Rohitbhai Jivrambhai Patel Vs ITO (ITAT Ahmedabad)
Section 54B: Late Registration Need Not Defeat Relief-Timely Payment and Possession Hold the Key
Registration Date Alone Does Not Settle the Claim
The Ahmedabad ITAT has held that a delay in registering the final conveyance deed beyond the assessee’s control should not defeat a legitimate exemption under Section 54B. Where the purchase consideration has been paid within the prescribed two-year period, the factual question of whether possession was also obtained within that period requires examination.
The Tribunal was considering a disallowance of ₹1,79,94,050 relating to agricultural lands whose registered sale deeds were executed after the two-year deadline.
It found that the entire purchase consideration had been paid within time. However, the evidence concerning timely possession had not been factually verified by the lower authorities. Accordingly, the matter was remanded to the Assessing Officer, with directions to examine the agreements, possession letter, and supporting documents.
The deduction was therefore not finally allowed by the Tribunal. Relief remains subject to verification of the relevant facts.
Sale of Agricultural Land and Reinvestment
The assessee, a resident individual, filed his return for Assessment Year 2018-19 on 30 October 2018.
He jointly owned agricultural land at Village Dumad, District Vadodara, with a 50% share. The land was sold on 11 August 2017 for an aggregate consideration of ₹6,67,23,250. The assessee’s share of the consideration was ₹3,33,61,625.
While computing long-term capital gains, he claimed deduction of ₹3,24,98,500 under Section 54B towards investment in new agricultural lands.
During scrutiny, the Assessing Officer noticed that certain lands were purchased through registered deeds dated 24 February 2020 and 16 July 2020. Both dates fell beyond the prescribed two-year period, which the order records as ending on 10 August 2019.
On this basis, the Assessing Officer disallowed ₹1,79,94,050 out of the aggregate deduction claimed. The assessment was completed on 31 March 2021, determining income of ₹2,26,37,410.
CIT(A) Insisted on Registered Transfer of Title
The CIT(A) confirmed the disallowance by an order dated 13 January 2026.
The appellate authority relied on Section 54 of the Transfer of Property Act, 1882, observing that legal title passed only upon execution of a registered sale deed.
Since registration occurred after the two-year period, the CIT(A) considered payment of consideration within time insufficient, particularly in the absence of conclusive evidence showing transfer of possession or revenue mutation within the prescribed period.
Thus, the dispute concerned both the significance of delayed registration and the adequacy of proof that the purchase had been substantively completed within time.
Assessee Relied on Payment and Possession
Before the Tribunal, the assessee submitted that the entire purchase consideration had been paid within two years of transferring the original agricultural land.
He further contended that possession of the new agricultural lands had also been obtained within that period. According to him, a subsequent delay in execution or registration of the sale deeds should not deprive him of Section 54B relief.
In support, the assessee cited Sanjeev Lal v. CIT, 365 ITR 389 (SC), CIT v. T.N. Aravinda Reddy, 120 ITR 46 (SC), CIT v. R.L. Sood, 245 ITR 727 (Delhi), and Balraj v. CIT, 254 ITR 22 (Delhi).
The Revenue supported the lower authorities, arguing that a valid purchase required transfer of immovable property and that neither timely registration nor possession within two years had been adequately established.
Tribunal Found Timely Payment Established
After examining the records and the decisions cited, the Tribunal observed that mere delay in registration beyond the assessee’s control should not bar a legitimate statutory exemption.
It expressly found that the entire consideration had been paid within the statutory two-year period.
The unresolved issue was possession. The assessee had placed purchase agreements, a possession letter, and other documents before the Tribunal. The Revenue contended that some of this material had not been furnished to the Assessing Officer or CIT(A).
Consequently, the lower authorities had not undertaken the necessary factual verification to determine whether possession was obtained within time.
Assessing Officer Directed to Verify Possession
The Tribunal set aside the CIT(A)’s order on this issue and restored the matter to the Assessing Officer.
