AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 1498
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....long with questionnaire were issued and served on the assessee. In response, ld. AR of the assessee submitted the relevant information through ITBA Portal. Further AO observed that during the relevant assessment year, assessee has income from capital gain and income from other sources. 3. During assessment proceedings, the AO verified the investments made by the assessee in the property and not found discrepancies as per the mandate of CASS. Further AO observed that in computation of capital gains for the AY 2013-14, the assessee has claimed deduction u/s 54F amounting to Rs. 21,92,00,000/- on account of deposit made by her in the capital gain account. Since the above deduction was claimed by the assessee out of the sale of shares held by her and the above deposit of capital gain was utilized by her in the investment in capital assets. Since the assessee has claimed the exemption u/s 54F, the AO proceeded to verify the above aspect whether the assessee has rightly claimed the exemption u/s 54F in AY 2013-14 and as per the provisions of section 54F, the limitation period ends in this assessment year. 4. At this juncture, the AO has proceeded to verify the exemptions claimed by....
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....0 dated 10.12.2020 held as under:- "We have gone through the record in the light of the submissions made on either side. There is no dispute that the case of the assessee was picked up for scrutiny under the category of limited scrutiny. This fact is established from the assessment order and also the notice issued under section 143(2) of the Act. It is also not in dispute that the CBDT issued the instructions relied upon by the assessee and for the sake of convenience we extract the relevant portions thereof hereunder: - "CBDT Instruction No. 7/2014 The reason(s) for selection of cases under CASS are displayed to the Assessing Officer in AST application and notice u/s 143(2), after generation from AST, is issued to the taxpayer with the remark ".Selected under Computer Aided Scrutiny Selection (CASS)". The functionality in AST is being modified suitably to flag the reasons for scrutiny selection in AIR/CIB/26AS cases. This functionality is expected to be operationalized by 15th October, 2014. Further, the Assessing Officer while issuing notice under section 142(1) of the Act which is enclosed with the first questionnaire would proceed to verify o....
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....gularities. Amongst other irregularities, it was found that no reasons had been recorded for expanding the scope of limited scrutiny, no approval was taken from the PCIT for the conversion of the limited scrutiny case to a complete scrutiny case and the order sheet was maintained very perfunctorily. This gave rise to a very strong suspicion of mala fide intentions." 9. The above CBDT instructions and the letter clearly establish that it's not open for the learned Assessing Officer to travellers beyond the reason for selection of the matter for limited scrutiny and on that aspect the assessment order in this case is in accordance with the instructions governing the field. In such circumstances it has to be seen whether the Ld. PCIT is justified in holding the assessment order to be erroneous insofar as it is prejudicial to the interest of the Revenue for the learned Assessing Officer not considering the aspects which are beyond the purview of limited scrutiny. 10. In the Deccan Paper Mills Co. Ltd. vs. CIT in ITA 1013 AND 1635/PUN/2015, Pune Bench of the Tribunal held, that, "40. Now, coming to the aspect of book profits which was considered by the Commiss....
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.... matters we are of the considered opinion that when the assessing officer is bound to follow the CBDT instructions and while following such instructions and after verification of the material furnished by the assessee on the aspect covered by the limited scrutiny, is not open for the Ld. PCIT to say that not adverting to the other aspects of the competition would render the assessment order erroneous and prejudicial to the interest of the Revenue. With this view of the matter we find that the impugned order cannot be sustained and, therefore, the same is liable to be quashed. We accordingly quash the same." 8. Respectfully following the above decision, in our considered view, the AO has proceeded to touch upon the issue which was not the mandate of the limited scrutiny and he proceeded to make the addition without converting the limited scrutiny into complete scrutiny. This itself is in violation of jurisdiction of the AO. Accordingly, additional ground raised by the assessee is valid and accordingly, we allow the additional ground raised by the assessee. 9. Be that as it may, we shall also proceed to adjudicate the issue on merits. 10. During assessment proceedings, the A....
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....gain scheme before the statutory limit of three years and also submitted that the new asset purchased by the assessee was in a dilapidated condition when it was purchased on 09.09.2015 and had to be demolished to be reconstructed again which she did in the time span of three years. Since the assessee has not submitted maps or plan to substantiate the above, AO rejected the submissions of the assessee and further observed that construction needs to be completed by 17.12.2015 while in the case of assessee she failed to even commence the construction of the abovesaid property. By relying on the provisions of section 54F, he proceeded to reject the submissions of the assessee and proceeded to make the addition u/s 45 of the Act. Further with regard to acquiring permission from competent authority, MCD, on 17.12.2015 in order to commence the construction of the property, he rejected the same with the observation that the assessee had only applied for permission on 16.09.2015 well within three years time limit, however she could not have begun the construction on the property without the approval of the plan of the MCD which came only on 23.12.2015, the assessee was asked to submit the a....
