2019 (2) TMI 362 - AT - Income Tax

Denial of exemption u/s 54/54F - Held that - CIT(A) erred in confirming the order of the A.O. in taxing long term capital gains. On this issue, we note that the A.O. while considering the alternate claim of the assessee u/s. 54F has quoted in the case of Goetze (India) Ltd. v. CIT 2006 (3) TMI 75 - SUPREME COURT for the proposition that in absence of revised return, the assessee cannot make a fresh claim. This has been upheld by the CIT(A). Another reason given for the denial of exemption u/s. 54F is that the assessee owns more than one residential house other than the new asset as found in the balance sheet. Denial of exemption on the touch stone of the Hon ble Apex Court decision in the case of Goetze (India) Ltd. (supra) is not sustainable, as the Hon ble Apex Court in the said case has held that the said decision would not impinge upon the Income Tax Appellate Tribunal s jurisdiction to admit additional/fresh claims/grounds. Accordingly, we direct that this claim of the assessee should be considered. We note that while canvassing this appeal, the assessee has filed the additional evidences to counter the A.O. s finding that the assessee is owned more than one flat. These additional evidences were not submitted before the authorities below. As a matter of fact, it is the plea of the assessee that no opportunity in this regard was granted by the A.O. Upon careful consideration, in the interest of justice, we remit this ground as well as additional evidences to the file of the A.O. to consider the claim of the assessee u/s. 54F. Needless to add, the assessee should be granted adequate opportunity of being heard.

Summary

Issues:
1. Denial of exemption under section 54/54F of the Income Tax Act, 1961
2. Taxing notional rental income

Analysis:

Issue 1: Denial of exemption under section 54/54F of the Income Tax Act, 1961
The appellant contested the denial of exemption under section 54/54F of the Income Tax Act, 1961. The Appellant argued that all conditions mentioned in section 54 were satisfied, entitling them to exemption. Additionally, it was claimed that exemption under section 54F was also applicable. The denial of indexation benefit by the Assessing Officer (AO) was highlighted. The Appellate Tribunal noted a delay in filing the appeal, which was condoned due to the appellant's health issues. The appellant withdrew certain grounds of appeal. The appellant also filed a petition for admission of additional evidence, including a purchase agreement and photographs supporting the claim for exemption under section 54F. The Tribunal directed the AO to consider the claim under section 54F, emphasizing the importance of granting the appellant a fair opportunity to be heard.

Issue 2: Taxing notional rental income
The appellant challenged the taxing of notional rental income on properties under construction. It was argued that the properties were not in possession, hence no rental income could be charged. The appellant further contended that even if some rental income could be charged, the amount was excessive. The Tribunal remitted this issue, along with the additional evidence submitted, to the AO for fresh consideration. The Tribunal emphasized the need for a thorough review by the AO in light of the additional evidence presented by the appellant.

In conclusion, the appeal filed by the assessee was partly allowed for statistical purposes, with certain grounds remitted to the AO for reconsideration. The Tribunal stressed the importance of providing the appellant with a fair opportunity to present their case and directed the AO to reevaluate the issues in light of the additional evidence submitted.