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Facts
The late assessee and her specially-abled daughter, co-owners, sold a property, incurring Long-Term Capital Gains (LTCG) for AY 2016-17 & 2017-18. The assessee claimed exemption under Section 54EC by investing in NHAI bonds, but the investment was made belatedly, beyond the 6-month period, due to the non-availability of bonds. The AO and FAA disallowed the exemption, which led to the present appeals with a 133-day delay.
Held
The Tribunal condoned the 133-day delay in filing the appeal, finding reasonable cause. It noted that the assessee had consistently attempted to invest by writing to the bank and kept funds reserved, and the non-availability of bonds was beyond her control. Relying on judicial pronouncements and a similar favorable decision for the co-owner, the Tribunal directed the AO to grant the Section 54EC exemption.
Key Issues
Whether the exemption under Section 54EC of the Income Tax Act should be allowed when the investment in specified bonds is delayed due to their non-availability, and if the delay in filing the appeal should be condoned.
Sections Cited
250, 54EC, 270A
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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI GEORGE GEORGE K & SHRI INTURI RAMA RAO
आदेश/ O R D E R PER GEORGE GEORGE K, VICE PRESIDENT: These appeals filed by the assessee are directed against two orders of the Commissioner of Income Tax (Appeal), National Faceless Appeal Centre (NFAC), Delhi both dated 26.12.2024 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Years are 2016-17 & 2017-18.
& 1972/Chny/2025 :- 2 -: There is a delay of 133 days in filing these appeals. The 2. assessee has filed a petition for condonation of delay and also a supporting affidavit of the legal representative, aged 84 years stating therein the reasons for belated filing of these appeals. The reasons stated for delay in filing these appeals are as follows:- 1) My wife Dr. Kannaki (PAN: AGLPK 2785R) died on 10.09.2021 in a Fire Accident. 2) My only daughter Muruga Sakthi Preethi (mentally challenged) and I, are the only legal heirs of my late wife Dr. Kannaki. I have filed the appeal as her Legal heir / Representative of my deceased wife. 3) My late wife and my daughter, said above, were co-owners of a property and Capital Gains arose in their hands for the AYs 2016-17 & 2017-18. Claim u/s 54EC were made in the lands of my wife for both the years in the hands of my daughter for AY 2016-17. The Ld.AO disallowed the claim and appeals were preferred before the Ld. CIT(A). 4) In both their hands investments in NHAI Capital Gains Bonds were made but due to non-availability of the said bonds there was delay in the investments. The Bank had confirmed the fact. 5) On the same facts, for the same disallowance, for the same Asst. Year, the sale of the same property as a Co-Owner, on an appeal, in the name my daughter, said (2) above, an order u/s 250 dt. 14-06-2024 was allowed by the Ld. CIT(A) and giving effect to that Order, the Ld.AO has issued a Refund and I sincerely thought that all the income-tax cases have been settled and are put to rest. 6) However, the Ld. CIT(A) had dismissed the appeal in the case of my Late Wife and the Order u/s 250 is dated 26-12-2024 and the due date for filing an appeal against the said Order is 24-02-2025 and I could file the appeal only on 11-07-2025 and there is a delay of 137days. 7) I was not aware of the said Order and I also did not receive any communication ether on my email or physically. Only when I received a Penalty Order u/s 270A. dt. 30-06-2025, in the name of my late wife, for AY 2017-18, 1 came to know of the dismissal order u/s 250 said above. 8) Thus, Technically, I humbly submit, that there is no delay in filing the appeal, since the appeal is filed within the tine, I as the Legal Representative came to know of the Order.
& 1972/Chny/2025 :- 3 -: 3. On perusal of the reasons stated in the affidavit, we are of the view that there is reasonable cause and no latches can be attributed to the assessee for belated filing of these appeals. Hence, we condone the delay of 133 days in filing these appeals and proceed to dispose off the case on merits.
The solitary issue that is raised is whether First Appellate Authority (FAA) is justified in confirming the AO’s action in denying the exemption u/s.54EC of the Act on the ground that investment in bonds was made belatedly.
Brief facts of the case are as follows: The late assessee is a senior citizen. The assessee along with other co-owner (the daughter of assessee who is a specially abled child) had sold a property under development agreement for the assessment years 2016-17 & 2017-18. The assessee had declared Long-Term Capital Gain (LTCG). In computing the LTCG, assessee had claimed exemption u/s.54EC of the Act for having made deposit in bonds issued by the National Highway Authority of India (NHAI). The AO in the assessment completed for both the assessment years had disallowed the claim of exemption u/s.54EC of the Act & 1972/Chny/2025 :- 4 -: since the investments were not made within six months from the date of transfer.
