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2018 (12) TMI 121 - AT - Income TaxRectification of mistake 154 - exemption u/s 54F - Held that - Invoking of the provisions of section 154 of the income tax act it is apparent that the learned assessing officer was not considering the issue of the cost of the residential house, but the provisions of section 54EC of the act. We are of the opinion that even in the show cause notice the AO has not noted that the assessee has shown the incorrect cost of residential house property. AO is to pass detailed order to show that certain cost of gadgets have been included by the assessee in the cost of residential house property for claiming exemption under section 54F of the act. We are of the opinion that the impugned adjustment that is proposed to be made by the learned assessing officer to the total income of the assessee is not on account of mistake apparent from record. In view of this we are not inclined to uphold the order of the learned assessing officer so far as it relates to the adjustment on account of the capital gain is chargeable to tax by tweaking the cost of the residential house property. Accordingly, the ground number 1 of the appeal is allowed. Whether deduction u/s 54F will include the expenditure incurred by the assessee on account of heater, air conditioner and home kitchen - Held that - As we have already quashed the rectification notice issued by the assessing officer to the extent of adjustment to the capital gain computed by the assessee. Accordingly, same is dismissed.
Issues Involved:
1. Adjustment to income under section 154 of the Income Tax Act. 2. Reduction of exemption under section 54F of the Income Tax Act. Issue-wise Detailed Analysis: 1. Adjustment to Income under Section 154 of the Income Tax Act: The first ground of appeal concerned whether the adjustment to the income of the appellant was a mistake apparent from the record and thus within the scope of section 154 of the Income Tax Act. The assessee had filed an original return and a revised return, with the assessment under section 143(3) being based on the original return. The AO issued a notice for rectification under section 154, citing two reasons: the original assessment did not consider the revised return, and there was a discrepancy in the computation of long-term capital gains under section 54EC. The assessee accepted the adjustment to reflect the revised return but contested the adjustment related to long-term capital gains. The AO rejected the explanation and passed an order under section 154, which was contested by the assessee on the grounds that the adjustment was beyond the scope of section 154. The Commissioner of Income Tax (Appeals) directed the AO to re-examine the claim under section 54F, leading to a reassessment that excluded certain costs from the exemption under section 54F. The Tribunal held that the issue of the cost of residential house property was not a mistake apparent from the record and thus not within the scope of section 154. The AO's detailed examination of the cost of construction indicated that the issue was debatable, and therefore, the provisions of section 154 were not applicable. The Tribunal allowed the first ground of appeal, quashing the rectification notice to the extent of the adjustment to the capital gain. 2. Reduction of Exemption under Section 54F of the Income Tax Act: The second ground of appeal concerned the reduction of the exemption claimed under section 54F by excluding ?12,31,260 incurred for various gadgets from the total cost of construction. The AO had disallowed this amount, considering it not covered under section 54F, which was upheld by the Commissioner of Income Tax (Appeals). The Tribunal, having already quashed the rectification notice related to the adjustment of capital gains, found the second ground infructuous. Consequently, the Tribunal dismissed the second ground of appeal. Conclusion: The appeal was partly allowed, with the Tribunal quashing the rectification notice under section 154 regarding the adjustment of capital gains but dismissing the ground related to the exclusion of certain costs from the exemption under section 54F. The order was pronounced in the open court on 29/11/2018.
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