TMI Blog2023 (3) TMI 1140X X X X Extracts X X X X X X X X Extracts X X X X ..... to the provisions of section 54F, so that he can claim the deduction against the sale of capital asset. The act of the assessee was prearranged step for execution, and it served no commercial purpose but was motivated to avoid paying taxes. The orders passed by the assessing officer and ld.CIT(A) were within the four corners of law and do not require any interference. Appeal of the assessee is dismissed. - ITA.No.420/Hyd/2022 - - - Dated:- 15-3-2023 - Shri Rama Kanta Panda, Accountant Member AND Shri Laliet Kumar, Judicial Member For the Assessee : Shri Sunil Kumar Jain, CA For the Revenue : Shri Kumar Adithya for Shri K.P.R.R.Murthy, Sr.AR ORDER PER SHRI LALIET KUMAR, J.M. This appeal is filed by the assessee, feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, dated 06.07.2022 for the A.Y 2015-16, on the following grounds : 1. In computing the total income, the CIT(A) has wrongly upheld the order of the learned Assessing Officer in disallowing exemption u/s. 54F of Income tax Act, 1961 claimed by the assessee amounting to Rs.2,63,67,705/- by stating that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 100% of the property to any other person in the form of further gift. Thus it is proved that a family arrangement has been made by the assessee to evade payment of due taxes to the State 12. In the light of the above it is clearly established that the assessee was effectively the owner of the two house properties viz., i) one at D.No. 3-6-305/43, 431L, Avanthi Nagar, Basheerbagh, Hyderabad and, ii another flat bearing number 171, 7 floor, Block-A, Srila Heights, St. Johns Road, East Maredpally, secunderabad as on the date of transfer of old asset, besides the third house property at Plot No.5, sy. No. 52 53, Saheb Nagar, Khurd Village, LB Nagar, Hyderabad, which the assessee himself claimed as house property in his return of income. In respect of the third property, the assessee claimed it is a commercial property but even failed to establish that It is a commercial property and the electricity bills (to prove non- domestic consumption) submitted by the assessee do not pertain to this third property at all. Notwithstanding the nature (i.e., whether commercial or residential) of the third property at Plot No.5, Sy. No. 52 53, Saheb Nagar, Khurd Village, LB Nagar, Hyderaba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find that the whole substance of the gift transaction is to avail the exemption under section 54F of the I T Act. During the relevant period the assessee was not the owner of the residential property although he had full control over the property. Before the AO, the appellant has stated that his father is free to gift this property to any other person. Thus, I find that that the assessee has hypothetically attempted to justify the transfer of residential property to father in the garb of gift to avail exemption u/s 54 of the Act. At the appellate stage also, the assessee has not produced any evidence to fully substantiate his action to show that the main substance of the gift transaction is not to avail the exemption u/s 54 of the Act. The assessee has merely stated that his father Sri Vijay Kumar Shah is separately assessed under Income Tax Act with PAN: AMFPS4199D and therefore the gift transaction cannot be covered under the ambit of colourable device. The real intent of the gift transaction is to ensure that the appellant has only one self-occupied property in his books and can claim exemption u/s 54 of the Act without alienating himself from the property gifted. This action ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information before the Assessing Authority and the Assessing Authority ultimately passed the impugned assessment order for the said Assessment Year 2015-16 u/s 143(3) dated 29.12.2017 by disallowing exemption u/s 54F of Rs.2,63,67,705/- and wrongly considering the property at Shaheb Nagar Kurd, as a residential property. The total income assessed by the Assessing Authority was Rs.2,71,48,595/- thereby making an addition of Rs. 2,63,67,705/- to the returned income. The nature of the addition to the returned income is as follows: Particulars Amount(in Rs.) Income as declared in the return 7,80,890/- Add: Disallowance of exemption sec 54F I.T.Act, 1961 2,63,67,705/- Total Income assessed 2,71,48,595/- Aggrieved by the order of the learned assessing officer, the assessee preferred an appeal before the First Appellate Authority (CIT(A)). The CIT(A) had partly allowed the appeal of the assessee by clearly specifying that the property mentioned above is a plot and not a residential property. However, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gift settlement deed is clearly a colourable device . Whereas, if the property is gifted to the father, being a lineal ascendant, the gifted property would come back to the son (assessee) as an inherited property or the father would even gift back the same property to his son during father's lifetime. Gifting the house property to his father is like throwing a ball tied with rubber band and the ball would come back to the thrower's hands after lapse of certain time. With respect to the above, it is to be noted that the learned assessing officer has wrongly stated that the gifted property would come back to the assessee only. Firstly, it is to be noted that the property was gifted to father out of natural love and