LALCHAND KISHANCHAND NAWANI,KOLKATA vs. ITO 24 (2)(5), MUMBAI

None appeared on behalf of the assessee, even though the notice of hearing was sent by registered post on earlier occasions. Hence I proceed to dispose of the appeal ex-parte, without the presence of the assessee.

I heard Ld D.R and perused the record. The assessing officer reopened the assessment of the year under consideration u/s 147 of the Act on the reasoning that the assessee has made investment to the tune of Rs.50 lakhs in Bonds and further the aggregate credit in bank account was shown at 2 Lalchand Kishanchand Nawani Rs.90.70 lakhs as against the sale consideration of Rs.44.46 lakhs. In the return of income filed by the assessee, he did not disclose the capital gains. During the course of assessment proceedings, the assessee furnished the details of sale of flats and also the details of investment made in bonds eligible for deduction u/s 54EC of the Act. The AO computed the capital gains, but did not allow deduction u/s 54EC of the Act on the reasoning that the same was not claimed in the return of income. The Learned CIT(A) also confirmed the same.

The AO noticed that the assessee has made deposit of Rs.85,000/- into his bank account maintained with Dena Bank. The AO assessed the same u/s 69 of the Act on the reasoning that the sources of the said deposit were not explained by the assessee. Before Learned CIT(A), the assessee explained the sources, but the Ld CIT(A) did not accept them. Accordingly, he confirmed this addition also.

I heard Ld D.R and perused the record. There is no dispute with regard to the fact that the assessee has made investment in bonds eligible for deduction u/s 54EC of the Act. The tax authorities have rejected the claim for deduction on the reasoning that the assessee has not claimed the same as deduction in the return of income. However, the fact remains that the assessee did not disclose long term capital gains in the return of income at all, since the capital gains was nil after claim deduction u/s 54EC of the Act. Since the assessing officer has computed long term capital gains on sale of flats, I am of the view that he should have allowed deduction u/s 54EC of the Act also, without which the capital gains workings cannot be said to be correct. Accordingly, I am of the view that the Learned CIT(A) was not justified in confirming the disallowance of deduction allowable u/s 54EC of the Act. Accordingly, I set aside the order passed by Learned CIT(A) on this issue and restore the same to the file of the AO for examining the claim for deduction u/s 54EC of the Act in accordance with law.

The next issue relates to the addition of bank deposit amount of Rs.85,000/-. I notice that the assessee has offered explanations before the Learned CIT(A), but the same was not accepted by him. In my view, this issue also requires fresh examination at the end of AO. Accordingly, I set aside the order passed by Learned CIT(A) on this issue also and restore the same to the file of AO for examining it afresh in accordance with law.

Needless to mention, the assessee should be given proper opportunity of being heard.

In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.