KULDEEP SINGH SHEKHAWAT,KOTA vs. ITO W-2(1), KOTA, KOTA

Considering the past track record of the assessee before the lower authorities and the affidavits filed by the assessee and his new counsel, we deem it fit to condone the delay of 292 days in filing of appeal.

It is observed that during the year under consideration the assessee sold property situated at Village Deoli Arab Road, Tehsil Ladpura, and Kota for Rs. 3.08 Cr. Which was jointly owned by the assessee himself and some Mr. Naveen Kumar in 50:50, meaning thereby the share of the assessee in sale consideration was Rs. 1.54 Cr. Issue here for our consideration was allowability of deductions u/s. 54F and 54B of the Act, as the assessee filed return belatedly u/s. 139(4) of the Act. The property purchased by the assessee for the purposes of section 54F of the Act was purchased on 31.03.2017 and property for the purposes of section 54B of the Act on 25.08.2016, i.e. after the due date of filing the return and money was not deposited in the Capital Gain Account Scheme (CGAS).

It is also observed that assessee has failed to deposit the amount in Capital Gains Accounts Scheme (CGAS) and also failed to purchase House Property before the due date of filing of return as per section 139(1) of the Act i.e. 31-7-2012. Based on these observations, AO issued a show-cause that why Rs. 1, 19, 45,236/- should not be taxed under the head "Long Term Capital Gain (LTCG)".

Section 54 of the Income-tax Act, 1961 ("Act") provides for exemption of capital gains arising to a specified assessee from transfer of a long-term capital asset to the extent capital gains are invested in a residential house within a prescribed period. The said exemption is available if the residential house is purchased or constructed within the prescribed period of one year before or two years after (in case of purchase); or three years after (in case of construction) the date of transfer of the long-term capital asset.

It may be noted that the aforesaid provision mandates that the period of utilization or appropriation of the capital gains in purchase or construction of the new residential house is to be considered till the due date under section 139 [which also covers sub-section (4) and (5) of section 139]. However, for the purpose of taking the benefit of Capital Gains Account Scheme, the time limit for making such deposit has been prescribed to be till the due date under section 139(1) [see the text of section 54(2) as contained in the parenthesis].

In other words, the sub-section (2) clearly provides a pigeonhole in the sense that the investment by way of purchase or construction, without resorting to the Capital Gains Account Scheme, can be made till the date of belated return under section 139(4) or revised return under section 139(5) as the wordings used in section 54(2) is "section 139", and not section 139(1), which covers all sub-sections of section 139". The Supreme Court, in the context of interpretation of provisions of 276CC, in Prakash Nath Khanna v. CIT [2004] 135 Taxman 327/266 ITR 1 (SC) had observed that "…Had the Legislature intended to cover sub-section (4) also, use expression "section 139" alone would have sufficed." Therefore, in terms of the decision of the Supreme Court, since the legislature in section 54(2) used the words "section 139" only, the interpretation as discussed above seems plausible.

Section 54(2) is a subject matter of extensive litigation. Further, the view of various High Courts and Tribunals of the country in the following cases clearly outlines that the judicial consensus is that the exemption to be allowed regarding the amount invested in purchase or construction of the residential house under section 54 or 54F is to be considered till the date of filing return of income under section 139(4) of the Act. Reliance in this regard has been placed on the following decisions:

Fathima Bai v. ITO [2010] 32 DTR 243 (Kar.) 10. R.K.P. Elayarajan v. Dy. CIT [2012] 23 taxmann.com 206/52 SOT 159 (Chennai) (URO). 11. ITO v. Smt. Sapana Dimri [2012] 19 taxmann.com 15/50 SOT 96 (Delhi) 14. Interestingly, none of the decisions referred above rely upon a binding precedent of the Supreme Court which has settled this issue. The aforesaid interpretation has been approved by the Hon'ble Supreme Court in the case of Xavier J. Pulikkal v. Dy. CIT [2016] 73 taxmann.com 34/242 Taxman 59/[2015] 379 ITR 535 (Mag.) when the Hon'ble Apex Court, while allowing the civil appeal, modified (or so to say - reversed) the reasoning of the Kerala High Court in the underlying order reported in Dr. Xavier J. Pulikkal v. Dy. CIT [2015] 64 taxmann.com 457/[2016] 242 Taxman 206. The Kerala High Court held as under: "So far as the facts of the present case, we have already stated above, it is possible that facts of the other appeal considered by the Appellate Tribunal along with appeal of the revenue may be different. The scheme for depositing capital gain is contemplated under section 54F (4) and it depends upon when the property of the assessee is sold and when exactly the amounts were invested, whether it was invested in a residential house or otherwise. All these facts have to be considered with reference to provisions of section 54F (4) along with section 139 (1) of the Act, as the due time would be under section 139(1) only not under section 139(4) of the Act." 15. Tribunal, as a matter of fact, has accorded one more opportunity to the appellant assessee to place on record relevant facts for consideration and if his case were to be different from the facts of the other case and makes a vast difference altogether. So far as provisions of law are concerned, it is always open to him to place such facts before the Assessing Officer for consideration. However Assessing Officer, while applying the provisions of law, to the facts of a case without interdependent on facts of the other case has to consider the same. With these modifications, we dispose of the appeal directing the Assessing Officer to dispose of the matter in the light of the above observations. 16. It is to be noted that the Hon'ble Supreme Court, in Xavier J. Pulikkal (supra), while remanding the matter for de-novo consideration to the assessing officer has clearly modified the aforesaid observations of the Hon'ble Kerala High Court. The purported effect of the decision of the Hon'ble Supreme Court is that it has modified the "modifications" made by the Kerala High Court in the civil appeal after granting the SLP under Article 136 of the Constitution of India. Pertinently, the Supreme Court has allowed the appeal of the assessee and the effect of allowing an appeal by the Hon'ble Apex Court is to vacate a preceding order of the Kerala High Court containing a specific position taken by the Revenue. Also, the Supreme Court has to be understood to have differed in law with the Kerala High Court. The following verdict of the Hon'ble Supreme Court in the case of Kunhayammed v. State of Kerala [2000] 113 Taxman 470/245 ITR 360 supports the aforesaid proposition: "Once a special leave petition has been granted, the doors for the exercise of appellate jurisdiction of this Court have been let open. The order impugned before the Supreme Court becomes an order appealed against. Any order passed thereafter would be an appellate order and would attract the applicability of doctrine of merger. It would not make a difference whether the order is one of reversal or of modification or of dismissal affirming the order appealed against. It would also not make any difference if the order is a speaking or non- speaking one. Whenever this Court has felt inclined to apply its mind to the merits of the order put in issue before it though it may be inclined to affirm the same, it is customary with this Court to grant leave to appeal and thereafter dismiss the appeal itself (and not merely the petition for special leave) though at times the orders granting leave to appeal and dismissing the appeal are contained in the same order and at times the orders are quite brief. Nevertheless, the order shows the exercise of appellate jurisdiction and therein the merits of the order impugned having been subjected to judicial scrutiny of this Court."

It is also submitted that the order passed by the Hon'ble Supreme Court, albeit in brief, is the declaration of law in terms of Article 141 of the Constitution of India, the exemption needs to be allowed if the amount is invested on or before the due date of filing of return under section 139(4).

We have deliberated at length the issue under consideration i.e. the entitlement of the assessee's claim of exemption under section 54. In our considered view in the backdrop of the facts of the case considered in the light of judicial pronouncements relied upon by the Revenue and by the assessee, particularly the ratio laid down by the Hon'ble Supreme Court of India in the matter of Xavier J. Pulikkal (supra), It can be safely be concluded that the assessee in the case before us is entitled to claim exemption under section 54 to the extent she had invested towards the purchase of new residential property under consideration upto the date of filing of belated return under section 139(4) i.e. 31-3-2014. In the case before us assessee purchased new property well before the deadline given in section 139(4) i.e. 30-4-2013 for Rs. 1, 66, 74,200/-. Which we find is much in excess of LTCG of Rs. 1, 19, 45,236/-. We, therefore, in terms of our aforesaid observations set-aside the order of the CIT(A) and vacate the disallowance of the assessee's claim of exemption under section 54 of Rs. 1,19,45,236/- as was sustained by him.”

In view of the decision of the coordinate bench, Mumbai on similar facts, wherein all the applicable judicial pronouncements have been discussed (Both relied upon by the revenue and the assessee, i.e. in favour and against the assessee), we respectfully follow the same and relying on the decision of the Hon’ble Apex Court in the case of the Xavier J. Pulikkal (supra), without hesitation we set aside the orders of the authorities below and allowed the grounds taken by the assessee.

In the result, the appeal of the assessee is allowed.