2014 (6) TMI 1084 - AT - Income Tax

LTCG - Denial of exemption u/s. 54F - both the assessees have purchased another residential house i.e., second new asset within one year from the purchase of residential house i.e., the first new asset and thus, are ineligible to claim exemption by virtue of proviso to section 54F(1) - HELD THAT - Denial of benefit merely on the ground that the assessees who are husband and wife have purchased second residential houses in their joint names, in our considered opinion, is not justified. The husband has included the name of his wife while purchasing residential property out of love, affection and sentiments. Similarly, the wife has included the name of husband in the residential property acquired out of her own funds out of love and affection and sentiments. A partial interest in the new residential asset acquired will not disentitle the assessee from claiming exemption u/s. 54F - The words used in the proviso to section are any residential house . Legislature in its wisdom has excluded partial interest in the new asset. Wherever, the Legislature intended to include interest in part in any section, it has specifically provided for it. As relying on Sasiklal N. Satra 2005 (9) TMI 586 - ITAT MUMBAI the authorities below have erred in not granting the benefit of section 54F to both the assessees. Both the assessees succeed on this issue. Addition from sale of trees treated as un-explained income - assessee is allegedly having agricultural land measuring 12 acres approximately, from which she has earned ₹37.85 Lakhs by sale of causarina trees - CIT(Appeals) in his order has categorically mentioned that the assessee has not placed on record any documentary evidence to show that the assessee has received any amount from sale of trees. The assessee has placed on record, confirmation letter from one Mr. Tamilarasan stating that he had contracted with the assessee for sale of trees - HELD THAT - A perusal of the above shows that except for payment of ₹3.00 Lakhs received on 21-04-2008 which is assessable to tax in the AY. 2009-10, the rest of the amount ₹34,85,000/- has been received in the period relevant to AY. 2008-09. However, the assessee has not accounted the same in her books of account. Further, the contractor in his confirmation letter has stated that the amounts have been paid by way of cash, cheque and demand draft. AO has observed that the Bank statement given by the assessee does not reflect the receipt of any such payments. In the absence of any cogent evidence, this ground of appeal of the assessee is liable to be dismissed. Treating of agricultural income as non-agricultural income - The addition has been made on the basis of some statement allegedly made by the assessee, which is contrary to the facts on record. The assessee owns 3.5 acres of agricultural land at Kulamangalam and Panakkulam, Pudikkottai Dist. This fact has not been disputed by the Revenue. The agricultural income worked out by the assessee is ₹10,000/- per acre. We find that the estimation made by the assessee is fair and reasonable. Therefore, the addition made on this account is deleted. Addition of income admitted by assessee - Assessee during the course of examination made statement u/s. 131 that, the income from M/s. Arul Murugan Real Merchants was in fact ₹1.00 Lakh whereas, in her return of income she has admitted ₹32,355/-. The assessee had agreed for addition - Subsequently, she retracted from the said statement. The assessee has offered explanation that her real income from M/s. Arul Murugan Real Merchants was in fact only ₹32,355/- and not ₹1.00 Lakh. However, no explanation was offered for accepting the additions of ₹67,645/- and thereafter, retracting from the same. The assessee had admitted additional income in statement made under oath. There would be no sanctity of the statement made on oath, if the same is subsequently withdrawn casually, without giving persuasive reason. We do not find any merit in the submissions made by the ld. Counsel on this ground of appeal, therefore, the same is dismissed. Un-explained investment in the residential property - The addition has been made for making investment in purchase of second residential house at Mogappair, Chennai. It has come on record that the said house has been purchased by the wife of the assessee from her own sources. Therefore, addition made by the Revenue in the hands of the assessee for funding of the said house does not sustain. This ground of appeal of the assessee is allowed.

Summary

Issues:
- Denial of exemption u/s. 54F of the Income Tax Act, 1961
- Treatment of income from sale of trees as unexplained income
- Classification of agricultural income as non-agricultural income
- Addition of admitted income
- Levy of interest u/s. 234A, 234B & 234C

Analysis:

Denial of Exemption u/s. 54F:
The assessees, a husband and wife, purchased residential properties within the prescribed time limit after selling their respective plots. The Assessing Officer denied exemption u/s. 54F, claiming they bought a second property within a year. The Tribunal disagreed, stating that joint ownership doesn't disqualify them. Referring to a Mumbai Tribunal case, it highlighted that partial interest doesn't affect eligibility for exemption. The Tribunal ruled in favor of the assessees, allowing the exemption under section 54F.

Treatment of Income from Sale of Trees:
The assessee earned income from selling trees on agricultural land. The CIT(A) questioned the lack of documentary evidence. While some receipts were presented, the Assessing Officer found discrepancies in the bank statements. As a significant portion of the income wasn't accounted for, the Tribunal upheld the dismissal of this ground of appeal.

Classification of Agricultural Income:
The Revenue treated agricultural income as non-agricultural based on a statement allegedly made by the assessee. However, the Tribunal found the estimation of agricultural income reasonable and deleted the addition made on this account.

Addition of Admitted Income:
The assessee admitted to additional income during examination but later retracted the statement. The Tribunal held that retracting without a persuasive reason undermines the credibility of the initial statement made under oath. Consequently, the addition of income was upheld.

Levy of Interest u/s. 234A, 234B & 234C:
The levy of interest under these sections was considered consequential and therefore dismissed as a ground of appeal in both cases.

Conclusion:
The Tribunal partly allowed the appeals, granting exemption u/s. 54F to the assessees but upholding the dismissal of other grounds such as treatment of income from sale of trees and addition of admitted income. The classification of agricultural income and the levy of interest were also addressed, with the Tribunal providing detailed findings for each issue.