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Facts
The assessee sold shares for ₹53.14 crore, realizing a long-term capital gain of ₹49.33 crore, and claimed a deduction of ₹48.26 crore under Section 54F for investment in land and construction of a residential house. The Assessing Officer disallowed this claim, citing insufficient documentation and doubts about the construction timeline. The CIT(A) allowed the deduction. Separately, the Assessing Officer added ₹26 lakhs to the assessee's income as an unexplained cash deposit, believing it originated from a car sale to an individual who denied the purchase, and this addition was confirmed by the CIT(A).
Held
The Tribunal upheld the CIT(A)'s decision to allow the Section 54F deduction, finding that the assessee had provided ample evidence of investment in the residential house within the statutory period, and the AO's objections regarding completion certificates or building plans were not legally mandated for the deduction. The professional expenses incurred for share transfer were also found allowable under Section 48(i). Regarding the ₹26 lakhs cash deposit, the Tribunal found overwhelming evidence proving the car sale to Raheja Continental and the deposit of proceeds, thereby deleting the addition made by the lower authorities.
Key Issues
1. Whether the assessee is entitled to deduction under Section 54F for investment in a residential house from the proceeds of long-term capital gain on shares. 2. Whether the addition of ₹26 lakhs as unexplained cash deposit in the bank account from a car sale was justified.
Sections Cited
143(3), 54F, 54, 45, 48(i), 131, Rule 46A
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Income Tax Appellate Tribunal, DELHI BENCH F : NEW DELHI
Before: SHRI MAHAVIR SINGH & SHRI KRINWANT SAHAY
Assessee by : Shri Ajay Wadhwa, Shri Saksham Garg and Ms. Ragini Handa, Advocates. Revenue by : Ms. Monika Singh, CIT-DR. Date of hearing : 17.09.2025 Date of pronouncement : 15.12.2025 ORDER PER MAHAVIR SINGH, VP These cross-appeals, by the Revenue and the assessee, are arising out of the order of learned Commissioner of Income-tax (Appeals)-34, New Delhi in Appeal No.9/14-15 dated 28th June, 2019. Assessment was framed by the DCIT, Circle-11(1) for the assessment year 2011-12 under Section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), vide his order dated 30th March, 2014.
The only issue in the appeal of the Revenue in is as regards to the order of learned CIT(A) allowing deduction under Section 54F of the Act on the given facts and circumstances of the case. For this, the Revenue has raised various grounds which are argumentative and exhaustive and hence, will be covered in the decision.
Brief facts are that the Assessing Officer completed assessment under Section 143(3) of the Act and disallowed the claim of deduction under Section 54F of the Act at ₹48,26,66,960/-. The facts relating to capital gain are that the assessee sold shares of M/s FCM Travel Solutions Pvt.Ltd. to M/s Flight Centre Mauritius for a total consideration of ₹53,14,40,275/-. The assessee worked out the long term capital gain at ₹49,33,50,775/-. The assessee claimed deduction under Section 54 of the Act for an amount of ₹8,46,76,000/- against purchase of land and Rs.39,79,90,960/- against the building construction. The Assessing Officer asked the assessee to furnish the documentary evidence regarding the payment against the investment in land and building, completion certificate of building and no objection certificate from the civil authorities. The assessee only filed the valuation report prepared by M/s S.K. Miglani and Co., the valuer which was not accepted by the Assessing Officer regarding the completion of building during the relevant period relevant to assessment year 2011- 12. Accordingly, the Assessing Officer disallowed the deduction amounting to ₹48,26,66,960/- and added the same to the returned income of the assessee. Aggrieved, assessee preferred appeal before the learned CIT(A).
