DHANDAPANI ARUNACHALAM,CHENNAI vs. INCOME TAX OFFICER, NON-CORPORATE WARD 15(1), CHENNAI

ITA 3416/CHNY/2026Status: DisposedITAT Chennai06 October 2026AY 2016-177 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee is entitled to the deduction under Section 54 of the Income Tax Act, 1961. The Tribunal reasoned that when the assessee has satisfied the mandatory requirement of Section 54(1) by acquiring the new residential property within the stipulated time, the mere non-compliance of the procedural requirement under Section 54(2) cannot stand in the way of the assessee getting the benefit. The Tribunal respectfully followed the decision of the Hon'ble Madras High Court in *Venkata Dilip Kumar vs. CIT* [2019] and the decision of the coordinate bench in *Rathinavel Sukumar vs. ITO* [2026]. The Tribunal found that it is an admitted fact that the assessee fulfilled the mandatory requirements of Section 54(1). Therefore, the Tribunal directed the AO to delete the addition made towards capital gains. No issue was expressly left undecided.

What were the facts?

The assessee, Dhandapani Arunachalam, an individual, filed a return for AY 2016-17 declaring an income of Rs. 11,02,897. The case was selected for scrutiny. The assessee claimed exemption under Section 54 of the Income Tax Act, 1961, for Long-Term Capital Gains (LTCG) arising from the sale of a property. The assessee computed LTCG as Rs. 77,40,668 and claimed an exemption of the same amount based on the purchase of a new flat on 07.11.2016, with payment made on 01.11.2016. The Assessing Officer (AO) noted that while the purchase of the new residential house was within the stipulated period, the assessee failed to deposit the capital gains in a specified bank account under Section 54(2) before the due date for filing the return. Consequently, the AO added Rs. 67,40,668 to the assessee's income. The CIT(A) confirmed this addition. The assessee appealed to the ITAT.

What were the issues?

1. Whether the assessee is entitled to the deduction under Section 54 of the Income Tax Act, 1961, for Long-Term Capital Gains when the substantial requirement of acquiring a new residential house within the stipulated period is met, but the procedural requirement of depositing the unutilized capital gains in a specified bank account under Section 54(2) before the due date of filing the return of income is not fulfilled? Assessee's Contention: The assessee argued that compliance with the substantial requirement of Section 54(1) should entitle them to the deduction, and non-compliance with the procedural requirement of Section 54(2) should not disentitle them to the benefit. The assessee relied on the decision of the Madras High Court in *Venkata Dilip Kumar vs. CIT* [2019] and a coordinate bench decision in *Rathinavel Sukumar vs. ITO* [2026]. Revenue's Contention: The revenue contended that the assessee failed to fulfill the procedural requirement of depositing the capital gains in the specified accounts scheme with a nationalized bank under Section 54(2) before the due date for filing the return of income, thus disentitling them to the deduction. The revenue relied on the Supreme Court decision in *Dilip Kumar and Co.* (supra).

Which sections of the Income-tax Act were involved?

Section 54,Section 54(1),Section 54(2),Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI

Before: SHRI SS VISWANETHRA RAVI & MS. PADMAVATHY.S

For Respondent: Ms. Anshu Sharawat, Addl. CIT

PER PADMAVATHY.S, A.M: This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals), Addl./JCIT(A), Panaji (in short "FAA") passed u/s. 250 of the Income Tax Act, 1961 (in short "the Act") dated 16.10.2025 for Assessment Year (AY) 2016-17. 2. The assessee is an individual and filed the return of income for AY 2016-17 on 24.10.2016 declaring total income of Rs.11,02,897/-. The case Dhandapani

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 54

All 1,745 judgments and leading authorities on Section 54 →

Recent GST High Court judgments

Search GST case law →