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TMI Blog2024 (7) TMI 285X X X X Extracts X X X X X X X X Extracts X X X X ..... in the return of income filed by the petitioner. The very basis of such reason denying deduction under Section 54 of the Act is contrary to the application filed by the petitioner for settlement of the tax dues vis-a-vis the undisclosed income. Settlement Commission/ Board is required to pass order in accordance with the provisions of the Act. Therefore, the grounds for rejection given by the board for denying the deduction under Section 54 of the Act apparently are not in accordance with the provisions of Section 54 of the Act. Therefore, exercising the scope of judicial review against the order of the Board as held in case of Jyotendrasinhji [ 1993 (4) TMI 1 - SUPREME COURT] wherein it is held that writ jurisdiction of the High Court is not barred and the Hon ble Supreme Court has further observed that the judicial review flowing from the exercise of such powers should be restricted to considering whether the order of Settlement Commission is contrary to the provisions of Income Tax Act. Not in dispute that the transactions reflected in excel sheet are pertaining to the cash portion received by the petitioner on sale of Sahajanand Bungalow and payment of cash for purchase of Saha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rule for the respondent. 3. Having regard to the controversy in narrow compass, with consent of learned advocates for the respective parties, the matter is taken for hearing. 4. By this petition under Article 227 of the Constitution of India, the petitioner has prayed for setting aside the impugned order passed by the Interim Board for Settlement, so far as it rejects the claim of the exemption under Section 54 of the Income Tax Act, 1961 (for short the Act ) amounting to Rs. 2,40,14,000/- for Assessment Year 2016-17. 5. The brief facts of the case are that the petitioner was subjected to search proceedings by the Income Tax Authority under Section 132 of the Act on 06.03.2018. During the course of search proceedings, various incriminating material and documents were found and seized and proceedings for assessment under Section 153A of the Act commenced. 5.1. The petitioner thereafter filed an application before the Settlement Commission on 27.12.2019 for the period from A.Y. 2011 12 to 2018 19 disclosing the total income of Rs. 2,99,15,288/-. The petitioner in the said application stated that the undisclosed income has been earned by carrying out transactions for buying and sellin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the same preferred a rectification application under Section 245D(6B) on 15.07.2023 before respondent no.1 to rectify the order passed under Section 245D(4) of the Act and to allow exemption under Section 54 of the Act under cash portion of the sale consideration on sale of the property. 5.10. However, respondent no.1 did not decide the rectification application filed by the petitioner and therefore being aggrieved has preferred this petition. 6. Learned Senior Advocate Mr.Saurabh Soparkar for the petitioner submitted that the order passed by the respondent no.1 under Section 245D(4) of the Act to the extent, it denies the claim of exemption under Section 54 of the Act, on the cash portion of the investment made by the petitioner to purchase the property after sale of the property situated at 13, Sahajanand Bungalows on the ground three grounds, firstly that the claim has not been made in return of income, secondly claim of exemption is not allowed on the concealed transaction and thirdly that the applicant has not deposited the amount of capital gain in the capital gain deposit scheme under Section 54(2) of the Act and all these grounds are contrary to the facts. 6.2. It was su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under: Particulars Amount in Cheque Amount in Cash Total Sale Consideration 1,50,00,000 2,40,14,000 3,90,14,000 Indexed Cost of Acquisition 20,76,666 20,76,666 Indexed Cost of Improvement 1,19,818 1,19,818 Long Term Capital Gain 1,28,04,116 2,40,14,000 3,68,18,116 The petitioner offers long term capital gain of Rs. 15,50,432/- by claiming reinvestment in construction of Bungalow No.27 as under: Particulars Amount in Cheque Amount in Cash Total Villa Land Purchase 78,72,000 1,44,40,100 2,23,12,100 Incidental Expenses 7,74,589 7,74,589 Villa Construction Cost 56,00,024 65,80,971 1,21,80,995 Total Cost of construction 1,42,46,613 2,10,21,071 3,52,67,684 Particulars Total Gross Capital Gain 3,68,18,116 Less: amount invested (exemption u/s 54) 3,52,67,684 Net Capital gain 15,50,432 6.6. Learned Senior advocate Mr.Soparkar in support of his submissions placed reliance upon decisions of this Court in case of Glass Lines Equipments Company Ltd. Vs. Commissioner of Income Tax reported in 253 ITR 454 (Gujarat) and in case of Sumilon Industries Ltd. Vs. Income Tax Settlement Commission reported in 83 taxmann.com 352 (Gujarat) to submit that this Court can exercise powers under Article 227 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gives details of payment of money for purchase of the plot of Sahajanand Villa from M/s. Himalaya Darshan Developers (Gujarat) Pvt. Ltd. which shows various dates of payments whereas copies of ledger account of Shri. Ashwin B.Dudhat in the books of the said company, which is only in respect of plot no.27 disclosing different dates of payments reflected in the regular books of accounts of the seller and the sale deed. 7.3. It was therefore submitted that there is no correlation between sales consideration received for plot no.13 at Sahajanand Bungalows for purchase of plot in Sahajanand Villa by the petitioner. It was therefore submitted that the petitioner has not been able to established any nexus between the receipt of the sale consideration and purchase of the property by utilizing such sale consideration accordingly and hence, in absence of detail cash flow statement the source of such cash remains unexplained in as much as the petitioner has