COMMISSIONER OF INCOME TAX, ROHTAK vs. JAGTAR SINGH CHAWLA

ITA/71/2012HC Punjab & HaryanaPHHC01099438201220 March 2013Author: MR. JUSTICE HEMANT GUPTA,MS. JUSTICE RITU BAHRI7 pages
AI SummaryDismissed

What were the facts?

The Revenue appealed against an order of the Income Tax Appellate Tribunal (ITAT) for assessment year 2007-08. The assessee sold agricultural land and a residential house on June 20, 2006, for Rs. 2,16,00,000 and Rs. 8,25,000, respectively. The assessee claimed to have intended to deposit the sale proceeds in a capital gains account but deposited them in a "Flexi General Account." The assessee purchased a residential house from these proceeds. The Assessing Officer disallowed the claim for exemption under Section 54F of the Income Tax Act, 1961, and added Rs. 76,85,829 as long-term capital gains. The CIT(A) upheld this addition. The ITAT, however, set aside the CIT(A)'s order, holding that the assessee purchased the residential house within the period prescribed under Section 139 of the Act, making the addition unsustainable.

What did the High Court hold?

The High Court held that Section 54F(4) of the Income Tax Act, 1961, requires the unutilized portion of the net consideration to be deposited in a specified bank account or utilized for purchasing a new asset before the due date of furnishing the return of income under Section 139. The Court noted that Section 139(4) allows for furnishing a return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of assessment, whichever is earlier. Relying on precedents from the Gauhati High Court in CIT v. Rajesh Kumar Jalan and the Karnataka High Court in Fathima Bai v. ITO, as well as its own prior judgment, the Court held that Section 139(4) is a proviso to Section 139(1), extending the period for filing the return. Therefore, if the assessee invests the sale proceeds in a residential house within this extended period, the capital gain is not payable. In this case, the assessee acquired the residential house before the end of the next financial year in which the sale took place, which falls within the extended period. Thus, the addition was not sustainable. The appeal was dismissed.

What were the issues?

1. Whether, on the facts and circumstances of the case, the ITAT was justified in reversing the finding of the CIT(A) and disallowing the claim of exemption under Section 54F of the Income Tax Act, 1961, due to the assessee's failure to deposit the unutilized consideration of capital gains in the Capital Gains Accounts Scheme as per the Act's prescribed limit? Assessee's Contention: The assessee argued that the purchase of the residential house was made within the period prescribed under Section 139 of the Act, and therefore, the addition was not sustainable. The ITAT's finding was based on this premise. Revenue's Contention: The Revenue contended that the assessee was required to deposit the sale proceeds in the capital gains account as per Section 54F(4) of the Act within one year of the sale or acquire a new asset within one year as per Section 139(1) of the Act. Since the assessee did neither, the ITAT's order was not sustainable, and the orders of the Assessing Officer and CIT(A) were legal.

Which sections of the Income-tax Act were involved?

Section 54F,Section 139,Section 54F(4),Section 139(1),Section 139(4)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARAYANA AT CHANDIGARH

ITA No. 71 of 2012 (O&M) Date of Decision: 20.3.2013

The Commissioner of Income Tax, Rohtak …..Appellant

Versus

Shri Jagtar Singh Chawla

….Respondent

CORAM: HON’BLE MR. JUSTICE HEMANT GUPTA

HON’BLE JUSTICE MS. RITU BAHRI

Present: Shri Inderpreet Singh, Advocate, for the appellant.

1.

Whether Reporters of local papers may be allowed to see the judgment?

2.

To be referred to the Reporters or not?

3.

Whether the judgment should be reported in the Digest?

Hemant Gupta, J.

The Revenue is in appeal under Section 260A of the Income Tax Act, 1961 (for short `the Act’) against an order dated 30.6.2011 passed by the Income Tax Appellate Tribunal, Delhi Bench `D’ New Delhi (for short `the Tribunal’) in ITA No. 4923/Del/2010 for the assessment year 2007-08. The Revenue has sought the following substantial question of law:-

“Whether on the facts and circumstances of the case, the Hon’ble ITAT, New Delhi is justified in law in reversing the finding of CIT(A) in confirming the addition of Rs.76,85,829/- made by the Assessing Office

The order continues below.

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