2025 (4) TMI 715 - AT - Income Tax

LTCG - Rejection of claim for deduction u/s. 54F - assessee owns more than one residential house on the date of transfer of shares - CIT(A) allowed claim - HELD THAT - CIT(A) has examined the details of each of the properties referred to by the AO and has given clear cut finding that the has owned only one residential house on the date of sale of shares meaning thereby the AO has misled himself in this matter. Before us the revenue could not contradict the findings so given by the CIT(A). Accordingly we affirm the order passed by CIT(A) on this issue. Addition made u/s. 68 in respect of sale of shares - assessed the sale consideration of shares received as gift from her son as un-explained cash credit u/s. 68 - CIT(A) deleted addition - HELD THAT - The assessee has received one lakh shares of the said company from her son by way of gift and the same is supported by the gift deed executed by the son of the assessee. It was received on 27-10-2020. The assessee sold the above shares along with shares held by the assessee subsequently on 09-11-2020. The proportionate sale value pertaining to one lakh shares which has been assessed by the AO un-explained cash credit. When the above said amount has been received by way of sale of shares and the said shares have been gifted by her son we are of the view that the Ld.CIT(A) was justified in holding that the sale consideration of Rs. 6.90 crores cannot be considered as un- explained cash credit. Ld.CIT(A) was justified in deleting the addition of Rs. 6.90 crores made by the AO u/s. 68 of the Act. Addition made u/s. 68 in respect of unsecured loans - assessed certain un-secured loans received from the family members as un-explained cash credit u/s. 68 - CIT(A) deleted addition - HELD THAT - We notice that the assessee has furnished the details of loan account of the above two years and the current year. The above said account statements also been confirmed by M/s. TokershiBhavanji Co. Hence the repayment of Rs. 19, 49, 320/- of the amount advanced earlier cannot be considered as a fresh cash credit assessable u/s. 68 of the Act. With regard to remaining amounts it was submitted that the same represented school fee pertaining to the school run by the assessee. Those school fee have already been taxed by the AO either in the current year or in the preceding year/succeeding year. Hence they cannot be added u/s. 68 of the Act. Accordingly we are of the view that the Ld.CIT(A) was justified in deleting the entire addition made by the AO u/s. 68 of the Act. Appeal filed by the Revenue is dismissed.

ISSUES PRESENTED and CONSIDERED

The appellate tribunal considered the following core legal questions:

Whether the assessee was eligible for a deduction under Section 54F of the Income Tax Act, 1961, given the claim that the assessee owned more than one residential house at the time of the transfer of shares.
Whether the addition made under Section 68 of the Income Tax Act, concerning the sale consideration of shares received as a gift, was justified.
Whether the addition made under Section 68 of the Income Tax Act, in respect of unsecured loans, was appropriate.

ISSUE-WISE DETAILED ANALYSIS

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

Relevant legal framework and precedents: Section 54F provides a deduction for capital gains arising from the transfer of a long-term capital asset, provided the assessee does not own more than one residential house on the date of the transfer.
Court's interpretation and reasoning: The tribunal reviewed the factual findings of the CIT(A), who assessed the ownership status of various properties. The CIT(A) concluded that the properties identified by the AO were either commercial, transferred earlier, or not owned by the assessee.
Key evidence and findings: The CIT(A) relied on documentary evidence such as gift deeds, sale agreements, and ownership documents to establish that the assessee owned only one residential property at the relevant time.
Application of law to facts: The tribunal agreed with the CIT(A) that the assessee met the conditions of Section 54F, as she owned only one residential house at the time of the share transfer.
Treatment of competing arguments: The tribunal found the AO's reliance on balance sheet disclosures from previous years to be erroneous, as these were rectified in the current assessment year.
Conclusions: The tribunal upheld the CIT(A)'s decision to allow the deduction under Section 54F.

2. Addition under Section 68 for Sale of Shares

Relevant legal framework and precedents: Section 68 deals with unexplained cash credits, where the assessee must provide satisfactory evidence of the nature and source of the credits.
Court's interpretation and reasoning: The tribunal considered the gift deed and the evidence provided by the assessee, which demonstrated that the shares were a legitimate gift from her son.
Key evidence and findings: The gift deed and the timing of the share transfer supported the assessee's claim. The sale of shares was a legitimate transaction, not an unexplained cash credit.
Application of law to facts: The tribunal found that the CIT(A) correctly applied the law, as the assessee had satisfactorily explained the source of the Rs. 6.90 crores.
Treatment of competing arguments: The tribunal dismissed the AO's doubts about the genuineness of the gift, as the evidence was clear and uncontradicted.
Conclusions: The tribunal upheld the deletion of the addition under Section 68 concerning the sale of shares.

3. Addition under Section 68 for Unsecured Loans

Relevant legal framework and precedents: Similar to the previous issue, Section 68 requires the assessee to explain the nature and source of any cash credits.
Court's interpretation and reasoning: The tribunal reviewed the evidence of loan repayments and school fees, which were initially treated as unexplained cash credits by the AO.
Key evidence and findings: Evidence included confirmations from related parties and documentation of school fees, which were already accounted for in taxable income.
Application of law to facts: The tribunal agreed with the CIT(A) that the amounts in question were not fresh credits but repayments or already taxed income.
Treatment of competing arguments: The tribunal found the AO's classification of these amounts as unexplained cash credits to be unjustified.
Conclusions: The tribunal upheld the deletion of the addition under Section 68 for unsecured loans.

SIGNIFICANT HOLDINGS

The tribunal affirmed the CIT(A)'s interpretation of Section 54F, emphasizing the importance of accurate property ownership assessments at the time of asset transfer.
Regarding Section 68, the tribunal established that legitimate gifts and documented transactions cannot be treated as unexplained cash credits.
The tribunal reiterated the necessity for the AO to consider all relevant evidence and rectify errors in previous disclosures before making additions under Section 68.
Final determinations: The appeal by the Revenue was dismissed, and all additions made by the AO were deleted.

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