2023 (3) TMI 37 - AT - Income Tax

Tribunal orders reexamination of denial under section 54, stresses evidence review for fair decision

The Tribunal remanded the case back to the assessing officer for reexamination due to discrepancies in the findings regarding the denial of the claim ... Deduction u/s 54 - construction of residential house at Nelambur village, Thirukalukundram, Kanchipurram District and the claim u/s 54 are bogus - HELD THAT:- We find that the assessee has filed certain evidence including approved plan for building house, copy of VAO certificate certifying existence of building in the above address and also copy of VAO certificate for agricultural income. The assessee had also filed bill of quantities of construction of building obtained from Shri. K.M. Rajan. The assessee claimed that she had constructed new house property, however, due to heavy rain and floods during the period, the house was damaged. The inspector, when visited the site he could not ascertain the construction, therefore, gave a report that there was no proof of construction of building. Even when the DVO visited the site, he could not identify the construction. Therefore, he had reached to a conclusion that there was no construction. If you go by various evidences filed by the assessee, it is difficult to reject the claim of the assessee that she had constructed a house property at Nirambur Village, Thirukazhukundram Taluk, Kancheepuram District. If you go by findings recorded by the AO and the Ld. CIT(A), there is no dispute that the claim of the assessee is incorrect, because the assessee could not adduce proper evidence. Facts are contradicting with each other. The assessee claims to have constructed new residential house property, whereas the authority claims that there is no proof of new construction. Therefore, we are of the considered view that the matter needs reexamination from the AO. Thus, we set aside the order passed by the CIT(A) and restore the issue back to the file of the AO and direct the AO to re-examine the claim of the assessee in light of various averments including evidence filed by the assessee - Appeal filed by the assessee is treated as allowed for statistical purposes. Issues:1. Denial of claim u/s 54 for construction of residential house.2. Reopening of assessment under section 147.3. Disallowance of deduction u/s 54 by AO and CIT(A).4. Evidence presented by the assessee for construction of the house.5. Discrepancies in the findings of the assessing officer and the appellant authority.Issue 1: Denial of claim u/s 54 for construction of residential house:The assessee's appeal was against the order of the Commissioner of Income Tax (Appeals) regarding the denial of the claim under section 54 of the Income-tax Act for the assessment year 2014-15. The appellant contended that the denial was erroneous and unsustainable on the facts of the case. The appellant argued that the documents provided, such as the construction agreement, civil works quantities, and cash vouchers, supported the construction of the residential house. The assessing officer's decision to deny the claim was based on the lack of evidence for the construction and failure to explain the sources. The appellant emphasized that a reference made by the AO to the Valuation Cell should have been binding, and the denial of the claim was incorrect in law and on facts.Issue 2: Reopening of assessment under section 147:The assessment for the year in question was reopened under section 147 of the Act due to the assessee's failure to file the return of income on time. The AO proceeded with best judgment assessment as the assessee did not respond to notices. The sale of a residential flat and the claim for deduction under section 54 were key aspects leading to the assessment proceedings.Issue 3: Disallowance of deduction u/s 54 by AO and CIT(A):The AO disallowed the deduction claimed under section 54 as the assessee failed to provide evidence for the construction of the residential property and the source of funds. The CIT(A) upheld the AO's decision, stating that the appellant did not substantiate the claim adequately. The appellant argued that all necessary evidence, including building sanction plans and bills of quantities, were submitted, but the authorities rejected the claim based on incorrect assumptions.Issue 4: Evidence presented by the assessee for construction of the house:The appellant submitted various documents supporting the construction of a new residential house, including building plans, certificates, and bills of quantities. However, the inspector's report and the absence of proof of construction on-site raised doubts regarding the claim. The DVO's failure to submit a report further complicated the assessment process.Issue 5: Discrepancies in the findings of the assessing officer and the appellant authority:The assessing officer and the CIT(A) presented conflicting views on the validity of the claim for deduction under section 54. While the appellant asserted the construction of the house with documentary evidence, the authorities questioned the lack of tangible proof on-site. The Tribunal found discrepancies in the facts presented and decided to remand the issue back to the AO for reexamination, emphasizing the need for a thorough review of the evidence and a fair determination of the claim.This detailed analysis of the judgment highlights the key issues, arguments presented by both parties, and the Tribunal's decision to remand the matter for further assessment.