Section 54F Deduction under Income Tax cannot be Denied without Examining Construction Evidence: ITAT [Read Order]

The Surat bench of Income Tax Appellate Tribunal ( ITAT) has held that deduction under Section 54F cannot be denied without examining the construction evidence including ledger accounts of purchase of plot and a completion certificate issued by a Government Approved Valuer.

The assessee, Rahulkumar Shantilal Shah sold an open plot of land and earned long-term capital gains of about ₹35.91 lakh in the Assessment Year 2016-17. Against this, the assessee claimed exemption under Section 54F on account of investment in construction of a residential house.

The Assessing Officer, however, restricted the deduction to a proportionate amount of ₹8.83 lakh, stating absence of documentary evidence regarding the cost of construction, and consequently made an addition of ₹27.07 lakh.

This view was confirmed by the Commissioner of Income Tax (Appeals), who dismissed the assessee’s appeal ex parte.

Before the Tribunal, the assessee contended that proper opportunity of hearing was not granted by the CIT(A) and that relevant evidence was not considered.

The assessee, through his counsel, P.M. Jagasheth, CA, submitted that he had submitted the additional evidence including ledger accounts relating to purchase of plots and a completion certificate dated 23 November 2017 issued by a Government Approved Valuer, to substantiate the claim of construction and the quantum of investment.

The bench noted the evidence was important and the same was not examined by the lower authorities.

The bench of Suchitra Kamble (Judicial member) and Dr. B.R. R. Kumar (Vice president) observed that the “Assessing Officer restricted the deduction u/s 54F of the Act, mainly on the ground that the cost of construction was not supported by documentary evidence and was not reflected in the balance sheet.”

Accordingly, the matter was restored to the file of the Assessing Officer for fresh adjudication after considering the construction evidence and after granting due opportunity to the assessee.

The appeal was accordingly allowed for statistical purposes.

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