POINT MANI JANAKI,CHENNAI vs. ITO, WARD-2(1), TIRUPUR

Aggrieved by the order of the ld.CIT(A) dated 16.07.2025, the assessee had preferred an appeal before this Tribunal on 20.08.2025. The Registry had fixed the appeal for hearing on 13.11.2025. However, none appeared for the assessee to represent the case when it is called for. Hence the appeal was dismissed due to non-participation of the assessee. Later, the assessee filed Miscellaneous Application on 04.12.2025 before this Tribunal and the MA was allowed by recalling the order of the Tribunal by passing an order dated 31.12.2025. Accordingly, the present appeal has been heard on 21.08.2026. 3. The brief facts of the case are that the assessee is an individual, filed her return of income for the AY 2016-18 on 30.03.2017 by declaring a total income of Rs.9,01,050/-. The case was selected for limited scrutiny through CASS to examine the issue as to whether deduction from capital gains has been claimed correctly and whether investment of income relating to properties are duly disclosed. Accordingly, the statutory notices were issued calling for details of investments in properties, working for long term capital gain and deductions claimed from long term capital gains. The assessee filed the details stating that she had sold a land for a consideration of Rs.1,12,00,000/- on 16.11.2015. The guideline value of the said property for stamp valuation was Rs.1,41,15,000/-, which was considered as the value of consideration and arrived at the long term capital gain of Rs.1,24,53,493/-. Further, the assessee had claimed Rs.1,33,55,551/- as investment made in the construction of house property up to 31.07.2016 and claimed Rs.1,17,83,441/- as the deduction u/s.54F of the Act on pro-rata basis by admitting Rs.6,70,052/- as taxable capital gains. The assessee also furnished a copy of valuation report of the building, where the value of the building is estimated at Rs.1,46,28,312/- as on 20.10.2016. 4. In order to verify the claim of the assessee regarding the investment in new house property for having claimed deduction u/s.54F of the Act, the AO issued a notice u/s.133(6) of the Act to Tirupur Municipal Corporation calling for the details. Accordingly, the authorities furnished a letter dated 10.12.2018, which is reproduced in page No.3 of the of AO’s order and the AO noted that :-3-:

Accordingly, the AO issued a show cause notice to the assessee, proposing to disallow the claim of deduction, as the assessee has not constructed any new house property during the financial years 2015-16 and 2016-17 and also owns seven houses as per the letter issued by the Tirupur Municipal Corporation, therefore the assessee is not eligible for deduction u/s.54F of the Act. In response, the assessee filed the details stating that she had constructed residential house admeasuring 2066 sq.ft. during the year 2001. Later in the year 2015-16, she stated that she has constructed a new house property admeasuring 4685 sq.ft. since she had demolished the existing house property and constructed new house property in the same door number and she did not obtain any demolishing certificate or new construction approval from the Municipality. Further, she also stated that there is no condition that the building plan for residential house should be approved by the competent authority, by relying on various judicial precedents. Further, the assessee also stated that she has enclosed a valuation report dated 20.10.2016 mentioning the value of the building as Rs.1.46 crores. Further, the gruhapravesam invitation mentioning that the housewarming function has been held on 29.01.2016. Further, the assessee stated that she has withdrawn funds from her account for construction of new house property during the financial year 2015-16 and 2016-17. Therefore, the assessee prayed for considering the above explanations and allow the deductions claimed u/s.54F of the Act.

