ORDER
Ms. Astha Chandra, Judicial Member.- The appeal filed by the assessee is directed against the order dated 24.12.2024 of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi [“CIT(A)”] pertaining to Assessment Year (“AY”) 2020-21.
2. The assessee has raised the following grounds of appeal :-
“1) The Ld. CIT(A) erred in not allowing genuine claim u/s 54F where the total payment towards new property was made by the appellant.
2) The Ld. AO erred in making addition of the difference in ready reckoner value of the property (Rs. 84,63,000/-) and stamp duty paid by the Appellant (Rs.9,30,000/-). The act of the Ld. AO making addition by comparing the two incomparable values needs cancellation.
3) The Ld. AO & Ld. CIT(A) erred in stating that returns filed by the Appellant were invalid. However, in fact, CPC – Bengaluru had condoned the delay in submitting ITR-V and both the returns are valid returns.
4) The Ld. CIT(A) erred in passing the final appeal order without taking into consideration the point of dispute (i.e. difference between ready reckoner value of the property and stamp duty paid on the apparent consideration) or referring the case back to the file of the AO by exercising the powers conferred u/s 251 of the Act.
5) The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal and/or to lay the additional evidences at the time of hearing.”
3. Briefly stated the facts are that the assessee is an individual. For AY 2020-21, the assessee filed his return of income declaring total income of Rs.6,72,900/- under the heads of „income from business’, „income from capital gain’ and „income from other sources’. The case of the assessee was selected for scrutiny under CASS. Accordingly, notice(s) u/s 143(2) and 142(1) of the Income Tax Act, 1961 (the “Act”) were issued and served upon the assessee. The Ld. Assessing Officer (“AO”) found that during the relevant AY 2020-21, the assessee had sold two small plots of land. The sale consideration received was invested jointly with his wife in a new property. The assessee claimed deduction u/s 54F of the Act. The total investment in the new property was Rs.1,55,00,000/- on which stamp duty of Rs.9,30,000/- was paid which was calculated at 6% of the value of new asset as per the prevailing law in Maharashtra. The stamp duty value/ready reckoner value of the said property was Rs.84,63,000/-. The assessee submitted the requisite details/documents in response to the notice issued u/s 143(2) of the Act. However, other statutory notices were also communicated to the assessee but assessee failed to comply with the same. Therefore, due to non-compliance of these notices and in the absence of any submission on behalf of the assessee, the Ld. AO completed the assessment u/s 144 r.w.s. 144B of the Act by making an addition of Rs.75,33,000/- treating the same as misreported stamp duty value of the new asset vide his order dated 24.09.2022.
4. Aggrieved, the assessee carried the matter before the Ld. CIT(A)/NFAC. After considering the submission of the assessee, the Ld. CIT(A)/NFAC dismissed the appeal by observing as under:
“Ground No.2: The learned AO erred completing the assessment on a totally wrong interpretation of available information. The learned AO comparing the Stamp duty value (Rs. 84,63,000) of the new asset with that of the stamp duty paid (Rs. 9,30,000) on the new asset is itself wrong. Thus, the assessment was baseless and without application of mind and therefore needs to be cancelled.
I have carefully examined the ground raised by the appellant. The AO issued notices to the assessee-appellant on 29.06.2021, 05.02.2022, 01.09.2022, 10.09.2022 and Show Cause Notice on 20.09.2022. The AO contended that the assessee-appellant partly submitted his submissions for the notice issued on 05.02.2022. The relevant portion of the assessment order is reproduced below for clarity:
“Variation proposed on the basis of inference drawn
The assessee had filed following Income Tax Returns (ITR-3) for the A.Y.2020-21
| (i) | | vide acknowledgement No. 143247320080121 and |
| (ii) | | vide acknowledgement No.329297250310321 and both the ITRs found invalid. |
| (a) | | On perusal of ITR-3 filed vide acknowledgement No. 329297250310321, it is revealed that assessee has claimed Refund of Rs. 10,73,270/- on payment of tax of Rs. 11,22,233/- whereas Rs. Rs. 9,58,110/- was claimed in ITR filed vide acknowledgement No. 329297250310321. |
| (b) | | Again, assessee has claimed Capital gain deduction of Rs.98,88,710/- |
(Rs. 76,91,783/- Rs.21,96,927/-) u/s.54F on investment of another immovable property. Again, as per reply furnished on 19/02/2022, assessee has claimed the deduction of Rs.84,63,000/- on Stamp duty value for calculation of Capital Gain of the Property made transaction on 12/02/2020. This transactions has been verified with the information available in the Departmental ITBA database, transaction value of the Property found Rs. 77,55,000/-whereas Stamp value of the Property was Rs.9,30,000/- Hence, the difference of Stamp duty value of the Property at Rs.75,33,000/- (Rs. 84,63,000/- Rs. Rs.9,30,000/-) has either been misreported or it was the part of income not disclosed in the ITR for the A.Y. 2020-21. Hence, the amount of misreporting Stamp duty value of Rs.75.33,000/- is brought to tax by disallowing the deduction u/s 54F of the Income Tax Act, 1961.
