ANUBHAV KAPOOR,LUCKNOW vs. INCOME TAX OFFICER - 2(1)(1), GHAZIABAD

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, ‘A’: NEW DELHI

BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER

ITA No.2364/DEL/2023 [Assessment Year: 2016-17]

Anubhav Kapoor, Income Tax Officer-2(1)(1) M-5, Gole Market, 2nd Floor, CGO Complex-1, Purani Hapur C/o-S N Kapur Mahanagar, Vs Chungi, Ghaziabad, Lucknow, Uttar Pradesh-201002 Uttar Pradesh-226006 PAN-BIVPK0383E Assessee Revenue

Assessee by Sh. Sanjay Kumar, CA, Sh. Akarsh Garg, Adv. and Sh. Subhash Singh, Adv. Revenue by Sh. Kanv Bali, Sr.DR

Date of Hearing 07.05.2024 Date of Pronouncement 29.05.2024

ORDER PER BRAJESH KUMAR SINGH, AM,

This appeal by the assessee is directed against the order of

National Faceless Appeal Centre (NFAC), Delhi, dated 23.06.2023

pertaining to Assessment Year 2016-17.

“1 the authorities below have erred in law and on facts, in taking fair market value of residential property situated at Triveni Nagar, Mohalla - Ahibarnapur, Sitapur Road, Lucknow at Rs.1,62,47,700/- as against actual sale consideration realised by the appellant, at Rs.1,50,00,000/-.

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50C(2) of the Act so as to ascertain fair market value of the property in question at the time of sale; (4) notice under section 143(2), even if issued on 27.09.2017, could not have been said to be put into 'computer recourse, before 30.09.2017, the outer limit for service of such notice, and accordingly the assessment order dated 28.09.2018 itself was bad in law; (5) the authorities below have erred in law and on facts in denying appellant's claim for exemption under section 54, on the ground that the consideration realized on sale of property in question, had not been invested in purchase of residential flat, within the time prescribed under section 139(1) of the Act; (6) the express term used under section 54(2) referred to investment made prior to filing of "return of income" under section 139, without any suffix thereto, so as to hold that even if the "return" had been filed belatedly, under section 139(4) of the Act, no such benefit could have been denied to the assessee/vendor, which is supported by large number of judicial pronouncements; (7) order appealed against is contrary to facts, law and principles of natural justice.” 3. Brief facts of the case: In this case, the assessment order for AY

2016-17 dated 28.09.2018 u/s 143(3) of the Act was passed determining

the Long Term Capital Gain (LTCG) at Rs.1,02,91,568/- as against

Rs.4,88,868/- offered by the assessee. The AO noted that this case was

selected for scrutiny through CASS under ‘limited scrutiny’ to examine

the following issue:-

(i) Large deduction claim u/s 54B, 54C, 54D, 54G, 54GA (schedule CG of ITR) 3.1. The AO noted that during the year under consideration, the

assessee sold a residential property at Triveninagar, Mohalla-Ahibranpur,

Sitapur Road, Lucknow for a sum of Rs.1,50,00,000/-(value as per

section 50C of Rs.1,62,47,700/-) to Dr. Mamta Gaur and Dr. Ajay Kumar

on 17.02.2016. The AO noted that this property was received by the

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assessee through Will executed on 19.03.2004 from his grandmother Smt.

Sarojni Devi Kapoor and the assessee had worked out the capital gains as

under:-

Sale consideration of the property Rs.1,50,00,000/- Less: Indexed cost of acquisition Rs. 43,56,132/- Long Term Capital Gain Rs.1,06,43,868/- Less: Deduction u/s 54 of the IT Act, Rs. 1,01,55,000/- 1961 Net Long Term Capital Gain Rs. 4,88,868/-

3.2. The AO noted that the assessee while calculating the LTCG had not

adopted the sale consideration of the property as per section 50C of the

Act. The AO further noted that the assessee had purchased new

residential property for Rs.95,00,000/- and had paid stamp duty of

Rs.6,55,000/- on 08.08.2016. The AO on examination on details of

payments made to the seller to acquire new residential house property

found that the assessee made the payment to the seller to claim

deduction u/s 54F of the Act as under:-

the extended due date for filing of return for AY 2016-17 was 05.08.2016.

On examination of the details of the investment made by the assessee to

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acquire the property, the AO found that the assessee had invested Rs.78,

05,000/- on 10.08.2016, Rs.95,000/- on 09.08.2016 and Rs.06,55,000/-

on 08.08.2016 and noted that these investments were made by the

assessee after the due date of filing of ITR in the case of the assessee. The

AO after analyzing the provision of section 54(2) of the Act held that

assessee should have deposited LTCG of Rs.85,55,000/-, which was not

utilized to acquire new property before the due date of filing of ITR i.e.