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.... account opened under the aforesaid scheme. The amount deposited under capital gain scheme was invested by the assessee in purchase of land for construction of a residential property at N 50, Panchsheel Park, New Delhi on 09.09.2015. However, Ld. AO taxed this amount in the year under consideration vide assessment order dated 26.l2.20 18 on the ground that the assessee had not completed the construction of the house within three years as per section 54F of the Act. Further, Ld. CIT(A) confirmed the addition in impugned order dated 09.08.2024. Hence the present appeal. The case of the assessee is that she sold shares on 20.12.2012 and deposited capital gain in bank account under capital gain scheme and further she started construction of a residential property. For this purpose, she purchased a residential property on 09.09.2015 which was uninhabitable at the time of purchase. Therefore, assessee demolished the same and obtained approval for the construction from the local authority and commenced construction which is evident from the following voluminous evidence: - PB 20-40 is the copy of purchase deed dated 09.09.2015 of subject house property at N 50, ....
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....00 11.10.2015 199 Visarg 414,000.00 09.11.2015 200 Visarg 314,000.00 12.11.2015 198 Visarg 514,000.00 22.11.2015 195 D.D. Constructions 575,875.00 Total 221,242,405.00 PB 203 is the copy of completion certificate of MCD dated 31.03.2017 which confirms that the subject residential property was constructed after its demolition. PB 204-205 is the copy of show cause notice dated 21.12.2018 stating that "After the show cause dated 23.10.2018 you changed your statement and asserted that you have constructed the property" PB 206-208 is the copy of assessee's reply dated 25.12.2018 before Ld. AO against the show cause notice stating that there was never an intent to misguide and always submitted the details and documents in support of construction and construction activity of clearing the site, getting material for construction etc. had already started. PB 254-270 is the copy of written submission before Ld. CIT(A) reiterating the above-mentioned facts and supported the submission with pictures taken before the commencement of construction showing that existing depleted constru....
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....ucted after its demolition. 2. Ld. AO mentioned in para 5.9.1 at page 14 of the assessment order that assessee failed to submit any maps or plans to substantiate the depleted condition of the original purchased property. In this regard it is submitted that Form A (PB 40) of deed showing that year of construction is 0.7 which means that the purchased property was constructed somewhere between 1970-79. Further construction was immediately demolished by assessee which also proves that the existing house was depleted and uninhabitable. Assessee got fresh building plan sanctioned and took permission from various authorities which has been discussed by Ld. AO in assessment order. PB 271-273 are the copies of pictures taken before the commencement of construction to show that property was in depleted condition. PB 274-300 are the copies of bills related to the construction of subject residential property. PB 203 is the copy of completion certificate of MCD dated 31.03.2017. PB 186-187 is the copy of grant of permission of National Monuments Authority for construction of property. PB 188-190 is the copy of letter of permission ....
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....essee applied for the approvals to these agencies immediately on acquiring the plot and simultaneously started the construction activities. The application to National Monumental Authority was made on 16.09.2015 that is within 7 days of acquiring the plot." PB 186-187 is the copy of grant of permission of National Monuments Authority (Government of India, Ministry of Culture) dated 07.12.2015 in respect of construction of subject residential property stating that it is in response of assessee's letter dated 16.09.2015. Reliance can be placed on following judicial decisions: - * CIT v. Sambandam Udaykumar, HC (Kamataka), [2012] 19 taxmann.com 17 "Section 54F is a beneficial provision for promoting construction of residential house, and, therefore, it has to be construed liberally for achieving purpose for which it was incorporated in statute. Whether once it is demonstrated that consideration received on transfer of a capital asset has been invested either in purchase or in construction of a residential house, even though these transactions are not complete in all respects as required under law, same would not disentitle assessee from benefit ....
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....issions and material placed on record. We observe that no doubt, the assessee has sold the shares on 20.12.2012 and claimed the deduction u/s 54F by depositing the amount in the bank account under capital gain scheme. The only issue under consideration before us is that the assessee has utilized the abovesaid fund before expiry of three years from the statutory time limit available for construction of the property from the date of transfer of original asset. The assessee has utilized the funds deposited under capital gain scheme as under :- Date PB No. Vendor Name Amount (Rs. 07.08.2015 201 Visarg 228,000.00 09.09.2015 48 Land 219,196,530.00 11.10.2015 199 Visarg 414,000.00 09.11.2015 200 Visarg 314,000.00 12.11.2015 198 Visarg 514,000.00 22.11.2015 195 D.D. Constructions 575,875.00 Total 221,242,405.00 17. We observe from the record submitted before us that assessee had purchased a land and building on 09.09.2015 which is in uninhabitable residential property at Panchsheel Park, New Delhi by paying an amount of Rs. 21,91,96,530/- from the deposited amount under capital ....
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....which it was incorporated in the statute. Where once it is demonstrated that consideration received on transfer of a capital asset has been invested either in purchase or in construction of a residential house, even though these transactions are not complete in all respect as required under law, the same would not disentitle assessee from benefit of exemption u/s 54F of the Act. In the given case also, the assessee has utilized the total amount earmarked under the capital gain scheme and the same was utilized by the assessee within the statutory period of three years for the purpose of construction and the project was delayed due to acquiring the relevant permission and completion of the construction. No doubt, there is some delay on the part of the assessee for finalizing and completing the purchase of an old residential property for the purpose of construction on the house. In this case, what is relevant is, the assessee has utilized all the funds earmarked for the purpose of construction of the property within the period of limitation as held by the Hon'ble Karnataka High Court in the case of CIT vs. Sambandam Udaykumar (supra) u/s 54F is a beneficial provision for promoting con....