2022 (9) TMI 1085 - AT - Income Tax

Disallowance of exemption claimed u/s 54 - Long Term Capital Gain on sale of residential house property - whether the assessee is entitled to deduction u/s 54 of the Act or not and what is the date of acquisition of new residential house for the purpose of deduction u/s 54? - HELD THAT - Provision of Section 54 shows that whether any individual or a HUF invest, the capital gain arise on transfer of residential house within a period of 1 year before or two years after the date of transfer of the house property then the amount of capital gain invested in purchase of new house property, the capital gain was not chargeable to tax. Here the fact shows that the residential property was sold on 12th May, 2006 and agreement to purchase the new house property was registered on 16th March, 2005, whereas the possession of the new house property was granted to the assessee on 16th July, 2005. As admitted fact that the date of possession was not available before the learned Assessing Officer and therefore, he took the date of agreement to sale as the date of purchase of the property. Therefore, he denied the deduction under Section 54 of the Act. This fact was available before the learned CIT (A), however, he rejected the same stating that this is additional evidence filed by the assessee and same is not in conformity with the Rule 46A of the Income Tax Rules, 1962. We find that Rule 46A, does not mandate compulsorily by making return application for admission of additional evidence. It is for the CIT (A) to record the reason if such additional evidences are admitted. CIT (A) rejected the claim of the assessee on flimsy ground - we set aside the whole issue to the file of AO with a direction to the assessee to submit the evidence of possession letter of the new property, AO may examine the same and decide the issue whether the claim of the assessee is eligible for deduction u/s 54F or not. The learned AO may grant an opportunity of hearing to the assessee. After hearing, the AO may decide the issue on the merits of the case. Accordingly, the appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
Delay in filing appeal for condonation, Disallowance of exemption u/s 54 of the Income-tax Act, 1956

Delay in filing appeal for condonation:
The appeal was filed late by 250 days, and the assessee sought condonation of delay due to the accountant's inadvertent ignorance and ill health, as well as the husband's illness and subsequent death. The Tribunal considered the reasons for delay, including the mental devastation caused by the husband's death, and found them sufficient. The delay was condoned, and the appeal was admitted.

Disallowance of exemption u/s 54 of the Income-tax Act, 1956:
The assessee claimed an exemption under Section 54 for Long Term Capital Gain on the sale of a residential property. The Assessing Officer denied the deduction, stating that the purchase of the new property did not meet the timeline requirements. The CIT (A) dismissed the appeal, citing lack of submission of the possession letter and non-compliance with Rule 46A. The Tribunal found that the possession date was crucial for determining the date of acquisition for Section 54 deduction. Since the possession letter was not presented earlier, the Tribunal remanded the issue back to the Assessing Officer for reevaluation with the possession letter. The Tribunal allowed the appeal for statistical purposes.

In conclusion, the Tribunal addressed the delay in filing the appeal and the disallowance of exemption under Section 54 of the Income-tax Act, 1956. The delay was condoned due to valid reasons, and the issue of exemption was remanded back to the Assessing Officer for further evaluation based on the possession letter. The appeal was allowed for statistical purposes.