Assessee held entitled to claim of exempt. u.s 54 of I.T.Act., ITAT

Facts in Brief:

1. Assessee individual filed her return of income.

2. In assessment year, assessees has purchased a property and sold the property for the same value.

3. Assessee did not admit capital gains on the transaction.

4. On verification, property in question was purchased in order to claim exemption u/s. 54 (of Income Tax Act, 1961).

5. Since, property on which exemption u/s. 54 (of Income Tax Act, 1961) was sold within 3 years the cost of the property is to be reduced by the amount of capital gain exemption claimed.

6. Accordingly, a notice u/s. 148 (of Income Tax Act, 1961) was issued.

7. In assessment proceedings, A.O. found assessee has sold a house property along with five other co-owners, the assessee's share of capital gain was Rs.34,03,603.

8. Since the assessee has claimed capital gain exemption of Rs.34,03,603, the same was to be reduced from cost of acquisition as per the provisions of sec. 54(1)(ii) (of Income Tax Act, 1961) and worked out the short term capital gain on sale of house.

9. A.O. added an amount of Rs.29,64,850 to the income returned.

10. On appeal CIT(A) held, without considering the fact that the purchase of the second property was made within specified time limit under section 54 (of Income Tax Act, 1961), passed the impugned order treating the income chargeable to tax as per the provisions of section 54F(3) (of Income Tax Act, 1961), whereas, assessee claimed exemption under section 54 (of Income Tax Act, 1961).

On appeal ITAT held,

11. In the referred case while considering the same set of facts on merits, the Tribunal held that the investment in the second property is within the period of two years from the date of sale of the original asset.

12. Therefore, the assessee therein who is a co-owner of the assessee herein was entitled to claim exemption under section 54 (of Income Tax Act, 1961).

13. Since the facts and circumstances of the case are similar and property involved therein are one and the same, respectfully following the decision of the Coordinate Bench of 'B' Bench of this Tribunal in the case of Mr. Nilesh Dharod, Hyderabad vs. ITO, Ward-6(3), Hyderabad, the grounds raised on the issue by the assessees are allowed.

14. In two of the co-sharers above, one of the contention was that proceedings u/s 147 (of Income Tax Act, 1961) were initiated second time on same set of facts and reopening was bad in law.

15. This issue was also considered and allowed in favour of assessee in the above referred case of Mr. Nilesh Tharod and following the same, we have to hold that proceedings initiated under section 147 (of Income Tax Act, 1961) are bad in law and consequential orders are to be cancelled. As we adjudicated the issue on merits, no separate finding is ITA.Nos.1154, 1155 & 1156/H/2015 Smt. Neena N. Dharod & Others, Hyderabad. given in these two appeals. Suffice to say the addition made by AO does not survive either way.

16. In the result, appeals of the assessees are allowed. 

Case Reference - Neena N Dharod, Hyderabad, ... vs Assessee.