The Assessing Officer was directed to examine the agreements, possession letter, and other supporting documents. If verification established timely possession, with consideration paid within the stipulated period, the deduction was to be allowed in accordance with law.
The assessee was directed to furnish all necessary evidence and was entitled to a reasonable opportunity of hearing. His rights and contentions were left open.
The appeal was allowed for statistical purposes.
Author’s Comments
The decision recognises that the registration date may not fully reflect when the purchaser paid for and obtained possession of the property. Nevertheless, the assessee must establish those facts through reliable documents.
For a Section 54B claim involving delayed registration, the purchase agreement, payment trail, possession acknowledgment, and supporting contemporaneous records assume particular importance. The explanation for the registration delay should also be supported wherever available.
This order should be read as a conditional remand, rather than an unconditional approval of every purchase registered after two years. Timely payment was established here; timely possession still required verification.
Delayed paperwork may be explainable, but timely purchase must be provable.
Cases Discussed
- Sanjeev Lal v. CIT, (2014) 365 ITR 389 (SC) – Cited in support of the proposition that subsequent delay in completing the formal transfer should not necessarily defeat statutory capital-gains relief where substantive steps towards the transaction were taken within the prescribed period.
- CIT v. T.N. Aravinda Reddy, (1979) 120 ITR 46 (SC) – Cited on the meaning of “purchase” for purposes of capital-gains exemption and against an unduly technical construction of that expression.
- CIT v. R.L. Sood, (2000) 245 ITR 727 (Delhi High Court) – Cited in support of the claim that substantial compliance through timely payment towards acquisition may be relevant notwithstanding subsequent delay in completion of formalities.
- Balraj v. CIT, (2002) 254 ITR 22 (Delhi High Court) – Cited on the proposition that registration of the document is not necessarily indispensable for satisfying the statutory concept of purchase for capital-gains exemption.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
1. The present appeal has been preferred by the Assessee against the Order, dated 13/01/2026, passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the ‘CIT(A)’] whereby the Learned CIT(A) had dismissed the appeal against the Assessment Order, dated 31/03/2021, passed under Section 143(3) of the Income Act, 1961 [hereinafter referred to as ‘the Act’] for the Assessment Year 2018-2019.
2. The Assesse has raised the following grounds of appeal :
1. On the facts and in the circumstances of the case and in law, the Id. CIT(A), has grossly erred in confirming the disallowance of claim of deduction u/s 54B of the Act to the extent of Rs. 1,79,94,050/-as made by the Ld. AO ignoring the fact that the appellant had fulfilled the prescribed condition for such claim. The Hon’ble ITAT is humbly requested to delete the addition of Rs.1,79,94,050/- as made on account of disallowance of claim of the appellant u/s 54B of the Act. Being the same illegal and devoid of any merit.
3. The relevant facts in brief are that the Assessee, a resident individual, filed the return of income for the Assessment Year 2018-2019 on 30/10/2018. The case of the Assessee was selected for scrutiny. The Assessing Officer noted that the Assessee, being a joint owner having a 50% share, had sold agricultural land at Village Dumad, District Vadodara on 11/08/2017. The share of the Assessee in the aggregate consideration of INR.6,67,23,250/- amounted to INR.3,33,61,625/-. In the return of income, while computing long-term capital gains, the Assessee had claimed deduction under Section 54B of the Act to the extent of INR.3,24,98,500/- in respect of investment made in the purchase of new agricultural lands. The Assessing Officer observed that the agricultural lands purchased vide registered deeds dated 24/02/2020 and 16/07/2020 fell beyond the prescribed statutory period of two years (ending 10/08/2019) from the date of transfer of the original asset (11/08/2017). Therefore, the vide Assessment Order, dated 31/03/2021, passed under Section 143(3) read with Section 144B of the Act the Assessing Officer completed the assessment at income of INR.2,26,37,410/- after making a the Assessing Officer made disallowance of INR.1,79,94,050/- out of the aggregate deduction claimed by the Assessee under Section 54B of the Act.
