TaxTMI 
TaxTMI 
2023 (1) TMI 406
X X X X Extracts X X X X
X X X X Extracts X X X X
....ity. 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 of the Revenue without appreciating the factual position. 6.1 That the Ld. Princip....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nbsp; 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 computation and deduction claimed u/s. 54 was demanded 7. Notice u/s. 142(1) of the Income Tax Act, 1961 2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bove 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 122-133) i) Copy of Pass Book of the assessee (Paper Book Page 134-147" 4.2. It was submitted that as evident from the above, detailed information/documents and related submissions were made before the AO and after detailed scrutiny thereof, the AO has allowed the claim under section 5....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 was submitted that where there is a failure on the part of the assessee to construct the house within the specified period, the amount can be taxed only on the expiry of three years and not in the year under consideration. It was accordingly submitted that even on the basis of investment made in the Capital....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ate 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 some vouchers were uploaded on the E-filling Portal, it was submitted that this finding/observation of the ld. PCIT is also factually incorrect. It was submitted that the Assessee has annexed a separate paper book of more than 300 vouchers before AO and PCIT. It was submitted that out of the total investment of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o 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 reliance was placed on the decision of Hon'ble Supreme Court in case of Malabar Industrial Co. Vs. CIT [2000] 243 ITR 83 and CIT Vs. Max India Ltd. [2007] 295 ITR 282. 5. Per contra, the Ld. CIT DR relied on the order passed by the Ld. PCIT and our reference was drawn to the show cause notices issued by the Ld. PCIT and the contents ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 assessee stated that explanation with evidences was furnished before the AO who was satisfied with the reply of the assessee at the time of assessment. Also now in response to show cause notice issued on 08.03.2021, the assessee has filed reply alongwith supporting documents, which were not filed before the AO at the time of assessment. This shows that the AO has failed to conduct the en....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sment 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 2,31,550 3. Samrat Furnishers & Decorators Steel Furniture 10,002 Total 4,42,052 In addition to the above said amount, the assessee had incurred expenditure in cash amounting to Rs. 19,66,293/- on purchase of bricks, sand, crusher, labour, debris clearance, freight and cartages which is not supported by bills. Therefore, disallowance of 5% of such expenditure in cash amounting to Rs. 98,312/....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 appreciated in the context of and relative to term of "original asset" which has been used. In the instant case, it is an admitted fact that the assessee has purchased a residential house measuring 225 sq. yards at Aggar Nagar, Ludhiana on 15.11.2011. As per evidences placed on record and are part of the assessment records and available at the time of examination before the ld. PCIT, in terms of building plan of the said residential house, demolition of ....