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Income Tax Appellate Tribunal, ‘’ SMC” BENCH, AHMEDABAD
Before: SHRI WASEEM AHMED
आदेश/O R D E R
PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned two appeals have been filed at the instance of the Assessee against the common order of the Learned Commissioner of Income Tax (Appeals) National Faceless Appeal Centre (NFAC), Delhi, dated 26/07/2021 arising in the matter of assessment order passed under s. 143(3) r.w.s. 147 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Years 2011-2012 & 2012-2013.
ITA nos.255-256/AHD/2021 A.Ys. 2011-12 & 2012-13 2
First, we take ITA No. 255/Ahd/2021, an appeal by the assessee for A.Y. 2011-12
The assessee has raised following the grounds of appeal:
Disallowance of claim u/s.54F – Rs.8,05,100 The Hon’ble CIT(A), NFAC, Delhi has confirmed the addition of Rs.805,100 by not allowing deduction u/s.54F of the IT Act, 1961, which was rightly claimed by the appellant u/s.54F of the Act. The Ld.A.O and CIT(A), NFAC, Delhi has also wrongly estimated the market value of agricultural land as on 01/04/1981 ignoring the valuation report of government registered valuer. Further, the ld.A.O and CIT(A), NFAC, Delhi has not considered the real intention of the appellant assessee to buy a new residential flat on the basis of advance payment of Rs.3,50,000/- made on 18th August, 2010 i.e before the due date of filing return of income and thereafter within time allowed in the said provision. Your appellant therefore prays for the following : a) To delete an addition of Rs.8,05,100/- made towards Disallowance of claim u/s.54F during the year under review. b) Your appellant craves leave to add to, or delete or modify any Ground of Appeal before or the time of hearing of the appeal.
The only issue raised by the assessee is that the learned CIT(A)- National Faceless Appellate Center Delhi erred in conforming the disallowance of exemption claimed under section 54F of the Act for Rs. 8,05,100/- only.
The facts in brief are that the assessee is an individual and claimed to be engaged in agricultural activity. The assessee for the year under consideration did not file the return of income. The AO received an information that the assessee transferred immovable property for Rs. 93 lakh. Thus, the notice under section 148 of the Act was issued upon the assessee. The assessee in response to such notice filed return of income dated 25th April 2018 declaring income at Rs. 1,42,230/- and agricultural income at Rs. 5,65,000/- only.
ITA nos.255-256/AHD/2021 A.Ys. 2011-12 & 2012-13 3
4.1 The AO during the assessment proceedings found that the assessee along with other four co-owner transferred a land property situated at Block No. 170 Paiki, Moje-Samiyala admeasuring 9300 Sq. Mtr vide deed 20-07-2010 for a consideration of Rs. 93 Lakh in which assessee’s share was of Rs. 19 Lakh only. The assessee worked out the long term capital gain of Rs. 9,40,150/- against which claimed an exemption under section 54F of the Act for Rs. 8,05,100/- on account of new purchase of flat dated 27-06-2012. The AO found that the assessee purchased flat after the due date of filing the return of income under section 139(1) i.e. 30-07- 2011. Therefore, the assessee was required to deposit the sale proceeds in authorized bank account under capital gain account in order to claim exemption under section 54F of the Act but no such deposit was made. Therefore, the AO requires the assessee to explain why the claim of exemption under section 54F should not be disallowed.
4.2 The assessee in response thereto submitted that the impugned new flat was booked as on 18th August 2010 i.e. during the year under consideration by making down payment of Rs. 3.5 lakh through banking channel. Hence, he is eligible to claim deduction under section 54F of the Act.
4.3 However, the AO disagreed with the contention of the assessee by holding that the sale proceed was not invested in new residential house before the due date of filing the return of income under section 139(1) of the Act nor the same was deposited in the specified bank account. Further, the assessee only filed return of income as on 25th April 2018 in response to the notice issued under section 148 of the Act. Therefore, the claim for exemption made by the assessee for Rs. 8,05,100/- is not allowable in the absence of return of income under section 139(1) of the Act. Thus, the AO disallowed the same and added to the total income of the assessee.
On appeal by the assessee, the learned CIT(A)- National Faceless Appellate Center confirmed the disallowances made by the AO by observing as under:
ITA nos.255-256/AHD/2021 A.Ys. 2011-12 & 2012-13 4
In this case, the Assessing Officer(A.O) has clearly pointed vide para 2.1 and 2.3 of the assessment order that the claim of Section 54F made by the appellant has been disallowed as the flat was purchased after the due date of filing the return of income for A.Y. 2011-12 i.e after 30.07.2011. Moreover, the unutilized sale proceeds of land were not deposited in the capital gain scheme account of an authorized bank. The return of income was filed only on 25.04.2018 after issuance of a notice u/s.148 of the IT Act, 1961. The appellant’s submission on this issue do not address the basic legal point mentioned above. Hence, the disallowance has been rightly made and is confirmed.
