TaxTMI 
TaxTMI 
2018 (6) TMI 885
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....58,820/- and claimed exemption u/s 54F to the extent of Rs. 1,54,70,000/- and offered the difference to tax to the extent of Rs. 1,20,40,625/- as income from capital gains. During the assessment proceedings, AO asked for details of exemption claimed u/s 54F. In support of the above claim, assessee submitted documents in support of purchase of plot at Rs. 5,25,600/- and the difference of Rs. 1,42,64,285/- towards cost of construction of building on the plot purchased as above. However, assessee has not maintained any books of account or maintained any bills or vouchers in support of such expenditure. Considering the above submissions, AO allowed the deduction to the extent of Rs. 5,25,600/- for the cost of plot and disallowed the construction expenditure to the extent of Rs. 1,42,62,285/-. Aggrieved with the above order, assessee preferred an appeal before the CIT(A) - 10, Hyderabad and CIT(A) confirmed the order of AO. Subsequently, assessee preferred an appeal before the Hon'ble ITAT and the ITAT in its common order dated 10/02/2012 held as under: "7. We heard the parties. Af ter considering the facts and circumstances of the case in total ity, we feel it just and proper ....
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....On verif ication of the bank withdrawals, ledger details of the expenditure, with the supporting bills Vouchers. a) The assessee had made all payments in the form of cash exceeding Rs. 20,000/- b) Majority of the Vouchers / Invoices and bills are self - made. However, on verif ication of the NOC from gram panchayat and the permission given for the electricity connection, to the house, and receipt for the House taxes, paid for the period f rom April 2009 to March are follows: Ground f loor: Rs. 883/- First f loor: Rs. 529/- Second f loor: Rs. 529/- As per the submissions made before Ld. CIT(A) and subsequently before A.O, and as per the certif icate issued by Shri S. Laxman Consulting Architect and Govt. Approved valuer, the investment in the residential house was considered. Based on the above facts and circumstances, a report was submitted on 9/9/2015, through proper channel, that the assessee is eligible for claiming deduction u/s 54F. 4. Subsequent to the remand report submitted by the A.O, Ld. CIT(A) directed Addl. CIT, Range-8, Hyderabad vide his letter dated 05.10.2015 to submit the factual report after thorough v....
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....bove. So, the valuation of house (Rs. 1,10,10,000) and above expenses (Rs. 32,54,285) = 1,42,64,285/-, for which assessee has submitted the bills / vouches ets. & verif ied. 4. Assessee has submitted that he is illiterate and his son Mohd Salauddin is 10th pass. They did not have the knowledge about such statutory requirements, simply they purchased and constructed the house and did not collect & maintain the bills & vouchers. So, assessee could not submit the bills / vouchers during the assessment proceeding in the month of December 2009. However, when assessee came to know about this statutory requirement, assessee collected the bills / vouchers af terwards from where he made the purchases. Hence, this may be considered, as the related bills / vouchers in original were submitted for verif ication. 5. Assessee submitted that he sold the property in Sep 2009. Assessee purchased land in Feb 2008 (purchase document No. 653/08 dt. 06.02.2008). Assessee also submitted the NOC dt. 30.07.2008, Municipal House Tax Receipt dt. 18.08.2010 (for the period April 2009 to March 2010 paid on 18.08.2010). Thus, Assessee claimed that house was constructed within 3 years from the ....
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.... the new asset at Rs. 1,42,64,285/- 8. After considering the above remand report and submissions of the assessee, Ld. CIT(A) observed the following discrepancies in the submissions of the assessee. (a) In the balance sheet for the period 31.03.2008 submitted by the assessee, the value of land was shown at Rs. 5,25,600/- and closing in progress was shown at Rs. 25,51,250/-. (b) He observed that in the valuation report the period of construction was mentioned from May 2007 to October 2008 but he observed that the plot of land was purchased in February 2008 and construction cannot be started in May 2007. The above property was inspected on 22.07.2010 by a registered valuer and the registered valuer no doubt estimated the cost of construction but he has not mentioned above bills / vouchers maintained by the assessee. Therefore all the bills / vouchers were produced before the A.O are non-reliable. (c) He observed that valuation report is also incomplete, in the valuation report it is claimed that plan was enclosed but no such plan was enclosed. 8.1 Ld. CIT(A) further observed that Assessee also submitted before the A.O that no application was made befor....
