2014 (7) TMI 988 - AT - Income Tax

Deduction u/s 54F Computation of total income Compensation of land building from National Highway Securities - Held that - The AO has allowed deduction on account of cost of acquisition of land and no deduction u/s.54F was given on the amount invested in construction of residential house - The compensation money received by him along with the loan amount was invested in the same building and when he constructed the house, there was no provision of plant and estimate - assessee has constructed the house which is evident from the copy of certificate of valuation by Municipal Engineer and moreover, assessee has requested the AO to call for the Engineer, who has given the certificate - AO has not called any information from the Municipality and he has disallowed the claim - the burden was shifted upon the AO to verify the genuineness of the certificate, which he has not done - no further opportunity may be given to the AO and the claim of the assessee u/s.54F of the Act is allowed Decided in favour of Assessee.

Summary

Issues:
- Computation of total income considering deductions under section 54F of the Income Tax Act, 1961.

Analysis:
1. The appeal was against the order of the CIT(A) for the assessment year 2003-04 regarding the assessment under section 143(3)/254 of the Income Tax Act, 1961. The main issue was to correctly compute the total income after considering deductions under section 54F of the Act.

2. The assessee received compensation for land acquisition and the capital gain was computed by the Assessing Officer at a certain amount. The CIT(A) directed the AO to recompute the capital gain by considering the indexed cost of acquisition of the house. The Tribunal set aside the matter to verify the certificate furnished by the Muncipal Engineer for allowing deduction under section 54F to the assessee.

3. The Assessing Officer issued a notice to the Executive Engineer for details regarding the construction of the house. The Engineer denied permission for construction, leading to the disallowance of the deduction under section 54F. The CIT(A) upheld the decision, stating that without permission, the claim was not allowable.

4. The Tribunal noted discrepancies in the AO's order, where no mention was made regarding the certificate furnished by the Municipality as directed. The AO allowed deduction for land acquisition but not for the construction of the residential house. The Tribunal found that the AO did not verify the genuineness of the certificate, shifting the burden to the AO. Thus, the claim under section 54F was allowed.

5. The Tribunal allowed the appeal filed by the assessee, emphasizing the importance of verifying the genuineness of certificates and granting deductions under section 54F based on valid documentation and evidence.

This detailed analysis of the judgment highlights the key issues, the sequence of events, and the Tribunal's decision in allowing the appeal based on the verification of documents and the proper application of deductions under section 54F of the Income Tax Act, 1961.