JAGDISH RAJESH,CHENNAI vs. ITO, NCW-20(3), CHENNAI

This appeal filed by the assessee is directed against order of learned Commissioner of Income Tax (Appeals) – 14, Chennai, dated 31.08.2018 and pertains to assessment year 2013-14.

The assessee has raised the following grounds of appeal:-

The brief facts of the case are that the assessee is an individual, derives income from salary and income from capital gains, filed his return of income for the assessment year 2013-14 on 05.07.2013 admitting total income of Rs.21,42,800/-. Subsequently, the assessee has filed revised return on 05.09.2014 admitting total income of Rs.7,84,900/- after claiming exemption u/s.54F of the Act, for Rs.13,57,906/-. The case was taken up for scrutiny and during the course of assessment proceedings, the AO noticed that the assessee has derived long term capital gain from sale of property and claimed exemption u/s.54F of the Income Tax Act, 1961 (hereinafter the ‘Act’) and hence, called upon the assessee to file necessary evidences. In response, the assessee submitted that he has sold a vacant housing plot on 19.12.2012 for a consideration of Rs.19,20,000/- and computed long term capital

Being aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee contended that even if sale consideration is not deposited in capital gain deposit scheme, as required under sub-section (4) of Section 54F of the Act, but if such consideration is used for purchase / construction of new asset on or before due date

The ld.AR for the assessee submitted that the ld.CIT(A) has erred in setting aside the appeal to the file of AO even though, he has agreed that the assessee has reinvested sale consideration before the extended due date of furnishing return of income u/s.139(4) & 139(5) of the Act. The ld.AR further submitted that there is no dispute with regard to the fact that the assessee has 3 years from the date of sale of old asset. In fact, the AO in Para 2.6 of his assessment order had categorically admitted that the assessee has completed construction within 3 years, but has rejected the claim only for the reason that consideration for transfer of original asset was not deposited in capital gain deposit scheme before filing return of income. Therefore, once the CIT(A) having accepted the fact that there is no requirement to deposit sale consideration in capital gain deposit scheme, when such consideration was used for purchase of new asset within extended due date u/s.139(4) or 139(5) of the Act, he has erred in directing the AO to once again verify whether the construction of house property was completed or not.

The ld.DR on the other hand strongly supporting order of the ld.CIT(A) submitted that there is no error in findings recorded by the CIT(A) because facts with regard to date of completion of new house was not forthcoming from the order of the AO and hence, there is no merit in the arguments of the assessee that the CIT(A) has erred in directing AO to verify the issue.

We have heard both the parties, perused materials available on record and gone through orders of the authorities below. It is a well settled principle of law that even if sale consideration was not Act, deduction can be claimed, if consideration is deposited in capital gain deposit account scheme as required u/s.54F(4) of the Act. However, deduction cannot be denied if such consideration is used for purchasing / constructing new house on or before extended due date of furnishing return of income u/s.139(4) or 139(5) of the Act. This legal principle is supported by the decision of the Hon’ble Punjab & Haryana High Court in the case of CIT vs. Jagriti Aggarwal, supra. It is also well settled principle of law that if assessee utilized full value of sale consideration received for transfer of old asset for purchasing another vacant land for construction of house property and furnished necessary evidences to prove that house property was constructed later on, deductions cannot be denied merely for the reason that construction of house property was not completed within 3 years from the date of transfer of original asset. This legal principle is supported by the decision of ITAT, Chennai in the case of Mrs. Seetha Subramaniam vs. ACIT, (1996) 59 ITD 0094. In light of above legal position, if we examine the facts of present case, it is an admitted fact that the assessee has reinvested entire sale consideration of Rs.19,20,000/- for purchase of land and constructed residential house property. It is also not in dispute that the assessee has completed construction of house property within 3

In the result, all the appeal filed by the assessee is allowed.