THE DCIT,, RATLAM vs. SHRI ANIL JHALANI, RATLAM

PER BENCH

The appeal has been filed by the Revenue whereas the

assessee has filed the cross objection against the order of the

learned CIT(A), Ujjain, dated 30.1.2015 in First Appeal No. U-

156/2014-15 for the assessment year 2008-09.

“On the facts and in the circumstances of the case, the ld. CIT(A)

is erred in –

(a) Allowing deduction u/s 54F of the Act as the assessee has

not deposited the amount into the capital gain scheme

account before filing return of income and as such not fulfilled

the condition as provided 54F(4) of the Act.

(b) Allowing deduction u/s 54F as the assessee has already

own two houses as such the assessee is not eligible for

deduction as per proviso (a)(i) of section 54F(1) of the Act.”

derives income from civil contractorship, income from long term

capital gain and agricultural income. The return of income

DCIT vs. Anil Jhalani ITA No.246/Ind/2015 & CO36/Ind/2015 declaring total income at Rs.3,88,662/- has been filed b y the

assessee. The Assessing Officer made the addition of

Rs.75,55,894/- on account of long term capital gain, Rs.8,72,925/-

on account of short term capital gain and Rs.2,48,108/- on account

of interest and added the same to the total income of the assessee.

On appeal, the learned CIT(A) observed as under :-

“From the above it is clear that the transfer of the property

has been taken place within the meaning of section 2(47)(V)

on the taking over of possession by the transferee from the

transferer. The capital gain is chargeable in the year in

which the possession was handed over by the appellant

Shri Anil Jhalani to M/s Shubham Construction. The A.O.

has worked out the chargeable long term capital gain at

Rs.75,55,894/-. The appellant has not agitated in respect

of the quantum of the addition. As it is previously narrated

that the long term capital gain of Rs. 75,55,894/- is

chargeable in the A.YU. 2008-09 i.e. year under

consideration.

4.1.1 The appellant has made the claim of deduction u/s

54F ot the ILTE Act on the long term capital gain. The A.O. 3

DCIT vs. Anil Jhalani ITA No.246/Ind/2015 & CO36/Ind/2015 denied the claim of deduction u/s 54 on the ground that he

has not made claim in the original return of income filed or

return filed in response to notice u/s 148. The A.O. has not

cited any reason for denying the claim of deduction u/s

54F. In the present case the appellant has transferred the

capital asset pertaining to A.Y. 2008-09.The appellant as

per the sale agreement has received the consideration as

under :-

registered deed between the purchaser and seller along

with cheque no. and date. Therefore, it is clear that the

appellant has received the money as per above schedule in

the A.Y. 2010-11. The appellant has made the deposit in

DCIT vs. Anil Jhalani ITA No.246/Ind/2015 & CO36/Ind/2015 the capital gain account of Canara Bank in order to claim

the deduction u/s 54F of the IT Act. �. 12,50,000/- �दनांक 20.11.2009 �. 12,50,000/- �दनांक 20.11.2009 �. 12,50,000/- �दनांक 20.11.2009 �. 12,50,000/- �दनांक 20.11.2009 �. 50,00,000/- योग The appellant has further made the deposit of

Rs.17,00,000/- in the long term capital gain account

no.2467101013655 with Canara Banbk on 20.11.2009.

Therefore, in the balance sheet as on 31.03.2010 the

appellant has shown the capital gain deposit account at

Rs.17,09,917/- + Rs.50,16,541/- including interest. Since

appellant has made the investment in the capital gain

account immediately after receipt of the money as per sale

deed, the appellant is entitled for exemption u/s 54F. By

merely the appellant has not claimed the exemption u/s

54F he cannot be denied the benefit of exemption if he has

followed the procedure for claiming exemption undisclosed

income/s 54F. The appellant has not claimed the

exemption in the original refund because he has not offered

the capital gain during the year under consideration on the 5

DCIT vs. Anil Jhalani ITA No.246/Ind/2015 & CO36/Ind/2015 assumption that it is not taxable in the year under

consideration. The conclusion of the A.O. that it is taxable

during the year under consideration is correct but at the

same time he should have considered the exemption in

respect of 54F. The various judicial authorities dealt

regarding the chargeability of the long term capital gain

when sale consideration is not received :-

i. CIT vs. Smt. Najoo Dara Deboo (2013) Taxmann 743 it

has been held that capital gain is charged only on

receipt of sale consideration and not otherwise.

