2024 (12) TMI 1163 - AT - Income Tax

Deduction u/s 54F - no evidence for construction was filed, no evidence of ownership of land on which construction was claimed to be made was filed - Assessee initially submitted that house was constructed in the name of his son but subsequently it was contended that it was constructed in his name - HELD THAT -Valuation of the house property constructed by assessee which shows that construction was done between the period of Jan, 2013 to July, 2015 with value of Rs. 1,25,20,000/-. Aksh, Sizra and Jamabandi of the ancestral land showing the ownership of assessee. Copy of Certificate issued by Councillor, Gurgaon, Copy of cash flow statement of assessee and reply filed by the assessee mentions the residential house on ancestral land for a sum of Rs. 1,25,20,000/- was constructed in 3 years. The house situated in Lal Dora of the village Mohammedpur, Jharsa, Gurgaon. Nothing was brought on record by AO to disregard the above evidence produced by assessee. It is a material fact that assessee had sold agricultural land and received Rs. 4,31,25,000/- by selling agricultural land and sufficient fund. Assessee deserves benefit of section 54F of the Act, therefore, the findings of learned CIT(A) deserves to be set aside. Disallowance of exemption u/s 54B - Details of purchase of land by assessee for Rs. 3,08,33,650/- is at page 24 of the paper book. Sale deed agreements executed by assessee for purchase of agricultural land. The assessee claims to be illiterate and was not aware of the income tax laws and was suffering from serious diseases since 2012. Before learned AO assessee submitted that land was purchased in the name of wife to save stamp duty. In view of the above material facts and well settled principle of law, the assessee having purchased agricultural land was eligible for deduction under section 54B of the Act. Therefore, the findings of learned CIT(A) denying benefit of deduction under section 54F of the Act, is set aside. Unexplained cash credit on account of unsecured loan received by assessee from his brother Shri Brahm Singh, assessee filed copy of affidavit of Brahm Singh and cash flow statement - Agreement of sale dated 26.12.2012. In view of the above, said affidavit, cash flow statement and agreement to sale, it is evident that Shri Brahm Singh had paid Rs. 40,00,000/- on behalf of assessee for purchase of land as same was outstanding as on 31.03.2023. Assessee had made payment on behalf of Shri Brahm Singh for purchase of another land and thus squared off the transaction. In light of above facts, the addition consider as unexplained cash credit on account of unsecured land deserves to be deleted.

Summary

Issues Involved:

1. Deduction under Section 54F of the Income Tax Act, 1961.
2. Deduction under Section 54B of the Income Tax Act, 1961.
3. Addition of Rs. 40,00,000/- as unexplained cash credit.

Detailed Analysis:

1. Deduction under Section 54F of the Income Tax Act, 1961:

The appellant/assessee contended that the learned CIT(A) erred in not allowing the deduction under Section 54F of the Act amounting to Rs. 1,14,39,350/-. The assessee claimed to have constructed a house property on ancestral land using the proceeds from the sale of land. The evidence provided included a valuation report, ownership documents, and a certificate from a local councillor confirming the construction. The CIT(A) disallowed the exemption due to lack of evidence regarding ownership and construction. However, the tribunal observed that the evidence submitted by the assessee, such as the valuation report and cash flow statement, sufficiently demonstrated the construction of the house. It was noted that the house was constructed on Lal Dora land, which did not require municipal permission. Therefore, the tribunal set aside the findings of the CIT(A) and allowed the deduction under Section 54F.

2. Deduction under Section 54B of the Income Tax Act, 1961:

The appellant/assessee argued that the learned CIT(A) wrongly denied the deduction under Section 54B of the Act amounting to Rs. 3,08,33,650/-. The CIT(A) held that the agricultural land was purchased in the name of the assessee's wife, and thus, the deduction was not permissible. The assessee claimed the land was purchased within two years, and the decision to register it in the wife's name was due to illness and to save stamp duty. The tribunal referred to judicial precedents, including CIT vs. Gurnam Singh, which supported the assessee's position that the land being used for agricultural purposes justified the deduction, even if registered in a family member's name. Consequently, the tribunal found the assessee eligible for the deduction under Section 54B and overturned the CIT(A)'s decision.

3. Addition of Rs. 40,00,000/- as Unexplained Cash Credit:

The assessee contested the addition of Rs. 40,00,000/- as an unsecured loan. The assessee explained that the amount was a transaction between him and his brother, Shri Brahm Singh, where payments for land purchases were made on each other's behalf and later squared off. The evidence included an affidavit from Brahm Singh, cash flow statements, and sale agreements. The tribunal found the explanation and evidence credible, indicating that the transaction was genuine and not an unexplained cash credit. Therefore, the tribunal directed the deletion of the Rs. 40,00,000/- addition.

Conclusion:

The tribunal allowed the appeal, granting the deductions under Sections 54F and 54B of the Income Tax Act, and directed the deletion of the Rs. 40,00,000/- addition on account of unexplained cash credit. The appeal was pronounced in favor of the assessee on December 18, 2024.