Newly Purchased Asset was found as Residential Property on Physical Inquiry: ITAT allows Capital Gain Exemption [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the capital gain exemption shall be allowed since it was found on physical inquiry that the new asset purchased is a residential property under section 54 of the Income Tax Act, 1961.

After scrutiny of the returns filed by the assessee, the Assessing Officer noticed that in the year under consideration, the assessee has sold an immovable property and derived long term capital gain. While concluding the proceedings, the Assessing Officer rejected the assessee’s claim of deduction under section 54F of the Act by observing that the assessee had invested the capital gain in purchase of an agricultural land and not a residential house.

On first appeal, Commissioner (Appeals), granted relief to the assessee by observing that after due inquiry and verification of the relevant facts having found that the new asset purchased by the assessee is a residential house.

A two-Member bench of the Tribunal comprising of Mr. Saktijit Dey (Judicial Member) and Mr. B R R Kumar (Accountant Member) held that in course of proceeding before the first appellate authority, the assessee has furnished the sale-deed of the property purchased by him indicating that it is a residential house. The evidence furnished by assessee was forwarded to the Assessing Officer for verification. After receiving the additional evidence furnished by the assessee, the Assessing Office made a field inquiry through the Ward Inspector to ascertain assessee’s claim of existence of residential house.

Upholding the first appellate order, the Tribunal held that “on a careful perusal of the remand report furnished by the Assessing Officer, it becomes patent and obvious that on physical inquiry it has been found that the new asset purchased by the assessee is a residential house. That being the factual position, assessee’s claim of deduction under section 54F of the Act is certainly allowable. In view of the aforesaid, we do not find any infirmity in the decision of learned Commissioner (Appeals) in allowing assessee’s claim of deduction under section 54F of the Act.”

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