SANDEEP KHANNA,NEW DELHI vs. INCOME TAX OFFICER WARD 29(4) DELHI, NEW DELHI

Brief facts leading to the case is this that assessee sold a property for a consideration of Rs.5,00,00,000/- on 06.02.2012 as recorded in the Assessment Order dated 14.12.2019. Thereafter, the assessee deposited a sum of Rs.2,00,00,000/- in the Capital Gain Fund Account on 16.05.2012. The sum so deposited was in excess of the Capital Gain actually accrued upon the assessee, which was Rs. 1,56,57,937/-.

Further that the assessee bought a property within the stipulated time period for a consideration of Rs.1,60,74,306/-. Since the assessee had bought a property which was under construction, the limit of three years applied to him as per Section 54 (1) of the Income Tax Act as the case made out by the assessee.

Further relevant facts are that due to the default of the builder in getting the Occupation Certificate from the authorities, the assessee was unable to take possession of the said property, and hence, was not able to complete the pending payment of the builder of Rs.42,04,753/- of which Rs.37,88,834/- would have been due for tax, had it not been utilized towards the acquisition of the said property eventually. This excess amount of claim at Rs.37,88,384/- on unutilized capital gain within the time allowed under the Act was added to the total income of the assessee’s as income from other sources which was further confirmed by the First Appellate Authority. Hence, the instant appeal before us

I have heard the rival submissions made by the parties and perused the records. It appears that as the assessee not been able to utilize the same within the time limit prescribed, i.e., 3 years, the amount still remained in the Capital Gain Account, which could only be appropriated/used for making payment towards the balance amount agreed upon between the assessee and the builder. The law clarifies, by virtue of various decisions, that due to the reason of delay in occupancy certificate, the amount lying in the Capital Gain Fund Account had to be kept only for the payment of the unutilized exemption of Capital Gain as also the case of the assessee before us.

Under this facts and circumstances of the matter the question before us is that as to whether the impugned amount of addition to the tune of Rs.37,88,384/- is sustainable in the eyes of law or not.

The Ld. Counsel appearing for the assessee under this facts and circumstances of the matter relied upon the judgment passed by the Coordinate Bench in the case of Bal Kishan Atal VS. ACIT, Hon’ble ITAT Delhi Bench reported in (2019) SCC OnLine ITAT 6101, where the assessee had bought a property with part consideration made. The balance amount could not be paid within the stipulated time period due to the dispute arose between the assessee and the builder and the possession of the flat could not be obtained by the assessee neither the deed of sale was executed. The Coordinate Bench has been pleased to allow the claim of the assessee in respect of capital gain on the count that the assessee did not have any control over the situation, no failure on the part of the assessee was either found. In fact, the Coordinate Bench took reliance of a judgment passed by the Hon’ble High Court of Delhi in the case of CIT Vs. RL Sood, reported in 245 ITR 727 where it has been held that the unutilized amount which was held back due to failure of the builder was beyond the control of the assessee and hence exemption was allowed on the same.

Having regard to this particular aspect of the matter, it is found that under the present facts and circumstances of the matter when the capital gain amount could not be utilized towards the acquisition of the property by the assessee for no fault of him, the deduction claimed by the assessee under Section 54 for the whole amount of capital gain could not be disturbed. Therefore, the order impugned making addition of Rs.37,88,384/- made by the Ld. AO is found to be unsustainable in the eyes of law and thus, deleted.

The appeal of the assessee is allowed.