DCIT Vs Anjali Mittal (ITAT Delhi)
Perusal of the assessment order reveals that the Ld. AO negatived the assessee’s claim of exemption under section 54F for the reason that the entire payment towards purchase of the new property was not made by the assessee alone. Other family members namely, her husband, his HUF and son of the assessee also made payments towards purchase of the new property; that the assesee did not utilise the sale consideration of the old property towards purchase of the new property.
This contention of the Ld. AO was assailed by the Ld. AR before the Ld. CIT(A) by arguing that the long term capital gain arising out of sale of the old property was claimed as exempt under section 54F as the assessee purchased the new property in her name and paid Rs. 9,05,478/- from her account and rest of the payment was made by her family members. Once the new property is purchased and investment is made in the name of the assessee, the condition precedent for claiming exemption under section 54F stands fulfilled. The Ld. CIT(A) accepted the above contention of the assessee and rightly so as there is legal backing.
It is held by Hon’ble Bombay High Court in Prakash Vs. ITO 173 Taxman 311 (Bom) that for qualifying for the exemption under section 54F it is necessary and obligatory to have the investment made in residential house in the name of the assessee only. This criteria has been fulfilled in the case of the assessee.
Moreover, Hon’ble Punjab & Haryana High Court has held in the case of Kapil Kumar Agarwal (supra) that section 54F nowhere envisages that the sale consideration obtained by the assessee from original capital asset is mandatorily required to be utilised for purposes of meeting cost of new asset. Therefore, where investment made by the assessee, although not entirely sourced from capital gain, but was within stipulated time and more than capital gain earned by him, the assessee was entitled to exemption under section 54F. The assessee brought on record evidence to show that the family members paid the amounts from their respective bank accounts to meet the cost of the new property purchased by the assessee.
It may not be out of place to mention that the decision of Delhi Bench of the Tribunal rendered in Kapil Kumar Agarwal vs. ACIT reported in (2014) 63 SOT 22 (Del-Trib) (URO) has been affirmed by the Hon’ble P&H High Court in Revenue’s appeal in Kapil Kumar Agarwal’s case (supra).kapil
In Sunil Sachdeva’s case (supra) Delhi Bench of the Tribunal also held that section 54F does not require one to one co-relation between capital gain arising out of transfer of long term capital asset and utilisation thereof for purchase /construction of residential house.
Therefore, the argument of the Ld. DR and objection of the Ld. AO that sale consideration obtained from the old property has not been utilised by the assessee has no legal basis and cannot be a hindrance to the assessee for claiming exemption under section 54F of the Act.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal has been filed by the Revenue against the order of the Ld. Commissioner of Income Tax (Appeals)–Kanpur-4, (“CIT(A)”) dated 20.09.2021 pertaining to the Assessment Year (“AY”) 2018-19.
2. The Revenue has taken the following grounds:-
“1. On facts and circumstances of the case and in. law, the Ld. CIT(A) erred in restricting the addition to the tune of Rs. l4,93,596/- as the Ld. CIT(A) has appreciated the fact that the investment in the purchase of new property was not made by the assessee herself but was made by the other family members.
2. On facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of surrendered income of Rs, 1,00,00,000/- as the surrendered was made by the son of assessee, voluntarily and alter due consultation with the assessee, and the surrendered was based on the difference of stock and unexplained cash found during the course of survey proceedings.
3. On facts and circumstances of the case and in law, the CIT(A) failed to allude to the relevant facts & circumstances and misread the facts to arrive at the conclusion.”
2. The assessee is an individual engaged in the business of purchase and sale of gold, silver and diamond jewellery in the name & style M/s. Pushpanjali Jewels. Survey under section 133A of the Income Tax Act, 1961 (the “Act”) was conducted at her business premises on 30.05.2018. During the course of survey, the stock was got valued by an approved valuer who valued the stock at Rs. 5,57,34,223/- as against the value as per books at Rs. 4,63,31,680/-. During survey, statement of Shri Himanshu Mittal, Son of the assessee was recorded. He surrendered an amount of Rs. 1 crore as undisclosed income for the previous year relevant to AY 2018-19.
3. For AY 2018-19 the assessee e-filed her return on 31.10.2018 declaring income of Rs. 23,44,850/-. The case was selected for scrutiny. Statutory notices along with questionnaire were issued and complied with. The assessee submitted written reply and supporting documents before the Ld. Assessing Officer (“AO”) who completed the assessment on total income of Rs. 1,52,39,610/- including therein addition of Rs. 28,94,757/- on account of denial of exemption under section 54F claimed by the assessee and addition of Rs. 1 crore under section 69A of the Act being the amount surrendered by Shri Himanshu Mittal, son of the assessee during the course of survey.
4. The assessee appealed before the Ld. CIT(A).
5. The Ld. CIT(A) applied the provisions of section 54F(1)(b) of the Act, and computed the exempt value of capital gain at Rs. 14,93,596/- as against the assessee’s claim of Rs. 28,94,757/- by recording his findings in para 6.4 to 6.8 as under:-
“6.4 I have carefully perused the observation of the AO in the matter of disallowance of claim of exemption u/s 54F of .IT Act of Rs. 28,94,757/-. The AO observes that in the matter of claim of exemption u/s 54F, the payments towards new property have been made by SH. Sharad Chand Mittal (HUF), SH. Sharad Chand Mittal in his individual capacity and Sh. Himanshu Mittal along with the appellant, however the same is required to be made out of sales of the old property on which capital gain is derived. On the other hand, the AR submits that, the facts of the case are that the assessee had sold old property for a consideration of Rs. 58,50,000/- and computed LTCG of Rs. 28,94,757/- which was claimed exempt u/s 54F because assessee purchased a property on 19.09.2018. These facts are not in dispute since appellant purchased the property in her name and made the payment of Rs. 9,05,478/- from her account and the balance payment of Rs. 20,49,765/-was made by her husband on individual capacity and on the capacity of Karta of HUF and her son for purchase of new property. The AR submits that the disallowance of capital gain of Rs. 28,94,757/- is patently wrong since the new property has been purchased and the investment has been made in the name of the appellant. The appellant also submits that as per the provisions of section 54F of IT Act there is provision that the new asset should be purchased in the name of the appellant and the same has been done therefore underlying condition of benefit of exemption is duly fulfilled.
6.5 From the facts of the case, it has been found that the appellant had sold immovable property on 03.03.2018 at Rs. 58,50,000/- and for computation of capital gain, she claimed Indexed Cost of Acquisition of Rs 29, 55,243/-, thus capital gain has been computed at Rs. 28,94,757/-. Further the appellant purchased a residential property vide sale deed dated 19.09.2018 and the payments for the same are made as under:
