Kavita Manoj Damani,Mumbai vs Income Tax Officerm Int Tax Ward ...

on 9 June, 2025

Kavita Manoj Damani,Mumbai vs Income Tax Officerm Int Tax

Ward ... on 9 June, 2025

IN THE INCOME TAX APPELLATE TRIBUNAL, 'I' BENCH MUMBAI BEFORE: SHRI AMIT
SHUKLA, JUDICIAL MEMBER & SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER
(Assessment Year : 2020-21) Kavita Manoj Vs. ITO Damani INT Tax Ward 2(1)(1), 5 Floor, Dhiraj t
h Air India Building, Chambers, Nariman Point, 9 H.S. Marg, Mumbai-400021.

Mumbai-400001.

PAN/GIR No.AEYPD6472P
(Appellant) .. (Respondent)

Assessee by Shri. Bhadresh Doshi

Revenue by Shri. Krishna Kumar, Sr. DR

Date of Hearing 11/03/2025

Date of Pronouncement 09/06/2025

/ O R D E R

PER VIKRAM SINGH YADAV (A.M):

This appeal has been preferred against the impugned order dated 07.03.2024 passed in Appeal no.
CIT(A) 56, Mumbai/10315/2019-20 by the Ld. Commissioner of Income- tax(Appeals)/ National
Faceless Appeal Centre (NFAC) [hereinafter referred to as the "CIT(A)"] u/s. 250 of the Income- Tax
Act, 1961 [hereinafter referred to as "Act"] for the Assessment year [A.Y.] 2020-21 wherein the
assessee has taken the following grounds of appeal:

ITA no. 2648/MUM/2024 Kavita Manoj Damani "1 On the facts and circumstances
of the case and in law, the Ld. CIT(A) has erred in upholding the finding of the
Assessing Officer that the real / economic /deemed owner of the property (Flat No.
402A/402B, Glen Classic CHS, Hiranandani Gardens, Powai, Mumbai) was not the
appellant but her husband, Mr. Manoj Damani and further erred in denying the
exemption u/s. 54 to the appellant in respect of the long-term capital gains arising
from the sale of that property which has been assessed in the hands of the appellant.

2. On the facts and circumstances of the case and in law, without prejudice to the
above, the very fact that the long-term capital gains of „ 4,21,83,273 arising from sale
of the said property (Flat No. 402A/402B, Glen Classic CHS, Hiranandani Gardens,
Powai, Mumbai) has been assessed fully in the hands of the appellant by the lower
authorities implies that the appellant was the only real / economic/deemed owner of
the said property and not her husband.

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 Kavita Manoj Damani,Mumbai vs Income Tax Officerm Int Tax Ward ... on 9 June, 2025

3. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in
agreeing with the decision of the Assessing Officer to disallow the exemption claimed
by the appellant u/s.54 in respect of 50% of the long-term capital gains on the ground
that the 50% share in the said property was gifted by her husband to her and,
therefore, the provisions of Section 64(1)(iv) were applicable making her husband as
the deemed owner but without appreciating that at the most only the net income after
considering the eligible exemption could have been clubbed.

4.On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in
disallowing the exemption u/s. 54 on the ground that the appellant had not deposited
the unutilized amount of capital gains into an account under the Capital Gains
Account Scheme as required under the provisions of sub-section (2) of Section 54.

5. On the facts and circumstances of the case and in law, the Ld. CIT(A) ought to have
appreciated that the appellant had made the payments in respect of purchase of
another residential property well before the date of filing of her return of income u/s.

139.

6. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in
upholding the finding of the Assessing Officer that the appellant had adopted a
colourable device to evade tax and thereby disallowing the exemption claimed by the
appellant u/s. 54."

2. Briefly the facts of the case are that the assessee filed her return of income
declaring total income of Rs. 29,60,520/- which was selected for complete scrutiny
under CASS and one of the issues for which the case was selected for scrutiny was to
examine capital gains deduction claimed by the assessee in her return of income.
Notices u/s. 143(2) and 142(1) were issued and after ITA no. 2648/MUM/2024
Kavita Manoj Damani calling for necessary information/documentation including
issuing of notices u/s. 133(6) to the husband of the assessee Shri. Manoj Damani and
issuing a show-cause to the assessee, the assessment order was passed u/s. 143(3)
r/w 144C of the Act vide order dated 29.11.2022 wherein claim of exemption u/s. 54
amounting to Rs. 3,96,55,000/- was denied to the assessee.

