JAYSHRIBEN BHARATBHAI PATEL,VADODARA vs. THE ITO, WARD-1(3)(2), VADODARA

Brief facts of the case are that the Assessing Officer(AO) had information that the assessee had sold property and earned capital gains out of such transaction. Accordingly notice under section 148 of the Act was issued to the assessee, in response to which, the assessee filed return declaring total income of Rs.4,42,900/- including capital gain of Rs.4,40,276/- on sale of agriculture land and claimed deduction on account of investment in house under section 54F of the Act amounting to Rs.2,75,939/-. The AO, while

Aggrieved, the assessee carried the matter in appeal before the ld.CIT(A) who upheld the substitution of the sale consideration received by the assessee by stamp duty value as per section 50C of the Act, but at the same time, rejected valuation of cost of acquisition of the property adopted by the AO on the basis of valuation done by the DVO, and directed the AO to adopt the value of cost of acquisition taken by the assessee. He further upheld the denial of claim of deduction under section 54F of the Act by the AO. Against this order of the Ld.CIT(A) the assessee has come up in appeal before us.

Vide letter dated 3.8.2022 the assessee filed revised grounds of appeal substituting the original grounds raised in Form No.36 of the appeal filed before us and the said revised grounds read as under:

Taking up ground no.1, the ld.counsel for the assessee contended that difference between the sale consideration received by the assessee, and that computed as per section 50C of the Act, requiring substitution of the same with the stamp duty value was, less than 10% and as per the third proviso to section 50C of the Act, where such difference did not exceed 10% of the actual consideration then actual consideration received was to be taken as full consideration received. In this regard, he drew our attention to a chart reflecting reconciliation between returned capital gain and assessed capital gain placed before us in PB page No.71. Referring to the same, he pointed out that the assessee had shown sale consideration of Rs.17,52,000/- while as per section 50C of the Act on substitution of the same with the stamp duty value it had come to Rs.19,03,552/-. The difference between the two, it was pointed out, was Rs.1,51,552/- which was less than 10% of the sale consideration actually received by the assessee. He thereafter drew our attention to the third proviso to section 50C of the Act which reads as under: 50C. (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government (hereafter in this section referred to as the "stamp valuation authority") for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer : …. ….. ….. ….. Provided also that where the value adopted or assessed or assessable by the stamp valuation authority does not exceed one hundred and [ten] per cent of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of section 48, be deemed to be the full value of the consideration.”

The ld.DR was unable to controvert factual contentions of the assessee that variation between actual receipt and deemed consideration under section 50C of the Act was less than 10% of the consideration receivednor was he able to bring to our notice any contrary decision either of the ITAT or any higher Courts to those relied upon by the ld.counsel for the assessee before us.

Taking up ground no.2, relating to the denial of claim of deduction under section 54F of the Act, the ld.counsel for the assessee pointed out that thatthe same was upheld by the Ld.CIT(A) in the absence of any documents furnished by the assessee to substantiate its claim of having reconstructed his residential house for Rs.6,75,000/-. He drew our attention to para 4.3 of the Ld. CIT(A)’s order in this regard. Ld.counsel for the assessee contended that he had not been given any opportunity before denying the claim of deduction, and that all necessary evidences to prove his claim of reconstruction of house were available. He pointed out that the AO had denied his claim without giving any show cause notice and before the Ld.CIT(A) when necessary evidences substantiating his claim were filed by way of letter from Gardi Gram Panchayat and bills and vouchers of expenses ,the same were not admitted by the Ld.CIT(A) for considering his claim of deduction. He pleaded that in the interest of justice, therefore, the matter be restored back to the AO to verify the claim of the assessee and allow the same in accordance with law. The ld.DR objected to the same.

We have noted from the assessment order that there isno mention that the assessee had been put to notice before denial of this claim of deduction under section 54F of the Act. Further, the ld.CIT(A) noted that the assessee had furnished evidence by way of certificate of Talati of the village and vouchers & bills supporting the claim of reconstruction of house to the extent of Rs.6,75,000/- on which he claimed deduction under section 54F of the Act. But the 6 Ld.CIT(A) refused to admit these evidences since they were not produced before the AO. In this backdrop of facts the denial of claim of deduction u/s 54F of the Act for want of evidence appears unjustified. In all fairness and in the interest of justice therefore, we consider it fit to send the issue back to the file of the AO to verify the claim of the assessee, and thereafter adjudicate the issue in accordance with law. Needless to add the assessee be granted due opportunity of hearing by the AO. Ground no.2 is allowed for statistical purposes.

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