2015 (6) TMI 523 - AT - Income Tax

Disallowance of deduction claimed u/s 54F - Held that - Assessee has not submitted any documentary evidence to establish his claim that the amount withdrawn from the bank account out of the sale proceeds of immovable property were actually utilized for construction of new house. Therefore, in absence of even a single piece of evidence to indicate that assessee has utilized sale proceeds/capital gain in construction of new residential house, the claim of deduction u/s 54 cannot be accepted. No documentary evidence has been brought on record to establish the fact that assessee s father has given up his right over the property or assessee has actually made investment towards construction of house property. - Decided against assessee. Non-consideration of part of cost of acquisition of immovable property for computing capital gain - Held that - That assessee s claim of incurring an amount of ₹ 4,32,720 as cost of construction, requires to be considered afresh in view of additional evidence submitted by assessee by way of confirmation letter dated 28/01/12 from Parsn Foundation Pvt. Ltd. Accordingly, we set aside the order of ld. CIT(A) on this issue and remit the matter back to the file of AO for deciding the same afresh after due opportunity of hearing to assessee. - DEcided in favour of assessee for statistical purposes.

Summary

Issues:
1. Disallowance of deduction claimed u/s 54F of the Act
2. Non-consideration of an amount of Rs. 4,32,720 as part of cost of acquisition of immovable property for computing capital gain

Analysis:

Issue 1: Disallowance of deduction claimed u/s 54F of the Act
The appeal by the assessee was against the order of the ld. CIT(A)-IV, Hyderabad for the AY 2008-09. The first issue pertained to the disallowance of the deduction claimed u/s 54F of the Act. The assessee sold an immovable property during the relevant year and claimed a deduction u/s 54F. However, the Assessing Officer (AO) disallowed the deduction as the sale consideration was not deposited in the capital gain account scheme. The ld. CIT(A) upheld the disallowance stating that the assessee did not fulfill the conditions of section 54 and lacked evidence of constructing a house. The Tribunal observed that the agreement with the father did not confer legal ownership rights to the assessee over the property. The Tribunal dismissed the appeal, stating that there was no evidence to prove the utilization of sale proceeds for house construction, thereby denying the deduction u/s 54.

Issue 2: Non-consideration of an amount of Rs. 4,32,720 as part of cost of acquisition
The second issue revolved around the disallowance of Rs. 4,32,720 from being considered as part of the cost of acquisition. The AO recomputed the indexed cost of acquisition as the assessee failed to provide a basis for the cost of acquisition claimed. The assessee submitted details of the cost of acquisition, including construction costs paid to Parsn Foundation. The ld. CIT(A) rejected the claim, stating that the confirmation letter submitted did not prove how the amount was paid. The Tribunal allowed the additional evidence submitted by the assessee and remitted the matter back to the AO for fresh consideration after providing an opportunity for hearing to the assessee. The appeal was partly allowed for statistical purposes.

In conclusion, the Tribunal upheld the disallowance of the deduction claimed u/s 54F due to lack of evidence of utilizing sale proceeds for house construction. The matter regarding the cost of acquisition was remitted back to the AO for reevaluation based on the additional evidence submitted by the assessee.