3. As per the Assessing officer, the assessee has purchased flat N. 402A for
Rs.34,51,000/- and flat No.402B for Rs. 17,40,000/- at Glen Classic CHS Ltd.,
Hiranandani, Powai on 14.03.2002 in the joint name with her Husband Mr Manoj
Damani. Assessee was asked to provide documentary evidence regarding payment
made in respect of purchase of property i.e flat No. 402A/4028.

Assessee and her husband failed to prove that the assessee had made any payment in respect of the
purchase of the said flats. In the absence of same, it is proved that all the payment was made by her
husband and name of the assessee was added just for the name sake. Hence the real economic

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 Kavita Manoj Damani,Mumbai vs Income Tax Officerm Int Tax Ward ... on 9 June, 2025

owner of the said flats was her husband and not the assessee. As the real /economic/deemed owner
of the property flat No. 402A/402B was Mr Manoj Damani and owner of property situated at Lodha
Estella (on which the exemption u/s.54 was claimed) is also Mr. Manoj Damani, it is well
established in law that to constitute sale, there must be two separate parties/entities to the
transaction and no person can transact with oneself. Here, seller and purchaser are the same
person. Accordingly, the sale agreement was held as void and the exemption claimed by the ITA no.
2648/MUM/2024 Kavita Manoj Damani assessee of Rs.3,96,55,000/- cannot be accepted hence the
same was disallowed by the AO.

4. It was held by the AO that on 01st April 2017, Mr Manoj Damani has gifted his share of 50% to
her wife Kavita Damani. As husband gifted his share of property to his wife, husband is considered
as the deemed owner of the said property. Without prejudice to above, if it presumed that the
assessee has made the payment in respect of her share at the time of purchase of the said property
i.e flat No. 402A/402B, then also her husband is the deemed owner of 50% of the said property as
per section 64(1)(iv) of the I.T. Act.

5. It was held by the AO that in this case since the assessee's husband Mr. Manoj Damani is the
deemed owner of the said property i.e, flat No. 402A/402B, as per clubbing provision, the capital
gain earned on sale of property is the income of her husband i.e Mr. Manoj Damani. One cannot
claim exemption u/s.54 on purchase of its own property. Accordingly, half of the exemption claimed
by assessee of Rs.1,98,27,500/- u/s.54 of the IT Act is liable to be disallowed as purchaser and seller
(property situated at Lodha Estella, on which the exemption u/s.54 was claimed) are the same
person and it is a well settled law that one cannot purchase anything from himself.

6. It was further held by the AO that on perusal of records, it is seen that the assessee sold an
immovable property i.e, flat No. ITA no. 2648/MUM/2024 Kavita Manoj Damani 402A/402B
Hiranandani, Powai for Rs.5,98,00,000/- on January, 2020 and earned capital gain of
Rs.4,21,83,273/-. The assessee has claimed exemption u/s.54 of the IT Act in respect of the
immovable property purchased from her husband of Rs.3,85,00,000/-. In this regard, the assessee
has stated that she had made a payment of Rs. 10,00,000/- on 30.09.2019. However, this payment
was not reflected in the bank account statement of the assessee. Assessee has submitted copy of
agreement of sale dated 24.02.2020. As per agreement to sale, the assessee has to pay the balance
amount by 30th September, 2020, but the remaining payment was made by the assessee as under :-

Sr No Date Bank Amount

1 12.03.2021 Bank of Baroda 1,50,00,000
2 12.03.2021 Bank of Baroda 70,00,000
3 12.03.2021 Bank of Baroda 1,50,00,000
4 26.03.2021 Bank of Baroda 4,49,950

7. It was held by the AO that the seller of the new property i.e Mr. Manoj Damani (husband of the
assessee) received the payment in his bank account maintained with Vijaya bank. On scrutiny of
bank account statement of the assessee and her husband for the said period reveals that on

