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Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI MANJUNATHA. G & SHRI MANOMOHAN DAS
आयकर अपीलीय अिधकरण, ’बी’ "ायपीठ, चे"ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH: CHENNAI "ी मंजुनाथ. जी, लेखा सद" एवं "ी मनोमोहन दास, "ाियक सद" के सम' BEFORE SHRI MANJUNATHA. G, ACCOUNTANT MEMBER AND SHRI MANOMOHAN DAS, JUDICIAL MEMBER आयकर अपील सं./ITA No.774/Chny/2023 िनधा(रण वष( /Assessment Year: 2016-17 Shri Srikanth, The Income Tax Officer, 55, S2, 2nd Floor, Vs. Non Corporate Ward-2(1), Damodaran Street, T Nagar, Chennai. Chennai – 600 017. [PAN: AAMPS-0572-M] (अपीलाथ"/Appellant) (""यथ"/Respondent) अपीलाथ* की ओर से/ Assessee by : Shri N. Arjun Raj, Advocate ,-थ* की ओर से /Revenue by : Shri D. Hema Bhupal, JCIT सुनवाई क" तारीख/Date of Hearing : 01.04.2024 : 10.04.2024 घोषणा क" तारीख /Date of Pronouncement आदेश / O R D E R Per Manjunatha G, Accountant Member: This appeal by assessee is directed against the order passed by learned Commissioner of Income Tax, National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 25.05.2023 in the matter of assessment framed by Ld. Assessing Officer [AO] u/s.143(3) of the Income Tax Act, 1961 (hereinafter “the Act”) on 14-12-2018. The ground of appeal raised by the assessee is as under:
“1. The order of the NFAC, Delhi dated 25.05.2023 vide DIN & Order :- 2 -: No. ITBA/NFAC/S/250/2023-24/1053164578(1) for the above mentioned Assessment Year is contrary to law, fact and in circumstances of the case.
The NFAC, Delhi erred in confirming the disallowance of claim of deduction under Section 54 of the Act to the tune of Rs. 1,61,99,820/- (in the name of the wife) as part of the computation of Long Term Capital Gains without assigning proper reasons and justification.
The NFAC, Delhi erred in confirming the disallowance of Rs. 40,00,000/being the payment made to builders through RTGS as part of computation of Long Term Capital Gains without assigning proper reasons and justification.
The NFAC, Delhi in any event erred in disallowing Rs.40,00,000/- being the payments made towards acquiring the new house within the ambit of the provisions in section 54 of the Act and ought to have further appreciated that in any event, having allowed the claim with respect to one residential house, the NF AC went wrong in restricting the claim without assigning proper reasons and justification.
The NFAC, Delhi failed to appreciate that the claim of deduction under Section 54 of the Act was correct in all facets and further ought to have appreciate that having made payments to builders through proper banking channel for the purpose of claiming deduction under Section 54 of the Act, the consequential disallowance of the disputed sum should be reckoned as nullity in law. 7. The NFAC, Delhi failed to appreciate that the assessment order of the original authority was passed out of time, invalid, passed without Jurisdiction and not sustainable both on facts and in law.
T he NFAC, Delhi failed to appreciate that the faceless regime procedure prescribed statutorily was not followed admittedly and ought to have appreciated that non adherence to the procedure would be fatal to the orders passed and challenged in the present appeal.
The NFAC, Delhi failed to appreciate that there was no effective/proper opportunity given before passing the impugned order and any order passed in violation of the principles of natural justice is nullity in law.”
The brief facts of the case are that the assessee has filed his
return of income declaring total income of Rs. 7,11,320/- under the :- 3 -: capital gains in respect of sale of immovable property at West
Mambalam, Chennai for the sale consideration of Rs. 5,05,00,000/-.
The assessee in the computation has taken a cost of acquisition at Rs.
95,59,000/- and claimed deduction of Rs. 1,50,00,000/- for investment
on property on his own name and another deduction claimed for another property of Rs. 1,50,00,000/- in the name of his wife Smt. R.
Gayathri. The A.O in the assessment order has allowed indexed cost of acquisition only of Rs.11,68,039/- and deduction u/s. 54 of the Act of Rs.1,50,00,000/- in respect of investment made on his name thus,
recomputed the capital gain at Rs.3,32,96,961/-. Aggrieved by the above addition, the assessee has filed appeal before Ld. CIT(A). The assessee before the Ld. CIT(A) has revised working of capital gains
against the sale consideration of Rs. 5,05,00,000/- and he has taken
cost of acquisition at Rs.13,90,018/- (as on 01.04.1981) and cost of improvement is at Rs. 6,95,120/- as on 2007-08. Comparing the LTCG
of Rs. 3,30,75,139/-. The assessee has claimed exemption u/s. 54 of the Act in respect of investment made in a new residential unit
(Document No.1314/25.02.2016) at Rs.2,01,99,820/- and further,
claimed exemption u/s. 54 of the Act of Rs. 1,61,99,820/- in respect of investment in residential unit vide Document No.1448/2015 in the name
of his spouse determining taxable capital gain at Nil. The Ld. CIT(A) has allowed the cost of acquisition at Rs. 5,95,365/- as on 01.04.1981 and :- 4 -: cost of improvement at Rs. 6,95,120/- as on 2007-08 subject to verification. The Ld. CIT(A) has further allowed exemption u/s. 54 of the Act in respect of investment in the purchase of property in the name of the assessee at Rs. 1,61,99,820/-. The Ld. CIT(A) has not allowed the claim of further investment of Rs. 40 Lakhs claimed as paid to builder.