Learned CIT(A), after considering the submissions and admitting additional evidences allowed the claim of the assessee by observing in Paragraph Nos.6.3 to 6.6 of his order, as under:-
“6.3 I have considered the facts of the case, findings of the AO and submissions of the appellant. The appellant has claimed the deduction under Section 54F at Rs.48,26,66,960/- on account of purchase and construction of new residential house. Out of this amount Rs.8,45,76,000/- was towards the purchase value of the land whereas Rs.39,79,90,960/- was the cost of construction of the said land. The said long term capital gain arose out of the sale consideration of Rs.53,14,40,275/- received by the appellant on sale of shares of M/s FCM Travel Solution India Pvt. Ltd. by the appellant to M/s Fight Centre Mauritius in terms of settlement agreement dated 15.01.2010. The AO has denied the claim of exemption as appellant has not furnished the copy of purchase deed and documentary evidences of expenses incurred on construction of property, copy of completion certificate of building and fitness certificate from civil authorities were not filed. Further date of purchase of land shown as 15.09.2010 and the documents do not make it clear whether the property was constructed within the time span of six months and was ready to be occupied as dwelling unit. During the course of appellate proceedings, appellant has filed the copy of purchase deed, gazette notification relating to completion certificate and documents relating to seizure by landlord of rented premises, copy of possession letter obtained from the owners of the plots, break up of evidences / bills invoices alongwith name and nature of the expenses incurred and copies of the bills / Invoices raised by the contractors as additional evidence in support of purchase of land and construction of new residential house thereon. Remand report is called for from the AO as appellant has furnished additional evidences, which was submitted by the AO on 10.06.2019. The AO has raised the objection on admitting additional evidences as sufficient opportunity is provided by the appellant. In the remand report, AO has stated that in the computation of Income Appellant has claimed deduction under Section 54 and reduced the claim of investment made in land and building amounting to Rs.48,26,66,960/- from the LTCG not from the sale proceeds. The long term capital gain had accrued to the appellant on account of sale of shares hence the appellant is not entitled to claim deduction under Section 54. Further appellant is not entitled to claim deduction, as he failed to furnish documentary evidences like completion certificate from authority, copy of electricity bill etc. to substantiate his claim that construction was completed within three years of the sale of shares on 26.04.2010. The AO has also stated that appellant failed to produce original bills for verification and out of total claim of expenditure of Rs.39,79,94,048/- on the construction the appellant has claimed making payment of Rs.20,35,50,000/- i.e. more than 50% to a labour contractor. The appellant has not filed the bills nor the details of labour contractor even in the additional evidences. Thus AO has calculated the deduction at Rs.44,80,73,151/- under Section 54F considering the above facts. The AO has also raised objection on payment made to Luthra and Luthra at Rs.1,75,32,143/- as expenditure incurred on transfer of shares as the payments were made for settlement process not for transfer of shares.6.4 The appellant has filed rejoinder on the remand report and submitted that additional evidences are furnished during the appellate proceedings as per Rule 46A as appellant was unable to produce the same before the AO due to premises was locked by the landlord due to non payment of rent for a long time. The appellant fulfills the conditions as stipulated under Section 54F as appellant is an individual and capital gain claimed for exemption has arisen from transfer of long term capital asset and appellant has within a period of three years after the transfer of capital assets constructed a residential house. The appellant has submitted that completion certificate was not submitted as it is not called for by the AO and as per the gazette notifications appellant is residing in a farm house and for claiming deduction under Section 54F completion certificate is not required. It is submitted by the appellant that he is residing in the said residential house and all the notices have been sent to the same address to the appellant. The exemption could not be denied on the ground that completion certificate of building and fitness certificate from civil authority etc. have not been furnished. The appellant has filed the copy of electricity bill dated 06.04.2011, copy of letter dated 01.03.2012 filed with the office of Jt. Assesser and collector, Circle 4, Farm House, Civic Centre, New Delhi for house tax assessment alongwith affidavit at the time relating to imposition of house tax in support of completion of the construction and occupation of the house by the appellant. The appellant has submitted that it has made all the compliance before the AO alongwith original bills but AO has not recorded the compliance on the order sheet. In respect of labour payment appellant has submitted that labour cost included the cost of bricks also as appellant has made the payment for bricks at Rs.40 lacs only i.e. 1% of the total construction cost and balance payment for the bricks was made by the labour contractor for which payments were made by cheque. The appellant has also submitted that payment to Luthra and Luthra at Rs.1,75,32,143/- was made to resolve the dispute to sale the shares of an Indian company. The services of Luthra and Luthra were obtained from the sale of shares. The