2012 (12) TMI 689 - AT - Income Tax

Exemption u/s 54F - investment in residential house - period of limitation of 3 years - Long term capital gain - held that - It is the say of the assessee that the delay in the construction is attributable to the builder and the assessee cannot be penalized for something which is not in his hand. - We do not agree with this contention because as per the entries in the certificate of commencement, the approval was given on 7.9.2010 for C Wing whereas the assessee has filed return on 22.2.2007 claiming full exemption u/s. 54F of the Act, when on that date neither the agreement for sale was entered nor the C wing s 9th floor was approved by the local authority. The assessee has relied upon various judicial decisions claiming that the contiguous units are to be treated as one residential unit. - Exemption denied - Decided against assessee.

Summary

Issues:
Challenge to the correctness of the order of the Ld. CIT(A) regarding the denial of exemption u/s. 54F of the Act for assessment year 2006-07.

Detailed Analysis:

1. Factual Matrix and Assessment by AO:
The assessee claimed exemption u/s. 54F for investing in residential property. The Assessing Officer (AO) observed discrepancies in the claim, including non-appropriation of capital gains before the due date, lack of agreements, and investment in multiple flats instead of one house as per Sec. 54F.

2. Assessee's Response and AO's Rejection:
The assessee defended the claim, citing compliance with investment requirements, allotment letters from the builder, and plans to merge adjacent flats. However, the AO rejected these arguments, citing non-compliance with legal provisions and lack of proper documentation.

3. Appeal to CIT(A) and Dismissal:
The assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who upheld the AO's decision. The CIT(A) emphasized the non-construction within the stipulated time, lack of evidence for merging flats, and overall ineligibility for the deduction u/s. 54F.

4. Arguments Before ITAT:
The assessee further appealed to the Income Tax Appellate Tribunal (ITAT), reiterating the investment details, timeline of payments, and interpretation of Sec. 54F provisions. The ITAT considered both parties' submissions and reviewed the lower authorities' orders.

5. ITAT's Decision and Rationale:
The ITAT analyzed the factual timeline, including the surrender of tenancy rights, allotment letters, and construction progress. It noted discrepancies in approvals, agreements, and lack of completion of the residential units. The ITAT emphasized the importance of meeting statutory requirements before claiming exemptions.

6. Conclusion and Dismissal of Appeal:
After a thorough review, the ITAT affirmed the CIT(A)'s decision, dismissing the assessee's appeal. The ITAT concluded that the assessee failed to meet the conditions specified under Sec. 54F, highlighting the importance of timely compliance and substantial evidence to support exemption claims.

In summary, the ITAT upheld the denial of exemption u/s. 54F due to the assessee's failure to meet statutory requirements and provide sufficient evidence to support the claim, emphasizing the need for strict adherence to legal provisions in tax matters.