Being aggrieved by the order of the CIT-NFAC the assessee in appeal before us.
The learned AR before us filed paper book running from pages 1 to 46 and contended that there was the substantial compliance of the provisions of section 54F of the Act. Therefore, there cannot be any disallowance of the exemption claimed under section 54F of the Act.
7.1 On the other hand, the learned DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. Before we proceed to adjudicate the issue on hand, we find pertinent to refer the judgment of Hon’ble Karnataka High Court in the case of CIT Vs. K. Ramachandra Rao reported in 56 taxmann.com 163 where in the following question was raised and adjudicated: “(2) When the assessee invests the entire sale consideration construction of a residential house within three years from the date of transfer can be denied exemption under Section 54F on the ground that he did not deposit the said amount in capital gains account scheme before the due date prescribed under Section 139(1) of the IT Act?"
8.1 The above question of law was adjudicated by the Hon’ble High Court by observing as under: 4.1 Re.Question No.2 : "As is clear from Sub-section (4) in the event of the assessee not investing the capital gains either in purchasing the residential house or in constructing a residential house within the period stipulated in Section 54F(1), if the assessee wants the benefit of Section 54F, then he should
ITA nos.255-256/AHD/2021 A.Ys. 2011-12 & 2012-13 5
deposit the said capital gains in an account which is duly notified by the Central Government. In other words if he want of claim exemption from payment of income tax by retaining the cash, then the said amount is to be invested in the said account. If the intention is not to retain cash but to invest in construction or any purchase of the property and if such investment is made within the period stipulated therein, then Section 54F(4) is not at all attracted and therefore the contention that the assessee has not deposited the amount in the Bank account as stipulated and therefore, he is not entitled to the benefit even though he has invested the money in construction is also not correct." 5. For the aforesaid reasons both the substantial questions of law are answered in favour of the, assessee and against the Revenue. Therefore, we do not see merit in any of the appeals. Accordingly, all the four appeals are dismissed.”
8.2 In the judgment cited above, the assessee was allowed the benefit of the provisions of section 54F of the Act despite the fact that the assessee did not deposit the sale consideration under the capital gain account scheme with the bank. As per the Hon’ble High Court, it was observed that the assessee has made investment in house property within the stipulated period and thus there was substantial compliance of provisions of section 54F of the Act.
8.3 Now coming to the case on hand, admittedly the assessee has not deposited the sale consideration received by him on the transfer of the property under the capital gain account scheme with the bank as per the provisions of section 54F(4) of the Act. But the assessee has made the investment in the house property within the stipulated time provided under the provisions of section 54F(1) of the Act. Thus we are of the view that principles laid down by the Hon’ble High Court of Karnataka are directly applicable in the given facts and circumstances and therefore we hold that the assessee cannot be deprived of the benefit of exemption under the provisions of section 54F of the Act merely on the reasoning that the assessee did not deposit the money in the capital gain account scheme the bank before filing the return of income within the due date specified under section 139 of the Act.
8.4 Before parting, at this juncture it is important to note that provisions of section 54F of the Act require the assessee to make the investment in the new property of the net consideration received by him on the transfer of the property.
ITA nos.255-256/AHD/2021 A.Ys. 2011-12 & 2012-13 6
The word net consideration means the full value of the consideration minus the expenses incurred by the assessee in connection with the transfer of the property. However, from the preceding discussion we note that the amount of net consideration has been recorded in the assessment order at Rs. 19 Lakh whereas the assessee has made investment less than Rs. 19 Lakh. Thus it appears that the entire amount of net consideration has not been invested by the assessee in the new property and therefore the assessee is eligible for exemption in proportion to the net consideration viz a viz the amount of investment. However, none of the authorities below has gone into the working of the amount eligible for exemption under section 54F of the Act. Thus, for this purpose, we are inclined to set aside the issue to the file of the AO for fresh adjudication and calculation of the amount eligible for exemption. Hence, the ground of appeal of the assessee is partly allowed for the statistical purposes.
Coming to ITA No. 256/Ahd/2021, an appeal by the assessee for the AY 2012-13
The assessee has raised the following grounds of appeal: 69A Unexplained cash deposit in bank. The hon'ble CIT(A), NFAC, Delhi has wrongly confirmed part of the addition of Rs. 4,75,000 towards unexplained cash deposit in bank without considering submission made vide letter dated 03/12/2018 along with cash book to the Id. AO and to him also. Further, hon'ble CIT(A), NFAC, Delhi has not considered the deposit of Cash made from time to time out of earlier cash withdrawal and net agriculture income as per summary of cash balance furnished before the Hon. CIT(A), NFAC, Delhi, That is cash flow statement for the year to prove source of cash deposit made from time to time submitted at the time of hearing proceeding. Your appellant therefore prays for the following: a) To delete an addition of Rs. 4,75,000/- confirmed towards Unexplained Cash Deposit during the year under review. b) Your appellant craves leave to add to, or delete or modify any Ground of Appeal before or at the time of hearing of the appeal.
