2019 (6) TMI 465 - AT - Income Tax

Addition of Long Term Capital Gain - relinquishment of the right to the total income of the assessee - assessee claimed to have relinquished his right in bungalow No. 15 without any consideration in favor of his relatives - benefit under section 54 - AO was of the view that the assessee received consideration of ₹ 27 Lacs on account of relinquishment of his right in the property which was not disclosed in the income tax return - HELD THAT - The assessee has invested in another property dated 29-09-2009 bearing address Bungalow No. 16, Neelkanth Green Bungalow for rupees 93,00,000.00 in the year under consideration along other two co-owners being family members. Accordingly, the assessee claimed to have invested in his share the property for ₹31 lakhs only. Assessee before the CIT (A) claimed to allow the benefit of exemption under section 54 of the Act if the sum of ₹ 27 Lacs is treated as his income on account of relinquishment of his right the property. But the CIT (A) rejected the contention of the assessee by observing that the assessee has made a contradictory statement. As such the assessee before the learned CIT (A) claimed to have received consideration of ₹27 Lacs against the sale of bungalow No. 16 and which was invested in 16, Neelkanth Green Bungalow on 29/09/2009. CIT (A) misunderstood the claim of the assessee and observed in his order that the assessee after selling bungalow No. 16 Ashwamegh Ahmedabad to Manoj Kumar Vasudeo Sompura had purchased again after a gap of 41 days. Indeed the assessee has invested after 41 days of bungalow No. 16 Ashwamegh Ahmedabad sale, but the same was not repurchased by him as alleged by the ld. CIT-A. In fact, the assessee has invested in the bearing number 16, Neelkanth Green Bungalow on 29/09/2009. This fact for the purchase of bungalow No. 16, located at Neelkanth Green Bungalow on 29/09/2009 was not doubted by the authorities below. Relinquishment deed was made on 27/05/2008 FY 2008-09 corresponding to AY 2009-10 as evident from the relinquishment deed placed. Thus if any tax is required to be levied, then it has to be levied in the AY 2009-10. We conclude that the assessee was entitled to the benefit under section 54 of the Act in the given facts and circumstances. Addition to be deleted - Decided in favour of assessee.

Summary

Issues Involved:
1. Addition of Long Term Capital Gain of ?27,00,000 confirmed by CIT(A)
2. Eligibility for deduction under section 54 of the Income Tax Act
3. Contradictory statements regarding the sale and purchase of properties

Analysis:

Issue 1: Addition of Long Term Capital Gain
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) confirming the addition of ?27,00,000 as Long Term Capital Gain. The Assessee received this amount from the sale of a property and his father. The PCIT observed that the AO's order was erroneous and directed the addition to be made. The Assessee claimed the amount was received without consideration, but the PCIT disagreed. The CIT(A) upheld the addition, stating that the Assessee did not offer the tax on the capital gain. However, the Tribunal found that the Assessee was entitled to the benefit under section 54 of the Act and directed the AO to delete the addition.

Issue 2: Eligibility for Deduction under Section 54
The Assessee argued that if liable for tax under capital gain, he should be eligible for deduction under section 54. The AO did not consider the investment made by the Assessee in another property within the specified time limit. The CIT(A) upheld the addition, stating that the Assessee did not declare the capital gain on relinquishment of his share in a property. However, the Tribunal found that the Assessee had indeed invested in another property within the time limit specified under section 54, and thus, was eligible for the deduction.

Issue 3: Contradictory Statements
There were discrepancies in the statements made by the Assessee regarding the sale and purchase of properties. The CIT(A) misunderstood the Assessee's claim and wrongly concluded that the Assessee repurchased a property after selling it. The Tribunal clarified that the Assessee had invested in a different property and not repurchased the same property. The relinquishment deed was made in a previous assessment year, and any tax liability should have been in that year.

In conclusion, the Tribunal allowed the appeal of the Assessee, directing the AO to delete the addition of Long Term Capital Gain. The Tribunal found the Assessee eligible for the deduction under section 54 and clarified the misconceptions regarding the sale and purchase of properties.