Synopsis of the reply of the assessee to SCN and additional SCN (if any).
Relevant portion of the reply “Sir, during the year under consideration the assessee had sold two properties during the year under consideration. Honour may appreciate the fact that the assessee had offered the capital gain on sale of these properties in his return of income for the year under consideration. The funds received from sale of these properties are used to buy the new property. Copies of sale deed executed by the assessee are attached herewith. the date of transaction 12/02/2022, consideration value of Rs. 1,55,00,000/- and Stamp duty value Rs.84,63,000/-…..”
Assessee did not comply with the Show cause notice. Assessee did not rely upon no case law/Judgement”
During the course of appellate proceedings, the appellant was issued notices of hearing on a couple of occasions. In response, appellant uploaded/submitted his submissions. The appellant, in his submissions contended that he sold two small plots of land and the consideration thus received was invested in a new property. jointly and claimed deduction u/s 54F of the Act. Section 54F reads as under :-
“Ownership Criteria: At the time of transferring the original asset, the taxpayer should not own more than one residential house (excluding the new one). The exemption is revoked if the taxpayer purchases any other residential house within two years or constructs one within three years of the transfer”.
In case the deduction u/s 54F is claimed on investment in a new property jointly by the appellant and his/her spouse, then exemption/deduction u/s 54F can be claimed only @ 50% by the appellant. In this case, the AO found both the returns filed by the appellant to be invalid. In view of the observations of the AO in the assessment order, as both the returns filed by the appellant are found to be invalid as per law, technically speaking, the appeal filed by the appellant is deemed to be invalid/infructuous as well, and the grounds raised by the appellant are dismissed.”
5. Dissatisfied, the assessee is in appeal before the Tribunal and all the grounds of appeal relate thereto.
6. The Ld. AR at the outset submitted that the Ld. AO has completed the assessment ex-parte u/s 144 of the Act and thus the assessee was not granted with the proper opportunity to represent and substantiate its case before the Ld. AO. The Ld. AR contended that the observation made by the Ld. AO of the alleged misreported stamp duty value of the new asset is incorrect. During the course of assessment proceedings, the assessee had made his submissions before the Ld. AO providing all the requisite details in respect of the investment made by the assessee in the immovable property in the relevant AY under consideration along with the source of funds. The description of the property sold and purchased along with the copies of sale/purchase deed and bank statements showing the payment made towards purchase of the property was submitted (pages 23 to 27 of the paper book refers). The Ld. AR submitted that the name of the spouse was included in the purchase deed only for the sake of convenience, however the entire consideration has been paid by the assessee though his own funds and therefore the assessee should be eligible to claim deduction u/s 54F of the Act. He submitted that the Ld. CIT(A)/NFAC although took cognizance of the submissions made by the assessee and discussed the same in his appellate order, he still dismissed the appeal of the assessee rejecting the submissions/contentions of the assessee without appreciating the facts in the correct perspective.
6.1 In support of his claim, the Ld. AR relied on the decision of the Hon’ble Delhi High Court in the case of CIT v. Ravindra Kumar Arora /[2012] 342 ITR 38 (Delhi) and the Mumbai Tribunal in the case of ACIT v. Jay Bharat Mehta [ITAppeal No. 1085(Mum) of 2024, dated 13-1-2025].
