Assessee cannot claim Section 54 deduction for reinvestment in multiple residential properties, only one house allowed

ITAT Chennai held that an assessee cannot claim deduction under Section 54 for reinvestment in multiple residential properties, as the amended law specifies "one residential house." The assessee purchased two distinct properties in his wife's name, making him ineligible for the deduction. However, the tribunal remanded the matter regarding additional construction costs of Rs. 40 lakh paid to builders, as the assessee provided bank statements and bills as evidence that were not considered by the AO. The appeal was partly allowed for statistical purposes.

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Issues:
1. Disallowance of deduction under Section 54 of the Income Tax Act.
2. Disallowance of further investment claimed by the assessee while computing Long Term Capital Gains.

Issue 1: Disallowance of deduction under Section 54 of the Income Tax Act:
The appeal was against an order passed by the Commissioner of Income Tax, National Faceless Appeal Centre, regarding the assessment framed by the Assessing Officer under Section 143(3) of the Income Tax Act, 1961. The assessee contested the disallowance of deduction under Section 54 of the Act in relation to Long Term Capital Gains. The assessee had invested in two properties, one in his name and another in his wife's name, claiming deductions. The dispute arose as to whether the investment in two distinct properties could qualify for the deduction under Section 54. The law was amended to clarify that "a house" refers to one residential house only. The Tribunal upheld the CIT(A)'s decision, stating that the assessee, who purchased two separate residential houses in his wife's name, was not entitled to claim the deduction under Section 54 of the Act.

Issue 2: Disallowance of further investment claimed by the assessee:
The second issue revolved around the disallowance of an additional investment of Rs. 40,00,000 claimed by the assessee while computing Long Term Capital Gains from the sale of property. The Assessing Officer did not consider this additional payment made by the assessee to the builder for property improvement due to lack of evidence. The assessee argued that they had submitted evidence, including a bill from the builder and bank statements showing the payment. The Tribunal found that the assessee had not provided these pieces of evidence to the Assessing Officer initially. Consequently, the Tribunal decided to remand the matter back to the Assessing Officer to allow the assessee an opportunity to substantiate the claim of the cost of the new house, including the additional payment to the builder. If the assessee could establish this claim with necessary evidence, the Assessing Officer was directed to verify and allow the additional amount of Rs. 40,00,000 claimed by the assessee in the computation of Long Term Capital Gains.

In conclusion, the Tribunal partially allowed the appeal for statistical purposes and directed a reassessment regarding the disallowance of the additional investment claimed by the assessee.

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