2020 (4) TMI 12 - AT - Income Tax

Benefit of deduction claimed u/s. 54 and 54F - sale of flat and shop - as assessee did not furnish the purchase agreement of the flat and accordingly, the AO disallowed the deductions claimed u/s. 54 - HELD THAT - Assessee is allowed the benefit of deduction claimed u/s. 54 and 54F of the Act on the basis of the letter of allotment as the assessee has paid substantial amount of consideration to the builder and hence, the addition made by the AO is hereby deleted - See Hill JB Wadia 1993 (3) TMI 7 - BOMBAY HIGH COURT Addition u/s. 68 - interest in bank statement and pass book - absence of the books of accounts maintained - HELD THAT - As in case of CIT Vs. Bhaichand H. Gandhi 1982 (2) TMI 28 - BOMBAY HIGH COURT for the proposition that interest in bank statement and pass book cannot qualify that addition u/s. 68 of the Act. CIT(A) also noted that the assessee has filed unsigned confirmation and also no compliance was made regarding notice u/s. 133(6) of the Act thereafter finally learned CIT(A) held tha AO in this case has not observed or place on record as regards whether the assessee was mandatorily required to maintain books of accounts or not. Having said that and relying on the jurisdictional decision of the High Court, addition made by the AO in the absence of the books of accounts maintained by the assessee be deleted. - Decided in favour of assessee.

Summary

Issues Involved:
1. Deduction under sections 54 and 54F of the Income Tax Act
2. Addition of unexplained cash credit under section 68 of the Income Tax Act

Issue 1: Deduction under sections 54 and 54F of the Income Tax Act:

The case involved an appeal by the Revenue against the order of the CIT(A) regarding the deduction claimed by the assessee under sections 54 and 54F of the Income Tax Act for the assessment year 2014-15. The assessee had sold a shop and a flat, claiming deductions of ?76,25,040 and ?16,84,080 respectively. The dispute arose as the AO disallowed the deductions due to non-compliance with certain conditions, specifically related to the purchase of a new property. The CIT(A) analyzed the facts, including the allotment letter provided by the builder, and concluded that the assessee had invested a substantial amount in a new property, justifying the deduction claims. The CIT(A) referred to relevant court decisions and held in favor of the assessee, stating that the AO's addition was unjustified. The CIT(A) emphasized that the allotment letter was binding on both parties, and the AO's concerns regarding the advance being returned did not impact the claim for exemption under sections 54 and 54F. The CIT(A) relied on legal precedents and deleted the addition made by the AO, allowing the deductions claimed by the assessee.

Issue 2: Addition of unexplained cash credit under section 68 of the Income Tax Act:

Another aspect of the case involved an addition of ?5,00,000 as an unexplained cash credit under section 68 of the Income Tax Act. The AO had treated a loan amount as an unexplained cash credit due to the absence of proper documentation and non-compliance with notice requirements. The CIT(A) referred to relevant court decisions, including the Bombay High Court ruling, and noted that the AO did not establish whether the assessee was obligated to maintain books of accounts. The CIT(A) concluded that in the absence of evidence regarding mandatory bookkeeping requirements, the addition made by the AO should be deleted. The CIT(A) highlighted that interest in bank statements alone does not warrant an addition under section 68. Consequently, the CIT(A) ruled in favor of the assessee, deleting the addition of ?5,00,000 as unexplained cash credit. The Revenue appealed against this decision before the ITAT, which upheld the CIT(A)'s findings, considering the tax effect and reliance on jurisdictional court decisions.

This detailed analysis of the judgment highlights the key issues, arguments, and decisions made by the authorities involved in the case.