ITAT Deletes Capital Gains Addition of Rs.55 Lakh from Noida Property, Allows S.54 Deduction After Substantiation [Read Order]

The Chandigarh Bench of Income Tax Appellate Tribunal ( ITAT ) deleted the capital gains addition of Rs.55 lakh from the sale of a Noida property and allowed the deduction under section 54 of Income Tax Act,1961 after the source of funds was substantiated.

Pushpinder Oberai,appellant-assessee, had its assessment reopened under section 148 on 29-03-2017 following the purchase of immovable property in Mumbai for Rs.165 lakhs. The assessee stated that Rs.138 lakhs was funded through a bank loan and the remaining Rs.27 lakhs came from the sale of a Noida property and regular income, but this was not reflected in the income tax return, leading to reopening of the case.

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During assessment, the Assessing Officer (AO) noted that the Noida property was sold for Rs.55 lakhs, and after indexation, capital gains of Rs.27.44 lakhs were computed. The assessee claimed deduction under section 54, reducing gains to nil, and was asked to substantiate the sale.

It was further observed that the Mumbai flats were purchased for Rs.165.75 lakhs on 08-09-2009, with Rs.137.50 lakhs funded by a housing loan. The remaining Rs.55 lakhs was claimed to be from the Noida sale, supported by a tripartite agreement dated 04-01-2010 involving the assessee, Smt. Sushila Sukumaran, and Shri Anil Kumar Tyagi, under which the consideration was received by Smt. Sushila Sukumaran.

The AO disbelieved this source due to lack of proper evidence, added Rs.55 lakhs under section 69, and denied the section 54 deduction. The Commissioner of Income Tax (Appeals)[CIT(A)] upheld the AO’s findings, and the assessee appealed before the tribunal.

The assessee counsel submitted an agreement dated 26-10-2009 with Smt. Sushila Kumaran, showing that Rs.50 lakhs was received through cheques dated 19-08-2009, 26-08-2009, and 24-10-2009. It was shown that these cheques were credited to the assessee’s bank account, supported by bank certificates.

A delay of 78 days occurred in filing the appeal. The assessee counsel sought condonation through a petition and an affidavit, explaining that the assessee, a retired Colonel, faced medical issues concerning his daughter and mother. The tribunal condoned the delay and heard the appeal on merits.

The two member bench comprising Rajpal Yadav (Vice President) and Manoj Kumar Aggarwal ( Accountant Member) noted that Smt. Sushila Kumaran had sold the property to another buyer through a sale agreement dated 04-01-2010 and received the sale consideration, with the assessee acting only as a confirming party.

The tribunal held that the source of investment in the assessee’s hands was thus substantiated, and the claim could not be disbelieved. Accordingly, the capital gains computation and the deduction under section 54 were allowed, and the impugned addition of Rs.55 lakhs was deleted. No other grounds were pressed in the appeal.

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