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Facts
The assessee claimed a deduction of Rs 3,62,37,500 under Section 54F for the purchase of a new residential property after selling an old one. The Assessing Officer disallowed this deduction, stating the conditions were not met and documents were not provided. The assessee also faced an addition of Rs 12 lakhs for alleged unexplained cash deposits.
Held
The Tribunal held that the assessee had provided sufficient documentary evidence to the CIT(A) to substantiate the claim for deduction under Section 54F and the source of funds for the new property. The Tribunal also found that the cash deposits were explained as withdrawals from the bank.
Key Issues
Whether the assessee is eligible for deduction under Section 54F for reinvestment in a new residential property, and if cash deposits in the bank account were unexplained.
Sections Cited
143(3), 54F, 68, 115BBE, 54
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Income Tax Appellate Tribunal, DELHI BENCH “C”: NEW DELHI
Before: SHRI CHALLA NAGENDRA PRASAD & SHRI M. BALAGANESH
O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in for AY 2021-22, arises out of the order of the ld National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] dated 16.12.2024 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 21.12.2022 by the Assessing Officer, Assessment Unit, Income Tax Department (hereinafter referred to as ‘ld. AO’).
The Ground No. 1 raised by the revenue is challenging the action of the Learned CITA in deleting the addition of Rs 3,62,37,500 on account of capital gain deduction under section 54F of the Act.
We have heard the rival submissions and perused the materials available on record. The assessee is an individual and had filed his return of income for assessment year 2021-22 on 27-10-2021 declaring total income of Rs 11,74,700. The case of the assessee was selected for scrutiny under CASS for the reason ‘capital gains deduction claimed’ . The assessee had actually claimed the benefit of substantial deduction under section 54F of the Act and for the purpose of examining the veracity of the claim, the case of the assessee was selected for scrutiny. The Learned AO noted that assessee had claimed a deduction under section 54 F of the Act for Rs 3,62,37,500 in the return. The Learned AO noted that assessee had actually sold a residential house during the year and deduction under section 54F of the Act is available only for reinvestment made in residential house out of transfer of long-term capital asset other than a residential house. The assessee was accordingly show-caused by the Learned AO to comply with the eligibility conditions prescribed under section 54F of the Act with all the supporting documents. The Learned AO noted that no reply was filed by the assessee to the said show-cause notice. Further, it was noticed by the Learned AO that assessee had not submitted the purchase agreement in respect of the property sold during the year. Hence, in the absence of legal documents that could be relied upon , the title / ownership as well as the cost of acquisition of the immovable property sold during the year remain to be unsubstantiated. Since replies were not filed by the assessee properly, the Learned AO completed the assessment and disallowing the deduction of under section 54F of the Act in the sum of Rs 3,62,37,500 .
The assessee submitted before the Learned CITA that the Learned AO had failed to consider the documents submitted vide submission dated 9-9-2022 comprising of a) copy of bank statement of Bank of India and HDFC Bank through which the payments were made for purchase of property ; b) copy of sale deed for sale of property; c) copy of purchase deed for purchase of property ; d) copy of loan sanction letter from Shriram Housing Finance Pvt Ltd for purchase of property ; e) in the purchase deed schedule of payment was shown on page no. 7 which also shows the loan from Shriram Finance of Rs 4.96 crores through Banker Cheque No. 513918 dated 31-12-2020.
The assessee submitted that he had sold a residential property situated at A-3 / 195, Janakpuri , Delhi - 110058 for a consideration of Rs 4 crores comprising of two sale deeds of Rs 2 crores each. The income under the head capital gain of Rs 3,62,37,500 had been duly disclosed in the return of income of the assessee. The assessee purchased a new residential property for a total consideration of Rs 12,65,00,000 along with co-purchaser i.e. Sakshi Kumar, daughter-in-law of the assessee. The assessee and co-purchaser had the equal share of 50-50 in the property and purchase consideration for the assessee was Rs 6,32,50,000 being 50% of Rs 12,65,00,000. For the purchase of the new residential property, the assessee and co-purchaser had taken loan from Shriram Housing Finance of Rs 4,96,00,000. The assessee also enclosed the complete details of payments made for the new property. The assessee enclosed the sanction letter from Shriram Housing Finance in respect of sanction of housing loan for purchase of new residential property. The assessee submitted the complete payment details with corresponding link with the bank statement of the assessee for purchase of the new property. The assessee also submitted that the source for making investment in the new property was out of sale consideration of old property of Rs 4,00,00,000, salary income and rental income. The assessee also enclosed the return of income for the last three years before the Learned CITA. The assessee also submitted that the source for making payment by the Co-Purchaser for the new property is also out of the receipts from her husband Mr. Vicky Kumar and father-in-law Mr. Vijay Kumar. The assessee also enclosed the last three years IT returns of the Co-Purchaser.
