2022 (6) TMI 68 - AT - Income Tax

Deduction u/s 54F - capital gain was not invested in purchase/construction of new residential house within the specified period of three years - assessee failed to justify the fact that the construction of residential property had taken place within the stipulated time period of 3 years from the date of transfer - HELD THAT - As in the remand report AO after verifying the additional evidences has categorically observed that assessee s claim of construction of new house property appears to be genuine. The only objection of the Assessing Officer is, since the additional evidences were not produced in course of the assessment proceedings, they should not be accepted. Thus, from the aforesaid fact, emerging on record, it is very much clear that though, at the time of assessment proceedings, Assessing Officer was doubtful regarding assessee s claim of investment in the construction of a new house property within the stipulated period of three years, however, after examining the additional evidences filed by the assessee, such doubts have been removed and assessee s claim of construction of new residential house was accepted as genuine - when the Assessing Officer has accepted assessee s claim of construction of new residential house to be genuine, in such circumstances, deduction claimed under Section 54F of the Act has to be allowed. - Decided in favour of assessee.

Issues Involved:
Appeal by Revenue against acceptance of deduction u/s 54F by CIT(A) for failure to justify construction completion within 3 years, acceptance of additional evidence, reliance on Remand Report without independent examination, acceptance of updated photograph, acceptance of land records as proof, acceptance of electricity bills as documentary evidence.

Analysis:

Issue i: Justification of deduction u/s 54F
The Revenue contested the acceptance of the Assessee's claim of deduction under Section 54F due to the failure to prove completion of construction within the stipulated 3-year period. The Assessing Officer disallowed the claim as the Assessee could not provide essential documents like completion certificate, bills for construction materials, and photo proof of construction. However, the CIT(A) allowed the claim after the Assessee submitted additional evidence during the appellate proceedings, including photographs and revenue records showing the existence of the house. The Assessing Officer, in the remand report, acknowledged the genuineness of the Assessee's claim based on the additional evidence, leading to the acceptance of the deduction under Section 54F.

Issue ii: Acceptance of additional evidence
The Revenue raised concerns about the acceptance of additional evidence by the CIT(A) without sufficient cause from the Assessee. The CIT(A) allowed the additional evidence to be considered, which included updated photographs, land records, and electricity bills, to support the claim of construction completion within the specified time frame. The Assessing Officer, in the remand report, confirmed the genuineness of the Assessee's claim based on the additional evidence submitted during the appellate proceedings, leading to the allowance of the deduction under Section 54F.

Issue iii: Reliance on Remand Report
The Revenue questioned the CIT(A)'s reliance on the Remand Report without independent examination of the additional evidence submitted during the appellate proceedings. The Remand Report provided by the Assessing Officer acknowledged the genuineness of the Assessee's claim based on the additional evidence, such as photographs and revenue records. The CIT(A) considered the Remand Report and the additional evidence to support the Assessee's claim, ultimately allowing the deduction under Section 54F.

Issue iv: Acceptance of updated photograph and land records
The Revenue challenged the acceptance of an updated photograph of the residential property and land records by the CIT(A) as justification for completion of construction within the stipulated time period. The CIT(A) considered these documents, along with other evidence, to support the Assessee's claim of investment in the construction of a new residential house within the specified time frame. The Assessing Officer, in the remand report, acknowledged the genuineness of the Assessee's claim based on the additional evidence, leading to the acceptance of the deduction under Section 54F.

Issue v: Acceptance of electricity bills as documentary evidence
The Revenue disputed the acceptance of electricity bills for the month of June 2018, not in the Assessee's name, as documentary evidence to justify construction completion within the stipulated time period. The CIT(A) considered these bills, along with other evidence, to support the Assessee's claim of investment in the construction of a new residential house within the specified time frame. The Assessing Officer, in the remand report, confirmed the genuineness of the Assessee's claim based on the additional evidence, leading to the acceptance of the deduction under Section 54F.

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