2019 (7) TMI 1274 - AT - Income Tax

Deduction u/s 54F - proof of construction of a new asset - admission of additional evidence - construction of the new asset was made on plot which is in the name of the assessee wife - HELD THAT - As perused the materials available on record and gone through the orders of the authorities below. We find that the evidences furnished are electricity bills, property tax receipts, inaugural photograph of house and the affidavit from the assessee. Considering the totality of the facts, these evidence goes to the root of the issue, and are material evidence to prove the construction of a new asset. We therefore, admit the same and set aside the orders of the authorities below on this issue and remit the issue of allowability of deduction u/s 54F to the A.O. The A.O. would decide the issue after considering the evidences placed on record in accordance with law. This ground of the assessee s appeal is allowed for statistical purposes. Addition made towards enhancement of business income - HELD THAT - The law is well settled where the A.O. makes best judgement by estimating the profit. He is required to make independent enquiries, if he is not satisfied with the profit declared by the assessee from the similarly situated assessee. In the present case, the sales as declared by the assessee were of ₹ 7,29,700/- A.O. has made addition purely on the basis that gross receipts are not declared. However, the assessee has declared the gross profit. We find that the Ld. CIT(A) in his order has stated a figure of ₹ 7,29,700/- as the sale proceeds which could be taken as gross receipts. Therefore, the very foundation of making estimation is not correct. Hence, we cannot confirm this adhoc and casual approach of the assessing authority, he is therefore hereby directed to delete the addition. This ground of the assessee s appeal is allowed.

Summary

Issues:
1. Rejection of deduction claimed under section 54F
2. Addition in business income

Analysis:

Issue 1: Rejection of deduction claimed under section 54F
The appellant's appeal challenged the rejection of a deduction claimed under section 54F of the Income Tax Act. The appellant had sold agricultural lands and reinvested in a new residential property, claiming a deduction under section 54F. The assessing officer denied the deduction, leading to an appeal. The appellant submitted additional evidence, including electricity bills, property tax receipts, photographs of the new house, and an affidavit. The Tribunal admitted the evidence, setting aside the lower authorities' decisions. The matter was remitted to the assessing officer for reconsideration based on the new evidence, emphasizing the need for proper evaluation in accordance with the law.

Issue 2: Addition in business income
The second ground of appeal concerned an addition to the business income by the assessing officer. The appellant, engaged in brick manufacturing, declared a profit, which was estimated higher by the assessing officer without a clear basis. The Tribunal noted the lack of proper accounts and the estimation made without sufficient justification. The assessing officer's approach was criticized for not conducting necessary inquiries or considering comparable businesses. The CIT(A) upheld the addition based on the lack of proper documentation, but the Tribunal found discrepancies in the estimation process. The Tribunal directed the assessing officer to delete the addition, highlighting the importance of a thorough and reasonable assessment process.

In conclusion, the Tribunal partially allowed the appellant's appeal, emphasizing the importance of proper evaluation and justification in tax assessments. The judgment highlighted the need for assessing officers to conduct thorough inquiries and base their decisions on solid evidence and reasoning.