In respect of the properties shown by the Tirupur Municipal Corporation, the assessee stated that these are the quarters let out to labourers, staff and bachelors and it consists mainly of only one room and does not contain kitchens or bathrooms and they are using only common bathrooms and toilets provided to the users. Therefore, the assessee stats that such properties cannot be deemed as residential properties. On verification of the said property by the Inspector of the Income Tax Department found that out of ten residences from whom information was gathered by the Inspector during his inquiry, seven of them are staying with their families and seven persons are staying therein for more than five years. All these properties are having electricity connections and toilet facilities, which are used commonly. In view of the above, the AO found that the assessee is owning more than one residential house apart from new residential property stated to be built by the assessee during the financial years 2015-16 and 2016-17 and disallowed the deductions claimed u/s.54F of the Act and prayed to tax Rs.1,17,83,441/- after giving effect of Rs.6,70,052/-, which is already been offered as long term capital gains by the assessee. Accordingly, the AO passed an order u/s.143(3) of the Act dated 29.12.2018. 7. Aggrieved by the order of the AO, the assessee preferred an appeal before the ld.CIT(A) on 28.01.2019. Before the ld.CIT(A), the assessee reiterated the facts and submitted that the seven houses mentioned by the AO in his order has to be treated as one residential property only and hence the assessee is eligible for deduction u/s.54F of the Act for the amounts spent towards new residential house property. On perusal of the submissions made by the assessee, the ld.CIT(A) rejected the claim of the assessee and confirmed the order of the AO by holding as under:- “6. Decision:

1 I have carefully considered the grounds of appeal, facts and circumstances of the case, assessment order and material available on record. The assessee has contested grounds of appeal No. 1 to 3 stating that the assessing officer erred in disallowing the claim of the assessee under section 54 of the IT Act and the assessing officer has incorrectly appreciated the facts and legal provisions.

2 It is found that the assessee has sold land situated at SF No. 363/2, 363/2 B, 6.2 It is found that the assessee 363/4, the 363/4A, Nallur, Tirupur for consideration of Rs. 1,12,00,000/- on 16.11.2015. The guidelines value of the property/stamp duty valuation was adopted at Rs. 1,41,15,000/- of the index cost of acquisition was considered at Rs. 16, 61507 /-. The long-term capital gain computed by the assessee under section 50 C at Rs. 1,24,53,493/-. It is submitted that the assessee has demolished existing residential house admeasuring 2066 sq.fts and constructed new residential building at the same piece and parcel of the land admeasuring 4685 sq.fts. Further, it is submitted that Rs. 1,33,55,551 was invested in construction of a house property up to 31.07.2016 and claimed Rs. 1,17,83,441 as deduction u/s 54F of the Act on pro- rata basis. An amount of Rs. 6,70,052 was offered as taxable capital gains.

3 It is also found the assessee has obtained a valuation report of such property. As per the valuation report obtained from Approved Valuer Er. M.S. Vijayakumar dated 20.10.2016 the Valuation of the Building is valued at Rs. 1,46,28,312.00. 6.4 Therefore, the sole question is to be decided whether the assessee is eligible to claim deduction under section 54F of the IT Act? If yes, what is an amount for which the assessee is eligible to claim such deduction. If not, what is the provision the assessee has violated to become illegible to claim such deduction.

5 After considering the facts and circumstance of the case and submission of the assessee, it is found that the assessee has claimed long-term capital gain of Rs. 1, 24, 53, 493/- after considering the full value of consideration at Rs. 1, 41, 15, 000/- as per stamp duty valuation whereas the assessee has actually received consideration on transfer of land of Rs. 1, 12, 00, 000/-.

6 It may be appreciated that the assessee is eligible to claim deduction under section 54F of the IT Act up to the extent of net consideration received or accruing as result of transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer. For the sake of ready reference, provisions of section 54F of the IT Act is reproduced as under- "54F. (1) Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, one residential house in India (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say, - 1. if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45; 2. b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45: Provided that nothing contained in this sub-section shall apply where

7 As such, it may be appreciated that the 'net consideration' is defined as under "net consideration", in relation to the transfer of a capital asset, means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer".

