Nitin Bhatia Vs ITO (ITAT Hyderabad)
Section 54 Deduction Allowed Despite CGAS Non-Deposit Due to Timely Property Investment; Capital Gains Exemption Granted Because Section 54(2) Held Procedural, Not Mandatory; Full Section 54 Relief Allowed Since New House Was Purchased Within Two Years; Deduction Under Section 54 Restored as Actual Investment Trumped CGAS Technicality; Section 54 Claim Upheld Because Substantive Compliance Overrides Procedural Lapse
The Hyderabad Bench of the ITAT held that deduction under Section 54 cannot be denied merely for non-deposit of unutilised capital gains in the CGAS, when the assessee has substantively complied with Section 54(1). The assessee earned long-term capital gains of ₹66,91,617 on sale of a residential house and invested the entire amount in a new residential property within two years from the date of transfer. Although only ₹44,40,000 was paid before the due date under Section 139(1) and the balance was not deposited in CGAS, the Tribunal held that Section 54(2) is procedural and directory in nature. Relying on Madras High Court judgment in Venkata Dilip Kumar v. CIT (2021) 419 ITR 298, the ITAT ruled that once the substantive condition of investment is satisfied, deduction cannot be denied on technical grounds. Accordingly, the disallowance of ₹22,51,617 was deleted and full deduction under Section 54 was allowed .