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12.03.2021, Mrs. Kavita Damani (assessee) received Rs.70,00,000/- from M/s. Altan Engineering
Pvt Ltd, a company in which she and her husband Mr. Manoj Damani are common directors. Then
on the same day, Mrs. Kavita Damani made the payment of Rs.70,00,000/- to her husband Mr.
Manoj Damani in his account maintained Vijaya bank. Then Mr. Manoj Damani ITA no.
2648/MUM/2024 Kavita Manoj Damani transfer the said Rs.70,00,000/- to M/s. Altan
Engineering Pvt Ltd. The same rotation was followed for the another payment of Rs.3,00,00,000/-
(1,50,00,000 and 1,50,00,000/-) on the same day i.e 12.03.2021. Hence, it is seen that the payment
of Rs.3.7 crore was moved from M/s. Altan Engineering Pvt Ltd and reached to M/s. Altan
Engineering Pvt Ltd through Kavita Damani and Manoj Damani in a single day. In view of the
above, it is clear that no actual consideration was paid by the assessee for purchase of new property
from her husband, but moved the fund of M/s. Altan Engineering Pvt Ltd/ her husband from one
hand to another. This is nothing but the rotation of money just to evade tax, no actual transfer of
money, no right to use the property changed, only title of the property has changed. In view of the
above, it is nothing but a colourable device used to evade tax and reliance was placed on the Hon'ble
Supreme Court Order in McDowell and Company Ltd. Vs Commercial Tax Officer, 154 ITR 148
wherein it was held that the "Tax planning may be legitimate provided within the framework of law
and the colourable device cannot be a part of the tax planning."

8. It was further held by the AO that without prejudice to above, in view of the above, it is clear that
for claiming of exemption u/s.54(2) of the IT Act, one has to invest in the new property or deposit
the same in the capital gain account scheme before furnishing the return of income. However, in his
case, on perusal of bank account statement, it is seen that the assessee received Rs.5,98,00,000/- in
January, 2020 as sales ITA no. 2648/MUM/2024 Kavita Manoj Damani consideration of
immovable property i.e flat No. 402A/402B, instead of investing the same or deposit it in the capital
gain account scheme, the assessee has utilized the same for payment of bills, making FDs and
investing in her company i.e. M/s. Altan Engineering Pvt Ltd. as evident from bank account
statement furnished by the assessee. It was further held by the AO that the claim of the assessee that
she had made a payment of Rs. 10,00,000/- (vide cheque No. 181392) on 30.09.2019 to her
husband is not supported by any evidence. Perusal of bank account statement shows that the
assessee has made a payment of only Rs 1,00,000/- on 03.10.2019 from her Vijaya Bank account
vide cheque No.28181393. It is not cleared that this amount is actually related to purchase of
property as cheque number mentioned in the agreement of sale (dated 24.02.2020) is different from
this.

9. In view of the above, the AO held that total long term capital gain of Rs.4,21,83,273/- earned
during the said transaction should be taxed under LTCG without giving any benefit of exemption
claimed by the assessee u/s. 54 of the IT Act and therefore the exemption claimed of
Rs.3,96,55,000/- was disallowed and added back to the income of the assessee.

10. Being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A) who has
sustained the findings of the AO and the findings of the Ld. CIT(A) read as under:

"4.3 The findings of the AO in the assessment order, written submissions of the
appellant and the case laws relied upon by the appellant as well as the AO have been

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 Kavita Manoj Damani,Mumbai vs Income Tax Officerm Int Tax Ward ... on 9 June, 2025

carefully examined.

ITA no. 2648/MUM/2024 Kavita Manoj Damani The fact of the case is that the
assessee has purchased flat N. 402A for Rs. 34,51,000/- and flat No. 402B for Rs.
17,40,000/- at Glen Classic CHS Ltd., Hiranandani, Powai on 14.03.2002 in the joint
name with her Husband Mr Manoj Damani. Later on 01st April 2017 Mr Manoj
Damani has gifted his share of 50% to her wife Kavita Damani. The said flats were
sold by the assessee on 03.10.2019 for Rs 5,98,00,000/- Capital gain in the said
transaction was calculated by the assessee at Rs. 4,21,83,273/-, Further, the assessee
claim exemption u/s. 54 of the Act by investing in a new residential property of
Rs.3,96,55,000/-. This new property has been purchased by the assessee from her
husband. The case of assessee was selected for complete scrutiny under CASS and the
notice u/s. 143(2) of the I T Act, 1961 was issued on 29.06.2021 by NaFAC. The
assessee being a non resident, his case was transferred to the assessment work list of
the undersigned in ITBA for completion of the scrutiny assessment. The major issues
based on which the case was selected are as follows:

1. Increase in TDS in Revised Return

2. Refund Claim

3. Capital Gains Deduction Claim Assesse has purchased purchased flat N. 402A for
Rs 34,51,000/- and fat No.402B for Rs 17,40,000/- at Glen Classic CHS Ltd.,
Hiranandanı, Powai on 14.03.2002 in the joint name with her Husband Mr Manoj
Damani). Assessee was asked to provide documentary evidence regarding payment
made in respect of purchase of property ve flat No. 402A/402B Assessee and her
husband were failed to prove that the assessee had made any payment in respect of
the purchase of the said flats. In the absence of same, it is proved that all the payment
was made by her husband and name of the assessee was added just for the name
sake. Hence the real/ economic owner of the said flats was her husband and not the
assesse. As the real /economic/deemed owner of the property flat No. 402A/402B
was Mr. Manoj Damani and owner of property situated at Lodha Estella (on which
the exemption u/s.54 was claimed) is also Mr. Manoj Damani. Assessee has claimed
exemption u/s.54 of the IT Act in respect of the immovable property purchased from
her husband of Rs.3,85,00,000/-. In this regard, the assessee has stated that she had
made a payment of Rs. 10,00,000/- on 30.09.2019. However, this payment was not
reflected in the bank account statement of the assessee. Assessee has submitted copy
of agreement of sale dated 24.02.2020. Hence, it is seen that the payment of Rs.3.7
crore was moved from M/s. Altan Engineering Pvt Ltd and reached to Mis. Allan
Engineering Pvt Ltd through Kavita Damani and Manoj Damani in a single day. In
view of the above, it is clear that no actual consideration was made by the assessee for
purchase of new property from her husband, but moved the fund of M/s. Altan
Engineering Pvt Ltd/ her husband from one hand to another. This is nothing but the
rotation of money just to evade tax. No actual transfer of money, no right to use the

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property changed, only title of the property has changed. As per Supreme Court
Order in McDowell and Company Ltd.

Vs Commercial Tax Officer, 154 ITR 148 held that the "Tax planning may be legitimate provided
within the framework of law and the colourable device cannot be a part of the tax planning." In view
of the above, total long term capital gain of Rs.4,21,83,273/- earned during the said transaction
should be taxed under LTCG without giving any benefit of exemption claimed by the assessee u/s.54
of the IT Act On the facts and circumstances of the case and in law, I uphold the decision of the AO.
The exemption u/s.54 of the Act claimed by the appellant should be disallowed. In view of ITA no.
2648/MUM/2024 Kavita Manoj Damani the above, and taking into consideration the Supreme
Court Order in McDowell and Company Ltd. V/s commercial Tax Officer, 154 ITR 148, it is clear
that for claiming of exemption u/s.54(2) of the IT Act, one has to invest in the new property or
deposit the same in the capital gain account scheme before furnishing the return of income.
However, in his case, rotation of money has been made to evade the tax. Taking into the
consideration all the aspects of this case, I uphold the decision of the AO and agree with the decision
of disallowing the exemption claimed by the appellant u/s 54 of the Act. Accordingly, this ground of
appeal is dismissed."

11. Against the said findings and directions of the ld CIT(A), the assessee is in appeal before us.

12. During the course of hearing, the Ld. AR submitted that on 14-3-2002, two adjacent residential
flats (402A & 402B, Glen Classic, Hiranandani Gardens, Powai, Mumbai) were purchased vide
Agreements for Sale. The agreements were executed jointly by the assessee and her husband (Manoj
Damani) and the assessee's name being the first. It was submitted that on 1-4- 2017, a registered gift
deed was executed whereby husband of the assessee gifted his undivided share in the said property
to the assessee whereby the assessee became the exclusive owner of the said property. Thereafter,
the rental income earned from the said residential property was also fully offered by the assessee in
her ITR.

13. It was submitted that on 9-1-2020, the assessee sold this property vide Agreement for Sale which
were executed by her in her individual capacity and also the consideration for which was fully
received in her bank account. The long-term capital gains of „ 4,21,83,273 had arisen upon transfer
of this residential property.

