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TMI Blog2024 (8) TMI 820X X X X Extracts X X X X X X X X Extracts X X X X ..... der consideration, apart from the amount received on 21.10.2011; and further, we note that assessee had withdrawn an amount of Rs. 13.90 lakhs between 01.08.2009 to 16.07.2010. Therefore, the assessee succeeds in proving the nature and source of Rs 59.90 lakhs, and therefore, addition made of Rs. 59.90 lakhs was not warranted. In such an event, no addition u/s. 68 of the Act is sustainable and directed to be deleted. Appeal filed by the assessee is allowed. - Shri Aby T. Varkey, Judicial Member And Shri Amitabh Shukla, Accountant Member For the Appellant : Shri Sathyanarayanan, Adv. For the Respondent : Shri P. Sajit Kumar, JCIT ORDER PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter in short the Ld.CIT(A) ), Delhi, dated 17.11.2023 for the Assessment Year (hereinafter in short AY ) 2012-13. 2. Ground No.1 is the action of the Ld.CIT(A) confirming the action of the AO denying exemption u/s. 54F of the Income Tax Act, 1961 (hereinafter in short the Act ). 3. The brief facts are that the assessee filed return of income (RoI) for AY 2012-13 on 31.07.2012 declaring total income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia or has within a period of three years after the date of transfer constructed a residential house in India and if the amount of the cost of the residential house, so purchased or constructed is equal to or less than the amount of capital gain. Thus, it can be seen that the assessee would be allowed deduction u/s. 54F of the Act if he purchased a residential property one year before or after two years from the date of transfer or constructed a residential house within three years from the date of transfer. In this case, admittedly, the assessee had constructed a house ( first floor on the top of the ground floor building which was already existing ) and claimed deduction u/s. 54F of the Act on the constructed first floor, which has been denied only on the ground that such a claim u/s. 54F of the Act can be allowed only if an assessee constructed a house within three years from the date of transfer. This reason of the AO can t be accepted, because, u/s. 54F of the Act, inter-alia, if the assessee had purchased a house one year before the date of transfer, then, assessee could have successfully claimed deduction u/s. 54F of the Act. In other words, prior purchase of house is allowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idential property which resulted in the capital gain. (ii) If the amount of capital gain is greater than the cost of the residential house so purchased or constructed, the difference between the amount of the capital gain and the cost of the new asset is to be charged under Section 45 as the income of the previous year. (iii) If the amount of the capital gain is equal to or less than the cost of the new residential house, the capital gain shall not be charged under Section 45. 20. What has to be adjusted and/or set off against the capital gain is, the cost of the residential house that is purchased or constructed. Section 54(1) of the said Act is specific and clear. It is the cost of the new residential house and not just the cost of construction of the new residential house, which is to be adjusted. The cost of the new residential house would necessarily include the cost of the land, the cost of materials used in the construction, the cost of labour and any other cost relatable to the acquisition and/or construction of the residential house. 21. A reading of Section 54(1) makes it amply clear that capital gain is to be adjusted against the cost of new residential house. The condit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s discussed above, the appeal is allowed. The questions framed above are answered in favour of the appellant assessee and against the respondent revenue. The first question is answered in the affirmative and the second question is answered in the negative. No costs. 7. And also, we take note of the decision of this Tribunal in the case of Smt. Kethsial Justin v. ITO dated 18.06.2018 in ITA No.781/Chny/2018, wherein, similar question arose, and in that case, the assessee had put up a new dwelling unit on the first floor of existing residential house and claimed that the cost incurred for construction of such new dwelling unit as eligible for deduction u/s. 54F of the Act. However, the AO was of the opinion that it was only an extension of the existing building and there was no dwelling unit or residential house. However, the Tribunal didn t agree and noted that there was separate stair-case for the construction done in the first floor and approved plan of the Engineer, which showed existence of kitchen for the first floor building as well as separate water connection, separate electricity connection, etc. In such circumstances, the Tribunal held that the construction of a new reside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial unit was within the time stipulated u/s. 54F of the Act. Therefore, assessee is eligible for claiming deduction u/s. 54F of the Act and therefore, we set aside the impugned order of the Ld.CIT(A) and direct the AO to grant deduction claimed u/s. 54F of the Act. 10. Ground No.2: Coming to the next ground against the action of the Ld.CIT(A) confirming the addition made u/s. 68 of the Act to the tune of Rs. 59,90,000/-. The AO noted that the assessee had constructed a house (first floor) in the relevant Assessment Year before the transfer of property in February, 2012 and therefore, he asked the assessee to prove source of the funds for the construction of the first floor, because, the transfer of the property at Noombal Village, was an event after the commencement of the construction. In order to prove the nature source of the money, the assessee contended (i) the sale consideration of Rs. 78,48,000/- was received on 21st October, 2011 ( 4 months before the Sale Deed was executed on 29.02.2012 and (ii) that he received Rs. 59,90,000/- from his father/mother/brothers sisters. In this regard, the assessee explained that he had executed on stamp paper an agreement for purchase of la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee, (i) Shri C. Uma Shankar (ii) Shri Gowri Shankar, (iii) Shri C. Girija Shankar and (iv) Shri C. Durga Shankar; and pursuant to it, they confirmed the fact regarding agreement of sale in 2007 which was later cancelled by their father and also that they have duly returned the money to the assessee. Copy of their replies are found placed at Page Nos.58-60 of the Paper Book. Further, according to the Ld.AR, he has come to know that the Ld.CIT(A) even had issued notice to the Stamp Vendor to ascertain whether the agreement for sale dated 25.07.2007 which was executed on stamp-paper was genuine or not; and had verified about the veracity of the stamp-paper purchased from that stamp vendor which shows the genuineness of the said document. However, according to him, when the investigation was at this stage, unfortunately, the appeal proceedings migrated to the faceless regime and he couldn t access the other evidences collected by the Ld.CIT(A); and prayed that in the light of the contemporaneous evidence like bank statement of assessee which shows that assessee in order to purchase the property in 2007 for a consideration of Rs 75 Lakhs, got loan partly from Axis Bank which amount wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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