Deduction U/s. 54 can be claimed for House purchased in wife’s name

Shri Radhey Shyam Arora Vs. Income Tax Officer (ITAT Jaipur)

It is apparent that the assessee did not disclose the transaction of sale of house and the AO completed the assessment by making the addition on account of cash deposit in the bank account of the assessee. Before the ld. CIT(A) the assessee claimed the benefit of section 54 on account of investment made in purchase of new house. The ld. CIT(A) denied the claim of the assessee on the ground that the new house was purchase in the name of his wife. At the same time, the ld. CIT(A) has observed that the entire sale consideration will be assessed as capital gain.

When the entire investment for the purchase of new house has gone through the assessee’s account then the benefit u/s 54 of the Income Tax Act cannot be denied on the ground the new house was purchased in the name of wife. Hence, the claim of the assessee u/s 54 of the Income Tax Act is allowed.

FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-

This appeal by the assessee is directed against the order dated 22.06.2016 of ld. CIT(A), Jaipur for the A.Y. 2008-09.

2. There is delay of 209 days in filing the present appeal the assessee has filed a petition for condonation of delay which has been supported by the affidavit.

3. I have heard the ld. AR as well as ld. DR and considered the explanation of the assessee as stated in the affidavit for delay in filing the appeal. The ld. DR has vehemently opposed to the condonation of delay. Having perused the contents of the affidavit it is noted that the assessee has explained the cause of delay that the assessee has duly signed the appeal papers on 17.08.2016 and also paid the appeal fee on the same day and therefore, the assessee took all the steps within the period of limitation to file the appeal against the impugned order. However, due to inadvertence and over sight on the part of the Chartered Accountant of the assessee namely Sh. H.M. Singhvi, the appeal could not be filed in time. The assessee has also filed an affidavit of Sh. H.M. Singhvi (C.A.) an authorized representative of the assessee wherein he has stated that due to over sight and inadvertence the appeal papers remained in the office and could not be filed in the registry of this Tribunal. Thus, the assessee has explained that it is a banafide and inadvertent mistake on the part of the authorized representative of the assessee who could not filed the present appeal within the period of limitation. I find that the appeal fee was paid on 17.08.2016 and this fact has not been disputed by the Revenue. Therefore, when the authorized representative of the assessee in his affidavit has accepted the bonafide mistake and oversight for not filing the appeal within the period of limitation despite the appeal was ready and fee was paid in time then it would be a reasonable cause for not presenting this appeal within the period of limitation.

Having regards to the facts and circumstances of the case that the assessee took the requisite steps to file the appeal in time and also deposited the appeal fee I am satisfied that the assessee had a reasonable cause for not presenting the present appeal in time. Accordingly, the delay of 209 days in filing the present appeal is condoned.

4. The assessee has raised the following grounds:-

“1. That the Learned CIT(A) erred in certainning the action for imitation of proceedings u/s 147 by A.O in order.

2. Whether on the facts and circumstances of the case the Learned CIT(A) was justified in confirming the assessment made u/s 144?

3. Whether on the facts and circumstances of the case the Learned CIT(A) was justified in confirming the addition of Rs. 2054500/- made by AO u/s 69A?

4. The Learned CIT(A) has erred in over looking and summarily rejected the detailed submission along with affidavit, documents and evidence placed on record and the various orders of ITAT, Jaipur and judgments of High Court.”

The assessee has also raised the additional grounds which reads as under:-

^“1. That the CIT(A) has made enhancement not allowing the benefit u/s 54 thereby directing the AO to charging long term capital gain of Rs. 6202310/- on sale of the house without giving any notice for enhancement.

2. That the Learned CIT(A) was wrong in not allowing the benefit u/s 54 for purchase of house at Deli in the name of the wife Smt. Radha Rani out ofthe capitalgain on the sale of residential house at Grater Kailash Colony, Jaipur.”

5. Ground No. 1 is regarding validity of reopening of assessment u/s 147/148. The assessee is a retired government employee and filed its return of income on 3 1.07.2008 which was processed u/s 143(1) of the Act declaring total income of Rs. 1,07,840/- from pension, interest income after claiming the deduction u/s 80C & 80H. Subsequently on the basis of a letter received from ITO, Ward -6(1) on 25.04.2011 regarding the cash deposit of Rs. 20,54,500/- in the bank account of the assessee the AO proposed to reopen the assessment of the assesee by issuing a notice u/s 148 on 02.06.2011. The AO completed the reassessment u/s 144 r.w.s. 147 of the Act by making an addition u/s 69A of the Income Tax Act of Rs. 20,54,500/-. The assessee challenged the action of the AO before the ld. CIT(A) and raised objection of validity of initiation of proceedings u/s 147 could not succeed.

6. Before the Tribunal, the ld. AR of the assessee has submitted that the Assessing Officer has reopened the assessment without reaching to the conclusion of the cash deposit in the bank account represents the income of the assessee escaped assessment. The Assessing Officer at the time of initiation of proceedings u/s 147 of the I.T. Act must have reasons to believe that any income chargeable to tax has escaped assessment. Thus, the AO was wrong in treating the total cash deposits as income u/s 69A of the Act. Hence, the initiation of proceedings u/s 147 was illegal and bad in law. In support of his contention he has relied upon the decision of Hon’ble Delhi High Court in case of United Electrical Co. (P) Ltd. v. CIT 178 CTR 192 and submitted that the Hon’ble High Court has held that existence of tangible material for the formation of opinion is pre- requite for initiation of action u/s 147 of the Act. There should be facts before the AO that reasonably give rise to the belief, but the facts on the basis of which he entertain the belief need not at this stage be tentative conclusion. The material before the AO must have rational connection or relevant bearing to the formation of the belief. The ld. AR has further submitted that the AO cannot make a fishing or rowing inquiry into the whole question as to how the income was generated chargeable to tax has escaped assessment. The reasons recorded for reopening of assessment did not make out of a case that the assessee was engaged in some business and income from such business has not been returned by the assessee which represents the cash deposits in the bank account. The Source of deposits need not necessarily be income of the assessee, therefore, the reassessment proceedings cannot be resorted with a purpose to examine the facts unless there was a reason to belief rather than suspect that income has escaped assessment. The ld. AR has relied upon the following decisions:–

• Kantamani Venkata Satyavathi v. ITO 64 ITR 516
• Bir Bahadur Singh Sinwali v. ITO 69 SOT 197 (Delhi) (URO)
• Amrik Singh v. ITO 142 DTR 6 (Amr-Trb)
• Deepak Sareen v. ITO in (ITAT, Jaipur) ITA No. 619/JP/09
• CIT v. Intezar Ali (All.) Appeal no. 162 of 2013

7. On the other hand, ld. DR has submitted that the deposit of cash in the bank account of the assessee is a sufficient material on the basis of which the AO has formed the belief that income asses sable to tax has escaped assessment. He has further contended that the assessee has not disclosed this transaction in its return of income and therefore, in the absence of any source of the despot, the same was rightly believed to the income of the assessee which has escaped assessment. He has relied upon the orders of the authorities below.

8. I have considered the rival submissions as well as relevant material on record. It is not a case of mere transaction of cash deposit in the bank account of the assessee but during the assessment proceedings in the case of the wife of the assessee the AO found that the cash deposited in the joint account of the assessee and his wife belongs to the assessee. The wife of the assessee stated that the entire cash in the account was deposited by the assessee. Therefore, in the absence of showing this amount in the return of income the AO on the basis of an inquiry conducted during the assessment proceedings of the wife of the assessee found that this transaction pertains to the assessee which constitutes a tangible material to belief that the income asses sable to tax as escaped assessment. Further, there is no assessment and the return of income was processed only u/s 143(1) of the Act, therefore, it is not a case of change of opinion. Only during the course of assessment proceedings the AO came to know that the assessee sold the house. Accordingly I do not find any error or illegality in the action of the AO to reopen the assessment u/s 147/148 of the IT Act. The decisions relied upon by the assessee are not applicable in the facts of the case as prior to the reopening of the assessment the Assessing Officer conducted an inquiry in the assessment proceeding of the wife of the assessee.

9. Ground no. 2 is regarding assessment made u/s 144. The assessee did not response to the notice issued u/s 148 and further, the assessee has also not filed the return of income in response to the notice issued u/s 148 of the Act. However, the assessee requested the AO consider the original return of income as return filed in response to the notice issued u/s 148 of the IT Act. Thereafter, the assesse did not appear before the Assessing Officer. Accordingly, when the assessee has chosen not to participate in the assessment proceedings then the AO was left with no option but to complete the assessment u/s 144 of the Act. The ld. CIT(A) while considering this issue has taken note of the fact that the AO issued notices to the assessee and fixed the hearing, but the assessee did not appear either in person or through representative. Even no adjournment request was filed before the Assessing officer. Accordingly, in the absence of any contrary fact brought before the Tribunal I do not find any reason to interfere with the orders of the authorities below qua this issue.

