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2021 (2) TMI 1076 - AT - Income TaxDenial of deduction u/s 54F - assessee alongwith 4 other family members sold a piece of land - Out of the sale consideration received assessee had invested in construction of house property and accordingly claimed deduction u/s 54 - as per revenue report of valuation submitted by the assessee cannot be considered as evidence for verification of claim u/s 54F of the Act on the grounds that valuation was made by the valuer on 25/02/2015 instead of year 2011 and the contractor from whom the construction of house was gone done was not produced and source of investment in the house property was not explained or proved by the assessee HELD THAT - The valuer has determined the cost of construction on 30/07/2011 and the year of construction was certified by the valuer as 2010-11. The fact of construction being carried out has not been doubted by the lower authorities, thus, so far as the assessee has invested capital gain for construction within the time limit prescribed and the said fact has also been confirmed by the registered valuer, therefore, there was no reason to not consider the same. Had there been any doubts about the authenticity of the valuation report, then in that eventuality, the A.O. could have summoned the registered valuer or could have referred the matter to the DVO. Therefore, when once the valuation report of the registered valuer is submitted and the A.O. has not referred the same to the DVO then in that eventuality, the said report ought to have accepted by the A.O. Non-appearance of the contractor before the A.O. - We are of the view that the A.O. should not have taken an adverse inference merely on account of non-appearance of the contractor as practicably it is a common fact that a common man always hesitates in appearing before the Income Tax Department due to fear of being interrogated and getting into unwanted and prolonged litigation. As far as the allegation of the Revenue that the assessee has withdrawn cash to the tune of ₹ 4.00 lacs only till 31/07/2011 which was not invested in construction by that date nor deposited in the bank account notified under capital gain account scheme is concerned. In this regard, we noticed that Section 54(1) of the Act provides that if capital gain earned by assessee is invested within a period of one year before or two years after the date on which the transfer took place, purchased or has within a period of three years after that date, constructed one residential house in India, then exemption u/s 54 shall be available in respect of capital gain in accordance with clause (i) and (ii) thereof. We also draw strength from the decision of CIT vs Jagriti Agarwal 2011 (10) TMI 279 - PUNJAB AND HARYANA HIGH COURT as held that provision of section 139(4) is not an independent provision, but is related to time contemplated under the provision of section 139(4) of the Act. Accordingly, section 139(4) had to be read alongwith sub section (1) of section 139 and the due date for furnishing the return of income u/s 139(1) is subject to the extended period provided u/s 139(4). Hence, extended period u/s 139(4) has to be considered for the purpose of utilisation of the capital gain amount.Thus the assessee has made investment in construction of house property within the specified time, therefore, we direct the A.O. to allow exemption U/s 54F of the Act to the assessee. Addition on account of cash deposits made in the bank account of the assessee - HELD THAT - During the course of assessment proceedings, the AO sought explanation regarding source of such deposits which was duly replied by the assessee vide reply dated 23.02.2015 which is at page No. 13 and 14 of the paper book wherein it was categorically explained by the assessee that such sum was received by assessee as gift from his mother. In support of such claim, assessee furnished copy of bank pass book of his mother, wherein a sum of ₹ 12,35,000/- was reflecting as withdrawals on the same day. Copy of passbook showing withdrawals of the said amount has also been placed on record. Apart from this, the assessee had also submitted a declaration of gift of his mother - AO completely disregarded the same for the sole reason that the mother of the assessee is very old and assessee had discharged his onus by furnishing vital evidences in the shape of bank statement of his mother and declaration of gift. On the contrary, the A.O. could not place on record any cogent material to prove that the documents placed on record by the assessee are not reliable. Further, the A.O. also could not point out any discrepancy in the documents placed on record relied upon by the assessee. Thus we are of the view that the assessee has proved all the three conditions, i.e. (i) Identity (ii) Genuineness and (iii) creditworthiness of person from whom cash is explained to have been received. See NEK KUMAR VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX. 2004 (7) TMI 59 - RAJASTHAN HIGH COURT - Decided in favour of assessee.
Issues Involved:
1. Disallowance of Deduction under Section 54F. 2. Addition of ?11,38,750/- as income from undisclosed sources. Detailed Analysis: Issue 1: Disallowance of Deduction under Section 54F The assessee challenged the disallowance of ?5,78,571/- claimed as a deduction under Section 54F of the Income Tax Act, 1961. The facts reveal that the assessee, along with family members, sold a piece of land and invested the proceeds in constructing a house, claiming the deduction under Section 54F. However, the Assessing Officer (AO) disallowed the claim, citing discrepancies in the valuation report and the non-production of the contractor. Key Points: - The assessee sold land and invested in house construction. - A valuation report by a registered valuer was submitted but dated 25/02/2015, not contemporaneous with the construction year (2011). - The AO disallowed the claim due to the report's date and the non-appearance of the contractor. Tribunal's Findings: - The valuation report, although dated 25/02/2015, was based on construction rates from 2011. The Tribunal noted that the construction was completed in 2011, as confirmed by the valuer. - The Tribunal emphasized that the AO should have referred the matter to the DVO if there were doubts about the valuation report. - The Tribunal accepted the valuation report since the AO did not seek further verification from the DVO. - Regarding the non-appearance of the contractor, the Tribunal acknowledged the practical difficulties and did not consider it a valid reason for disallowance. - The Tribunal referred to Section 54(2), which allows the capital gain amount to be utilized within the extended period under Section 139(4), not just 139(1). Conclusion: - The Tribunal directed the AO to allow the deduction under Section 54F, as the assessee had invested the capital gain in constructing a house within the specified period. Issue 2: Addition of ?11,38,750/- as Income from Undisclosed Sources The assessee contested the addition of ?11,38,750/- made by the AO, claiming the amount was a gift from his mother. The assessee provided bank statements showing withdrawals by his mother and a gift declaration. Key Points: - The assessee deposited ?3,08,750/- and ?8,30,000/- in his bank account. - The AO sought an explanation, and the assessee claimed the amount was a gift from his mother, supported by her bank passbook and a gift declaration. - The AO disregarded the explanation due to the non-production of the mother for examination. Tribunal's Findings: - The Tribunal noted that the assessee provided sufficient evidence, including the mother's bank passbook showing withdrawals and the gift declaration. - The Tribunal emphasized that the AO did not present any material evidence to contradict the assessee's claim. - The Tribunal highlighted the principles of proving the identity, genuineness, and creditworthiness of the donor, which the assessee had fulfilled. Conclusion: - The Tribunal directed the AO to delete the addition of ?11,38,750/-, accepting the assessee's explanation and evidence of the gift from his mother. Summary: The Tribunal allowed the appeal of the assessee on both counts. The disallowance of the deduction under Section 54F was overturned, and the addition of ?11,38,750/- as income from undisclosed sources was deleted. The Tribunal emphasized the importance of proper verification and the practical aspects of evidence submission, providing relief to the assessee.
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