GURKANWAL KAUR,CHANDIGARH vs. INCOME TAX OFFICER, WARD-1(3), CHANDIGARH, CHANDIGARH

Briefly stated, the facts of the case are that the assessee is an individual who filed return of income declaring total income at Rs.20,75,450/-. The case was selected for limited scrutiny under CASS to examine the deduction claimed u/s 54F of the Act. During the year under consideration, the assessee sold an immovable property for a consideration of Rs.1,20,96,000/- and earned long term capital gain amounting to Rs.1,10,01,913/-. Against the said capital gain, the assessee claimed deduction u/s 54F of the Act amounting to Rs.1,00,87,016/- on account of investment made in a residential house property.

During the course of assessment proceedings, the Assessing Officer observed that out of the total investment made towards acquisition of the residential property, only an amount of Rs.15,00,000/- had been paid before the due date prescribed u/s 139(1) of the Act and the remaining amount was paid subsequently. The Assessing Officer further observed that the assessee had not deposited the unutilized amount in the Capital Gain Account Scheme before the due date prescribed u/s 139(1) and therefore restricted the deduction allowable u/s 54F to Rs.13,78,105/- and consequently made addition of Rs.87,08,911/- under the head “Capital Gains”.

While making the addition, the Assessing Officer in para 4.5 of the assessment order further referred to certain alleged contradictions between the details furnished by the assessee and the information obtained from the developer. The Assessing Officer observed that whereas the assessee had referred to Flat No.82 in Tower-3, the developer had referred to Flat No.131-A in Tower No.1. It was also observed that there was variation in the date of receipt of the last installment as reflected by the assessee and by the developer and further that the assessee had stated that possession was not taken to avoid maintenance charges whereas the developer had stated that possession was to be handed over on 14.07.2018 pending registration. On the basis of the aforesaid observations and for non-deposit of the amount in the Capital Gain Account Scheme, the claim of deduction u/s 54F was partly disallowed by the Assessing Officer.

Aggrieved against the assessment order, the assessee carried the matter in appeal before the Ld. CIT(A). The Ld. CIT(A), however, confirmed the action of the Assessing Officer primarily on the ground that the assessee had failed to deposit the unutilized capital gain amount in the Capital Gain Account Scheme before the due date prescribed u/s 139(1) of the Act and therefore the

Before us, the Ld. Counsel for the assessee submitted that the entire amount of capital gain stood invested in acquisition/construction of the residential house property within the overall statutory period prescribed under section 54F of the Act and therefore the exemption could not be denied merely on account of non-deposit of the amount in the Capital Gain Account Scheme. It was further submitted that section 54F being a beneficial provision deserves liberal interpretation and substantial compliance having been made by the assessee, the deduction ought to be allowed.

Per contra, the Ld. Sr. DR strongly relied upon the orders of the lower authorities and more particularly referred to para 4.5 of the assessment order. The Ld. Sr. DR submitted that the Assessing Officer had pointed out material discrepancies in the claim of the assessee with regard to the details of the property, the payments made and the aspect of possession of the flat and therefore the authorities below had rightly disallowed the claim to the extent the amount was not deposited in the Capital Gain Account Scheme.

We have heard the rival submissions and perused the material available on record. We had also specifically called upon both the

Be that as it may, we further note that the principal basis adopted by the Ld. CIT(A) for sustaining the disallowance was not founded upon the aforesaid discrepancies noted by the Assessing Officer. The disallowance has essentially been confirmed on the technical objection that since the assessee had not deposited the unutilized capital gain amount in the Capital Gain Account Scheme before the due date prescribed u/s 139(1) of the Act, the assessee was disentitled from claiming deduction u/s 54F of the Act.

In our considered opinion, such an approach adopted by the Ld. CIT(A) is highly pedantic and hyper-technical. It is a settled proposition of law that the provisions of section 54F are beneficial

In the present case, it is an undisputed position that the assessee has invested the entire amount in the residential house property within the statutory period prescribed under section 54F of the Act. The Revenue has also not disputed the genuineness of such investment. Therefore, denying the exemption merely on account of non-compliance with a procedural requirement would amount to elevating form over substance, which is impermissible while interpreting a beneficial provision intended to promote residential investment.

Considering the entirety of the facts and circumstances of the case and in the light of the discussion made hereinabove, we are

In the result, the appeal of the assessee is allowed.