ITO, TIRUPPUR vs. SRI S. SATHISHKUMAR, UDAMALPET

This appeal is filed by the Revenue aggrieved by the order of the Ld. Commissioner of Income Tax (Appeals), Coimbatore in Appeal No.54/16-17 dated 07.09.2016 passed u/s. 250(6) r.w.s. 143(3) of the Act.

The Ld. CIT(A) has erred in granting deduction u/s.54 of the Act by holding that the purchase of land and approval of plan within the periods stipulated u/s.54 of the Act are sufficient for claiming deduction.

The brief facts of the case are that the assessee is an individual, engaged in business and earned income from house property, income from capital gains and income from other source during the relevant assessment year. He filed his return of income for the assessment year 2013-14 on 31.07.2013 admitting income of Rs.2,75,210/-. Initially the return was processed u/s.143(1) of the Act, subsequently the case was selected for scrutiny under CASS and finally assessment was completed u/s.143(3) of the Act on 31.03.2016, wherein the Ld. AO disallowed the claim of deduction u/s.54 of the Act for Rs.57,27,550/- and also made addition invoking Section 68 of the Act for Rs.17,05,881/-.

The assessee had sold his residential house for Rs.65,10,000/- during the relevant assessment year and had claimed exemption u/s.54 of the Act, citing the cost of the vacant site purchased by him during the relevant assessment year as Rs.27,83,580/- and cost of construction Rs.30,50,000/-. The Ld. AO deputed his inspector to verify the construction of the residential house. Subsequently the inspector in his report stated that the assets sold by the assessee and purchased by the assessee does not fall under the category of residential house so as to qualify for deduction u/s.54 of the Act. Further the assessee could only produce the approval plan of the residential property and the sale deed; however he could not produce the completion certificate or the house tax / water tax receipts etc. Therefore the Ld. AO disallowed the claim of deduction u/s.54 of the Act.

On appeal, the Ld. CIT(A) held that purchase of land and approval of plan within the period stipulated in Section 54 of the Act are sufficient evidence and accordingly allowed the claim of deduction u/s.54 of the Act, aggrieved by which the Revenue is in appeal before us.

The Ld. DR vehemently argued before us stating that the assessee has not fully complied with the provisions of the Act, because he had not proved that the construction of the residential house was completed. Hence, he pleaded that the order of the Ld. AO may be reinstated. On the other hand the Ld. AR relied on the order of the Ld. CIT(A).

We have heard the rival submissions and carefully perused the materials on record. The Ld. AO has not given any categorical finding as to the nature of property sold by the assessee and the building constructed by the assessee. He simply rejected the claim of the assessee for granting deduction u/s.54 of the Act, by stating that the immovable property sold by the assessee and the property constructed by the assessee do not fall under the category of residential house only based on the blunt statement of his inspector, who has not elaborately narrated the facts with any cogent evidence. However after examining the issue, the Ld. CIT(A) had granted relief to the assessee relying upon the approval plan and the purchase deed of the land. Though the completion certificate was not obtained by the assessee, the Ld.A.O has also not examined the issue and brought out any materials to suggest that the residential house is not inhabitable. In this situation, we do not find it necessary to interfere with the order of the Ld. CIT(A) on this issue.

In the result, the appeal of the Revenue is dismissed.