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Facts
The assessee filed an appeal against the order of the CIT(A) which upheld the disallowance of deduction claimed under Section 54F of the Income Tax Act. The original assessment order was passed under Section 144 of the Act. The assessee had claimed a deduction of Rs. 2,58,34,383/- on account of the purchase of a residential house property in Delhi from the sale proceeds of land in Patna.
Held
The Tribunal held that the assessee had inadvertently claimed the deduction under Section 54 instead of Section 54F. It was also observed that the CIT(A) failed to consider the judicial precedents and denied the deduction without proper consideration. The Tribunal set aside the order of the CIT(A) and remitted the matter back to the AO to allow the claim under Section 54F.
Key Issues
Whether the assessee is eligible for deduction under Section 54F of the Income Tax Act, 1961, when the deduction was inadvertently claimed under Section 54, and whether the authorities below correctly denied the claim.
Sections Cited
143(3), 144, 250, 54, 54F, 48, 194-IA, 194-IB, 270A, 115BBE
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PATNA BENCH AT KOLKATA
Before: SHRI GEORGE MATHAN & SHRI RAKESH MISHRA
PER RAKESH MISHRA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)- NFAC, Delhi [hereinafter referred to as Ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2017-18 dated 14.11.2024, I.T.A. No.: 715/PAT/2024 Assessment Year: 2017-18 Seema Srivastava. which has been passed against the assessment order u/s 143(3) of the Act, dated 28.12.2019. 2. The assessee is in appeal before the Tribunal raising the following grounds of appeal:
“1. For that the Ld. CIT(A), NFAC has erred in not allowing opportunity of virtual hearing as mandated u/s 250(2) of the Act read with Sub-section (6B) and the guidelines prescribed in the Faceless Appeal Scheme, 2021 vide notification dated 28.12.2021. 2. For that the Ld. CIT(A), NFAC has erred in holding that the impugned order has not been passed u/s 144 and that the mentioning of section 144 in last para of the assessment order is an inadvertent mistake which is required to be ignored whereas the fact remains that the impugned order has been passed u/s 144 for non-compliance to final SCN dated 07.12.2019. 3. For that the Ld. CIT(A), NFAC has erred in not taking into the consideration the fact that no proper & adequate opportunity of hearing was granted by the A.O. and thus, there has been violation of natural justice on the part of the A.O.
For that the Ld. CIT(A), NFAC has erred in upholding the rejection of claim of deduction u/s 54F amounting to Rs.2,58,34,383/- on account of purchase of residential house property at Delhi out of sale proceeds of land at Patna.
For that the Ld. CIT(A), NFAC has erred in holding that the assessee has not furnished the requisite details regarding claim of deduction u/s 54F either before the A.O. or during the appellate proceeding whereas the fact remains that the requisite details were submitted before both the authorities.
For that the Ld. CIT(A), NFAC has erred in ignoring the legislative intent behind provisions of sections 54 and 54F which are beneficial provisions promoting purchase/construction of residential houses, hence, liberal, pragmatic interpretation should be taken to the provisions and technical errors should not deprive assessee of legitimate claim of deduction/ exemption particularly in the light of circular of CBDT bearing No. 14 (XL-35) dated 11/04/1955. 7. For that the non-allowance of claim of deduction u/s 54F amounting to Rs.2,58,34,383/- is wrong, illegal and unjustified in the facts and circumstances of the appellant's case. I.T.A. No.: 715/PAT/2024 Assessment Year: 2017-18 Seema Srivastava.
For that on the facts and circumstances of the case the Ld CIT has erred in confirming the levy of Tax u/s 115BBE regarding deemed income even though no addition has been made by the AO under the referred sections.
For that the appellant reserves its right to furnish detailed written submission along with documents and evidences on or before date of hearing.
For that the appellant may be given opportunity of personal hearing physically/virtually at the time of hearing of the appeal.
For that the whole order is bad in fact and law of the case and is fit to be annulled and/or restored back to the file of Ld. CIT(A), NFAC and/or the A.O.
For that the other grounds, if any, shall be urged at the time of hearing of the appeal.”
