2020 (7) TMI 656 - AT - Income Tax

Deduction u/s 54 denied - LTCG - Reopening of assessment - entitlement /claim for deduction or exemption denied under income tax statute on the sole ground that no return was filed - Whether this section does not require that the new residential property shall be purchased in the name of the assessee only? - HELD THAT - It is pertinent to note that the assessee has demonstrated before the AO as well as the CIT(A) that the purchase of property in the name of the son was acquired by the assessee himself through the consideration received from the sale deed of earlier old property. The bank statement and the cheque issued to the builder as well as the confirmation received from the builder demonstrated that the payment was made by the assessee for purchase of new property within the stipulated time as prescribed u/s 54. Though, the assessee is not filed any return and at that stage never claimed Section 54, once the reopening u/s 148 has been issued, the assessee cannot be denied his entitlement /claim for deduction or exemption under income tax statute on the sole ground that no return was filed. The benefit of income tax act and its provisions related to exemption and deduction has to be taken into account while computing the income of the assessee and it is the proper procedure on the part of the Assessing Officer to follow all the aspect of taxation within the corners of Income Tax Act. As regards the name under whom the property is purchased, it can be seen that the son of the assessee is a direct relation and as per case of CIT(A) Vs. Kamal Vahal 2013 (1) TMI 401 - DELHI HIGH COURT where assessee purchased new house in name of his wife, the claim under Section 54 is held valid. Thus, the exemption could not be denied if entire investment had come out of proceeds of old property. - Decided in favour of assessee.

Summary

Issues:
Interpretation of provisions of section 54 for claiming relief, Constructive Ownership theory application, Consideration of investments made in the name of assessee's son, Denial of claim under Section 54 due to property not being in the name of the assessee.

Interpretation of Provisions of Section 54:
The appeal involved a dispute regarding the interpretation of provisions of section 54 for claiming relief. The appellant argued that the section does not require the new residential property to be purchased solely in the name of the assessee. The appellant contended that the investment made in the new residential property in the name of the youngest son should not be denied relief under section 54. The appellant further cited the theory of Constructive Ownership pronounced by the Hon'ble Supreme Court to support the claim that the father is the real owner of the property, even if registered in the name of the son. The tribunal agreed with the appellant's interpretation, emphasizing that the investment in the new property was made by the assessee father using proceeds from the old property, and thus, the claim under section 54 was valid.

Investments Made in the Name of Assessee's Son:
The issue of investments made in the name of the assessee's son was a significant point of contention. The appellant demonstrated that the purchase of the property in the son's name was funded by the assessee himself through the consideration received from the sale of the old property. The tribunal noted that the payments to the builder were made by the assessee within the prescribed time under section 54. Despite the property being in the son's name, the tribunal held that the direct relation between the assessee and the son allowed for a valid claim under section 54, citing a precedent where a similar purchase in the name of a family member was deemed valid.

Denial of Claim Due to Property Not in Assessee's Name:
The denial of the claim under Section 54 due to the property not being in the name of the assessee was a key aspect of the case. The Assessing Officer and the CIT(A) had raised concerns regarding the property being purchased in the son's name, leading to the rejection of the claim. However, the tribunal observed that the investment in the new property was made using proceeds from the old property, and the name under which the property was purchased did not disqualify the assessee from claiming relief under section 54. The tribunal emphasized that the denial of the claim solely based on the property being in the son's name was not justified, especially considering precedents where similar claims were allowed.

This detailed analysis of the judgment highlights the key issues involved in the case and provides a comprehensive overview of the tribunal's decision on each issue, emphasizing the interpretation of legal provisions and the application of relevant precedents.