2019 (12) TMI 1254 - AT - Income Tax

Exemption u/s 54F for the investment made in the residential bungalow - builder has delayed the construction - HELD THAT - Admittedly, the property was finally acquired by the assessee as evident from the copy of the sale deed which is available on record. Now the question arises whether the assessee can be denied the benefit of the provisions of section 54F of the Act in a situation where the builder has delayed the construction. It is also not in dispute that the payment for the purchase of the property was made well within the time specified under section 54F of the Act. In our considered view, in a situation as in the case on hand the assessee cannot be denied the benefit of exemption merely on the ground that the construction was not completed within the time. In this regard we find support and guidance from the judgment of Hon ble Karnataka High Court in the case of CIT versus Sambandam Udaykumar 2012 (3) TMI 80 - KARNATAKA HIGH COURT Revenue in the case of the co-owner as discussed above has accepted the claim made by the assessee in the assessment framed under section 147 read with section 143(3) of the Act. The courts have held that once the claim in the case of the co-owner has been accepted then such claim/benefit cannot be denied in the case of other coowner. We hold that the impugned transaction cannot be treated as colourable device adopted by the assessee to escape from the income tax liability. Accordingly we are of the opinion that the principles laid down in the case of McDowells 1985 (4) TMI 64 - SUPREME COURT cannot be applied in the case on hand. In view of the above, the ground of appeal of the assessee is allowed. Addition on account of cash deposited in the bank - HELD THAT - Cash withdrawal from the bank has not been doubted by the authorities below. Similarly nothing has been brought on records suggesting that the cash withdrawn from the bank has been utilized for some other purposes other than the deposit of cash as alleged by the authorities below. The onus was of the Revenue to reject the contention of the assessee based on cogent reasons that the cash was not deposited out of the cash withdrawal from the bank. But the Revenue failed to do so. Thus in the absence of any documentary evidence, we can safely presume that the cash withdrawn from the bank was available with the assessee which was subsequently deposited with the bank. Therefore, we cannot treat the same as undisclosed income of the assessee. We are of the opinion that there cannot be any addition on account of deposit of cash in the saving bank account of the assessee by treating the same as undisclosed income. Hence the ground of appeal of the assessee is allowed

Summary

Issues Involved:
1. Denial of exemption under Section 54F of the Income Tax Act.
2. Addition of cash deposits in the bank account as undisclosed income.

Issue-wise Analysis:

1. Denial of Exemption under Section 54F:
The primary issue in the appeals was whether the Assessee was entitled to exemption under Section 54F of the Income Tax Act for investments made in a residential bungalow. The Assessee, a non-resident Indian, sold land and claimed exemption for investing in a new property. The Assessing Officer (AO) denied the exemption, treating the transaction as a colorable device for tax evasion, citing the Supreme Court's judgment in Mcdowell & Co. Ltd. vs. Commercial Tax Officer. The AO's denial was based on the grounds that the construction was incomplete within the stipulated time and the transaction was a dubious method for tax evasion.

The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, noting that the Assessee failed to provide necessary documents like booking forms or allotment letters to substantiate the claim. The CIT(A) also observed that the Assessee did not comply with the three-year construction timeline specified under Section 54F, even after six years.

However, the Tribunal found that the Assessee made payments for the new property within the specified time and eventually acquired the property, as evidenced by the sale deed. The Tribunal relied on judgments from the Karnataka High Court (CIT vs. Sambandam Udaykumar and PCIT vs. C. Gopalaswamy), which held that delays in construction by the builder should not penalize the taxpayer if the investment was made within the stipulated time. Additionally, the Tribunal noted that a co-owner had been granted similar exemptions, and the principle of equality should apply. Consequently, the Tribunal allowed the Assessee's appeal, granting the exemption under Section 54F.

2. Addition of Cash Deposits as Undisclosed Income:
The second issue was the addition of cash deposits in the Assessee's bank account as undisclosed income. The Assessee contended that the cash deposits were sourced from prior cash withdrawals. The AO rejected this explanation, arguing there was no direct link between the withdrawals and deposits, and treated the deposits as income from undisclosed sources.

The CIT(A) upheld the AO's decision, doubting the Assessee's rationale for withdrawing and then redepositing cash. However, the Tribunal found no evidence that the cash withdrawn was used for purposes other than the deposits. The Tribunal emphasized that the Revenue failed to provide substantial proof to counter the Assessee's claim. Therefore, the Tribunal ruled in favor of the Assessee, holding that the cash deposits could not be treated as undisclosed income.

Separate Judgments:
The Tribunal delivered separate judgments for each Assessee, but the issues and rulings were identical. In both cases, the Tribunal allowed the appeals, granting the exemptions under Section 54F and rejecting the additions for cash deposits as undisclosed income.

Conclusion:
The Tribunal's comprehensive analysis led to the conclusion that the Assessee was entitled to the exemption under Section 54F and that the cash deposits could not be treated as undisclosed income. The appeals were allowed in favor of the Assessee.