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Income Tax Appellate Tribunal, “C” BENCH : BANGALORE
Before: SHRI SUNIL KUMAR YADAV & SHRI A. K. GARODIA
Per Sunil Kumar Yadav, Judicial Member
This appeal is preferred by the assessee against the order of CIT(A), inter alia, on the following grounds:
“(a) The impugned order id improper, unjust and much against all known canons of law. (b) The Assessing officer has seriously erred in stating that the Appellant has not produced evidence in support of claim. (c) Hon'ble Commissioner of Income Tax (Appeals)-7, Bengaluru, during the passing the order has allowed cost of construction of building U/s 54, however he has ignored cost of land on which building was constructed. (d) The appellant craves leave to file additional grounds of appeal and detailed submissions of grounds of appeal at the
The facts in brief borne out from the record are that the assessee is an employee of UAS GKVK, Bengaluru. He has sold immovable property on 22.03.2010 for a sale consideration of Rs.28,80,000/- and since the income chargeable to tax in the shape of capital gain arising from it, had escaped assessment and the notice under section 148 was issued. In response to notice under section 142(1) of the IT Act, (hereinafter called as an “Act”), the assessee filed various details of sale and purchase of immovable properties, statement of bank account and furnished the statement of income admitting a long term capital gain of Rs.17,49,049/-. The assessee claimed exemption of capital gain under section 54 of the Act at Rs.8,50,299/- and paid tax of Rs.1,82,170/-. Subsequently, in response to notice under section 148 of the Act, return was filed on 12.02.2015 declaring capital gain at Rs.4,51,127/-. In this return, the sale consideration under section 50C of the Act was taken as Rs.29,50,500/-. The other two statements of income filed earlier in response to notice under section 142(1) was that the amount of commission paid has been increased from Rs.57,600/- to Rs.59,000/- and development charges, civil works and compound wall, ACC roof shed, water deposit, cost of site expenses, after indexation of the same at Rs.13,06,122/- was reduced from the sale consideration to compute long term capital gain. Further, a sum of Rs.11,33,750/- was also reduced as cost of new site construction and commission to arrive the amount of capital gain at Rs.4,51,128/-.
The assessee has also claimed the cost of removal of shrubs and weeds, leveling, cutting and filling the surface and water deposit charges as cost of development, that effect the indexation claimed for computation of long term capital gain. The AO denied the expenses of removal of shrubs and weeds,
Page 3 of 5 leveling of surface etc., which were not capital gain in nature. The AO further denied that claim of investment in construction of compound wall etc., as no documentary evidence was furnished. In the absence of sanctioned plan, the electricity, water supply connection and no claim made in the original computation, the AO denied the exemption under section 54 of the Act to the assessee.
Aggrieved, the assessee preferred an appeal before the CIT(A) and during the appellate proceedings, he filed the ground floor plan of the above mentioned site which shows there is a proposed construction of residential house. The said plan was duly approved by Adhyaksharu, Chikkajala Grama, Panchayati, Chikkajala, Jala, Hobli, Bengaluru Uttara Taluk. It was further submitted that the proposed site plan shows that the construction of 25’ X 10’ ft has been proposed and approved by the competent authority. It was further contended that AO has not brought out any other fact as to why the claim of construction of the assessee should be denied. The CIT(A) re-examined the claim of the assessee but was not convinced with the contentions of the assessee. He accordingly denied the exemption under section 54 of the Act having held that exemption is allowable in full even if house is partly purchased and partly constructed, following the judgment in the case of B. B. Sarkar v. CIT [1981] 132 ITR 150(Cal.). The CIT(A) further observed that the main purpose of section 54 of the Act is to give relief for the acquisition of the new residential house. Therefore it does not really matter that the new residential house is partly constructed or partly purchased. He accordingly confirmed the computation of long term capital gain at Rs.13,26,433/- but he allowed the exemption under section 54 of the Act on amount of investment of Rs.3,05,000/- incurred on the construction of the residential building.
Aggrieved, the assessee preferred an appeal before the Tribunal with the Page 4 of 5 submission that he be allowed deduction under section 54 of the Act and the capital gain declared by the assessee at Rs.4,51,127/- be accepted.
The learned DR on the other hand has contended that in original return, assessee has not claimed exemption under section 54 of the Act. In support of his contention, he invited our attention to the assessment order in which AO has categorically mentioned that assessee had not admitted capital gain in tax return filed on 20.07.2010. Now the assessee intend to claim the deduction under section 54 of the Act in the return filed in response to notice under section 148 of the Act. He had further contended that provisions of section 147 are invoked for the benefit of the Revenue and not for the benefit of the assessee. It was further contended that despite these facts, the lower authorities have considered the claim of the assessee under section 54 of the Act and granted the relief accordingly. The learned DR further placed reliance on the judgment of the Apex Court in the case of Sun Engineering Works P. Ltd [1992] 198 ITR 297.
Having carefully examined the order of the lower authorities in the light of rival submissions, we find that undisputedly the assessee has not offered any capital gain in the return filed originally. When it was detected that the assessee has not offered the capital gain to tax, the AO reopened the assessment by issuing notice under section 148 of the Act having formed a belief that on account of non disclosure of capital gain, the income chargeable to tax has escaped assessment. But in response to notice under section 148 of the Act, the assessee filed a return of income and claimed deduction under section 54 of the Act. We have carefully perused the judgment of the Hon’ble Apex Court in the case of Sun Engineering Works P. Ltd (supra) in which it has been held that the provision under section 147 of the Act can be invoked to help the Revenue for detecting the undisclosed income and not for the assessee to raise a further claim
Page 5 of 5 which was not raised in the original return of income. In the instant case, the lower authorities have already examined the claim under section 54 of the Act, though the assessee is not entitled to raise a claim, and granted a relief to the assessee. Moreover, as per provision of section 54 of the Act, deduction can only be claimed if the assessee has established that he has acquired the residential house out of sale proceeds. But we do not find any evidence on record where from it can be established that assessee has acquired the residential house out of the sale proceeds received by him on sale of capital asset. In the absence of these evidences, we are of the view that no further relief can be granted to the assessee. Since the CIT(A) has already granted reasonable relief to the assessee, we find no justification to interfere in his order.
In the result, the appeal of the assessee is dismissed. Pronounced in the open court on 20th September, 2017.