By Jagdish T. Punjabi | Prachi Parekh | Chartered Accountants
Devendra Jain | Advocate
FACTSThe assessee, an individual deriving income from various heads of income, had submitted his return of income for the year under consideration. The return was duly processed u/s 143(1). Subsequently, the assessment was sought to be reopened based on information about the sale of immovable property and the assessee was asked to reconcile the same. The assessee filed a reply stating that he had not made any transaction for the year concerned and the transaction might have been wrongly reflected using his PAN. The assessee further requested the A.O. to recheck with the sub-registrar. Accordingly, the A.O. issued notice u/s 133(6) to the Sub-Registrar and received information that the assessee had effected sale of an immovable property being a residential flat for which no capital gains tax had been offered. The assessee furnished a capital gains working, submitting that the amount had been reinvested in purchasing another residential property. The A.O. contented that since the claim of capital gains and reinvestment thereof was not made in the return of income, the same was to be rejected and made an addition of Rs. 35 lakhs.
The A.O. also received information from the ITO that during the assessment proceedings of the assessee’s wife, it was found that a property jointly owned by the two had been sold during the year and the proceeds were reinvested in acquiring the same property for which exemption was claimed in the assessee’s case.
On appeal before the CIT(A), the CIT(A) accepted the capital gains workings submitted by the assessee and held that the assessee is eligible for exemption, even though the same was not claimed in the return of income. The A.O. had relied on the Supreme Court decision in the case of Goetze (India) Ltd. vs. CIT to deny the claim for exemption. The CIT(A) held that the decision had categorically held that the appellate authorities could accept such a claim.
As far as the jointly owned property was concerned, the CIT(A) observed that since the capital gains on the same had been reinvested, the assessee would be eligible for capital gains exemption. Thus, the CIT(A) held that the assessee would be eligible for exemption u/s 54 on the sale of the second property also.
Aggrieved, the Revenue filed an appeal before the Tribunal.
HELD
The Tribunal held that exemption u/s 54 is granted to the assessee for reinvestment made in the residential house. The section nowhere restricts that the assessee should have sold only one property and claimed the exemption u/s 54 for only one property. In the instant case, the assessee has sold two residential properties and reinvested in one residential property. The entire conditions of section 54, both pre and post the amendment to section 54 [vide Finance Act (No. 2) of 2014, w.e.f. A.Y. 2015-16] had been satisfied. Thus, the order of the CIT(A) was upheld and Revenue’s appeal was dismissed.
