2017 (7) TMI 254 - AT - Income Tax

Reopening of assessment - whether a claim of a new deduction can be allowed during the course of reassessment proceedings consequent to the notice under section 148? - claim of exemption under section 54F - Held that - A matter not agitated in the concluded original assessment proceedings also cannot be permitted to be agitated in the reassessment proceedings unless relatable to the item sought to be taxed as escaped income . In this case the assessee has claimed deduction of exemption under section 54F of the Act for investment made in the residential house property out of sale consideration of agricultural land, which was found to be escaped assessment, and no new claim of deduction has made during the course of reassessment proceedings. SEE Sun Engineering Works (P) Ltd. v. CIT 1992 (9) TMI 1 - SUPREME Court Thus we set aside the orders of authorities below and held that the assessee has rightly claimed deduction of exemption under section 54F of the Act during the course of reassessment proceedings. - Decided in favour of assessee. Entitlement to benefit under section 54F - investment in house property made in the names of the assessee s minor daughters - Held that - In the present case, the new house property was purchased by the assessee in the name of his daughters, legal heir & dependents and not in the name of any stranger or somebody, who is unconnected with the assessee. Therefore, we are of the considered opinion that the assessee is eligible to claim deduction of exemption under section 54 of the Act.- Decided in favour of assessee. Investment in 40% undivided share in the house property by way of Deed of Mortgage by Conditional Sale - Held that - In the present case, the arrangement between the assessee (mortgagee) and vendor (mortgagor) to transfer the house property through a Deed of Mortgage by Conditional Sale grossly falls within the definition of transfer under section 2(47)(vi) of the Income Tax Act, therefore the said transaction is a purchase made by the assessee on entering the Deed of Mortgage by Conditional Sale . The agreed consideration of ₹.21,00,000/- was paid by the assessee on 19.09.2005, which is the day on which the Deed of Conditional Sale through mortgage has been executed and registered. Since, the assessee has also taken the possession of the property on the said date, the transaction has become a deemed transfer even under section 53A of the Transfer of Property Act, 1882. Thus we are of the opinion that the assessee is legally eligible to claim deduction under section 54F of the Act. - Decided in favour of assessee. Eligibility for deduction u/s 54EC - investment in Bonds specified under section 54EC after a period of six months from the date of transfer but before the due date specified under section 139 - Held that - If the assessee has invested in the NABARD bonds by end of February, 2005, then he can very well claim the exemption, but, he has invested in the bonds only on 10.06.2005 i.e., fourth month after lapse of six months period provided in the statute. Therefore, we are of the considered opinion that the authorities below have rightly rejected the claim of deduction under section 54EC of the Act. Thus, the ground raised by the assessee is dismissed.

Issues Involved:
1. Whether a new deduction claim can be allowed during reassessment proceedings under Section 148 of the Income Tax Act.
2. Eligibility of investment in house property in the names of assessee’s minor daughters for exemption under Section 54F of the Act.
3. Treatment of 'Deed of Mortgage by Conditional Sale' as a purchase for exemption under Section 54F of the Act.
4. Eligibility of investment in bonds beyond six months from the date of transfer for deduction under Section 54EC of the Act.

Detailed Analysis:

Issue 1: New Deduction Claim During Reassessment Proceedings
The first issue pertains to whether a new deduction can be claimed during reassessment proceedings initiated under Section 148 of the Income Tax Act. The assessee contended that investment in house property in the name of minors should be allowed as exempt under Section 54 of the Act. The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] rejected this claim, stating that fresh claims cannot be entertained in reassessment proceedings. The Tribunal referred to the Supreme Court's decision in CIT v. Sun Engineering Works Pvt. Ltd. and the Bombay High Court's decision in CIT v. Caixa Economica De Goa, which allow claims for deductions related to escaped income. The Tribunal held that the assessee's claim was not a fresh claim but related to the escaped income, thereby setting aside the orders of the lower authorities and allowing the deduction.

Issue 2: Investment in House Property in Names of Minor Daughters
The second issue concerns whether the investment in house property made in the names of the assessee’s minor daughters qualifies for exemption under Section 54F of the Act. The AO and CIT(A) rejected the claim, stating that the property was not registered in the name of the assessee. The Tribunal, however, referred to various High Court judgments, including CIT v. V. Natarajan and CIT v. Kamal Wahal, which held that the new residential house need not be purchased exclusively in the assessee's name. The Tribunal concluded that since the daughters were legal heirs and dependents, the assessee was eligible for the exemption under Section 54F.

Issue 3: 'Deed of Mortgage by Conditional Sale' as Purchase
The third issue is whether the investment in 40% undivided share in the house property by way of 'Deed of Mortgage by Conditional Sale' qualifies as a purchase for the purpose of availing benefit under Section 54F of the Act. The AO rejected the claim, arguing that the deed did not constitute a purchase. The Tribunal analyzed the provisions of the Transfer of Property Act, 1882, and concluded that the mortgage by conditional sale transfers possession to the mortgagee, making it a deemed transfer under Section 2(47)(vi) of the Income Tax Act. The Tribunal held that the assessee had become the owner of the property on the date of the mortgage deed and was thus eligible for the exemption.

Issue 4: Investment in Bonds Beyond Six Months
The final issue is whether the investment of ?4,50,978 in bonds specified under Section 54EC after a period of six months from the date of transfer qualifies for deduction. The AO and CIT(A) rejected the claim as the investment was made beyond the six-month period stipulated under Section 54EC. The Tribunal upheld this decision, noting that the investment was made much after the six-month period and the assessee did not provide any valid reason for the delay. The Tribunal dismissed the ground raised by the assessee.

Conclusion:
The Tribunal partly allowed the appeal, granting relief on the first three issues but rejecting the claim for deduction under Section 54EC due to the delayed investment in bonds. The order was pronounced on February 6, 2017, in Chennai.

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