DHADUVAI PRAKASH RAO (HUF),HYDERABAD vs. ITO WARD-5(1), HYDERABAD

Brief facts of the case are that the assessee HUF sold its ancestral immovable property on 08/11/2016 along with two brothers, received share of consideration of Rs.2,64,00,000/- and claimed exemption under section 54 of the Income tax Act, 1961 (“the Act”). However, it was observed that the asset transferred is not a residential house and hence the assessee was asked to explain as to how the assessee is eligible for deduction under section 54 of the Act. In response, the assessee vide letter dated 05/12/2019 submitted that due to inadvertence and clerical mistake, deduction has been claimed erroneously u/s 54 instead of 54F of the Act.

Along with the letter, the assessee filed revised computation of total income, shown capital gains of Rs.2,29,69,514/-, claimed entire gain as deduction u/s 54F being investment made in construction of house property at Rs.2,95,58,927/- and submitted date-wise breakup of expenditure from 04/04/2016 to 28/03/2016 amounting to Rs.2,72,64,435/- along with copies of some bills. On careful consideration, the learned Assessing Officer observed that the assessee has included the payment of housing loan and property tax amounting to Rs.56,88,252/- also as cost of construction expenses. Since the assessee has not submitted any evidence with regard to details of home loan taken, amount of loan, property on which loan was taken etc., the learned Assessing Officer rejected the claim of the assessee and reworked long term capital gains at Rs.41,96,998/-.

Aggrieved by the order of the learned Assessing Officer, assessee preferred an appeal before the CIT(A) and the Ld.CIT(A) dismissed the appeal of the assessee as the assessee has not filed any documentary evidences in support of its claim either during the assessment or during appellate proceedings.

Against which, assessee filed an appeal before me and taking my attention to page number 75 and 76 of the paper book with regard to loan taken from Kotak Mahindra Bank and vide page number 34 and 35 with regard to building permission sanction by the GHMC, learned AR submitted the Revenue authorities erred in assuming that the said expenditure is not incurred towards construction of house and disallowed the claim against law. He, therefore, pleaded that the assessee may be given an opportunity of being heard before the learned Assessing Officer to prove its claim by furnishing the relevant credible material evidences.

Learned DR on the other hand submitted that the assessee failed furnish any evidences in support of its claim either during assessment or appellate proceedings. Hence, the learned CIT(A) is right in disallowing the claim of the assessee. He, therefore, pleaded to uphold the order passed by the learned CIT(A) and dismiss the appeal filed by the assessee.

I have heard both the parties and perused the material available on record. It is evident from the paper book filed by the assessee that the assessee had availed loan from Kotak Mahindra Bank and also obtained permission from the GHMC Town planning section for construction of the house. In view of the same, I am inclined to remit the matter back to the file of the learned Assessing Officer to examine the evidences filed by the assessee and to pass order accordingly after affording an opportunity of being heard to the assessee in the interest of justice. Assessee is also directed to adhere to the notices issued by the Revenue authorities and cooperate during the proceedings by furnishing relevant material evidences in support of its claim.

In the result, the appeal of the assessee is allowed for statistical purpose.