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Facts
The assessee sold agricultural land, claiming a deduction of Rs. 30,48,569/- under Section 54B for reinvesting in new agricultural land. The Assessing Officer and Ld. CIT(A) disallowed a substantial portion of the deduction (Rs. 28,95,569/-) because the unutilized capital gains were not deposited into the Capital Gains Account Scheme (CGAS) before the due date under Section 139(1), and payments for the new land were made via post-dated cheques after the due date.
Held
The Tribunal noted that the purchase deed for the new agricultural land was executed, and cheques for the entire consideration were issued on 14.08.2019, which was prior to the due date for filing the Return of Income. Since the assessee maintained sufficient bank balance to honor the cheques and the reinvestment within the prescribed time was undisputed, the Tribunal allowed the appeal, granting the full Section 54B deduction.
Key Issues
Whether the Section 54B deduction can be denied solely due to the non-deposit of unutilized capital gains into the Capital Gains Account Scheme (CGAS) and payment for the new asset through post-dated cheques, when the purchase deed was executed and cheques issued before the due date for filing the Return of Income, and the assessee maintained sufficient funds.
Sections Cited
250, 54B, 2(14)(iii), 139(1), 54B(1), 54B(2), 234A, 234B, 234C, 270A
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Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD
Before: DR. B.R.R. KUMAR, VICE-MS. SUCHITRA KAMBLE
PER DR. B.R.R. KUMAR, VICE-PRESIDENT:- This appeal has been filed by the assessee against the order dated 06.06.2024 passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, [hereinafter referred to as “Ld. CIT(A)” in short], under section 250 of the Income-tax Act, 1961 [hereinafter referred to as “the Act” in short] for the Assessment Year 2018-19
The assessee has raised the following grounds of appeal:
1. 1. 1. The learned CIT(A) has erred in law and on facts of the case in upholding action of ld. AO in denying relief u/s 54B of the Act to the extent of Rs.28,95,569/-, on the ground, that the appellant has failed to deposit the unutilized amount in the Capital Gain Account out of investible/exempted amount u/s54B of Rs.30,48,569/-, ignoring the fact that assessee had already issued cheques for the unutilized amount on the date of the agreement before the due date of furnishing ITR.
2. The learned CIT(A) and Ld. AO have erred in law and on facts of the case in grossly misinterpreting the beneficial provisions of Sec. 54B of the Act without appreciating the intention of the legislature behind the introduction of these provisions.
3. The learned CIT(A) and Ld.AO have erred in denying deduction under Section 54B merely on procedural grounds that payments were not routed through Capital Gains Account Scheme, even though the appellant had completed the purchase of new
The learned CIT(A) and AO have grossly erred in bringing to tax the alleged capital gains on sale of rural agricultural land, which is not a "capital asset" within the meaning of Section 2(14)(iii) of the Income Tax Act, 1961. The land sold was situated more than 8 km outside the municipal limits, was used for agricultural purposes, and is supported by 7/12 extract of the land records which will be filed along with the appeal. Therefore, the transaction is entirely outside the scope of capital gains tax.
The learned CIT(A) has passed the appellate order in breach of natural justice by not granting proper opportunity of hearing, especially in light of the difficulties faced by the appellant and his family during the COVID-19 pandemic.
6. The learned AO has passed the order without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. The action of the learned AO is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed.
7. The learned CIT(A) has erred in law and on facts of the case in confirming action of the Id. AO in levying interest u/s. 234A/B/C of the Act.
8. The learned CIT(A) has erred in law and on facts of the case in confirming action of the Id. AO in initiating penalty proceedings under Section 270 A of the Act.
The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.
3. The brief facts of the case are that the assessee filed return of income on 02.10.2018 declaring capital gains arising from sale of agricultural lands situated beyond 8 kms from municipal limits. The assessee claimed deduction of Rs.30,48,569/- u/s 54B on the ground that new agricultural land was purchased on 14.08.2019, within two years from the date of transfer.
3.1 During scrutiny assessment, the Assessing Officer observed that as on the date of filing the return, the assessee had utilized only Rs.1.53 lakh towards purchase of the new agricultural land. The balance consideration was paid later through post-dated cheques. Since the unutilized capital gains were not deposited into the Capital Gains Account Scheme (CGAS) before the due date u/s 139(1), the Assessing Officer restricted the deduction u/s 54B to Rs.1.53 lakh and disallowed Rs.28,95,569/-.
4. Aggrieved by the disallowance made by the Assessing Officer, the assessee filed an appeal before the Ld. CIT(A) who dismissed the appeal of the assessee by observing as under:- “In the light of overall facts of case, on perusal of appellant grounds of appeal
, it is noticeable that appellant is contending the order of AO as bad in law as it involves erroneous appreciation of facts of case by disallowing deduction u/s.54B of I.T Act though the assessee has indeed purchased new agricultural land before due date of filing of ROI and thereby contended such order of AO as bad in law. Further in these GOA, appellant contended that the stated agricultural land was purchased on 14.9.2014 by issue of post-dated cheques and the same have been affected payments subsequently and on this analogy appellant contends that the entire payment as indeed paid as on the date of registration making it eligible for deduction u/s.54B of I.T Act. Further in these GOA, appellant is contending the stipulated condition for depositing the fund in specified capital gain bank A/c is only procedural to examine incurring of expenditure out of capital gain and accordingly claims such procedural deficiencies cannot be invoked to deny the exemption is the contention of the appellant. On this analogy, appellant adduced various citations to hold such non-deposit of funds in specified bank A/c though the same is incurred for intended property as involving justifiable claim and accordingly requested to consider. Further in these GOA, appellant contended that AO failed to provide more time as sought by appellant keeping in view the COVID conditions and thereby contended such order of AO as bad in law. Precisely in all these GOA, appellant is contending the claim as made u/s.54B of I.T Act as involving justifiable claim as the intended property is purchased before filing of ROI and thereby claims such procedural deficiency for not routing the payments through specified bank A/c as involving acceptable payments and thereby pleaded to delete the addition as not maintainable. However, on perusal of facts on record as brought out by AO in the assessment order, it is clearly noticeable that, appellant is indeed involved in sale of agricultural properties with consequent purchase of agricultural property before filing of ROI and apparently there is no dispute on these claims of appellant. However, appellant did not deposit the capital gain fund as received on sale of agricultural lands in specified bank A/c as per the due procedure for its use subsequently to make use of the claim for deduction as envisaged u/s.54B of I.T Act. Apparently appellant purchased the property on 14.8.2019 that being before furnishing of ITR for the relevant AY and amount paid / actually incurred as on this date is only at Rs.1.53 lacs out of total claim for deduction u/s.54B of I.T. Act of Rs.30.48 lacs. The balance amount is indeed paid/ incurred subsequently through post-dated cheques in violation of the provisions u/s.54B of I.T Act, that too without routing such payments through specified capital gain bank A/c as per the due procedure as reasoned in the assessment order. In the light of Asst. Year : 2018-19 - 4– these finer facts on perusal of appellant various contentions / GOA and submissions as advanced during appeal proceedings., it is noticeable that, appellant is vehemently contending such non-deposit of funds in specified bank A/C is only a procedural irregularity as appellant is indeed involved in purchased of new agricultural land before filing of ROI as per the provisions of I.T Act and thereby contended the deduction as claimed u/s.54B of I.T Act and thereby contended the deduction as claimed u/s. 54B of I.T Act as involving only justifiable claim for full amount as Rs.30.48 lacs as against of its restriction by AO to Rs.1.53 lacs. However, it is a clear fact that the appellant did not pay/ incurred the balance purchase cost before filing ROI and same has been indeed incurred and paid much beyond the specified date / filing of ROI, that too through post-dated cheques without being routed through specified bank A/C as per the prescribed conditions to avail the benefit u/s.54B of I.T Act. Considering these finer facts as envisaged u/s.54B of I.T Act as reasoned by AO in the assessment order, appellant mere contentions as advanced to hold the payments as incurred through post-dated cheques without being depositing the same in specified bank A/C as involving justifiable fulfillment of provisions u/s.54B of I.T Act is to be treated as not maintainable as the same is not the legislative intent and spirit as specified in these provisions as per law. Appellant ought to have deposited these funds at the first instance