The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that when the property claimed is different from the property referred to in the sale agreement then benefit under Section 54 of the Income Tax Act, 1961 cannot be attracted.
The assessee filed a return of income declaring a total income of Rs. 26,64,690/-. The case was selected for scrutiny under the Computer-Assisted Scrutiny Selection (CASS) and assessment was completed under Section 143(3) of the Income Tax Act, 1961.
During the course of assessment proceedings, the claim of the assessee under Section 54 of the Income Tax Act was examined and the same was denied. Consequently, an addition of Rs. 13,84,87,515/- was added to the income of the assessee.
The property sold by the assessee was long-term in nature and this fact is not under challenge. To claim deduction under Section 54 of the Income Tax Act, the assessee has to acquire another residential house within a period of one year before or 2 years after or has to construct another house within a period of three years from the date of transfer of the old house.
At the time of entering the transaction, the builder had no clear permission for construction, but the assessee has chosen flat no. 5101 situated at C-Block which is beyond anybody’s understanding as the assessee can book a flat with all the clearances and construction in progress on any floor. She was buying property from the company under the substantial control of her husband.
In comparing with the allotment letter vide page 3 of the paper book it confirms the booking of flat no. C- 5101 vis-a-vis agreement of sale executed on 23rd Jan 2018 vide page no. 19 to 77 of the paper book which confirms flat no. C- 5701.
The allotment letter initially submitted by the assessee before the Assessing Officer is no more in existence and acted upon. Rather assessee entered into an altogether new transaction that is nowhere related to the claim of the assessee with reference to Section 54 of the Income Tax Act. It is a clear case where the assessee claimed benefit under Section 54 of the Income Tax Act on a different document, whereas ultimately the transaction was completed on altogether a different set of conditions and property, which is not permissible to claim benefit under Section 54 of the Income Tax Act.
The Two-member bench comprising of Vikas Awasthy (Judicial member) and Gagan Goyal (Accountant member) held that the actions and intentions of the assessee were not very clear and the assessee was never in a position to confirm the conditions laid down in Section 54 of the Income Tax Act, despite of the fact that a liberal view may be taken in this case.
Therefore, the order of the Commissioner of Income Tax (Appeal) was set aside and the additions made by the Assessing Officer were confirmed. Thus, the appeal of the revenue was partly allowed.
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