2020 (1) TMI 310 - AT - Income Tax

Deduction claimed u/s 54 - Proof of construction in the village - assessee has claimed the deduction stating that the assessee along with his wife has jointly constructed a house at Kotada Jadodar Bhuj in Gujarat state - HELD THAT - In the instant case the assessee has sold the property consisting of site and Madras terraced building located at Sy.No.129 Block No.4 Plot No.21 22 with D.No.32-37-20 within the Greater Visakhapatnam Municipal Corporation limits Visakhapatnam for a consideration of Rs. 9, 00, 000/- along his wife. The total sale consideration of the assessee and his wife was Rs. 18, 00, 000/- which was received jointly by them and credited in the bank accounts as evidenced from the assessment order. The assessee submitted that the sum of Rs. 18 lakhs was used for construction and accordingly the said amounts were withdrawn from the bank account on various dates. The assessee submitted a certificate from Gram Panchayat confirming the construction of house property on the site owned by them earlier. The AO without making any enquiries disbelieved the claim of the assessee and disallowed the deduction claimed by the assessee which is unjustified according to our view. As per the certificate the house was constructed during the period 2007-08 and no approval was necessary in the village. The Sarpanch has signed the letter duly signed and stamped the certificate. If the AO did not believe the certificate or considered the same as bogus the AO ought to have made the enquiries and disproved the genuineness of the certificate issued by the Gram Panchayat. Since the assessee has furnished the required details and constructed the small house at the village where no approvals or permissions are necessary we do not find any reason to disallow the deduction claimed by the assessee u/s 54F. Accordingly we set aside the orders of the Ld.CIT(A) and delete the addition made by the AO. - Appeal of the assessee is allowed

Summary

Issues Involved:
Addition of deduction claimed under section 54 of the Income Tax Act.

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) denying the deduction claimed under section 54 of the Income Tax Act. The assessee sold a property and claimed deduction under section 54F for the construction of a house jointly with his wife. The Assessing Officer (AO) disallowed the deduction due to lack of evidence regarding the construction of the house, resulting in the addition of long-term capital gains. The Commissioner of Income Tax (Appeals) upheld the AO's decision, citing the Supreme Court's judgment in a similar case. The Tribunal noted that the assessee had sold the property with his wife and credited the sale proceeds to a joint bank account. The assessee provided a certificate from the Gram Panchayat confirming the construction of the house. The Tribunal found the AO's disbelief of the certificate unjustified, as no further inquiries were made to disprove its genuineness. The Tribunal concluded that since the assessee provided necessary details and constructed the house in a village where no approvals were required, the deduction under section 54F should not have been disallowed. Consequently, the Tribunal set aside the orders of the lower authorities and allowed the appeal of the assessee.

Judgment Summary:
The Appellate Tribunal ITAT Visakhapatnam ruled in favor of the assessee, allowing the appeal against the disallowance of deduction claimed under section 54F of the Income Tax Act. The Tribunal found that the assessee had provided sufficient evidence, including a certificate from the Gram Panchayat, to support the construction of the house for which the deduction was claimed. The Tribunal criticized the AO for not conducting further inquiries to verify the genuineness of the certificate and concluded that the deduction should not have been disallowed. As a result, the Tribunal set aside the orders of the lower authorities and deleted the addition made by the AO.