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TMI Blog2023 (1) TMI 406X X X X Extracts X X X X X X X X Extracts X X X X ..... ,041 disallowing a sum of Rs. 5,40,364/- as evident from the assessment order. We are therefore, unable to agree with the findings of the ld. PCIT that it is a case of lack of enquiry on part of the AO to verify the claim of deduction u/s. 54 made by the assessee. How the order passed by the AO has been held as erroneous in so far as prejudicial to the interest of the Revenue? - PCIT has merely referred to the show-cause notice and summarily recorded his findings stating that the AO has failed to conduct the enquiries and to bring on record the relevant evidences in respect to the issues raised in the show-cause notice and it has been held that it is a case where the AO had failed to apply his mind. In the instant case, it is an admitted fact that the assessee has purchased a residential house measuring 225 sq. yards at Aggar Nagar, Ludhiana on 15.11.2011. As per evidences placed on record and are part of the assessment records and available at the time of examination before the ld. PCIT, in terms of building plan of the said residential house, demolition of the residential structure thereon in May 2014 on the said plot of land, request for approval of the new building p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order. Here, it is relevant to note that the assessee has not claimed cost of purchase of the old house of Rs. 50 lacs and cost relating to demolition of the old structure and has only claimed the cost towards construction of the new house for the purposes of claiming deduction under section 54 of the Act, a fact which is not disputed by the ld. PCIT. It is also not the case of the PCIT that these costs of construction of new house have not been met out of sale proceeds of the original asset. We therefore do not find any infirmity in the order so passed by the AO. We are of the considered view that the matter relating to claim of deduction u/s. 54 has been thoroughly examined by the AO during the course of assessment proceedings as evident from material available on record and the findings of the ld. PCIT that it is a case of lack of enquiry on part of the AO and the impugned order passed u/s. 263 is hereby set-aside and the order of the AO is sustained. Appeal of assessee allowed. - ITA No. 35/Chd/2021 - - - Dated:- 30-11-2022 - SHRI. SANJAY GARG, JM And SHRI VIKRAM SINGH YADAV, AM Assessee by : Shri. Pankaj Bhalla, C.A Revenue by : Smt. Kusum, CIT DR ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is finally heard or disposed off. 2. Briefly the facts of the case are that the assessee filed its return of income declaring total income of Rs. 1,51,83,600/-. Subsequently the case of the assessee was selected for limited scrutiny and the notices under section 143(2) and 142(1) were issued and necessary information/documents were called for and examined by the AO and as against the returned income of Rs. 1,51,83,600/-, the assessed income was determined by the AO at Rs. 1,52,39,586/-, disallowing the claim of deduction under Section 54 to the extent of Rs. 5,40,364/-. Thereafter the assessment records were called for and examined by the Ld. PCIT and a show cause dt. 08/03/2021 was issued and after calling for the information/submissions from the assessee, the assessment order was held to be erroneous and prejudicial to the interest of the Revenue and same was set aside and restored to the file of the AO. 3. Against the said findings and the order of the Ld. PCIT, the assessee is in appeal before us. 4. During the course of hearing the Ld. AR submitted that during the year under consideration, the assessee had sold a flat for Rs. 4.00 crore and has claimed deduction un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Racks, Generator, Sofa Set, Sofa Set Chair, Elevator, Kitchen Material, Recliner, AC, Architect, Paradise Landscape consultant and developers, Watchman as deduction u/s. 54 of the Act was demanded. 8. Notice u/s. 142(1) of the Income Tax Act, 1961 06.12.2018 21-22 Copies of all the bill in support of deduction claimed was demanded and a justification as to how movable items are eligible for deduction claim was also demanded Detailed submission in support of above was filled by the assessee:- 1) Letter dated 20.11.2018:- Copy of ITR, Computation, Tax Audit and Balance Sheet was filed. 2) Letter dated 21.11.2018:-The assessee in a detailed letter explained that entire sales consideration of Rs. 4.00 crore was shown in computation of income. Reconciliation of sales consideration with Form 26QB to the satisfaction of A.O. was done. Particulars of selling expenses to the tune of Rs. 1,88,300/- were furnished. It was explained that the said payment was made to the Society for issuance of NOC for transfer of ownership. (Documentary evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO, the present proceeding under section 263 for re-enquiring the same matter cannot be permitted in the eyes of law. In support, the reliance was placed on the decision of Coordinate Chandigarh Benches in case of Leeford Healthcare Limited Vs. Pr. CIT(Central), Ludhiana (ITA Nos. 343 to 353/Chd/2022 dt. 29/07/2022). 4.3. It was further submitted that even if it is assumed that the AO has not conducted some enquiry in the matter, it was incumbent on the part of the Ld. PCIT to do certain minimal enquiry especially in the light of the facts that the assessee has filed detailed submission and paper book containing over 300 pages before the Ld. PCIT. It was submitted that inspite of the voluminous documentation submitted before the Ld. PCIT, no verification or enquiry was done by him other than remanding the matter back to the file of AO under the guise of re-verification. It was submitted that the said action on the part of the Ld. PCIT cannot be sustained in the eyes of law and in support, reliance was placed on the decision of Coordinate Chandigarh Benches in cases of Shri Hakam Singh Vs. PCIT, Patiala (ITA No. 597/Chd/2019) and Shri Abhimanyu Gupta Vs. Pr. CIT (ITA No. 771 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year. In support, reliance was placed on the decision of Coordinate Delhi Benches in case of Deepak Bhardwaj Vs. ITO, W-1(3), Noida [2020] 116 taxmann.com 891. 