The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) remanded the matter for verification concerning CIT(A)’s disallowance of Rs. 1.41 crore exemption claimed under Section 54F of the Income Tax Act for alleged additional residential property. The tribunal observed it was commercial property based on additional evidence.
Malav Jashwantlal Shah, the assessee filed an income tax return declaring a total income of Rs. 28,34,790. The assessee claimed a long-term capital gain exemption under Section 54F of the Income Tax Act for reinvesting in a residential house.
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The assessing officer disallowed the exemption under Section 54F stating that the constructed house was on agricultural land without a conversion certificate for residential use. The assessing officer taxed the long-term capital gain on the sale of the land due to the lack of the conversion certificate.
The assessee appealed to the Commissioner of Income Tax (Appeals) who denied the exemption stating that the assessee owned more than one residential house at the time of transferring the original asset.
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On appeal before the ITAT, the assessee’s counsel argued that the properties in question were commercial and generated rental income, not residential properties. The assessee’s counsel submitted new evidence such as documentation of the residential property and three commercial properties leased to various entities.
The assessee’s counsel submitted municipal corporation tax receipts and details of three commercial properties leased to the State Bank of India, Axis Bank, and New India Assurance Company. This evidence was not previously submitted to the lower authorities.
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The assessee’s counsel argued that the Commissioner of Income Tax (Appeals) erroneously denied the exemption under Section 54F of the Income Tax Act by stating that the taxpayer held more than one residential house on the date of the transfer of the capital asset.
The two-member bench comprising Annapurna Gupta ( Accountant Member ) and T.R. Senthil Kumar ( Judicial Member ) observed from the additional documents submitted by the assessee that those were commercial property not residential.
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The tribunal observed the need for verifying the additionally submitted evidence. So, the tribunal remanded the matter back to the Commissioner of Income Tax (Appeals) for verification and concluding the matter on merits. The appeal of the assessee was allowed for statistical purposes.
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