2014 (9) TMI 952 - AT - Income Tax

Exemption under section 54/54F denied - AO proceeded to complete the assessment under section 144 - CIT(A) held that the assessee ought to have furnished evidence to substantiate his claim and has failed to do so and therefore the action of the Assessing Officer had to be upheld - assessee challenged the validity of initiation of reassessment proceedings - Held that - In the proceedings before the Assessing Officer as well as the Commissioner of Income-tax (Appeals), the assessee was not properly represented. From the computation of total income filed by the assessee, it is seen that the assessee had clearly expressed his intention of constructing a residential house by pointing out construction of compound wall and levelling of the site had been carried out. It is also seen from the photographs filed before us that there exists a house constructed on the site purchased by the assessee. The question is as to, when the construction started. The date on which the construction is completed may not be very material in the light of decision of CIT v. Sambandam Udayakumar 2012 (3) TMI 80 - KARNATAKA HIGH COURT . The assessee has filed before us the letter which indicates construction activities having been carried out over the site purchased by the assessee within a period of three years from the date of transfer of the capital asset. In these circumstances, we are of the view that the assessee should be afforded an opportunity to explain its stand with supporting evidence. We therefore set aside the order of the Commissioner of Income-tax (Appeals) and remand the issue to the Assessing Officer for fresh consideration. The assessee will be at liberty to substantiate his case by filing necessary documentary or oral evidence. We are also of the view that the order of the Assessing Officer is silent as to the basis on which the proceedings under section 148 were initiated. A perusal of the reasons recorded before issue of notice under section 148 of the Act is necessary to find out, if the conditions precedent for initiating reassessment proceedings under section 147 of the Act are satisfied. We are of the view that even this issue should be left open to be agitated by the assessee in the set aside proceedings before the Assessing Officer. - Decided partly in favour of assesse for statistical purposes.

Summary

Issues:
1. Claim of exemption under section 54/54F of the Income Tax Act.

Detailed Analysis:
1. The only issue in this appeal was whether the Revenue authorities were justified in rejecting the assessee's claim for exemption under section 54/54F of the Income Tax Act. The assessee, an individual, sold a vacant site and purchased another site, claiming exemption for the capital gains. The Assessing Officer disallowed the exemption claimed by the assessee, leading to an appeal before the Commissioner of Income-tax (Appeals) and subsequently before the Tribunal.

2. The assessee contended that a major portion of the capital gain was reinvested in the purchase of a vacant site, and construction of a residential house had commenced within the stipulated period. The assessee argued that the construction did not need to be completed within three years, citing legal precedents. Additionally, a portion of the sale proceeds was deposited in a fixed deposit. However, the Commissioner of Income-tax (Appeals) rejected these contentions, emphasizing the lack of evidence provided by the assessee to support the claim for exemption.

3. The Tribunal observed that the assessee had expressed the intention to construct a residential house by detailing the construction activities carried out. Photographs of the property showing the existence of a house were also submitted. The Tribunal noted that the construction had started within the required timeframe, as indicated by the evidence presented. Consequently, the Tribunal set aside the Commissioner's order and remanded the issue to the Assessing Officer for fresh consideration, allowing the assessee to provide further evidence to support their case.

4. Furthermore, the Tribunal highlighted that the basis for initiating the reassessment proceedings under section 148 was not adequately explained in the Assessing Officer's order. The Tribunal emphasized the importance of reviewing the reasons recorded before issuing the notice under section 148 to ensure compliance with the necessary conditions for reassessment. This aspect was left open for the assessee to address during the reassessment proceedings.

5. Ultimately, the Tribunal partially allowed the appeal, granting the assessee the opportunity to substantiate their case with additional evidence and directing a reevaluation of the reassessment proceedings to ensure procedural compliance. The judgment was pronounced on September 12, 2014, by the Tribunal.