6.2 The Ld. AR further submitted that the Ld. CIT(A)/NFAC has also observed that the return(s) filed by the assessee are invalid as pointed out by the Ld. AO and thus held the assessee’s appeal deemed to be invalid/infructuous on this technical ground. The Ld. AR submitted that this observation of the Ld. AO which has been upheld by the Ld. CIT(A)/NFAC is also not correct because the CPC had condoned the delay in submitting the returns and both the returns filed by the assessee are valid returns (pages 28 & 29 of the paper book refers).
7. The Ld. DR, on the other hand, supported the order of the Ld. CIT(A)/NFAC and the Ld. AO.
8. We have heard the Ld. Representatives of the parties and perused the material available on record as well as paper book filed by the Ld. AR on behalf of the assessee. We find that the Ld. AO made the impugned addition of Rs.75,33,000/- on account of difference in stamp duty value declared by the assessee and the information available with the Department vide his order passed u/s 144 r.w.s. 144B of the Act. While completing the assessment, the Ld. AO compared the ready reckoner value of the property i.e. Rs.84,63,000/-with the stamp duty paid on purchase of property i.e. 9,30,000/- and the difference of the above two amounts i.e. Rs.75,33,000/- has been treated as misreported stamp duty value of new asset and accordingly an addition to that effect has been made to the income of Rs.6,72,900/- returned by the assessee. It is the contention of the Ld. Counsel for the assessee that the Ld. CIT(A)/NFAC has disallowed the assessee’s claim u/s 54F of the Act without appreciating the fact that the property was purchased by the assessee through his own funds and the name of the spouse was included in the purchase agreement for the purpose of convenience only. However, the Ld. CIT(A)/NFAC while passing the impugned assessment order ignored that the property was purchased by the assessee through his own funds and the name of the spouse was included in the purchase agreement for the purpose of convenience only. We find that the Hon’ble Delhi High Court in the case of Ravindra Kumar Arora (supra) and the Mumbai Tribunal in the case of Jay Bharat Mehta (supra) under the similar set of facts have allowed the claim of deduction u/s 54F of the Act where the new residential property was purchased by the assessee jointly with his wife taking note of the fact that the entire sale consideration was paid by the assessee. In the present case, it is the submission of the Ld. AR that the assessee has made the entire payment towards the purchase of the new residential property and as such the assessee should be eligible to claim deduction u/s 54F of the Act. We find some force in this contention advanced by the Ld. AR.
9. Further from page 10 of the paper book, we find that the assessee had filed an application for rectification of appeal order with the Ld. CIT(A)/NFAC stating all the relevant facts mentioned above for his consideration and also without prejudice requesting the Ld. CIT(A)/NFAC to set aside the assessment and refer the case back to the file of the Ld. AO for making fresh assessment as the original assessment order against which the appeal was preferred before him was passed u/s 144 of the Act by the Ld. AO. The said application of the assessee is still pending for disposal by the Ld. CIT(A)/NFAC. It is also the contention of the Ld. AR that both the Ld. AO and the Ld. CIT(A)/NFAC in their respective orders have mentioned that the returns filed by the assessee were invalid. However, fact on record reveals that on an application filed by the assessee for condonation of delay, the CPC had condoned the delay and both the returns (original and revised) were treated as valid returns. The Ld. AR has placed on record a screen shot for approval of condonation of delay in verifying the returns (page 28 of the paper book refers). We therefore tend to agree with the arguments advanced by the Ld. Counsel for the assessee that both the Ld. CIT(A)/NFAC as well as Ld. AO have not appreciated the facts of the case correctly and hence, in our view, the disallowance of claim of deduction u/s 54F needs reconsideration. Considering the totality of the facts and in the circumstances of the case and without going into the merits of the appeal, we deem it fit to set aside the order of the Ld. CIT(A)/NFAC and restore the matter back to the file of the Ld. AO with a direction to decide the issues afresh on merits as per fact and law in light of the above factual and legal submission(s) already on record and further submissions, if any, made by the assessee and accordingly allow relief to the assessee as a result of his verification thereof, after giving reasonable opportunity of being heard to the assessee. The assessee is also hereby directed to appear/make his submissions before the Ld. AO on the appointed date without seeking any adjournment under any pretext unless required for a sufficient cause, failing which the Ld. AO shall be at liberty to pass appropriate order in accordance with law. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.
10. In the result, the appeal of the assessee is allowed for statistical purposes.