ACIT., CIRCLE-5(1), HYDERABAD vs. SANJAY CHOWDARY GADDIPATI, HYDERABAD

ITA 376/HYD/2025Status: DisposedITAT Hyderabad12 June 2025AY 2022-2335 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the matter required to be restored to the Assessing Officer (A.O.) for verification of the assessee's claim of investment. The Tribunal found that while the CIT(A) had allowed the appeal, his order lacked specific details regarding the documentary evidence that substantiated the investment in the construction of the new residential house within the prescribed period. The Tribunal noted the absence of references to bank statements, construction contracts, bills/vouchers, or valuation reports. Therefore, the Tribunal restored the issue to the A.O. for verification of the investment, including the purchase of the plot, based on which the exemption under Section 54F was claimed. The A.O. was directed to provide the assessee with a reasonable opportunity to be heard and to submit fresh documentary evidence. Furthermore, the Tribunal noted that the assessee transferred the new residential house in AY 2024-25 and offered the LTCG for tax in that year. The Tribunal directed the A.O. to make appropriate adjustments for the subject year (AY 2022-23) if the exemption claim is not found in order, considering the tax already realized by the Revenue on the LTCG in AY 2024-25, to avoid double taxation, citing the Supreme Court judgment in ITO, Lucknow Vs. Bachulal Kapoor.

What were the facts?

The Revenue appealed the order of the CIT(A) which had allowed the assessee's claim for exemption under Section 54F of the Income Tax Act, 1961, for Assessment Year 2022-23. The assessee had claimed exemption of Rs. 4,24,08,090/- on Long Term Capital Gains (LTCG) arising from the sale of capital assets, by investing in the construction of a new residential house. The assessee had purchased a plot of land on 12.12.2019 and claimed to have constructed a house thereon. The Assessing Officer (A.O.) denied the exemption, citing that the plot was purchased prior to the one-year period before the sale of the capital asset and that the assessee failed to provide conclusive documentary evidence for the investment in construction. The CIT(A) allowed the appeal, accepting the assessee's claim.

What were the issues?

1. Whether the assessee complied with the provisions of Section 54F(4) of the Income Tax Act, 1961. 2. Whether the assessee produced conclusive documentary evidence relating to the investment in the new residential house as per Section 54F. 3. Whether the CIT(A) erred in allowing credit for the amount invested in the purchase of a plot of land prior to the cut-off period of one year from the date of transfer. 4. Whether Section 54F allows for a 'reasonable time' for purchase or investment, or sets out specific, non-discretionary time limits. Assessee's Contentions: The assessee claimed exemption under Section 54F by utilizing the net sale consideration for the construction of a new residential house. They purchased a residential plot on 12.12.2019 and constructed a house on it, claiming exemption of Rs. 4,24,08,090/-. The assessee also submitted that the new residential house was transferred in AY 2024-25 (within the lock-in period) and the LTCG was offered to tax in that year, supported by the return of income for AY 2024-25. Revenue's Contentions: The Revenue argued that the assessee did not comply with Section 54F(4), failed to produce conclusive documentary evidence for the investment, and erred in allowing credit for the plot purchase prior to the one-year cut-off period. They contended that Section 54F specifies strict time limits and does not allow for 'reasonable time'.

Which sections of the Income-tax Act were involved?

Section 54F,Section 143(3),Section 144B,Section 45,Section 139,Section 34

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Cases cited in this judgment(3)Show list

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Income Tax Appellate Tribunal, Hyderabad “B” Bench, Hyderabad

प्रति रवीश सूद, जे.एम./PER RAVISH SOOD, J.M.

The present appeal filed by the Revenue is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 14.01.2025, which in turn arises from the order passed by the Assessing Officer (for short “A.O.”) u/s 143(3) r.w.s.144B of the Income Tax Act, 1961 (for

The order continues below.

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