appellant has enclosed the copies of the bills in support of its contentions.6.5 The appellant has furnished the copy of purchase deed and it is observed that appellant has purchased the property by agreement to sale executed on 15.09.2010. The appellant has also filed the possession letter on paper book page no.239 according to that appellant has taken over the possession of the vacant plot on 2nd April, 2010. The appellant has furnished the complete detail of the expenses alongwith bills and vouchers and it is observed that payments were made through banking channel by cheque. The last payment was made for the construction of building on 03.03.2011. The objection of the AO that building could not be constructed within the period of six months without any basis as AO has not carried out any enquiry to verify the construction of the building and occupation of the new residential house by the appellant. The appellant residing in the said residential house i.e. B- 31, Ansal Vilas Satbari, Chhatarpur, New Delhi. The appellant has brought on record that throughout the assessment proceedings, all notices have been sent to the said address of the appellant only. The appellant has furnished the electricity bill, copy of bank account and copy of notices issued by the AO at the address of new residential house to prove that he has occupied the house after the completion of the construction within the stipulated time. The appellant has filed the valuation report prepared by govt. approved valuer M/s S.K. Miglani and Co. which was not accepted by the AO. For claiming deduction under Section 54F the appellant has to made investment in the construction of the residential house within a period of three years after the transfer of capital assets. The relevant provisions of Section 54F is reproduced as under:-
54F. (1) [Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or [two years] after the date on which the transfer took place purchased, or has within a period of three years after that date [constructed, one residential house in India] (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,- (a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under Section 45; (b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under Section 45: [Provided that nothing contained in this sub-section shall apply where- (a) the assessee,- (i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or (ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or (iii) 29 constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and (b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head "Income from house property".] 6.6 As per the provisions of Section 54F, deduction is allowable if investments is made in a residential house before one year from the transfer long term capital asset or two years from the transfer of long term capital asset or two years from the transfer of asset or construct a house within three years from the transfer of the asset. If the cost of new asset is not less than the net consideration in respect of original asset the whole of such capital gain shall not be charged under Section 45. The appellant has sold the shares on 15.01.2010 and made investment in the purchase of the land and construction of the residential house within the period of three years and last payment towards construction of the building was made on 03.03.2011. The only requirement under the provision is that the proceeds of capital gain must be invested by the appellant in the construction of a residential house. Completion certificate and fitness certificate by the civil authorities is not mandated under law. The appellant has constructed farm house and there was no prohibition regarding the construction of residential house on agricultural land. The appellant has given the address of the property in his bank account, return filed with the department and electricity bill etc. to substantiate his claim that he is residing in that house. There is no condition under Section 54F that the building plan of the residential house constructed should be approved by the Municipal Corporation or any other competent authority. The appellant has fulfilled the essential condition of the construction of residential house which was not disputed by the AO. The appellant has brought the necessary evidences on record by furnishing documents relating to purchase of plot and documents relating to construction expenses i.e. detail of construction expenses alongwith bills and vouchers which proves that he has taken the possession of the vacant plot and started construction from April 2010 and completed the construction of the house by March 2011. The similar issues were considered by the Hon'ble ITAT, Jaipur in the case of ITO Vs Saroj Devi Aggarwal and allowed the appeal of the assessee after considering the various issues in detail. In the case appellant has brought sufficient evidences on record that it has utilized the consideration on the sale of long term assets for the purchase of land and construction of the residential house within the stipulated time. The AO has filed the revised working of the computation in remand report under Section 54F without bringing the facts on record that on what basis he has computed the deduction under Section 54F, thus revised working of the AO is not acceptable. Further appellant has also brought on record the evidences that legal and professional expenses on the payment of Luthra and Luthra was incurred for the purpose of transfer of shares which is allowable, as the expenses were incurred wholly and exclusively in connection of the transfer of shares. Thus addition made by the disallowing the claim of the appellant under Section 54F at Rs.48,26,66,960/- is not sustainable and it is hereby deleted."
Aggrieved, now Revenue is in appeal before the Tribunal.