Person cannot pay capital gain if he has not received

any amount.

ii. IOTAT Hyderabad in case of Gulf Oil Corpration Ltd.

vs. ACIT reported on 39 CCH 023 held that same item

of income cannot be taxed in two different

assessment years.

iii. Mahesh Nemichand Ganeshwade & Others vs.

Income Tax Officer case reported on (2012) 147 TTJ

488, ITAT Puna – In this case the Hon'ble ITAT Puna

Bench held as under :- 6

DCIT vs. Anil Jhalani ITA No.246/Ind/2015 & CO36/Ind/2015 Capital gain – Exemption u/s 54EC – Assessee

claimed exemption under s. 54EC for having made

investment within 6 months from the date of receipt of

sale consideration – A.O. & CIT(A) allowed exemption

onlyniro Rs.25,00,000/- but denied in respect of

Rs.12,50,000/- and Rs.37,50,000/- made on

3.8.2007 and 27.10.2007 on the ground that the

investment in eligible bonds was not made by the

assessee within the stipulated period of 6 months

from the date of transfer of land – Held, CBDT in

consultation with the Ministry of Law decided that

period of six months for making investment in

specified asserts fort the purpose of ss.54EA, 54EB

and 54EC should be taken from the date when stock

in trade is sold or otherwise transferred in terms of s.

45(2) though the taxability of capital gain was on the

basis of transfer as understood in s. 45(2) – Having

regard to the impossibility of performance to invest

the amount in specified assets within six months from

the date of transfer i.e. the date of conversion of 7

DCIT vs. Anil Jhalani ITA No.246/Ind/2015 & CO36/Ind/2015 capital asset into stock in trade, the period of six

months for making investment in specified assets has

to be reckoned from the date of the sale of such stock

in trade when the right to collect sale consideration in

such cases arose. Appeal of the assessee on this

issue is allowed.

iv. The board issued the circular no. 791 dated

02.06.2000 wherein it has been held that appellant

can make the investment in the specified assets for

the purpose of section 54EA, 54EB and 54EC with in

six month from date of consideration received.

v. The Hon'ble Bombay High Court in the case of CIT vs.

Smt. Beena K. Jqain (1994) 75 Taxmann 145 held

that section 54F of the Income Tax Act, 1961 – Capital

gains Exemption – In case of investment in residential

house Assessee sold office premises on 23.7.1987

which resulted in long term capital gain

ofRs.24,05,050/- - Prior to this assessee had entered

into an agreement dated 4.9.1985 for purchase of a

residential flat for a total consideration of 8

DCIT vs. Anil Jhalani ITA No.246/Ind/2015 & CO36/Ind/2015 Rs.12,26,751 which agreement of sale was registered

on 27.10.1985 – Assessee paid consideration amount

on 29.7.1988 and was put in possession of sald flat

on 30.7.1988 – Assessee claimed benefit of exemption

under section 54F – Whether new residential house

was purchased by the assessee within two years

after the sale of the capital asset which resulted in

long term capital gains – Held, yes – Whether a

question of law arose from the Tribunal’s order

allowing exemption of Rs. 11,04,423/- under section

54F considering date of possession nof new

residential premises instead of date of sale agreement

and date of registration – Held, no.

4.1.2 Following the above decisions it is concluded that the

date of reckoning of the investment start from the

receipt of the consideration in the hands of the

appellant. In the present case the appellant has

utilised the sale consideration within a stipulated time

in scheme of Central Government made in that behalf.

