Case Law Details
Shri Arun Kumar Jain Vs. ITO (ITAT Delhi)
The A.O. noted that as per Section 54(2) of the I.T. Act, the amount of capital gain, which is not utilized by him for the purchase of new asset before the date of furnishing the ITR under section 139, shall be deposited by him, before furnishing such return in an account in any such bank or institution as may be specified in the Official Gazette, shall be accompanied by proof of such deposit. In this case, assessee has not deposited the unutilized amount in capital gain account before filing of ITR of 2014-2015 i.e., 26th July, 2015, so benefit of capital gain to the tune of unutilized amount and not deposited in capital gain account will not be given to the assessee and it will be charged to tax under section 45 of the I.T. Act. The A.O. accordingly, made addition of Rs. 12,93,349/- under the head “Long Term Capital Gains”.
The assessee challenged the addition before the Ld. CIT(A), in which, the assessee briefly highlighted that due date of filing of the return for assessment year under appeal under section 139(1) was 31st July, 2014. The assessee however, filed the return of income on 26th July, 2015. It was submitted that assessee has paid Rs. 75 lakhs to the vendor instead of Rs. 50 lakhs mentioned by the A.O. in the assessment order. The additional amount of Rs. 25 lakhs was paid vide cheque No. 000002 dated 30th July, 2014 drawn on HDFC Bank, East of Kailash, New Delhi. Photo copy of the cheque was also filed. It was, therefore, submitted that assessee duly utilized the capital gain for purchase of new asset before the due date of furnishing of the ITR under section 139 as per the conditions provided under section 54(2) of the I.T. Act. It was, therefore, submitted that since assessee utilized Rs. 75 lakhs for the purpose of purchase of new residential property, therefore, addition should be deleted.
The only dispute left for consideration is, whether assessee appropriated/ utilized Rs. 25 lakhs for purchase of property in question before due date of filing of the return of income. Ld. D.R. pointed-out from the bank statement that date of cheque is 1st August, 2014. However, in the bank statement such date is mentioned as “value date”. It did not say that it is the date of the cheque. The assessee filed copy of the cheque before Ld. CIT(A) to show that date of the cheque No. 000002 was dated 30th July, 2014, on which, no adverse comments have been made by the Ld. CIT(A). The assessee filed bank certificate in which it is clarified that cheque in question was dated 30th July, 2014 which was subsequently cleared on 1st August, 2014. The assessee also filed receipt of the vendor to the same effect also. It may also be noted here that the copy of the sale deed duly registered on 3rd September, 2014 for purchase of property have been filed on record, in which the total consideration of the property of Rs.80 lakhs have been mentioned which is also mentioned by the A.O. in the assessment order in which the assessee paid Rs. 25 lakhs each on two occasions vide cheque dated 2nd April, 2014 and 15th April, 2014. It is further mentioned in the sale deed that assessee paid further Rs. 25 lakhs vide cheque No. 000002 dated 30th July, 2014. Further payments have been made vide different cheques and TDS deducted is also mentioned. The assessee filed return of income on 26th July, 2015. Therefore, there is no question of assessee making a theory of afterthought. The registered documents support the explanation of the assessee that date of cheque was 30th July, 2014. Even if there was any doubt, this fact could have been verified from the vendor. The Ld. CIT(A) rejected the explanation of assessee that when assessee can make payment of Rs. 50 lakhs in April, why assessee waited till the end of July, 2015. There may be some terms of payment of consideration to the vendor and the availability of the funds with the assessee. Even the payment of Rs. 50 lakhs was made in two installments. Therefore, it may not be a good reason to reject the explanation of assessee because assessee made further payment even after July, 2014 as per the sale deed. Considering the totality of the facts and circumstances, it is clear that assessee had made payment of Rs. 25 lakhs to the vendor on 30th July, 2014 and if the cheque is en cashed immediately thereafter on 1stAugust, 2014, there is nothing wrong in the explanation of assessee. I am, therefore, satisfied that assessee appropriated and utilized the amount of capital gain before the due date of filing of the return of income. The addition is, therefore, totally uncalled-for.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
This appeal by assessee has been directed against the order of the Ld. CIT(A)-10, New Delhi, dated 18.01.2017, for the A.Y. 2014-2015 on the following ground :
“On the facts and in the circumstances of the case and in law the Ld. CIT (Appeals) has erred: –
In sustaining the additions/dis allowance made by the Assessing Officer in the impugned assessment order:
(I) Rs. 12,93,349/- in contravention of provisions of section 54(2) of the Income Tax Act, 1961 without appreciating the facts that the amount of capital gain has duly been utilized for the purchase of new asset before the due date of furnishing the return of income u/s 139 of the I T Act.
