Genuine gift cannot consider as unexplained cash credit and exemption under section 54 cannot be denied only on purchase of new house in joint name

IN THE INCOME TAX APPELLATE TRIBUNAL

DELHI BENCH “A” New Delhi

BEFORE SHRI R.P. TOLANI AND SHRI T.S. KAPOOR

ITA No. 4063/Del/11

A.Yr. 2004-05

ACIT, Cir. 43(1),

New Delhi.

(Appellant)

Vs.

 Shri Ashok Alexander,

26, Sultanpur Estate,

Mandi Road, New Delhi-30.

PAN: AAJPA5919M

 (Respondent)

Appellant by: Mrs. Anusha Khurana Sr. DR

Respondent by: Shri Sanjiv Chaudhary CA

O R D E R

PER R.P. TOLANI, J.M::

This is Revenue’s appeal against CIT(A)’s order dated 21-6-2011 relating to A.Yr. 2004-05. Following grounds are raised:

“On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in:

(i) The CIT(A) has erred on facts and in law in deleting the addition of Rs. 3,26,690/- made by the AO as income from undisclosed sources.

(ii) The CIT(A) has erred on facts and in law in deleting the addition of Rs. 29,20,228/- made by the Assessing Officer on account of long term capital gain by disallowing the exemption claimed by the assessee u/s 54 of the I.T. Act.”

2. Brief facts are: The assessee was an employee of Bill and Milinda Gates Foundation, USA (“BMGF” ), USA and was appointed to work with the liaison office of BMGF, New Delhi as Director in its India AIDS initiative program. Assessee could not file his return of income within time prescribed by sections 139(1)/139(4), however, after the lapse of time the relevant income was offered for tax by way of paying the challan & TDS. Further a letter was written to the AO indicating this fact and accompanying TDS certificate and payment of remainder of tax. On this basis, Assessing Officer initiated proceedings u/s 148, asking the assessee to file a return of income, which was duly filed. The Assessing Officer made the above two additions to the income of the assessee, which have been deleted by the CIT(A).

3. During the course of appellate proceedings CIT(A) called for a remand report from the Assessing Officer which is also considered in his order. Facts about first ground are that assessee’s wife and son received gifts from assessee’s father-in-law. They were credited in a joint a/c of assessee and his wife. Assessing Officer , however, held it to be unexplained cash credits of the assessee u/s 68. CIT(A) observed that the bank a/c in question in which these gifts were credited, was actually a joint account held with the assessee’ wife. The amounts were gifted by the assessee’s father-in-law out of his own bank account. According to CIT(A) the addition could not be made in assessee’s hands as:

(i) the gift was genuine, given by the assessee’s father-in-law to his own daughter and grand son through banking channels.

(ii) The gifts being received by these two persons, they could not be added in assessee’s hands as his unexplained cash credit.

4. Apropos second ground, brief facts are: The assessee was owner of the property standing in his name which was sold; qua capital gain exemption u/s 54f was claimed by the assessee as the sale proceeds of the property were utilized for purchasing another house in the name of assessee and his wife. Wife did not contribute any amount towards purchase. Thus new house was purchased by the assessee. The entire purchase amount was sourced by the assessee from the sale of house property. Rental income from the sold property was earlier offered in the hands of the assessee. Assessing Officer was of the view that exemption u/s 54 was allowable to assessee to the extent of one half of the purchase amount as one half belonged to wife. CIT(A) on the basis of evidence, remand report, facts and circumstances held that sec. 54 is applicable when the assessee has utilized the entire proceeds of its property in the purchase of a new house which is complied with. Reliance was placed on Hon’ble Madras High Court judgment in the case of CIT Vs. V. Natarajan 287 ITR 271 holding that even if the new house is purchased by the assessee in the name of his wife within a period of one year of receiving the sale proceeds, the exemption u/s 54 was eligible.

5. Aggrieved, revenue is before us on these grounds.

6. Ld. DR relied on the order of Assessing Officer.

7. Apropos first ground, ld. counsel for the assessee, relied on the order of CIT(A). Apropos second ground, ld. counsel, apart from relying on the above judgment in the case of V. Natarajan (supra), further relied on Hon’ble Delhi High Court judgment in the case of CIT Vs. Ravinder Kumar Arora 342 ITR 38 (Del.), observing as under:

“On the aforesaid facts, we are of the view that the conditions stipulated in Section 54F stand fulfilled. It would be treated as the property purchased by the assessee in his name and merely because he has included the name of his wife and the property purchased in the joint names would not make any difference. Such a conduct has to be, rather, encouraged which gives empowerment to women. There are various schemes floated by the Government itself permitting joint ownership with wife. If the view of the Assessing Officer (AO) or the contention of the Revenue is accepted, it would be a derogatory step.”

8. We have heard rival contentions and gone through the relevant material available on record. We see no infirmity in the order of CIT(A), inasmuch as:

(i) The gifts in question have been received not by the assessee but by his wife and son, gifted by assessee’s father-in-law, who is a close relative. The gifts are from bank a/c of donee. In view thereof, we are unable to hold that the gifts in question were unexplained cash credits of the assessee. In any case, the amounts are not received by the assessee but his wife and son. Therefore, the question of this addition in the hands of assessee does not arise.

(ii) Apropos second ground, respectfully following the Hon’ble Delhi High Court judgment in the case of Ravinder Kumar Arora (supra), which in turn follows Hon’ble Madras High Court judgment in the case of V. Natarajan (supra), and Hon’ble Andhra Pradesh High Court judgment in the case of Mir Gulam Ali Khan Vs. CIT 165 ITR 228, we uphold the order of CIT(A) on this issue also.

9. In the result, revenue’s appeal stands dismissed.

Order pronounced in open court on 24-08-2012.

                                                     Sd/-                                 Sd/-

                                           (T.S. KAPOOR)           (R.P. TOLANI)

                                ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated:24-08-2012.

MP

Copy to:

1. Assessee

2. AO

3. CIT

4. CIT(A)

5. DR