YUGANDHAR CHEVULA,NELLORE vs. INCOME TAX OFFICER, WARD - 2, NELLORE

The brief facts of the case are that the assessee is an individual and filed his return of income for the A.Y 2016-17 on 03.09.2016 through electronic mode by declaring an income of Rs.10,37,810/-. The return of income was processed and statutory notices u/s 143(2) and 142(1) were issued and served

Page 1 of 4 on the assessee to which the assessee has not filed any information in response to the said notices. In response to notice issued u/s 148 of the I.T. Act, 1961, the filed his return of income on 19.12.2019 admitting an income of Rs.5,42,090/. The Assessing Officer noticed from return of income filed for the A.Y 2016-17, that the assessee has arrived Long-Term Capital Gain on a sum of Rs.49,34,358/- and further the assessee has claimed the entire capital gain of Rs.49,34,358/- as exempt u/s 54 of the I.T. Act, 1961. Thereafter, the Assessing Officer issued notice u/s 143(2) and also a show cause notice on 27.12.2019 asking the assessee to file documentary evidence in support of his claim u/s 54 of the Act. The assessee submitted municipal plan approval and also the copy of the loan sanction letter issued by the Bank. On verification of the documents filed, the Assessing Officer observed that the municipal plan is a blue print only, projected plan for construction and further noticed from the bank loan sanction letter, the nature of loan was housing loan. The Income Tax Inspector on inspection of the construction reported that the construction was not a residential construction but it was a function all. As the assessee has not fulfilled the main object for claiming of exemption u/s 54, the Assessing Officer denied the claim of exemption. Thus, the Assessing Officer completed the assessment and made a demand of Rs.21,03,260/-.

In appeal, the learned CIT (A) dismissed the appeal filed by the assessee on the ground that assessee’s claim of Page 2 of 4 exemption u/s 54 was denied by the Assessing Officer and upheld the action of the Assessing Officer.

Aggrieved by the order of the learned CIT (A), the assessee is in appeal before the Tribunal.

The learned Counsel for the assessee submitted that the assessee primarily constructed the property for residential purpose, but later on it has been used for a commercial purpose, it cannot lose its character as a residential property. Therefore, the assessee prayed for granting another opportunity to substantiate its claim before the learned CIT (A).

The learned DR, on the other hand, supporting the orders of the authorities below submitted that the appellant has violated the provisions of section 54 F for claiming of deduction. Hence, the orders of the Assessing Officer and learned CIT (A) should be upheld and the appeal filed by the assessee should be dismissed.

We have heard both the parties, perused the material available on record and gone through the orders of the authorities below. Considering the totality of the facts and circumstances of the case, we deem it proper to restore the issue back to the file of the learned CIT (A) with a direction to grant another opportunity to the assessee to substantiate his case by filing the requisite details/evidences. The assessee is also hereby directed to appear

Page 3 of 4 before the learned CIT (A) on the appointed date and time with all the requisite details/documentary evidences, without seeking any adjournment. We hold and direct accordingly.

In the result, appeal filed by the assessee is allowed for statistical purposes.