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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGH, HON’BLE & SHRI G. MANJUNATHA, HON’BLE
आदेश /O R D E R
PER G. MANJUNATHA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is directed against the order passed by the learned Commissioner of Income Tax (Appeals)-4, Chennai, dated 09.03.2020 and pertains to assessment year 2014-15.
:-2-: ITA. No: 81/Chny/2021 2. The assessee has raised the following grounds of appeal: “1. The order of the Commissioner of Income Tax (Appeals) is contrary to law erroneous and unsustainable on the facts of the case.
2. The Commissioner of Income Tax (Appeals) erred in confirming the denial of claim u/s 54 on the ground that both construction of residential house at Nelambur village, Thirukalukundram, Kanchipurram District and the claim u/s 54 are bogus.
3. The Commissioner of Income Tax (Appeals) failed to appreciate that the documents attached as annexure to the assessment order, like, copy of construction agreement, quantities of civil works, cash vouchers issued by Mr.K.M.Rajan - contractor, etc. perse, indicated construction and denial of claim u/s 54 was unsustainable in law as well as on facts.
4. The Commissioner of Income Tax (Appeals) further failed to appreciate that the Assessing Officer, having made a reference to Valuation Cell u/s SSA on 04.12.2018 "with a view to ascertaining the fair market value of a capital asset for the purposes of this chapter", it was neither open to the Commissioner of Income Tax (Appeals) nor the Assessing Officer to hold otherwise as to the existence of the property and hence denial of claim u/s 54 was erroneous in point of law as well as on facts.
5. The Commissioner of Income Tax (Appeals) failed to appreciate, that having made a reference u/s SSA, such reference was binding on the Assessing Officer and hence to hold otherwise as to the necessity of reference u / s SSA by the Commissioner of Income Tax (Appeals) was untenable in law.
6. The Commissioner of Income Tax (Appeals), in any view of the matter and having regard to the written submissions, ought to have accepted the claim u/s 54 of the Act.”
:-3-: ITA. No: 81/Chny/2021 3. The brief facts of the case are that, the assessee did not filed her return of income for the assessment year 2014-15 on or before due date specified u/s. 139(4) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”). Therefore, the assessment has been re-opened u/s. 147 of the Act, for the reasons recorded as per which income chargeable to tax has been escaped assessment. The assessee neither filed return of income in response to 148 notice nor responded to 142(1) notice. Therefore, proceedings u/s. 144 was issued to assess the income of the assessee by best judgment assessment. As per assessment record, it was noticed that during the financial year relevant to assessment year 2014-15, the assessee had sold a residential flat on 17.04.2013 for a consideration of Rs. 2.90 crores and computed long term capital gains. The assessee had also claimed deduction u/s. 54 of the Act, for Rs. 2,26,69,255/-. The AO, called upon the assessee to file necessary details of computation of long term capital gains and claim of deduction u/s. 54 of the Act. In response, the assessee submitted that she had entered into an agreement for purchase of flat at Vasanthi Avante in Bangalore and paid advance of Rs. 20 lakhs. There was a difference between the appellant and the builder, and thus, the flat was :-4-: ITA. No: 81/Chny/2021 not handed over to the assessee. Therefore, the assessee has constructed a new residential house at Nirambur Village, Thirukazhukundram Taluk, Kancheepuram District and claimed deduction u/s. 54 of the Act. The AO, on the basis of information furnished by the assessee and also on the basis of independent evidence collected during the course of proceedings, opined that the claim of the assessee towards deduction u/s. 54 of the Act is not allowable, because the assessee could not produce any evidence for construction of residential house property at Kancheepuram District and also failed to explain sources. Therefore, rejected arguments of the assessee and disallowed deduction claimed u/s. 54 of the Act. The assessee carried the matter in appeal before the first appellant authority, but could not succeed. The Ld. CIT(A), for the reasons stated in their appellant order dated 09.03.2020, rejected arguments of the assessee and sustained additions made by the AO towards disallowance of deduction claimed u/s. 54 of the Act. Being aggrieved by the ld. CIT(A) order, the assessee is in appeal before us.
