Past Electricity and Water Bills can’t be Proof for Construction of House for the purpose of Capital Gain Deduction: ITAT [Read Order]

The Jaipur bench of the Income Tax Appellate Tribunal (ITAT) has recently held that past electricity and water bills cannot come to the aid of the assessee to demonstrate the existence of the constructed house at the time of sale for availing capital gain deduction under section 54F of the Income Tax Act, 1961.

The assessee’s claim for deduction under section 54F was denied by the Assessing Officer by finding that no constructed house has been sold and the claim of cost of construction and deduction under section 54 has been rightly rejected by him as there is no mention of the constructed house in the sale deed. He further observed that there is nothing on record in terms of buyers’ confirmation/affidavit or photographs of the property at the time of sale which can corroborate that what has been purchased/sold is not just a plot of land but a plot of land along with constructed house thereon.

It was contended on behalf of the assessee that the assessee has amply proved that a house was constructed over the land sold by him having electricity and water connections.

Rejecting the contention of the assessee, the Tribunal found that “the affidavit of the tenant in terms of past tenancy and past electricity and water bills cannot come to the aid of the assessee to demonstrate the existence of the constructed house at the time of sale. We thus find that the assessee has failed to discharge the necessary onus placed on him in support of his claim and cost of construction as so claimed to remain unsubstantiated and cannot be allowed.”

However, the Tribunal added that “at the same time, where the AO is ceased of the information that the assessee has made a fresh investment in certain house property and plots of land and is also accepting that such investment may be eligible for a claim under section 54F, it is incumbent on the part of the Assessing officer that in such a situation, where he had denied the assessee’s claim under section 54, he should have allowed the appropriate claim to the assessee under section 54F as per law. Since we have already quashed the notice u/s 148, no useful purpose would be served in setting aside the matter to the AO to allow the deduction under section 54F as the consequent proceedings stand quashed.”