Sale consideration of Property seized by IT Department can’t be treated as Amount Invested as per S. 54EC Bond: ITAT [Read Order]

In the case of Jitender Singh Marvaha vs. D.DI.T, the Kolkata bench of the Income Tax Appellate Tribunal (ITAT) has held that the number of sale proceeds of the property seized by Income Tax Department cannot be constructed as the amount invested as per section 54EC bond of the Income Tax Act 1961.

The assessee, in the present case, is an individual and a citizen of United Kingdom. During the financial year, the assessee sold his ancestral land and received consideration. He declared his total income as Rs.500 only. Thereafter, a search was conducted and seized cash of Rs. 51.50 lakhs roughly and 20,000 Pounds Sterling from the assessee. The said cash amount found in the search & seizure operation was relating to sale proceeds of the ancestral land.

During the assessment proceedings, the Assessing Officer (AO) noticed that the Assessee had claimed the deduction of Rs.49,00,000 under section 54EC of the Act on account of investment made on bonds. In response, the Assessee contended that he intended to purchase bonds of National Highway Authority of India, but due to the seizure of Rs.49,00,000 by the department during search & seizure operation, the assessee could not actually invest the said amount as per section 54EC of the Act. The AO further noticed that the Assessee failed to furnish any supporting documents to show the details of the said investment, consequently he disallowed the claim of the Assessee by holding the fact that the Assessee could not make investment anywhere.

While analyzing the facts and circumstances of the issue, the Tribunal bench comprising of Judicial Member S.S. Viswanethra Ravi and Accountant Member M. Balaganesh observed that “the assessee had admitted that he had not made any investments in specified bonds notified under section 54EC of the Act. The assessee only claims that since the major portion of the sale proceeds of the property amounting to Rs. 49,00,000was seized by the Income-tax Department pursuant to search and there is no money was left with the assessee to make investments in specified bonds. Therefore, it has found that the assessee claimed deduction under the said section in the return of income without making any investment in the notified bonds as per section 54EC of the Act”.

The division bench further observed that “Section 54EC mandates that investment in specified bonds be made within prescribed time by the assessee either out of sale proceeds of the capital asset or out of any other means. But in the present case, the assessee had not made any investments in the specified bonds as per provisions of section 54EC of the Act”. Consequently, the bench upheld the order of the lower authorities while dismissing the appeal filed by the Assessee.