8 Therefore, it may be appreciated that the net consideration received or accrued to the assessee as a result of transfer cannot be adduced to after deduction of cost of acquisition from notional/presumptive value of sale of value of consideration under section 50C of the IT Act. Therefore, considering the facts and circumstance of the case, net value of consideration received by the assessee is as under-

9 As such, considering the facts and circumstance of the case and provisions of section 54F of the IT Act, the maximum amount which assessee can claim

10 Without prejudice to the above, it may be appreciated that the provisions of section 54F has prescribed following conditions to claim such deduction- 1. the assessee shall transfer long-term asset 2. the assessee shall receive net e net consideration as a result of such transfer 3. the assessee shall purchase or construct new house within the prescribed time limit 4. the assessee shall invest part of net consideration/full of net consideration in the construction or acquisition of new residential house 5. in case the amount invested in the new residential house (construction or acquisition) is more than need consideration received the amount of deduction shall not exceed the total amount received on transfer of land or any other long- term asset 6. the assessee shall not own more than one residential house, other than the new asset on the date of transfer of asset

11 After considering the facts and circumstances of the impugned case it is found that the assessee has transferred a long-term asset and received certain amount as net consideration. Further, it is found that the assessee has invested the proceeds of transfer of long-term asset in construction of new house by demolishing the existing old house. Thereby, the assessee has claimed deduction of even amount under section 54F of the IT Act.

12 However, pursuant to the third-party enquiries, during the course of assessment proceedings, the assessing officer found that the assessee has sold long-term capital asset. However, on the date of transfer of long-term capital asset, the assessee own more than one residential houses. Further, it is also found that the assessee has not obtained/submitted any completion certificate of construction of alleged house and invested the proceeds of sale of transfer of long-term asset in such house. The assessing officer has given a finding of the fact that the assessee has not obtained any commencement certificate or completion certificate from the competent authority to construct a new house and invest the proceeds of the sales of transfer of long-term capital asset. Therefore, the assessing officer disallowed the claim of the assessee within the meaning of provisions of section 54F of the IT Act. For the sake of reference the relevant para from the assessment order is reproduced as under- "

As per information obtained from the Tirupur Municipal Corporation, the assessment in the above assessment number was done in the year 2001. The above fact contradicts the claim of the assessee that the building constructed in 2001 was demolished during 2015-16. If the building had actually been demolished, as claimed by the assessee, the old assessment number would have ceased to exist and the new residential house, if any, would have been allotted a new assessment number.

The assessee has relied on the decision of the Hon'ble High Court of Delhi in the case of the CIT Vs. Ashok Kumar Ralhan. In the above case, the Hon'ble

In light of the above discussion, it is clearly established that the assessee has failed to prove its claim of construction of new residential house in order to be eligible for deduction u/s 54F of the Income Tax Act.

Having examined the claim of the assessee regarding demolishing the old building and construction of a new residential house, I now proceed to examine the allowability of deduction u/s 54F of the Act in the light of proviso to 54F(1) of the Act. As per the information obtained from the Tirupur Municipal Corporation, the assessee owned 7 residential houses on the date of transfer of the original capital asset. In response to this office letter dated 21.12.2018 on the above issue, the assessee has furnished her reply on 26.12.2018 as under, 18. 18. The crux of the assessee's contentions is that the properties mentioned in this office letter dated 21.12.2018 proposing to disallow deduction claimed u/s 54F of the Act are commercial in nature. The above claim of the assessee is in stark contrast with the facts available on record and the findings of the inquiries

The assessee states that the properties in question are being let-out to laborers, staff and bachelors and it consist mainly of only one Room and do not contain kitchen or bath rooms. The assessee further states that only common bath rooms and toilet are used by them. Therefore, the assessee states that such properties cannot be termed as residential house properties.

As per the own submissions of the assessee, the houses are let out for laborers, bachelors and staff who reside there. In this regard, the Inspector of this office was deputed to conduct an inquiry about the nature of the buildings owned by the assessee.

