2022 (2) TMI 330 - AT - Income Tax

Deduction u/s 54F - transaction of sale of paintings and investment in residential property - whether sale consideration of art effects has been utilized towards purchase of above property, the capital gain be treated exempt? - CIT(A) deleted the addition - HELD THAT - As observed by the ld. CIT(A) that on the date of such transfer of capital asset, appellant was not in the possession of any other identical house property and the new residential property was purchased on 08.09.2011 within a year from the date of such transfer of capital asset. After examining the submissions made before him, the ld. CIT(A) has found them to be in order and held that the assessee is entitled to claim exemption u/s. 54F in respect of sale of art effects. Since, the investment in the property (₹ 2.70 Cr.) is more than the amount of sale consideration received (₹ 2.50 Cr), the entire capital gain is eligible for exempt from tax. Since, the facts could not be contradicted before us, considering the facts on record, we hereby decline to interfere with the order of the ld. CIT(A). - Decided against revenue.

Summary

Issues:
1. Admissibility of additional evidences during appellate proceedings.
2. Acceptance of claim u/s. 54F without documentary evidence.
3. Acceptance of claim regarding sale of art effects.

Analysis:

Issue 1: Admissibility of additional evidences during appellate proceedings
The revenue challenged the admission of additional evidences by the assessee during appellate proceedings, arguing that the assessee had sufficient opportunity during assessment proceedings to submit documentary evidences. However, the ld. CIT(A) admitted the additional evidences based on the facts that the plea for claiming exemption of sale proceeds from art effects was presented to the Assessing Officer during original assessment proceedings. The ld. CIT(A) found that no adverse comments/evidences were brought to controvert the claim of the appellant, leading to the deletion of the addition.

Issue 2: Acceptance of claim u/s. 54F without documentary evidence
The revenue contested the acceptance of the claim u/s. 54F by the ld. CIT(A) during appellate proceedings without examining the conditions prescribed for availing the claim and the absence of documentary evidence to substantiate mandatory conditions. However, the ld. CIT(A) held that the appellant had made an investment in a residential property, satisfying the conditions of section 54F. The ld. CIT(A) further noted that the investment in the property exceeded the sale consideration received, making the entire capital gain eligible for exemption from tax.

Issue 3: Acceptance of claim regarding sale of art effects
The revenue raised concerns regarding the acceptance of the claim made during appellate proceedings concerning the sale of art effects, specifically miniature paintings, solely on the appellant's account. The revenue argued that the sale was made jointly with the appellant's spouse, rendering the claim of exempt income unsubstantiated. However, the ld. CIT(A) found the submissions regarding the sale of art effects to be in order, as the investment in the residential property was supported by relevant documents and met the requirements of section 54F.

In conclusion, the Appellate Tribunal upheld the decision of the ld. CIT(A) based on the facts presented and declined to interfere with the order. As a result, the appeal of the revenue was dismissed, and the entire capital gain was deemed exempt from tax.