SHRI ISHWARBHAI HIMMATBHAI PATEL,AHMEDABAD vs. DCIT, CIRCLE-3(2), AHMEDABAD

The assessee has raised following grounds of appeal:- “1.1 The order passed u/s 250 on 23.07.2018 for A.Y.2015-16 by CIT(A)-3, A'bad upholding addition of Rs.20 lacs towards capital gain is wholly illegal, unlawful and against the principles of natural justice.

3 Without prejudice to above and in alternative, in case the addition of Rs.20 lacs is upheld in this year, the AQ should be directed to exclude the same from the total income for AY 2018-19. It is therefore prayed that the addition towards capital gain of Rs. 20,00,000/- upheld by CIT(A) should be deleted.” The fact in brief is that assessee has filed return of income on 22nd

Sep, 2015 declaring total income at Rs. 71,87,630/-. The case was selected for scrutiny and notice u/s. 143(2) of the act was issued on 19th Sep, 2016. During the course of assessment, the assessing officer has noticed that assessee along with other assessee Shri Govind Himmatbhai Patel who is appellant in the second case vide ITA No. 2009 as mentioned above were joint holder with 50% shares of agricultural land which was sold on 26th March, 2015 for sale consideration amounting to Rs. 3.5 crores and an amount equivalent 50% of the sale consideration of Rs. 1.75 crores was come in the share of each assessee. The assessee has shown long term capital gain of Rs. 1,72,41,187/- . Against the long term capital gain, the assessee has claimed exemption u/s. 54B of Rs. 32,86,200/- on account of I.T.A Nos. 2009 &2010/Ahd/2018 A.Y. 2015-16 Page No 3 investment made in agricultural land on 3rd Feb, 2015 and also claimed exemption u/s. 54F of Rs. 4,78,000/- on account of investment in residential house in Bopal, Ahmedabad on 23rd July, 2015. The assessee has also deposited an amount of Rs. 20 lacs in capital gain claim on 29th July, 2015 with the bank during the year under consideration. During the course of assessment, the assessing officer has raised query to the assessee to justify his claim of Rs. 20 lacs u/s. 54 on account of amount deposited in capital gain account as the same was in violation of conditions laid down under clause (ii) and (iii) of proviso a of section 54F(1) of the act. The assessee explained that he was intended to make further construction on the purchased house, therefore, un-utilized amount was deposited in the capital gains claim. The period of three years for utilizing the deposited amount in the capital gain scheme was to be expired on 24th March, 2013. The assessee has also submitted that as per provision of the act (i)(a) & (b) sub- section (4) section 54(F) the un-utilized amount shall be charged u/s. 45 as income of the previous year in which the period of three years from the date of transfer of the original asset expired. The assessing officer has not agreed with the submission of the assessee stating that assessee is not entitled to claim further exemption u/s. 54F of the act on account of extension or new investment in other residential house within period of three years from transferred of original property. The assessee has deposited Rs. 20 lacs in the capital gain account without keeping in mind the provision of section 54F, therefore, claim of exemption was disallowed and added to the total income of the assessee.

Aggrieved assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee reiterating the fact reported by the assessing officer.

We have heard the rival contentions and perused the material on record. It is noticed that assessee has sold the agricultural land on 26th March, 2015 and deposited the un-utilized amount of capital gain to the amount of Rs. 20 lacs in the capital gain scheme on 29th July, 2015, before filing the Income Tax Return u/s. 139(1) of the Act for the year under consideration as the assessee has filed the Income Tax Return from assessment year 2015-16 on 22nd Sep, 2015. In this regard, we are of the view that as per the provision of section 54(2) of the act, there is no bar on the assessee for making deposit of un-utilized capital gain in prescribed bank before due date of filing tax return as per section 139(1) of the act, despite the fact that assessee has already purchased one residential flat as held in CIT vs. Khoobchand M. Makhija (2014) 223 taxman 189 and in the decision of the Mumbai ITAT vide (2016) 66 taxman.com 105 (Mumbai)/(2016) 157 ITD 119 Mumbai. The assessee has disclosed the amount of Rs. 20 lacs as capital gain after expiry of three years in the assessment year 2018-19. As per proviso to sub-section (4) of section 54F if the amount deposited in capital gain account is not utilized wholly or partly for purchase of or construction of new asset within the period specified in sub-section (1) then the amount of capital gain shall be charged under section 45 as income of the previous year in which the period of three years from the date of transfer of the asset expired. Thus from the plain reading of the provisions of sections 54 & 54F it is clear that once the amount has been deposited in the capital gain account and subsequently, the I.T.A Nos. 2009 &2010/Ahd/2018 A.Y. 2015-16 Page No 5 assesse could not utilize the said amount for purchase of new asset, then the said amount shall be charged to capital gain as income for the previous year in which the period of three years as provided under sub-section (1) expired. The consequence of non-utilization of the capital gain within the period of three years would lead to assessment of the capital gain to tax in the assessment year relevant to the previous year in which three years expired. Therefore, it is neither the discretion of the assessee nor the discretion of the assessing officer to assess the said amount to capital gain tax in the assessment year other than the year as provided in section 54/54F and particularly as per proviso to sub-section (4) of the said section so long the amount is deposited in capital gain account. Thus, the addition made by the assessing officer for the year under consideration was not sustainable and the same is deleted. Therefore, the appeal of the assessse is allowed.

Without repeating the facts as mentioned above in ITA No. 2010/Ahd/2018 on the basis of similar issue and identical facts after applying the finding of ITA 2010/Ahd/2018 as supra, this appeal of the assessee is also allowed.

In the result, both the appeals filed by different assessees are allowed. Order pronounced in the open court on 19-02-2020 (MADHUMITA ROY) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 19/02/2020