2018 (7) TMI 810

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....ppeal proceedings even if the assessee has not claimed it in the return of income submitted. 3. Your appellant humbly submits the appellant is entitled to deduction u/s 54F arising out of investments made in constructing a residential house. 4. Your appellant humbly prays that the addition made Rs. 24,75,698/- by the Learned Assessing Officer and confirmed by the First Appellate Authority is not based on any facts or law and kindly be deleted." 2. The assessee, an individual by status, admitted total income of Rs. 1,60,942/- and agricultural income of Rs. 1,20,000/- for the previous year relevant to the assessment year 2010-11 and the same was processed accordingly. Later on, it was selected for scrutiny under CASS and a notice was issued u/s 143(2) of the Act. As per the AIR data, the A.O. noticed that the assessee made transaction of sale of property of Rs. 51,91,000/-. Therefore, the A.O. called upon the assessee to furnish the details of sale of property and reasons for not admitting the capital gains thereon. It may be noticed here that the assessee has neither admitted capital gains on sale of property nor claimed exemption under any of the provisions of ....

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.... claim the assessee is not entitled to get any deduction u/s 54F of the Act hence, the capital gains is added to the income of the assessee as 'undisclosed income' under the head long term capital gains. 6. Aggrieved, assessee challenged the order passed by Assessing Officer by contending that a claim u/s 54F was not made in the return of income on account of genuine impression of the assessee that since he has invested the sale proceeds for construction of a residential house, the sale proceeds are not liable to be taxed for capital gains; but the fact remains that the Assessing Officer, during the course of assessment proceedings, examined all the details and accepted the claim of the assessee and thus it cannot now be denied merely on the ground that the assessee has not made a specific claim in the return of income. He also submitted that the Assessing Officer must have been relying on the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd vs. CIT (284 ITR 323) (SC) to negative the claim u/s 54F of the Act overlooking the fact that the Supreme Court clearly laid down that this application of law is restricted to the Assessing Officer and does not apply t....

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....F for investment in the new residential house. Further, the A.O. had not verified whether the sale proceeds have actually been utilized for construction of house property and whether all the conditions laid down u/s 54F have been fulfilled or not. The circumstances would show that A.O. had made the assessment in a hurried manner, without applying his mind and such assessment order by virtue of this became an erroneous one." 9. If the conclusion of the Revisional Authority is limited to the legal issue that the assessee having neither disclosed capital gains nor made any claim u/s 54F, the A.O. cannot allow deduction u/s 54F of the Act, there was no further need to the Commissioner to set-aside the mater with a direction to the A.O. to verify whether all the conditions laid down u/s 54F have been fulfilled or not. In otherwords, the direction of the Commissioner to the A.O. to verify as to whether sale proceeds have actually been utilised for construction of house property pre-supposes that the Assessing Officer has to examine the issue independently on merits even though there was no such claim, in the return of income. The reasoning given by the Commissioner i.e., "in the insta....

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....ubserved by the object of the legislation and if another construction is possible apart from strict literal construction then that construction is to be preferred to the strict literal construction. 10. On the other hand, Learned Departmental Representative submitted that the finding of the Revisional Authority that "A.O. ought not to have considered the claim u/s 54F, in the absence of any claim", is an independent finding and conclusion, which was carried out by the Assessing Officer in the order passed u/s 143(3) r.w.s 263 and hence the assessee cannot be said to be aggrieved by the order passed by the Assessing Officer and if there is any grievance against the order of the Revisional Authority, an appeal should have been filed against such order rather than the consequential order passed by the Assessing Officer. 11. We have carefully considered the rival submissions and perused the record. We have also carefully perused the order passed by the Revisional Authority. There are fallacies in the said order which can easily be highlighted and considered, if an appeal is filed against the order directly before the Tribunal but we restrain ourselves at this stage since we are o....