The Ld. Counsel for the assessee, submitted that the Ld. CIT(A) is erred in confirming disallowance of deduction u/s. 54 :-5-: ITA. No: 81/Chny/2021 of the Act, without appreciating fact that the assessee has furnished all evidences including building sanction plan, bill of quantities of civil works supplied by contractor Mr. K.M. Rajan and various evidences for incurring expenditure for construction of building. The Ld. Counsel for the assessee, further submitted that although, the assessee has filed various evidences, but the AO and the CIT(A) rejected arguments of the assessee only on the wrong assumption that the assessee has made a bogus claim of deduction u/s. 54 of the Act for construction of residential house at Nirambur Village, Thirukazhukundram Taluk, Kancheepuram District, on the basis of inspector report which was obtained during the course of assessment proceedings after more than three years from the date of construction of house property. He further submitted that although, the AO has referred valuation of building to the DVO, but the DVO did not submit his report before completion of assessment proceedings. Therefore, the conclusion reached by the AO on the basis of inspector report is incorrect.
The Ld. DR, on the other hand supporting the order of the CIT(A) submitted that, the AO as well as the Ld. CIT(A)
:-6-: ITA. No: 81/Chny/2021 brought out clear facts to the effect that the assessee has initially made a claim of deduction u/s. 54 of the Act, in respect of purchase of flat at Bangalore. Subsequently, the assessee has changed her stand and argued that she had purchased a flat at Hyderabad. Finally, she could not furnish any evidences in respect of purchase of flat and Bangalore and Hyderabad and when the AO has questioned the claim, she had changed her stand and argued that she had constructed a residential house at Nirambur Village, Thirukazhukundram Taluk, Kancheepuram District. But, fact remains that when the inspector visited the place, there was no proof of construction of new residential property. The ld. DR, further submitted that even when the DVO visited the place for determination of value of construction, he could not find any construction of house property. Therefore, submitted that there was no error in the reasons given by the Ld. CIT(A) to reject deduction claimed u/s. 54 of the Act.
We have heard both the parties, perused materials available on record and gone through orders of the authorities below. There is no dispute with regard to the fact that the assessee has sold a residential flat during the financial year :-7-: ITA. No: 81/Chny/2021 relevant to assessment year 2014-15 and computed long term capital gain of Rs. 2,26,69,255/-. The assessee has claimed deduction u/s. 54 of the Act for Rs. 2,26,69,255/- and claimed that she had entered into an agreement with the builder for purchase of flat at K.R. Puram Hobli, Bangalore and also paid Rs. 20 lakhs advance. The assessee could not file necessary evidence in respect of purchase of flats at Bangalore and when the AO questioned, she replied that because of difference with builders, the transfer could not be completed and thus, she had constructed a new residential house property at Nirambur Village, Thirukazhukundram Taluk, Kancheepuram District. The AO disregarded claim of the assessee on various grounds including non-availability of source for construction of house property, and absence of necessary evidence. The AO had reached to above conclusion on the basis of report of inspector of Income-tax, non-appearance of Contractor Mr. K.M. Rajan and also failed to prove source for construction of house property. According to the AO, the assessee has utilized consideration received for transfer of original asset for some other purpose and claimed that she had constructed a new residential house property out of agricultural income, but could not substantiate her claim.
:-8-: ITA. No: 81/Chny/2021 7. Having considered relevant documents and also heard both the sides, we find that the assessee has filed certain evidence including approved plan for building house, copy of VAO certificate certifying existence of building in the above address and also copy of VAO certificate for agricultural income. The assessee had also filed bill of quantities of construction of building obtained from Shri. K.M. Rajan. The assessee claimed that she had constructed new house property, however, due to heavy rain and floods during the period, the house was damaged. The inspector, when visited the site he could not ascertain the construction, therefore, gave a report that there was no proof of construction of building. Even when the DVO visited the site, he could not identify the construction. Therefore, he had reached to a conclusion that there was no construction. If you go by various evidences filed by the assessee, it is difficult to reject the claim of the assessee that she had constructed a house property at Nirambur Village, Thirukazhukundram Taluk, Kancheepuram District. If you go by findings recorded by the AO and the Ld. CIT(A), there is no dispute that the claim of the assessee is incorrect, because the assessee could not adduce proper evidence. Facts are contradicting with each :-9-: ITA. No: 81/Chny/2021 other. The assessee claims to have constructed new residential house property, whereas the authority claims that there is no proof of new construction. Therefore, we are of the considered view that the matter needs reexamination from the Assessing Officer. Thus, we set aside the order passed by the CIT(A) and restore the issue back to the file of the AO and direct the AO to re-examine the claim of the assessee in light of various averments including evidence filed by the assessee. The AO may also take necessary report from the DVO, if necessary to ascertain fair market value of residential building constructed by the assessee and decide the issue in accordance with law.