TaxTMI 
TaxTMI 
2023 (1) TMI 406
X X X X Extracts X X X X
X X X X Extracts X X X X
....conducting any minimal enquiry being a revisionary authority. 3. On the facts and under the circumstances of the case and in law, the learned Principal Commissioner of Income-tax - 1, Ludhiana has erred in directing the learned Assessing Officer to pass a de novo assessment without pointing out any error in order u/s. 143(3) or pointing out any prejudice to the revenue under order u/s. 143(3) of the Act. 4. That the Ld. Principal Commissioner of Income-tax - 1, Ludhiana erred in law and facts in holding supporting documents were not filed before the A.O. and that various aspects remain unverified. Thus, this finding given by the Pr. CIT-1, Ludhiana is factually incorrect. 5. On the facts and under the circumstances of the case and in law, the learned Principal Commissioner of Income-tax - 1, Ludhiana erred in holding that due verification was not undertaken by the learned Assessing Officer. 6. On the facts and under the circumstances of the case and in law the learned Principal Commissioner of Income-tax - 1, Ludhiana erred in exercising jurisdiction under section 263 of the Act by holding that the assessment order was prejudicial to the interest....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... so furnished before the AO: S. No. Particulars Date of Notice Paper Book Page Remarks 1. Notice u/s. 143(2) of the Income Tax Act, 1961 06.07.2017 7-10 Statutory notice regarding fixation of case 4. Notice u/s. 142(1) of the Income Tax Act, 1961 25.05.2018 11-12 Details regarding ITR, Note of business activity, Sale/Purchase documents, Bank Statement, All documents related to Capital Gain were demanded 5. Notice u/s. 143(2) of the Income Tax Act, 1961 19.11.2018 13-16 Statutory notice issued after change in jurisdiction 6. Notice u/s. 142(1) of the Income Tax Act, 1961 20.11.2018 17-18 Detail of Computation of Capital Gain and documentary evidence to support compu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ll namely of Racks, Generator, Sofa Set, Sofa Set Chair, Elevator, Kitchen Material, Recliner, AC, Architect, Paradise Landscape consultant and developers, Watchman as deduction u/s. 54 of the Act was furnished. Apart from above detailed submission further documentary evidences were filed namely a) Sale Deed of Flat No. A/1201/A in Mumbai (Paper Book Page 62-89) b) Purchase Deed of the House situated at Aggar Nagar, Ludhiana dated 15.11.2011 (Paper Book Page 90-92) c) Copies of FDR regarding Investment made in capital gain account scheme (Paper Book Page 93-105) d) Detailed working of the expenses claimed u/s. 54 of the Act (Paper Book Page 106-109) e) Justification report of Regd. Valuer regarding expenses claimed on construction of residential building (Paper Book Page 110-116) f) Actual MAP of the constructed house of the assessee (Paper Book Page 117-120) g) various bills of expenses filed before the A.O. regarding claim of exemption u/s. 54 (Total 317 pages in a separate Paper Book) h) Bills submitted by the assessee with respect to justification of certain Items claimed as cost. (Paper Book Page ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and, the assessee has constructed a new residential house with covered area of 6500 sq. yrds in August 2017. It was accordingly submitted that since the assessee has sold his flat at Mumbai on 01/06/2015 and constructed a new residential house in August 2017, the construction has been completed within a period of three years from the date of sale. 4.5. It was submitted that in the interim, the amount of the sale consideration was deposited in the Capital Gain Account Scheme and out of the amount so deposited, the money was spent on the construction of the new residential house. It was submitted that the assessee has sold the property on 01/06/2015 thereafter on 13/07/2015, the assessee has purchased FDR for Rs. 1.25 crore under Capital Gain Account Scheme and thereafter, on 12/10/2016, the assessee has purchased another FDR for Rs. 80 lacs under Capital Gain Account Scheme. 4.6. It was further submitted that even where it is assumed that the assessee has not carried out the construction within time limit, the fact that the assessee has deposited the amount in the Capital Gain Account Scheme, the assessee continue to be eligible for exemption under section 54 of the Act. It wa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted that Rs. 1.84 crore was invested by means of cheque. The copy of passbook is enclosed at page no 134 to 147 of the paperbook. It is again coupled with the fact that bills and voucher of each and every expenditure/bill is uploaded and were furnished again before AO as well as before the ld. PCIT in a separate paper book. It was submitted that the date of investment was also explained in letter dated 22.11.2018 (refer paper book page 54/55) wherein the assessee had stated that the construction of the property was started in January 2015 and the assessee had spent Rs. 1.03 Crore on construction of the residential house prior to due date of filing return u/s. 139(1). The remaining amount was invested in the capital gain account scheme and this aspect was also verified by the Ld. A.O. It is coupled with the fact that investment of Rs. 18.96 Lacs was made in cash. The Ld. AO has categorically the verified the availability of cash (Refer paper book page 107). It was accordingly submitted that the entire investment was made within the time limit specified u/s. 54 of the Act, calling for no adverse view. 4.9. Further regarding the vouchers, the Ld. PCIT in show cause has stated that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 134 to 147. c) Affidavits of neighbours etc:- The said affidavit are supplementary in nature and not substantive. 