SHALINI AGARWAL,KOLKATA vs. ITO, WARD-45(4), KOLKATA, KOLKATA

The common issue involved in Grounds No. 1 & 2 of this appeal relates to the disallowance of assessee’s claim for deduction under section 54F as made by the Assessing Officer amounting to Rs.99,95,500/- , which is restricted by the ld. CIT(Appeals) to Rs.22,01,396/-.

The assessee in the present case is an individual, who filed her return of income for the year under consideration on 30.03.2014 declaring total income of Rs.2,76,690/-. In the said return, long-term capital gain arising from the sale of property was shown by the assessee

As regards the claim of the assessee for exemption under sectin 54F in respect of land purchased for Rs.1,06,04,753/- for construction of residential house, the Assessing Officer was of the view that the exemption under section 54F was claimed by the assessee for construction of house property and the purchase of land was not coming under the purview of “construction of house property”. He, therefore, held that the assessee was not entitled for any deduction under section 54F in respect of investment made in purchase of land. As regards the cost of construction of residential house property amounting to Rs.22,67,700/- as claimed by the assessee, the Assessing Officer found that even though the relevant evidence in the form of bills for construction of house was furnished by the assessee, no evidence was produced by him to show that the construction of house was completed within the time stipulated in section 54F. He accordingly disallowed the claim of the assessee for deduction under section 54F in respect of cost of construction of residential house property also amounting to Rs.22,67,700/- and determined the total income of the assessee at Rs.1,02,72,190/- in the assessment completed under section 143(3) vide an order dated 14.03.2016.

Against the order passed by the Assessing Officer under section 143(3), an appeal was preferred by the assessee before the ld. CIT(Appeals) and after considering the submissions made by the assessee, the ld. CIT(Appeals) allowed the claim of the assessee for deduction under section 54F in respect of investment made in purchase of plot for the construction of residential house by relying on the CBDT Circular No.667 dated 18.10.1993, wherein it was clarified that for claiming the deduction under section 54 and 54F in respect of the residential house to be constructed within the specified period, the cost of such residential house can be taken to include the cost of the plot also. The ld. CIT(Appeals), however, did not find merit in the claim of the assessee for deduction under section 54F in respect of cost of construction of house property amounting to Rs.22,67,700/- on the ground that there was no evidence filed by the assessee to show that the construction of house was completed before the prescribed date and the same was in habitual condition. He accordingly sustained the disallowance of Rs.99,95,500/- made by the Assessing Officer on account of assessee’s claim for deduction under section 54F to the extent of Rs.22,01,396/-. Still aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal.

We have heard the arguments of both the sides and also perused the relevant material available on record. The ld. Counsel for the assessee has filed additional evidence in the form of completion certificate for the residential house property constructed by the assessee issued by the concerned Gram Panchayat on 31.03.2014 to support and substantiate the claim of the assessee for deduction under section 54F in respect of the cost of construction of the residential property. He has also filed an application seeking admission of the said additional evidence stating therein that the authorities below did not afford sufficient and specific opportunity to the assessee to produce the said additional evidence. Since the said additional evidence is a relevant evidence to adjudicate upon the

During the course of appellate proceedings before the Tribunal, the assessee has also filed an additional ground claiming that for computing the deduction under section 54F, the actual net consideration received in respect of the original asset should be taken into consideration and not the deemed consideration as adopted by invoking the provisions of section 50C. We have admitted this additional ground raised by the assessee keeping in view the decision of the Hon’ble Supreme Court in the case of National Thermal Power Co. Limited [229 ITR 383]. The Assessing Officer is accordingly directed to consider the claim of the assessee while re-computing the deduction allowed to the assessee under section 54F keeping in view the decision of this Tribunal in the case of Smt. Chandrakala Devi Bansal –vs.- ITO (ITA No. 2481/KOL/2005 dated 20.04.2007) and in the case of ACIT –vs.- Harmeet Kaur (ITA No. 1482/KOL/2014 dated 10.10.2018).

In Ground No. 3, the assessee has challenged the action of the ld. CIT(Appeals) in directing the Assessing Officer to tax the capital gains of Rs.77,94,104/- for A.Y. 2015-16 by initiating the proceedings under

We have heard the arguments of both the sides on this issue and also perused the relevant material available on record. It is observed that the ld. CIT(Appeals) after having allowed the claim of the assessee for deduction under section 54F to the extent of Rs.77,94,104/- and after having found that the construction of the house property of the assessee was not completed within the prescribed period, was of the view that the deduction allowed under section 54F was liable to be withdrawn in assessment year 2015-16 in which three years had expired from the date of transfer. He accordingly directed the Assessing Officer to tax the capital gains of Rs.77,94,104/- in the hands of the assessee for A.Y. 2015- 16 by initiating the proceedings under section 147 of the Act. As submitted by the ld. Counsel for the assessee, the said direction given by the ld. CIT(Appeals) for A.Y. 2015-16, which was not in appeal before him while disposing of the appeal of the assessee for A.Y. 2013-14 is beyond his power and jurisdiction. Although the ld. D.R. has sought to justify the direction given by the ld. CIT(Appeals) by relying on sub-section (1) of section 150, we find that the said provisions is not relevant in the context of the powers of the ld. CIT(Appeals), since the said powers are governed by section 251 of the Act, which is relevant. In the case of R.S. Davey –vs.- CIT [140 ITR 1035], a similar issue relating to scope of powers of first appellate authority had arisen for the consideration of Hon’ble Calcutta High Court and it was held by the Hon’ble Calcutta High Court that the ld. CIT(Appeals) was not competent to give to the Assessing Officer the direction in respect of an assessment year which was not in appeal before him. Respectfully following the said decision of the Hon’ble jurisdictional High Court, we cancel the direction given by the ld. CIT(Appeals) to the Assessing Officer in respect of the assessment year 2015-16, which was not in appeal before him and allow Ground No. 3 of the assessee’s appeal.

In the result, the appeal of the assessee is treated as allowed as indicated above. Order pronounced in the open Court on January 18, 2019.