The above actions being arbitrary, illegal and unwarranted must be quashed.”
2. Briefly, the facts of the case are that assessee filed return of income at Rs. 1,56,420/- on 26th July, 2015. In this case, assessee sold his flat bearing 172, Abhinav Apartments, Plot No.B-12, Vasundhara Enclave, Delhi, for a total consideration of Rs. 98,50,000. As per the Conveyance Deed of the property, it was allotted to the assessee on 19th December, 1998 by DDA for a total consideration of Rs. 13,45,071. Further, the assessee purchased a residential flat B-61, East of Kailash, New Delhi, during the F.Y. 2014-2015 in the joint name of assessee and Smt. Sangita Jain, wife of assessee, for a total consideration of Rs. 80 lakhs from M/s. Jatinder Construction Company. All the payments of this property were made from the bank accounts of assessee. The capital gain computed by the Revenue on sale of flat 172, Abhinav Apartments, Plot No.B-12, Vasundhara Enclave, Delhi on the basis of documentary evidences submitted by assessee showing long term capital gain of Rs. 62,93,349/-. For the purchase of new Flat B-61, East of Kailash, New Delhi, assessee paid Rs. 50 lakhs to the vendor till the filing of his ITR for A.Y. 2014-2015 under appeal. The return was however, filed on 26th July, 2015. The A.O. noted that as per Section 54(2) of the I.T. Act, the amount of capital gain, which is not utilized by him for the purchase of new asset before the date of furnishing the ITR under section 139, shall be deposited by him, before furnishing such return in an account in any such bank or institution as may be specified in the Official Gazette, shall be accompanied by proof of such deposit. In this case, assessee has not deposited the unutilized amount in capital gain account before filing of ITR of 2014-2015 i.e., 26th July, 2015, so benefit of capital gain to the tune of unutilized amount and not deposited in capital gain account will not be given to the assessee and it will be charged to tax under section 45 of the I.T. Act. The A.O. accordingly, made addition of Rs. 12,93,349/- under the head “Long Term Capital Gains”.
3. The assessee challenged the addition before the Ld. CIT(A), in which, the assessee briefly highlighted that due date of filing of the return for assessment year under appeal under section 139(1) was 31st July, 2014. The assessee however, filed the return of income on 26th July, 2015. It was submitted that assessee has paid Rs. 75 lakhs to the vendor instead of Rs. 50 lakhs mentioned by the A.O. in the assessment order. The additional amount of Rs. 25 lakhs was paid vide cheque No. 000002 dated 30th July, 2014 drawn on HDFC Bank, East of Kailash, New Delhi. Photo copy of the cheque was also filed. It was, therefore, submitted that assessee duly utilized the capital gain for purchase of new asset before the due date of furnishing of the ITR under section 139 as per the conditions provided under section 54(2) of the I.T. Act. It was, therefore, submitted that since assessee utilized Rs. 75 lakhs for the purpose of purchase of new residential property, therefore, addition should be deleted. The Ld. CIT(A), however, confirmed the addition and dismissed the appeal of assessee. His findings in paras 3.1 to 5 of the order are reproduced as under :
“FINDINGS :
3.1 I have carefully considered the details submission of the Ld. AR and have also gone through the detailed assessment order passed by the AO u/s 143(3) of the I.T. Act. During the year under consideration the appellant Sh. Arun Kumar Jain sold his flat bearing No. 172, Abhinav Apartment, plot No.-B-12, Vasundhara Enclave, New Delhi, for total consideration of Rs. 98,50,000/-. As per conveyance deed the said property was allotted to the appellant on 19.12.1998 by the DDA for total consideration of Rs. 13,45,071/-. Appellant further purchased a residential flat B-161, East of Kailash, New Delhi in the joint name of Sh. Arun Kumar Jain and Smt. Sangitra Jain for total consideration of Rs. 80,00,000/- from M/s Jatinder Construction Company. Ail the payments are found to be paid through bank accounts of the assessee.
