MOHIT GUPTA,CHENNAI vs. ITO,NON- CORP WARD 17(2), CHENNAI, CHENNAI

Aggrieved by the assessment completed, assessee filed appeal before the First Appellate Authority (FAA). The contentions raised by the assessee was rejected by the FAA by observing as under:-  “The sale consideration of Rs.2 crore is confirmed to have been received in F.Y.2015-16 and correctly taxed under the head "Long Term Capital Gain" in A.Y 2016-17 under section 45 of the Act.  The appellant is not eligible for exemption under section 54 due to non- compliance with the mandatory requirements of section 54(2).  Even assuming the compromise decree evidences possession in 2017 mere is no separate agreement of part-performance furnished by the appellant nor say registered agreement preceding the sale deed to which section 53A could apply. Hence, section 2(47)(iva) is not 4 -: attracted. Therefore, the appellant's reliance on this provision is misplaced, and the Assessing Officer has rightly taxed the capital gains in A.Y. 2016-17.  The appellant's failure to substantiate the cost of acquisition with credible evidence, as well as the inability to establish eligibility for exemption under section 54 through proper supporting evidence, renders his claim unsubstantiated and unsustainable in law.  The appellant claims to have filed details of the cost of acquisition (Rs 1,93,299/-) in his submission dated 07.01.2023, which was allegedly not considered by the AO. However, on careful examination of the assessment records and the order, it is observed that no verifiable documentary evidence. such as purchase deed, valuation report, or cost allocation statement, was placed on record. A mere statement or submission without supporting documentation is not sufficient to allow deduction under section 48.  In the absence of any legally admissible proof, the computation offered by the appellant cannot be accepted.”

Aggrieved by the order of the FAA, assessee has filed the present appeal before the Tribunal. The assessee has filed a paper-book enclosing therein the return of income filed for the assessment years 2016-17 & 2017-18, the scrutiny assessment completed u/s.143(3) of the Act for the assessment year 2017-18, the return of income filed pursuant to notice issued u/s.148 of the Act for the assessment year 2016-17, the notices issued during the course of proceedings before the AO and the FAA, the statement of capital gains, the sale documents and the case laws relied on, etc. The Ld.AR reiterated the submissions made before the AO and the FAA.

We have heard rival submissions and perused the material on record. The AR’s preliminary issue is that long term capital gains is to be assessed on the transfer of immovable property in the assessment year 2017-18 instead of relevant assessment year 2016-17. Alternatively, the Ld.AR also contended that if capital gain is liable to be taxed in the relevant assessment year, assessee is entitled for exemption u/s.54 of the Act, since new asset has been purchased within the stipulated time.

As regards, alternative plea of assessee is concerned, we note that the original asset was sold vide registered sale deed dated 23.03.2016 vide Doc.No.735/2016 of SRO, Adyar and the new asset was purchased on 08.03.2018 within the time stipulated under the Act. The copy of the deed executed for purchasing the new asset is enclosed at page 156 of the paper-book. The recitals capturing the payments made are under:- That in pursuance of the aforesaid agreement and in consideration for sum of Rs. 2,00,00,000/- (Rupees Two Crores Only) paid by the PURCHASER to the VENDORS in the following manner:

The Hon’ble Karnataka High Court in the case of Commissioner of Income-tax, Bangalore vs. K Ramachandra Rao, reported in [2015] 56 taxmann.com 163 had held in the context of Section 54F of the Act that when the entire sale consideration is utilized in construction of a residential house on or before the time limit specified u/s 139(4) of the Act, exemption cannot be denied merely because the amount was not deposited in the capital gains account scheme before the due date u/s 139(1). The relevant finding of the Hon’ble High Court reads as follows:- “4. Re.Question No.2 :

In light of aforesaid judgment of the Hon’ble Karnataka High Court, we hold that assessee is entitled to the re-investment made in terms of section 54 of the Act, in view of the utilization of the sale proceeds within the stipulated time prescribed u/s.139(4) of the Act.

Moreover, the failure to deposit the sale proceeds into the capital gains account scheme should be reckoned as a technical breach and such technical breach cannot disentitle the exemption claimed u/s.54 of the Act. In this context, we place reliance on the following judicial pronouncements, wherein it was held that the non-routing of the sale proceeds through the capital gains account scheme is only a technical breach:- i. P.Sankaran vs. ITO in ii. A.C. Shyam Sundar vs. JCIT in ITA No.2279/Mds/2015

Therefore, we direct the AO to grant exemption claimed u/s.54 of the Act for the assessment year 2016-17 provided assessee satisfies the other condition prescribed under the said section. Since, we have allowed the alternative plea of the assessee, the preliminary issue raised, in which assessment year the long-term capital gain is to be taxed is not adjudicated and is left open. It is ordered accordingly.

In the result, the appeal filed by the assessee is partly- allowed for statistical purposes.