2015 (7) TMI 866 - AT - Income Tax

Addition under the head Income from Other Sources - amount does not represent the sale consideration of the property sold and consequently, the exemption u/s. 54F of the Act was also denied by AO - Held that - There is nothing on record to suggest that the appellant was having any other source of income or the appellant is capable of earning that much of money. Having regard to her state of health, age and qualification etc., it is highly improbable that appellant could have earned so much of income from undisclosed sources. The preponderance of probability is more in favour of explanation of the appellant. The Assessing Officer also failed to contradict the explanation furnished by the appellant with some positive evidence and, therefore, it can safely be said that the explanation furnished by the appellant cannot be doubted. Moreover, this kind of addition can be made by the Assessing Officer by using his discretionary power under the provisions of Sec. 69 of the Act and the Assessing Officer is not obliged under law to make addition in every case where the explanation offered by the assessee is found to be not satisfactory. This ratio was laid down by the Hon ble Supreme Court in the case of CIT vs. P.K.Noorjahan - 1997 (1) TMI 6 - SUPREME Court which is squarely applicable to the facts of the present case. Therefore, we hold that the Assessing Officer is not justified in holding that the sum of ₹ 3,00,00,000/- is not attributable to sale of property and making addition of the same. Thus, we accordingly direct the Assessing Officer to delete the addition of ₹ 3,00,00,000/-. As held in the para supra that the money of ₹ 3,00,00,000/- was receive as a part of sale consideration of the house property sold, the same is, therefore, eligible for consequential relief u/s.54 of the Act to the extent of the actual investment made in the new house. - Decided in favour of assessee.

Summary

Issues Involved:
1. Addition of Rs. 3,00,00,000/- under the head "Income from Other Sources".
2. Entitlement to relief under Section 54 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Addition of Rs. 3,00,00,000/- under the head "Income from Other Sources":

The appellant contested the addition of Rs. 3,00,00,000/- made by the Assessing Officer (AO) under the head "Income from Other Sources". The AO formed an opinion that the appellant had not received the sale consideration of Rs. 3,00,00,000/- over and above the consideration stated in the conveyance deed and, therefore, this amount was not eligible for exemption under Section 54 of the Act. The appellant maintained before the ADIT (Investigation) that the total sale consideration was Rs. 10,00,00,000/-, out of which Rs. 3,00,00,000/- was received in cash. The appellant's conduct, such as paying advance tax on this amount and filing returns disclosing the total consideration, supported this claim.

The Tribunal noted that the AO had failed to contradict the appellant's explanation with positive evidence and had not examined the buyer of the property. The appellant's state of health, age, and qualifications made it highly improbable that she could have earned such an amount from undisclosed sources. The Tribunal held that the preponderance of probability favored the appellant's explanation. Citing the Supreme Court's decision in CIT vs. P.K.Noorjahan, the Tribunal stated that the AO is not obliged to make an addition in every case where the explanation offered by the assessee is found to be unsatisfactory. Consequently, the Tribunal directed the AO to delete the addition of Rs. 3,00,00,000/-.

2. Entitlement to relief under Section 54 of the Income Tax Act:

Since the Tribunal held that the amount of Rs. 3,00,00,000/- was part of the sale consideration of the house property sold, it was eligible for consequential relief under Section 54 of the Act. The appellant had acquired another residential property out of the sale consideration in joint names with her daughter for a sum of Rs. 8,11,50,100/- and sought exemption under Section 54 to this extent. The Tribunal allowed this ground of appeal, directing that the appellant be granted the relief under Section 54 for the actual investment made in the new house.

Conclusion:

The appeal filed by the assessee was allowed in full, with the Tribunal directing the deletion of the addition of Rs. 3,00,00,000/- under the head "Income from Other Sources" and granting the appellant the relief under Section 54 of the Income Tax Act for the actual investment made in the new house. The order was pronounced in the Open Court on 15th July, 2015.