2017 (12) TMI 998 - AT - Income Tax

Claim u/s 54 with regard to second house purchase disallowed - Held that - As the assessee was allotted two flats on two different stories. It is not the case of the assessee that both the flats on different floors were used as one residential house. Naturally it could not have been so for the reason of these two flats situated on different stories can not constitute one house. CIT(A) was justified in restricting the benefit of exemption u/s 54 only in respect of one flat. This ground is not allowed. See case of Smt. Syrtle D Souza Vs. Income Tax Officer, Ward 19(3)(4), Mumbai 2012 (9) TMI 118 - ITAT MUMBAI - Decided against assessee

Summary

Issues:
1. Validity of order passed under section 147/144 of the Income Tax Act, 1961.
2. Disallowance of a portion of the cost of acquisition.
3. Allowance of benefit under section 54 for the purchase of a second house.

Issue 1: Validity of Order Passed under Section 147/144:
The appeal challenged the order passed by the CIT(A) confirming the action of the Assessing Officer under sections 147/144 of the Income Tax Act, 1961. The appellant argued that the order was void ab initio and should be quashed. However, the grounds related to this issue were not pressed during the hearing and were dismissed.

Issue 2: Disallowance of a Portion of the Cost of Acquisition:
The appellant contested the adoption of the cost of acquisition at ?2,12,250 by disallowing an amount of ?4,04,737. The specific grounds related to this issue were also not pressed during the hearing and were dismissed.

Issue 3: Allowance of Benefit under Section 54 for Second House Purchase:
The primary issue revolved around the denial of the benefit of ?7,25,630 claimed by the assessee under section 54 for the purchase of a second house. The CIT(A) examined this claim and allowed a deduction of ?1,51,030 for Stamp Duty and Registration charges related to the first property. However, the further deduction of ?7,25,630 for the second house purchase was not allowed. The CIT(A) held that the exemption under section 54 is applicable only for the purchase of one new house property, even before the specific amendment introduced in section 54 with effect from 01-04-2015. This view was supported by judicial decisions. The ITAT Mumbai Bench and the Punjab & Haryana High Court had previously ruled similarly on the matter. Considering the legal precedents and the factual aspects, the appellant's claim for the second house purchase was dismissed.

In conclusion, the ITAT Jaipur dismissed the appeal of the assessee, upholding the decisions made regarding the issues raised. The judgment provided detailed reasoning for each issue, citing relevant legal provisions and judicial precedents to support the conclusions reached.