RAVI KUMAR ,HYDERABAD vs. INCOME TAX OFFICER, WARD 4(4), HYDERABAD

Being aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the Ld.CIT(A), the assessee challenged the additions made by the Assessing Officer towards recomputation of capital gains, after disallowing cost of improvement and deduction u/s 54F of the Act. The assessee had also made a fresh claim of deduction u/s 54F of the Act, towards amount of capital gains derived from transfer of property, in pursuant to joint development agreement, by filing revised return on 27.12.2018. The Ld.CIT(A), after considering the submissions of the assessee and also taking note of certain judicial precedents, rejected the ground taken by the assessee, challenging the disallowance of indexed cost of improvement and also deduction u/s 54F of the Act in respect of deduction claimed in original return of income filed on 15.11.2018. Further, in respect of deduction claimed u/s 54F of the Act, on the basis of revised return filed on 27.12.2018, the Ld.CIT(A) observed that the assessee failed to prove that the new residential house property constructed in pursuant to joint development agreement has been completed within three years from the date of transfer of the 4 ITA 167/Hyd/2024 Ravi Kumar original asset. Therefore, rejected the arguments of the assessee and sustained the additions made by the Assessing Officer towards capital gains.

Aggrieved by the order of the Ld.CIT(A), the assessee is now in appeal before the Tribunal.

The learned counsel for the assessee submitted that the Ld.CIT(A), having accepted in principle, that the assessee is entitled for deduction u/s 54F of the Act, in respect of five flats received in pursuant to joint development agreement before the assessment year 2015-16, but erred in rejecting the claim of the assessee only on the ground that the assessee could not furnish evidences of completion of construction within three years from the date of transfer of original asset. The learned counsel for the assessee, further referring to the date of joint development agreement, submitted that the assessee had entered into joint development agreement on 24.03.2011 and as per the said joint development agreement, builder is supposed to complete construction within 18 months from the date of agreement. The municipal authorities have issued occupation certificate on 05.12.2012. From the date of joint development agreement and the occupation certificate issued by the municipal authority, it is evident that the construction of new residential house property was completed within three years from the date of transfer of asset and therefore, the assessee is eligible for deduction u/s 54F

The Ld.DR, supporting the order of the Ld.CIT(A) submitted that the assessee is not entitled for deduction u/s 54F of the Act, because the assessee has not satisfied the conditions prescribed therein, including filing of return of income on or before the due date provided u/s 139 of the Act. Further, assuming for a moment, the return of income filed by the assessee, in response to notice u/s 148 is considered as if the said return was filed u/s 139 of the Act, but the fact remains that in the first return filed by the assessee, in response to notice u/s 148, the assessee has not made any claim for deduction u/s 54F of the Act. Further, when the Assessing Officer has disallowed the cost of improvement and recomputed the long-term capital gains, the assessee came with a new and fresh claim of deduction u/s 54F of the Act for all five flats received in pursuant to joint development agreement. The Assessing Officer, after considering the relevant facts has rightly computed the long-term capital gains and the Ld.CIT(A), after considering the relevant facts, rightly sustained the additions and therefore, their order should be upheld.

We have heard both the parties, perused the material on record and gone through the orders of the authorities below. There is no dispute with regard to the fact that the assessee has not filed his return of income u/s 139(1) / 139(4) of the Act and declared capital gains, if any arising out of transfer of property, in pursuant to joint development agreement dated 24.03.2011. It is also an admitted fact that the assessee has not filed the return of income in response to the notice u/s 148 on or before the date provided in the reassessment notice. Further, the assessee has filed return of income in response to notice u/s 148 on 15.11.2018 and declared total income at Rs.11,42,204/-, which consist of long-term capital gains of Rs.9,45,600/- from transfer of property, in pursuant to joint development agreement. Further, when the Assessing Officer has recomputed the long-term capital gains by disallowing cost of improvement and deduction u/s 54F of the Act, the assessee has filed revised return on 27.12.2018, i.e., one day before the Assessing Officer has passed order on 28.12.2018. Therefore, the Assessing Officer has no occasion to examine the issue of deduction u/s 54F of the Act, claimed by the assessee towards the long-term capital gains derived from transfer of property, in pursuant to joint development agreement.

The Ld.CIT(A) has examined the issue and in principle, agreed that before amendment to section 54F of the Act from 01.04.2015, multi flats investment could be considered as one residential unit and if assessee receives more than one house, in 7 ITA 167/Hyd/2024 Ravi Kumar pursuant to joint development agreement, then the assessee is eligible for deduction u/s 54F, however, rejected the claim of the assessee, on the ground that no evidence has been furnished to prove the completion of house property within three years from the date of transfer of original asset. Now, the learned counsel for the assessee has furnished a copy of occupancy certificate issued by Greater Hyderabad Municipal Corporation dated 05.12.2012 and argued that the construction of residential building was completed and occupancy certificate was received on 05.12.2012 and if we consider the said occupancy certificate, the property was constructed within three years from the date of transfer of original asset. To this extent, there is no dispute, however, the fact remains that neither the Assessing Officer nor the Ld.CIT(A) examined the eligibility of the assessee to claim deduction u/s 54F of the Act in the reassessment proceedings and further, none of the authorities below have examined the fact with regard to one of the conditions for claiming deduction u/s 54F of the Act, i.e. filing of return of income on or before the due date for filing the return of income as provided u/s 139 of the Act and further as per section 54F of the Act, although the appellant claims that it has filed revised return on 27.12.2018, but the fact remains that whether the said return is valid or not and further from filing the said revised return, whether the assessee has satisfied the conditions for claiming deduction u/s 54F of the Act or not has not been verified by the lower authorities. Since the assessee has filed the occupancy certificate issued by the Greater Hyderabad

In the result, appeal filed by the assessee is allowed for statistical purpose.