2020 (7) TMI 538 - AT - Income Tax

Tribunal orders reassessment for tax exemption claim and deduction dispute, emphasizing evidence review.

The Tribunal directed a de novo assessment by the Assessing Officer for the assessee's claim of exemption under Section 54 of the Income Tax Act, ... Exemption u/s 54 - Long term capital gain arising on sale of residential flat at Varsova (Mumbai) against the purchase of new residential property made during the year - HELD THAT:- The CBDT in Circular No. 672 dated 16/12/1993 has clarified that in terms of a scheme of the allotment and construction of the flat/house by the co- operative societies or the other institution are similar to those mentioned in para 2 of CBDT circular No. 471/Dated 15/10/1986 and thus such case may be treated as the construction of the flat for the purpose of section 54 and 54F of the Act. The Tribunal in the case of Ayushi Patni [2019 (1) TMI 1130 - ITAT PUNE] after following the decision of the Hon’ble Bombay High Court in the case of CIT Vs Smt. Beena Jain [1993 (11) TMI 7 - BOMBAY HIGH COURT] treated the date of the taking possession as the date of the purchase of the flat and allowed benefit of section. Thus, in view of undisputed facts of the case and the decision rendered in the case of CIT Vs. Smt. Beena K. Jain (supra), we hold that the assessee is eligible for claiming exemption u/s 54F on the entire amount of capital gain utilized for purchase of residential property. Consequently, the appeal of the assessee is allowed and the appeal of Revenue is dismissed. Issues Involved:1. Claim of exemption under Section 54 of the Income Tax Act.2. Deduction of Rs. 21 lakh retained by the buyer due to house tax dispute.3. Cost of construction of the flat claimed against short-term capital gain.Issue-wise Detailed Analysis:1. Claim of Exemption under Section 54 of the Income Tax Act:The assessee appealed against the denial of exemption under Section 54 for the long-term capital gain arising from the sale of a residential flat. The assessee had purchased a new residential property during the year but did not claim this exemption in the original return. The authorities denied the claim, stating that no such claim was made initially and the assessee already owned another residential house at the time of the investment. The Tribunal, however, directed the CIT(A) to consider the additional ground raised by the assessee and examine the evidence of investment or booking in light of CBDT circulars and judicial decisions. The Tribunal highlighted the Supreme Court's decision in Goetze India Ltd Vs CIT, which bars the Assessing Officer from accepting new claims but allows appellate authorities to do so. The Tribunal emphasized that the assessee's claim had not been properly examined and should be reassessed, considering the relevant CBDT circulars and judicial precedents.2. Deduction of Rs. 21 Lakh Retained by the Buyer Due to House Tax Dispute:The assessee claimed a deduction of Rs. 21 lakh retained by the buyer due to a house tax dispute against the long-term capital gain. The Assessing Officer disallowed this deduction while computing the long-term capital gain. The Tribunal did not specifically address this issue in the final judgment but directed a fresh assessment by the Assessing Officer, which implies that this issue should also be reconsidered during the reassessment.3. Cost of Construction of the Flat Claimed Against Short-term Capital Gain:The assessee claimed a deduction for the cost of construction of the flat based on a valuation report, which was disallowed by the Assessing Officer on the grounds that no such cost was incurred by the assessee. The CIT(A) supported this view, stating that the developer bore the construction costs, and the assessee did not provide evidence of incurring any expenses. The Tribunal directed the Assessing Officer to reassess this issue, considering the assessment order in the case of another co-owner, Sh. Saurabh Jain, where the construction cost was allowed. The Tribunal acknowledged that the development agreement indicated that the developer was responsible for the construction costs, but this matter required a fresh examination of the documentary evidence.Conclusion:The Tribunal concluded that all issues raised by the assessee need to be examined afresh by the Assessing Officer. The entire assessment was restored to the file of the Assessing Officer for a de-novo assessment, with a directive to verify the documentary evidence provided by the assessee. The assessee was instructed to produce all relevant documents promptly, and adequate opportunity for a hearing was to be afforded. The appeal was allowed for statistical purposes, and the order was pronounced on 21st July 2020.