2023 (3) TMI 603 - AT - Income Tax

Deduction u/s 54F - assessee has neither claimed this benefit during the course of assessment nor provided the complete evidences in support of this claim - condition required under sub-section (2) of section 54F of the Act not satisfied as assessee actually sold property which was a plot of land - HELD THAT - Neither the AO nor the ld. Sr. DR controverted the factual position that the assessee received consideration of Rs.7,31,76,075/- as consideration of sale of plots and had invested an amount of Rs.7,42,40,524/- in purchase of residential property during the relevant financial period in which the property was sold. It has also not been controverted that at the time of selling the plots and purchasing residential property, the assessee was owning only one other residential house during FY 2016- 17. For making claim u/s 54F, the cost of acquisition of house and full consideration, its fair market value is not relevant for the purpose of adjudication of claim of the assessee because the full consideration has to be considered for eligibility for deduction u/s 54F of the Act and, in the present case, the assessee has demonstrated that she has invested higher amount in purchase of residential property than the total amount of consideration received by her against sale of plots. CIT(A) was right in holding that the condition required under sub-section (2) of section 54F of the Act and other requirements have been successfully satisfied by the assessee, therefore, the assessee was eligible for deduction u/s 54F to the extent of consideration invested in acquisition of new residential property which is undisputably higher than the amount of consideration received by the assessee on sale of plots. Therefore, we are unable to see any valid reason to interfere with the findings arrived and recorded by the ld.CIT(A) and, thus, we uphold the same. Accordingly, grounds of the Revenue are dismissed.

Summary

Issues:
1. Eligibility for claiming deduction under section 54F of the Income Tax Act, 1961.
2. Allowing deduction based on fresh evidence without opportunity for verification.
3. Appreciation of evidence for allowing deduction under section 54F.

Analysis:

Issue 1: Eligibility for claiming deduction under section 54F
The Revenue contested the order of the CIT(A) regarding the eligibility of the assessee for claiming deduction under section 54F of the Income Tax Act. The Revenue argued that the assessee did not provide complete evidence to support the claim during the assessment and did not fulfill the necessary conditions. The Senior DR highlighted that the mere investment in a new property does not automatically make the assessee eligible for the deduction. The AO had rightly taxed the income from the property sale as long-term capital gain due to the lack of fulfillment of section 54F requirements. However, the assessee's counsel referred to a previous ITAT order in favor of another co-owner, supporting the eligibility for section 54 benefits. The counsel emphasized that the assessee had invested a substantial amount in a new residential property, meeting the conditions for deduction under section 54F.

Issue 2: Allowing deduction based on fresh evidence
The Revenue raised concerns about the CIT(A) allowing the deduction based on fresh evidence without providing an opportunity for verification. However, the CIT(A) did not rely on any new evidence that required confrontation to the AO as per Rule 46A of the IT Rules. The CIT(A) meticulously detailed the facts, submissions, and findings in the order, indicating no reliance on undisclosed evidence.

Issue 3: Appreciation of evidence for allowing deduction under section 54F
The CIT(A) carefully examined the facts and determined that the consideration received by the assessee was from the sale of plots, not a residential house, hence disallowing the deduction under section 54. The CIT(A) upheld the AO's decision as the property sold was land plots, not a residential house. The CIT(A) found that the assessee had invested a significant amount in a new residential property, satisfying the conditions of section 54F. The CIT(A) concluded that the assessee met the requirements of section 54F, as evidenced by the substantial investment in the new residential property, surpassing the consideration received from the sale of plots. Consequently, the CIT(A) dismissed the Revenue's grounds and upheld the eligibility of the assessee for deduction under section 54F.

In conclusion, the ITAT Delhi upheld the CIT(A)'s order, dismissing the appeal filed by the Revenue and the cross objection of the assessee. The judgment emphasized the importance of meeting the conditions stipulated in the Income Tax Act for claiming deductions and carefully evaluating the evidence presented during assessment proceedings.