2018 (8) TMI 59 - AT - Income Tax

Addition on account of long term capital gain - disallowing the claim of the assessee on account of exemption u/s 54F - assessee had neither purchased nor constructed any house and the amount of sale consideration was utilized in purchase of plot which cannot be treated as residential house - Held that - No doubt the provisions of section 54F should be construed liberally and it is also held in various decisions that where substantial amount of the capital gain has been invested for construction of the house property, exemption u/s 54F may be allowed notwithstanding that the property is not fully complete or that the house is not in habitable condition. However, in the instant case, the assessee could not produce the contractor M/s Manya & Bhuwan Infrastructure (P) Ltd. who had constructed the house and the architect who had issued the certificate certifying the cost of construction of 903 sq.ft. on the said plot of ₹ 8,57,850/- for the examination of the Assessing Officer to find out about the completion of the construction - restore the issue to the file of the Assessing Officer with a direction to give one more opportunity to the assessee to produce the contractor M/s Manya & Bhuwan Infrastructure (P) Ltd. and the architect M/s Khurshid Ahmed & Associates for examination of the Assessing Officer. The Assessing Officer upon satisfaction may allow the deduction u/s 54F of the I.T. Act as per fact and law. Thus hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes. Chargeability of interest u/s 234B - Held that - CIT(A) has not adjudicated the issue by passing a speaking order on account of chargeability of interest u/s 234B. Since the deduction u/s 54F has been restored to the file of the Assessing Officer, therefore, I deem it proper to restore this issue also to the file of the Assessing Officer with a direction to levy interest u/s 243B as per law

Summary

Issues Involved:
1. Denial of exemption claimed under Section 54F of the Income Tax Act.
2. Levy of interest under Section 234D of the Income Tax Act.
3. Levy of interest under Section 234B of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Denial of Exemption Claimed Under Section 54F:
The primary issue revolves around the denial of exemption under Section 54F of the Income Tax Act, 1961, amounting to ?60,62,443/-. The assessee had sold a property and claimed exemption on the long-term capital gain by investing in a plot and constructing a house. The Assessing Officer (AO) disallowed the exemption on the grounds that the assessee neither purchased nor constructed a residential house within the stipulated time. The AO's decision was based on the fact that notices issued to the contractor and architect were returned unserved, and there was no evidence of the house being habitable.

The Tribunal noted that the assessee had invested substantial amounts in the plot and construction. The assessee provided water bills and a valuation report but failed to produce electricity bills or approval from the Noida Development Authority. The Tribunal acknowledged that Section 54F should be construed liberally, allowing exemption even if the house is not fully complete or habitable. However, the Tribunal found it necessary for the assessee to produce the contractor and architect for verification. The issue was remanded to the AO to give the assessee another opportunity to substantiate the claim with the required evidence.

2. Levy of Interest Under Section 234D:
The second issue pertains to the levy of interest under Section 234D of the Income Tax Act. The assessee contended that the interest levied was excessive. The Tribunal restored the issue to the AO to charge interest as per the law, ensuring it aligns with the factual and legal framework.

3. Levy of Interest Under Section 234B:
The third issue involves the levy of interest under Section 234B. The assessee argued that interest should be calculated only up to the date of the original assessment order, not the reassessment order. The Tribunal referred to judicial precedents, including the Supreme Court's decision in Modi Industries Ltd., which defined "regular assessment" as the original assessment. The Tribunal directed the AO to levy interest under Section 234B in accordance with the law, considering the judicial precedents.

Conclusion:
The Tribunal allowed the appeal partly for statistical purposes, remanding the issues related to Section 54F and the levy of interest under Sections 234D and 234B to the AO for reconsideration and appropriate action based on the provided guidelines and judicial precedents. The Tribunal emphasized the need for a liberal interpretation of Section 54F while ensuring the assessee substantiates the claim with adequate evidence.