The Learned CITA duly appreciated the aforesaid documents and deleted the addition by observing as under:-
“I have gone through the submission and same has been perused carefully. It is pertinent to note that during the year the appellant has sold a residential property situated at Janakpuri, Delhi for total sale consideration of Rs. 4 Cr vide two separate sale deeds of Rs. 2cr each. The copy of sale deeds was duly submitted before the assessing officer. The income under the head capital gain of Rs. 3,62,37,500/- had been duly disclosed in the return of income of the appellant. During the same year, the appellant purchased new residential property jointly with Sakshi Kumar daughter in law from Uppal Housing Pvt. Ltd. For total sale consideration amounting to Rs. 12,65,00,000/- and copy of purchase deed was submitted before the AO. The Investment made was claimed as deduction u/s 54 of the Act. However, it is evident that the purchase price of property was Rs. 12.65 cr. and ½ share of the appellant was Rs. 6,32,50,000/-. Further stamp duty of Rs. 63,25,000/- (1/2 share of assessee Rs. 31,62,500/-) and corporation tax of Rs. 12,65,000/-(1/2 share of assessee i.e.. Rs. 6,32,500/-) and the details of payment made for purchase of property is duly mentioned in the sale. After verified the details it is seen that except for amount of Rs. 4,96,00,000/- (which was loan from Shriram Housing) (1/2 share of appellant Rs. 2,48,00,000/-) all the payments were made by the appellant and co-buyer Sakshi Kumar). The payments of this share by the appellant were from his bank accounts (HDFC bank and Bank of India) and the same were verifiable from the bank statements of the appellant submitted before the AO. The break-up of the payment made by the appellant and co- purchaser for the purchase of new residential property are as above. In view of the above discussion, it is pertinent to note that the appellant is having the source of income during the year under consideration was receipts of sale consideration of Rs. 4,00,00,000/- for sale of property, salary income and rental income. And also the source of income of the Co- purchaser is salary income and rental income. The source of the fund for the purchase of the property is receipts from her husband Mr. Vicky Kumar and father-in-law Mr. Vijay Kumar. After verified the details, it is found that the co-purchaser filed the return of income for the last three years and same property duly reflected in the return of income. Therefore, considering the facts and circumstances of the case, the impugned addition of Rs. 3,62,37,500/- was not warranted. It is also fact that the assessing officer has not considered the submission submitted by the appellant during the course of assessment proceedings on 09.09.2022. The contention of the appellant is found tenable. Hence, the ground is allowed.”
None of the aforesaid factual observations could be controverted by the revenue before us by bringing in contrary evidences on record. Hence we do not find any infirmity in the order of the Learned CITA in this regard. Accordingly, the Ground No. 1 raised by the revenue is dismissed.
The Ground No.2 raised by the revenue is challenging the deletion of addition made in the sum of Rs 12 lakhs on account of cash deposits made in the bank account.
We have heard the rival submissions and perused the materials available on record. The Learned AO in the assessment proceedings directed the assessee to explain the source of cash deposits of Rs 12 lakhs made by him in the bank account. The Learned AO noted that no reply was filed by the assessee and accordingly the Learned AO proceeded to treat the said cash deposit as unexplained cash credit under section 68 read with section 115 BBE of the Act and made an addition of Rs 12 lakhs in the assessment. The assessee explained before the Learned CITA that he had explained to the Learned AO that the cash deposits were made out of cash withdrawals made from the bank account during the year itself and also enclosed the complete bank statements and cash book before the Learned AO before the Learned CITA. The Learned CITA on examination of the cash book and the bank statements observed that assessee had deposited the cash out of cash withdrawals from the bank and hence no part of the cash deposits is unexplained. This factual finding of the Learned CITA could not be contraverted by the revenue before us by bringing in contrary evidence on record. Hence the Ground No. 2 raised by the revenue is dismissed.
The Ground No. 3 raised by the revenue is general in nature and does not require any specific adjudication.
In the result, the appeal of the revenue is dismissed.
Order pronounced in the open court on 11/03/2026.