SAIKATA SUMAN GANGULY,THANE, MUMBAI vs. ITO, WARD 2(1), THANE, THANE

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ITA 4168/MUM/2026Status: DisposedITAT Mumbai14 October 2026AY 2020-216 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee is entitled to the deduction claimed under Section 54 of the Act. The sale of the old property was on 27.12.2019, and the reinvestment in a new residential house was on 08.07.2021, which falls within the two-year period stipulated by Section 54(1). Regarding Section 54(2), the Tribunal noted that the due date for filing the return of income under Section 139(4) was initially 31.03.2021, but due to COVID-19, the due dates for filing returns and depositing unspent capital gains in the Capital Gains Account Scheme were extended to 31.03.2023. Since the assessee invested by purchasing a flat on 08.07.2021, well before the extended deadline, the conditions of Section 54(2) were complied with. Therefore, the AO was directed to allow the deduction. Concerning the addition of Rs. 15,35,000/- under Section 69A, the Tribunal found that the assessee's bank statements clearly showed receipts of Rs. 15,35,000/- from her husband's and son's accounts. This established the source of the funds, demonstrating that the investments were not unexplained money covered under Section 69A. Accordingly, the AO was directed to delete the addition. The issue raised in the additional ground became academic and was left open. Grounds relating to interest and penalty were dismissed as consequential and premature.

What were the facts?

The assessee, Saikata Suman Ganguly, filed an appeal against the order dated 17.03.2026 of the National Faceless Appeal Centre (NFAC), Delhi, for Assessment Year 2020-21. The Assessing Officer (AO) reopened the assessment under Section 147, believing income had escaped assessment, as the assessee had not filed a return under Section 139(1) but had made investments in mutual funds and term deposits, and sold immovable property for Rs. 2,05,27,000/-. The AO disallowed a deduction of Rs. 45,45,752/- claimed under Section 54 for reinvestment of sale consideration from an immovable property sold for Rs. 60 lakhs, citing a lack of supporting evidence. The first appellate authority upheld this disallowance. The assessee also contested an addition of Rs. 15,35,000/- made under Section 69A for investments in mutual funds and term deposits, which were allegedly made from funds received from her husband. This addition was also sustained by the first appellate authority.

What were the issues?

1. Whether the assessee is entitled to claim deduction under Section 54 of the Income Tax Act, 1961, for reinvestment of capital gains from the sale of an immovable property, considering the timeline for investment and the impact of COVID-19 extensions on the due dates for investment and deposit in the Capital Gains Account Scheme. - Assessee's contention: The assessee complied with Section 54(1) by investing capital gains within two years and with Section 54(2) due to COVID-19 extensions, which allowed investment up to 31.03.2023. Reliance was placed on Pratap Hirji Ved vs. DCIT and Dr. Dharmista Mehta vs. ITO. - Revenue's contention: The revenue relied on the observations of the Assessing Officer. 2. Whether the addition of Rs. 15,35,000/- made under Section 69A of the Income Tax Act, 1961, on account of investments in mutual funds and term deposits is justified, given the assessee's claim that the funds were received from her husband. - Assessee's contention: The investments were made from money transferred by her husband, who had declared an income of Rs. 28,34,620/- for AY 2020-21. Bank statements showing receipts from her husband's and son's accounts were presented. - Revenue's contention: The revenue relied on the observations of the Assessing Officer regarding the lack of proper documentary evidence.

Which sections of the Income-tax Act were involved?

Section 54,Section 54(1),Section 54(2),Section 139,Section 139(1),Section 139(4),Section 69A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCHES, MUMBAI

Before: SHRI SAKTIJIT DEY & SHRI MAKARAND VASANT MAHADEOKAR, ACCOUNTANT REGISTRAR

For Respondent: Ms. Meenu Ola, Sr. DR
Pronounced: 14.10.2026

आदेश / ORDER

PER SAKTIJIT DEY, VICE PRESIDENT:

This is an appeal by the assessee against order dated 17.03.2026 of National Faceless Appeal Centre, Delhi (‘NFAC’ for short) for the assessment year 2020-21.

2.

At the outset, ld. Counsel for the assesse, on instructions, did not press ground no. 1. Accordingly, ground no. 1 is dismissed as not pressed.

3.

In ground no. 2, the assessee has challenged the disallowance of deduction

claimed u/s. 54 of the Income Tax Act, 1961 (‘the Act’ for short).

4.

Briefly, the facts are, the assessee is a resident individual. As alleged by the

Assessing Officer (A.O. for short), the assessee did not file any return of income

u/s.139(1) of the Act for the impugned assessment year under dispute. Whereas, the

information available in the system of the department indicated that the assessee had

made investments in mutual fund and term deposits. Further, the assessee had also sold

immovable property during the year. The total investment/receipt from these

transactions aggregated to Rs.2,05,27,000/-. Based on such information, the AO formed

belief that the income chargeable to tax has escaped assessment. Accordingly, he

reopened the assessment u/s.147 of the Act by issuing a notice u/s.148 of the Act. In

response to the notices issued by the AO, the assessee furnished reply from time to time.

