2022 (12) TMI 1320 - AT - Income Tax

Deduction u/s 54B - deduction denied as agricultural land in which the capital gain was invested was purchased in the name of assessee s wife - HELD THAT - This above view, is unsustainable. Deduction under Section 54B/54F of the Act is available in cases where investments are made in property purchased in the name of wife. Therefore, following the ratio laid down in these decisions Laxmi Narayan 2017 (11) TMI 1622 - RAJASTHAN HIGH COURT, JAIPUR , Kamal Wahal 2013 (1) TMI 401 - DELHI HIGH COURT , Natarajan 2006 (2) TMI 136 - MADRAS HIGH COURT and Ravinder Kumar Arora 2011 (9) TMI 343 - DELHI HIGH COURT Thus hold that the assessee is eligible for deduction under Section 54B of the Act. Accordingly, direct the AO to allow deduction under Section 54B of the Act - Decided in favour of assessee.

Summary

Issues:
1. Legality of proceedings initiated under Section 147 of the Act
2. Merits of the addition made of Rs.3,55,602
3. Eligibility to claim deduction under Section 54B of the Act

Analysis:

Issue 1: Legality of proceedings under Section 147:
The assessee raised grounds challenging the legality of proceedings initiated under Section 147 of the Act. However, during the hearing, the counsel for the assessee focused only on the merits of the addition made, thereby deeming the legal grounds raised as not pressed. Consequently, the legal grounds were dismissed.

Issue 2: Merits of the addition made:
The Assessing Officer reopened the assessment under Section 147 of the Act as the assessee did not file a return of income despite receiving consideration from the sale of an immovable property. The Assessing Officer proceeded to complete the assessment to the best of his judgment, adding back an amount of Rs.8,61,250 as the gain from the sale of the property. The assessee contested this addition before the Commissioner (Appeals).

In the first appellate proceedings, the assessee claimed that the consideration received was invested in purchasing agricultural land, making them eligible for deduction under Section 54B of the Act. After considering additional evidence and the remand report, the Commissioner (Appeals) determined the actual share of the assessee in the sales consideration to be Rs.4,30,625, resulting in a long-term capital gain of Rs.3,55,602. The Commissioner (Appeals) rejected the deduction claim under Section 54B as the land was purchased in the name of the assessee's wife.

Issue 3: Eligibility for deduction under Section 54B:
The key issue before the Tribunal was whether the assessee could claim deduction under Section 54B of the Act. The Tribunal noted that the only reason the Commissioner (Appeals) denied the deduction was that the agricultural land was purchased in the name of the assessee's wife. However, relying on decisions from various High Courts, including the Delhi High Court, the Tribunal held that deductions under Section 54B/54F are permissible even when investments are made in property purchased in the spouse's name. Consequently, the Tribunal directed the Assessing Officer to allow the deduction under Section 54B of the Act.

In conclusion, the appeal was partly allowed, and the Tribunal pronounced the order on 28th December 2022.