Case Law Details
Summary- The assessee has not invested in Capital Gain Account Scheme before 139(1) of the Act but complied with the conditions under section 54F(1) of the Act by purchasing and construction of residential property within three years from the date of transfer of original asset which is not disputed in the assessment proceedings or in appellate proceedings. The provisions of section 54F are beneficial provisions and are to be considered liberally in the aspect of limitation period.
The Brief facts of the case that the assessee is an individual having income from salary, income from house property and interest income and filed return of income on 17-3-2006 with total income of Rs. 5,28,430. The assessee made investments during the financial year and notice was issued under section 148 of the Act and assessment was completed on 4-12-2009 determining total income at Rs. 9,65,440. Subsequently, the assessing officer found that assessee has sold shares of CTL amounting to Rs. 81,63,440 and claimed exemption under section 54EC and Rs. 10,00,000 by investing in NABARD bonds and for balance claimed exemption under section 54F by utilizing the funds in the construction of flat in Bangalore. The learned assessing officer found the assessee has not submitted proof of investment in bond Rs. 10,00,000 and also not disclosed value of flat Rs. 72,00,000 in the balance sheet as on 31-3-2005 and believed that the income chargeable to tax has escaped assessment and issued notice under section 148 of the Act. In compliance to notice, the assessee filed letter dated 13-7-2012 to teat original return of income filed for assessment purpose. The learned Authorised Representative of the assessee appeared and furnished proof of investment of Rs. 10,00,000 in NABARD Capital Gains Bond and explained that the assessee claimed exemption under section 54F of the Act by investing in residential property. The learned Authorised Representative also produced copies of sale agreement and construction agreement of flat No. 4B, Bearyers Acacia Lakeview, Bangalore. On perusal of the agreements, the assessing officer found that the agreement was entered on 13-12-2006 and not complied capital gain accounts scheme before due date under section 139(1) of the Act and alleged the said investment of Rs. 72,00,000 in the property after due date and observed that assessee has utilized net consideration only after due date of filing of return under section 139(1) of the Act and denied exemption under section 54F of the Act and assessed total income of Rs. 54,48,750 and raised demand. Aggrieved by the order, the assessee filed an appeal before the Commissioner (Appeals).
In the appellate proceedings, the learned Authorised Representative reiterated the submissions made in assessment proceedings and challenged the validity of reopening of assessment as reopening was based on Audit objection and alleged the order of reassessment is bad in law. The learned Authorised Representative further argued that the assessing officer is not correct in observing that the assessee has not invested the net consideration in the capital gain scheme but assessee has completed the construction of the residential property within the stipulated time and disclosed in Balance Sheet as on 31-3-2008. The assessee advanced money at initial stage and entered into agreement only in 2006 and completed construction within three years from the date of transfer of property which in not disputed by the assessing officer except that amount was not deposited in Capital Gain Scheme 1988 before due date under section 139(1) of the Act. The learned Commissioner (Appeals) perused the grounds and considered the findings of the assessing officer and submissions made in the appellate proceedings on the ground of validity of reassessment proceedings, the Commissioner (Appeals) has dealt on the reasons for issue of notice under section 148 of the Act as there was no evidence in earlier assessment to prove the assessment record is complete and discussed in para 3 & 4 of his order as reasons being genuine and there was a scope for escapement of income. The learned assessing officer has applied his mind carefully before recording reasons and issued notice under section 148 of the Act as the information of investment in NABARD capital bond under section 54EC of the Act and the purchase and construction of property are not supported with evidence. Therefore the learned assessing officer has sufficient reasons and re-opening of assessment is in order and confirmed the order of the assessing officer and rejected the assessee ground.
On the grounds of claim for deduction under section 54F of the Act, the assessee has invested the net consideration in construction of residential property only after due date of filing of return. The learned Authorised Representative filed written submissions dated 27-10-2014 supporting the claim of deduction under section 54F of the Act alongwith legal provisions and judicial decisions. The learned Commissioner (Appeals) has considered submissions at page 5 to 9 of his order, with findings and factual aspects of investments, found that the assessee is an individual and due date of filing of return of income is 31-7-2005 and date for filing belated return under section 139(4) of the Act being 31-3-2007 and the assessee has spent Rs. 68,00,000 for purchasing and construction of the property till 31-3-2007. On comparison with the sale consideration of Rs. 81,63,440 the assessee has utilized Rs. 68,00,000 before the extended date of filing of return under section 139(4) of the Act. The property was sold on 14-2-2005 and new residential property was constructed and possession was taken on 15-12-2007, which is within three years period from the date of transfer of asset. The learned Commissioner (Appeals) found that substantial part of sale consideration was utilized for acquisition of new asset within the stipulated extended time and the assessee has complied with the basic conditions under section 54F(1) of the Act. With these findings, learned Commissioner (Appeals) observed at para 5.2.1 of his order as under :–
“5.2.1 I have considered the findings of the assessing officer and also submissions made by the AR of the appellant and also perused the copy of the judgments filed with the submission. In the instant case, the due date of filing return of income under section 139(1) of the Income Tax Act was 31-7-2005 and due date for filing of return of income under section 139(4) of the Income Tax Act was 31-3-2007. The appellant has spent Rs. 68 lakhs till 31-3-2007 for the purpose of purchasing house property. Therefore, out of the total sale consideration of Rs. 81,63,440, the appellant has utilized Rs..68 lakhs before the extended date of filing of return of income under section 139(4) of the Income Tax Act. Possession of new property was taken on 15-12-2007 within period of 3 years from date of transfer of original asset i.e. on 14-2-2005. Thus, the appellant has purchased the property within the stipulated period under section 54F(1) of the Income Tax Act. The issue involved in the appeal is whether the assessee is eligible for deduction under section 54F of the Income Tax Act in a case where substantial part of sale consideration was utilized for acquisition of new asset within extended date of filing of return of income under section 139(4) of the Income Tax Act, 1961 particularly when main conditions under section 54F(1) were fulfilled. The Hon’ble High Court of Punjab & Haryana in the case of CIT v. Jagtar Singh Chawla reported in (2013) 215 Taxman 154 (P&H) held that the assessee is not liable for payment of capital gains tax when substantial amount of sales consideration for purchase of residential property was made before the extended period of limitation of filing of return of income i.e. 139(4) of the Income Tax Act. The Hon’ble ITAT A Bench in the case of Anil Kumar Aurora reported in (2013) 37 CCH 221 (Mum) also held the similar view. The Hon’ble Gauhati High Court in the case of Rajesh Kumar Jalan 286 ITR 274 held that the capital gains is not chargeable when the appellant has purchased the new property before the extended due date of filing of return under section 139(4) of the Income Tax Act for the purpose of claim of deduction under section 54 of the Income Tax Act. Utilization of the funds in constructing the residential house within the stipulated period should be treated as sufficient compliance of section 54 of the Income Tax Act in the cases decided by Jurisdictional Tribunal in the case of Madhuvanprasad in ITA No. 2485/Mds/2004 and K.S. Ramachandran in ITA No. 941/Mds/2011. The wording of the section 54 & 54F in the manner of utilization of the funds are similar. Therefore, since in this case RS.68 lakhs was utilized by the appellant before 31-3-2007 i.e. the due date of filing of return of income under section 139(4) of the Income Tax Act in the case of the appellant, the assessing officer shall consider the claim of granting the deduction proportionate to the investment in the new property as on 31-3-2007. Therefore, the assessing officer is directed to recalculate the allowable deduction as per the directions of the above and grant relief accordingly.”
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