Brief facts of the case are that the assessee is an individual and had filed the return of income for AY 2017-18 showing total income of Rs. 21,00,750/- under the head “income from other sources” and the case was selected for scrutiny through Computer Assisted Scrutiny Selection (in short 'CASS') to verify the issue on investment in immovable property, income from house property, capital gain/loss on sale of property, sales turnover/receipt and deduction/exemption from capital gains. The notice u/s 143(2) of the Act was issued and subsequently notice u/s 142(1) of the Act was also issued but there was no compliance by the assessee. The assessee had shown receipt of Rs. 2,87,77,235/- from sale of immovable property during the year under consideration and had claimed deduction u/s 48 of the Act in respect of cost of acquisition with indexation of Rs. 29,42,852/-. Further, the assessee had claimed deduction of Rs. 2,58,34,383/- u/s 54 of the Act and had shown ‘NIL’ income from long term capital gains on sale of immovable property during the year under consideration. It was also noted that the assessee had received Rs. 4,95,59,000/- from Arnyana Engycon Pvt. Ltd. and TDS of Rs. 2,47,795/- was deducted by the buyer I.T.A. No.: 715/PAT/2024 Assessment Year: 2017-18 Seema Srivastava. u/s 194-IA of the Act, and it was also observed that the assessee had received Rs. 15,00,000/- from Chitwan Blenders & Bottlers Pvt. Ltd. as rent and the tenant had deducted TDS of Rs. 1,50,000/- u/s 194-IB of the Act. The Ld. AO issued a show cause notice dated 30/11/2019 in response to which the reply was filed by the assessee. As regards the exemption u/s 54/54F of the Act, the assessee had submitted purchase deed of only the new asset against which the deduction was claimed. Therefore, the Ld. AO issued a final show cause notice. Subsequently, the total capital gain was worked out at Rs. 2,52,74,403/- which was lower than the capital gain of Rs. 2,58,34,383/- shown by the assessee in the return of income. However, the exemption u/s 54 of the Act was not allowed as the immovable property shown by the assessee was not a residential house. Further, the exemption u/s 54F of the Act was also not allowed as the assessee neither claimed any exemption u/s 54F of the Act nor had provided any details regarding all the applicable conditions deemed to be fulfilled as required u/s 54F of the Act. Accordingly, the exemption of Rs. 2,62,08,000/- claimed u/s 54 of the Act was disallowed and a sum of Rs. 2,58,34,383/- was added to the income of the assessee. No adverse view regarding the rent received was formed as the same had been shown under the head ‘income from other sources’ and the total income was accordingly assessed u/s 144 of the Act at Rs. 2,79,35,133/-. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) who went through the submission of the assessee and dismissed the appeal. The relevant findings of the Ld. CIT(A) are as under: “Decision: Ground No. 1: It is submitted that the AO completed the assessment u/s 143(3) while making the addition u/s 144. The order is contradictory and bad, both in law and on facts. I.T.A. No.: 715/PAT/2024 Assessment Year: 2017-18 Seema Srivastava. It is noted that the submission of the appellant is not ground wise. The same is clear from the submission which is reproduced already. In the statement of facts also, the appellant has not specifically dealt with this ground. Further, on carefully perusing the assessment order, it is seen that the AO has mentioned "Assessed u/s 144 of the Act at a Total Income of Rs. 2,79,35,133/-" in the last para of the assessment order. However, there is no reference to the order being a best judgment order anywhere in the assessment order. The AO has considered the submissions of the assessee and has also referred to the results of enquiry made. Therefore, the mention of section 144 in last para of the assessment order appears to be an inadvertent mistake which needs to be ignored. Therefore, this ground is dismissed.
1 Ground Nos. 2 & 3 pertain to addition of Rs. 2,58,34,383/- as long term capital gain by disallowing the claim of deduction u/s 54. The details of the order of AO and basis of disallowance discussed in paras 5 to 5.4. 6.1.1 The appellant has filed a detailed submission. The first 7 pages of the submission discuss the AO's order. The submission of the appellant is to be found in pages 8 & 9 of the order which is followed by various case laws till the end of the order. The appellant has also not numbered the paragraphs in the submission. The relevant portion therefore starts just above the table on page 8 with the words "the whole assessment order was based on misappreciation of fact and total confusion of the learned Assessing Officer which can be seen from the following chart". 6.1.2 It is contended that the AO disallowed the claim of the assessee for clerical mistake of the section under which this exemption is claimed, whether it is section 54 or section 54F. The assessee submitted before the AO that the mistake was inadvertent. However, details of sale of land where the capital gain arises and purchase, cost of house property in New Delhi in which capital gain was utilized were also given. Since all details were available, it was the duty of the Taxing Authority to give all statutory allowance of exemption to the assessee, even when the assessee failed to claim that exemption. Accordingly, it is claimed that the AO's action was arbitrary, illegal and against provisions of law. She has relied on various case laws including the decision of the Supreme Court in the case of State of Kerala Vs. C. Velukutty (1966) 60 ITR 239 (SC) and Hukumchand Mills 6.1.3 I have considered the submission carefully. The AO has referred to the issue in para 7 mentioning that "the assessee did not sell a residential house, therefore, the claim of exemption u/s 54 was not correct". The AO has observed that it was sale of asset other than residential house; therefore, the provisions of section 54F would be applicable if the assessee I.T.A. No.: 715/PAT/2024 Assessment Year: 2017-18 Seema Srivastava. fulfils the other applicable conditions in section 54F. Thereafter, the AO has reproduced the parts of the section 54F which mention the conditions i.e. clause a and b. In concluding para of the order i.e. para 9, the AO has given a finding that "exemption u/s 54 of the IT Act cannot be given as the assessee has neither claimed any exemption u/s 54F nor has provided any details regarding whether she fulfills all the applicable conditions as mentioned in section 54F of the I T Act". 6.1.4 The entire submission of the appellant is based on the premise that the AO has disallowed the claim because it was not made under appropriate section in the return of income. The case laws referred in the submission also support the same contention. However, neither before the AO nor during the appellate proceedings, the appellant has submitted or discussed as to how she fulfills various conditions required for claiming the deduction u/s 54F. The AO has clearly disallowed the claim because of two reasons including the assessee not providing any details regarding whether she fulfills all the applicable conditions u/s 54F. The appellant having failed to do so even during the appellate proceedings, the claim of deduction/exemption cannot be allowed. Therefore, both the grounds are dismissed.
2 Ground No. 4 pertains to initiation of penalty proceedings u/s 270A. The ground being premature is dismissed.
3 Ground No. 5 is general in nature and does not require any adjudication.
In the result, the appeal is dismissed.” Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before the Tribunal.
Rival contentions were heard and the submissions made and the paper book filed have been examined. Before us it has been submitted vide written submission filed that before the Ld. AO, the assessee had submitted revised computation of income and the copy of deed dated 05.11.2016 in respect of newly purchased property having transaction value of Rs. 2,52,00,000/- situated at New Delhi and had also submitted the sale deed dated 26.10.2016 registered at Sub-