2019 (1) TMI 1076 - AT - Income Tax

Claim for deduction u/s 54F on construction of residential house - exemption u/s 54F was claimed by the assessee for construction of house property and the purchase of land was not coming under the purview of construction of house property - assessee has filed additional evidence in the form of completion certificate for the residential house property constructed by the assessee issued by the concerned Gram Panchayat on 31.03.2014 to support and substantiate the claim - Held that - Since the said additional evidence is a relevant evidence to adjudicate upon the issue involved in the case of the assessee related to its claim for deduction under section 54F in respect of the cost of construction of the residential property and even the D.R. has not raised any objection for admission of the same the additional evidence filed by the assessee is admitted. As rightly contended by the D.R. the AO is required to give an opportunity to verify the said additional evidence which is filed by the assessee for the first time before the Tribunal. We accordingly restore this issue to the file of the Assessing Officer for deciding the claim of the assessee for deduction under section 54F in respect of cost of construction of residential house property afresh in the light of the additional evidence filed by the assessee. Additional ground claiming that for computing the deduction under section 54F the actual net consideration received in respect of the original asset should be taken into consideration and not the deemed consideration as adopted by invoking the provisions of section 50C. We have admitted this additional ground raised by the assessee keeping in view the decision of the Hon ble Supreme Court in the case of National Thermal Power Co. Limited 1996 (12) TMI 7 - SUPREME COURT . The Assessing Officer is accordingly directed to consider the claim of the assessee while re-computing the deduction allowed to the assessee under section 54F. Reopening of assessment - scope of powers of first appellate authority issuing notice - Held that - In the case of R.S. Davey vs.- CIT 1981 (8) TMI 31 - CALCUTTA HIGH COURT a similar issue relating to scope of powers of first appellate authority had arisen for the consideration and it was held that the ld. CIT(Appeals) was not competent to give to the Assessing Officer the direction in respect of an assessment year which was not in appeal before him. Respectfully following the said decision of the Hon ble jurisdictional High Court we cancel the direction given by the ld. CIT(Appeals) to the Assessing Officer in respect of the assessment year 2015-16 which was not in appeal before him and allow Ground of the assessee s appeal.

Summary

Issues involved:
1. Disallowance of deduction under section 54F by Assessing Officer.
2. Disallowance of deduction for cost of construction of residential house property.
3. Direction to tax capital gains for A.Y. 2015-16 by ld. CIT(Appeals).

Issue 1: Disallowance of deduction under section 54F by Assessing Officer:
The Assessing Officer disallowed the assessee's claim for deduction under section 54F, restricting it to a lower amount. The claim was related to the exemption of long-term capital gain arising from the sale of property. The Assessing Officer held that the exemption claimed for the purchase of land did not fall under the purview of "construction of house property." Additionally, the cost of construction of the residential house property was disallowed as the evidence of completion within the stipulated time was not provided by the assessee. The total income was determined accordingly.

Issue 2: Disallowance of deduction for cost of construction of residential house property:
The ld. CIT(Appeals) allowed the claim of the assessee for deduction under section 54F regarding the investment made in purchasing a plot for constructing a residential house. This decision was based on a CBDT Circular clarifying that the cost of the plot could be included in the cost of the residential house for claiming the deduction. However, the claim for deduction related to the cost of construction of the house property was not allowed due to lack of evidence showing completion within the prescribed time. The disallowed amount was sustained to a lower extent by the ld. CIT(Appeals.

Issue 3: Direction to tax capital gains for A.Y. 2015-16 by ld. CIT(Appeals):
The ld. CIT(Appeals) directed the Assessing Officer to tax the capital gains for A.Y. 2015-16 due to the non-completion of the house construction within the prescribed period. The direction was challenged by the assessee, arguing that it exceeded the jurisdiction of the ld. CIT(Appeals) as the assessment year was not under appeal during the proceedings. The Tribunal found that the ld. CIT(Appeals) did not have the authority to give such a direction for an assessment year not in appeal. Citing relevant case law, the Tribunal canceled the direction given by the ld. CIT(Appeals) and allowed the ground raised by the assessee.

In conclusion, the Tribunal allowed the appeal of the assessee, directing the Assessing Officer to reconsider the deduction under section 54F in light of additional evidence provided by the assessee. The Tribunal also canceled the direction of taxing capital gains for A.Y. 2015-16, as it was beyond the jurisdiction of the ld. CIT(Appeals). The order was pronounced in an open court on January 18, 2019.