It is seen from the inquiry report of the Inspector of Income Tax that the above properties in the name of the assessee are being used by people, mostly families, for residential purpose and they pay monthly rent to the assessee. Out of 10 residents from whom information was gathered by the Inspector during his inquiry, 7 of them are staying with their families and 7 persons are staying there for more than 5 years. The people who reside there cook their meals. The premise has its own toilets even though the same are commonly used. The electricity connections in the above premises are residential connections. The above findings reveal that the buildings come under the category of "Residential house". Above all, the Tirupur Municipal Corporation, vide their response to notice u/s 133(6) of the Act, has categorically stated that all the 7 properties in the name of the assessee are being used as "House". Therefore, the contention of the assessee that the above buildings are "commercial" is contrary to the facts and circumstances and cannot be accepted.

The assessee, by citing the decisions of the Hon'ble Supreme Court, Hon'ble Karnataka High Court, and Hon'ble ITAT, Chennai, states that even rental income from commercial building comes under "Income from House Property". The above aspect is not in dispute here. It is true that rental income from residential houses as well as commercial properties also come under the head "Income from House Property". The only issue being examined here is whether the assessee owned more than 1 residential house on the date of transfer her original capital asset.

Further, the assessee has filed another letter dated 27.12.2018 on 28.12.2018 reiterating her contentions already submitted vide the letter dated 26.12.2018. In addition, the assessee has quoted the order of the Hon'ble ITAT, Hyderabad in the case of N Revathi Vs. ITO stating that "if the building has been constructed for residential use with all amenities like kitchen, bathroom etc. which are necessary for residential accommodation, then only it can be considered as residential building".

The submission of the assessee as well as the order of the Hon'bie ITAT has been considered. The contention of the assessee that the building is a commercial one has been examined in the preceding paras and found to be contrary to the facts as discussed therein.

As regards the order of the Hon'ble ITAT, it is seen that the same had been delivered in a different context where the building was constructed for residential purpose, but was being used as a commercial one. However, in the case of the assessee, the buildings have been constructed as "Houses" as confirmed by the Tirupur Municipal Corporation and are being used as have been carefully considered. It was held by the Hon'ble ITAT that if construction is made in such way that it is not normally for residential use but In the case in hand, the spot inquiries reveal that the buildings have amenities purely commercial use, then it cannot be considered to be a residential house. like kitchen, bathrooms etc. and that most of the tenants residing in the building owned by the assessee have been living with their families for periods more 5 years. The very fact that those people have been staying there for such a long period establishes that the buildings has the characteristics of "residential houses".

As per the proviso to section 54F(1), if the assessee owns more than one residential house other than the new asset on the date of transfer of the original asset, the assessee is disqualified form claiming deduction u/s 54F of the Act. The relevant portion of the proviso to section 54F(1) is reproduced as under;

The key words used here are residential' and 'house'. The buildings owned by the assessee are "Houses" as per the record of the Corporation. The above houses are being used as residential houses on regular and continued basis as revealed form the inquiries conducted. Therefore, all the 7 properties which are in the name of the assessee as on the date of sale of her land are residential houses. Therefore, the assessee falls within the disqualification as contemplated in proviso to section 54F(1) of the Act.

In view of the discussion in the preceding paras, it is seen that the assessee has furnished inaccurate particulars with regard to her claim for deduction u/s 54F of the Act. The claim of the assessee for deduction u/s 54F of the Act fails on two aspects: one, the assessee has failed to substantiate construction of new residential house as provided in sub-section (1) and two, since the assessee owned more than 1 residential house other than the new asset on the date of transfer, the assessee is hit by the proviso to sub-section (1) of section 54F of the Act.

Since the assessee is not eligible for deduction u/s 54F of the Act, the entire long term capital gains of Rs. 1,24,53,493 from the sale of land is liable to be taxed. Since the assessee has already offered an amount of Rs. 6,70,052 for taxation the balance amount of Rs. Rs 1,17,83,441 which is claimed as deduction u/s 54F".

