Ex-Parte Order: Section 54F Deduction Denied for Lack of Ownership Proof

Ex-Parte Order: Section 54F Deduction Denied for Lack of Ownership Proof

Issue

Whether the claim for deduction under Section 54F (Capital Gains exemption) can be allowed when the assessee fails to produce the registered sale deed or any conclusive evidence of ownership for the new residential property, and the available documents suggest he is merely a nominee.

Facts

• The Transaction: The assessee sold an immovable property for Rs. 1.01 Crore, resulting in Long Term Capital Gains (LTCG) of Rs. 51,73,052/-.

• The Claim: To claim exemption u/s 54F, the assessee stated he reinvested the proceeds in purchasing a residential house in Noida (Rs. 47.02 Lakhs) and a commercial space.

• AO’s Finding: The Assessing Officer (AO) noted that the documents for the Noida property showed the owner as Sh. Raj Kumar, while the assessee was listed only as a nominee.

• Verification Failure: Notices issued u/s 133(6) to the developer (M/s Granite Gate Properties P. Ltd.) to confirm ownership and payments went unanswered. The assessee provided bank statements showing payments but failed to produce the Sale Deed.

• Outcome: The AO disallowed the exemption and added the entire LTCG to the income. The CIT(A) confirmed this, and the assessee appealed to the Tribunal but failed to appear.

Decision

• The Income Tax Appellate Tribunal (ITAT) dismissed the assessee’s appeal.

• Ownership is Mandatory: The Tribunal upheld the lower authorities’ view that to claim Section 54F benefits, the assessee must be the legal owner of the new residential property. Merely making payments or being a nominee is insufficient.

• Lack of Evidence: The assessee failed to furnish the registered sale deed or any document proving title transfer. In the absence of such crucial evidence, the claim was unsustainable.

• Ex-Parte Disposal: Due to the assessee’s repeated non-appearance, the Tribunal decided the matter ex-parte based on the available records, finding no infirmity in the AO/CIT(A)’s orders.

Key Takeaways

• Title Deed is Crucial: For capital gains exemptions involving property reinvestment (Sec 54/54F), possessing a valid, registered title deed in the assessee’s name is a fundamental requirement.

• Nominee vs. Owner: A nominee is a custodian, not an owner. Tax benefits tied to ownership cannot be claimed by a nominee unless they can prove they are the beneficial owner who provided the funds and holds the dominion.

• Burden of Proof: The onus is on the taxpayer to prove eligibility for exemption. Silence or non-cooperation during assessment and appellate proceedings usually leads to an adverse inference.

Judgement :- 1762758293-F8h82b-1-TO