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Facts
The Revenue challenged the CIT(A)'s order which allowed a deduction under Section 54F(4) to the assessee for Assessment Year 2021-22. The assessee had deposited the entire sale consideration of Rs. 3,21,00,000/- into a Capital Gains Account Scheme before the due date for filing the return, even though a new residential house had not been purchased or constructed within the stipulated time. The Revenue also raised grounds concerning property ownership and the acceptance of additional evidence by the CIT(A).
Held
The Income Tax Appellate Tribunal (ITAT) dismissed the Revenue's appeal, affirming the CIT(A)'s decision. The Tribunal held that the assessee was entitled to the deduction under Section 54F(4) as the sale proceeds were duly deposited in the capital gains account. It clarified that while non-utilization for purchase/construction within the specified period could lead to tax imposition in a subsequent year, the initial deposit fulfilled the conditions for the period under consideration.
Key Issues
Whether the assessee is eligible for Section 54F(4) deduction when sale consideration is deposited in capital gains account but a new asset is not acquired or constructed within the specified period, and whether the CIT(A) erred in admitting additional evidence.
Sections Cited
54F, 139(1), 295(2)(mm)
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Income Tax Appellate Tribunal, CHANDIGARH BENCH, ‘B’, CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI KRINWANT SAHAY
Order Per Krinwant Sahay, AM: Appeal in this case has been filed by the Revenue against the order dated 29.7.2024 of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi.
Grounds of appeal are as under: -
1. The findings of Ld. CIT(A) are perverse in the facts 1. of the case with respect of ownership of Housing
1000-Chd-2024 Poonam Khetrapal Singh, Chandigarh 2 Properties so much so that the property which was already in possession of the assessee and assessee has herself claimed deduction u/s 54 F on account of investment on reconstruction of the same i.e. C-217A, Defence Colony, New Delhi, has been held to be not owned by the assessee.
2. The Ld. CIT(A) has erred in facts and law in holding that property (# 302A, Silver Arch Apartment, Feroz Shah Road, New Delhi) from which assessee herself has shown income from House Property for assessment year under consideration i.e. A.Y 2021-22 itself, has been held to be not owned by the assessee. The Ld. CIT(A) has erred in facts and law in 3 allowing the deduction u/s 54F of the Income Tax Act, 1961 ignoring the facts that assessee was owning more than one residential house other than new asset on the date of transfer of capital asset i.e. Plot No. 15, Pocket / Block C2, Sushant Lok-L Guru gram.
4 The Ld. CIT(A) has erred in facts and law on allowing benefit of additional evidence submitted by the assessee during the appellate proceedings without providing opportunity to offer his comments of the Assessing Officer and without giving finding in writing before admitting the same as required by the Rule 46A of the Income Tax Rule, 1962 read with Section 295(2)(mm) of the Income Tax Act, 1961.
1000-Chd-2024 Poonam Khetrapal Singh, Chandigarh
3 5 It is prayed that the order of the Ld. CIT(A) be set aside and that of the Assessing Officer may be restored.
6. The appellant craves leave to add or amend any grounds of appeal before the appeal is heard or is disposed off.
Although there are many grounds of appeal taken by the Revenue in this case but the main ground of appeal is against the action of the CIT(A) for allowing deduction u/s 54F(4) of the Income Tax Act, 1961 (in short 'the Act'). The Ld. CIT(A) has given his findings on this issue as under: - “6.3.1 I find that during the assessment stage itself, the assessee claimed that the entire sale consideration of Rs.3,21,00,000/- was deposited by her in the capital gain account bearing No.0175001000000301 and submitted a copy of the bank statement with the Assessing Officer, The Assessing Officer ignored such submission.
6.3.2 I have perused the issue and I find that in section 54F(4) the statue provides that the amount of consideration which is not used by the assessee within one year before the date of transfer or not utilized for purchase or construction of new asset before the due date of filing of return u/s.139(1) for the year of the 1000-Chd-2024 Poonam Khetrapal Singh, Chandigarh
4 transfer, such unutilized amount has to be deposited in a bank account and to be utilized within the stipulated period as per the statue for purchase or construction of a new house. In this case, although during the year the assessee could not purchase or construct a new house but deposited the entire receipt in the capital gain account as stipulated by the statute before the due date of filing of return. Therefore, the Assessing Officer was not correct in denying the benefit of deduction. In case, the assessee failed to purchase a new house by July, 2022 or constructed a new house in July, 2023, the Assessing Officer has to revisit the issue and impose tax accordingly in the relevant Assessment Year. However, for the period under consideration, she was eligible to get the deduction of the entire amount of capital gain as the entire amount of receipt was deposited in the specified scheme prescribed in section 54F. The AO is directed to allow the deduction u/s.54F on the entire capital gain as calculated by the assessee in the return of income. The grounds taken in this issue is therefore allowed.”
Per contra, the Ld. DR relied on the order of the AO.
We have considered the findings given by the Assessing Officer in the assessment order and by the Ld. CIT(A) in the appellate order. We find that the Assessee has deposited the entire sale consideration in the capital gains account as discussed by the 1000-Chd-2024 Poonam Khetrapal Singh, Chandigarh
5 ld. CIT(A) in this order. Therefore, there is no question of disallowing the same and charging capital gain on the same amount.
The Ld. CIT(A) has very clearly given his findings that in case the Assessee does not purchase a new property or get constructed a new house within time prescribed under the Act, then Assessing Officer has to revisit the same section and deny the capital gains, but during the period under consideration, the Assessee is very much entitled to make deposits of the sale proceedings in the capital gains account and claim deduction u/s 54F(4) of the Act. Thus, we do not find any reason to interfere in the findings given by the Ld. CIT(A) on this issue. Accordingly, Revenue’s appeal on this issue is dismissed.