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2014 (8) TMI 754 - AT - Income TaxClaim of exemption u/s 54/54F Income from salary and property AO was of the view that assessee own more than two houses at the time of capital gains Held that - Assessee received a total of ₹ 75,00,000 - even though the cancellation deed was entered presumably for saving the stamp duty, the intention of the assessee seems to be selling the plot No.19 purchased three years back for a consideration of ₹ 75,00,000 as can be seen from the terms of agreement of sale through which assessee acknowledges receipts of ₹ 11,00,000 - assessee has originally admitted the capital gain correctly treating the re-transfer/re-conveyance of the plot as a transfer thereon and claimed deduction under section 54F - CIT(A) order in treating the amount as breach of contract seems to be devoid of facts - What assessee actually intended from the citations of the documents on record is to resell the plot to the original vendor at a consideration of ₹ 75,00,000/- and assessee claimed indexation benefit on the cost of the purchase of plot in 2005 - Decided in favour of Revenue. Admission of additional grounds Held that - Admission of additional grounds by the CIT(A) involved examination of facts which are not on record - there is no dispute with reference to capital gains being offered by the assessee relying upon CIT Vs. S.A. Builders Ltd. 2006 (12) TMI 76 - SUPREME COURT OF INDIA - if the facts are not available on record, additional ground cannot be raised on any legal issue - the facts on the issue of capital gains are obviously not examined by the AO as the assessee himself offered the capital gains - CIT(A) entertained additional ground which involve examination of fresh facts which is not permitted under Law - thus, CIT(A) erred in admitting additional grounds of appeal and also not given the opportunity to the AO to examine under Rule 46A Decided in favour of Revenue.
Issues Involved:
1. Denial of exemption under sections 54 and 54F of the Income Tax Act. 2. Taxability of capital gains arising from the sale of property. 3. Admissibility of additional grounds of appeal by the assessee. 4. The necessity of a remand report under Rule 46A. Issue-wise Detailed Analysis: 1. Denial of Exemption under Sections 54 and 54F: The Assessing Officer (A.O.) denied the assessee's claim for exemption under sections 54 and 54F of the Income Tax Act. The A.O. stated that the assessee did not construct a house on the plot and merely had an agreement for construction, which does not qualify for exemption under section 54. Additionally, the A.O. noted that the assessee owned more than two houses at the time of the capital gains, disqualifying him from claiming exemption under section 54F. 2. Taxability of Capital Gains: The assessee contested the taxability of the capital gains, arguing that the cancellation deed dated 22.09.2008 nullified the original sale deed, and the compensation received was for the "extinguishment of rights to sue" rather than a resale. The Ld. CIT(A) accepted this argument, citing judicial precedents that compensation for extinguishment of a right to sue does not attract capital gains tax liability. However, the Revenue appealed, arguing that the Ld. CIT(A) erred in admitting additional grounds and not addressing the exemption under section 54F. 3. Admissibility of Additional Grounds of Appeal: The Revenue contended that the Ld. CIT(A) wrongly admitted the additional grounds of appeal raised by the assessee, which were not examined by the A.O. The Ld. CIT(A) allowed the additional grounds, concluding that the compensation received by the assessee was not taxable as capital gains. However, the Tribunal found that the Ld. CIT(A) admitted additional grounds involving fresh facts not on record, which is not permissible under the law. 4. Necessity of a Remand Report under Rule 46A: The Revenue argued that the Ld. CIT(A) should have called for a remand report on the additional grounds/evidence under Rule 46A. The Tribunal agreed, stating that the Ld. CIT(A) did not give the A.O. an opportunity to examine the new facts, which is a procedural lapse. Conclusion: The Tribunal concluded that the Ld. CIT(A)'s order was not correct as it admitted additional grounds involving fresh facts without giving the A.O. an opportunity to examine them. The Tribunal set aside the orders of the A.O. and Ld. CIT(A) and restored the entire assessment to the file of the A.O. for fresh examination. The A.O. is directed to re-examine the issue of taxability of the capital gains, allowing the assessee to furnish necessary evidence and rely on relevant case law. The appeal of the Revenue was allowed for statistical purposes.
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