The Mumbai Bench of Income Tax Appellate tribunal (ITAT) has allowed capital gain exemption under Section 54F of the Income Tax Act 1961, on finding that the purchase of flats was out of sale proceeds of gold jewellery.
The assessee Kishori Dwarakanath Pandey is a teacher and takes tuition classes. The assessee jointly with her husband purchased a residential flat. Theassessee in order to source the funds for purchase of flat sold her gold jewellery for a consideration of and had also prematurely encashed fixed deposits to the tune in the joint name with her husband. The assessee filed her return of income
During the course of scrutiny assessment proceedings, the assessee explained the source of funds for purchase of immovable property in the joint names with her husband. The assessee claimed deduction under Section 54F of the Act but this claim of deduction was not made in the return of income or by way of revised return of income.
The Assessing Officer without considering the evidences produced that the gold jewellery was received by the assessee from her mother at the time of her marriage in 1985 and some of the gold jewellery was received at the time of death of her mother in 2005, made addition of the amount contributed by assessee from sale of gold jewellery under Section 69A of the Act. The AO further rejected the assessee’s claim of deduction under Section 54F of the Act.
Prateek Jha on behalf of the assessee submitted that there was no impediment for the Appellate Authorities to admit fresh claims not made in the return of income. Therefore, the CIT(A) ought to have admitted the ground raised by the assessee claiming deduction under Section 54F of the Act.
Tejinder Pal Singh Anand on behalf of the revenue submitted that the assessee had failed to explain the source of acquisition of gold jewellery and had not filed any return under Wealth Tax Act to show possession of gold jewellery.
The Mumbai Bench of Vikas Awasthy (Judicial Member) and Gagan Goyal (Accountant Member) allowed the appeal observing that
“The proximity of the sale of gold jewellery and payments made towards purchase of flat establishes live nexus between sale of gold jewellery and purchase of flat. Therefore, we hold that the assessee is eligible for claiming deduction u/s. 54F of the Act.”
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