Mukesh Babulal Shah Vs ITO (ITAT Mumbai)
No Need for CGAS Deposit If Entire Capital Gains Utilised Before Filing Return – Matter Remanded for Verification
Mumbai ITAT held that deposit in Capital Gains Account Scheme (CGAS) is not mandatory where the entire capital gains are already utilised before filing the return of income, even if the return is filed belatedly under Section 139(4).
The assessee’s claim of ₹3.69 crore deduction u/s 54 was denied by the AO and upheld by CIT(A) on the ground that:
- Capital gains were not deposited in CGAS before due date u/s 139(1)
- Investment in new property was made after the due date
The Tribunal made key distinctions:
- As per Bombay HC in Humayun Suleman Merchant, CGAS deposit is mandatory only for unutilised amounts
- If the entire capital gains are utilised before filing return u/s 139 (including 139(4)), exemption can still be allowed (supported by Rajesh Kumar Jalan)
- Strict interpretation applies only where amount remains unutilised
On facts, the assessee claimed to have invested the full amount (₹8.45 crore) before filing return, leaving no unutilised balance, hence CGAS requirement may not arise.
However, since payment details were not fully verified, the ITAT:
- Restored the matter to AO
- Directed verification of actual utilisation before return filing
- Ordered that deduction u/s 54 be allowed if utilisation is proved
Accordingly, the appeal was allowed for statistical purposes with clear legal relief in principle.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
