2019 (9) TMI 906 - AT - Income Tax

Tribunal rules in favor of assessee on contested issues, including land valuation and deduction eligibility.

Shri Dinesh Khodidas Patel HUF Versus ITO, Ward-1 (3) (3), Ahmedabad

The Tribunal ruled in favor of the assessee on all contested issues, including the legality of the CIT(A)'s order, the acceptance of land valuation by the ... Capital gain computation - accepting the valuer of land as per report of DVO which pertains to area far away from the land sold by the appellant - HELD THAT:- This issue has duly been covered in favour of the assessee by the decision of Hon’ble ITAT in the case of co-sharer of the same land, therefore, the claim of the assessee is liable to be allowed in the interest of justice. However, on the other hand, the Ld. Representative of the Department has refuted the said contention. Deduction u/s 54F - HELD THAT:- Claim u/s 54F of the Act is beneficial provisions and is applicable to the assessee when old capital assets is replaced by new capital assets in form-a residential house. Once an Assessee falls within ambit of beneficial provision, then said provision should be liberally interpreted. The Hon’ble High Court of Karnataka in the case of CIT Vs. Sambandam Udaykumar [2012 (3) TMI 80 - KARNATAKA HIGH COURT] has held that the Section 54F is a beneficial provision for promoting the construction of residential house & requires to be construed liberally for achieving that purpose. The intention of the Legislature was to encourage investments in the acquisition of a residential house and completion of construction or occupation is not the requirement of law. The words used in the section are purchased or constructed. The condition precedent for claiming benefit u/s 54F is that the capital gain should be parted by the assessee and invested either in purchasing a residential house or in constructing a residential house. Merely because the sale deed had not been executed or that construction is not complete and it is not in a fit condition to be occupied does not disentitle the assessee to claim section 54F relief If the construction was not completed within the prescribed period and the assesssee has invested the amount, therefore, the claim of the assessee is not liable to be declined u/s 54F of the Act. We are of the view that the claim of the assessee has wrongly been denied by CIT(A), therefore, we set aside the finding of the CIT(A) on this issue and allowed the claim of the assessee u/s 54F of the Act. Accordingly, this issue is decided in favour of the assessee against the revenue. Issues Involved:1. Legality of CIT(A)'s order.2. Validity of notice issued under section 251(1)(a) of the Act.3. Acceptance of land valuation by DVO.4. Determination of fair market value of land.5. Disallowance of deduction under section 54F of the Act.Issue-wise Detailed Analysis:1. Legality of CIT(A)'s Order:The assessee challenged the legality of the CIT(A)'s order, arguing it was against law, equity, and justice. The Tribunal examined the case and found that the CIT(A) had partially allowed the assessee's claim but the assessee was still dissatisfied. The Tribunal concluded that the CIT(A)'s order was not in line with the established legal principles and thus decided in favor of the assessee.2. Validity of Notice Issued under Section 251(1)(a) of the Act:The assessee contended that the notice issued under section 251(1)(a) of the Act was erroneous. The Tribunal acknowledged this issue but did not provide a separate detailed analysis for it, implying that the resolution of other issues rendered this point moot.3. Acceptance of Land Valuation by DVO:The assessee argued that the CIT(A) erred in accepting the valuation of land as per the DVO's report, which pertained to an area far from the land sold by the appellant. The Tribunal referenced a similar case involving a co-sharer of the same land, where it was held that the AO had no power to refer the matter to the DVO under the provisions existing at that time. The Tribunal found that the CIT(A) had improperly enhanced the assessment based on the DVO's valuation, which was not permissible. Thus, the Tribunal decided this issue in favor of the assessee, rejecting the DVO's valuation.4. Determination of Fair Market Value of Land:The assessee contested the CIT(A)'s determination of the fair market value of the land at Rs. 2,45,000, ignoring the registered valuer's determination of Rs. 40,56,000. The Tribunal, aligning with its decision on the DVO's valuation, held that the CIT(A) and AO could not reduce the fair market value as determined by the assessee's registered valuer. Consequently, the Tribunal ruled in favor of the assessee on this issue as well.5. Disallowance of Deduction under Section 54F of the Act:The assessee challenged the disallowance of deduction under section 54F amounting to Rs. 96,31,350, arguing that the investment was made in a residential house but the construction was not completed within the stipulated three years. The Tribunal cited various judicial precedents, including decisions from the High Courts of Gujarat and Karnataka, which held that section 54F is a beneficial provision and should be interpreted liberally. The Tribunal concluded that the assessee's investment in the residential house, despite the incomplete construction, entitled them to the deduction under section 54F. Thus, the Tribunal set aside the CIT(A)'s findings and allowed the deduction.Conclusion:The Tribunal allowed the appeal filed by the assessee, ruling in favor of the assessee on all contested issues. The order was pronounced in the open court on 19/09/2019.