Sec. 54 of Income Tax Act, 1961—Capital Gain—Exemption could not be denied if entire investment had come out of proceeds of old property.

Facts: C!T(A) erred in not considering the rule of purposive and beneficial construction and erred in interpreting the provisions of section 54, this section does not require that the new residential property shall be purchased in the name of the assessee only. CIT(A) has further grossly erred in not considering the affidavit submitted by the “ assessee father” and that of “ son” clearly stating the fact that investment in new house property was made by “ assessee father” out of sale proceeds of the old house property as “son” who is a student has no ostensible source of income and all payments to the builder are routed through banking channel, under such circumstances source of investment cannot be said to be unestablished.

Held, that it is pertinent to note that assessee has demonstrated before the AO as well as the CIT(A) that the purchase of property in the name of the son was acquired by the assessee himself through the consideration received from the sale deed of earlier old property. The bank statement and the cheque issued to the builder as well as the confirmation received from the builder demonstrated that payment was made by assessee for purchase of new property within the stipulated time as prescribed u/s 54. Though, the assessee has not filed any return and at that stage never claimed Section 54, once the reopening u/s 148 has been issued, the assessee cannot be denied his entitlement /claim for deduction or exemption under income tax statute on the sole ground that no return was filed. The benefit of income tax act and its provisions related to exemption and deduction has to be taken into account while computing the income of the assessee and it is the proper procedure on the part of AO to follow all the aspect of taxation within the corners of Income Tax Act. As regards the name under whom the property is purchased, it can be seen that the son of the assessee is a direct relation and as per the Hon’ble Delhi High Court decision in case of CIT(A) Vs. Kamal Vahal 351 ITR 4 where assessee purchased new house in name of his wife, the claim under Section 54 is held valid. Thus, the exemption could not be denied if entire investment had come out of proceeds of old property. Thus, the order of the CIT(A) is not justified in light of the decision in case of Kamal Vahal (supra). Therefore, the appeal of the assessee is allowed. - BHAGWAN SWAROOP PATHAK V/s ITO - [2020] 80 ITR (TRIB) 089 (ITAT-DELHI)