VIDJAYANE DURAIRAJ VIDJAYANE VELRADJOU,PUDUCHERRY vs. INCOME TAX OFFICER, WARD 3, PUDUCHERRY, PUDUCHERRY

The main grievance of the assessee is against the action of the Ld.CIT(A) confirming the action of the AO by which he has disallowed the claim of deduction u/s.54F of the Income Tax Act, 1961 (hereinafter in short "the Act”) of Rs.44,27,994/- and added the same to the total income of the assessee.

The brief facts as noted by the AO are that the assessee didn’t file his Return of income (RoI) for AY 2012-13, but he (AO) received information from the ITS Data that assessee had deposited cash into his UCO bank account to the tune of Rs.19,75,000/-, during the relevant year. Hence, he re-opened the assessment and issued notice u/s.148 of the Act dated 27.03.2018, pursuant to which assessee filed his RoI admitting total income of Rs.2,92,100/-. The AO noted that assessee has sold an immovable property during the relevant year for consideration of Rs.50,40,000/- which was received in cash and that sale proceeds has been deposited into his and his wife’s bank account. Further, he noted that the assessee has claimed a deduction of Rs.44,27,994/- being the capital gain investment into residential property purchased by his wife.

Therefore, the AO issued show cause notice to the assessee ‘as to why’ he should not treat the deduction claimed u/s.54F to the tune of Rs.44,27,984/- as Long Term Capital Gain (LTCG) of the assessee for AY 2012-13. The assessee in order to justify the claim of deduction u/s.54F of the Act brought to his notice that a residential house was purchased by him on 18.01.2012 in the name of his wife and that this house is the only residential property of theirs. In other words, it was asserted that the assessee didn’t have any other residential property other than the property it purchased in his wife’s name. However, the AO noted that assessee’s wife is also assessed to tax and independently files her RoI.

Aggrieved, the assessee preferred an appeal before the Ld.CIT(A)

Aggrieved, the assessee is in appeal before this Tribunal.

Assailing the action of the Ld.CIT(A), the Ld.AR pointed out that the Ld.CIT(A) erred in not following the ratio of the decision of the Hon’ble Madras High Court in the case of CIT v. V. Natarajan [2006] 287 ITR 271 and instead has followed the decision of the Punjab and Haryana High Court in the case of Kamal Kant Kamboj v. ITO, Ward-3, Haryana, [2017] 88 taxmann.com 541 (Punjab & Haryana) and cited the decision of the Hon’ble Supreme Court in the case of CIT v. Vegetable Products reported in 88 ITR 192 wherein the Hon’ble Supreme Court has held that in case of doubt or dispute it is well settled that construction of provision of law which favors assessee be adopted, rather that of Revenue. Thus, if two reasonable views are possible on an issue, then one in favour of the assessee must be adopted. Therefore, according to the Ld.AR, on the issue when favourable view is there as held by the jurisdictional High Court in the case of CIT v. Natarajan (supra) and which is binding , the Ld.CIT(A) erred in following the order of the non-jurisdictional High Court to disallow the claim of the assessee.

Per contra, the Ld.DR supporting the action of the Ld.CIT(A)

We have heard both the parties and perused the material available on record. We note that the assessee didn’t file his Return of income (RoI) for AY 2012-13, and the AO received information from the ITS Data that assessee had deposited cash into his UCO bank account to the tune of Rs.19,75,000/-, during the relevant year. Hence, he re-opened the assessment and issued notice u/s.148 of the Act dated 27.03.2018.

The assessee submitted that the residential house was purchased by him on 18.01.2012 in the name of his wife and that this residential property is the only residential property they have. Meaning, they doesn’t have any other residential property. On appeal, the Ld.CIT(A) confirmed the action of the AO by citing the decision of non-jurisdictional High Court as noted supra. Before us, the Ld.AR brought to our notice that the assessee has sold his immovable property for a consideration of Rs.50,40,000/- in cash (copy of sale documents, statement of bank accounts of the assessee) and out of ibid sale proceeds an amount of Rs.19,75,000/- was deposited in the assessee’s bank account and Rs.36 lakhs cash was deposited in the bank account of the assessee’s wife in her UCO bank in the relevant Assessment Year; and that assessee has purchased a residential property in his wife’s name, and claimed deduction u/s.54F of the Act to the tune of Rs.44,27,994/- which was disallowed by the AO because the assessee has not purchased the said residential property in his name. It is further noted that AO had re- opened the assessment of assessee’s wife for AY 2012-13; since there was deposit of Rs.36 lakhs in her bank account and in her assessment order, the AO noted that she filed her RoI pursuant to the notice u/s.148 of the Act returning a total income of Rs.98,010/- and that she has e-filed statement of her bank account as well as that of the assessee, and filed copy of sale document showing sale of immovable property by her husband during the F.Y. 2011-12 etc. And the AO verified the details furnished by assessee’s wife and found that the assessee's husband sold three properties for consideration of Rs.50,40,000/- and received sale proceeds in cash and the AO accepted the assessee's wife’s contentions, and completed the assessment by order dated 18.11.2019 by accepting the income returned as under:-

The Hon’ble Delhi high Court in the case of CIT v. Kamla Wahal reported in [2013] 30 taxmann.com 34 (Delhi) has observed as under:

In the result, appeal filed by the assessee is allowed.