2019 (11) TMI 1137 - AT - Income Tax

Tribunal dismisses appeal, adds Rs. 1,15,73,665 to taxable income for failure to meet Section 54F exemption conditions.

Smt. Amarjeet Kaur Versus Income-tax Officer, Ward 36 (5), New Delhi.

Smt. Amarjeet Kaur Versus Income-tax Officer, Ward 36 (5), New Delhi. - TMI Issues Involved:1. Eligibility for exemption under Section 54F of the Income Tax Act, 1961.2. Validity of the purchase transaction and the timing of investment.3. Compliance with legal requirements for claiming capital gains exemption.4. Credibility of evidence provided by the assessee.Issue-wise Detailed Analysis:1. Eligibility for exemption under Section 54F of the Income Tax Act, 1961:The assessee claimed exemption under Section 54F of the Income Tax Act, 1961, arguing that the capital gains from the sale of the original property were invested in the purchase of a new residential property within the stipulated period. The Assessing Officer (AO) and the Commissioner of Income-tax (Appeals) [CIT(A)] did not accept this claim, noting that the required conditions for the exemption were not met. Specifically, the AO observed that the assessee did not invest the capital gains within the prescribed period of one year before or two years after the date of transfer, nor did they complete the construction of the new property within three years.2. Validity of the purchase transaction and the timing of investment:The assessee contended that there was an understanding with the purchaser of the original property to buy back a portion of the house constructed on it. The agreement of sale dated 30/3/2012 and the sale deed executed on 9/7/2015 were presented as evidence. However, the AO and CIT(A) found these claims unsubstantiated, noting that the alleged agreement was unregistered and could have been created to suit the assessee's convenience. They also pointed out that neither the assessee nor the purchaser declared the respective capital gains, raising doubts about the authenticity of the transaction.3. Compliance with legal requirements for claiming capital gains exemption:The authorities emphasized that the assessee did not declare the capital gains arising from the sale of the original property in her income tax return. Additionally, the purchaser, Smt. Jaspreet Kaur, did not declare any short-term capital gains or income from business as a builder. This lack of compliance with legal requirements led the authorities to conclude that the conditions for claiming exemption under Section 54F were not met.4. Credibility of evidence provided by the assessee:The authorities questioned the credibility of the evidence provided by the assessee, particularly the unregistered agreement of sale dated 30/3/2012. They noted inconsistencies in the documentation, such as the absence of a recital regarding book entries in the agreement and the sale deed. The authorities also highlighted that the sale deed dated 9/7/2015 was executed beyond the three-year period stipulated for claiming the exemption, further undermining the assessee's claim.Conclusion:The tribunal upheld the findings of the AO and CIT(A), concluding that the assessee did not provide sufficient evidence to prove that the capital gains were invested in the new property within the stipulated period. The tribunal noted that the agreement of sale dated 30/3/2012 appeared to be an afterthought and lacked credibility. Consequently, the assessee's appeal was dismissed, and the addition of Rs. 1,15,73,665/- to her taxable income was sustained. The tribunal found no merit in the appeal and pronounced the dismissal in open court on 18th November 2019.