2022 (10) TMI 226 - AT - Income Tax

Disallowance of exemption u/s. 54 - Fresh claim before CIT(A) - before the AO the assessee could not make a claim for deduction otherwise than by filing a revised return - CIT-A deleted the addition - whether CIT(A) has erred in ignoring that the fact that, the intention of section 54 has always been to provide exemption if the assessee constructs one residential house in India in the event of capital gains arising from transfer of residential house and the amendment brought in Finance Act, 2014 is only a clarifying amendment and did not change the position of law? HELD THAT - As case of assessee was picked up for limited scrutiny and one of the issues involved was sale consideration of property in ITR is less than sale consideration in Form 26QV. Para 3 of the assessment order specifically mentions that on 05.12.2016. Assessee was directed to show cause why sale consideration as shown in 26AS was not shown in ITR and why no income was offered as capital gain. Once the assessing officer had taken into consideration Form 26QV and the report under 26AS, which have to considered to be part of the returns of an assessee and the assessee has replied in detail to the query putting forth all the information about the transaction along with documents as to how no capital gain had arisen then it can not be a case that assessee had made claim beyond his return. Assessment is not only of the income but also involves considering claim of the exemption or deduction which flow with the assessee s income. CIT(A) was very much in powers to consider the claim of the assessee which was left half way by the Ld. AO. Then, upon going through order of ld. CIT(A) it can be observed that Ld. CIT(A) has meticulously examined the claim of deduction u/s 54 of the Act in terms of eligibility and quantum. He specifically dealt with question if the sale proceeds can be used for purchasing property in Dubai and has rightly relied the judgment quoted by Ld. Sr. Counsel before this Bench wherein it was held that prior to amendment brought by Finance Act No. 2, 2014 the benefit of exemption is available even if the house is purchased / constructed outside India. As examined the evidence on record which established that assessee purchased the residential plot in the name of himself and his wife and constructed residential house within the prescribed period. As with regard to the contention of Ld. DR that this aspect was required to be examined by ld. AO and he had no material before him then going by the grounds raised there is no ground of the appeal of the revenue that assessee had failed to prove construction of the house on the plot within prescribed period. Rather, Ld. CIT(A) has relied completion certificate bearing consultants signature dated 15.12.2017. There is no substance in the arguments raised on behalf of the Revenue and the Ld. CIT(A) had not fallen in error in extending benefit of deduction u/s 54 of the Act to the assessee. There is no substance in the grounds raised. The appeal of Revenue is dismissed.

Summary

Issues Involved:

1. Whether the assessee can claim a deduction under Section 54 of the Income Tax Act, 1961, during assessment proceedings without filing a revised return.
2. Whether the sale proceeds can be used for purchasing property outside India for claiming exemption under Section 54.
3. Whether the construction of the house within the prescribed period was adequately substantiated.

Issue-Wise Detailed Analysis:

1. Claim of Deduction under Section 54 without Revised Return:

The Revenue appealed against the deletion of the disallowance of exemption under Section 54 by the CIT(A). The Assessing Officer (AO) rejected the assessee's claim for deduction under Section 54, citing the Supreme Court judgment in Goetze (India) Ltd. vs. CIT, which mandates filing a revised return to claim such deductions. However, the CIT(A) allowed the deduction, referencing various judicial pronouncements that permit appellate authorities to consider claims not made in the original or revised return if relevant material is available on record. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO had already considered the information provided during the assessment proceedings, thus fulfilling the requirement for a comprehensive assessment.

2. Use of Sale Proceeds for Property Outside India:

The CIT(A) meticulously examined the eligibility and quantum of the deduction under Section 54, including whether the sale proceeds could be used for purchasing property outside India. The CIT(A) relied on judgments indicating that, prior to the amendment by Finance Act No. 2, 2014, the exemption under Section 54 was available even if the house was purchased or constructed outside India. The Tribunal agreed with this interpretation, noting that the CIT(A) had correctly applied the law to the facts of the case.

3. Substantiation of Construction within Prescribed Period:

The Revenue contended that the AO did not have sufficient material to verify the construction of the house within the prescribed period. However, the CIT(A) had relied on a completion certificate dated 15.12.2017, which confirmed the construction within the stipulated time frame. The Tribunal found no merit in the Revenue's arguments, noting that there was no specific ground in the appeal challenging the completion of the house within the prescribed period.

Conclusion:

The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to allow the deduction under Section 54. The Tribunal highlighted that the assessment process involves considering all relevant claims and deductions, even if they are not part of the original or revised return, provided the necessary information is available on record. The Tribunal also confirmed that the exemption under Section 54 could be claimed for property purchased outside India prior to the 2014 amendment and that the construction of the house within the prescribed period was adequately substantiated.