13 As such, it may be seen that the assessing officer has carried out third-party inquiries, deploy the inspector to obtained field inquiries as mentioned in para 20 and order, given a factual finding that as on date of transfer of the 21 of the assessment order, long-term asset, the assessee owned more than one residential properties. Therefore, the assessee has violated the provisions of section 54F, provisio - 1. Therefore, considering the facts and circumstance of the case and express legal provisions, assessee is not eligible to claim deduction under section 54F of the IT Act.

14 Without prejudice the above, it may be appreciated that the assessing officer has given a factual finding at para-5, 6, 7, 8, 9, 12, 14, 15 and 17 that the assessee has demolished the old house. It is claimed that the assessee has constructed new house after demolishing the old house and invested proceeds from the sale of long- term capital asset therefore claimed to be eligible for claiming deduction under section 54 F of the IT Act. Further it is found that the assessment of the property mentioned by the assessee to be completed and newly constructed pertains to year 2001. Which means that the assessee is paying the property tax or N.A. assessment tax prescribed by the local authorities on the basis of construction made or completed in 2001. The claim of the assessee and submissions made by the assessee and the information gathered from the municipal Corporation are contradictory. If the assessee has constructed new property in the year 2015, than, the assessment of property tax and payment of property tax shall be made and the relevant document shall be available with the assessee pertains to the new construction made in 2015. However, it may be appreciated that the assessee failed to substantiate its claim with payment of property tax/any of the tax prescribed by the local authority as per the constructions made by the assessee in the 2015. Further, it may be appreciated that the assessee has not submitted any documentary evidence other than the valuation report that the assessee has actually obtained commencement

15 It may be appreciated that the provisions of section 54F has prescribed that the deduction under section 54F is available to the assessee for construction of one residential house. The assessee is duty bound by the statutory provisions to construct new residential house and invest the proceeds of the sales of long-term capital asset in such construction of new house. However, such construction does not mean 'construction made without proper sanction' [illegal construction] of the local authority. If the assessee construct new residential house by flouting the prescribed statutory provisions governing the constructions/ development control rules of local authority, such construction would amount to illegal construction. It may be appreciated that, statutory provisions of Income Tax Act does not encourage or incentivise the illegal construction to be made by the assessee to claim deduction on such illegal constructions. It may be appreciated that there is no presumption of correctness of illegal activities to claim benefit of provisions of Income Tax Act.

16 Therefore, considering the facts and circumstance of the case, factual findings gathered and marshalled by the assessing officer during the course of assessment proceedings, absence of documentary evidence in the form of commencement certificate, completion certificate, the assertion of the assessee that it has constructed new house by demolishing old house is self-serving and devoid of any documentary evidence issued by competent authority. Therefore, considering the facts and circumstance of the case, findings given by the assessing officer, material available on record, grounds of appeal the contested by the assessee at serial No. 1 to 3 are dismissed.

In the result, the appeal of the assessee is dismissed.”

Aggrieved by the order of the ld.CIT(A), the assessee is in appeal before us. The ld.AR for the assessee, assailing the action of the ld.CIT(A), submitted that the assessee has clearly demonstrated that the residential houses considered as a separate unit by the AO is not a residential house and it was only a shed, built and used by the labourers for the temporary shelter. Hence, the same cannot be considered as independent separate unit for the purpose of holding number of houses by the assessee for the impugned assessment

Further, the ld.AR submitted that the assessee has constructed new residential house of 4,685 sq.ft. after selling the immovable property of land during the financial year 2015-16 along with the existing building of 2066 sq.ft. which is eligible for claiming deduction u/s.54F of the Act. As the assessee has demolished the existing building and rebuilt the new house, she did not take demolishing certificate or new plan approval for the newly constructed house. Therefore, the ld.AR prayed for allowing the deduction claimed u/s.54F of the Act by setting aside the order of the ld.CIT(A).

