9911796707
TMI Blog2024 (11) TMI 1382X X X X Extracts X X X X X X X X Extracts X X X X ..... nt (hereafter Assessee) had sold a residential property, 1/7 Shanti Niketan, New Delhi on 25.09.2014, for a consideration of Rs. 6,88,00,000/- and had earned a capital gain of Rs. 5,63,74,550/-. However, the assessee claimed exemption in respect of the said gains on the ground that he had constructed 'a residential house' within a period of three years. Therefore, the said gains were exempted under Section 54 of the Act. 4. The Assessing Officer (AO) made certain queries and found that the Assessee was not eligible for the exemption under Section 54 of the Act. The AO concluded that the Assessee had not constructed a residential house but purchased vacant agricultural land. The structure on the agricultural land, which the Assessee claimed was a constructed residential house, was only a makeshift structure that had been raised with a view to evade the tax liability. 5. The AO also caused the property 'Khewat No. 76, Khatoni No. 76, Village Bandhwari, Sohna, Distt. Gurgaon' (hereafter the subject property) to be physically inspected and confronted the Authorised Representative (AR) of the Assessee with the report of the inspector as well as photographs of the property which the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 9991160943), on contacting Mr. Sawan, he informed us that without Kila/Musti number, it is difficult to identify the exact location of the land. T. KHUP SUAN LIAN Inspector ACIT, Circle - 22(2) New Delhi." 9. The AO was of the view that it was necessary for the Inspector to once again visit the site and called upon the Assessee to arrange a visit to the site on 07.12.2017. The inspection (second inspection) of the site was conducted on 07.12.2017 and the report furnished by the Inspector as noted in the assessment order, is set out below: "INSPECTOR'S REPORT" (in the case of Shri. Sandeep Hooda) 1. One makeshift guardroom (make plywood) of7 x 6 feet, One cylinder and one gas stove along with some utensils were found in the guard room, on which guard Sh. Padam Singh prepares his daily food items. 2. One similar room of plywood of 16 x 12 feet was also there, with toilet attached, in which some furniture was lying. Nobody lives there except than guard. 3. No electricity connection was there on the land. For electricity genset is used. 4. No water connection was found in the premises. Only source of water was found to be a syntax tank of approximate 300 litres. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the AO and reached a conclusion that the Assessee had not constructed a residential house till 25.09.2017. 14. The responses furnished by the AR to the questions posed by the AO on 27.11.2017 clearly indicated that there was no electricity connection or water connection to the subject property in question. It is also material to note that prior to 27.11.2017, on 13.11.2017, the AO had asked the Assessee to show cause why the deductions under Section 54 of the Act should not be disallowed as the construction of the house could not completed before 25.09.2017. However, the Assessee had not filed any written response at the material time. The learned ITAT also examined the Inspector's report and concluded that the assessee had not invested the capital gains in purchase of 'a residential house'. The learned ITAT held that the residential house whether situated in urban or rural locality is required to have the "basic amenities such as a boundary wall, kitchen, washroom, bedroom, electricity connection and water connection" as required for habitation in a residential house. The learned ITAT noted that although the Assessee may be intending to construct a residential house on the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct which is set out below: "54. Profit on sale of property used for residence. [(1)] [Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of a long-term capital asset, [* * *] [being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head "Income from house property" (hereafter in this section referred to as the original asset), and the assessee has within a period of [one year before or two years after the date on which the transfer took place purchased], or has within a period of three years after that date [constructed, a residential house in India], then], instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,- (i) if the amount of the capital gain [is greater than the cost of [the residential house] so purchased or constructed (hereafter in this section referred to as the new asset), the difference between the amount of the cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he allowance is available if the capital gains arising from a sale of residential property is utilised by the Assessee for purchasing a residential property or constructing a residential house. It is obvious that the construction of a residential house would entail raising a construction for inhabitation as a residential dwelling unit. 19. The Inspector's report, which the learned ITAT had accepted is a makeshift guardroom made of plywood of 7 feet x 6 feet was found on the site and a similar room of plywood of 16 feet x 12 feet with a toilet attached was found at the said site. Putting together a structure of plywood sheets cannot be construed as constructing a residential house. The Inspector had also reported that there was no electricity or water connection on the land and electricity was used by genset. 20. The first inspection report indicated that the exact location itself of the land was difficult to find as the area was vast and inhabited and comprised of hilly terrain. It is material to note that the structures made of plywood sheets were found to exist on the subject property during the second visit of the Inspector conducted on 7.12.2017. 21. In our view, no question ..... X X X X Extracts X X X X X X X X Extracts X X X X
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