2024 (7) TMI 93 - AT - Income Tax

Exemption u/s 54 in respect of investment in new residential property - claim denied as the assessee has not purchased any residential property against the capital gain arisen on account of sale of property - HELD THAT - As decided in of Sanjeev Lal case 2014 (7) TMI 99 - SUPREME COURT as been relied by the ld. AR wherein it is held that where the assessee executed the agreement to sell in respect of house property purchased new residential property within one year from the date of agreement to sell and subsequently sale deed could not be executed within the prescribed time due to order passed by the competent authority in such peculiar facts a valid transfer took place within the meaning of Section 2(47) of the Act by even executing the agreement to sale and relief under Section 54 was to be granted to assessee in respect of purchase of new residential property subject to fulfilment of other condition. In the present case the observation of the Assessing Officer that sale deed is not property registered appears to be not justifiable as vide letter dated 14.05.2019 the assessee has given details along with the sale deed and purchase deed which is a registered document including registration fee as well as payment of Municipal Tax in assessee s name. Thus the decision of Hon ble Supreme Court in the case of Suraj Lamp Industries Pvt. Ltd. 2011 (10) TMI 8 - SUPREME COURT will not be applicable in the present case and the decision of Hon ble Supreme Court in the case of Sanjeev Lal vs. CIT (supra) has to be taken into account. Appeal of assessee allowed.

Summary

Issues:
1. Validity of assessment order and reopening of assessment.
2. Disallowance of deduction claimed under Section 54 of the Act.
3. Violation of principle of natural justice in penalty proceedings.
4. Justification of charging interest under Sections 234A, 234B, 234C, and 234D.

Analysis:

Issue 1: Validity of assessment order and reopening of assessment
The appeal was filed against the order passed by the CIT(A) for the Assessment Year 2012-13. The Assessing Officer observed that the assessee did not furnish details of a property sale despite a notice under Section 133(6) of the Act. The case was reopened under Section 147, and notice under Section 148 was issued after necessary approval. The assessee objected to the reasons for reopening, which were disposed of. The Assessing Officer disallowed a deduction claimed under Section 54 of the Act due to the non-purchase of a residential property against the capital gain. The assessee contended that the transaction qualified as a transfer under Section 2(47)(v) based on possession and agreements. The Tribunal noted the legal transfer based on the investment made and allowed the appeal, citing a Supreme Court decision.

Issue 2: Disallowance of deduction claimed under Section 54 of the Act
The assessee claimed a deduction under Section 54 for investing in a new residential property after selling an immovable property. The Assessing Officer disallowed the deduction citing non-registration of the sale deed. The assessee argued possession and agreements as evidence of transfer, relying on relevant case law. The Tribunal found the investment reflected in the return and supported by documents, concluding that the Supreme Court decision on peculiar facts applied, granting relief under Section 54. The Tribunal favored the assessee, considering the legal transfer and investments made during the relevant assessment year.

Issue 3: Violation of principle of natural justice in penalty proceedings
The appeal raised concerns over the initiation of penalty proceedings under Section 271(1)(c) and the charging of interest under Sections 234A, 234B, 234C, and 234D. However, the judgment did not address these issues specifically, focusing on the disallowance of the deduction under Section 54 and the validity of the assessment order. Therefore, no detailed analysis or decision was provided regarding the penalty proceedings or interest charges.

Issue 4: Justification of charging interest under Sections 234A, 234B, 234C, and 234D
The judgment did not delve into the justification of charging interest under the specified sections. The Tribunal's decision primarily revolved around the disallowance of the deduction claimed under Section 54 of the Act and the validity of the assessment order. Hence, there was no detailed analysis or ruling provided concerning the charging of interest under Sections 234A, 234B, 234C, and 234D.

In conclusion, the Tribunal allowed the appeal of the assessee concerning the disallowance of the deduction claimed under Section 54 of the Act, emphasizing the legal transfer and investments made by the assessee. The judgment did not address the penalty proceedings or interest charges, focusing solely on the primary issue of the deduction disallowance and the validity of the assessment order.