2014 (1) TMI 603 - AT - Income Tax

Cost of improvement - Held that - The original construction was made in 1991-92, therefore, the assessee would have spent considerable amount during the assessment year 2006-07 atleast for maintenance of the building, if not for improvement - The Tribunal is of the considered opinion that this amount of Rs.3.5 lakhs shall be taken as cost of improvement - When the assessee borrowed loan and it was used for improvement or maintenance of the building it cannot be said that the assessee could not have used the funds merely because housing loan was not borrowed - The assessee could have invested the funds due to passage of time after the construction, rejecting the claim of the assessee in toto is not justified - Decided in favour of assessee. Undisclosed sales consideration - Held that - The assessee admitted the receipt of Rs.9 lakhs over and above the sale consideration disclosed in the sale deed - The assessing officer has also found that this Rs.9 lakhs was credited in the account of the assessee s wife Smt. K.S. Beena - Since the amount was received by cheque and it was credited in the name of the assessee s wife Smt. K.S. Beena and the same was also admitted by the assessee by a letter dated 18-09-2009, the CIT(A) was justified in making addition - Decided against assessee. Exemption u/s 54EC - Held that - Following Jagriti Agarwal 2011 (10) TMI 279 - PUNJAB AND HARYANA HIGH COURT - After referring to sub clause (2) of section 54 and section 139(1) of the Act, the Punjab & Haryana High Court found that sub section 139(4) provides the extended period of limitation for filing of return of income which is an exception to sub section (1) of section 139 - Due date for furnishing of return of income as per section 139(1) is subject to extended period provided u/s 139(4) of the Act - In view of section 54 of the Act it is obvious that if the assessee could not utilize the amount within one year either for purchase of a new asset or for construction of a new asset, the capital gain shall be deposited in the appropriate account before the due date for filing of return of income u/s 139(1). Following Prakash Nath Khanna & Ors vs CIT & another 2004 (2) TMI 3 - SUPREME Court - While interpreting section 139(1), 139(2) and 139(4) of the Act, the Apex Court found that due date certainly mean due date as prescribed in sub section (1) of section 139 -The time within which the return is to be furnished is indicated only in sub-section (1) of section 139 and not in sub-section (4) of section 139 - Even if a return is filed in terms of sub-section (4) of section 139 that would not dilute the infraction in not furnishing the return in due time as prescribed under sub-section (1) of section 139 - Otherwise, the use of the expression in due time would lose its relevance and it cannot be said that the said expression was used without any purpose - This judgment of the Apex Court was not brought to the notice of the CIT(A) as well as the assessing officer The issue was restored for fresh adjudication.

Summary

Issues:
1. Addition of Rs.3,50,000 towards the cost of improvement claimed by the assessee.
2. Addition of Rs.9 lakhs to the sale consideration.
3. Claim of exemption u/s 54 of the Act.

1. Addition of Rs.3,50,000 towards the cost of improvement claimed by the assessee:
The appellant contested the disallowance of Rs.3,50,000 claimed as the cost of improvement, citing the funds borrowed from a cooperative bank for property enhancement. The assessing officer disputed the claim due to the loan being classified as general, not housing. The Tribunal noted the property's history and upheld the claim, reasoning that over time, maintenance or improvement was likely necessary. It opined that the borrowed funds could have been used for property enhancement, regardless of loan type, and directed the assessing officer to allow the claimed amount.

2. Addition of Rs.9 lakhs to the sale consideration:
The appellant refuted the addition of Rs.9 lakhs to the sale consideration, asserting no such extra amount was received beyond the sale deed. The Department argued that the appellant admitted receiving the additional sum, credited to the wife's account, as per the assessment order. The Tribunal upheld the addition, considering the admission of receipt and the credited amount, leading to the confirmation of the CIT(A)'s decision.

3. Claim of exemption u/s 54 of the Act:
The appellant sought exemption of Rs.33,33,805 under section 54, but the assessing officer allowed only Rs.14,11,428, citing expenditure by the due date for filing the return. The appellant referenced a Tribunal order and a High Court judgment to support the claim based on the extended time limit for investment. The Department contended that non-utilization of the amount before the due date for filing the return barred full exemption. The Tribunal analyzed the relevant provisions and judicial precedents, highlighting the requirement to deposit unutilized capital gains before filing the return. It noted a Supreme Court judgment on due dates for filing returns and remanded the issue back to the assessing officer for reconsideration in light of the legal interpretation provided.

In conclusion, the Tribunal partly allowed the appeal, directing a fresh examination of the exemption claim under section 54 in consideration of the legal nuances discussed, while upholding the additions to the sale consideration and the cost of improvement claimed by the assessee.