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2024 (8) TMI 820 - AT - Income TaxLTCG - denial of exemption u/s. 54F - as no new residential house was purchased/constructed and it was only an extension of the old house, the AO disallowed the claim of the assessee - HELD THAT -We are of the opinion that the assessee had discharged the burden to prove construction of a residential house/dwelling unit (first floor with separate stair-case, kitchen, new electrical connection, water connection, etc.) and it is not disputed that construction of the new dwelling/residential unit was within the time stipulated u/s. 54F of the Act. Therefore, assessee is eligible for claiming deduction u/s. 54F of the Act and therefore, we set aside the impugned order of the Ld.CIT(A) and direct the AO to grant deduction claimed u/s. 54F of the Act. Addition u/s. 68 - unexplained cash credit - HELD THAT - We are of the opinion that assessee had discharged the burden to prove that an amount of Rs. 57 lakhs was in his hands, which was received from his family members in the relevant year under consideration, apart from the amount received on 21.10.2011; and further, we note that assessee had withdrawn an amount of Rs. 13.90 lakhs between 01.08.2009 to 16.07.2010. Therefore, the assessee succeeds in proving the nature and source of Rs 59.90 lakhs, and therefore, addition made of Rs. 59.90 lakhs was not warranted. In such an event, no addition u/s. 68 of the Act is sustainable and directed to be deleted. Appeal filed by the assessee is allowed.
Issues Involved:
1. Denial of exemption under Section 54F of the Income Tax Act, 1961. 2. Addition under Section 68 of the Income Tax Act, 1961 for unexplained cash credit. Detailed Analysis: Issue 1: Denial of Exemption under Section 54F The assessee filed a return of income for AY 2012-13, declaring a total income of Rs. 31,70,459/-. The Assessing Officer (AO) denied the exemption under Section 54F of the Income Tax Act, 1961, on the grounds that the assessee extended his old house by constructing a first floor, which was started a year before the date of transfer. The AO argued that the construction was not a new residential house but an extension of the old house, thus disallowing the claim. The Tribunal noted that under Section 54(1) of the Act, capital gain arising from the transfer of a residential house is not charged to income tax if the assessee purchases another residential house within one year before or two years after the date of transfer or constructs a residential house within three years from the date of transfer. The Tribunal found that the assessee had constructed a first floor on the existing ground floor building within the stipulated time and claimed deduction under Section 54F. The Tribunal relied on the decision of the Hon'ble Madras High Court in the case of C. Aryama v. CIT, which held that the cost of a new residential house includes the cost of land, materials, labor, and other related costs. The Tribunal also referred to the decision in Smt. Kethsial Justin v. ITO, where the construction of a new dwelling unit on the first floor of an existing house was considered eligible for deduction under Section 54F. The Tribunal concluded that the assessee had provided sufficient evidence, including an approved plan, new electricity and water connections, enhanced property tax receipts, and photographs, to prove the construction of a new residential unit. Therefore, the Tribunal directed the AO to grant the deduction claimed under Section 54F. Issue 2: Addition under Section 68 for Unexplained Cash Credit The AO added Rs. 59,90,000/- under Section 68 of the Act, questioning the source of funds for the construction of the first floor before the transfer of property in February 2012. The assessee explained that he received Rs. 78,48,000/- on 21st October 2011 and Rs. 59,90,000/- from his family members. The assessee also provided an agreement for the purchase of land in 2007, which was later canceled, and the amount was returned by his family members. The Tribunal noted that the AO had accepted the receipt of Rs. 78,48,000/- on 21st October 2011. The Tribunal also found that the assessee had withdrawn Rs. 46 lakhs from Axis Bank between 25th July to 10th November 2007, and the sale agreement dated 25.07.2007 was genuine. The Tribunal observed that the Ld.CIT(A) had conducted an inquiry and confirmed the return of the amount by the family members. The Tribunal concluded that the assessee had discharged the burden of proving the nature and source of Rs. 59.90 lakhs and that the addition under Section 68 was not warranted. Therefore, the Tribunal directed the deletion of the addition. Conclusion: The appeal filed by the assessee was allowed. The Tribunal directed the AO to grant the deduction claimed under Section 54F and delete the addition made under Section 68.
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