Therefore, appellant is eligible for exemption u/s 54F 9

DCIT vs. Anil Jhalani ITA No.246/Ind/2015 & CO36/Ind/2015 of the IT Act. Therefore, the A.O. is directed to allow

exemption u/s 54F of the IT Act on the amount

deposited by the appellant in the capital gain account

amounting to Rs.67,00,000/-. Therefore, the appeal

on this ground is partly allowed.”

perused the relevant material placed on record of the Tribunal,

inter-alia, assessment order, impugned first appellate order and

other relevant documents. The learned Departmental

Representative (DR) supporting the action of the Assessing Officer,

contended that the assessee has not shown long term capital gain

amounting to Rs.75,55,894/- and short term capital gain of

Rs.8,72,925/- in the original return of income or in the return filed

in response to notice u/s 148 of the Income Tax Act, 1961 (in short

‘the Act’). The learned DR drew our attention towards paragraph 9

of the assessment order and submitted that on the basis of entire

documents placed on record of the Assessing Officer, it was clear

that the assessee, Shri Anil Jhalani, was the sole owner of the

property on the date of execution of the sale deed and accordingly

DCIT vs. Anil Jhalani ITA No.246/Ind/2015 & CO36/Ind/2015 the entire sale consideration was assessed in the hands of the

assessee. The learned DR vehemently contended that the Assessing

Officer clearly noticed that the assessee never made the claim of

deduction u/s 54F of the Act in the original return of income or in

the return of income filed in response to notice u/s 148 of the Act.

Accordingly, the Assessing Officer was quite correct in not allowing

the deduction u/s 54F of the Act. Lastly, the learned DR submitted

that since the learned CIT(A) has granted relief to the assessee

without any justification and basis, the impugned order may kindly

be set aside by restoring that of the Assessing Officer. Replying to the above, the learned counsel for the assessee 5.

supporting the order of the learned CIT(A) took us through the

operative part i.e. para 4.1 of the first appellate order and

submitted that the assessee has made deposit in the capital gain

account with Canara Bank in order to claim deduction u/s 54F on

20.11.2009 and the assessee received the entire consideration on

6.7.2009. The learned counsel for the assessee further submitted

that in view of the above, the assessee has made investment in

capital gains account immediately after the receipt of the money as

per sale deed and, therefore, the assessee is entitled to exemption 11

DCIT vs. Anil Jhalani ITA No.246/Ind/2015 & CO36/Ind/2015 u/s 54F of the Act. The learned counsel for the assessee contended

that merely because the assessee has not claimed exemption u/s

54F of the Act in the original return, he cannot be denied benefit of

exemption for which he is entitled u/s 54F of the Act. Explaining

the cause of non-claiming the deduction in the original return of

income, the learned counsel for the assessee submitted that the

assessee has not offered the capital gain during the year under

consideration on the assumption that it is not taxable in the year

under consideration under the bonafide belief. Therefore, the

assessee cannot be denied the benefit of exemption for which he is

entitled under the provisions of the Act, due to bonafide omission in

claiming the same in the original return of income. The learned

counsel for the assessee further drew our attention towards Board

Circular No. 791 dated 2.6.200 and submitted that the assessee

can make investment in the specified assets for the purpose of

claiming deduction within six months from the date of the

consideration received. Therefore, the assessee cannot be denied

exemption u/s 54F of the Act and, therefore, the conclusion drawn

by the learned CIT(A) is sustainable and thus the same may kindly

be upheld. 12

DCIT vs. Anil Jhalani ITA No.246/Ind/2015 & CO36/Ind/2015 6. On careful consideration of the above rival submissions, from

the relevant operative part of the assessment order i.e. paras 9 to

12, we observe that the main allegation of the Assessing Officer is

that the assessee neither claimed deduction in the original return of

income nor claimed the same in the return filed in response to

notice u/s 148 of the Act. However, the learned Assessing Officer

noted in the end of para 9 that the assessee, Shri Anil Jhalani, was

the sole owner of the property sold on the date of execution of the

sale deed and accordingly the entire sale consideration is assessed

in the hands of the assessee.