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....itted that when the assessee received notice u/s 148, he promptly filed return of income u/s 139(4) declaring full value of consideration and by that time assessee has utilized the sale consideration to the extent of Rs. 1,54,70,000/- in construction of the residential house and the balance was promptly declared as income from capital gains and paid the relevant due tax. He submitted that since the assessee was denied the benefit of section 54F for not maintaining proper bills and vouchers, he arranged for the relevant bills and vouchers from the same suppliers, who supplied the relevant materials for the construction of building and the same was submitted as additional evidence before the authorities. Further, assessee submitted valuation report from a registered valuer in support of the construction of the building. The valuer estimated the value of the property at Rs. 1,10,10,000/-. Even though the valuer has estimated the value of the property at Rs. 1,10,10,000/- by following the standard rates for construction, the ld. AR submitted that the actual investment was to the extent of Rs. 1.43 crores. 11.1 With regard to the observation of CIT(A) that assessee has not deposited ....
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.... mean that conditions of section 54F of the Act are fulfilled, it is a fact that assessee has not deposited unutilized funds in the bank before filing the return of income. By relying on the decision of High Court of Mumbai in the case of Humayun Suleman Merchant Vs CCIT, reported in 387 ITR 421 (2016) (Bom), he submitted that mandate of Sec 54F(4) of the IT Act is clear that the amount which has not been utilized in construction / purchase of property before filing the return of income must necessarily be deposited in account duly notified by Central Government so as to avail exemption, which is an essential condition u/s 54F of the IT Act. He, also supported the finding of the Ld. CIT(A) in paras 6.3 and 6.4 of CIT(A) order. 12.1 He further submitted that when the assessee could not submit any evidence that there was a construction of residential building out of sale proceedings, claim of exemption u/s 54F of the IT Act could not be allowed. He relied on the decision of coordinate bench of this Tribunal in the case of Syed Nawab Hussian Vs. ACIT [2013] 39 taxmann.com177 (Hyd). Further he submitted that the remand report submitted by the A.O is not binding on CIT(A) and submitt....
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....) which is part of Ld. CIT(A) order, these bills and vouchers which are submitted before him, according to him were subsequent to the period of construction, the total of the bills are Rs. 2,46,222/-, in our view, CIT(A) cannot deny the benefits by finding the some anomalies in the additional bills to the extent of Rs. 2,46,222/- to deny the benefit u/s 54F of the IT Act to the assessee since these bills could be for additional construction expenses post completion. With regard to date of construction, the valuation was done in 2010 subsequent to completion of the construction of the property in 2008. It may be wrong observation of the valuer, which cannot be ruled out. 13.1 Coming to the main issue Sec. 54F(4) of the IT Act i.e. the benefit of the Sec. 54 of the IT Act, whether, it can be denied when assessee failed to deposit unutilized funds before filing the return of income. There are conflicting views expressed by Hon'ble High Court of Karnataka in the case of CIT Vs. K. Ramachandra Rao (Supra) and Hon'ble High Court of Bombay in the case of Humayun Suleman Merchant Vs CCIT (supra). After considering both the ratios of the Hon'ble High Courts, we observed that the Hon'ble ....
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.... includes a return f iled under sub-section (4). The return was admittedly f iled before the expiry of the time provided under section 139(4), which was till March 31, 1986, and accordingly had to be treated as a return contemplated under section 139 even though it was f iled in response to a notice under section 148. By issuing a notice under section 148, the statutory rights conferred on the assessee cannot be taken away and the assessee is entitled to f ile a return at any time before the expiry of the period prescribed under the statute. The Tribunal was therefore justif ied in holding that the assessee was entitled to the benef it of the loss to be determined and carried forward for set of against the income of subsequent years." 13.4 By following the above ratio, even in this case, assessee has filed return of income only upon serving notice u/s 148, which is within the time allowed u/s 139(4) of the Act. At the time of filing return of income, assessee has utilized sale proceeds to the extent of claim made by the assessee u/s 54F. what is relevant at this point of time is the attitude of the assessee. As soon as the notice is served, being an illiterate person, assessee f....