also not provided any actionable information of the person to whom such cash was paid. 7.4. It was therefore submitted that the respondent no.1 has rightly not granted exemption under Section 54 of the Act to the petitioner in respect of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of the cash received under Section 54 of the Act. 9. Respondent no.1 has rejected the claim of the deduction under Section 54 of the Act on following grounds: Thus the applicant has claimed deduction u/s 54 not only on the cheque portion but also on the cash portion on the basis that the same has been invested in the purchase and construction of New Bungalow in Sahajanand Villa. The claim of the applicant in respect of cash portion i.e Rs 2,40,14,000/- under section 54 of the I. T. Act is not allowable since the following conditions are pre-requisite for the claim of exemption u/s 54 which have not been fulfilled by the applicant:-. 1. The first and foremost condition is that the said claim should be made in the return of income, which has not been fulfilled by the applicant. 2. Secondly, such claim of exemption can be allowed only to the extent of disclosed amounts and not on concealed transactions and the applicant has not disclosed the said amount in his return of income/books of accounts. 3. The applicant has also failed to fulfill the condition of depositing the said amount in the Capital Gains Accounts Scheme before the due date of filing the return of income which is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s option, purchase or construct two residential houses in India, and where such an option has been exercised, (a) the provisions of this sub-section shall have effect as if for the words one residential house in India , the words two residential houses in India had been substituted; (b) any reference in this sub-section and sub-section(2) to new asset shall be construed as a reference to the two residential houses in India: Provided further that where during any assessment year, the assessee has exercised the option referred to in the first proviso, he shall not be subsequently entitled to exercise the option for the same or any other assessment year.] [(2) The amount of the capital gain which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication and any other matter relating to the case not covered by the application, but referred to in the report of the 1 [Principal Commissioner or Commissioner]. 12. On bare perusal of the above provisions, the Settlement Commission/ Board is required to pass order in accordance with the provisions of the Act. Therefore, the grounds for rejection given by the board for denying the deduction under Section 54 of the Act apparently are not in accordance with the provisions of Section 54 of the Act. 13. Therefore, exercising the scope of judicial review against the order of the Board as held by the Hon ble Supreme Court in case of Jyotendrasinhji (Supra) wherein it is held that writ jurisdiction of the High Court is not barred and the Hon ble Supreme Court has further observed that the judicial review flowing from the exercise of such powers should be restricted to considering whether the order of Settlement Commission is contrary to the provisions of Income Tax Act. It was observed as under: Be that as it may, the fact remains that it is open to the Commission to accept an amount of tax by way of settlement and to prescribe the manner in which the said amount shall be paid. It may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e also raised. The commission has interpreted the trust deeds in a particular manner, Even if the interpretation placed by the commission the said deeds is not correct, it would not be a ground for interference in these appeals, since a wrong interpretation of a deed of trust cannot be said to be a violation of the provisions of the Income Tax Act. it is equally clear that the interpretation placed upon the said deeds by the Commission does not bind the authorities under the Act in proceedings relating to other assessment years. 14. Regarding contentions of Mr. Patel learned advocate for the respondent on the issue of denying deduction under Section 54 of the Act, we find that the respondent no.1-Board has committed serious error in law in disallowing the claim of the petitioner inasmuch as the petitioner is entitled to the deduction under Section 54 of the Act considering the claim made by the petitioner in respect of cash portion of Rs. 2,40,14,000/- also as the petitioner has already disclosed such sale consideration as part of the undisclosed income and it is not in dispute that the petitioner has made investment for purchase of the property at Sahajanand Bungalows. 15. In view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed out on the same date on 15.04.2014, 15.07.2014, 15.09.2014, 15.11.2014, 15.01.2015, 15.03.2015 and 15.05.2015 respectively. 17. It is not in dispute that the transactions reflected in excel sheet are pertaining to the cash portion received by the petitioner on sale of Sahajanand Bungalow and payment of cash for purchase of Sahajanand Villa. Therefore, the contention raised on behalf of respondent that there is no correlation between the receipt and payment of cash for sale and purchase of the property is without any basis. The petitioner is accordingly entitled to the benefit of deduction under Section 54 of the Act with regard to the cash transaction of sale and purchase of the property even if the petitioner did not disclose such cash portion of transaction in the return of income filed or that the petitioner did not deposit the said amount in the bank account when it is apparent from the seized materials that the cash transaction has been carried out of sale and purchase of the properties by receipt and payment of cash is carried out on the same dates as stated herein above. 18. Therefore the grounds on which the deduction under Section 54 of the Act is denied by the board ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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