SHRI ALPESH NAVINBHAI BAROT,AHMEDABAD vs. THE INCOME TAX OFFICER, WARD-3(3)(1), AHMEDABAD

Aggrieved with the order of the Assessing Officer, the assessee had filed an appeal before the First Appellate Authority which was decided by the Ld. CIT(A) vide the impugned order and the appeal of the assessee was dismissed.

Now the assessee is in second appeal before us. The following ground has been taken by the assessee in this appeal: - “1. The appellant humbly submits that the Ld. CIT(A) has erred in law as well on facts while passing the Order by not granting benefit under section 54, that the appellant has utilized all the consideration received from the sale of Land for the construction of the residential house before (Assessment Year: 2015-16) Shri Alpesh Navinbhai Barot vs ITO Page 3 of 6 the filling of the return under section 139 and thereby denying the exemption under section 54F of the Act.

The assessee has also raised an additional ground which reads as under: -

Shri Rohan Thakkar, the Ld. AR of the assessee, submitted that the assessee had disclosed Long Term Capital Gain (LTCG) on sale of property by considering the entire sale consideration as capital gain. He explained that due to ignorance, the assessee did not claim deduction for indexed cost of acquisition of the property sold. Further, the land premium was paid for conversion of agricultural land into non-agricultural land and the deduction for such premium was also not claimed by the assessee while working out the LTCG. The Ld. AR submitted that the Assessing Officer also did not enquire about the cost of acquisition/cost of improvement of the asset and no deduction in this respect was allowed to the assessee. As regarding completion of the new property within the period of three years, the Ld. AR submitted that the new property was completed on 29.03.2017 and an evidence in this respect was sent to the Assessing Officer vide e-mail dated 29.12.2017, wherein it was also clarified that the assessee was having only one house. As regarding deposit of the unutilised amount of capital gain in the capital gain’s account, the Ld. AR submitted that the assessee had utilised the capital gain for the purpose of construction before the extended due date u/s 139(4) of the Act and, therefore, the deduction u/s 54F of the Act was (Assessment Year: 2015-16) Shri Alpesh Navinbhai Barot vs ITO Page 4 of 6 rightly made. In this regard, the Ld. AR relied upon the decision of ITAT Bangalore in the case of DCIT vs. BB Shankar reported in 2013(1) TMI 290 (ITAT, Bangalore).

Per contra, Shri B.P. Srivastava, the Ld. Sr. DR submitted that no evidence was brought before the Assessing Officer for completion of construction of the new property within three years. As regards email dated 29.12.2017 sent by the assessee, the Ld. Sr. DR submitted that the said mail was sent to the AO at 10.43 PM on 29.12.2017, which was after completion of the assessment in this case. The Ld. Sr. DR further submitted that no deposit in the capital account was made by the assessee at all. Therefore, the alternate contention that the amount was utilised within the due date under Section 139(4) of the Act was not acceptable.

We have considered the rival submissions. The assessee has taken an additional ground regarding deduction of cost of acquisition and cost of improvement while computing the capital gain on sale of property. From the working of capital gain, it is found that the entire sale consideration of Rs.2 Crores was considered as LTCG derived by the assessee out of which deduction of Rs.1,74,62,500/- was claimed u/s 54F of the Act and the balance amount of Rs.25,37,500/- was offered as LTCG in the return of income. The assessee did not claim any deduction towards the cost of acquisition/improvement of the asset. This aspect was also not examined by the Assessing Officer in the course of assessment proceedings. It is a settled position that the Department must not derive advantage from ignorance of an assessee as to his rights. Therefore, the Assessing Officer should have enquired about the cost of acquisition and cost of improvement, if any, of the asset sold, in the course of assessment (Assessment Year: 2015-16) Shri Alpesh Navinbhai Barot vs ITO Page 5 of 6 proceedings. It is not the case that this was a self-acquired asset with no cost of acquisition. We, therefore, deem it proper to set aside the matter to the file of the Assessing Officer with a direction to work out the correct LTCG derived on the sale of asset. The Assessing Officer should allow deduction for cost of acquisition and cost of improvement, if any, in respect of the asset sold, after calling for the necessary details from the assessee and after verifying the same. The ground taken by the assessee is allowed for statistical purpose.

As regarding the deduction u/s 54F of the Act, the Assessing Officer has held that the assessee did not deposit the capital gain derived in the capital gain’s account. Even if no deposit was made by the assessee in the capital gain’s account, the expenditure incurred towards construction of the house till the due date for filing of return was required to be allowed as deduction. The assessee has relied upon the decision of Co-ordinate bench of ITAT Bangalore in the case of BB Shankar (supra) wherein it was held that it was sufficient for the assessee to utilise the capital gains for the purchase of a flat before the extended due date u/s 139(4) of the Act, in order to claim deduction u/s 54F of the Act. Following the decision of the Bangalore Bench of this Tribunal, we direct the Assessing Officer to allow deduction u/s 54F of the Act in respect of the expenses incurred by the assessee towards construction of the house till the due date of filing of return u/s 139(4) of the Act. The condition regarding the assessee being owner of not more than one house property as on date of sale of the property under consideration, should also be examined by the Assessing Officer in the course of set aside proceeding, before allowing the deduction u/s 54F of the Act.