2023 (7) TMI 605 - AT - Income Tax

Deduction claimed u/s 54F OR 54 - Investment of LTCG - Owning more than one house property - CIT(A) deleted the addition considering the same u/s 54 - Assessee revised the claim of exemption from u/s 54F to u/s 54 in appeal - whether or not the assessee was owning more than one residential houses other than new asset on the date of original asset? - HELD THAT - After comparing both the provisions of law, we can easily infer that Section 54 is more assessee friendly as compared to Section 54F. The proviso to Section 54F which prohibits an assessee from claiming deduction, if he owns more than one residential house, other than the new asset, on the date of transfer of original asset is not there in Section 54. Therefore, in our view, the assessee can claim deduction u/s 54 of the Act if he constructs/ purchases a new house property within the stipulated time irrespective of any number of residential houses owned by him. As per facts of this case, the assessee has fully complied with all the conditions of Section 54 therefore, he is entitled to claim a deduction u/s 54 as the assessee had specifically claimed deduction u/s 54 of the Act in his return filed in response to notice u/s 148 AO has disallowed claim u/s 54F by alleging that the assessee was owning more than one residential house on the date of transfer of asset . Therefore, in our view, the entire assessment passed by the AO is wrong application of facts. Even otherwise, the ld. CIT(A) was competent enough to appreciate the entire facts of the case in his order and CIT(A) has thoroughly discussed the claim of the assessee for deduction u/s 54 of the Act and finally allowed the claim u/s 54 of the Act. Therefore, in our view the whole discussion as to whether or not the assessee was owning more than one residential houses other than new asset on the date of original asset has become redundant as the assessee in return filed in response to notice u/s 148 had specifically claimed deduction u/s 54 of Income Tax Act and thus we are of the considered view that there is no such restriction on the assessee under that section. Even otherwise, second claim of the assessee u/s 54 of the Act cannot be treated as fresh claim as at very first instance i.e. in first notice issued u/s 148 of the Act, the assessee filed return thereby specifically claimed deduction u/s 54 of the Act. Assessee specifically claimed deduction u/s 54 only in the return filed in response to notice u/s 148. Therefore by no stretch of imagination, the claim of the assessee could be treated as fresh claim. Even if the assessee had wrongly claimed deduction u/s 54F in the original return of income and the same was allowed to him by the AO in the assessment completed u/s 143(3). Even if there is no bar on the assessee to make correct claim for deduction under the provisions to law while filing return of income in response to notice under section 148 as if for some reason the AO wanted to withdraw the deduction given u/s 54F in the original assessment, then in that eventuality, AO should have considered the claim of the assessee for deduction u/s 54 in the return filed in response to notice u/s 148. Department could not controvert the findings of the ld. CIT(A). Hence Bench does not find any merit in the submission/ argument of the Department as to the order of the ld. CIT(A) and we concur with the findings of the ld. CIT(A). - Decided against revenue.

Summary

Issues Involved:
1. Deletion of addition by disallowing deduction claimed under Section 54F and considering the same under Section 54.
2. Acceptance of revised grounds of appeal without providing the Revenue an opportunity to examine conditions under Section 54, allegedly violating Rule 46A.
3. Cross Objection by the Assessee regarding disallowance of deduction claimed under Section 54F and procedural errors in reopening the case.

Summary:

Issue 1: Deletion of Addition by Disallowing Deduction Claimed under Section 54F and Considering the Same under Section 54
The Tribunal evaluated the original and revised grounds of appeal filed by the assessee. The assessee initially claimed a deduction under Section 54F but later revised it to Section 54 in response to a notice under Section 148. The Tribunal noted that the property sold by the assessee was a residential house and that the assessee had complied with all conditions under Section 54. The Tribunal upheld the CIT(A)'s decision to allow the deduction under Section 54, emphasizing that Section 54 is more favorable to the assessee compared to Section 54F, especially since Section 54 does not restrict the number of residential houses owned by the assessee. The Tribunal also referenced the Department Circular No. 14(XL-35) of 1955 and the Supreme Court's decision in Bajaj Tempo Ltd., which advocate for a liberal interpretation of provisions intended for economic growth.

Issue 2: Acceptance of Revised Grounds of Appeal without Providing Opportunity to Revenue
The Tribunal found that the CIT(A) was within his rights under Section 250 of the Income Tax Act to accept the revised grounds of appeal. The Tribunal dismissed the Revenue's argument that Rule 46A was violated, clarifying that Rule 46A pertains to the submission of additional evidence, not revised grounds of appeal. The Tribunal noted that the AO had sufficient time to examine the claim under Section 54 during the reassessment proceedings and that the CIT(A) was justified in allowing the revised grounds without further remand.

Issue 3: Cross Objection by the Assessee
The assessee filed a cross objection challenging the disallowance of deduction under Section 54F and procedural errors in reopening the case. The Tribunal noted that the assessee had initially claimed the deduction under Section 54F due to ignorance of law but later correctly claimed it under Section 54 in response to the notice under Section 148. The Tribunal found that the AO's rejection of the assessee's objections to reopening the case was arbitrary and not in line with the principles laid down by the Supreme Court in GKN Drive Shaft Limited. Given the Tribunal's decision to uphold the CIT(A)'s order allowing the deduction under Section 54, the cross objection became infructuous.

Conclusion:
The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s order allowing the deduction under Section 54. Consequently, the assessee's cross objection was deemed infructuous.