ITAT upholds Section 54F exemption, quashes Section 263 revision where substantial house construction completed within three years

The ITAT allowed the assessee's appeal and restored the assessment order, setting aside the revisional order passed u/s 263 by the CIT. It held that exemption u/s 54F was rightly granted where the assessee had invested the entire net consideration from sale of shares in constructing a residential house within the statutory three-year period. The Tribunal ruled that substantial completion of construction, with only minor finishing work pending to make the property fully fit for occupation, satisfies the conditions of s.54F. Consequently, the assessment was not erroneous or prejudicial to the interests of the Revenue, invalidating revision u/s 263.

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Issues involved: Appeal against order u/s 263 of the Income-tax Act regarding exemption claimed u/s 54F for construction of a residential house.

Summary:
The assessee, an individual, claimed exemption u/s 54F for constructing a residential house from sale proceeds of shares. The Commissioner of Income-tax found the house incomplete on inspection and issued a show-cause notice u/s 263. The assessee argued completion of major construction work and reliance on circulars by CBDT for exemption. The departmental representative contended the house was not fit for occupation within the stipulated time. The Tribunal noted the entire consideration was invested in construction within the time frame, supporting the assessee's claim. Relying on CBDT circulars, the Tribunal held that completion of construction or occupation is not required for exemption u/s 54F. Citing a similar case, the Tribunal concluded that the assessee had complied with the conditions and set aside the CIT's order, allowing the appeal.

Conclusion:
The Tribunal allowed the appeal, holding that the assessee had complied with the conditions for exemption u/s 54F and set aside the CIT's order.

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