Purchase & Reconstruction of Old House Qualifies for Section 54F Exemption: ITAT Delhi

Sneh Gupta Vs ACIT (ITAT Delhi)

ITAT Delhi Quashes Rs.21.66 Cr Addition – AO Cannot Travel Beyond Limited Scrutiny- Purchase & Reconstruction of Old House Qualifies for 54F – Tribunal Grants Full Relief

Assessee had filed her return declaring income of Rs.77.98 lakh. The case was selected for limited scrutiny under CASS for verifying large investment in property vis-à-vis income declared. AO, while verifying, went beyond the scope of limited scrutiny without converting it into complete scrutiny. He examined exemption claimed u/s 54F in A.Y. 2013-14 on sale of shares of M/s Triveni Polymers Pvt. Ltd., where the Assessee had deposited Rs.21.92 crore in Capital Gains Scheme & claimed exemption of Rs.21.66 crore. AO held that the property at Panchsheel Park purchased on 09.09.2015 was a built-up house & not a vacant plot, hence the time limit was 2 years & not 3 years. Since construction was not completed within 2 years, AO withdrew exemption & added Rs.21.66 crore as LTCG in A.Y. 2016-17. CIT(A) confirmed the addition.

Before Tribunal, Assessee raised an additional jurisdictional ground that AO could not have examined deduction claimed in A.Y. 2013-14 in a limited scrutiny for A.Y. 2016-17. Tribunal observed that AO had clearly travelled beyond the mandate of limited scrutiny without converting into complete scrutiny, thereby violating CBDT Instructions. Relying on precedents including Balvinder Kumar Vs PCIT (ITAT Delhi) & Deccan Paper Mills Ltd. Vs CIT (ITAT Pune), Tribunal held that such action was beyond AO’s jurisdiction. Accordingly, the additional ground was allowed.