Though, the AO acknowledged that the assessee furnished reply, but he observed that

no supporting documentary evidences were furnished. After verifying the materials

available on record, the AO found that in the year under consideration, the assessee had

sold an immovable property for a consideration of Rs.60 lakhs. However, the assessee

has not offered to tax the capital gain claiming that the sale consideration has been

reinvested in purchase of a new residential house. Upon verification of materials on

record, the AO ultimately concluded that the assessee failed to furnish any supporting

evidence to demonstrate that the sale consideration was actually reinvested in purchase

of a new residential house. Accordingly, he disallowed the deduction claimed u/s.54 of

the Act amounting to Rs.45,45,752/-.

5.

Though, the assessee contested the disallowance before learned first appellate

authority, however, she was unsuccessful.

6.

Before us, learned counsel appearing for the assessee submitted that as per the

provision of section 54(1) of the Act, the assessee has to investment the capital gain

derived from a sale of property within a period of two years from the date of transfer.

He submitted, the assessee had complied with the said condition. So far as, compliance

with the conditions of section 54(2) of the Act, the assessee submitted that due to

prevailing condition, on account of COVID-19, the Central Government had raised the

condition of investment of capital gain in the Capital Gain Accounts Scheme from time

to time and the last date for such investment was extended up to 31.03.2023. He

submitted, since, the assessee had entirely invested the capital gain in the purchase of a

new residential house by 08.07.2021, the conditions of section 54(2) of the Act are

complied. In support of such contention, he relied upon the following decisions:

1.

Pratap Hirji Ved vs. DCIT (in ITA No. 1102/Mum/2019 vide order dated 17.01.2022) 2. Dr. Dharmista Mehta vs. ITO [2022] 144 taxmann.com 136 (Mumbai-Trib.)

7.

Learned Departmental Representative (‘ld. DR’ for short) strongly relied upon

the observations of the AO.

8.

We have considered rival submissions and perused materials available on record.

The facts have revealed that the assessee had sold the old property on 27.12.2019,

whereas, the sale consideration received by the assessee was reinvested in purchase of

a new residential house on 08.07.2021. Therefore, undisputedly, the assessee has invested the capital gain in purchase of a new residential house within a period of two

years as per the condition of section 54(1) of the Act. So far as, compliance with the

conditions of section 54(2) of the Act, admittedly, as per the provisions, the assessee has

to invest the capital gain in purchase of the new property on or before the due date of

filing of the return of income u/s.139 of the Act. Meaning thereby, the assessee has time

to invest in the new property before filing the return of income in terms of sub-section

(1), sub-section (4) and (5) of Section 139 of the Act. In the facts of the present appeal,

the assessee had to invest the capital gain on or before the due date of return of income

u/s.139(4) by 31.03.2021. However, due to prevailing condition arising out of COVID-

19, the due date of furnishing the return of income was further extended from time to

time till 31.03.2023. Even, the time limit for deposit of unspent capital gain in the

Capital Gains Account Scheme was extended till 31.03.2023. Whereas, it is a fact on

record that assessee has invested the capital gain by purchasing flat on 08.07.2021, much

prior to the end of time limit. Thus, in our considered view, the conditions of Section

54(2) stand complied. Hence, the assessee is entitled to claim deduction of entire claim

u/s.54(1) of the Act. Accordingly, the AO is directed to allow assessee's claim of

deduction.

9.

In ground no.3, the assessee has contested additional of Rs.15,35,000/-.

10.

Briefly the facts relating to this issue are, from the material available on record,

the AO found that the assessee had made investments in mutual funds and term deposits.

In response to the query raised by the AO, the assessee submitted that the investments

were made out of funds received from her husband. The AO, however, did not accept the claim of the assessee, alleging lack of proper documentary evidence. Hence, he

added back the amount of Rs.15,35,000/- u/s.69A of the Act.

11.

The addition so made was sustained by learned first appellate authority.

12.

Before us, learned counsel appearing for the assessee submitted that assessee's

husband is an employee of Wipro Limited and as per his return of income filed for

A.Y.2020-2021, the income declared was to the tune of Rs.28,34,620/-. He submitted,

the investments made were out of money transferred by her husband. In this context, he

drew our attention to the bank statements of the assesse. On perusal of the bank

statement kept in the paper book, it is noticed that the assesse had received amount of

Rs.15,35,000/- in total on transfer. The entries in the bank account clearly reveal that

the source from which the amounts have been received was from the accounts of her

husband and son. Thus, the source of refund received in the bank account stands

established. That being the case, the assessee has established that investments would not

be covered u/s.69A of the Act. Accordingly, we direct the AO to delete the addition.

13.

In view of our decision above, the issue raised in additional ground having

become academic is kept open.

14.

Ground nos. 4 and 5 relating to levy of interest and initiation of penalty

proceedings, being consequential and premature are dismissed.

15.

In the result, the appeal is allowed.

Order pronounced in the open court on 14.10.2026.

Sd/- Sd/-

MAKARAND V MAHADEOKAR SAKTIJIT DEY ACCOUNTANT MEMBER VICE PRESIDENT

Mumbai Dated: 14.10.2026 Roshani, Sr. PS Copy to: SAIKATA SUMAN GANGULY, SAIKATA GANGULY, B 606, DONUM DEI BUILDING NO. 1, MIRA ROAD 1 (EAST), MUMBAI, THANE-401107, MAHARASHTRA

ITO, WARD 2(1), THANE, 2 ITO, WARD 2(1), THANE, THANE-400602, MAHARASHTRA

3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAI BENCH 5 GUARD FILE

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