2021 (2) TMI 184 - AT - Income Tax

Appellant's Appeal Granted: Importance of Evidence for Tax Exemptions

Shri Lakshmi Narayana Prasad Versus The Income Tax Officer, Ward 6 (3) (1), Bangalore

Shri Lakshmi Narayana Prasad Versus The Income Tax Officer, Ward 6 (3) (1), Bangalore - TMI Issues:Claim of exemption u/s 54 of the Income-tax Act, 1961 - Denial of deduction by AO - Lack of evidence for cost of construction - Disallowance upheld by CIT(A) - Appeal before ITAT Bangalore.Analysis:The appellant's appeal before ITAT Bangalore challenged the order of the CIT(Appeals) denying the claim of exemption u/s 54 of the Income-tax Act, 1961. The appellant had sold a property and claimed exemption u/s 54 for the reinvestment in a new residential property. However, the AO disallowed the claim stating lack of evidence for the cost of construction. The appellant's submission of construction details without supporting vouchers or documents was not accepted by the AO. The AO determined the total income at Rs. 66,14,070 due to the disallowance. The CIT(A) also upheld the disallowance, emphasizing the absence of evidence that the original asset sold was a residential house eligible for deduction u/s 54.The CIT(A) noted that the appellant sold a vacant site, not a residential house, and thus, the deduction u/s 54 was not allowable. Despite the appellant's reliance on various documents, including sale deeds and valuation certificates, the CIT(A) found the deduction inapplicable. The CIT(A) highlighted that the construction, as per the valuation certificate, started and completed within specific timelines, but the appellant's claims regarding the property's status and assessments were not substantiated. The CIT(A) concluded that without evidence proving the original asset was a residential house, the deduction u/s 54 could not be granted.During the ITAT hearing, the appellant's representative pointed to bank statements as evidence of using the sale consideration for the new residential property. However, the lack of bills, vouchers, and receipts for the construction costs remained a concern. The ITAT considered the issue and found that the CIT(A) had erred in determining the property sold was not a residential house. The ITAT directed the Assessing Officer to reevaluate the matter, emphasizing the appellant's opportunity to provide all necessary evidence supporting the claim for deduction u/s 54.In conclusion, the ITAT allowed the appeal for statistical purposes, remitting the issue back to the Assessing Officer for a fresh consideration based on the appellant's submission of complete evidence regarding the cost of construction for the new residential property. The judgment highlighted the importance of substantiating claims with proper documentation to avail of statutory deductions under the Income-tax Act.