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2015 (5) TMI 1232 - AT - Income TaxAssessment u/s 153A - deduction u/s.54F denied on account of purchase of a flat - Eligibility to make a new claim - case of the revenue that since the proceedings u/s.153A are akin to the provisions of section 147 i.e. reassessment proceedings therefore the assessee cannot make a new claim which was not there in the original return of income - HELD THAT - The character of the income remains long term capital gain and the assessee can make a new claim in the pending assessment which has not abated. Since the assessee otherwise fulfils the conditions laid down in provisions of section 54F of the I.T. Act therefore we are of the considered opinion that the assessee is entitled to claim deduction u/s.54F to the extent of Rs. 31, 20, 000/-. In this view of the matter we set aside the order of the CIT(A) and allow the appeal filed by the assessee.
Issues Involved:
1. Disallowance of exemption under Section 54F of the Income Tax Act. 2. Eligibility to make a fresh claim of exemption in the assessment under Section 153A. 3. Classification of income declared during the search as capital gains or income from other sources. Detailed Analysis: 1. Disallowance of Exemption under Section 54F: The assessee filed a return of income declaring Rs. 1,22,01,352/-. During a search, unaccounted cash receipts of Rs. 15,20,000/- and cheque receipts of Rs. 16,00,000/- were discovered, which were not disclosed in the original return. The assessee claimed a deduction of Rs. 31,20,000/- under Section 54F in the return filed in response to the notice under Section 153A. The Assessing Officer (AO) disallowed this claim on two grounds: it was not claimed in the original return, and the undisclosed income did not qualify as capital gains for deduction under Section 54F. The CIT(A) upheld the AO's decision, aligning with the Supreme Court's rulings in Sun Engineering Works Pvt. Ltd. and Chettinad Corporation Pvt. Ltd., which stated that reassessment proceedings under Section 153A are for the benefit of the revenue and do not allow for new claims not made in the original return. 2. Eligibility to Make a Fresh Claim in the Assessment under Section 153A: The assessee argued that since the capital gains were unearthed during the search and offered to tax, the deduction under Section 54F should be allowed. The CIT(A) rejected this argument, stating that Section 153A proceedings are akin to reassessment proceedings under Section 147, and new claims not made in the original return cannot be entertained. The CIT(A) relied on the decisions of the Delhi High Court in CIT Vs. Anil Kumar Bhatia and the Tribunal decisions in Suncity Alloys Pvt. Ltd. and Charchit Agarwal Vs. ACIT to support this view. 3. Classification of Income Declared During the Search: The assessee contended that the income from the sale of land should be treated as long-term capital gains, allowing for the deduction under Section 54F. The CIT(A) disagreed, holding that the income declared during the search should be assessed as income from other sources, thus disqualifying it from the Section 54F exemption. Tribunal's Findings: The Tribunal considered the arguments and relevant case laws. It noted that the payment of Rs. 58,50,000/- for a duplex was not disputed and that the agreed value of the duplex was Rs. 5,99,47,500/-. The Tribunal referred to the Pune Bench decision in Malpani Estates, which allowed a deduction under Section 80IB(10) for additional income declared during a search, emphasizing that the character of the income does not change due to the search. The Tribunal also cited the decision in B.G. Shirke Construction, which allowed fresh claims in assessments under Section 153A, even if not made in the original return. Conclusion: The Tribunal concluded that the character of the income remains long-term capital gain and that the assessee can make a new claim in the pending assessment under Section 153A. Since the assessee fulfilled the conditions under Section 54F, the Tribunal allowed the deduction of Rs. 31,20,000/- and set aside the CIT(A)'s order, allowing the appeal filed by the assessee. The appeal was thus pronounced in favor of the assessee on 22-05-2015.
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