Payal Kishore Kulchandani Vs ITO (ITAT Mumbai)
The case of Payal Kishore Kulchandani vs Income Tax Officer came before the Income Tax Appellate Tribunal (ITAT) in Mumbai, centered on the assessee’s appeal against an order passed by the National Faceless Appeal Centre (NFAC), Delhi. The core dispute was the disallowance of a Long-Term Capital Gains (LTCG) exemption claim amounting to Rs. 91,33,892, which the assessee had sought under Section 54 of the Income-tax Act, 1961.
The factual background of the case is as follows: The assessee, Payal Kishore Kulchandani, filed her income tax return for the Assessment Year 2012-2013. The return was selected for scrutiny, during which it was discovered that she had claimed an LTCG exemption on the sale of an old flat. The property was sold on July 21, 2011, for a total consideration of Rs. 2,85,00,000. As a joint holder of the property, the assessee’s share of the profit was calculated at Rs. 91,33,892, which she claimed as exempt from tax. The exemption was sought on the basis that she had jointly purchased a new flat with her husband for a total consideration of Rs. 3,05,00,000.
The Assessing Officer (AO) disallowed the claim. The primary reason for the disallowance was the timeline of the property transactions. The AO noted that the agreement to purchase the new, under-construction flat was entered into on August 28, 2009. A substantial portion of the payment had also been made by December 14, 2009. The AO concluded that since the date of purchase (based on the agreement) was more than one year before the date of sale of the old property (July 21, 2011), the assessee did not meet the conditions stipulated under Section 54 of the Act. This led to the disallowance and a revised assessment. The assessee’s subsequent appeal to the Commissioner of Income Tax (Appeals) was also dismissed, leading her to file a further appeal with the ITAT.