in specified bank A/C of capital gain A/C and same would have been subsequently utilized for its consequent payments to purchase new agricultural land for its consideration as involving eligible claim as per law. In the absence of the same, apparently AO has restricted such eligible claim to the actual amount as indeed incurred by the appellant before filing ROI and thereby the computation of AO in restricting such claim in adherence to the provisions u/s.54B of I.T Act is to be seen as apparently reconcilable. Further, appellant has placed reliance on various citations as per the submissions to hold the same as allowable deduction even though not routed through the specified bank A/c etc. and on perusal of facts of case / ratios of adjudication of the citations as applicable to appellant facts of case, the same are neither comparable nor equitable in its facts of case and ratios of adjudication apparently as per law. Further, appellant did not bring out such comparative analysis as applicable to appellant facts of case involving post- dated cheque payments etc. and ratios of adjudication as attributable to the citations as needed to adduce and thereby appellant mere contentions on this analogy is to be treated as not maintainable as per the facts of case and circumstances as explained above. Considering all these facts of case, apparently there exists no infirmity in the order of the AO as per the facts available on record as reasoned in restricting / disallowing the claim of deduction u/s.54B of I.T Act and in view of the same, appellant various inter-related / over-lapping contentions as advanced in various grounds of appeal needs to be treated as not maintainable as per law. In the result, appellant appeal is dismissed as not maintainable as per facts available on record on merits as needed to advance the grounds 5. Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal.
Before us, the Ld. AR submitted that the assessee had purchased the new agricultural land on 14.08.2019, prior to the due date of filing the return. It was further submitted that although the cheques issued towards the purchase consideration were realised after the due date of filing the return, the cheques themselves were issued on the date of execution of the registered purchase deed, i.e., on 14.08.2019. Therefore, once the assessee had issued the cheques and had maintained sufficient bank balance to honour them, the payment must be regarded as having been made on the date of issuance of the cheques, and the benefit of deduction under section 54B could not be denied merely because the cheques were presented later by the seller. The Ld. AR also pointed out that the purchase deed dated 14.08.2019 was duly furnished before the Assessing Officer, who had verified the same.
The Ld. DR supported the orders of the lower authorities and contended that non-deposit of the unutilized amount into ‘CGAS’ before the due date u/s 139(1) is fatal to the assessee’s claim, as mandated by section 54B(2).
We have heard the submissions of both the parties and perused the material available on record. The undisputed facts from the record are that:-
(i) the purchase deed for the new agricultural land was executed on 14.08.2019, (ii) the cheques for the entire consideration were issued on the same date and (iii) the assessee maintained adequate bank balance for honouring such cheques.
There is no dispute with regard to purchase/reinvestment of capital gains in the eligible assets. We have gone through the following judgments of the various High Courts and Co-ordinate Benches of the Tribunal viz:- i. Principal Commissioner of Income Tax v. Shankar Lal Saini [2018] 89 taxmann.com 235 (Rajasthan) ii. Jobanji Thakor v. Income-tax Officer [2025] 175 taxmann.com 62 (Ahmedabad-Trib.) iii. Income Tax Officer, Ward-5(3)(1), Ahmedabad vs. Jhaveri Sandeep Bipinchandra (HUF) [ITA No. 805/Ahd/2023] iv. Manilal Dasbhai Makwana v. Income-tax Officer, Ward-3(2)(3), Ahmedabad [2018] 96 taxmann.com 219 (Ahmedabad – Trib.) v. Dr. Dharmista Mehta v. Income-tax Officer [2022] 144 taxmann.com 136 (Mumbai – Trib.) vi. Uddhav Krishna Bankar v. Income Tax Officer, Ward-8(4), Pune [2020] 121 taxmann.com 53 (Pune – Trib.) vii. Rameshbhai Ganeshbhai Sanghani v. Assistant Commissioner of Income-tax [2024] 166 taxmann.com 34 (Surat-Trib.) viii. Gemini Film Circuit v. Addl. CIT [2024] 461 ITR 13 (Mad) ix. Shree Shyam Sales Corporation v. ITO [ITA No: 188/RPR/2024] x. Shamrao Gopal Benake v. ITO [ITA No. 1036/PUN/2025]
Since the reinvestment of the capital gains into the specified asset within the prescribed time is not in dispute, the appeal of the assessee is hereby allowed.
The order is pronounced in the open Court on 10.12.2025.