2019 (12) TMI 595 - AT - Income Tax

Tribunal overturns denial of deduction under section 54F, emphasizing evidence requirements

Anil Vijay Versus Income-Tax Officer

The Tribunal allowed the appeal, emphasizing the importance of substantiating claims with evidence and conducting proper enquiries before denying ... Deduction u/s 54F denied - investment made by the assessee in construction of new house - AO has allowed the deduction for which the assessee purchased the residential plot but denied the claim of deduction towards the cost of construction of new house on the ground that the assessee has not produced any supporting evidence to show that the house was completed within the stipulated period provided under section 54F - HELD THAT:- Though the assessee has not filed any valuation report, however, the assessee produced the bank account statement showing the withdrawal of money from time to time as well as various bills and vouchers towards purchase of construction material. All these evidences go to prove that the expenditure was incurred by the assessee within the stipulated period as provided under section 54F of the Income-tax Act. Further, the Assessing Officer has not disputed the fact that the house was finally constructed by the assessee by incurring the cost of construction. There may be a dispute of correct cost of construction but it cannot be denied that the assessee has not constructed the residen- tial house after sale of the existing asset. Thus the rejection of the claim of the assessee without conducting any enquiry to verify the fact about the actual cost of construction as well as the time period of the construction of the house is not warranted and justified. Hence, once the assessee has produced the evidence in support of his claim of construction of new residential house and house was actually constructed as existed at the plot of land, then the claim of the assessee cannot be denied on mere suspicion or doubt. Hence the claim of the assessee under section 54F is allowed. - Decided in favour of assessee. Issues:1. Validity of reassessment order dated March 14, 20142. Addition of long-term capital gain by denying deduction under section 54F of the Income-tax Act on account of investment in construction of a new houseIssue 1 - Validity of Reassessment Order:The appeal challenged the additions and disallowances made in the order under section 148/143(3) dated March 14, 2014, questioning jurisdiction and other reasons. Ground Nos. 1.1 and 1.2 raised concerns about the validity of the reassessment order. During the hearing, the assessee did not press these grounds, leading to their dismissal as not pressed. The Tribunal dismissed these grounds accordingly.Issue 2 - Addition of Long-term Capital Gain:The assessee, an individual, declared a total income of &8377; 1,74,910, with the Assessing Officer reopening the assessment due to the sale of an immovable property. The Assessing Officer assessed long-term capital gain at &8377; 5,02,398, challenging which the assessee approached the Commissioner of Income-tax (Appeals) unsuccessfully. The Tribunal heard arguments that the entire sale consideration was utilized for the new house's purchase and construction, totaling over &8377; 15,00,000. The assessee provided bank statements and material purchase invoices as evidence. The Departmental representative argued that the construction completion within the stipulated time was not proven, citing the lack of a valuation report. The Tribunal noted that while no valuation report was filed, bank statements and purchase evidence demonstrated timely expenditure. The Assessing Officer's denial of the deduction without verifying the construction facts was deemed unjustified. As the house was constructed after the asset sale, the claim under section 54F was allowed, and the addition made by the Assessing Officer was deleted.In conclusion, the Tribunal allowed the appeal, emphasizing the importance of substantiating claims with evidence and conducting proper enquiries before denying deductions.