4. Being aggrieved, the Assessee preferred appeal before the Learned CIT(A) which was dismissed vide Order, dated 13/01/2026. The Learned CIT(A) held that under Section 54 of the Transfer of Property Act, 1882, transfer of title took place only upon execution of a registered sale deed. Since in the present case the registered sale deeds were executed on 24/02/2020 and 16/07/2020 (beyond two years from 11/08/2017), payment of consideration alone within two years was held insufficient in the absence of conclusive proof of transfer of possession or revenue mutation within the statutory period.
5. Being aggrieved by the order of the Ld. CIT(A), the Appellant has preferred the present appeal before the Tribunal on the ground reproduced in paragraph 2 above.
6. We have heard the rival submissions and perused the material available on record.
7. The solitary ground raised by the Assessee pertains to the disallowance of deduction under Section 54B of the Act to the extent of INR.1,79,94,050/-.
8. During the course of hearing, Learned Authorised Representative for the Assessee submitted that the entire sale consideration for the purchase of the new agricultural land was paid within the statutory period of two years from the date of transfer of the original asset. It was contended that the Assessee had parted with the purchase consideration and obtained possession within the specified period of two years. Therefore, a mere delay in the execution or registration of the legal sale deed would not disentitle the Assessee from statutory relief under Section 54B of the Act. In support of this contention, the Learned Authorised Representative for the Assessee placed reliance on the following judicial precedents:
(a) Sanjeev Lal v. CIT 365 ITR 389 (SC)
(b) CIT v. T.N. Aravinda Reddy 120 ITR 46 (SC)
(c) CIT v. R.L. Sood 245 ITR 727 (Del)
(d) Balraj v. CIT 254 ITR 22 (Del)
9. Per contra, the Learned Departmental Representative supported the orders of the lower authorities. The Learned Departmental Representative submitted that under Section 54B(1) of the Act, ‘purchase’ requires valid transfer of immovable property. As per Section 54 of the Transfer of Property Act, 1882, legal title passes only upon registered sale deeds, which were admittedly executed on 24/02/2020 and 16/07/2020 (beyond two years ending 10/08/2019). Therefore, the Learned Departmental Representative contended that in the absence of registered deeds or evidence of possession within two years, the Learned CIT(A) rightly confirmed the disallowance.
10. We have given thoughtful consideration to the rival submissions, examined the statutory provisions, and perused the decisions relied upon. It is a well-settled proposition that mere delay in registration of the final conveyance deed beyond the control of the assessee should not operate as a bar to defeat a legitimate statutory exemption. On perusal of the records it is clear that entire sale consideration was paid within the statutory period of two years. We note that the Learned CIT(A) has confirmed the disallowance observing that the Assessee had failed to establish that the possession of the agricultural land was taken with the specified period of 2 years. The Assessee has now placed on record purchase agreements, possession letter and other documents details. Since it has been contended on behalf of the Revenue that a part of the aforesaid documents/details were not placed before the Assessing Officer and CIT(A), neither the Assessing Officer nor the Learned IT(A) undertook a factual verification to ascertain whether possession of the agricultural land was taken by the Assessee within the specified period of 2 years. Therefore, in the interest of justice, we deem it fit to set aside the order of the Learned CIT(A) on this issue and restore the matter to the file of the Assessing Officer. If on verification of the agreements, possession letter and other documents furnished by the Assessee, it is found that the Assessee had obtained possession of the agricultural land within consideration was paid within the stipulated period of two years, the Assessing Officer shall allow the deduction under Section 54B of the Act to the Assessee in accordance with the law. The Assessee is directed to furnish all necessary documentary evidence in support of his claim before the Assessing Officer. Needless to add, that the Assessee shall be granted a reasonable opportunity of being heard. All the right and contention of the Assessee are left open. Thus, Ground No. 1 is, accordingly, allowed for statistical purposes.
11. In result, present appeal preferred by the Assessee is allowed for statistical purposes.
Order pronounced on 30.09.2026
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