The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) granted an exemption on capital gains related to the transfer of a residential property, despite a 10-year delay in the verification process by the Assessing Officer (AO).
The individual assessee, a non-resident Indian residing in Germany, had submitted her income tax return for the relevant year, declaring a total income of Rs. 8,08,010/-. The case went through scrutiny, resulting in the issuance of a notice under section 143(2). In response, the assessee’s representative participated in the proceedings, furnishing the required details as requested.
The Counsel for the assessee Hemant Pai argued that the capital gain should not be taxable in the contested assessment year 2013-14. During the assessment, the assessee provided Bangalore Electricity Supply Company (BESCOM) bills and a photograph of the building, which was later demolished. The Assessing Officer (AO) explicitly rejected the existence of the building, despite the details presented in support of the assessee’s assertion.
The Counsel for the Respondent Nischal.B had relied on statements by CIT (A) and AO, asserting Section 50C’s applicability. Despite the assessee having received sale consideration in FY 2009-10, the transfer had occurred in 2008. Section 50C had mandated that the consideration for the capital asset transfer be less than the guidance value. In this case, 90% of the total consideration had been received in FY 2008-09, and only Rs. 1, 44,785/- in FY 2009-10. The AO had neglected to verify the guidance value during FYs when the sale consideration exceeded the assessee’s rate.
After reviewing the arguments presented by both parties and examining the available records, the bench observed that the assessee had invested Rs. 95 Lakhs in a new residential house, with possession granted on 18.05.2013, a fact undisputed by the AO. The assessee had sought exemption under Section 54, amounting to Rs. 66,01,550, representing the sale proceeds from the asset transfer through the sale deed dated 09.11.2012. The denial of exemption was solely based on the AO’s perspective that the sale deed didn’t mention a residential building, asserting the sale involved only land.
The two member bench of the tribunal comprising Chandra Poojari ( Account member) and Beena Pillai ( Judicial member) concluded that After examining the sale deed dated 09.11.2012, it became evident that the assessee had transferred a residential property, making them eligible for exemption under Section 54 of the Income Tax Act 1961,
The assessee had submitted supporting documents, including BESCOM bills, Katha, tax paid receipts, and photos of the structure to the AO. Unfortunately, the AO summarily dismissed these documents without conducting a thorough investigation. The failure of the AO to carry out necessary verifications could not be attributed to the assessee after a decade. Due to the substantial lapse of time, remanding became impractical. In the interest of justice, the assessee’s claim under Section 54 should have been acknowledged.
In the interest of justice, the claim of the assessee u/s. 54 needs to be granted.
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