Rajendra Pal Verma Vs ACIT (ITAT Mumbai)
On a perusal of Sec. 54(2), it emerges that the assessee in order to claim exemption under Sec. 54 remains under an obligation to appropriate the amount of the capital gain towards purchase of the new asset within a period of one year before or two years after the date on which the transfer of the original asset took place, or has within a period of three years after that date constructed, a residential house. Where the capital gain is not appropriated by the assessee towards purchase or construction of the residential property upto the date of filing of the return of income under Sec. 139, then in such a case the entitlement of the assessee to claim the exemption by making an investment towards purchase or construction of the new asset would be available, though subject to the condition that the assessee had deposited the amount of such capital gain in the CGAS account with the specified bank by the “due date” contemplated under Sec. 139(1) of the IT Act. Further, in case if any part of the capital gain had already been utilized by the assessee for the purchase or construction of the new asset, the amount of such utilization along with the amount so deposited shall be deemed to be the cost of the new asset. On the basis of our aforesaid deliberations, we are of the considered view that the outer limit for the purchase or construction of the new asset as per sub-section (2) of Sec. 54 is the date of furnishing of the “return of income” by the assessee under Sec. 139. On a plain and literal interpretation of the aforesaid statutory provision, it can safely be gathered that the conscious, purposive and intentional providing by the legislature of “date of furnishing the return of income under Sec. 139” cannot be substituted and narrowed down to Sec. 139(1) of the IT Act. In our considered view the date of furnishing of the return of income under Sec. 139 would safely encompass within its sweep the time limit provided for filing of the “return of income” by the assessee under Sec. 139(4) as well as the revised return filed by him under Sec. 139(5) of the IT Act. In the backdrop of the aforesaid settled position of law, we are of a strong conviction that sub-section (2) of Sec. 54 contemplates two situations viz. (i) a case where the assessee had utilized the amount of LTCG towards acquisition of the new asset within a period of one year before the date on which the transfer of the original asset took place or for the purchase or construction of the new asset before furnishing the return of income under Sec. 139 of the IT Act; AND (ii) a case where the assessee had not utilized the amount of the capital gain before furnishing the “return of income” under Sec. 139, there he shall be eligible to claim exemption under Sec. 54 towards purchase of the “new asset” within a period of two years after the date on which the transfer took place or towards construction of a new asset within a period of three years from the date on which the transfer took place, subject to a rider that he should have deposited the unutilised amount of capital gain in a CGAS account with a specified bank by not later than the “due date” applicable in his case for furnishing the “return of income” under sub-section (1) of Sec. 139. We find that the case before us clearly falls within the sweep of the aforementioned “first limb” i. e sub-section (1) of Sec. 54 of the IT Act. As the assessee in the case before us had utilized an amount of Rs. 2,49,94,088/-(i. e much in excess of amount of LTCG on sale of the residential property) up till the date of filing of its revised return of income u/s 139(5) on 15. 11. 2014, therefore, his claim of exemption u/s. 54 in respect of the investment made towards the purchase of the new residential property at Cresent Bay, L&T Parel project, Mumbai up to the date of filing of the revised return of income u/s. 139(5) is found to be in order.
It can be safely be concluded that the assessee in the case before us was entitled to claim exemption u/s. 54 to the extent he had invested towards the purchase of the new residential property under consideration upto the date of filing of his revised return of income under Sec. 139(5) i. e. on 15. 11. 2014.
FULL TEXT OF THE ITAT JUDGEMENT
The present appeal filed by the assessee is directed against the order passed by the CIT(A)-46, Mumbai, dated 07. 10. 2016, which in turn arises from the order passed by the A. O u/s. 144 of the Income Tax Act 1961 (for short “I. T Act”), dated 12. 01. 2016 for A. Y 2013-14. The assessee assailing the order of the CIT(A) has raised before us the following grounds of appeal :
1) On the facts and in the circumstances of the case and in law, the CIT(A) erred in upholding impugned order passed u/s 144 of the Act which is bad in law and void ab initio as the same is passed without issuing a show cause notice u/s 144, without giving adequate opportunity for hearing and explaining the return of income. Further, the observations made by the Assessing Officer (AO) are factually incorrect.
2) On the facts and in the circumstances of the case and in law, the CIT(A) erred in partly confirming the action of the AO in not granting exemption u/s 54 of the Act to the extent of Rs. 60,79,680 as against claim of Rs. 1,44,51,461 (thereby allowing partly at Rs. 83,71,781) against sale of residential flat situated at Sewree, Mumbai claimed by investing the realized long term capital gains in a new residential flat at Parel, Mumbai within 2 years and/or constructed within 3 years from the date of sale.
3) On the facts and circumstances of the case and in law, the learned CIT(A) legally erred in confirming the consequential chargeability of interest u/s 234B.
4) On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the initiation of penalty proceedings u/s 271(l)(c) of the Act.
5) The appellant craves leave of your Honours to add to, alter, amend and/or delete all or any of the grounds on or before the date of hearing and further prays that additional income so assessed and expenditure disallowed be deleted and allowed.
2. Briefly stated, the assessee had e-filed his return of income for A. Y 2013-14 on 31. 07. 2013, declaring total income of Rs. 61,40,881/-. Thereafter, the assessee filed a revised return of income on 15. 11. 2014, declaring total income of Rs. 59,30,550/-. Subsequently, the case of the assessee was selected for scrutiny assessment u/s. 143(2) of the I. T Act.
3. During the course of the assessment proceedings it was observed by the A. O that the assessee had during the year under consideration sold a residential flat at Rushab Tower, Mumbai (hereinafter referred to as “old residential flat”) for a consideration of Rs. 2. 09 crore. It was observed by the AO that the entire “Long term capital gain” (for short “LTCG”) on sale of the said “old residential flat” was claimed by the assessee as exempt u/s. 54 of the IT Act. As per the details made available on record, it was noticed by the A. O that the aforesaid claim of exemption u/s. 54 was raised by the assessee on the ground that he had purchased a new residential flat at Cresent Bay, L&T Parel project, Mumbai (hereinafter referred to as “New residential property”) for a consideration of Rs. 4,27,41,300/-. The A. O observed that the aforementioned new residential property was purchased by the assessee as per an “agreement” dated 29. 12. 2014 with the builder/developer, as per which the construction of the property was expected to be completed by September, 2017. The assessee on being called upon to furnish the details of the payments made towards purchase of the aforementioned residential property submitted the same as under:-
