2022 (9) TMI 1315 - AT - Income Tax

Deduction u/s 54F - Capital gains Computation of sale of residential flat ad gold ornament - assessee and her son sold jointly owned residential flat - Whether sale consideration credited to the assessee's bank account should not be the basis of addition of capital gains in her hand? - addition on account of error in filing return of income be deleted and deduction u/s 54F be granted in respect of gains arising from sale of gold ornaments - HELD THAT - From the perusal of the record, we find that there is no attempt on the part of the assessee or her son to rectify the return which is claimed to have been filed with incorrect details - since the AO is common to both the assessee and her son, therefore, in all fairness AO has not brought any excess amount to tax in the hands of the assessee's son but has accepted the amount offered for taxation in his return. AO has accordingly brought to tax the amount which was credited in assessee's bank account, for the purpose of computation of capital gains. We are of the considered view that if the plea of the assessee is accepted then it will result in non-taxation of the entire amount of sale consideration as in the case of assessee's son amount of sale consideration disclosed in his return of income, has already been accepted by the Department and no direction can be passed to enhance son's income in a concluded assessment. Since, it is the claim of the assessee that the entire sale consideration has further been invested by the assessee and her son in another residential flat at Khar, therefore, we deem it appropriate to direct the AO to examine as to how much of the amount of sale consideration received by the assessee has been invested in a new residential property for the purpose of claiming exemption u/s 54 and to grant the exemption to the assessee under the said section if the other conditions laid down therein are satisfied. Sale consideration on sale of gold ornaments, the assessee had claimed exemption u/s 54F - The lower authorities denied the claim of the assessee in absence of any documentary proof of having made investment as per requirement of section 54F. In the present case, AR referred to sale invoices of 2 jewellers, forming part to which jewellery weighing about 541.560 gms was sold during the relevant financial year for a total consideration. The sale consideration has duly been credited through cheque on 26/11/2013 in the bank account of the assessee maintained with Bank of India, forming part of the paper book - Since, the lower authorities denied the claim of the assessee merely on the basis that no documentary evidence has been furnished and there is no allegation regarding the genuineness of the transaction, therefore, we deem it appropriate to direct the AO to examine as to how much of the amount of sale consideration received by the assessee from sale of gold ornaments has been invested in a new residential property for the purpose of claiming exemption under section 54F of the Act and to grant the exemption to the assessee under the said section if the other conditions laid down therein are satisfied. Addition made merely on the basis of declaration made in the ITR- typographical error - In the present case, we find that the Revenue has not disputed the sale consideration of the residential property at Bandra and has computed capital gains in the hands of the assessee by considering amount credited in her bank account. The sale consideration of gold ornaments has also been reasonably satisfied - In the present case, there is neither any allegation that the amount has been received by the assessee or credited in her bank account nor any material has been brought on record in this regard. Merely because the assessee could not explain the balance amount as mention in her computation of income and return, the same was added to the total income of the assessee by stating the same as income from other sources. We find no basis in sustaining the addition which appears to be merely a typographical error on the part of the assessee, while filing the return of income. Accordingly, we direct the AO to delete the addition made to the total income of the assessee. As a result, ground raised in assessee's appeal is allowed

Summary

Issues Involved:
1. Determination of total income and assessment of Long Term Capital Gains (LTCG) on the sale of flat.
2. Addition of Rs. 1,08,637 on account of LTCG on sale of flat.
3. Computation of LTCG based on the appellant's contribution towards the cost of acquiring flat.
4. Taxability of Rs. 85,70,000 in the appellant's hands.
5. Denial of exemption under section 54F of the Income Tax Act against LTCG on sale of jewelry.
6. Addition of Rs. 8,57,000 as Income from Other Sources.
7. Levy of interest under section 234B of the Income Tax Act.

Detailed Analysis:

1. Determination of Total Income and Assessment of Long Term Capital Gains (LTCG) on Sale of Flat:
The assessee challenged the determination of total income at Rs. 18,42,982 by the Assessing Officer (AO) against the returned income of Rs. 1,53,634. The AO computed LTCG of Rs. 1,08,637 on the sale of a jointly owned flat, treating the entire sale consideration credited to the assessee's bank account as her income. The assessee argued that the flat was jointly owned with her son, and the LTCG should be computed considering a 50:50 ratio or proportionate to their contributions towards the cost of acquisition.

2. Addition of Rs. 1,08,637 on Account of LTCG on Sale of Flat:
The AO added Rs. 1,08,637 to the total income of the assessee as LTCG on the sale of the flat. The assessee contended that the flat was jointly owned, and her share of the LTCG, after exemption under section 54, would be nil. The Tribunal directed the AO to examine the investment in a new residential property for the purpose of claiming exemption under section 54 and grant the exemption if the conditions are satisfied.

3. Computation of LTCG Based on the Appellant's Contribution Towards the Cost of Acquiring Flat:
The assessee argued that even if the LTCG is computed based on her contribution towards the cost of acquiring the flat (Rs. 6,00,000 out of Rs. 9,50,000), the resultant LTCG after exemption under section 54 would be nil. The Tribunal directed the AO to consider the contribution ratio and grant exemption under section 54 if the conditions are met.

4. Taxability of Rs. 85,70,000 in the Appellant's Hands:
The AO treated Rs. 85,70,000 as the sale consideration received by the assessee, as reflected in her bank statement. The assessee argued that the flat was jointly owned, and the sale consideration should be apportioned accordingly. The Tribunal noted that the AO had not taxed the excess amount in the son's hands and directed the AO to examine the investment in a new residential property for exemption under section 54.

5. Denial of Exemption Under Section 54F Against LTCG on Sale of Jewelry:
The AO denied the exemption of Rs. 7,23,711 claimed under section 54F on the sale of gold ornaments due to lack of documentary proof. The Tribunal directed the AO to examine the investment in a new residential property for the purpose of claiming exemption under section 54F and grant the exemption if the conditions are met.

6. Addition of Rs. 8,57,000 as Income from Other Sources:
The AO added Rs. 8,57,000 as income from other sources, citing a typographical error in the return of income. The Tribunal found no basis for this addition, as the amount was neither received by the assessee nor credited to her bank account. The Tribunal directed the AO to delete the addition.

7. Levy of Interest Under Section 234B of the Income Tax Act:
The levy of interest under section 234B is consequential in nature. The Tribunal allowed this ground for statistical purposes.

Conclusion:
The Tribunal allowed the appeal for statistical purposes, directing the AO to re-examine the investments in new residential properties for the purpose of claiming exemptions under sections 54 and 54F and to delete the addition of Rs. 8,57,000. The Tribunal emphasized the need to consider the joint ownership and contribution ratios in computing LTCG.