2021 (11) TMI 347 - AT - Income Tax

Exemption claimed u/s 54 denied - assessee has not filed any documentary evidence establishing the fact that he has purchased any property within the time prescribed under the provisions of section 54F of the Act except the agreement for purchase of the property - whether the assessee has purchased the property within a period of 2 years from the date of transfer? - HELD THAT - As perused the bank statement of the assessee name of the builder was appearing showing the payment of ₹ 50,51,000/- within the financial year under consideration. Moving further, the flat was handed over to the assessee after the expiry of 2 years which contravenes the provisions of section 54 of the Act. However we find that the Mumbai tribunal in the case of Kishore H. Galaiya 2012 (9) TMI 40 - ITAT, MUMBAI has held that once the assessee booked flat with builder and started making payment of instalment - builder was to handover the possession of the flat to assessee on completion of construction. Then such act of the assessee is to be considered as construction of new residential house not the purchase of property. Accordingly the time limit will extend to 3 years from the date of transfer of property to complete the construction. We hold that the assessee cannot be denied the benefit of exemption available to him under the provisions of section 54/54F of the Act on account of the delay on the part of the builder. Whether the assessee has deposited a sum of ₹ 14 lakhs in the capital gain account scheme? - AR, at the time of hearing has not brought anything on record establishing the fact that the impugned amount represents the money deposited under the capital gain account scheme. However, the revenue has also not conducted any enquiry to disprove the contention of the assessee based on the cogent materials. Nevertheless, in the interest of justice and fair play we are inclined to remit this issue to the file of the AO to verify whether the impugned amount represents the deposits made under the capital gain account scheme or not. Assessee was the co-owner in the property along with his brother. The claim of the assessee s brother by the same AO was accepted and the deduction/exemption was allowed for the investment made by the co-owner with M/s Sharnam builders for the purchase of the property. In such a situation, we are of the view that the AO was to maintain the consistency. AO cannot reject the claim of the assessee whereas in the case of the brother of the assessee in the identical facts and circumstances, the same was accepted. Accordingly on this count, we are not convinced with the finding of the authorities below. Hence, we set aside the finding of the learned CIT (A) and direct the AO to delete the addition made- Appeal of the assessee is partly allowed for the statistical purposes.

Summary

Issues:
1. Denial of exemption claimed under section 54 of the Income Tax Act for a specific amount.

Analysis:
The appellant contended that the denial of the exemption under section 54 of the Act for a certain amount was erroneous. The Assessing Officer (AO) found that the appellant did not provide sufficient documentary evidence to prove the purchase of a property within the prescribed time under section 54F. The AO denied the claim and added the amount to the total income of the appellant. The appellant argued before the Commissioner of Income Tax (Appeals) that the payment for the property was made within the financial year, and possession was handed over by the builder. However, the CIT (A) upheld the AO's decision, stating that the property should have been purchased within two years, which the appellant failed to do. The CIT (A) rejected the appellant's claim based on the time limit requirement under section 54.

Regarding the first issue, the Tribunal noted that the payment for the property was made within the financial year, as evidenced by the bank statement. The possession was received after two years, which initially seemed to contravene the provisions of section 54. However, citing a Mumbai Tribunal case, it was held that the act of booking a flat with a builder and making installment payments should be considered as construction of a new residential house rather than a property purchase. Therefore, the time limit for completion of construction should be extended to three years from the date of property transfer. Consequently, the Tribunal ruled in favor of the appellant, allowing the exemption under section 54/54F based on the delay caused by the builder.

Regarding the deposit of a specific amount in the capital gain account scheme, the Tribunal observed that while the bank statement showed the payment, it did not confirm whether the amount was deposited in the capital gain account scheme. The Tribunal decided to remit this issue back to the AO for further verification. Additionally, the Tribunal noted that the appellant's brother, who co-owned the property, had a similar case where the claim was accepted by the AO. In the interest of consistency, the Tribunal directed the AO to delete the addition made in the appellant's case, as the same AO had accepted the claim in the brother's case with identical circumstances. Thus, the Tribunal partly allowed the appellant's appeal for statistical purposes.

In conclusion, the Tribunal's decision favored the appellant on the grounds related to the time limit for property purchase and directed further verification on the deposit issue while emphasizing the importance of maintaining consistency in similar cases.