find that the learned CIT(A), after elaborately discussing the issue in

paras 4.1, 4.1.1 and 4.1.2 (supra) has granted relief to the assessee

with the direction to the Assessing Officer to allow exemption u/s

54F of the Act on the amount deposited by the appellant in the

capital gain account amounting to Rs.67,00,000/-.

the Assessing Officer himself has accepted the fact that on the date

of execution of sale deed, the assessee, Shri Anil Jhalani, was the

sole owner of the property. When we logically analyse the 13

DCIT vs. Anil Jhalani ITA No.246/Ind/2015 & CO36/Ind/2015 observations recorded by the learned CIT(A) then we observe that

for granting relief to the assessee, the learned CIT(A) has noted a

very relevant fact that the assessee has made investment of entire

sale consideration in the capital gains account immediately after

receiving the money as per the sale deed. Therefore, the assessee is

entitled to exemption u/s 54F of the Act. On the totality of the facts

and circumstances of the case, we are in agreement with the

conclusion drawn by the learned CIT(A) that merely because the

assessee has not claimed exemption u/s 54F of the Act in the

original return of income and subsequent return filed in response to

notice u/s 148 of the Act, the assessee cannot be denied the benefit

of exemption. We may also point out that when the assessee has

deposited the entire sale consideration in the capital gains account

within the prescribed time i.e. within six months after receipt of the

sale consideration as per sale deed then the assessee is entitled to

exemption u/s 54F of the Act.

perversity or any other valid reason to interfere with the impugned

first appellate order and, hence, we uphold the same.

DCIT vs. Anil Jhalani ITA No.246/Ind/2015 & CO36/Ind/2015 9. Before we part with the order, we may point out that the

revenue department in the second part of the ground raised before

the Tribunal has challenged the conclusion of the learned CIT(A) by

alleging that the learned CIT(A) was not correct in allowing the

deduction u/s 54F of the Act as the assessee already own two

houses and as such the assessee is not eligible for

deduction/exemption as per proviso (a)(i) of section 54F(1) of the

Act. From a careful reading of the assessment order we are unable

to see any such allegation against the assessee that he is not

entitled for deduction u/s 54F of the Act as he has already owned

more than one residential house other than the new asset on the

date of transfer of the original asset. This proviso applies to the

cases wherein the assessee claims deduction u/s 54F of the Act on

account of purchase of new residential house from the sale

consideration received which brings long term capital gain to the

assessee. Since in the present case as we have already concluded

that the assessee did not claim deduction u/s 54F of the Act on

account of purchase of new residential house and the claim of the

assessee u/s 54F of the Act has been based on the premise that the

assessee deposited sale consideration within the prescribed time 15

DCIT vs. Anil Jhalani ITA No.246/Ind/2015 & CO36/Ind/2015 limit in the capital gains account with Canara Bank, therefore,

second part of the ground raised by the revenue is irrelevant and,

hence, we dismiss the same.

assessee fairly submitted that the cross objection of the assessee

has been filed merely with an object to support the conclusion of

the learned CIT(A) in favour of the assessee. Since by the earlier

part of this order we have dismissed the appeal of the revenue,

therefore, the cross objection of the assessee becomes academic and

thus the same is dismissed as having become infructuous.

objection of the assessee are dismissed.

The order has been pronounced in open Court on March 30,

2017.

Sd/- sd/-

लेखा सद�य �या�यक सद�य (O.P.Meena) (C.M. Garg) Accountant Member Judicial Member

March 30th 2017. Dn/ 16

DCIT vs. Anil Jhalani ITA No.246/Ind/2015 & CO36/Ind/2015