The Ld. CIT(A) has also not allowed claim of exemption u/s. 54 of the Act in respect of investment made in the name of his wife in respect of another residential unit of Rs. 1,61,99,820/-. The assessee is aggrieved
against not granting exemption u/s 54 of the Act in respect of payment
of Rs. 40,00,000/- paid to builder in respect of residential unit paid in his
name and exemption claimed in respect of investment made in the name of his wife. As regard to claim of exemption u/s. 54 of the Act
addition of Rs. 40,00,000/-, the assessee has submitted addition
evidence in the form of bank statement of the builder in whose account
Rs. 40,00,000/- was credited, the assessee has required to admit the above evidence.
The first issue that came up for our consideration from Ground
No.2 of assessee’s appeal is disallowance of deduction u/s. 54 of the Act in respect of reinvestment of capital gains derived from transfer of original asset. The A.O has also disallowed deduction u/s. 54 of the Act
on the ground that the assessee has invested in two distinct properties :- 5 -: in the name of his wife contrary to provisions of Section 54 of the Act,
where it has been specified a residential house means one residential
house.
The Ld. counsel for the assessee submitted that if two residential
houses have been purchased for the purpose of residence of the assessee even if such property was purchased in the name of his wife,
deduction u/s. 54 of the Act cannot be denied.
The Ld. D.R, on the other hand, supporting the order of Ld. CIT(A)
and submitted that the law is clear after amendment in respect of deduction u/s. 54 of the Act is concerned, where ‘a house’ has been clarified to mean one residential house and thus when the assessee
has purchased two distinct houses, the assessee is not eligible for deduction u/s. 54 of the Act.
We have heard both the parties, perused the materials available
on record and gone through orders of the authorities below. The law
has been amended to clarify the meaning of ‘a house’ and as per said
amendment ‘a house’ referred u/s. 54 of the Act means one residential
house. Even the assessee purchased more than one residential house
then deduction u/s. 54 of the Act cannot be claimed. In the present
case, the assessee has purchased two residential houses, which are :- 6 -: distinct and separate properties and further, said property has been purchased in the name of his wife. Therefore, we are of the considered
opinion that the assessee is not entitled to claim deduction u/s. 54 of the Act and thus, we are inclined to uphold the findings of the Ld.
CIT(A) and reject the ground taken by the assessee.
The next issue came up for our consideration from ground Nos.3 &
4 of assessees’s appeal is disallowance of further investment of Rs.40,00,000/- claimed by the assessee while computing LTCG derived
from transfer of property. The A.O has not considered additional
payment made by the assessee to the builder for construction of building and further improvement in the property on the ground that the assessee could not furnish any evidences including payment details
and bills for improvement to the building.
It was the arguments of the Ld. counsel for the assessee that the assessee has filed certain evidences, but could not furnish bills for construction during the course of assessment proceedings. Further, the assessee has obtained certain additional evidences like bill from KK
Builders to prove that the assessee has paid a sum of Rs. 40,00,000/-
to the builder for improvement of the property and also filed bank
statement evidencing payment through proper baking channel.
Therefore, the assessee’s counsel submitted that the matter may be set :- 7 -: aside to verify the claim of the assessee and allow further investment in new property.
We have heard both the parties, perused the materials available
on record and gone through orders of the authorities below. The assessee claimed that cost of new house includes a sum of Rs.
40,00,000/- paid to KK Builders for further improvement to the property.
In this regard, the assessee has filed a copy of bill issued by KK
Builders and the bank statement to prove that the said payment has been made through banking channel. These evidences were not before
the A.O. Therefore, we are of the considered view that the matter
needs to go back to the file of A.O to give one more opportunity to the assessee to substantiate his claim of cost of new house including sum
of Rs.40,00,000/- paid to Builder for construction of building including
improvements to the property. In case, the assessee is able to establish
the claim of cost of new house with necessary evidences then, the A.O
may verify the claim of the assessee and allow additional amount of Rs.40,00,000/- as claimed by the assessee while computing LTCG
derived from sale of property. :- 8 -: 10. In the result, the appeal filed by the assessee is partly allowed for statistical purposes.
Order pronounced on 10th April, 2024. (मनोमोहन दास) (मंजुनाथ. जी) (Manomohan Das) (Manjunatha. G) "ाियक सद"/Judicial Member लेखा लेखा सद"य लेखा लेखा सद"य सद"य /Accountant Member सद"य चे"ई/Chennai, "दनांक/Dated: 10th April, 2024. EDN/-
आदेश क" "ितिलिप अ"ेिषत/Copy to: 1. अपीलाथ*/Appellant 2. ,-थ*/Respondent 3. आयकर आयु./CIT 4. िवभागीय ,ितिनिध/DR 5. गाड( फाईल/GF