3.1.1. The capital gain on sale of above capital asset is worked-out as under :
During the assessment proceeding it was noticed by the AO that Rs. 50,00,000/- was stand paid to the vendor till the filing of his IIP, for A.V.2014-15. He has filed his ITR on 26.07.2015. AO in his order explained the provision of section 54(2) of the I.T. Act and vis-a-vis verified the proof of deposit of capital gain to claim exemption of capital gain. AO has concluded in his assessment order that the remaining amount of capital gain of Rs. 12,93,349/- was not found to be deposited in the capital gain account before the filing of ITR for A.Y.2014-15. Therefore, the unutilized amount was added to the income of the assessee.
The relevant section i.e. section 54(2) of the I.T. Act is as under:
“Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family, the amount of the capital gain which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset to place, or which is not utilized by him for the purchase or construction of the new asset. Before the date of furnishing the return of income u/s 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of assessee for furnishing of the return of income under sub section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilized in accordance with, in scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit and for the purpose of sub-section (1) the amount, if any, already utilized by the assessee for the purchase or construction of the new asset together with the amount show deposited shall be deemed to the cost of new asset:
Provided that if the amount deposited under this sub section is not utilized wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,-
(i) The amount not so utilized shall be charged under sub-section 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires, and
(ii) The assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid. 3.1.2. Thus sec 54(2) of the I.T. Act, states that the amount which has not been utilized for purchasing a new house before the due date of furnishing of return of income u/s 139(1) of the Act shall be deposited by him before furnishing such return in an account in any such bank or institution as may be specified in and shall be utilized in accordance with scheme so framed in this regard.
3.1.2. Thus sec 54(2) of the I.T. Act, states that the amount which has not been utilized for purchasing a new house before the due date of furnishing of return of income u/s 139(1) of the Act shall be deposited by him before furnishing such return in an account in any such bank or institution as may be specified in and shall be utilized in accordance with scheme so framed in this regard.
In the instant case, as per above detail discussion, the time limit of filing of return arc its due date u/s 139 or are found to be as under:
3.1.3. The due date for filing of return u/s 139(1) for the A.Y.2014-15 in the case of assessee was 31.07.2014. However, it is noticed that he has filed his return of income on 26.07.2015. Therefore, appellant was required to invest its capital gain of Rs. 62.93,349/-into purchase of new property to claim exemption from tax on capital gain. As it is seen that the appellant has purchased a new flat B-61, East of Kailash, New Delhi from Jatinder Construction Company. He has paid Rs. 50,00,000/- by two cheques on 03.04.2014 and 16.04.2014 respectively are found to be invested before the due date for filing of return, which is 31.07.2014 in the case of the assessee. However, the another payment of Rs. 25,00,000/- was found to be paid only on 01.08.2014, When appellant can make payment of Rs. 50 Lakh well in time i.e. in the month of April itself, and is also aware that he was to make payment of entire amount in time to get exemption of his capital gain, why he has deliberately waited till the fag end of July 2014. It appears that initially he was to deposit only Rs. 50 Lakh the remaining amount of Rs. 12,93,349/- could be a out come of after thought. That is how he has deposited this amount after the gap of three months of its initial amount, despite there was enough balance in the bank account of the assessee. “Net sale consideration should have deposited/ invested, in the capital gain account scheme or should have invested in purchase/construction of house before the due date of filing of return u/s 139(1) of the I.T. Act. CIT vs V R Desai (Ker) 197 Taxman 52”. As per the fact of the case the amount which is paid on 01.08.2014 is beyond the date of due date hence the conditions prescribed in section 54(2) have not been full filled by the assessee. Therefore, AO was justified in rejecting the claim made u/s 54 of the Act to the extent of Rs. 12,93,349/-.