Aggrieved by the assessments completed by disallowing the claim of exemption u/s.54EC of the Act for the assessment years 2016-17 & 2017-18, the assessee filed appeals before the First Appellate Authority (FAA). The assessee had contended before the FAA that bonds were not available and hence, assessee could not invest in the bonds within the stipulated time. It was submitted that assessee had wrote a letter to the bank within the stipulated time to allot the bond. It was stated that only on account of non- availability of bonds banks could not allot the impugned bonds within the specified time. The FAA, however rejected the contentions of the assessee and confirmed disallowance of section 54EC of the Act made by the AO for assessment years 2016-17 & 2017-18.
Aggrieved by the orders of the FAA, assessee has filed the present appeals before the Tribunal. The assessee has filed a paper-book enclosing therein the death certificate, certificate of legal heirship, power of attorney, submissions made before the AO and the FAA, the order of the FAA in the case of other co-owner & 1972/Chny/2025 :- 5 -: allowing the claim of exemption u/s.54EC of the Act, etc. The Ld.AR reiterated the submissions made before the income-tax authorities.
The Ld.DR strongly relied on the orders of the AO and the FAA.
We have heard rival submissions and perused the material available on record. The assessee before the AO as well as the FAA had specifically contended that bonds of NHAI was not available and as & when it was available, assessee had purchased the bonds. Admittedly, the AO and the FAA has not disputed the claim of the assessee that impugned bonds were not available within the stipulated time. For assessment year 2016-17, the assessee wrote a letter to the Union Bank of India as early as on 24.03.2016 i.e., within 43 days from the date of transfer requesting to allot 54EC bonds for assessee and the other co-owner. When bonds were available money was transferred from the assessee’s account on 24.04.2017 and bonds were allotted on 30.04.2017. Till the date of remittance for purchase of bonds, money was continuously kept reserved in bank account and was not utilized for any other purposes.
& 1972/Chny/2025 :- 6 -: 10. Similarly for assessment year 2017-18, assessee had written a letter to the bank on 24.03.2016 and again on 09.01.2017, well before the close of the previous year and within due date for investment for allotment of 54EC bonds. When bonds were made available, money was transferred from assessee’s bank account on 24.04.2017 and was allotted the bonds on 30.04.2017. For 2017-18 also the required funds for investment were all along lying with the bank account and was not put to any other use. On the given facts, it is abundantly clear that assessee was unable to invest in the bonds within the stipulated time due to the reasons beyond the control of the assessee.
On the same set of facts in the case of other co/joint owner, a similar disallowance was made by the AO u/s.54EC of the Act for the assessment year 2016-17. However on appeal, the FAA vide order dated 14.06.2024 allowed the claim of assessee. The FAA had followed various judicial pronouncements for taking a decision in favour of the assessee in that case. The relevant finding of the FAA reads as follows:- “3.2 The AO has denied the deduction claimed u/s 54EC holding that the investment was not made within 6 months from the date of transfer. However, the appellant has filed a letter with acknowledgment from the bank confirming non-availability of bonds as on date. The AO has not disputed the said claim in the assessment & 1972/Chny/2025 :- 7 -: order. Reliance has been placed by the appellant on various High court decisions wherein it was held that delay in investment u/s 54EC Bonds should be condoned and deduction shall not be disallowed especially when the Bonds were not available in the market during the period of 6 months from the date of transfer. A) [2018] 401 ITR 242 (Karnataka) Dr.(Smt.) Sujatha Ramesh v. CBDT b) [2015] 378 ITR 561 (Bombay) KamlakarMoghe v. ACIT, Nagpur c) [2014] 49 taxman.com 202 (Madras) CIT v. Akbar Ali Dhala d) [2012] 24 taxmann.com 111 (Bom.) CIT v. Cello Plast. In this vice, the AO is directed to verify the factual matrix and allow deduction claimed u/s 54EC of the Act. In the result, the appeal is treated as partly allowed.
The Revenue has not filed further appeal to ITAT. In light of the aforesaid reasoning and relying on the judicial pronouncements relied on by the FAA in the case of co-owner, we direct the AO to grant deduction u/s.54EC of the Act in the case of the assessee for the assessment years 2016-17 & 2017-18. It is ordered accordingly.
In the result, both the appeals filed by the assessee are allowed.
Order pronounced in the open court on 9th December, 2025 at Chennai.