SRINIVASAMURTHI MATHANGI,CHENNAI vs. ITO, NON CORPORATE WARD 1(3), CHENNAI

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) -2, Chennai, dated 29.09.2017 and pertains to assessment year 2014-15.

The first issue arises for consideration is rejection of claim of the assessee under Section 54 of the Income-tax Act, 1961 (in short 'the Act') to the extent of ₹75,00,000/-.

Shri N. Anush Shanker, the Ld. representative for the assessee, submitted that the assessee is carrying on a proprietary business in the name and style of M/s Woodstock. The assessee is also a partner in the firm known as M/s Chamiers. According to the Ld. representative, the assessee earned income by undertaking marriage hall decorations, etc. During the year under consideration, according to the Ld. representative, the assessee sold a residential house property at Door No.7, 1st Street, East Abhiramapuram, Mylapore, for a total consideration of ₹2,75,00,000/-. On a query from the Bench, the Ld. representative clarified that the property was sold on 11.12.2013. The assessee purchased a new property on 04.12.2013. The assessee claimed deduction under Section 54 of the Act in respect of capital gain. According to the Ld. representative, the Assessing Officer disallowed ₹75,00,000/- on the ground that the assessee availed Home Loan of ₹75 lakhs for the purpose of purchasing a ready built property. Hence, the Assessing Officer found that the sale consideration of the property was not invested in the new property. According to the Ld. representative, there is no condition that the assessee has to invest the very same sale consideration for the purpose of claiming deduction under Section 54 of the Act. Referring to Section 54 of the Act, the Ld. representative submitted that the assessee was given an option of purchasing a new residential house before one year from the date of sale. Therefore, according to the Ld. representative, it is obvious that the assessee can invest any money either borrowed or otherwise in acquiring a new house even before sale of the old asset. Therefore, merely because the assessee has availed Housing Loan to the extent of ₹75 lakhs, according to the Ld. representative, the authorities below are not justified in disallowing the claim of the assessee to the extent of ₹75 lakhs.

We heard Ms. G.D. Jayanthi Angayarkanni, the Ld. Departmental Representative also. According to the Ld. D.R., the assessee has not invested the actual sale consideration for purchase of new asset. Therefore, according to the Ld. D.R., the CIT(Appeals) has rightly confirmed the order of the Assessing Officer. On a query from the Bench, if the intention of the Parliament is to invest the very same sale consideration for acquiring new asset, how one expects the assessee to purchase a property one year before the date of sale of property? The Ld. D.R. clarified that in that case, the assessee may have a case.

We have considered the rival submissions on either side and perused the relevant material available on record. The Assessing Officer and the CIT(Appeals) disallowed the claim of the assessee to the extent of ₹75 lakhs on the ground that the assessee has availed Home Loan of ₹75 lakhs for purchasing a new asset. It is not in dispute that the assessee is eligible for deduction under Section 54 of the Act. The dispute is only with regard to ₹75 lakhs borrowed by the assessee as a Home Loan. The Revenue contends that the assessee has not invested the very same sale consideration for purchasing a new property. When the Parliament from its wisdom clarified that the assessee can acquire / purchase a new asset one year before the sale of property, the assessee is not expected to invest the very same sale consideration for purchasing a new asset. In other words, even if the assessee borrowed Home Loan and purchased a new asset, the assessee is eligible for exemption under Section 54 of the Act since the assessee has actually invested in the new asset. Therefore, this Tribunal is unable to uphold the orders of the lower authorities. Accordingly, orders of both the authorities below are set aside and the disallowance made by the Assessing Officer under Section 54 of the Act is deleted. The Assessing Officer is directed to grant deduction under Section 54 of the Act even in respect of Home Loan said to be borrowed to the extent of ₹75 lakhs.

The assessee has also raised one more ground with regard to the addition made by the Assessing Officer to the extent of ₹67,12,516/- under Section 68 of the Act.

Shri N. Anush Shanker, the Ld. representative for the assessee, submitted that the deposits made in the bank account are all from business receipts. According to the Ld. representative, the assessee could not produce necessary evidence before the lower authorities. Since the assessee has now collected the material with regard to cash deposit/cheque deposited in the bank account, according to the Ld. representative, there is no need for any addition under Section 68 of the Act.

On the contrary, Ms. G.D. Jayanthi Angayarkanni, the Ld. Departmental Representative, submitted that the material now filed by the assessee is a fresh material and the Assessing Officer had no occasion to examine the same. Therefore, the Ld. D.R. submitted that the matter may be remitted back to the Assessing Officer for reconsideration.

We have considered the rival submissions on either side and perused the relevant material available on record. The assessee admittedly could not file the material evidence before the Assessing Officer and the CIT(Appeals). Therefore, the CIT(Appeals) confirmed the addition made by the Assessing Officer under Section 68 of the Act. Now the assessee claims that the entire deposits were from business receipts and the material evidence is available, which is filed before this Tribunal in the form of paper-book. In view of this, this Tribunal is of the considered opinion that the matter needs re-examination by the Assessing Officer. Accordingly, orders of both the authorities below are set aside and the addition made under Section 68 of the Act is remitted back to the file of the Assessing Officer. The Assessing Officer shall reconsider the matter in the light of the material filed by the assessee before this Tribunal and that may be filed before the Assessing Officer and thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee.

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