2021 (2) TMI 184 - AT - Income Tax

Deduction u/s. 54 - Claim denied on the reason that assessee has not filed any supporting evidence to show the sale consideration was reinvested in new residential property - HELD THAT - Before us, the ld. AR pointed out to the copies of bank statements and submitted that the amount is accounted out of sale consideration towards construction of new residential house and deduction u/s. 54 has to be granted - assessee has not produced the relevant bills, vouchers and receipts towards incurring the cost of construction of new residential property. The assessee pleaded for an opportunity to produce the relevant evidence in support of the cost of construction of new residential house. Assessee submitted that the Schedule of property in original sale deed dated 7.4.2017 itself shows that assessee has purchased the Site No.20 at Cholanayakanahalli Village, Kasaba Hobli, Bangalore North Taluk situated within Ward No.96 Guddadahalli Main Road, BMP, measuring East to West Northern Side 37 ft, Southern Side 45 ft., and North to South Eastern side 78 ft. and on the Western side 94 ft. along with two squares A.C Sheet shed with electric amenity and the same was sold vide Sale Deed dated 29.8.2012. Being so, in our opinion, the CIT(Appeals) is not justified in holding that the property sold was not a residential house. We are of the opinion that the ld. AR s request for opportunity to produce all the relevant documents has to be accepted - we remit the entire issue to the file of the Assessing Officer for fresh consideration and direct the assessee to produce all the evidence in support of his claim for deduction u/s. 54. Appeal of the assessee is treated as allowed for statistical purposes.

Summary

Issues:
Claim of exemption u/s 54 of the Income-tax Act, 1961 - Denial of deduction by AO - Lack of evidence for cost of construction - Disallowance upheld by CIT(A) - Appeal before ITAT Bangalore.

Analysis:
The appellant's appeal before ITAT Bangalore challenged the order of the CIT(Appeals) denying the claim of exemption u/s 54 of the Income-tax Act, 1961. The appellant had sold a property and claimed exemption u/s 54 for the reinvestment in a new residential property. However, the AO disallowed the claim stating lack of evidence for the cost of construction. The appellant's submission of construction details without supporting vouchers or documents was not accepted by the AO. The AO determined the total income at ?66,14,070 due to the disallowance. The CIT(A) also upheld the disallowance, emphasizing the absence of evidence that the original asset sold was a residential house eligible for deduction u/s 54.

The CIT(A) noted that the appellant sold a vacant site, not a residential house, and thus, the deduction u/s 54 was not allowable. Despite the appellant's reliance on various documents, including sale deeds and valuation certificates, the CIT(A) found the deduction inapplicable. The CIT(A) highlighted that the construction, as per the valuation certificate, started and completed within specific timelines, but the appellant's claims regarding the property's status and assessments were not substantiated. The CIT(A) concluded that without evidence proving the original asset was a residential house, the deduction u/s 54 could not be granted.

During the ITAT hearing, the appellant's representative pointed to bank statements as evidence of using the sale consideration for the new residential property. However, the lack of bills, vouchers, and receipts for the construction costs remained a concern. The ITAT considered the issue and found that the CIT(A) had erred in determining the property sold was not a residential house. The ITAT directed the Assessing Officer to reevaluate the matter, emphasizing the appellant's opportunity to provide all necessary evidence supporting the claim for deduction u/s 54.

In conclusion, the ITAT allowed the appeal for statistical purposes, remitting the issue back to the Assessing Officer for a fresh consideration based on the appellant's submission of complete evidence regarding the cost of construction for the new residential property. The judgment highlighted the importance of substantiating claims with proper documentation to avail of statutory deductions under the Income-tax Act.