4.12. It was submitted that the assessee has filed detailed submission before the Ld. PCIT and Ld. PCIT has failed to point out any error in the assessment order which render the order erroneous or prejudicial to the interest of the revenue. It was accordingly submitted that the assessee has constructed a new residential house within the time frame of three years from the date of transfer and amount invested in new residential house amounting to Rs. 2,05,93,405/- satisfy all the conditions for exemption under section 54 of the Act. Alternatively, the assessee is entitled to exemption under section 54 on the strength of investment of Rs. 2.05 crores in the FDR under the Capital Gain Account Scheme and even if there is any fault or irregularity, the amount can be brought to tax on completion of three years and not in the year under consideration. It was accordingly submitted that there is no error or prejudice in the proceedings under section 143(3) of the Act and therefore the order so passed by the Ld. Pr. CIT deserves to be set aside and in support, the r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oning the date of construction material purchased. Only some vouchers found uploaded on system. AO has not made any enquiry with regard to house map passed by Municipal Corporation, Ludhiana as well as the period of construction. Deduction u/s. 54 is only available if the assessee has no other residential unit the city. In this regard, the AO has also made any enquiry. 5. Further, out of sale of two flats for Rs. 4,00,00,000/- the assessee had to pay Rs. 1,88,300/- to society for issue of NOC for transfer of ownership and the amount has been reduced from sale consideration. The expense claimed by the assessee has not been paid during the year under consideration. Hence, the claim of the assessee has been accepted by the AO without making the enquiry and obtaining documentary evidence." 5.1. Thereafter, our reference was drawn to the findings of the Ld. PCIT which are contained at para 3 to 3.1 of the impugned order which read as under: 3. In response to this, the assessee filed written submissions. Also revision proceedings have been attended by Sh. Pankaj Bhalla, C.A. and Sh. Ramesh Aggarwal, C.A. and the case has been discussed with them. The Counsels of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed opinion that the matter has been thoroughly examined by the AO during the course of assessment proceedings and thereby through a speaking order, the claim of deduction u/s. 54 has been allowed by the AO though with a restricted amount of Rs. 2,00,53,041 disallowing a sum of Rs. 5,40,364/- as evident from the assessment order and the contents thereof read as under: 2. During the course of assessment proceedings, it is noticed that the assessee has claimed deduction under section 54 at Rs. 2,01,09,761/- for which the assessee submitted a claim of revising it to Rs. 2,05,93,405/-. To verify the genuineness and correctness of the deduction claimed, the assessee was asked to furnish the detail of investment made in residential house #276A, Aggar Nagar, Ludhiana. Perusal of the list supplied with regard to investment made it is noticed that some items included in the list do not fit in the definition of residential house for the claim of deduction under section 54 which is as under:- Sr. No. Party Name tem Name Amount (in Rs.) 1 Aakriti Fumnishers Pvt. Ltd. 1 Sofa Set & 2 Chairs 2,00,500 2. High Life Furnishers Pvt.Ltd. 3 Sofa Set & 5 Chairs ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the show-cause notice, the emphasis of the ld. PCIT is on purchase or construction of new property as against modification of an old house beyond the stipulated time frame and thereafter, in the latter part of the show-cause, in the same breath, the emphasis has been on lack of enquiry on part of the AO relating to period of construction/modification of the old house and related examination of construction documentation. 11. Firstly, regarding the purchase or construction of new property as against modification of an old house beyond the stipulated time frame, we refer to the provisions of sub-section (1) of section 54 of the Act which provides for purchase or construction of one residential house in India within stipulated time period and the appropriation of the capital gains for such purposes arising out of transfer of the original asset and the emphasis therefore is on purchase or construction of a residential house and which has been referred to a new asset in the context of transfer of a residential house in respect of which capital gains has arisen and which has been referred to as the original asset. The reference to "new asset" therefore has to be understood and appre....