Registered property transaction and explained bank deposits supported section 54 relief; unexplained money additions were deleted.

Registered purchase of a new residential flat was held to support deduction under section 54 where sale deeds, bank entries and payment records traced the investment to sale proceeds, and delayed cheque encashment did not by itself make the transaction unexplained; the addition under section 69A was deleted. Cash deposits in the bank were also treated as explained because they were linked to sale consideration already accepted, proceeds from sale of household items and electronic goods, and the assessee's own cash balance, with supporting bills and surrounding facts. On these facts, the adverse inference under section 69A was unsustainable and both additions were deleted.

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Issues: (i) Whether the assessee was entitled to deduction under section 54 in respect of investment in the new residential flat and whether the addition of Rs.49,80,330/- as unexplained money under section 69A was sustainable. (ii) Whether the cash deposits of Rs.10,80,000/- in the assessee's bank account were to be treated as unexplained money under section 69A.

Issue (i): Whether the assessee was entitled to deduction under section 54 in respect of investment in the new residential flat and whether the addition of Rs.49,80,330/- as unexplained money under section 69A was sustainable.

Analysis: The assessee had sold the earlier residential flat and the registered sale and purchase deeds, together with bank entries, showed that the funds used for the new flat were traceable to the sale proceeds. The delay in encashment of the cheques by the vendor did not, by itself, establish an unexplained inflow of funds or invalidate the registered purchase. The assessee had sufficient bank balance on the relevant date, and the registered conveyance and payment of stamp duty and registration charges supported the genuineness of the transaction. In the absence of evidence that the purchase deed was sham or fraudulent, the lower authorities' conclusion was based on conjecture.

Conclusion: The assessee was entitled to deduction under section 54, and the addition of Rs.49,80,330/- under section 69A was unsustainable and deleted.

Issue (ii): Whether the cash deposits of Rs.10,80,000/- in the assessee's bank account were to be treated as unexplained money under section 69A.

Analysis: The cash deposits were explained as comprising cash received on sale of the earlier flat, proceeds from sale of household items and electronic goods, and the assessee's own cash balance. The cash component of the sale consideration was already accepted in the assessment of capital gains. The sales of personal effects were supported by bills and surrounding circumstances, and the fact that individual sales were below the threshold under rule 114B meant that PAN particulars were not required. On the facts, the explanation was found to be plausible and the adverse inference drawn by the lower authorities was unjustified.

Conclusion: The addition of Rs.10,80,000/- under section 69A was deleted.

Final Conclusion: The assessee's claim for capital-gains relief was accepted, both impugned additions were deleted, and the appeal succeeded in full.

Ratio Decidendi: A registered property transaction supported by bank evidence and corroborative circumstances cannot be treated as sham or as unexplained money under section 69A merely because payment is cleared later, when the source is traceable and the Revenue fails to disprove the explanation with evidence.

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