ITA no. 2648/MUM/2024 Kavita Manoj Damani

14. It was submitted that Mr. Manoj Damani (husband of the assessee) was owning another
residential property viz. Flat No. B-3901, Tower-B, Lodha Estrella, New Cuffe Parade, Mumbai 400
022. This property was purchased by him vide Agreement to Sell dated 27-3-2015 which was
executed exclusively in his name. On 18-3-2021, the assessee purchased this residential property
from her husband by executing a registered agreement for sale for a total consideration of Rs.
3,85,00,000. The assessee also paid this consideration fully (after deducting the applicable TDS u/s.
195) to her husband. The assessee claimed the exemption u/s. 54 amounting to Rs. 3,96,55,000
(purchase consideration of 3,85,00,000 plus stamp duty of 11,55,000) against the long-term capital

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gains arising from the transfer of the residential property as mentioned above.

15. It was submitted that the consideration aggregating to Rs 3,80,00,000 in respect of the
residential flat purchased from husband was paid by the assessee by 12-3-2021. It is after making
the payment of consideration, the return of income for the year under consideration was filed by the
assessee on 24-3- 2021 u/s 139(4) claiming the exemption u/s 54 of the Act.

16. In the aforesaid factual background, in the context of Ground No. 1 & 2 wherein the AO has
denied the exemption claimed u/s 54 on the ground that the assessee's husband was the real /
economic/deemed owner of the property sold (i.e. 402A & 402B, Glen Classic, Hiranandani
Gardens, Powal, Mumbai), it ITA no. 2648/MUM/2024 Kavita Manoj Damani was submitted that
where the contention of the Revenue is accepted, then the capital gain itself (arising on sale of the
said property at Powai) was required to be assessed in the hands of the husband of the appellant.
Having assessed the capital gains in the hands of the assessee fully, it would not be justified to deny
the exemption claimed thereon u/s. 54 on this ground. Irrespective of the fact that the details of the
payments made while purchasing the said property in 2002 were not available, the husband of the
appellant had gifted his rights/interest in the said property to the assessee on 1-4-2017. By virtue of
the said gift, the assessee had become the owner of the said property. Further, the rent income
earned from the said property was also offered to tax by the assessee fully in her hands right from
the day on which the husband of assessee gifted her share to the assessee. The sale agreement in
respect of the said property was executed by the assessee in her individual capacity. The certificate
to deduct tax at source at the lower rate in respect of the entire sale consideration was also issued in
favour of the assessee. The sale consideration was fully received by the assessee and it was being
credited to her bank account. Therefore, the assessee was only required to be considered as the real
and economic owner of the said property.

17. In the context of Ground No. 3, wherein the AO has denied the exemption claimed u/s. 54 to the
extent of 50% on the ground that the provisions of Section 64(1)(iv) were applicable to that extent
on account of gift made by the husband of the ITA no. 2648/MUM/2024 Kavita Manoj Damani
assessee to the assessee, it was submitted that once again, even if the provisions of Section 64(1)(iv)
are to be invoked, then the capital gain itself (arising on sale of 50% rights in the said property at
Powai) was required to be assessed in the hands of the husband of the appellant. It was submitted
that having assessed the capital gains in the hands of the assessee fully, it would not be justified to
deny the exemption claimed thereon u/s. 54 on this ground to the extent of 50%. Without prejudice,
the provisions of Section 64(1)(iv) require the clubbing of the income arising from the asset
transferred without consideration. For this purpose, the income is first required to be computed by
applying all the provisions of the Act. Section 2(24) defines 'Income' which includes the capital gain
which is chargeable to tax u/s. 45, Section 45 provides for the chargeability of the capital gains but
subject to the provisions of Section 54 etc. (which provide for the exemption). Therefore, the capital
gain if exempt u/s. 54 then does not fall within the chargeability provision of Section 45 at all and,
therefore, does not fall within the definition of the 'income' at all. Section 64(1)(iv) would fail to
operate with respect to something which cannot be regarded as 'income' at the first place. In
support, reliance was placed on the decisions in case of CIT vs. Ajit Thomas (Madras High Court),
Hemant Shah vs. ACIT (Mumbai ITAT) and ACIT vs. Madan Lal Bassi (Chandigarh ITAT)

