2014 (7) TMI 130 - AT - Income Tax

ITAT upholds CIT (A) order allowing deduction under section 54F

The Income Tax Appellate Tribunal (ITAT) dismissed the department's appeal and upheld the Commissioner of Income Tax (Appeals) (CIT (A)) order allowing ... Claim of exemption u/s 54F – amount advanced to his wife towards purchase of the property - assessee has 50% ownership over the property - Held that:- The AO does not dispute the fact that assessee’s wife has purchased the property in her name by utilizing the amounts advanced by the assessee - the assessee’s investment in the property cannot be disputed - the assessee has shown the amount advanced to his wife towards purchase of the property in the cash flow statement - If the AO had any doubt with regard to the fact, he should have conducted necessary enquiry to find out whether the assessee has actually made the advance of ₹ 40 lakh to his wife - the finding of the AO appears to be contradictory – there was no infirmity in the order of the CIT (A) in directing the AO to allow deduction u/s 54F of the Act - the CIT (A) has power coterminous with that of the AO - When the evidence produced is glaring and speaks for itself, it will serve no purpose in getting it verified again by the AO – thus, the order of the CIT(A) is upheld – Decided against Revenue. Issues:Claim of exemption u/s 54F of the Income Tax Act.Analysis:The case involved an appeal by the department against the order of the CIT (A) pertaining to the assessment year 2007-08. The main issue revolved around the claim of exemption u/s 54F of the Act. The assessee had sold a property and claimed exemption by stating that he paid an amount to his wife for the purchase of a new property. The Assessing Officer disallowed the claim, stating that the agreement provided by the assessee was on plain paper and not legally valid. The AO held that the property was purchased in the wife's name, making it an application of income. The CIT (A) allowed the claim, noting that the assessee paid an advance to his wife for 50% ownership of the property, supported by municipal tax receipts and certificate. The ITAT upheld the CIT (A) order, stating that the assessee's investment in the property was valid, and the AO should have verified the advance payment instead of presuming otherwise. The ITAT also rejected the department's contention of violation of Rule 46A, stating that the CIT (A) has the power to consider necessary material without providing an opportunity to the AO under Rule 46A.In conclusion, the ITAT dismissed the department's appeal, upholding the CIT (A) order to allow the deduction u/s 54F of the Act. The judgment was pronounced on 13-6-2014.