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2020 (7) TMI 683 - AT - Income TaxDeduction u/s 54 denial - AO disallowed the claim of the assessee on account of the fact that the fresh investment has been made in the name of the assessee s wife and secondly, the assessee has failed to substantiate the cost of construction - HELD THAT - In the instant case, the assessee has sold a residential house on 29.11.2007 and the same is thus not under dispute. Secondly, the assessee has within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, one residential house in India. In the instant case, the assessee has purchased a plot of land situated at Plot No. 184, Maruti Nagar, Airport Road, Sanganer, Jaipur on 5.11.2007 and thereafter, has carried out construction of a residential house thereon, which as per valuation report has been carried out during the year 2007-08. The Assessing officer has disallowed the claim of the assessee on account of the fact that the fresh investment has been made in the name of the assessee s wife and secondly, the assessee has failed to substantiate the cost of construction. As far as investment made in the name of the assessee s wife is concerned, we find that the issue is covered in favour of the assessee by decision of the Hon ble Rajasthan High Court in case of Shri Mahadev Balai vs ITO 2017 (1) TMI 183 - ITAT JAIPUR . The ratio of the aforesaid decision though rendered in the context of section 54F of the Act, given the similarity of language employed, will equally apply in the instant case in context of section 54. Further, the decision of Hon ble Madras High Court in case of CIT vs. Natarajan 2006 (2) TMI 136 - MADRAS HIGH COURT rendered in context of section 54 supports the case of the assessee. Therefore, mere fact that the investment has been made in the name of the wife cannot be a reason for disallowance of deduction under section 54. Regarding the cost of the construction, the same is supported by the valuation report where the valuer has determined the cost of construction at ₹ 250481/-. Assessee is eligible for claim of deduction under section 54 - Appeal of the assessee is allowed. Levy of penalty u/s 271(1)(c) - HELD THAT - As directed to allow the claim of deduction u/s 54, the penalty u/s 271(1)(c) of the Act, being consequential in nature, is hereby directed to be deleted. Penalty u/s 271F - failure to furnish return of income (ITR) - HELD THAT - In the instant case, the assessee s total income without giving effect to the provision of section 54 come to ₹ 9,37,280/- which exceeds the maximum amount not chargeable to tax. The assessee was therefore required to furnish his return of income and in absence of any reasonable cause shown by the assessee for such failure to file his return of income, the penalty u/s 271F is hereby confirmed. Appeal of the assessee is dismissed.
Issues Involved:
1. Denial of deduction claimed under Section 54 of the I.T. Act. 2. Levy of penalty under Section 271(1)(c) of the I.T. Act. 3. Levy of penalty under Section 271F of the I.T. Act. Issue-wise Detailed Analysis: 1. Denial of Deduction Claimed Under Section 54 of the I.T. Act: The assessee sold a residential house and claimed deductions under Section 54 for reinvestment in a new property. The Assessing Officer (AO) disallowed the deduction, arguing the new investment was in the name of the assessee's wife and lacked documentation for construction costs. The assessee argued that the investment was made from the sale proceeds and supported his claim with various judicial precedents. The Tribunal noted that as per Section 54, the assessee must purchase or construct a new residential house within specified periods. The Tribunal referenced the Rajasthan High Court decision in Mahadev Balai vs. ITO, which allowed deductions even if the investment was in the name of the assessee's wife, provided the funds came from the assessee. The Tribunal concluded that the assessee was eligible for the deduction under Section 54, as the investment was made from the assessee's funds, and allowed the appeal. 2. Levy of Penalty Under Section 271(1)(c) of the I.T. Act: The AO levied a penalty under Section 271(1)(c) due to the denial of the deduction under Section 54. However, since the Tribunal allowed the deduction under Section 54, the penalty was deemed consequential and was directed to be deleted. 3. Levy of Penalty Under Section 271F of the I.T. Act: The assessee did not file a return of income, believing his income did not exceed the taxable limit. The AO imposed a penalty under Section 271F for failing to file the return on time. The Tribunal reviewed Section 139(1)(b) and the sixth proviso, which mandates filing a return if total income, without giving effect to Section 54, exceeds the non-taxable limit. The assessee's income, without the Section 54 deduction, exceeded the limit, necessitating a return. The Tribunal found no reasonable cause for the failure to file and confirmed the penalty under Section 271F. Conclusion: The Tribunal allowed the appeal regarding the deduction under Section 54, deleted the penalty under Section 271(1)(c), and confirmed the penalty under Section 271F. The decisions were pronounced in the open court on 21/07/2020.
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