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2024 (6) TMI 1289 - AT - Income TaxLTCG Computation - denial of cost of improvement - As per AO no prudent person would wait for more than three years when there is no reference of such improvement in the sale deed. Further, the payment has been made only after the issue of show cause notice - HELD THAT - We find the identical addition was made by the AO in the hands of spouse of the assessee i.e. another co-owner 2023 (6) TMI 1397 - ITAT PUNE . We find the Ld. CIT(A) / NFAC deleted the said addition and although the Revenue has filed an appeal against the order of CIT(A) / NFAC challenging the deduction u/s 54 / 54F of the Act, however, no such ground was raised by the Revenue on the issue of cost of improvement in the hands of the spouse of the assessee. Once the Revenue has accepted the cost of improvement in the hands of the spouse of the assessee being the co-owner to the extent of her share, we find no reason as to how and why the Revenue is aggrieved against the order of CIT(A) / NFAC on this issue . Further, we find the CIT(A) / NFAC has given justifiable reasons while deleting the cost of improvement and the Ld. DR could not rebut the findings of the Ld CIT(A) / NFAC by producing any contrary material. In this view of the matter and in view of the detailed reasoning given, the order of CIT(A) / NFAC deleting the cost of improvement in the hands of the assessee is upheld and the grounds raised by the Revenue on this issue are dismissed. Denial of deduction u/s 54 - addition on the ground that the assessee failed to comply with the conditions stipulated in section 54 i.e. he has not completed the construction within three years from the date of transfer of original asset on or before 26.07.2019 - We find the CIT(A) / NFAC in the present case has given a finding that the assessee sold an old asset and realized the consideration and applied the same for acquiring the new asset which is in the nature of residential house, which is evident from the purchase deed filed by the assessee. He has given a finding that the assessee has satisfied all the conditions as stipulated u/s 54 of the Act. Further, we find in the case of spouse of the assessee the claim of deduction u/s 54 of the Act was denied by the Assessing Officer and in appeal the CIT(A) / NFAC allowed the claim of the assessee. Decided against revenue.
Issues Involved:
1. Disallowance of cost of improvement. 2. Denial of deduction under Section 54 of the Income Tax Act, 1961. Detailed Analysis of Judgment: 1. Disallowance of Cost of Improvement: Facts and Assessment: The Assessing Officer (AO) disallowed the cost of improvement claimed by the assessee to the extent of Rs. 11,42,700/- out of a total of Rs. 30,42,700/-. The AO noted that the assessee paid Rs. 19 lakhs to M/s Vision Buildcon, while Rs. 20 lakhs was paid by the purchaser, Shri Ramesh Kondhare. The AO argued that the payment made after the issuance of a show cause notice was an afterthought and not justified. CIT(A) / NFAC's Findings: The CIT(A) / NFAC deleted the disallowance, observing that the assessee and his wife paid Rs. 15 lakhs each to Shri Ramesh Kondhare as reimbursement for the improvement cost. The CIT(A) referenced a similar disallowance in the case of the assessee's wife, which was deleted by the CIT(A), NFAC, Delhi. The CIT(A) concluded that the AO failed to consider the appellant's claim properly and did not conduct any inquiry with Shri Ramesh Kondhare. Tribunal's Decision: The Tribunal upheld the CIT(A) / NFAC's deletion of the disallowance. It noted that a similar addition was made in the hands of the assessee's spouse, which was deleted by the CIT(A) / NFAC and not contested by the Revenue. The Tribunal found no reason for the Revenue's grievance against the CIT(A) / NFAC's order and noted that the AO's reasons for disallowance were not justified. The Tribunal confirmed the deletion of the disallowance of Rs. 11,42,700/-. 2. Denial of Deduction under Section 54: Facts and Assessment: The AO disallowed the deduction under Section 54 amounting to Rs. 2,26,33,135/-, stating that the assessee failed to complete the construction within three years from the date of transfer of the original asset. The AO relied on information from the local municipal corporation indicating that no completion certificate was issued for the construction. CIT(A) / NFAC's Findings: The CIT(A) / NFAC allowed the deduction, observing that the assessee sold an old asset and applied the consideration for acquiring a new residential house. The CIT(A) noted that the new property was not merely a plot but a residential house, as evidenced by the purchase deed. The CIT(A) referenced a similar case involving the assessee's spouse, where the deduction was allowed. The CIT(A) concluded that the assessee satisfied all conditions under Section 54 and cited various judicial precedents supporting a liberal interpretation of the provision. Tribunal's Decision: The Tribunal upheld the CIT(A) / NFAC's decision, noting that the AO's observation that the property was a plot was factually incorrect. The Tribunal referenced its earlier decision in the case of the assessee's spouse, where the claim under Section 54 was allowed. The Tribunal found that the assessee satisfied all conditions for the deduction under Section 54 and confirmed the CIT(A) / NFAC's order allowing the deduction of Rs. 2,26,33,135/-. Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the CIT(A) / NFAC's order that allowed the cost of improvement and the deduction under Section 54. The Tribunal found no infirmity in the CIT(A) / NFAC's detailed reasoning and conclusions, which were supported by judicial precedents and factual findings. The appeal by the Revenue was dismissed in its entirety.
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