2022 (2) TMI 1056 - AT - Income Tax

Disallowance u/s 54F - assessee did not purchase or construct any new residential house, but claimed to have acquired residential house by way of a gift deed, that too, 3/4th share of the property owned by the assessee's spouse - As contented assessee had re-invested his capital gain both in residential property by way of obtaining gift from his wife and repairs and maintenance incurred thereupon so as to be eligible for Section 54F deduction - HELD THAT - We find no merit in the assessee's arguments as it has come on record that the impugned gift had been executed in the year 2012-13 without any actual consideration having re-invested in favour of the spouse concerned. Coupled with this, CIT(A) has made it clear that the assessee had failed to prove repairs and maintenance expenditure alleged to have been paid to his relative contractor Shri Kota Ramakrishna, who could neither prove any repair activity to this effect nor genuineness of the claim as it was found that even this recipient's return had been filed belatedly to cover up the impugned issue. All these clinching findings on facts have gone un-rebutted from the assessee's side. - Decided against assessee.

Summary

Issues:
Challenge to CIT(A)'s action upholding assessment findings disallowing Section 54F deduction claim.

Analysis:
1. The assessee contested the correctness of the CIT(A)'s decision on disallowing the Section 54F deduction claim. The CIT(A) noted that the assessee did not purchase or construct a new residential house but claimed to have acquired one through a gift deed from the spouse. The gift deed was registered during the relevant financial year, but the assessee argued that the gift was received earlier. However, there was no documentary evidence to support this claim. The CIT(A) found that the assessee did not acquire any new property during the relevant year and failed to deposit the net consideration as required by law for claiming the exemption under Section 54F.

2. The assessee further contended that he had developed the gifted property through a contractor but failed to provide evidence to substantiate this claim. The contractor could not prove the genuineness of the transactions or provide supporting documents for the expenditure incurred on the property development. Both the assessee and the contractor filed their income tax returns belatedly, raising suspicions about the authenticity of the claimed transactions. The CIT(A) concluded that there was no evidence to support the reinvestment of the net consideration in a new residential house, thereby dismissing the assessee's appeal on this issue.

3. During the hearing, the authorized representative argued that the assessee reinvested the capital gain in the residential property received as a gift and in repairs and maintenance. However, it was found that the gift was executed without actual consideration reinvested in favor of the spouse. The CIT(A) highlighted that the assessee failed to prove the repairs and maintenance expenditure paid to the contractor, who also could not substantiate the repair activity or the genuineness of the claim. These findings remained unchallenged by the assessee, leading to the upholding of the CIT(A)'s decision. Consequently, the assessee's appeal was dismissed.

4. In conclusion, the Appellate Tribunal upheld the CIT(A)'s decision to disallow the Section 54F deduction claim, emphasizing the lack of evidence supporting the reinvestment of net consideration in a new residential house. The failure to provide credible material evidence and the belated filing of income tax returns by both the assessee and the contractor contributed to the dismissal of the appeal.

This detailed analysis of the legal judgment provides a comprehensive overview of the issues involved and the Tribunal's decision on the matter.