ITAT Pune Remands Section 54F Claim for Fresh Verification; Additional Evidence Allowed Under Rule 29

ITAT Pune Remands Section 54F Claim for Fresh Verification; Additional Evidence Allowed Under Rule 29

The assessee, engaged in real estate trading, declared NIL income for AY 2011-12. During scrutiny, the Assessing Officer made several additions, including denial of deduction under Section 54F amounting to Rs. 92.85 lakh, on the ground that the assessee had invested sale proceeds in a farmhouse rather than a residential house.

In appeal, the CIT(A)/NFAC deleted additions relating to interest and unsecured loans but upheld the denial of Section 54F deduction, holding that the assessee failed to demonstrate that the investment was in a qualifying residential property or that actual construction had taken place. Before the Tribunal, the assessee produced additional evidence and contended that the farmhouse was permissible under zoning laws, capable of residential use, and aligned with judicial precedents. The assessee requested admission of additional evidence under Rule 29 to substantiate compliance with Section 54F conditions.

Main Issue: Whether the assessee’s investment in a farmhouse property qualifies as a “residential house” under Section 54F, and whether additional evidence justifying the claim should be admitted at the appellate stage.

ITAT Held: The Tribunal admitted the assessee’s additional evidence under Rule 29, noting that these documents were essential for adjudicating the real nature of the property and were not properly examined by the lower authorities. Observing that the dispute turned primarily on factual verification, particularly whether the property constituted a residential house under Section 54F, the Tribunal held that these matters required fresh evaluation by the Assessing Officer.

Thus, the order of the CIT(A) was set aside only on the Section 54F issue, and the matter was remanded to the Assessing Officer for a de novo decision after granting full opportunity to the assessee. The assessee was directed to cooperate and furnish all materials, including the newly submitted evidence and relevant case law. Thus, the appeal was allowed.

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