2019 (11) TMI 1137 - AT - Income Tax

Exemption u/s 54F - whether really the assessee invested the amount in purchase of the property before the expiry of the period prescribed under section 54F ? - HELD THAT - Agreement dated 30.3.2012and the sale deed dated 9.7.2015 do not rule out the possibility of the parties bringing such documents into existence as a result of an afterthought, the doubt rightly entertained by the authorities below. Doubt entertained by the authorities below is well corroborated by the conduct of the parties themselves, inasmuch as neither the sale of plot nor the purchase of flat is declared by the assessee either in her capital gains or by way of claiming exemption under section 54F. So also, there is no denial of the fact recorded by the learned Assessing Officer that the examination of the income tax return filed by Smt. Jaspreet Kaur established that she had not declared any capital gains under the head capital gains either longterm or short-term and also, she has not shown any income derived from the business or profession, if at all it has to be taken that Smt. Jaspreet Kaur carried on any business as a builder as claimed by the assessee. The statement of the assessee is not supported by her conduct.In this set of facts and circumstances, we are not inclined to believe the genuineness of the agreement to sell dated 30.3.2012. If this agreement is taken out of consideration, there is nothing on record to suggest that at any time prior to 9.7.2015, the assessee invested the amount for purchase of the residential house or that she had taken possession thereof within the time stipulated for the purpose of investment under law. It is unsafe to place reliance on the agreement of sale dated 30.3.2012 to hold that as on such date there was a transaction of purchase of the entire ground floor of the property or that any amount was paid under such an instrument on that day, but only because the basic structure of the building was not complete as on the date, possession was taken subsequent to the expiry of the period of 3 years when the sale deed dated 9.7.2015 was executed. With this view of the matter, we do not find anything illegal in the conclusions reached by the authorities below. - Decided against assessee.

Summary

Issues Involved:

1. Eligibility for exemption under Section 54F of the Income Tax Act, 1961.
2. Validity of the purchase transaction and the timing of investment.
3. Compliance with legal requirements for claiming capital gains exemption.
4. Credibility of evidence provided by the assessee.

Issue-wise Detailed Analysis:

1. Eligibility for exemption under Section 54F of the Income Tax Act, 1961:

The assessee claimed exemption under Section 54F of the Income Tax Act, 1961, arguing that the capital gains from the sale of the original property were invested in the purchase of a new residential property within the stipulated period. The Assessing Officer (AO) and the Commissioner of Income-tax (Appeals) [CIT(A)] did not accept this claim, noting that the required conditions for the exemption were not met. Specifically, the AO observed that the assessee did not invest the capital gains within the prescribed period of one year before or two years after the date of transfer, nor did they complete the construction of the new property within three years.

2. Validity of the purchase transaction and the timing of investment:

The assessee contended that there was an understanding with the purchaser of the original property to buy back a portion of the house constructed on it. The agreement of sale dated 30/3/2012 and the sale deed executed on 9/7/2015 were presented as evidence. However, the AO and CIT(A) found these claims unsubstantiated, noting that the alleged agreement was unregistered and could have been created to suit the assessee's convenience. They also pointed out that neither the assessee nor the purchaser declared the respective capital gains, raising doubts about the authenticity of the transaction.

3. Compliance with legal requirements for claiming capital gains exemption:

The authorities emphasized that the assessee did not declare the capital gains arising from the sale of the original property in her income tax return. Additionally, the purchaser, Smt. Jaspreet Kaur, did not declare any short-term capital gains or income from business as a builder. This lack of compliance with legal requirements led the authorities to conclude that the conditions for claiming exemption under Section 54F were not met.

4. Credibility of evidence provided by the assessee:

The authorities questioned the credibility of the evidence provided by the assessee, particularly the unregistered agreement of sale dated 30/3/2012. They noted inconsistencies in the documentation, such as the absence of a recital regarding book entries in the agreement and the sale deed. The authorities also highlighted that the sale deed dated 9/7/2015 was executed beyond the three-year period stipulated for claiming the exemption, further undermining the assessee's claim.

Conclusion:

The tribunal upheld the findings of the AO and CIT(A), concluding that the assessee did not provide sufficient evidence to prove that the capital gains were invested in the new property within the stipulated period. The tribunal noted that the agreement of sale dated 30/3/2012 appeared to be an afterthought and lacked credibility. Consequently, the assessee's appeal was dismissed, and the addition of ?1,15,73,665/- to her taxable income was sustained. The tribunal found no merit in the appeal and pronounced the dismissal in open court on 18th November 2019.