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18. In the context of Ground No. 4 & 5, where the AO has denied the exemption on the ground that
the assessee did not ITA no. 2648/MUM/2024 Kavita Manoj Damani deposit the unutilised amount
of the capital gains in CGAS A/c as required under the provisions of sub-section (2) of Section 54, it
was submitted that the time limit for making the investment for the purpose of claiming the
exemption u/s. 54 was extended upto 31-3-2021 vide Section 3 of the Taxation and Other Laws
(Relaxation and Amendment of Certain Provisions) Act, 2020. The assessee had invested the
amount of capital gains well before 31-3-2021. The Ld. AO and CIT (A) have failed to take into
consideration this aspect of the extension granted by the TOLA.

19. In the context of Ground No. 6, wherein the AO has denied the exemption u/s 54 on the ground
that the assessee had adopted a colourable device to evade tax, it was submitted that the gift deed in
favour of the assessee was executed and also registered on 1-4-2017. The said property was then sold
on 9-1- 2020. By no stretch of imagination, it can be said that the gift was made with the intention to
evade the tax. This is for a simple reason that it could not have been imagined in 2017 that the
property would be sold. With respect to the purchasing of the residential property from the
husband, it was submitted that it was a legitimate transaction wherein a registered agreement was
executed, stamp duty as applicable was fully paid, procedure for obtaining the certificate for
deducting the tax at lower rate was fully completed and certificate was granted and consideration
was fully paid to the husband from the bank account of the assessee.

ITA no. 2648/MUM/2024 Kavita Manoj Damani

20. It was further submitted that the only point on the basis of which the AO alleged that it was a
colourable device was the rotation of funds between the assessee, Altan Engineering Pvt. Ltd. and
assessee's husband. In this respect, a summary of how the sale consideration received by the
assessee was being utilized by her was submitted as under:

Date of Consideration Date of Nature of Payment Amount Paid Receipt Received

Payment 3-10-2019 5,50,000 5-10-2019 Manoj Damani-against 10,00,000 purchase
of flat 3-10-2019 5,50,000 5-10-2019 Altan Engineering Pvt. 1,00,000 Ltd.

14-1-2020 1,02,51,101.40 15-1-2020 Altan Engineering Pvt. 25,35,000 Ltd.

14-1-2020 2,74,74,102.40 20-1-2020 Remittance of Dubai 71,23,567 14-1-2020

1,02,51,101.40 22-1-2020 Altan Engineering Pvt. 27,00,000 Ltd.

22-1-2020 Fixed Deposit 99,00,000

22-1-2020 Fixed Deposit 1,00,00,000
12-2-2020 Altan Engineering Pvt. 1,00,00,000
Ltd.
Total 4,90,76,305.20 4,33,58,567

21. It was submitted that these Fixed Deposits were matured on 9-10-2020 and the

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funds aggregating to 2,03,14,369 were credited to the bank account of the assessee
out of which the amount of 1,80,00,000 was given as loan to Altan Engineering Pvt.
Ltd. Thus, it can be observed that the assessee had parked the funds aggregating to „
3,33,35,000 with Altan Engineering ITA no. 2648/MUM/2024 Kavita Manoj
Damani Pvt. Ltd. which she received back on 12-3-2021 and she made the payment of
the consideration payable to her husband against the purchase of the residential
property on which the exemption u/s. 54 was being claimed. It may also be noted
that the assessee could not utilise the sale consideration immediately for the purpose
of buying the residential property from her husband only for the reason that the
application for deducting tax at lower rate was pending with the Income-tax
Authorities and it was granted only on 24-2-2021.

22. In support, reliance was placed on the following decisions wherein the exemption
u/s. 54/54F was being granted with respect to the residential property purchased by
the assessee from his relative / family member-

i. ITO vs. Kalawati Vijaykumar Agarwal (Pune ITAT) ii. ITO vs. Rajesh Sharma (Jaipur ITAT) iii.
Surjeet Singh vs. PCIT (Chandigarh ITAT)

23. It was submitted that in the first decision mentioned at (i) above, the revenue itself had agreed
that the relationship between the purchaser and seller is not relevant and that there is no restriction
on purchase of the said residential property from the spouse. In view of the above, it was submitted
that the exemption claimed by the assessee u/s. 54 may thus be allowed.

