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Facts
The assessee sold land and earned Long Term Capital Gain, claiming deduction under Section 54F. The Assessing Officer allowed only proportionate deduction due to lack of evidence for construction cost. The CIT(A) dismissed the appeal ex-parte.
Held
The Tribunal noted that the CIT(A) passed the order ex-parte and that the assessee has now submitted additional evidence relevant to the Section 54F deduction. In the interest of justice, the matter was set aside to the Assessing Officer for fresh consideration.
Key Issues
Whether the CIT(A) erred in dismissing the appeal ex-parte and confirming the AO's disallowance of Section 54F deduction; and whether adequate opportunity was provided to the assessee.
Sections Cited
54F, 250, 271(1)(c)
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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: DR. B.R.R. KUMAR, VICE-MS. SUCHITRA KAMBLE
O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:-
Delay condoned.
This appeal has been filed by the assessee against the order dated 05.03.2025 passed by the Ld. Addl/JCIT(A), Kochi (hereinafter referred to as the “Ld. CIT(A)”), under Section 250 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) for Assessment Year 2016-17.
The assessee has raised following grounds of appeal:-
“1. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in not allowing the exemption u/s. 54 of the Income Tax Act, 1961.
2. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in making addition of Rs.27,07,200/-on account of Long Term Capital Gain. Rahulkumar Shantilal Shah Vs. ITO Asst. Year : 2016-17 - 2–
3. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has not offered adequate opportunities to hear the case and passed ex-prate order and hence, the case may please be set aside and restored back to the CIT(A) or AO.
4. On the facts and in the circumstances of the case as well as the law on the subject, the learned Assessing Officer has erred in initiating penalty proceeding u/s.271(1)(c) of the Income Tax Act, 1961.”
The brief facts of the case are that the assessee filed his return of income declaring total income of Rs. 10,96,540/-. During the year, the assessee sold an open plot of land and earned Long Term Capital Gain of Rs. 35,91,084/-. The assessee claimed deduction against the said capital gain. The Assessing Officer held that the assessee was eligible only for proportionate deduction u/s 54F of the Act and, in the absence of evidence relating to cost of construction of the residential house, restricted the deduction to Rs. 8,83,884/-, resulting in addition of Rs. 27,07,200/-.
Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the Ld. CIT(A) who dismissed the appeal ex-parte and confirmed the order of the Assessing Officer.
Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal.
Before us, the Ld. AR submitted that the Ld. CIT(A) passed the order without granting adequate opportunity of being heard. It was further submitted that the assessee has now filed additional evidence in the form of a paper book containing ledger account statement of Jay Kesarkunj Residency, Plot Nos. 1 & 2, Survey No. 50/1 and copy of Completion Certificate dated 23.11.2017 issued by a Government Approved Valuer. It was contended that these evidences go to the Rahulkumar Shantilal Shah Vs. ITO Asst. Year : 2016-17 - 3– root of the matter for determining the correct quantum of deduction u/s 54F and were not properly appreciated earlier.
The Ld. DR, on the other hand, relied on the orders of the lower authorities.
We have heard the rival submissions and perused the material available on record. It is an admitted position that the appeal before the Ld. CIT(A) was disposed of ex parte. It is also evident that the Assessing Officer restricted the deduction u/s 54F of the Act, mainly on the ground that the cost of construction was not supported by documentary evidence and was not reflected in the balance sheet. The assessee has now placed on record additional evidences in the form of ledger accounts relating to purchase of plots and a completion certificate issued by a Government Approved Valuer. These evidences are relevant for adjudication of the issue and were not examined by the lower authorities. Therefore, in the interest of justice, we deem it appropriate to set aside the issue relating to deduction u/s 54F of the Act to the file of the Assessing Officer for fresh consideration after examining the additional evidences and after affording adequate opportunity of being heard to the assessee.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
The order is pronounced in the open Court on 30.01.2026 (SUCHITRA KAMBLE) VICE-PRESIDENT Ahmedabad; Dated 30/01/2026 btk Rahulkumar Shantilal Shah Vs. ITO Asst. Year : 2016-17 - 4–