05.08.2016 in the capital gain account and then after making withdrawal

from it, the assessee should have invested to acquire new property, which

was not done by the assessee in this case. The AO relying upon the

provisions of section 54(2) held that the LTCG of Rs.85,55,000/- invested

to acquire new property after due date of filing of ITR without depositing

to the capital gain account was not eligible for deduction u/s 54(2) of the

Act and restricted the deduction at Rs.16,00,000/- as against

Rs.1,01,55,000/- claimed by the assessee.

3.4. In this regard, on both the issues, i.e. adoption of sale consideration

of the property not as per the provision of section 50C of the Act and

wrong claim deduction u/s 54(2) of the Act, a show cause notice dated

23.08.2018 issued by the AO.

3.5. In reply, the assessee submitted that property was sold at a lower

price due to continued violence and threat by adjacent land lord, who

wanted to acquire their property. Regarding the reasons for not depositing

the capital gain amount in the capital gains account, the assessee

submitted that he was not aware about the legal consequences of not

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depositing the capital gains within the due dates in capital gain account

and other compulsions. The reply of the assessee is reproduced as under

“Though the valuation as per section 50C was higher than the sale price, I had no other option than to sell the property at lower rates because of scarcity of time and means to find a buyer deal for the higher valuation of 1.62 crores. The main reason of selling the Lucknow property at 1.50 er was the continued violence and threats by the adjacent landlord (Classic Motors Owner, having property on both the sides of my house), me and my family were bothered every now and then and they even tried to cause physical harm to me. They wished to acquire our property also. As my mother was living there alone, it was very unsafe. We therefore decided to do away with the property ASAP and the among the best available deal, sold the property at 1.50 crores. Even after we left the premises, there was still violence and FIR lodged by the new occupants for physical assault done o them by those peoples." "Depositing the amount in Capital Gain amount could not he done due to 3 prime reasons: - a) I was not aware about the consequences of not depositing the Capital Gain amount within the due dates in Capital Gain Bank Account. b) We had to do the registry in early August however due to strike in Ghaziabad Court we were sent back and had no choice but to wait (in July last week and August first week also), and c) The seller (Mr. Gurpreet Singh Sohal) was residing in Canada and he was due to travel to India in the last week of July for registry, however he could not come and the Registry was done by his mother in law (on power of auorney). This was one more reason for the delays in registry. Hence, we were always in a perplexed situation for opening the CG account." 3.6. The AO did not agree with the assessee mainly because of not

furnishing any evidence to support his claim of violence by the adjacent

land lord and that ignorance of law was no defence and he rejected the

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other claims of the assessee in this regard. The AO discussed the matter

as under and recomputed the LTCG at Rs.1,02,91,568/- accordingly:

“The reply of the assessee is not acceptable as the assessee did not furnish any evidence i.e. copy of FIR lodged against the owners of M/s Classic Motors for doing violence and threatening to the assessee with the intention to acquire property forcefully. Besides, the assessee did not furnish any evidence for taking legal action against the owners of M/s Classic Motors for their misbehaviour. Thus, in view of the above, the assessee's contention for not adopting the sale consideration as per section SOC of the IT Act, 1961 for computation of LTCG is not acceptable. Besides, the assessee's contention that he was not aware of the provisions of section 54(2) of the IT Act, 1961 is not acceptable "as ignorance of law is no excuse". In addition to this, the assessee submitted that "due to strike in Ghaziabad Court we were sent back and had no choice but to wait (in July last week and August first week also)". This contention of the assessee is also not acceptable if there was strike in Ghaziabad Court then he should have deposited unutilized LTCG in the Capital Gain Account but he did not deposit the unutilized LTCG to the capital gain account, therefore the assessee did not comply with the provisions of section 54(2) of the IT Act, 1961. Further, the assessee submitted that "seller (Mr. Gurpreet Singh Sohal) was residing in Canada and he was due to travel to India in the last week of July for registry, however he could not come and the Registry was done by his mother in law (on power of attorney)". The provisions of section 54(2) of the IT Act, 1961 mandates that the investment must be before the due date of filing of ITR and unutilized LTCG must be deposited in the capital gain account be before the due date of filing of ITR as provided u/s 139(1) of the IT Act, 1961. The transfer of the property can be done after due date of filing ITR. Therefore, the contention of the assessee that the seller could not come and the registry was done in August-2016 is not acceptable. Therefore, in view of the above discussion and facts, the LTCG has been worked out as under:- Sale consideration of the Rs.1,62,47,700/- property (as per sec: 50C) Less: Indexed cost of Rs.43,56,132/- acquisition Long Term Capital Gain Rs.1,18,91,568/- Less: Deduction u/s 54 of Rs.16,00,000/-