10. Ground no. 3 is regarding the addition of Rs. 20,54,500/- made u/s 69A of the I.T. Act.

11. I have heard the ld. AR as well as ld. DR and considered the relevant material on record. The assessee has not disputed the fact of depositing of this amount in cash in the bank account. The assessee has explained the source of the deposit as purchase consideration received in cash over and above the consideration shown in the sale deed and received through cheques. The assessee sold his house on 29.12.2007 for a consideration of Rs. 25,51,000/- the assessee claimed that apart from this amount of Rs. 25,51,000/- has also received on money as part of sale consideration out of total consideration of Rs. 71,00,000/-. Therefore, the cash was deposited out of the sale consideration received in cash however, no documentary evidence was filed by the assessee except his own ascertain. In support of the claim of on money receipt of sale consideration neither the confirmation of the purchaser nor any receipt or an agreement under which alleged cash consideration was received has been brought on record. It may be a case that the source of deposit is the consideration received in cash, however it may be equally possibility that the case was deposited into Account to pay the consideration for purchase of new house as immediately thereafter assessee has claimed to have invested the entire consideration in purchase of the new house. However, the payment made for the purchase of new house has gone from the bank account in which the cash was deposited. Even otherwise if the contention of the assessee is accepted that he has received part of sale consideration in cash then applying the same analogy the purchase consideration paid in cash for purchase of new house is also required to be explained by the assessee and at least in the same ratio the purchase consideration in cash has not been explained by the assessee. Thus, it is clear that cash consideration if any received by the assessee, the same has been paid for purchase of the new house and therefore, the source of cash deposit in the back account remained unexplained. The assessee has relied upon various decisions however, in those decisions there are some documents to support the receipt of cash consideration. Hence, the assessee has failed to explain the source of Rs. 20,54,500/- cash deposit in the bank.

12. As regards the additional ground No. 1 the assessee has challenged the enhancement of assessee made by the ld. CIT(A) without issuing the show cause notice.

13. I have heard the ld. AR as well as DR and considered the relevant material on record. Undisputedly the assessment was completed ex-parte u/s 144 r.w.s. 147 of the Income Tax Act. It is apparent that the assessee did not disclose the transaction of sale of house and the AO completed the assessment by making the addition on account of cash deposit in the bank account of the assessee. Before the ld. CIT(A) the assessee claimed the benefit of section 54 on account of investment made in purchase of new house. The ld. CIT(A) denied the claim of the assessee on the ground that the new house was purchase in the name of his wife. At the same time, the ld. CIT(A) has observed that the entire sale consideration will be assessed as capital gain.

14. The ld. CIT(A) has denied the claim of deduction u/s 54 by following decision of Hon’ble Jurisdiction High Court in case of kalya vs CIT (2012) 22 taxman.com67 (Raj). However, the Hon’ble jurisdiction High Court in the latest decision dated 07.11.2017 in case of Laxmi Narayan vs. CIT in ITA No. 20/2016,118/2017 & 136/2017 after consideration all the decisions on this point including the decision in case of kalya vs CIT (supra) has held in para 7.2 and 7.3 as under:-

^“7.2 On the ground of investment made by the assessee in the name of his wife, in view of the decision of Delhi High in sunbeam Auto Ltd. and other judgments of different High Courts, the word used is assessee has to invest it is not specified that it is to be in the name of assessee.

7.3 It is true that the contentions which have been raised by the department is that the investment is made by the assessee in his own name but the legislature while using language has not used specific language with precision and the second reason is that view has also been taken by the Delhi High Court that it can be in the name of wife. In that view of the matter, the contention raised by the assessee is required to be accepted with regard to Section 54B regarding investment in tube well and others. In our considered opinion, for the purpose of carrying on the agricultural activity, tube well and other expenses are for betterment of land and therefore, it will be considered a part of investment in the land and same is required to be accepted.

In view of the above, all the issues are answered in favour of the assessee and against the department.”

Accordingly when the entire investment for the purchase of new house has gone through the assessee’s account then the benefit u/s 54 of the Income Tax Act cannot be denied on the ground the new house was purchased in the name of wife. Hence, the claim of the assessee u/s 54 of the Income Tax Act is allowed.

15. Since, the claim of the assessee u/s 54 of the IT Act is allowed, therefore, another ground raised by the assessee of enhancement of income by the Id. CIT(A) become infructuous.

In the result, the appeal of the assessee is partly allowed.

Order pronounced in the open court on 13/12/2017.