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Facts
The assessee sold a plot of land and claimed deduction under Section 54F for the purchase of a new residential flat. The AO disallowed the deduction, stating the property was acquired after the prescribed time limit and also added a difference in the property's value as undisclosed investment under Section 69B.
Held
The Tribunal held that the assessee had intended to acquire the property through a construction agreement within the stipulated period, and the delay in registration was due to external factors. The Tribunal also found the addition under Section 69B unsustainable as the assessee was not required to maintain books of account and the investment did not exceed the recorded amount.
Key Issues
Whether the deduction under Section 54F for purchase of a new residential property is allowable when the sale deed is executed beyond the prescribed period, and whether the addition under Section 69B for the difference in property value is sustainable.
Sections Cited
143(1), 143(2), 142(1), 54F, 133(6), 69B
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Income Tax Appellate Tribunal, DELHI BENCH ‘A’: NEW DELHI
(Assessment Year: 2017-18) Avichal Kulshrestha, vs. ITO, Ward 35 (7), C/o Mr. Sanjeev Kulshrestha, Delhi. 111, Neelgiri Apartments, Sector 9, Rohini, Delhi – 110 085. (PAN :ATIPK3461A) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri C.S. Anand, Advocate Ms. Vaishnavi, Advocate REVENUE BY : Shri Ashish Tripathi, Sr. DR Date of Hearing : 16.04.2025 Date of Order : 18.06.2025 O R D E R
PER S.RIFAUR RAHMAN, ACCOUNTANT MEMBER :
This appeal is filed by the assessee against the order of ld. Commissioner of Income-tax Appeals/National Faceless appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. CIT (A)] dated 08.02.2024 for Assessment Year 2017-18.
Brief facts of the case are, assessee filed its return of income for AY 2017-18 on 05.08.2017 declaring total income of Rs.64,15,310/- and subsequently, on 03.08.2018, the assessee revised return of income declaring total income of Rs.24,07,710/-. The same was processed under section 143 (1) of the Income-tax Act, 1961 (for short ‘the Act’). Subsequently, the case was selected for limited scrutiny through CASS for the reason of reduction of income in revised return and claim of refund. Subsequently notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee through ITBA portal. In response, assessee filed relevant information as called for.
During the assessment proceedings, the AO observed that in the original return of income, assessee declared Long Term Capital Gain (LTCG) to the extent of Rs.62,72,665/-. However, in revised return of income, assessee has declared LTCG of Rs.22,65,071/-. AO observed that assessee has claimed additional deduction u/s 54F of the Act to the extent of Rs.61,41,102/- in place of Rs.21,33,108/-. In order to verify the same, notice u/s 133(6) was issued to Smt. Babita Jindal. She submitted copy of sale deed of the property. On perusal of the same, AO observed that assessee has sold plot of land for a consideration of Rs.86 lakhs to three parties as mentioned at page 2 of the assessment order. Further he observed that assessee had claimed deduction u/s 54F of the Act amounting to Rs.61,41,102/-. It was submitted before him that assessee had booked property on 14.03.2013. The assessee had taken a loan from HDFC Bank Ltd. and later the property was registered only on 21.12.2018. By relying on the provisions of section 54F, AO 26.09.2016 and assessee should have acquired the property on or before 25.09.2016 and he rejected the contention of the assessee that the assessee had constructed the residential property. He proceeded to reject the claim of the assessee u/s 54F of the Act by observing that assessee has acquired the property only on 21.12.2018 whereas the assessee should have acquired the property on or before 25.09.2018.
4. Further, on verification of assets and liability of the revised income-tax return filed by the assessee on 03.08.2016, he observed that assessee has reported the value of flat No.C1/10801 and the flat under dispute is recorded at Rs.1,00,61,431/-. On perusal of the sale deed of the property and the stamp duty, the total value comes to Rs.92,43,850/-. Since assessee has recorded the value of Rs.1,00,61,431/-, the difference of Rs.8,25,581/- was added as undisclosed investment u/s 69B of the Act.
5. Aggrieved with the above order, assessee preferred an appeal before the ld. CIT(A) and filed detailed submissions before him. After considering the detailed submissions of the assessee, ld. CIT (A) dismissed the grounds raised
by the assessee by relying on the findings of the AO, case law in the cases of Smt. Rita Gaur vs. DCIT reported in 90. ITD
24. (Lucknow) and ITAT, Cochin Bench in the case of George Dominic vs. ACIT reported in 144 ITD 502 (Cochin). Similarly he sustained the addition made u/s 69B of the Act. 6. Aggrieved with the above order, assessee is in appeal before us raising following grounds of appeal :-
1. That the learned CIT(A) had failed to appreciate that since the assessee had acquired the New Asset (being the Residential Flat No. Cl/0801, The Heartsong, Sector 108 Gurgaon, Haryana) well within the prescribed time, the exemption u/s 54F should not have been denied to the assessee.
2. That the learned CIT(A) had failed to appreciate that merely because the Sale Deed in respect of the New Asset (being the Residential Flat No. C1/0801, The Heartsong, Sector 108 Gurgaon, Haryana) could not be executed till 25.09.2018 (i.e. within two years after the date of sale of residential plot), the exemption u/s 54F should not have been denied to the assessee.
3. That on the peculiar facts of the case and in law, the exemption u/s 54F ought to have been allowed.
4. That the learned CIT(A) had failed to appreciate that the provisions of section 69B cannot be invoked, unless & until it is established by the LT. Authority that during the previous year relevant to the assessment year under consideration, the assessee had made certain investment whose amount exceeded the amount recorded in the books of account maintained by the assessee.
5. That the learned CIT(A) had failed to appreciate that where the assessee had not maintained the books of account, the provisions of section 69B have no applicability.
6. That on the peculiar facts of the case and in law, the addition of Rs.825581/- made u/s 69B is liable to be deleted.”
Before us, ld. AR of the assessee submitted his submissions and also filed synopsis for the sake of clarity, the same is reproduced as under :-
“1. The assessee was owning a plot of land in the residential colony known as 'The Greenfields' on Anagpur Road, Sarai Khawaja, District Faridabad (PLOT), having purchased in April 2004. Owing to certain legal hurdles, there was no buyer for the PLOT.
2. With the hope that he will soon get a buyer of the PLOT, the assessee had made a booking with M/s Experion Developers Pvt. Ltd. (EXPERION) for a residential flat in its upcoming project 'The Heartsong' in a Group Housing colony located in Sector 108, Gurgaon, by paying a booking amount of Rs. 500000/- (towards the total sale consideration, including Service Tax of Rs. 14987/-) on 22.05.2013. In due course of time, EXPERION and the assessee had entered into an Apartment Buyer Agreement (ABA) on 11.09.2013 in respect of residential flat no. C1/0801 on 8th floor in Tower No. C1 in block 'Harmony' (FLAT). As per the said ABA, the total cost of the FLAT(including allied charges)was Rs. 9398925/- (excluding Service Tax).
3. Since the assessee could not succeed in selling the PLOT and get money, he had to take financial assistance from HDFC (Rs. 70 lakhs) for making payments to EXPERION towards the cost of the FLAT.
The assessee could succeed in finding the buyers of the PLOT in the month of August 2016, with whom the total sale consideration was settled at Rs.8600000/-. The buyers had deducted tax of Rs.1771600/- at source @ 20.6% and paid the remaining amount of Rs.6828400/- to the assessee during the period 04.08.2016 to 26.09.2016.
Out of the sale consideration amounts received from the buyers of the PLOT, the assessee had paid (i) Rs.4100000/- to HDFC on 19.08.2016 towards repayment of loan which had been earlier utilized for making payments to EXPERION; (ii) Rs. 2053010/- to EXPERION on 24.08.2016 towards outstanding amount: and (iii) Rs.129692/- to Mainage Facility Management.
The assessee had computed LTCG arose on sale of PLOT at Rs.8406173/- and claimed deduction/exemption u/s 54F to the extent of Rs. 6141102/- (being the amount calculated on proportionate basis).
7. The learned AO had passed the assessment order on 29.12.2019 u/s 143(3) while disallowing the deduction/exemption claimed by the assessee u/s 54F at Rs.6141102/-, with the remark "This is not the case where the assessee has purchased any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset whilst the assessee has sold the plot on 26.09.2016. The assessee had to acquire the property till 25.09.2016. Also the case of the assessee does not come under the ambit of condition where assessee constructs any residential house other than the new asset, within a period of three years after the date of transfer of the original asset. Property bearing flat no.Cl/0801, the Heartsong, Sector 10B Gurgaon, Haryana, India 122001 was acquired only on 21.12.2018. To avail the benefit u/s 54F of the I. T. Act, 1961, the property had to acquire till 25.09.201B". #25.09.2018, if period of 2 years is counted 8. The learned CIT(A) had passed the order on 08.02.2024 u/s 250, dismissing the assessee's appeal. The comments of the learned CIT(A) and the counter comments of the assessee are summarized hereunder: Comments of the Counter comments of the assessee learned CIT(A) Since the appellant There is no such condition/bar in the has entered into the provisions of section 54F that the construction agreement four years must commence after the date of sale of old before the date of asset. Sale/transfer of the original asset for For this proposition reliance is hereby placed purchase of on the judgement of Hon'ble Karnataka High residential flat, the Court in CIT vs. J.R. Subramanya Bhat (165 appellant is not ITR 571), judgement of Hon'ble Allahabad entitled for claiming High Court in CIT vs. H.K. Kapoor (234 ITR deduction u/s 54F 753) and judgement of Hon'ble Delhi High Court in PCIT vs. Akshay Sobti & Others (423 ITR 321). The new asset that The booking of FLAT with builder/developer has been claimed as is treated as construction of FLAT by the reinvestment u/s 54F assessee and hence period of three years would has not been apply for construction of new house from the purchased/ registered date of transfer of long term capital asset. within two years from the date of transfer of For this proposition reliance is hereby placed the original asset. on the judgement of Hon'ble Delhi High Court in CIT vs. Brinda Kumari (253 ITR 343), Hon'ble Delhi High Court in CIT vs. Bharti Mishra (222 Taxman 2), order of Hon'ble ITAT Delhi Bench in ACIT vs. Vineet Kumar Kapila (ITA 6868/Del/2015) and judgement of Hon'ble Delhi High Court in PCIT vs. Akshay Sobti & Others (423 ITR 321). Without prejudice: Builder/developer had offered possession of the FLAT to assessee, vide its letter dt. 07.07.2016. It shows that construction was over by 07.07.2016. As regards the balance amount payable by the assessee to EXPERION, the assessee had paid almost entire amount well within time. Owing to the fact that the assessee was residing out of India, the sale deed could have been executed on 21.12.2018. Hon'ble ITAT This order has no bearing on the case of the Lucknow bench in the assessee, in as much as the facts were quite case of Smt. Rita distinguishable. In this case, plot was Gaur (90 ITD 24) purchased but house was not constructed. held that for claiming the benefit u/s 54F the assessee has to appropriate the amount of consideration and complete construction of residential house on plot purchased within specified period. Hon'ble ITAT Cochin The facts of this case were distinguishable, in bench in the case of as much as construction was not completed Geroge Dominic (144 within time. ITD 502) held that the word construct in Otherwise, the findings supports the case of clause (iii) of section the assessee because it has been held that the 54F(1) denotes word construct in clause (iii) of section 54F(1) completion of denotes completion of construction and for construction and for that purpose date of commencement of that purpose date of construction is irrelevant. commencement of construction is irrelevant.
9. Since the FLAT was constructed within the prescribed time, coupled with the fact that the sale deed of FLAT was executed in favour of the assessee within the prescribed time, the exemption under section 54F (as claimed by the assessee) should be allowed to the assessee.”
On the other hand, ld. DR of the Revenue brought to our notice page 7 of the appellate order wherein ld. CIT (A) has discussed the issue of reinvestment of sale consideration within two years from the date of original sale. Since the assessee has not purchased the property within two years from the date of sale, ld. CIT (A) has rightly disallowed the same and relied on the findings of the ld. CIT (A).
Considered the rival submissions and material placed on record. We observed that assessee has sold the plot of land on 26.09.2016. The assessee has entered into purchase of flat with Experion Developers Pvt. Ltd. on 14.03.2013. The assessee has submitted copy of the relevant agreement which is placed on record. The assessee has also taken a housing loan to acquire the same property. Since the assessee has entered into an agreement with Experion Developers Pvt. Ltd. on 14.03.2013, it shows that the assessee has intended to acquire the property after construction. This shows that assessee has entered into an agreement for a construction of flat with the builder. However, the tax authorities have considered the agreement as purchase of flat considering the date of registration of the property i.e. on 21.12.2018. They denied the benefit with the observation that assessee has not purchased the property within two years from the date of sale of original property.
From the facts brought on record, we observed that assessee has entered into an agreement with Experion Developers Pvt. Ltd. to acquire a flat on 14.03.2013 and to take the delivery after construction. As per the bank statement brought on record, assessee has paid substantial amount for the construction prior to execution of sale deed i.e. on 21.12.2018. Since assessee has entered into construction contract with Experion Developers Pvt. Ltd. on 14.03.2013, it is not necessary that the construction should have been completed within three years. The law is, when the assessee sold the property the sale consideration should be invested on the new property, however, the relevant property may be under consideration. What is relevant is, the assessee should have invested in the new property out of the sale proceeds and the new property should be constructed within three years from the date of sale of the property under consideration. In the given case, assessee has sold the property on 26.09.2016 and assessee should have invested and acquired the property on or before 25.09.2019, since the provisions of section 54F allows for construction of the property within a period of three years. Therefore, in this case, assessee has invested sale consideration in the above said property and also taken the possession as well as executed sale deed on 21.12.2018 before the statutory period allowed. Therefore, the claim of the assessee is proper as per law. The tax authorities disallowed the claim of the assessee on the basis of purchase instead of construction. Therefore, we are inclined to allow ground raised
by the assessee.
11. With regard to addition made u/s 69B of the Act for the difference of the value recorded in Balance Sheet versus the value recorded in the sale deed and stamp duty together, we observed that the AO has not asked the assessee to substantiate the difference rather he proceeded to make the addition based upon his observation. Even ld. CIT(A) had confirmed the addition.
12. At the time of hearing, ld. AR submitted his submissions regarding this grounds and also filed synopsis which are reproduced below :- “Apropos addition u/s 69B
10. The learned AO had made an addition of Rs. 825581/- u/s 69B, with the remark "after going through the schedule of Asset and Liability of revised income tax return filed on 03.08.2018, the assessee has reported the value of Flat No. Cl/0801, the Heartsong, Sector 108 Gurgaon, Haryana, India, 122001 of Rs. 1,00,69,431/-. On perusal of the sale deed of the property, value of this property shown to the extent of Rs. 92,43,850/- [88,03,650 (sale consideration) + 4,40,200 (stamp duty value)]. Provision of section 698 of the I. T. Act, 1961 attracts in this case.
11. As per section 69B, where in any financial year the assessee has made investments or ….and the AO finds that the amount expended on making such investments or …. exceeds the amount recorded in this behalf in the books of account maintained by the assessee, for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the AO, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year.
At the outset, it is clarified here that the assessee was neither required to maintain the books of account nor maintained the books of account. Hence, the provision of section 69B are not applicable in the case of the assessee. Even otherwise; the learned AO as well as the learned CIT(A) had admitted that the consideration amount of FLAT, as per the registered sale documents, was Rs.8803650/- and the stamp duty amount was Rs. 440200/-. Total of these two amounts is worked Rs. 9243850/-. It is not a case where the investment (Rs.9243850/-) exceeded the amount shown in the Schedule AL of ITR (Rs.10069431/-). Rather it is the other way around. As regards the figure of Rs.10069431/- shown in Schedule AL, it is explained that this figure includes the payment made by the assessee towards cost of FLAT, stamp duty charges registration charges, misc/allied charges etc. For the sake of clarity, it is stated that all such payments were made through banking channel only. Thus viewed from whatever angle, the addition made at Rs.825581/- is not sustainable.”
On the other hand, ld. DR of the Revenue relied on the findings of the lower authorities.
Considered the rival submissions and material placed on record. We observed that AO had made an addition of Rs.8,25,581/- u/s 69B, with the remark "after going through the schedule of Asset and Liability of revised income tax return filed on 03.08.2018, the assessee has reported the value of Flat No. Cl/0801, the Heartsong, Sector 108 Gurgaon, Haryana, India, 122001 of Rs. 1,00,69,431/-. Further we observed that on perusal of the sale deed of the property, value of this property shown to the extent of Rs.92,43,850/- [88,03,650 (sale consideration) + 4,40,200 (stamp duty value)] and the difference of the value recorded in the Balance Sheet was added under the provision of section 69B of the Act. We further observed that as per section 69B, “where in any financial year the assessee has made investments or ….and the AO finds that the amount expended on making such investments or …. exceeds the amount recorded in this behalf in the books of account maintained by the assessee, for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the AO, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year. We find that the assessee was neither required to maintain the books of account nor maintained the books of account, hence, the provision of section 69B are not applicable in the case of the assessee. We further find that even otherwise, the AO as well as the ld. CIT(A) had admitted that the consideration amount of FLAT, as per the registered sale documents, was Rs.88.03.650/- and the stamp duty amount was Rs.4.40.200/- and total of these two amounts is Rs.92,43,850/-. We observed that as regards the figure of Rs.1,00,69,431/- shown in Schedule AL, it is explained that the difference amount under dispute includes the payment made by the assessee towards cost of FLAT, stamp duty charges registration charges, misc/allied charges etc and these payments were made through banking channel only. The tax authorities could have asked the assessee to file the relevant information before making the addition or sustaining the same. Accordingly, we are of the opinion that the addition made at Rs.8,25,581/- is not sustainable and accordingly the same is deleted and ground taken by the assessee is allowed.