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Facts
The assessee, a retired individual, sold a plot of land and used the proceeds to construct a residential house. The Assessing Officer (AO) re-opened the case, stating a difference between the stamp duty value and the sale value, and later rejected the assessee's claim for deduction under Section 54F due to a lack of bills and vouchers.
Held
The Tribunal held that the rejection of the deduction claim solely on the ground of missing bills and vouchers was not justified, especially since the sale proceeds were utilized for construction. The AO's addition under Section 54F and the separate addition under Section 50C were also deemed unjustified.
Key Issues
Whether the disallowance of deduction under Section 54F and the addition under Section 50C were justified without cogent reasons, despite the sale proceeds being invested in construction?
Sections Cited
54F, 50C, 148
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Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI V. DURGA RAO
Aforesaid appeal by the assessee is emanating from impugned order dated 05/06/2024, passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Madurai, [“learned CIT(A)”], for the assessment year 2011–12.
In its appeal, the assessee has raised following grounds:–
“1. The order passed by learned A.O. is illegal, incorrect, bad in law and without natural justice.
2 Narayan Mahadeorao Dhawane ITA no.414/Nag./2024
2. The valuation made by valuation officer for Rs.4,48,628/- as against valuation incorrect as the same has not included the construction made by appellant is incorrect, bad in law and without natural justice and the same is to be deleted.
3. The disallowance of deduction u/s 54F of Rs.3,44,148/- and addition u/s 50C of Rs.1,04,480/-is incorrect, illegal, bad in law and without natural justice and the same is to be deleted.
4. The addition of Total Rs.4,48,628/- levied on appellant is incorrect, illegal, bad in law and without natural justice and the same is to be deleted. 5. Appellant craves a right to add, modify, alter or withdraw and of the ground/s of appeal during the course of hearing. PRAYS: Appellant prays before your honor to delete the addition of Rs. 4,48,628/- or the appropriate relief is to be granted as the Honorable CIT(A) may think fit.
Facts of the present case are that the assessee is an Individual and is a retired person. Since his income was below the taxable limit, hence the assessee did not file any return of income. On 04/08/2010, the assessee executed an agreement to sale of one of his properties with M/s Revati Construction and Developers, for sale of his plot 43 in KH 159/47, Ward–15, Mouza Somanawada, Nagpur, for ` 3,59,520, along with others. On the said plot, the assessee built residential house out of the entire sale proceeds by July 2011. The Assessing Officer was of the view that the difference in stamp duty value of the property sold at ` 6,96,750, as against the sale value of ` 3,59,520. Hence, the Assessing Officer re–opened the assessee’s case and issued statutory notices under section 148 of the Act, in response to which the assessee all the details on 31/08/2016 and further clarified the queries raised by virtue of notice dated 15/03/2017, and furnished reply dated 04/09/2017. The assessee, pursuant to the notice issued by the Assessing Officer under section 148 of the Act, on 25/04/2018, filed its return of income
3 Narayan Mahadeorao Dhawane ITA no.414/Nag./2024 for the year under consideration claiming his taxable income at ` 1,13,650, after deduction of under chapter VI-A of ` nil, and tax of ` nil. The Assessing Officer accordingly valued the cost of sold property at ` 4,64,000, as against the stamp duty value of ` 6,96,750. The assessee claimed deduction of ` 4,48,928, under section 54F of the Act for utilization of entire sale proceeds in his return of income which was rejected by the Assessing Officer for want of bills, payment vouchers, etc.
On appeal, the learned CIT(A) confirmed the assessment order passed by the Assessing Officer and dismissed the appeal of the assessee by holding as under:–
“5.8 The appellant has filed evidence which are contradictory to each other. It seems that the appellant has constructed two small shop rooms with GI sheet roofing and a small toilet sometime after the sale of land but before the date of filing of return in response to notice u/s 148 on 24-04-2018. The appellant is trying to fit this shop building constructed in 2016 into the category of investment qualifying u/s 53F for AY 2011-12 and this has resulted in filing of contradictory evidence. The finding of the AO is that the sales proceeds were invested as FD and the appellant has not proved that amounts are used for investments are correct. The grounds raised by the appellant are dismissed.
6. The appeal is dismissed.”
Consequent upon issuance of the impugned order passed by the learned CIT(A), the Assessee is in further appeal before the Tribunal.
The learned Authorised Representative for the assessee assailing the impugned order passed by the learned CIT(A) reiterated the submissions made authorities below. He invited our attention to the submissions made before the learned CIT(A) which was recorded in the impugned order vide Para–4 /Page–4 to Page–6. The learned Authorised Representative for the 4 Narayan Mahadeorao Dhawane ITA no.414/Nag./2024 assessee thus prayed that the impugned order passed by the learned CIT(A) be reversed.
On the other hand, the learned Departmental Representative supported the order of the authorities below.
I have heard the rival arguments, perused the material available on record and gone through the orders of the authorities below. In this case, the assessee has constructed a residential house and to that effect the Municipal Corporation also issued certificate. The assessee built residential house out of the entire sale proceeds and claimed deduction under section 54F of the Act for utilisation of entire sale proceeds in his return of income which was rejected by the Assessing Officer without adducing any cogent reason. The Valuation Officer valued the property for ` 4,64,000 as against the stamp duty value of ` 6,96,750. Rejecting the claim of the assessee under section 54F of the Act only on the ground that bills and vouchers are not produce, in our considered opinion, is not justified. Since the entire sale proceeds have been utilised for construction, therefore, the assessee is eligible to claim deduction under section 54F of the Act. Accordingly, we set aside the impugned order passed by the learned CIT(A) and direct the Assessing Officer to delete the addition made by him under section 54F of the Act for ` 3,44,148. Since the entire sale consideration has been invested in construction of house, separate addition of deemed income under section 50C of the Act is also deleted. The learned Departmental Representative could not bring on record any corroborative evidence or any cogent reason to buttress the arguments of the assessee to enable me to uphold the impugned order
5 Narayan Mahadeorao Dhawane ITA no.414/Nag./2024 passed by the learned CIT(A). In view of the above, we direct the Assessing Officer to delete the addition of ` 4,48,628.
In the result, assessee’s appeal stands allowed. Order pronounced in the open Court on 21/03/2025