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2018 (3) TMI 1524 - AT - Income TaxAddition u/s 68 - amount credited in bank account unexplained - Held that - Additional amount credited in the bank account in the sum of ₹ 71,00,000/- could not have emanated to the assessee out of some undisclosed sources but rather would have emanated only out of sale proceeds of the property requires to be believed and no addition could be made thereon u/s 68 of the Act, when the assessee had considered the entire sum of ₹ 2,21,00,000/- as sale consideration for the purpose of computation of capital gains. Hence the question nos. 1 & 2 raised above is answered in favour of the assessee. Entitled for deduction towards cost of construction and subject to indexation benefits - Held that - Assessee having purchased the land in the financial year 1999- 2000 had carried out construction during the financial year 2001-02 which is supported by the registered valuation report . The value as per registered valuation report (enclosed in pages 55 to 76 of the paper book ) is ₹ 64,31,517/-. It is not in dispute that the assessee was a non-resident even during the financial year 2001-02 which is also evident from the fact that the passport was issued to her in London on 2.5.2000. Hence out of her earnings in London, the construction cost could have been met by the assessee. In any case, there is no dispute with regard to the source for cost of construction carried out by the assessee. Hence we hold that the assessee is entitled for deduction towards cost of construction at ₹ 64,31,517/- and subject to indexation benefits. - Decided in favour of assessee. Claim of deduction u/s 54 - Held that - As we have already held that the assessee having reinvested a sum of ₹ 1,60,16,103/- before 31.3.2009 is entitled for claim of exemption u/s 54 of the Act.- Appeal of assessee allowed.
Issues Involved:
1. Residential Status of the Assessee 2. Addition towards unexplained credit in bank account 3. Allowability of cost of construction of the property 4. Denial of exemption under Section 54 of the Income Tax Act Issue-wise Detailed Analysis: 1. Residential Status of the Assessee: The primary issue was whether the assessee should be treated as a 'Resident' or 'Non-Resident'. The assessee provided a detailed travel history showing no presence in India during the relevant assessment year (2009-10). The Tribunal found that the assessee had not come to India during this period, thus retaining the status of Non-Resident. The Tribunal also considered the passport details, which confirmed the issuance in London and the permanent address in London. Consequently, the Tribunal concluded that the assessee was a Non-Resident Indian and the action of the Assessing Officer (AO) in treating the assessee as a 'Resident' was unwarranted. 2. Addition towards unexplained credit in bank account: The AO had treated an amount of ?71,00,000/- credited in the assessee's bank account as unexplained cash credit under Section 68 of the Act. The assessee argued that this amount was part of the sale consideration received for a property sold. The Tribunal noted that the assessee had deposited this amount along with other sale proceeds in the same bank account, indicating no intention to hide the amount. The Tribunal held that the additional amount credited in the bank account could not have emanated from undisclosed sources but was part of the sale proceeds. The Tribunal relied on the Supreme Court decision in CIT vs Smt P.K. Noorjahan, which emphasized the discretion of the AO in treating unexplained investments as income. The Tribunal concluded that no addition could be made under Section 68 when the entire sale consideration was considered for capital gains computation. 3. Allowability of cost of construction of the property: The assessee claimed a deduction for the cost of construction amounting to ?64,31,517/-, supported by a registered valuation report. The AO had not given any deduction towards the cost of acquisition, but the Commissioner of Income Tax (Appeals) [CIT(A)] directed the AO to verify the quantum claimed. The Tribunal found that the construction cost was met by the assessee out of her earnings in London, and there was no dispute regarding the source. The Tribunal held that the assessee was entitled to the deduction for the cost of construction, subject to indexation benefits. 4. Denial of exemption under Section 54 of the Income Tax Act: The AO denied the exemption under Section 54F, arguing that the assessee already owned a residential property. The assessee contended that the investment was made in a penthouse, which should qualify for exemption under Section 54. The Tribunal found that the assessee had indeed made investments in new flats and had sold both land and building, making her eligible for exemption under Section 54. The Tribunal noted that there is no restriction under Section 54 for having only one house. The Tribunal relied on the decisions of the Delhi High Court in CIT vs Gita Duggal and the Karnataka High Court in CIT vs D. Anand Bassappa, which supported the assessee's claim. The Tribunal held that the assessee was entitled to the exemption under Section 54 for the investment made in new property. Conclusion: The Tribunal allowed the appeal of the assessee, concluding that: - The assessee was a Non-Resident Indian. - The addition of ?71,00,000/- as unexplained cash credit was unwarranted. - The assessee was entitled to the deduction for the cost of construction. - The assessee was eligible for exemption under Section 54 for the investment in new property. Order Pronounced: The appeal of the assessee was allowed, and the order was pronounced in the Court on 28.03.2018.
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