2017 (11) TMI 1948 - AT - Income Tax

Deduction u/s.54 in respect of construction of a residential house - claim denied on the ground that the construction has not been completed till the date of assessment - action of the Ld. CIT(A) in holding that the Cost Inflation Index is to be applied from 01.04.1981 - HELD THAT - The property was originally owned by the assessee s grand-mother and in view of the provisions of Explanation-1(i)(b) to Sec.2(42A) has held that in determining the period for which any asset is held by assessee under a gift, the period for which the asset was held by the previous owner has to be included. The Revenue has not been able to dislodge the findings nor has any other decision on this issue been placed before us. This being so, as it is noticed that the Ld. CIT(A) has followed the decision of the Hon ble Bombay High Court in the case of Manjula J. Shah 2011 (10) TMI 406 - BOMBAY HIGH COURT we find no reason to interfere in the order of the Ld. CIT(A) on this issue. Construction of the residential house - A perusal of the capital gains account in the assessee s case with SBI shows that the first entry is of 27.07.2012 wherein there was a deposit of ₹ 25,000/- and then there are various other deposits. On 15.03.2013, there is a withdrawal of ₹ 90,12,733/- and subsequently another withdrawal of ₹ 5,01,500/- on 21.04.2014. A perusal of the order of the Ld.CIT(A) at Para No. 12 talks of deposits in Capital Gains Scheme Account of ₹ 95,30,000/-. However, the bank account mentioned in the said paragraphs completely varies. Further, as per the Paper Book, the capital gains account with SBI is shown as 32449616206. How the Ld.CIT(A) has treated the other bank accounts as capital gains account is unknown? The said capital gains account has shown in the Paper Book shows total deposit of nearly ₹ 96,21,714/-. How the Ld. CIT(A) has arrived at the figure of ₹ 95,30,000/- is also not coming out of any evidences? The Ld.AR has not been able to place before us any evidence to show that the residential house had been constructed. The Ld.AR was unable to explain, if the Completion Certificate was received on April 16, 2015, why the same had not been produced before the Ld. CIT (A)? However, no reply was given. Further, a perusal of the capital gains account, only two withdrawals one is ₹ 90,12,733/- and another is ₹ 5,01,500/-. How this amount was withdrawn, on the basis of what invoice is also not produced before us. This being so, as the assessee has not been able to produce any evidence to substantiate the construction of the residential house, the order of the Ld. CIT (A) on this issue is reversed and that of the AO restored. CIT (A) granting the relief to the assessee u/s. 80E - submission that the Ld. CIT (A) has entertained the fresh evidence in the form of the letter issued from SBI regarding the deposit of sum towards the educational loan account of Shri Guarav Syal and Shri Rajan Syal and the said evidence was not produced before the AO - HELD THAT - As the said evidence has not been produced before the AO for examination, in the interest of natural justice, the issue in respect of the deduction u/s.80E is restored to the file of the AO for re-adjudication after granting adequate opportunity to the assessee of being heard.

Summary

Issues:
1. Denial of deduction u/s.54 and u/s.80C by the AO.
2. Challenge by Revenue regarding Cost Inflation Index application.
3. Challenge by Revenue against direction to allow deduction u/s.54F.
4. Dispute over completion of construction for claiming deduction u/s.54F.
5. Granting relief to assessee u/s.80E based on fresh evidence.

Analysis:

1. The appeal involved the denial of deduction u/s.54 and u/s.80C by the Assessing Officer (AO). The AO disallowed the deduction u/s.54 for construction of a residential house due to incomplete construction. The Revenue challenged this denial, leading to a detailed submission by both parties. Ultimately, the Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) based on legal precedents, finding no reason to interfere with the order on this issue.

2. The Revenue challenged the application of the Cost Inflation Index by the Commissioner of Income Tax (Appeals) from 01.04.1981. The dispute arose from the acquisition date of a property received through family settlement. The Tribunal noted the reliance on a Bombay High Court decision and the absence of contradictory evidence. Consequently, the Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) on this issue.

3. Another issue involved the challenge by Revenue against the direction to allow deduction u/s.54F by the Commissioner of Income Tax (Appeals). The dispute centered around the completion of construction within the stipulated time frame for claiming the deduction. The Tribunal reviewed the evidence presented by both parties and found discrepancies in the documentation provided by the assessee. As a result, the Tribunal reversed the decision of the Commissioner of Income Tax (Appeals) and restored that of the AO.

4. The completion of construction for claiming deduction u/s.54F was a crucial aspect of the case. The assessee provided a Completion Certificate, but the Tribunal noted inconsistencies in the evidence presented, such as discrepancies in the capital gains account. The Tribunal found the lack of substantial evidence to prove the completion of the residential house construction, leading to the reversal of the Commissioner of Income Tax (Appeals) decision.

5. Lastly, the issue of granting relief to the assessee u/s.80E based on fresh evidence was raised. The Tribunal observed that the evidence was not produced before the AO for examination. In the interest of natural justice, the Tribunal restored this issue to the AO for re-adjudication, ensuring the assessee receives a fair opportunity to present their case.

In conclusion, the Tribunal partly allowed the appeal filed by the Revenue for statistical purposes, addressing various legal and factual disputes raised during the proceedings.