TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 999
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....d on 19.09.2016 to which the assessee sought adjournment on 26.09.2016. Thereafter, notice under section 142(1) along with a detailed questionnaire was issued on 11.01.2017 fixing the hearing on 23.01.2017. Subsequently, another notice under section 142(1) read with section 129 dated 19.06.2017 was issued fixing the hearing on 29.06.2017. The Assessing Officer recorded that neither the assessee nor his authorised representative attended or furnished submissions in response. A further notice under section 142(1) dated 27.10.2017, along with show cause for initiation of penalty under section 271(1)(b), fixed the hearing on 07.11.2017. On that occasion, the authorised representative attended, and the matter was discussed. The Assessing Officer required the assessee to produce the purchase deed of the new residential house for which deduction under section 54 was claimed, but no submission was filed on the date fixed. 2.2 The Assessing Officer noted that during the year the assessee had sold a residential house property for Rs. 83,00,000/- on 27.02.2015 and claimed deduction under section 54 of an equal amount, by treating the entire consideration as capital gain without claiming an....
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....on information under section 133(6) from Arcadia Developers that no such agreement existed and that Arcadia Developers had not carried out any construction on behalf of the assessee, the assessee was required to show cause why the deduction under section 54 should not be disallowed. 2.6 The Assessing Officer concluded that in the absence of a purchase deed or construction agreement, the ownership of the house could not be established and the payments were not shown to be relatable to the purchase of a residential house. Referring to the statutory conditions of section 54, the Assessing Officer held that the assessee had neither purchased a house within one year before or two years after the transfer nor constructed a house within three years after the transfer. The deduction of Rs. 83,00,000/- claimed under section 54 was therefore disallowed. 2.7 The assessee preferred an appeal before CIT(A). The CIT(A) recapitulated the Assessing Officer's findings that there was no sale deed or construction agreement with Arcadia Developers, that only a possession letter dated 05.01.2017 had been issued for furniture work, and that the occupancy or completion certificate by VUDA was dated....
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....ing from October 2015 onwards, which fell squarely within the statutory window, and that the aggregate payments clearly demonstrated substantial compliance with the conditions laid down under section 54. 3.1 In reply, the Departmental Representative placed strong reliance on the order of the Assessing Officer. It was submitted that the Assessing Officer had correctly applied the provisions of section 54 of the Act, which specifically require either the purchase of a residential house within one year before or two years after the date of transfer of the original asset, or the construction of a residential house within three years from such date. The Departmental Representative emphasised that in the present case, no registered sale deed or construction agreement had been executed in favour of the assessee within the statutory period, and that the possession letter produced was only for limited purposes of carrying out furniture work and could not confer ownership. It was thus contended that the assessee failed to fulfil the clear statutory mandate of section 54, and therefore the Assessing Officer was justified in disallowing the claim of deduction. 3.2 The matter was earlier ....
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....of "construction" for the purposes of section 54, and not mere "purchase." 4.2 In this regard, guidance is available from Circular No. 672 dated 16.12.1993 issued by the CBDT, which, though rendered in the context of allotments by the Delhi Development Authority, lays down a principle of general application. The circular clarifies that where an assessee acquires a flat in an under-construction scheme and makes payments linked to construction, such investment is to be treated as "construction" of a residential house for the purposes of section 54 and not as a "purchase." This rationale applies equally to cases of private builders and cooperative societies, as the essence of the transaction remains participation in the construction of the property rather than acquisition of a ready-built house. Judicial precedents have consistently held that where the assessee acquires a flat in an under-construction project from a builder, the investment is to be treated as "construction" and not "purchase. Turning to the facts, the assessee has placed material to show that payments to the builder commenced in October 2015 and possession, though limited, was handed over in January 2017. Further, ....