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Facts
The assessee sold two properties, realizing long-term capital gains, and claimed exemption under section 54 of the Income Tax Act for reinvestment in two separate house properties. Initially, the AO accepted one exemption fully and restricted the other, but later, through a rectification order under section 154, denied the second exemption citing an amendment to section 54, effective from 1.4.2015. The CIT(A) refused to condone the assessee's delay in appealing the rectification order and adjudicated the matter on merits.
Held
The Tribunal held that the assessee had 'sufficient cause' for the delay and the CIT(A) erred in dismissing the appeal without condoning the delay while still adjudicating on merits. The Tribunal directed the CIT(A) to condone the delay and re-adjudicate the issue on merits, specifically determining if the amended provisions of section 54 (effective 1.4.2015) are applicable to Assessment Year 2013-14.
Key Issues
Whether the assessee is eligible for Section 54 exemption for reinvestment in two separate house properties; Applicability of amended Section 54 provisions (effective 1.4.2015) to AY 2013-14; Condonation of delay in filing appeal before CIT(A).
Sections Cited
Section 54 of the Income-tax Act, 1961, Section 154 of the Income-tax Act, 1961
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “F”: NEW DELHI
Before: SHRI M. BALAGANESH & SHRI VIMAL KUMAR
O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in AY 2013-14, arises out of the order of the Commissioner of Income Tax (Appeals)-15, New Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] in Appeal No. 63/18-19 dated 08.07.2019 against the order of assessment passed u/s 154 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 16.08.2017 by the Assessing Officer, ITO, Ward-44(1), New Delhi (hereinafter referred to as ‘ld. AO’).
The only effective issue to be decided in this appeal is as to whether the assessee would be eligible for claiming exemption u/s 54 of the Act for reinvestment made in two separate house properties in respect of long term capital gain arising on sale of two separate properties, in the facts and circumstances of the instant case.
Raj Kumar Aasudhia 3. We have heard the rival submissions and perused the materials available on record. It is not in dispute that the assessee sold 2 properties for Rs 34,00,000/- and Rs 30,00,000/- and earned Long Term Capital Gains (LTCG) thereon of Rs 28,30,837/- and Rs 21,95,885/- respectively. It is not in dispute that the assessee had reinvested a sum of Rs 22,00,000/- on construction of self occupied property and claimed exemption u/s 54 of the Act in respect of LTCG of Rs 21,95,885/-. Similarly it is not in dispute that the assessee reinvested a sum of Rs 28,35,000/- in new house and claimed exemption u/s 54 of the Act in respect of LTCG of Rs 28,30,837/-. The ld AO in the original assessment accepted the claim of exemption u/s 54 of the Act for Rs 28,30,837/- for reinvestment in new house and restricted the exemption u/s 54 of the Act for the other property (i.e construction of self occupied property) to Rs 19,76,885/- and made addition of Rs 2,20,000/- thereon. This addition was made on adhoc basis by disallowing 10% of construction cost for want of bills and vouchers relating to construction. The assessee did not contest this addition and paid the demand as raised by the ld. AO. Later the ld. AO made suo moto rectification order u/s 154 of the Act stating that the exemption u/s 54 of the Act for a sum of Rs 21,96,885/- was wrongly granted by stating that the said exemption is available only for one house property as per the amended provisions of section 54 of the Act with effect from 1.4.2015. After this rectification order, the assessee made number of requests to the ld. AO to re-rectify the order passed u/s 154 of the Act. All the efforts of the assessee were invain. Hence thereafter the assessee preferred an appeal before the ld CIT(A) against the rectification order u/s 154 of the Act with a delay. The ld CIT(A) refused to condone the delay in filing of appeal before him. Having done so, the ld CIT(A) proceeded to adjudicate the issue on merits by
We find that the assessee was seeking alternative remedy before the ld. AO himself with a prayer to re-rectify the order passed by him u/s 154 of the Act . Hence in our considered opinion, the assessee was having ‘sufficient cause’ for the delay in filing of appeal before the ld. CIT(A). In any event, the ld. CIT(A) having dismissed the appeal by not condoning the delay, ought not to have adjudicated the issue on merits. We hereby direct the ld. CIT(A) to condone the delay and denovo adjudicate the issue in dispute on merits in accordance with law. The ld. CIT(A) is specifically directed to give a finding as to whether the amended provisions of section 54 of the Act with effect from 1.4.2015 could be made applicable for the year under consideration or not. With these directions, the grounds raised by the assessee are allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 15/10/2024.