Per contra, the ld.DR for the Revenue supported the orders of the lower authorities and submitted that the assessee was owning more than one residential house on the date of transfer of the original capital asset, thereby attracting the restriction prescribed under the proviso to section 54F(1) of the Act. The ld.DR further submitted that the assessee's claim of having constructed a new residential house measuring 4,685 sq. ft. after the sale of the land on 16.11.2015 was highly improbable, considering that the housewarming ceremony was stated to have been performed on 29.01.2016, leaving a period of only approximately two and a half months for completing the construction. In the absence of satisfactory evidence substantiating the demolition of the :-14-:

We have heard the rival submissions of the parties and perused the material available on record, including the assessment order, the order of the Ld. CIT(A) and the documents furnished by the assessee. The issue for our consideration is whether the assessee is entitled to deduction u/s.54F of the Act in respect of the investment claimed to have been made towards the construction of a new residential house after the transfer of the original capital asset.

The undisputed facts are that the assessee sold the original capital asset on 16.11.2015 for a consideration of Rs.1,12,00,000/-. For the purpose of computing the long-term capital gains, the stamp duty valuation of Rs.1,41,15,000/- was adopted u/s.50C of the Act. The assessee computed the long-term capital gains at Rs.1,24,53,493/- and claimed deduction u/s.54F of the Act amounting to Rs.1,17,83,441/-, contending that she had invested Rs.1,33,55,551/- towards the construction of a new residential house measuring 4,685 sq. ft. The assessee relied upon a valuation report dated 20.10.2016, certain bank withdrawals and an invitation indicating that the housewarming ceremony (gruhapravesam) was conducted on 29.01.2016. 13. The AO disallowed the claim on the ground that the assessee had failed to establish the demolition of the existing residential building and the construction of a new house within the prescribed period. The AO further relied upon information obtained from the Tirupur Municipal Corporation and the report of the Departmental Inspector, who conducted an on-site enquiry and confirmed the existence of the houses in question and their occupation by persons residing therein. The Ld.CIT(A), after considering the material on record, upheld the disallowance.

The principal contention of the assessee is that she demolished the existing structure and constructed a new residential house measuring 4,685 sq. ft. after the sale of the original capital asset. However, the chronology of events furnished by the assessee raises serious doubts regarding the veracity of this claim. The original capital asset was transferred on 16.11.2015, and the assessee relies upon the housewarming ceremony stated to have been conducted on 29.01.2016 as evidence of the construction of the new house. Thus, the period between the date of transfer and the stated date of the housewarming ceremony is only approximately two and a half months. In our considered view, the construction of a residential building measuring 4,685 sq. ft. within such a short period, particularly where the assessee claims that an existing building was first demolished and a substantially larger structure was thereafter constructed, is a circumstance that requires close scrutiny. Having regard to the magnitude of the construction claimed, the time available and the absence of satisfactory contemporaneous evidence establishing the stage-wise progress of construction, the assessee's assertion that the entire new residential house was constructed during the period claimed does not inspire confidence. The housewarming invitation, by itself, establishes at best the date of the stated ceremony; it does not conclusively establish the date of commencement of construction, the extent of work completed by that date or the amount actually invested in constructing the alleged new house.

Further, the valuation report dated 20.10.2016, estimating the value of the building at Rs.1,46,28,312/-, does not, by itself, establish that the building measuring 4,685 sq. ft. was newly constructed after the transfer of the original asset. The valuation of a building at a particular point in time cannot substitute for evidence establishing the date of construction and the actual expenditure incurred during the relevant period. Similarly, withdrawals from the assessee's bank account, without a corresponding reconciliation with construction bills, vouchers, material purchases, contractor payments or other reliable supporting evidence, are insufficient to establish that the claimed amount was actually utilised for the construction of the new residential house.

We also find that the assessee has not furnished satisfactory documentary evidence to substantiate the alleged demolition of the existing building measuring 2,066 sq. ft. or to establish that the structure existing at the relevant premises was replaced by a newly constructed residential house. The municipal records indicated that the properties continued to be assessed under the existing assessment particulars dating back to 2001, and the assessee continued to pay property tax under those particulars. Though the continuation of the same assessment number, considered in isolation, may not conclusively disprove demolition and reconstruction, the same assumes significance when considered together with the absence of contemporaneous evidence of demolition, the lack of satisfactory construction records and the improbability arising from the short period within which the substantial construction is claimed to have been completed.

The further contention of the assessee that the seven properties identified by the AO were merely sheds or temporary shelters and could not be treated as residential houses also does not find support from the material brought on record. The AO obtained information from the Tirupur Municipal Corporation, which identified the properties in the assessee's name as houses. More importantly, the Departmental Inspector conducted an on-site enquiry and confirmed the existence of the houses and the fact that persons were residing therein. The enquiry further indicated that several occupants had been residing in the premises for substantial periods, including with their families, and that electricity and toilet facilities were available.

The aforesaid findings arise from an actual field enquiry and are not based merely on the nomenclature appearing in municipal records. The assessee's contention that the structures were used for accommodating labourers and staff does not, by itself, establish that they were incapable of being regarded as residential houses. The relevant consideration is the actual nature and use of the structures. Where the premises exist as identifiable houses and are occupied by persons for residential purposes, the fact that the :-17-:

We further observe that the proviso to section 54F(1) of the Act restricts the benefit of deduction where the assessee owns more than one residential house, other than the new asset, on the date of transfer of the original asset. In the present case, the AO, on the basis of the information received from the Municipal Corporation and the departmental field enquiry, recorded a specific finding that the assessee owned seven residential houses on the date of transfer. The assessee has not satisfactorily rebutted this finding by producing convincing evidence concerning the actual physical character and use of those properties. Accordingly, on the facts established in the assessment proceedings, the assessee is hit by the restriction contained in the proviso to section 54F(1) of the Act.

We are also unable to accept the assessee's reliance on the beneficial nature of section 54F as a ground for allowing the deduction in the absence of satisfaction of the statutory conditions. While the provision is intended to encourage investment in residential housing, the benefit cannot be extended merely on the basis of an assertion that the sale proceeds were invested in a new house. The assessee must establish, through credible evidence, the requisite acquisition or construction of the new residential asset and compliance with the other applicable conditions of the provision. The beneficial character of the provision does not dispense with the requirement of establishing the underlying facts.

In the present case, the claim of construction of a new residential house measuring 4,685 sq. ft. within approximately two and a half months is not supported by satisfactory contemporaneous evidence establishing the demolition of the old building, the commencement and progress of the alleged

In view of the foregoing discussion, we find no infirmity in the order of the Ld.CIT(A) in confirming the disallowance of deduction claimed u/s.54F of the Act. The assessee has failed to establish her eligibility for the deduction on the facts and evidence available on record, and the ownership of more than one residential house on the date of transfer constitutes an additional statutory impediment to the claim. We, therefore, uphold the disallowance of Rs.1,17,83,441/- made by the AO and confirmed by the Ld.CIT(A), subject to the consequential computation of taxable long-term capital gains in accordance with law and after giving credit for the amount already offered to tax. Accordingly, the grounds raised by the assessee challenging the disallowance of deduction u/s.54F of the Act are dismissed.

In the result, the appeal of the assessee is dismissed. Order pronounced in the court on 12th October, 2026 at Chennai. (एस एस विश्िनेत्र रवि) (एस. आर. रघुनार्था) (S.S. VISWANETHRA RAVI) (S. R. RAGHUNATHA) न्याययक सदस्य/Judicial Member लेखा सदस्य/Accountant Member चेन्नई/Chennai, ददनांक/Dated, the 12th October, 2026. Devadas