2016 (6) TMI 795 - AT - Income Tax

Appeal partly allowed, issues remitted for re-examination. Exemption under section 54F must be in assessee's name.

The Tribunal partly allowed the appeal, remitting the issues of unexplained investment and the addition of twice the sale consideration back to the ... Denial of exemption under section 54F - assessee purchased a residential plot and constructed a house in the name of his unmarried daughter who was dependent and before due date of filing of return of income under section 139(1)- Held that:- We perused the provisions of section 54F of the Act which are beneficial provisions but exemption under section 54F has to be claimed only by purchasing/ constructing a new residential property in the assessee's own name and not on his unmarried daughter. This exemption is exclusive to be claimed by the assessee which cannot be clubbed or applied to the blood relation or family members and also rely on the decision of Prakash v. ITO [2008 (9) TMI 234 - BOMBAY HIGH COURT ] where the Lordships have considered that the exemption should be allowed only in the name of the assessee, confirm of the order of the Commissioner of Income-tax (Appeals) on this ground and dismiss the ground of the assessee. Addition twice the sale consideration - source of expenditure incurred for construction - Held that:- The findings of the Assessing Officer based on suspicion without considering the construction expenditure incurred towards labour, materials on day-to-day basis being highly unorganised sector. The observations of the Assessing Officer that the money has been used for some other purpose and investment are made in the construction of the residential property is from undisclosed source which are different from the Tamilnadu Mercantile Bank Ltd. are without any basis or evidence. But on a perusal of the bank account produced in hearing proceedings, we found that cheques were also issued in the name of the persons, and there is no clarity on issue whether the said sum was utilised for the construction of residential building. Therefore, we are of the opinion that the matter has to be re-examined by the Assessing Officer in the above context. Unexplained investment in respect of land - family arrangements - Held that:- Assessing Officer on suspicion treated the difference of ₹ 21,53,000 as unexplained income without any evidence or statement recorded from the assessee's mother or sister. The learned Assessing Officer has relied on the sworn statement of the assessee and the daughter and made elaborate findings in his order on addition. The Assessing Officer's observation of unexplained income is on imagination overlooking the fact that the life interest is created for the assessee's mother and sister by will of the late Dharmaraj Nadar (father) in the year 2001. The learned Assessing Officer hastily based on assumption made an addition without considering the basic realities of blood relations and their influence in completing the sale transaction. Therefore, considering the apparent facts and circumstances, we are of the opinion that the matter need to be re-examined as the learned Assessing Officer has not recorded any statement or made inquiry on this aspects. We set aside the order of the Commissioner of Income-tax (Appeals) on this issue and remit the entire issue to the file of the Assessing Officer for limited purpose only to verify the excess amount in bank account pertains to the mother and sister of the assessee. Issues Involved:1. Denial of exemption under section 54F of the Income-tax Act.2. Addition by the Assessing Officer of twice the sale consideration.3. Unexplained investment in respect of land.Detailed Analysis:1. Denial of Exemption under Section 54F of the Act:The assessee, a retired employee, claimed exemption under section 54F of the Income-tax Act by purchasing a residential plot and constructing a house in the name of his unmarried daughter. The Assessing Officer (AO) denied the exemption because the property was not purchased in the assessee's name but in his daughter's name. The AO relied on various judicial precedents which stipulated that the exemption under section 54F must be claimed by purchasing or constructing a new residential property in the assessee’s own name. The Commissioner of Income-tax (Appeals) [CIT(A)] upheld the AO’s decision, citing similar judicial decisions. The Tribunal confirmed this view, noting that the exemption under section 54F is exclusive to the assessee and cannot be applied to family members.2. Addition of Twice the Sale Consideration:The AO found discrepancies between the sale consideration reported by the assessee and the bank deposits. The assessee reported a sale consideration of Rs. 97,82,000, but the AO found cash deposits totaling Rs. 1,19,35,000 in the assessee’s bank account. The AO treated the difference of Rs. 21,53,000 as unexplained income, concluding that the entire sale consideration was not properly accounted for. The CIT(A) concurred with the AO’s findings. However, the Tribunal noted that the AO’s conclusions were based on suspicion without concrete evidence. The Tribunal remitted the issue back to the AO for re-examination, instructing the AO to verify the source of the deposits and the utilization of funds for the construction of the residential property.3. Unexplained Investment in Respect of Land:The AO added Rs. 97,82,000 to the assessee’s income as undisclosed investment, suspecting that the sale proceeds were used for purposes other than acquiring a new asset. The assessee argued that the amount was utilized for the purchase of land and construction of a residential property. The Tribunal found that the AO’s addition was based on suspicion and lacked evidence. The Tribunal remitted the issue back to the AO for verification, emphasizing the need to consider the construction expenses and the utilization of sale proceeds.Conclusion:The Tribunal partly allowed the appeal for statistical purposes, remitting the issues of unexplained investment and the addition of twice the sale consideration back to the AO for re-examination. The denial of exemption under section 54F was upheld, confirming that the exemption must be claimed in the assessee’s name.Order Pronounced:The appeal of the assessee in ITA No. 2047/Mds/2015 is partly allowed for statistical purposes. Order pronounced on April 7, 2016, at Chennai.