affection. Why does the learned assessing officer think that the property gifted to father would come back to assessee only? The father could sell the property or even if inherited it would be divided among all the children and not just the assessee. The assessing officer is just quoting the proverb in his order without understanding the actual case, intention behind the purpose of gifting the property. Moreover, we would like to inform that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very attempt at tax planning is illegitimate and must be ignored, or that every transaction or arrangement which is perfectly permissible under law, which has the effect of reducing the tax burden of the assessee, must be looked upon with disfavour. B. The Gujarat High Court while deciding the case Banyan Berry v. CIT (supra), has observed that what has been depreciated as tax planning for avoidance of tax are those acts which have doubtful or questionable character as to their bonafide and righteousness. Not all legitimate acts of a tax payer which in ordinary course of conducting his affairs a person does and are under law he entitled to do, can be branded of questionable character on the anvil of Mc Dowell Co. Ltd V. CTO (supra) case, in which distinction between the methods of tax evasion and avoidance of tax through tax planning has been found to the effect [he tax planning may be legitimate provided it is within the framework of law. The learned Judges of Gujarat High Court delivered, we are unable to read in the aforesaid decision that any act of an assessee which results in reduction of his tax liability or expectation of tax benefit in future amounts to colorab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the case of Me Dowell and alleged that the gift settlement deed is a colourable device. it is clear from the above case laws that every legitimate act of the tax payer cannot be questioned on the anvil of Me Dowell Co. Ltd V. CTO (supra) case. Even if the same is considered as tax planning as pointed by the officers, the same has to be allowed as it is within the four comers of law and :: legitimate act of the assessee. From all of the above, it is clear that on the date of transfer of Capital Asset the assessee owned only one residential house (@ Avanthi Nagar). The assessee sold the capital asset and invested the proceeds in a new residential house property and thereby fulfilled the conditions of section 54F of the Income Tax Act, 1961 to claim exemption. Hence, the intention of the CIT (A) is totally wrong, bad illegal. The Appellant prays that the addition of Rs.2,63,67,705/-made in respect of section 54F be deleted. As such, Your Honor is requested to consider the above-mentioned facts and allow the appeal of the assessee. 9. On the other hand, the Ld. DR had submitted that the Ld. CIT(A) had passed the detailed elaborate order dealing with the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HAH. 12. From the reading of the above said, it is clear that the assessee had already received a sum of ₹ 2,18,880/- by way of cash from the purchaser. The word already mentioned in the clause 2 clearly shows that it was paid prior to entering into agreement of sale. Normally, in the case of sale of immovable property, firstly, the seller identifies the buyer and thereafter, buyer conducts due diligence of title and thereafter, the parties negotiate the price of the property and lastly, buyer may apply for a loan, if any, and makes the payment and enters into an agreement of sale. In the present case, the two demand drafts of Rs.2,28,38,880/- dated 03.11.2014 and Rs.2,11,41,120/- dated 03.11.2014 were issued by HDFC bank in favour of Shri Rachit Shah and Smt. Harsha Shah, mother of Rachit Shah, i.e on the date of agreement of sale. The above said transaction of agreement of sale of the property happened on 03.11.2014 and the stamp papers were said to have been purchased on 01.11.2014. In the agreement, it was clearly mentioned that cash payment of Rs Rs.2,18,880/- already made to the assessee, prior to entering into an agreement of sale. No evidence has been filed bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 47, Plot no.946, Jubilee Hills, Hyderabad. The Assessing Officer had brought on record that the assessee had two residential properties before purchasing the residential house property at Road No.47, Plot no.946, Jubilee Hills, Hyderabad. 14. From the conduct of the assessee and in view of the circumstances prevailing at the time of the agreement of sale, more particularly giving gift to his father just before the date of agreement, it is clear that the act of the assessee to gift the house is nothing but a concerted effort to avoid the due payment of taxes to the Government. With a view to avoid the payment of taxes, the assessee surreptitiously gifted the house at Door No.3-6-305/43,43/1, Avanthi Nagar, Basheerbagh, Hyderabad to his father just before entering into agreement of sale and received the consideration of Rs.2,28,38,880/- on 03.11.2014 and Rs.2,11,41,120/- on 03.11.2014. Though, gift deed, on a standalone basis seems to be a natural act on the part of son to gift home to his father, but when the gift deed is to be examined in the light of the prior and subsequent acts and prevailing circumstances, then it is clear that the real intention of the assessee, was to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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