5. As a result, the appeal is dismissed.”
4. I have considered the rival submissions. Learned Counsel for the Assessee reiterated the submissions made before the authorities below and filed the copy of the receipt of payment of Rs. 25 lakhs vide Cheque No.000002 dated 30th July, 2014. He has also filed copy of the sale deed of property under reference in which it is specifically mentioned that cheque No. 000002 dated 30th July, 2014 of Rs. 25 lakhs have been paid to the vendor. He has also filed copy of the bank statement and Certificate from the HDFC Bank, in which it is clarified that Cheque was dated 30th July, 2014 which was got cleared on 1st August, 2014. He has, therefore, submitted that assessee utilized the amount of the capital gain before due date of filing of the return of income. Therefore, addition should be deleted.
5. On the other hand, Ld. D.R. relied upon the orders of the authorities below and submitted that in the bank statement the date of cheque is mentioned as 1st August, 2014. Therefore, appeal of assessee may be dismissed.
6. After considering the rival submissions, I do not find any justification to sustain the addition. The only dispute left for consideration is, whether assessee appropriated/ utilized Rs. 25 lakhs for purchase of property in question before due date of filing of the return of income. Ld. D.R. pointed-out from the bank statement that date of cheque is 1st August, 2014. However, in the bank statement such date is mentioned as “value date”. It did not say that it is the date of the cheque. The assessee filed copy of the cheque before Ld. CIT(A) to show that date of the cheque No. 000002 was dated 30th July, 2014, on which, no adverse comments have been made by the Ld. CIT(A). The assessee filed bank certificate in which it is clarified that cheque in question was dated 30th July, 2014 which was subsequently cleared on 1st August, 2014. The assessee also filed receipt of the vendor to the same effect also. It may also be noted here that the copy of the sale deed duly registered on 3rd September, 2014 for purchase of property have been filed on record, in which the total consideration of the property of Rs.80 lakhs have been mentioned which is also mentioned by the A.O. in the assessment order in which the assessee paid Rs. 25 lakhs each on two occasions vide cheque dated 2nd April, 2014 and 15th April, 2014. It is further mentioned in the sale deed that assessee paid further Rs. 25 lakhs vide cheque No. 000002 dated 30th July, 2014. Further payments have been made vide different cheques and TDS deducted is also mentioned. The assessee filed return of income on 26th July, 2015. Therefore, there is no question of assessee making a theory of afterthought. The registered documents support the explanation of the assessee that date of cheque was 30th July, 2014. Even if there was any doubt, this fact could have been verified from the vendor. The Ld. CIT(A) rejected the explanation of assessee that when assessee can make payment of Rs. 50 lakhs in April, why assessee waited till the end of July, 2015. There may be some terms of payment of consideration to the vendor and the availability of the funds with the assessee. Even the payment of Rs. 50 lakhs was made in two installments. Therefore, it may not be a good reason to reject the explanation of assessee because assessee made further payment even after July, 2014 as per the sale deed. Considering the totality of the facts and circumstances, it is clear that assessee had made payment of Rs. 25 lakhs to the vendor on 30th July, 2014 and if the cheque is en cashed immediately thereafter on 1stAugust, 2014, there is nothing wrong in the explanation of assessee. I am, therefore, satisfied that assessee appropriated and utilized the amount of capital gain before the due date of filing of the return of income. The addition is, therefore, totally uncalled-for. I, accordingly, set aside the orders of the authorities below and delete the addition.
7. In the result, appeal of assessee is allowed.
Order pronounced in the open Court.
Dear Sir,
There are number of assessees wanted to file IT Returns for the Financial years 2015-16 and 2016-17
If CBDT permits the assessee to file the IT Returns for the above financial years it will help number of assessees