NIKHIL RAVINDRA MANJREKAR ,MUMBAI vs. ACIT-35(2)(1), MUMBAI

The Assessing Officer issued a show-cause notice dated 26/12/2018, which went unanswered. Consequently, the assessee’s claim of deduction under section 54, arising from the investment of ₹3,55,00,000 in the new residential property, was summarily disallowed and the assessment came to be completed ex parte.

Before the learned CIT(A), the assessee explained that he had sold a residential flat on 08/04/2015 for ₹2,27,00,000, which had originally been purchased on 04/09/2010 for ₹1,17,75,000. Soon thereafter, the assessee purchased another residential flat at Oberoi Splendour, Jogeshwari, Mumbai, vide agreement dated 30/05/2015. The computation of long-term capital gain and claim of exemption under section 54 was placed on record as follows:

Sr Particulars Amount Rs No. 1. Sale Consideration 2,27,00,000/- 2. Less: Indexed cost of Acquisition 1,79,02,367 (CII of FY 2010-11:711 and CII of FY 2015- 16:1081) Original Cost *[CII of FY 2015-16 / CII of FY 2010- 11) i.e, 1,17,75,000*1081/711

Expenditure for transfer 2,27,000/- 4. Long Term Capital gain [l-(2+3)] (A) 45,70,363 Nikhil Ravindra Manjrekar 6. In support of his claim, the assessee produced the following documents: copy of the original purchase agreement dated 04/09/2010, copy of sale deed dated 08/04/2015, and copy of purchase agreement dated 30/05/2015 for the Oberoi Splendour flat.

The learned CIT(A), while considering the matter, noted the payment schedule for the new property aggregating to ₹3,55,00,000 as reflected in the purchase deed.

Rs. 5,00,000/- Rupees Five Lacs Only as token money Rs. 20,00,000/- Rupees Twenty Lacs Being paid as earnest money part payment before the execution of these presents. Rs. 1,61,45,000/- Rupees One Crore Sixty One lakhs & Forty Five thousand Only: Being paid as part payment on or before the execution of these presents. Rs. 3,55,000/- Rupees Three Lakhs and fifty five thousand only Being TDS 1% of the total consideration to be paid by the TRANSFEREE to the credit of the TRANSFEROR'S Income tax acct, u/s 194 IA of the Income Tax Act, 1961 Rs. 1,65,00,000/- Rupees One Crore & Sixty Five Lakhs Only: Being the balance full and final consideration, to be paid to the TRANSFERORS on or before the TRANSFERORS hands over all original documents along with the TRANSFERORS handing over

However, the learned CIT(A) rejected the claim essentially on the premise that the assessee had failed to furnish the mode of payment in respect of the said purchase and, therefore, the exemption under section 54 could not be allowed.

The assessee, in rebuttal, drew attention to the sale deed itself which contained details of cheque payments along with receipts annexed thereto. It was further explained that copies of bank statements were filed (even if as additional evidence) and that at no stage was any specific query raised by the appellate authority regarding the mode of payment. Thus, according to the assessee, the denial of deduction was wholly unwarranted.

The learned Departmental Representative, however, urged that the matter may be restored to the Assessing Officer for factual verification. 11. We have given our thoughtful consideration to the rival submissions and perused the material on record. Certain facts stand beyond dispute: the assessee sold his residential property at Kandivali on 08/04/2015 for ₹2,27,00,000 and, within a short span of over a month, reinvested the sale proceeds into another residential property at Oberoi Splendour, Jogeshwari, for ₹3,55,00,000 vide agreement Nikhil Ravindra Manjrekar dated 30/05/2015. The computation of capital gains placed before us shows that the taxable long-term capital gain amounted to ₹45,70,363, against which exemption under section 54 was claimed.

The reasoning adopted by the learned CIT(A) cannot stand judicial scrutiny. Once the sale deed itself recorded the consideration of ₹3,55,00,000, acknowledged receipt of substantial part of the consideration by cheques, and annexed contemporaneous receipts, it is wholly incorrect to conclude that mode of payment was not disclosed. The law does not require needless formalism when substantive compliance is manifest.

Moreover, it was never the case of the Revenue, either at the assessment stage or at the first appellate stage, that the source of purchase of the new property was doubtful or unexplained. The controversy was confined only to the claim of deduction under section 54. The assessee’s sale deed and supporting documents had already put the matter beyond doubt.

Now before us, the assessee has also produced his bank statements reflecting the payments made through regular banking channels. These statements corroborate the recitals in the registered sale deed and receipts, and establish beyond cavil that the entire purchase consideration was discharged through identifiable and explained sources. In this factual matrix, to disallow the claim by alleging absence of disclosure Nikhil Ravindra Manjrekar of payment details is not only unwarranted but also contrary to the very purpose of section 54.

We, therefore, hold that the assessee is entitled to exemption under section 54 to the extent of ₹45,70,363. The disallowance sustained by the lower authorities is accordingly directed to be deleted. 16. In the result, the appeal of the assessee is allowed.