2014 (5) TMI 264 - AT - Income Tax

Non-grant of deduction u/s 54F of the Act Capital gain on landed property Details of expenses on construction not furnished - Held that - The provisions of section 54F are that if the assessee being an individual or HUF, the capital gain arises from transfer of any long term capital asset not being a residential house and the assessee has, within a period of one year before or two years after the date on which the transfer takes place, purchases or, has within a period of three years after that date constructed a residential house, the capital gain will not be charged to the extent of cost of new asset if the entire net consideration is invested or proportionate to the extent of new asset bears to the net consideration if the conditions laid down u/s. 54F are fulfilled the assessee is entitled for deduction u/s. 54F - the onus is on the assessees to prove that the claim made by them u/s 54F is in accordance with law - there is lack of enquiry from the side of the AO thus, the matter is remitted back to the AO for fresh examination Decided in favour of Assessee.

Summary

Issues:
- Non-granting of deduction u/s. 54F of the Income-tax Act, 1961 for assessment year 2008-09.

Detailed Analysis:
The judgment by the Appellate Tribunal ITAT Hyderabad involved four appeals by different assessees challenging the orders of the CIT(A) regarding the denial of deduction u/s. 54F of the Income-tax Act, 1961 for the assessment year 2008-09. The common grievance in all appeals was the non-granting of the deduction, which led to the appeals being clubbed and heard together for convenience. The assessees claimed the deduction on the capital gain earned from the sale of landed property to the DFL Group of Companies. However, the lower authorities denied the deduction as the assessees failed to provide details of expenditure incurred on the construction of the building. The assessees argued that they did not maintain detailed construction expenditure records and that the expenditure was reflected by withdrawals from bank accounts, which was not accepted by the lower authorities.

During the proceedings, the learned AR representing the assessees submitted that the available material suggested the utilization of the sale consideration for building construction and requested the Assessing Officer to re-examine the issue. Additionally, a building plan was submitted as supporting evidence. On the other hand, the learned DR relied on the lower authorities' orders. The Tribunal considered the provisions of section 54F, which allow for a deduction if certain conditions are fulfilled, placing the onus on the assessees to prove their claims. In light of the arguments presented, the Tribunal decided to remit the issue back to the Assessing Officer for fresh examination, emphasizing that the assessees must cooperate by providing necessary evidence to demonstrate compliance with section 54F. Mere withdrawals from bank accounts were deemed insufficient to prove construction, and the actual transactions during the prescribed period needed to be substantiated. The Tribunal clarified that if the provisions of section 54F were met, the deduction should be granted, reiterating that the burden of proof rested on the assessees. The Assessing Officer was directed to provide a reasonable opportunity for the assessees to present their case.

Ultimately, the Tribunal allowed the assessees' appeals for statistical purposes, with the order pronounced in open court on 31st August 2012.