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2009 (11) TMI 904 - KERALA HIGH COURTExemption u/s 54F - intimation u/s 143(1)(a) - denial of deduction as assessee had not invested the sale consideration in full or part in any of the specified accounts prior to the date of filing return in terms of section 54F(4) - ITAT allowed deduction - HELD THAT:- In order to qualify for exemption under section 54F(3), the assessee should have first deposited the sale proceeds of the property in any bank account and the construction of the house to qualify for exemption under section 54F should have been completed by utilising the sale proceeds also available with the assessee. In this case, though the assessee constructed new building within the period of three years from the date of sale, it was with funds borrowed from HDFC. Assessee is not entitled to exemption u/s 54F because the assessee neither deposited the sale proceeds for construction of the building in the bank in terms of sub-section (4) before the date of filing returns nor was the sale proceeds utilised for construction in terms of section 54F(3) - So much so, the assessee was not entitled to claim exemption on capital gains under section 54F of the Act which the Assessing Officer rightly declined. Validity of intimation u/s 143(1)(a) denying exemption - Whether claim of exemption u/s 54F could be disallowed in the course of proceedings u/s 143(1)(a)? - It is settled position that the section authorises the AO to make disallowance of items which are prima facie inadmissible. It was the duty of the assessee to establish the eligibility for exemption from payment of tax on capital gains by production of documents in terms of the statutory provisions. According to the relevant provisions stated above in the first place, it was the duty of the assessee to deposit the net sale proceeds in the bank before due date for filing return and furnish proof of the same along with the return filed which was admittedly not done. Secondly, by allowing credit of value of transferred property in the capital account of the assessee in the firm, the assessee concedes that the sale proceeds was neither received nor going to be utilised for construction or purchase of house. So much so, in our view, exemption claimed u/s 54F was prima facie inadmissible and, therefore, the officer was justified in making disallowance in the proceedings u/s 143(1)(a). Consequently, the appeal is allowed vacating the order of the Tribunal and by restoring the assessment confirmed by the first appellate authority.
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