Unexplained consideration defeated by documentary evidence; reinvestment exemption for long term capital gain permitted following qualifying purchase.

Admitted documentary evidence including bank payment records and an agreement established the factual basis for two purchase transactions, leading to the conclusion that an assessing addition for alleged unexplained consideration could not be sustained and the addition was deleted. Separately, the asset's holding period qualified it as a long term capital asset and the sale proceeds were reinvested in a residential property in accordance with statutory requirements; consequently the reinvestment exemption under Section 54 was allowed. Both substantive contentions were resolved in the assessee's favour on the evidentiary and qualifying transaction bases.

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Issues: (i) Whether the addition of Rs. 66,00,000 made by the Assessing Officer and confirmed by the CIT(A) on account of alleged shortfall in sale consideration is sustainable; (ii) Whether the claim of exemption under Section 54 in respect of long term capital gain of Rs.15,50,000 is allowable.

Issue (i): Whether the addition of Rs.66,00,000 representing alleged difference in consideration for purchase of property is justified.

Analysis: Documentary record before the Tribunal included bank payment particulars showing payments aggregating Rs.81,00,000 and an agreement evidencing purchase of rights for Rs.66,00,000 which was filed and admitted under Rule 46A of the Income-tax Rules. The factual position shows purchase from two different persons for Rs.66,00,000 and Rs.15,00,000 respectively, and the payments correspond to these transactions. The admitted evidence and the transactional explanation demonstrate that the Assessing Officer's conclusion of unexplained excess consideration lacked factual foundation.

Conclusion: The addition of Rs.66,00,000 is deleted in favour of the assessee.

Issue (ii): Whether the assessee is entitled to exemption under Section 54 for long term capital gain of Rs.15,50,000.

Analysis: The assessee purchased the Gurgaon property in 1997 and sold it on 04.08.2010, a holding period consistent with long term capital asset treatment. The sale proceeds were invested in purchase of another residential property on 04.08.2010 as required for claiming exemption under Section 54. The contention that the income is business income was not supported by contrary evidence, and the facts indicate the property was held as an investment and not as stock-in-trade.

Conclusion: The assessee is entitled to exemption under Section 54 in respect of long term capital gain of Rs.15,50,000; the claim is allowed in favour of the assessee.

Final Conclusion: Both substantive issues raised by the assessee are decided in the assessee's favour, resulting in deletion of the assessed addition of Rs.66,00,000 and allowance of exemption under Section 54 for Rs.15,50,000.

Ratio Decidendi: Where admissible documentary evidence including agreements and bank payment records establishes the factual basis of a transaction, an assessing addition for alleged unexplained consideration cannot be sustained; and where a capital asset is held for the long term and sale proceeds are invested in qualifying residential property within the statutory requirements, exemption under Section 54 applies.

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