Reassessment can examine linked exemption claims, and section 54F relief may cover property in close relatives' names, but strict section 54EC timing applies.

ITAT Chennai held that a claim linked to the escaped capital gain could be examined in reassessment under section 147, so the revised exemption claim was admissible. It further held that section 54F relief could not be denied merely because the new residential house stood in the names of the assessee's daughters or was acquired through a mortgage by conditional sale; the transaction amounted to a qualifying purchase. However, deduction under section 54EC was refused because the investment in specified bonds was made after the prescribed six-month period from transfer. The assessee obtained partial relief, succeeding on reassessment and section 54F but failing on section 54EC.

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Issues: (i) Whether a new claim for exemption could be entertained in reassessment proceedings under section 147; (ii) whether exemption under section 54F was available where the new residential house was purchased in the names of the assessee's daughters and through a deed of mortgage by conditional sale; (iii) whether deduction under section 54EC was available for investment made beyond six months from transfer.

Issue (i): Whether a new claim for exemption could be entertained in reassessment proceedings under section 147.

Analysis: Reassessment proceedings are confined to income that has escaped assessment and do not permit reopening of concluded matters unrelated to the escaped income. A claim connected with the very income brought to tax in reassessment can be examined, and the assessee had not introduced a wholly new claim unrelated to the escaped income. The revised computation was made in response to the reopening that brought the capital gain to tax.

Conclusion: The claim was admissible in reassessment and was rightly considered in favour of the assessee.

Issue (ii): Whether exemption under section 54F was available where the new residential house was purchased in the names of the assessee's daughters and through a deed of mortgage by conditional sale.

Analysis: The exemption provisions for purchase or construction of a new residential house do not require that the new asset must be acquired only in the assessee's own name. Where the investment is made out of the assessee's sale consideration in favour of close family members who are not strangers, the benefit cannot be denied merely on the ground of the name in which the property stands. A transaction structured as a mortgage by conditional sale, accompanied by possession, payment of consideration, and later confirmation, amounted to a transfer or purchase for the purpose of the exemption. Registration was not treated as indispensable for denying the claim.

Conclusion: The assessee was entitled to exemption under section 54F on both counts.

Issue (iii): Whether deduction under section 54EC was available for investment made beyond six months from transfer.

Analysis: The statute prescribes investment in the specified bonds within six months from the date of transfer. The assessee's investment was made after the expiry of that period, and no acceptable basis was shown to extend or dilute the statutory limit. The relied-upon precedent on calendar-month computation did not assist on the facts.

Conclusion: The claim under section 54EC was not allowable.

Final Conclusion: The appeal succeeded on the reassessment and section 54F issues but failed on section 54EC, resulting in partial relief to the assessee.

Ratio Decidendi: In reassessment, a deduction claim connected with the escaped income can be examined, and exemption for purchase of a new residential house is not denied merely because the property stands in the name of close relatives or is acquired through a transfer arrangement amounting to purchase, but section 54EC relief remains subject to strict compliance with the prescribed six-month investment period.

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