2021 (2) TMI 1197 - AT - Income Tax

Entitlement for deduction u/s. 54F - AO denied exemption on the ground that construction was not completed within the period of 3 years - contention of the ld. AR is that though the construction was not fully completed, still the assessee is entitled for deduction - HELD THAT - In order to get benefit of deduction u/s. 54F, the assessee need not complete the construction of the house and occupy the same. It is enough if the assessee establishes that he had invested the entire net consideration within the stipulated period in the construction of a new house. The said view was taken in CIT v. Smt. B.S. Shantakumari 2015 (8) TMI 274 - KARNATAKA HIGH COURT followed by this Tribunal in the case of Smt. Babita Kemparaje Urs 2017 (10) TMI 581 - ITAT BANGALORE - Being so, in our opinion, the claim of the assessee is required to be allowed by the AO in the light of above judgments. Accordingly, we hold that assessee is entitled to deduction u/s. 54F of the act, even if the assessee has not completed the construction within the period of 3 years. However, for the limited purpose of quantification, we remit the issue to the file of AO. Addition u/s. 68 - assessee had taken loan from various parties but has not filed confirmation letters from the lenders of the loan - HELD THAT - These credits appear in the books of account of assessee and the assessee is liable to produce the proof regarding the identity of parties, genuineness of transaction and creditworthiness. Before us, the ld. AR submitted that the assessee filed the confirmation letter along with PAN before the CIT(Appeals) and the addition cannot be sustained. However, we find no adjudication by the CIT(Appeals) on this issue. In our opinion, it is appropriate to remit this issue to the file of the AO with a direction to the assessee to produce necessary evidence with all ingredients of section 68 about the identity, genuineness and capacity of the lender. Accordingly, this issue is remitted back to the file of Assessing Officer for fresh consideration. Appeal by the assessee is partly allowed for statistical purposes.

Summary

Issues:
1. Claim of deduction u/s. 54F for incomplete construction within the stipulated period.
2. Addition u/s. 68 regarding unconfirmed loans.

Issue 1: Claim of deduction u/s. 54F for incomplete construction within the stipulated period

The case involved the assessee who purchased land and started constructing a residential property but did not complete the building within three years. The AO denied the deduction u/s. 54F on this basis. The CIT(A) upheld the AO's decision. However, the ITAT held that the assessee had invested the sale consideration in construction within the stipulated period, entitling them to the deduction. Citing relevant judgments, the ITAT emphasized that completion and occupation of the house were not necessary; rather, the investment of the entire net consideration within the specified period was crucial. Relying on precedents, the ITAT directed the AO to allow the deduction u/s. 54F to the assessee, despite incomplete construction, remitting the issue for quantification.

Issue 2: Addition u/s. 68 regarding unconfirmed loans

The second issue pertained to the addition u/s. 68 of the Act concerning unconfirmed loans amounting to &8377; 38,85,074. The assessee had taken loans from various parties but failed to provide confirmation letters from lenders. Consequently, the AO made an addition, which was affirmed by the CIT(A). During the appeal, the assessee submitted that confirmation letters along with PAN were filed before the CIT(A). However, the ITAT noted the absence of a specific decision by the CIT(A) on this matter. Therefore, the ITAT remitted the issue back to the AO, instructing the assessee to furnish necessary evidence regarding the identity, genuineness, and creditworthiness of the lenders for fresh consideration.

In conclusion, the ITAT partially allowed the appeal for statistical purposes, granting the deduction u/s. 54F to the assessee despite incomplete construction within the stipulated period. Additionally, the ITAT remitted the issue of unconfirmed loans back to the AO for further examination and evidence submission.