The claim for exemption under Section 54 of the Income Tax Act is not disqualified by the fact that the new residential property is purchased or constructed in the name of the assessee's spouse, provided the investment originates from the capital gains of the transferred asset.

O R D E R

PER KESHAV DUBEY, JUDICIAL MEMBER:

This appeal at the instance of the assessee is directed against the order of the Income Tax Officer, Ward- International Taxation 1(2), Bengaluru dated 15.1.2025 vide DIN & Order No. ITBA/AST/S/147/2024-25/1072202882(1) passed u/s 147 r.w.s 144 of the Income Tax Act, 1961 (in short “The Act”) for the assessment year 2018-19.

2. The assessee has raised the following grounds of appeal:

1. That the order of the Income Tax Officer Ward Intl. Taxation 1(2), Bangalore dated 15.01.2025 passed u.s 147 r.w.s 144 of the Income-tax Act, 1961("the Act"), to the extent prejudice to the Assessee, is bad in law and on the facts and circumstances of the case.

2. The Ld. DRP has erred in law and on facts in upholding the draft order of the Ld.AO.

3. The Ld. DRP/AO has erred in law and on facts in passing the impugned order without jurisdiction.

4. The Ld. DRP/AO have grossly erred in the law and facts of the case by making a additions u/s 45 of the Act of Rs.26,91,120/-.

5. The Ld.DRP/AO have erred in law and on facts in denying the deduction u.s 54 of the Act;

6. The Ld DRP/AO has erred in law and on facts in levying interest under section 234A/B.

7. The Ld DRP/AO has erred in law and on facts in initiating penalty proceedings u/s 270A for underreporting of income consequent to misreporting and underreporting of income based on the above erroneous adjustments.

On the basis of the above grounds and other grounds which may be urged at the time of hearing with the consent of the Honorable Tribunal, it is prayed that the order passed under section 147. r.w.s.144 of the Act be quashed and the relief sought be granted.

3. The brief facts are that the case of the assessee was reopened u/s. 147 of the Act after following the due procedure as envisaged u/s. 148A of the Act. Accordingly, notice u/s. 148 of the Act was issued to the assessee on 07/04/2022. In response to notice u/s.148 of the Act, the assessee did not file any return of Income however during the course of assessment proceedings, the assessee filed a computation of income declaring income from house property of Rs.59,535/- and interest from deposits in banks of Rs.60,557/- along with NIL capital gains after claim of cost of acquisition & deduction u/s 54 of the Act. The assessee in his computation of income had also claimed deduction u/s 80TTA of the Act and thus declared total income of Rs.1,10,090/-.The AO while completing the assessment proceedings had also considered the income declared by the assessee by way of furnishing the computation of income.

Subsequently, the notices u/s. 142(1) of the Act as well as show cause notices was issued on various dates seeking documents and information to which the assessee made part compliances.

3.1 The AO on going through the sale deed dated 15/12/2017 noticed that the assessee had sold an immovable property for a consideration of Rs 60,00,000/-. Further, the cost of acquisition as on 01/04/2021 amounting to Rs.12,16,500/- as per the valuation report submitted by the assessee was found to be in order by the AO. In view of the above facts, the long term capital gain as worked out by the assessee amounting to Rs.26,91,120/- after allowing indexed cost of acquisition of Rs.33,08,880/- was accepted by the AO.

3.2 Further, the AO noticed that the assessee had also claimed exemption u/s 54 of the Act amounting to Rs.26,91,120/- on account of investments made in new property and claimed taxable LTCG at Rs. NIL. The AO disallowed the assessee’s claim of exemption u/s 54 of the Act mainly for the following grounds which are enumerated