SATYANARAYANA KOTA ,KADAPA vs. INCOME TAX OFFICER, WARD-1, KADAPA

The assessee’s sole substantive ground pleaded in the instant appeal challenges correctness of the CIT(A)’s action upholding assessment findings disallowing his Section 54F deduction claim as under: “7.8 I have carefully considered the assessee's contentions, and examined the same in the light of the facts and circumstances of the case. At the outset, it Is an admitted fact that the assessee did not purchase or construct any new residential house, but claimed to have acquired residential house by way of a gift deed, that too, 3/4th share of the property owned by the assessee’s spouse. 7.9 Also, it is an admitted fact that the said gift deed was registered on 21.03.2012 i.e., during the FY 2011-12 relevant to the AY.2012- 13. However, it is the contention of the assessee that the said gift was actually received by him on 14.02.2011 i.e., during the FY 2010- 11 relevant to AY 2011-12. 7.10 At this juncture, it is important to note that though the assessee has claimed to have received the gift on 14.02.2011, but there is no documentary evidence to corroborate the same. Under the circumstances, prima facie, it would appear that the assessee has not acquired / purchased any property i.e., new residential house, during the FY 2010-11 relevant to the impugned AY 2011-12. As such, the assessee has claimed exemption u/s. 54F of the Act on account of acquisition of a gifted property but without incurring any expenditure towards sale consideration of the property. Thus, the claim of the assessee is baseless and devoid of merits. 7.11 Alternatively, it may be noted that, in terms of the provisions of sub-sec. (4) of sec. 54F of the Act, the assessee is required to deposit the net consideration, which is not appropriated by the assessee towards purchase of new asset within one year before the date of transfer of the original asset or which is not utilized for the purpose of purchase or construction of the new asset before the due date of furnishing the return of income u [s. 139(1) of the Act, in the Capital Gains Account Scheme. However, as seen from the facts on record, the assessee has failed to do the same. In view of this, I am of the considered opinion that the assessee is not eligible to claim exemption u/s. 54F of the Act with regard to acquisition of property under a gift. 7.12 On the other hand, it is contended 'by the assessee that he had developed the gifted property through a contractor Sri Kota Ramakrishna. However, as clearly brought out in the assessment order, neither the assessee nor the contractor could prove the genuineness of the transactions between them supported by direct evidence or corroborative evidence that the contractor had incurred expenditure towards development I renovation of the gifted property. 7.13 To be precise; there is no evidence on record' in support of entering into any contract agreement between the parties. Similarly, contractor Sri Kota Ramakrishna has failed to produce the books of account and bills and vouchers in support of incurring the expenditure towards development of the property. Under the circumstances, merely on the basis of return of income filed by the contractor for AYs 2011-12 and 2012·13 disclosing certain transactions pertaining to receipt of amount from the assessee, it cannot be construed that the assessee has indeed incurred the expenditure towards development/renovation of the gifted property. 7.14 At this juncture, it may not be out of place to highlight the fact that the conractor Sri Kota Ramakrishna had filed the returns of income both for the AYs 2011-12 and 2012-13 belatedly on 29.03.2013. Similarly, the assessee has also filed his return of income for the impugned AY 2011-12 on the same date i.e. 29.03.2013. Also, as seen from the returns of income filed by the contractor Sri Kota Ramokrishna, he has not disclosed income / receipts from any other contract work except amount received from the assessee said to be towards development / renovation of the gifted property. 7.15 As such, It appears that the assessee has devised a plan wIth the help of his relative viz., the contractor Sri Kota Ramakrishna with an ulterior motive to evade the tax by way of claiming exemption ssls, 54F of the Act. Thus, on facts of the case, there is no evidence to suggest that the assessee had actually utilized the net consideration for reinvestment in the new residential house. The above mentioned findings and decision thereof are summarized as under: SUMMARY: 1) As per the provisions of sec.54F of the Act, the assessee is not entitled to claim exemption with regard to the property received under a gift, wherein there is no cost incurred by the assessee so as to claim the reinvestment of net consideration. 2) As explained elsewhere in this order, in order to claim exemption u/s.54F of the Act, it is mandatory either to utilize the net consideration towards acquisition of new residential house or deposit the same in the Capital Gains Account Scheme on or before the due date for filing the return of income U/s.139(1) of the Act. However, in the instant case, it is an admitted fact that the assessee neither utilized the same nor deposited in the Capital Gains Account Scheme. 3) The assessee has failed to adduce credible material evidence to support his claim that he had incurred expenditure towards improvement / renovation of the gifted property through his relative viz., the contractor Sri Kota Ramakrishna, and, Whatever evidence relied upon by the assessee is proved to he untrustworthy and, therefore, the same is not considered as an admissible evidence in the eyes of the law. 7.16 In view of the aforementioned factual matrix and discussion, I am of the considered opinion that the assessee has failed to fulfill the mandatory requirements of law as envisaged u/s. 54F of the Act. Thus, the grounds of appeal raised by the assessee on this issue are dismissed”.