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the IT Act, 1961 (invested before due date of filing of ITR) Net Long Term Capital Gain Rs.1,02,91,568/-

Thus in view of the above, the income of the assessee is recomputed as under:- 1 Salary income Rs.7,73,213/- 2 Income from other sources Rs.93,703/- 3 Less: Deduction under Chapter VIA Rs.1,41,645/- 4 Net Taxable income Rs.7,25,271/- 5 Long Term Capital Gain Rs.1,02,91,568/-

National Faceless Appeal Centre (in short NFAC). The NFAC, vide an order

dated 23.06.2023 agreeing with the findings of the AO, dismissed the

appeal of the assessee.

appeal before us.

between the stated sale consideration (Rs.1,50,00,000/-) vis-à-vis stamp

duty valuation (Rs.1,62,47,700/-) was less than 10% of the sale value

received and relying upon the judgment of the co-ordinate Bench in the

case of Amrapali Cinema vs ACIT, Circle-1, Meerut, reported in [2021] 127

taxmann.com 376 (Delhi-Trib.) submitted that amendment made in the

scheme of section 50C(1) by inserting third proviso by the Finance Act,

2020 enhancing tolerance band for variations between the stated sale

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consideration vis-à-vis stamp duty valuation from 5% to 10% are effective

from date on which section 50C, itself was introduced i.e. 01.04.2003 and

therefore, the adoption of Rs.1,62,47,700/- as sale consideration of

properties by the AO was not correct.

6.2. Further, as regards the non-deposit of the capital gains amount in

the capital gains account before the due date of the filing of the return,

the Ld. AR relied upon the decision of the Co-ordinate Bench in the case

of Smt. Manider Kartik vs DCIT in ITA No.5649/Del/2017, order dated

20.09.2023, wherein the Bench followed the decision of the CIT vs Venkat

Dilip Kumar (277 taxmann 463) where it was held that where the

assessee is in position to satisfy the requirements as envisaged in u/s

54(2) of 54(1) of the Act, the assessee could not be denied exemption u/s

54 of the Act for mere non-compliance of requirement u/s 54(2) of the

Act.

on record. In this case, the difference of Rs.12,47,700/- between the

stamp duty value and the sale consideration is less than 10% of

Rs.1,50,00,000/- i.e. the sale consideration received in this case.

Therefore, in view of the decision of the Co-ordinate Bench in the case of

Amrapali Cinema vs ACIT (supra), the action of the AO is not justified and

therefore, the AO is directed to adopt the sale consideration at

Rs.1,50,00,000/- as offered by the assessee in computing the capital

gains. Further, in this case, in view of the difficulties explained by the

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assessee, the capital gains amount of Rs.85,55,000/- could not be

deposited in the capital gains account before the due date of filing of

return on 05.08.2016. The Co-ordinate Bench in the case of Smt.

Maninder Kartik (supra) noted that in the case laws relied by the

assessee, it has been held that depositing the unutilized amount in a

special account is only a procedural matter, and non-compliance thereof

cannot result in negating the deduction claimed u/s 54 of the Act, if the

other requirements are complied with. As seen in the present case, the

assessee had complied with the other requirements of section 54 of the

Act. However, the assessee has deposited the amount of Rs.85,55,000/-

on or before 10.08.2016, which was five days later than the due date of

filing of the ITR on 05.08.2016 in the case of the assessee. In the case

relied by the ld. AR also, the ld. CIT(A) had allowed deduction for the

amount spent up to the date of filing of return of Rs.27,00,000/- only and

did not allow the rest of the payment, which was paid in the next week of

the due date of the filing of the return. However, the Co-ordinate Bench

allowed the full deduction including the amount, which was paid in the

next week after the due date of the filing of the return. In the present

case also, the assessee deposited the amount within five days of the due

date of file of the return. Therefore, the facts being similar in the case of

the assessee, the decision of the Co-ordinate Bench in the case of Smt.

Maninder Kartik (supra) will be squarely applicable. Respectfully

following the decision, it is held that the deposit/payment of stamp duty

of Rs.85,55,000/- is as per the provisions of section 54(2) of the Act and

the AO is directed to allow the full claim of deduction of Rs.1,01,55,000/-

as claimed by the assessee.

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8.1. Therefore, in view of the discussion, the AO is directed to accept the LTCG of Rs.4,88,868/- as offered by the assessee in his return of income and the addition of Rs.98,02,700/- under LTCG is hereby deleted.

Order pronounced in the open court on 29th May, 2024.

Sd/- Sd/- [KUL BHARAT] [BRAJESH KUMAR SINGH] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated 29.05.2024. ff^? ff^ ff^ ff^ Copy forwarded to: 1. Assessee 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi