2018 (11) TMI 511 - AT - Income Tax

Eligibility towards claim of deduction u/s 54 - new residential property purchased by the assessee beyond the stipulated period of one year before the transfer of the property under consideration - claim of deduction was declined by the A.O, for the reason that the agreement to purchase the new residential property entered into by the assessee on 29.01.2009 fell beyond the period of one year prior to the date on which the property under consideration had been transferred - Held that - Admittedly, though the assessee had entered into an agreement to purchase the new property viz. A-801, Lodha Luxuria on 29.01.2009, but then the possession of the same was delivered to her only as on 18.05.2012. We are persuaded to subscribe to the claim of the ld. A.R that the purchase of new residential property would be substantially effected on the date when the assessee had paid the full consideration on the flat becoming ready for occupation and had obtained possession of the same. In the backdrop of our aforesaid observations, we are of the considered view that as the possession of the new residential property was delivered to the assessee on 18.05.2012 i.e. within a period of one year prior to the transfer of the property under consideration, thus the purchase of the same could safely be held to have been substantially effected on the said date. As relying on COMMISSIONER OF INCOME-TAX VERSUS SMT. BEENA K. JAIN 1993 (11) TMI 7 - BOMBAY HIGH COURT the date of final occupation of the new residential property under consideration i.e 18.05.2012 shall be taken as the date of acquisition of the same by the assessee for the purpose of determining her eligibility towards claim of deduction under Sec. 54 of the Act.

Summary

Issues involved:
1. Assessment jurisdiction under Sec.143(3) without issuing notice under Sec.143(2) of the Income Tax Act.
2. Denial of deduction under Sec.54 of the Income Tax Act.
3. Non-observance of principles of natural justice.
4. Consequential reliefs regarding interest levied under Sec.234A/234B/234C.

Analysis:

Assessment Jurisdiction Issue:
The appeal challenged the assessment order under Sec.143(3) without the issuance of a notice under Sec.143(2) of the Income Tax Act. The appellant contended that the assessment was null and void due to the lack of proper jurisdiction. The argument was based on the failure to issue the statutory notice, which is a prerequisite for assuming jurisdiction for assessment.

Denial of Deduction under Sec.54 Issue:
The appellant claimed a deduction under Sec.54 of the Income Tax Act for the Long Term Capital Gain (LTCG) arising from the sale of a property. The Assessing Officer (A.O) disallowed the deduction as the new residential property purchase fell beyond the stipulated period before the transfer of the property under consideration. The appellant argued that possession of the new property was delivered within the required timeframe, making her eligible for the deduction. The contention revolved around the timing of possession as the crucial factor for determining eligibility for the deduction under Sec.54.

Non-Observance of Principles of Natural Justice Issue:
The appellant raised concerns regarding the CIT(A) dismissing the appeal based on a precedent without providing an opportunity to distinguish the case. The appellant argued that the precedent cited was distinguishable on facts and law, leading to a miscarriage of justice. The issue highlighted the importance of adhering to principles of natural justice in appellate proceedings.

Consequential Reliefs Issue:
The appellant sought relief from the interest levied under Sec.234A/234B/234C as charged by the A.O. The request for deletion of interest was presented as a consequential relief following the allowance of the appeal on the primary issues related to assessment jurisdiction and denial of deduction under Sec.54. The issue of consequential reliefs emphasized the financial implications of the original assessment order.

The judgment analyzed each issue comprehensively, addressing the legal arguments presented by both parties and citing relevant case law to support the conclusions. Ultimately, the appeal was allowed concerning the denial of deduction under Sec.54 based on the timing of possession of the new residential property. The decision underscored the importance of factual circumstances and legal interpretations in determining the eligibility for tax deductions under the Income Tax Act.