AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 1502
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....ssessment order and the reasons recorded therein. 3. Arguments heard. File perused. Brief Facts 4. Case of the assessee was selected under CASS for limited scrutiny. It led to issuance of notice u/s 143(2), on 13.08.2018 followed by a notice u/s 142(1) of the Act, on 03.05.2019 accompanied by a questionnaire. According to the Assessing Officer, the assessee submitted details and documents before him. 5. Admittedly, during the year under consideration, the assessee had sold residential plot - 1 Kha-18, Jawahar Nagar, Jaipur for Rs. 2,40,00,000/-, on 16.07.2016. Said residential plot was purchased by the assessee on 17.10.2012. The assessee claimed indexed cost of acquisition of Rs. 84,01,569/-. As observed by the Assessing Officer said transaction led to long term capital gain of Rs. 1,55,98,431/-. Said observation is not in dispute. The assessee and his brother are stated to have jointly purchased subject land having construction of house on a part there of, on 09.05.2016, for a sum of Rs. 4,80,00,000/-. In the said sale consideration, the assessee had his share of Rs. 2,40,00,000/-, which he invested for purchase of the said land with construction of house on it.....
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....ce for the enjoyment of such building, to the extent of land not exceeding one-third of the plinth area of the building comprising the dwelling unit or units at the ground level contiguous to the land occupied by such building. In view of the above the land appurtenant to the house one third of 1490 sq ft. which works out to roughly 500 sq ft. giving total area roughly of 2000 sqft eligible for claiming deduction u/s 54F. Since the land has been purchased jointly in partnership by two persons share of one person comes at 1000 sqft only and cost of investment in 1000 sqft comes at Rs. 5,17,385/- You are therefore requested to show cause why the claim u/s54F of Rs. 5,17,385/- is not allowed in place as claimed by you. You are therefore requested to show cause why the assessment as proposed above is not made in your case not later than 14.11.2019 along with documentary evidence." Assessee responds referring to the previous reply 8. The assessee submitted letter dated 11.11.2019 to the above said show cause notice pleading therein that his detailed reply already submitted vide dated 03.07.2019 may be treated as a response to the show cause notice. As is available from....
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.... Rs. 1,50,81,046/- which is added to its total income for the year under consideration. Subject to the above the income of the assessee is assessed as under Income as per ITR: 5,92,314 Add: LTCG as discussed above: 1,50,81,046 Total income : 1,56,73,360" Matter reached CIT(A) 10. When the issue was raised in appeal before Learned CIT(A), challenging denial of deduction for the reasons recorded by the Assessing Officer, on behalf the appellant, there it was reiterated that there is no limit to restrict land appurtenant to residential house, as per the provisions of IT Act. Learned CIT(A) recorded following observations/ findings, while dealing with the said contention raised before him:- "However, considering the overall facts of case involving huge agricultural land as large as 92,774 sq.ft. involving appellant constructed house of only 1490 sq.ft., AO has re-computed such attributable land to the residential house as at 500 sq.ft. being 1/3rd of the total constructed area on reasonable basis and arrived at 2000 sq.ft as attributable to new house as eligible for exemption u/s. 54F of I.T Act. On this analogy as reasoned by AO in the asse....
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.... 6. Accordingly, appellant appeal against the assessment order u/s. 143(3) of LT Act dated 16.11.2019 for AY 2017-18, is dismissed on merits as not maintainable as per law as above 7. In the result, appellant appeal for AY 2017-18, is dismissed." Assessee comes to the Appellate Tribunal-contentions 11. Before us, Ld. AR for the appellant has submitted that the Assessing Officer and Learned CIT(A) fell in error by recording observation and finding that in this case, only 1/3 area of the land is to be taken as the land appurtenant to the residential house and when so worked out, same came to about 500 Sq. Ft. Ld. AR for the appellant has contended that the area in which a residential house is constructed, is of no significance, when under the Act expression residential house has not been defined. He has tried to buttress his argument by submitting that it depends upon the area in which newly purchases property is situate and the amenities provided therein. 12. On the other hand, Ld. DR for the department has submitted that the size of the land appurtenant to the dwelling unit must be reasonable, for the purpose of allowing of deduction u/s 54 of the Act. 13.....
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....t if the investment is allowed, in suchlike cases of large size open land, it was not going to serve the purpose of exemption allowed under the Act. 22. On perusal of section 54 of the Act, it is quite obvious that same pertains to profit on sale of property used for residence. Said property has been described within the section by stipulating that the same may be a building or land appurtenant thereto, but the same must be a residential house. 23. Nature of the original asset sold by the assessee was never an issue in the assessing proceedings. When it is so, the only other requirement to claim exemption u/s 54 of the Act was that the assessee purchased or constructed one residential house, within stipulated period with the amount of the Long Term Capital Gain got on sale of the original property. 24. The Assessing Officer and Learned CIT(A) did not allow the claim of the assessee-appellant, as in their view, the entire new asset is not a residential house, as construction in the total area of 92774.1439 Sq. Ft is too small i.e. 1490 Sq. Ft. i.e. only 1.6% of the entire land. 25. As noticed above, the contention raised by the Ld. AR for the appellant is that the assess....