ITA no. 2648/MUM/2024 Kavita Manoj Damani

24. Per contra, Ld DR is heard who has relied on the findings of the lower authority which we have
already taken note of and not been repeated for the sake of brevity.

25. We have heard the rival contentions and purused the material available on record. The Assessing
officer has brought to tax long term capital gains of Rs 4,21,83,273/- on sale of two flats without
allowing the exemption claimed by the assessee u/s 54 amounting to Rs 3,96,55,000/-. The sale of
flats have been executed vide agreements to sell dated 9/1/2020 and the said flats were initially
purchased vide agreement to purchase dated 14/03/2002 read with registered gift deed dated
1/04/2017. The contents of these sale agreements (and purchase/gift deed) are not in dispute and
the same have been executed by the assessee in her individual capacity and the consideration has
been received by her in her bank account and which has been duly offered to tax by the assessee and
has been brought to tax by the AO in the hands of the assessee.

26. Now, coming to exemption claimed by the assessee u/s 54 amounting to Rs 3,96,55,000/-, the
same relates to purchase of another flat by the assessee from her husband vide registered agreement
to sell dated 18/03/2021 for a stated consideration of Rs 3,85,00,000/- on which the assessee has
paid stamp duty of Rs 11,55,000/-. The factum of ownership of the said flat in the name of the
husband of the assessee vide agreement to sell dated 27/03/2015 is not in dispute nor the contents

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 Kavita Manoj Damani,Mumbai vs Income Tax Officerm Int Tax Ward ... on 9 June, 2025

of the subject ITA no. 2648/MUM/2024 Kavita Manoj Damani registered agreement to sell dated
18/03/2021 wherein the title in the property has been transferred by him in the name of the
assessee.

27. In terms of utilisation of capital gains and discharge of whole of purchase consideration by the
assessee within the stipulated time frame as so mandated u/s 54, it has been submitted that the
assessee has discharged the whole of the consideration well before 31/03/2021, the extended time
limit for making the investment under the TOLA which the AO and the ld CIT(A) have failed to
consider. Further, in the interim, as the matter relating to withholding tax was pending before the
tax authorities and certificate was finally issued on 24/02/2021, the assessee parked the funds in
fixed deposits/with Altan Engineering Pvt Ltd and the same were liquidated/received back and
thereafter, the amount was paid to the husband of the assessee after taxes were withheld and
deposited. We find that the AO alleging the rotation of funds has merely looked at the transanctions
on 12/03/2021 when the majority of the purchase consideration has been discharged and has not
considered the transactions prior to that date where the money has been initially parked by the
assessee in fixed deposits/with Altan Engineering and thereafter, received back and out of which,
the amount was paid to the husband of the assessee towards the purchase consideration. Further,
we find that the capital gains which have been brought to tax relates to the flats that have been sold/
transferred by the assessee vide agreement to sell ITA no. 2648/MUM/2024 Kavita Manoj Damani
dated 9/1/2020 and the assessee has thereafter purchased another flat vide agreement to sell dated
18/03/2021 wherein the consideration has been discharged by 12/03/2021, the said purchase is
thus within the stipulated time period of two years after the date on which transfer of the original
asset took place as prescribed u/s 54, the claim of exemption u/s 54 cannot be denied to the
assessee.

28. In light of aforesaid discussion and in the entirety of facts and circumstances of the case, the AO
is hereby directed to allow the exemption claimed by the assessee u/s 54 of the Act.

In the result, the appeal of the assessee is allowed.

Order pronounced in open court on 09.06.2025.

Sd/- Sd/-
(AMIT SHUKLA) (VIKRAM SINGH YADAV)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai; Dated 09/06/2025
Anandi Nambi, Steno

Copy of the Order forwarded to:

1. The Appellant
2. The Respondent.
3. CIT
4. DR, ITAT, Mumbai
5. Guard file.

//True Copy//

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 Kavita Manoj Damani,Mumbai vs Income Tax Officerm Int Tax Ward ... on 9 June, 2025

ITA no. 2648/MUM/2024

Kavita Manoj Damani

BY ORDER,

(Asstt. Registrar)
ITAT, Mumbai

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