2020 (10) TMI 1043 - AT - Income Tax

LTCG - cost of construction of capital asset that was sold by the assessee - Deduction u/s 54 - HELD THAT - Cost of construction of new asset and the period within which it was constructed also requires examination in the light of evidence filed as additional evidence by the CIT(Appeals). For proper adjudication of long term capital gain in accordance with the law, these documents are necessary. We therefore set aside the order of CIT(Appeals) on the above two issues and remand the case to the Assessing Officer for fresh consideration in accordance with the law on the computation of long term capital gain and the claim of assessee for deduction u/s. 54 of the Act in the light of additional evidence filed before Tribunal and such other evidence that the Assessee may seek to rely on or required by the AO to substantiate her claim. Correct head of income - Long term capital gain or income from other sources - Admission of additional evidence - HELD THAT - We find that the assessee in the proceedings before the AO has filed copy of agreement for sale dated 22-7-2013 in which the price agreed between the parties was a sum of ₹ 94 lakhs. In the light of this evidence, the question whether the sum of ₹ 46 lakhs should form part of long term capital gain or income from other sources also needs to be examined by the AO. Accordingly, we set aside the order of CIT(Appeals) on this issue also and direct the AO to admit the additional evidence filed by the assessee and decide the issue in accordance with the law, after affording assessee opportunity of being heard.

Summary

Issues:
1. Cost of construction of the capital asset
2. Entitlement to deduction u/s. 54 of the Act
3. Classification of the sum of ?46 lakhs as income from other sources or capital gain

Cost of Construction of the Capital Asset:
The appeal involved a scrutiny assessment of an individual assessee for AY 2014-15 due to cash deposits and income discrepancies. The AO disputed the cost of construction claimed by the assessee, leading to a restriction of 50% of the claimed amount. The AO also denied the deduction u/s. 54 of the Act, resulting in the determination of income under 'capital gain.' The CIT(Appeals) upheld the AO's decision, emphasizing the need for proof of construction costs. However, the Tribunal found the CIT(Appeals) erred in not admitting additional evidence under Rule 46A(4) to ascertain the correct computation of long term capital gain.

Entitlement to Deduction u/s. 54 of the Act:
The assessee sought to file additional evidence to support the cost of construction and compliance with the provisions of u/s. 54 of the Act. The CIT(Appeals) rejected the evidence, citing failure to submit it before the AO. The Tribunal disagreed, emphasizing the necessity of examining the cost of construction and the construction period based on the additional evidence filed. The case was remanded to the AO for fresh consideration in line with the law.

Classification of the Sum of ?46 Lakhs:
Regarding the classification of the ?46 lakhs difference in sale consideration, the CIT(Appeals) taxed it as income from other sources due to a variance in actual and claimed sale consideration. The Tribunal directed the AO to reevaluate this issue, considering the evidence of the agreement for sale and providing the assessee an opportunity to present her case. The appeal was allowed for statistical purposes.

In conclusion, the judgment addressed the issues of cost of construction, entitlement to deduction u/s. 54, and classification of a sum as income from other sources or capital gain. The Tribunal emphasized the importance of admitting additional evidence for a proper assessment and directed a fresh consideration by the AO in accordance with the law.