4.7. It was further submitted that on 10/06/2014 the assessee applied to Municipal Corporation Ludhiana for approval of building plan for new residential house and deposited a sum of Rs. 35,318/- and the necessary documentation were submitted before the AO as well as before the Ld. PCIT and thereafter the approval was granted on 16/06/2014. It was submitted that the assessee has been paying property tax on its residential house at Aggar Nagar, Ludhiana from F.Y. 2013-14 onwards. It was submitted that total covered area of the old residential house which was demolished in May 2014 was 416 sq. ft whereas total covered area of new residential house completed during the F.Y. 2017-18 is 6500 sq. ft. which further demonstrates the construction of the new house from scratch where there is substantial increase in amount of annual property tax with corresponding increase of covered area of the property. It was accordingly submitted that a new construction of house has been done from scratch. Without prejudice, it was subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is supported by voucher forming part of record, calling for no adverse view. It was submitted that Assessing officer has scrutinized each and every item of expenditure and made disallowance of ineligible expenditure to the tune of Rs. 5,40,364/-. 4.10. Regarding the issue of disallowance of Rs. 1,88,300 claimed as expenses, it was submitted that the assessee has paid the said sum to Lake Castle Co-op Housing Society Limited for issue of NOC for sale of flat which was sold by the assessee. It was submitted that the amount has been paid through cheque during the period under review and has been correctly accepted by the AO after due application of mind. Therefore there is no justification in disallowing the said amount so paid by the assessee to the society for issuing the NOC for sale of flat. 4.11. Regarding additional documentation filed during the revisionary proceedings, it was submitted that even where there were certain additional document filed by the assessee, it was incumbent on the part of the Ld. PCIT to do some minimal inquiry. It was submitted that these documents were filed to support the case of the assessee wherein the verification/conclusion drawn by the AO is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee has purchased one residential house in Aggar Nagar, Ludhiana on 15.11.2011 for Rs. 50,00,000/- measuring 225 square yard. On the other hand, the assessee has sold two residential flat on 01.06.2015 for Rs. 4,00,00,000/- at Mumbai and claimed deduction u/s. 54 of Income Tax Act, 1961 amounting to Rs. 2,05,93,405/- on account of modification of residential house situated in Aggar Nagar, Ludhiana. To avail exemption u/s. 54, the assessee will have to purchase or construct one residential house the new residential house property should be purchased or constructed within the time limit given below:- Time limit For purchasing a new residential property It should be purchased within one year before, or within 2 years after, the date of transfer of the residential house property For constructing a new residential property The construction should be completed within 3 years from the date of transfer of residential house property. In the present case, the assessee has made modification in old house and claimed exemption on it. As per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment. This shows that the AO has failed to conduct the enquiries and to bring, on record the relevant evidences in respect to the issues raised in para 2 above and therefore remained unverified. These facts clearly revealed that AO had failed to apply his mind on the issue involved. Lack of enquiry is clearly established. In the considered opinion of the undersigned, the assessment completed by the AO u/s. 143(3) dated 20.12.2018 is erroneous and prejudicial to the interest of the revenue within the meaning of section 263 of the I.T. Act 1961 r.w. the explanation 2 of the Income Tax Act. 3.1 From these facts, it is held that the AO passed cryptic and routine order without application of mind rendering the assessment erroneous and pre-judicial to the interest of revenue. 5.2. It was accordingly submitted that it is a case where there is failure on the part of the AO to conduct the necessary and appropriate enquiry and to bring on record the relevant evidences and accordingly the order so passed by the Ld. PCIT should be sustained and the appeal filed by the assessee be dismissed. 6. We have heard the rival contentions and pursued the material available on record. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10,002 Total 4,42,052 In addition to the above said amount, the assessee had incurred expenditure in cash amounting to Rs. 19,66,293/- on purchase of bricks, sand, crusher, labour, debris clearance, freight and cartages which is not supported by bills. Therefore, disallowance of 5% of such expenditure in cash amounting to Rs. 98,312/- would be fair enough to rule out any inflation of claim of deduction u/s. 54 of Income-tax Act, 1961. Hence, in view of the above facts total amount of 5,40,364/- (Rs. 4,42,052/-+ Rs. 98,312/-) deserves disallowance as claim of deduction u/s. 54 of the Income-tax Act, 1961. 7. We are therefore, unable to agree with the findings of the ld. PCIT that it is a case of lack of enquiry on part of the AO to verify the claim of deduction u/s. 54 made by the assessee. 8. Now, coming to the specific findings of the ld. PCIT in the impugned order as to how the order passed by the AO has been held as erroneous in so far as prejudicial to the interest of the Revenue, we find that the ld. PCIT has merely referred to the show-cause notice and summarily recorded hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the context of and relative to term of original asset which has been used. In the instant case, it is an admitted fact that the assessee has purchased a residential house measuring 225 sq. yards at Aggar Nagar, Ludhiana on 15.11.2011. As per evidences placed on record and are part of the assessment records and available at the time of examination before the ld. PCIT, in terms of building plan of the said residential house, demolition of the residential structure thereon in May 2014 on the said plot of land, request for approval of the new building plan to Municipal Corporation on 10/06/2014, approval granted thereafter on 16/06/2014, subsequent construction of new structure measuring 6500 sq. feet in financial year 2017-18 as evident from the property tax receipts, we find that it is a case of construction of new house after demolition of old structure and well within the framework and having the necessary attributes and specification of a residential house eligible for deduction u/s. 54 of the Act. The preliminary findings of the ld. PCIT in the show-cause notice that it is a case of modification of an old house and which has been summarily turned into conclusive findings in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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