2022 (12) TMI 1348 - AT - Income Tax

Reopening of assessment u/s 147 - Deduction u/s 54 - correct provision under which the deduction would be available to the assessee is Sec.54F and not Sec.54 since the assessee has parted with land and invested the same in residential properties. Therefore, the claim of the assessee would be ascertained at the threshold of provisions of Sec.54F - HELD THAT - We find that the original return of income was never scrutinized. In fact, no capital gain was declared in the original return of income. Based on assessment proceedings of subsequent year, it transpired that certain capital gain would accrue to the assessee in this year. Accordingly, the case was reopened. The assessee sought reasons for reopening at fag- end. The reasons were also supplied to the assessee. Therefore, in our considered opinion, Ld. AO had rightly assumed jurisdiction u/s 147 and no infirmity could be found in the same from this angle. The adjudication in the impugned order, to that extent, does not require any interference on our part. The corresponding grounds urged by the assessee stand dismissed. Deduction u/s 54F - Assessee was eligible to acquire 7 flats against transfer of 50% undivided share in the land. The assessee has not received any consideration in cash rather the consideration is in the shape of flats only. Therefore, on the date of entering into JDA with the developer, it could be concluded that the assessee made deemed investment to acquire the flats. The mere delay on the part of the developer to hand over the possession of the flat would not vitiate the claim of the assessee since it would be beyond the control of the assessee to ensure timely acquisition of the flat. The provisions of Sec.54F are beneficial provisions and the same should be given effect to in full and could not be denied to the assessee on such technicalities. Therefore, we would hold that the assessee would be eligible for deduction u/s 54F. we direct Ld. AO to allow deduction u/s 54F on 7 flats acquired by the assessee under Joint Development Agreement. The corresponding ground raised by the assessee stand allowed. Unexplained cash credit - HELD THAT - AR pleaded for another opportunity to the assessee to substantiate source of cash deposit. The Ld. AR submitted that the deposits were out of past savings, cash withdrawals and out of sale proceeds of old jewellery as well as flat. The requisite details have been placed on record. Considering the same, this issue stands restored back to the file of Ld. AO for fresh consideration with a direction to the assessee to substantiate its case. The appeal stands partly allowed for statistical purposes.

Summary

Issues Involved:
1. Validity of reassessment proceedings.
2. Eligibility and quantum of deduction under Section 54F.
3. Addition of unexplained cash credit.

Detailed Analysis:

1. Validity of Reassessment Proceedings:
The assessee filed a return of income on 23.04.2010, declaring an income of Rs. 3.46 Lacs. Based on assessment proceedings for AY 2012-13, the case was reopened, and a notice u/s 148 was issued on 14.03.2016. The assessee contested the reopening, arguing that the objections raised were not addressed by the AO. However, the tribunal found that the original return was never scrutinized, and no capital gain was declared in the original return. The reasons for reopening were provided to the assessee, and the tribunal concluded that the AO had rightly assumed jurisdiction u/s 147. The corresponding grounds urged by the assessee were dismissed.

2. Eligibility and Quantum of Deduction under Section 54F:
The assessee entered into a Joint Development Agreement (JDA) with a developer, receiving 7 flats in exchange for 50% of the undivided share in the land. The assessee claimed exemption u/s 54 on 2 flats, but the AO denied this, arguing that the flats were handed over beyond 3 years. The tribunal found that the correct provision for deduction was Section 54F, not Section 54, as the assessee had invested in residential properties. The tribunal held that the mere delay by the developer in handing over possession should not vitiate the claim. The tribunal referenced the decision in CIT vs. Gumanmal Jain, which allowed multiple flats to be considered as a single residential house for the purpose of Section 54F. Consequently, the tribunal directed the AO to allow deduction u/s 54F on all 7 flats acquired under the JDA. The corresponding ground raised by the assessee was allowed.

3. Addition of Unexplained Cash Credit:
For AY 2012-13, the AO added Rs. 40.65 Lacs as unexplained cash credit, which was deposited in Yes Bank and ING Vysya Bank. The assessee claimed these were sourced from past savings, cash withdrawals, and sale proceeds of old jewelry and a flat. However, due to the absence of documentary evidence, the deposits were added to the income. The tribunal restored this issue back to the AO for fresh consideration, directing the assessee to substantiate the source of the cash deposits. The appeal was partly allowed for statistical purposes.

Conclusion:
The appeal for AY 2009-10 was partly allowed, granting the deduction u/s 54F for 7 flats. The appeal for AY 2012-13 was partly allowed for statistical purposes, with the issue of unexplained cash credit remanded back to the AO for fresh consideration.