ITA nos.255-256/AHD/2021 A.Ys. 2011-12 & 2012-13 7
The only issue raised by the assessee is that the learned CIT(A)-National Faceless Appellate Center erred in confirming the addition of Rs. 4,75,000/- by treating the cash deposit as unexplained income of the assessee.
The AO found that the assessee during the year has deposited cash in his bank account held with UCO Bank which aggregate to Rs. 11 Lakh. On question by the AO about the source of cash deposit, the assessee submitted that the cash was deposited out of agricultural income and cash available from past withdrawal.
11.1 However, the AO disagreed with the explanation of the assessee and found the assessee has shown gross agricultural receipt of Rs. 8,05,000/- against which claimed expenses of Rs. 1,80,000/- only and declared net agricultural income of Rs. 6,25,000/-only. The AO further found that this tribunal in case of Shri Dhirubhai N. Narula & Bros vs. ITO bearing ITA No. 2190/Ahd./2004 held that the agricultural expenses should not be less that 40% of the gross receipt. Thus, the AO following the above view of this tribunal recomputed the agricultural income of the assessee at Rs. 4,83,000/- only and held this amount was only available with the assessee to deposit in the bank account. Thus the AO treated the remaining/ balance of cash deposit i.e. Rs. 6,17,000/- (Rs. 11,00,000 – 4,83,0000) as unexplained money under section 69A of the Act and added to the total income of the assessee.
On appeal by the assessee, the learned CIT(A)-NFAC restricted the addition to the extent of Rs. 4.75 lakh by observing as under: The Assessing Officer (A.O) made an addition of Rs.6,17,000/- u/s.69A of the Income Tax Act on account of unexplained cash deposits of Rs.11,00,000/- made by the appellant after giving credit of Rs.4,83,000/- being agricultural income earned by the assessee. However, the assessee has to be granted credit to the extent of Rs.6,25,000/- being net agricultural income in view of the decision in ground no.1 above. It is seen that for the remaining sum of Rs.4,75,000/- the assessee has not been able to give a coherent explanation that the said deposits were linked to the agricultural income earned. Hence, the addition is confirmed to the extent of Rs.4,75,000/-
ITA nos.255-256/AHD/2021 A.Ys. 2011-12 & 2012-13 8
Being aggrieved by the order of the learned CIT(A)-NFAC the assessee is in appeal before us.
The learned AR before us filed a paper book running from pages 1 to 44 and contended that the cash was deposited out of the withdrawal from the bank. The learned AR in support of his contention has drawn our attention on pages 25 to 35 of the paper book where the cash book and the bank statement were placed.
14.1 On the other hand, the learned DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that there was the cash deposit in the bank account of the assessee to the tune of Rs. 11 Lakh on different dates in the year under consideration. However, out of such cash deposit, the learned CIT-A has given a finding that there was agricultural income generated in cash by the assessee to the tune of ₹6.25 lakhs which was utilized for the purpose of the deposits of cash in the bank. Thus, the issue before us is limited to the extent of ₹4.75 lakhs, source of which was not explained by the assessee. Accordingly, the learned CIT(A) held the impugned amount of cash deposit of ₹4.75 lakh was not explained by the assessee and therefore the addition was made. However, we are not in agreement with the finding of the learned CIT-A on the following reasons: i. The assessee has filed the cash book showing the receipt of money from the bank withdrawal on different dates which was not doubted by the authorities below. ii. There was no information brought on record suggesting that the amount withdrawn from the bank was utilized by the assessee either for any investment or any other expenditure.
ITA nos.255-256/AHD/2021 A.Ys. 2011-12 & 2012-13 9
iii. According to the assessee, the amount withdrawn from the bank was utilized for the deposit of the same in the bank account. The contention of the assessee was not doubted by the authorities below. 15.1 In view of the above facts and especially considering the fact that there was no defect pointed out by the authorities below with respect to the documents i.e. cash book/bank withdrawal which were not doubted by the authorities below. Thus in such facts & circumstances, a presumption can be drawn that the amount withdrawn by the assessee was utilized for the purpose of depositing the same in the bank account of the assessee. Thus, in such facts and circumstances, we are of the view that no addition is warranted on account of cash deposits in the bank account of the assessee. Hence we set aside the finding of the learned CIT-A, and direct the AO to delete the addition made by him. Thus the ground of appeal of the assessee is allowed.
15.2 In the result the appeal filed by the assessee is allowed.
In the combined result, the appeal bearing ITA No. 255/AHD/2021 of the assessee is partly allowed for statistical purposes whereas the appeal bearing ITA No. 256/AHD/2021 of the assessee is allowed.
Order pronounced in the Court on 23/11/2022 at Ahmedabad.
Sd/- Sd/- (MADHUMITA ROY (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 23/11/2022 Manish