We have heard the rival submissions and perused the material placed before us. We noted that the assessee, an individual, sold his shares of FCM Travel Solutions (India) Ltd. to Flight Centre (Mauritius) Ltd. and invested the proceeds in constructing a residential house by claiming deduction under Section 54F of the Act. The assessee sold his shares in FCM Travel Solutions (India) Ltd. for a sum of ₹53,14,40,275/- on 27th April, 2010, which is supported by settlement agreement dated 15th January, 2010 which is enclosed at pages 29 to 47 of the paper book. The assessee invested the sale proceeds of shares in land and construction of property at D-31, Ansal Villas, Satbari, Chattarpur, New Delhi by investing a sum of ₹8,46,76,000/- towards purchase of land and a sum of ₹39,79,90,960/- towards construction of the house. The assessee, to support this claim, submitted bank statement vide reply dated 10th January, 2014 and also submitted ledger accounts of land and building vide reply dated 25th February, 2014 before the Assessing Officer. The assessee made this claim under Section 54F of the Act which was denied by the Assessing Officer for the reason that the assessee failed to file copy of purchase deed and documentary evidences of the expenses incurred on the construction of the property and completion certificate by the competent authority. The Assessing Officer also denied on the ground that the purchase deed of the land is dated 15th September, 2010, but the document did not confirm whether the property was constructed within six months and was ready to be occupied as a dwelling unit. The assessee proved the claim by filing bank statements showing details of payment to contractors, ledger accounts of land and building in the books of account of the assessee and the valuation report dated 28th December, 2012 which proves the construction of property for a sum of ₹40,00,00,000/-. Now, the assessee before us contended that the purchase deed was unavailable during assessment due to office premises being locked by the landlord, which was explained to the Assessing Officer vide letter dated 25th February, 2014. Upon settlement with the landlord, the deed was retrieved and submitted before the learned CIT(A) with an application under Rule 46A, which was accepted by him. The relevant deed is enclosed at pages 154 to 171 of the assessee's paper book. The assessee also submitted completion certificate before the learned CIT(A) and it is a fact that the assessee resided at property D-31, Ansal Villas, Satbari, Chattarpur, New Delhi as evidenced by the delivery of income tax notices and impugned assessment order on this address. We noted that the Assessing Officer was under suspicion whether the timeline for construction is missed by the assessee, for this, we noted the fact that prior to the execution of the purchase deed, the assessee had already obtained possession of the land through possession letter dated 2nd April, 2010 and construction activities commenced from that date. The possession letter was duly submitted before the learned CIT(A) as an additional evidence. The factum of completion of construction of property was proved by filing electricity bill dated 6th April, 2011 and bank statement for the period 1st April, 2010 to 25th May, 2011, which are enclosed in assessee's paper book. It is a fact that the assessee has claimed the deduction under Section 54F of the Act and not under Section 54 as raised in the grounds by the Revenue. We noted that as per Schedule CG (Capital Gains) of the Income Tax Return form filed by the assessee clearly indicates that the deduction was claimed under Section 54F and, even otherwise, assessee is able to prove that the claim is bona-fide and assessee satisfies all the conditions prescribed under Section 54F of the Act. We noted that documentary evidences prove that the house was completed by 31st March, 2011 as the assessee made all payments to builders, contractors and material suppliers as evidenced by bank statement up to 31st March, 2011. We also noted from the details submitted by the assessee i.e., break-up of bills, invoices and supporting documents including the names of contractors and material suppliers to substantiate the claim of construction and the same was completed within that assessment year. In view of the above, we are of the view that the assessee is able to prove the entire investment and the building was completed within the stipulated period as per Section 54F of the Act. As regards the issue of learned CIT(A) allowing the claim of deduction under Section 54F of the Act on the payment of ₹1,75,32,143/- made to Luthra and Luthra as expenditure incurred on transfer of shares, which was made pursuant to settlement process and not transfer of shares, we noted that the supporting documents clearly prove that the addition was made by the Assessing Officer solely on the basis that the assessee could not provide copies of bills. We noted that the assessee, before the Assessing Officer, provided copies of bills from Luthra and Luthra as documentary evidence to substantiate that the expenses were wholly and exclusively incurred for the transfer of shares and this is allowable expense under Section 48(i) of the Act being expenses incurred wholly and exclusively in connection with the transfer of capital asset deductible while computing capital gains. In terms of the above, we find no infirmity in the order of learned CIT(A) allowing the deduction under Section 54F of the Act and, we confirm the same. This issue of Revenue's appeal is dismissed.
The only issue in the appeal of the assessee in CIT(A) confirming the action of the Assessing Officer in making addition of ₹26 lakhs being cash deposited in bank account as unexplained. For this, assessee has raised various grounds, which are argumentative and exhaustive and hence, need not be reproduced.
We have heard the rival submissions and perused the material placed before us. We noted that the Assessing Officer, during the course of assessment proceedings, on perusal of details filed by the assessee, noticed that the assessee has deposited a sum of ₹26 lakhs in his savings bank account maintained with Barclays Bank. The Assessing Officer required the assessee to explain the source of cash deposit, for which, assessee filed reply dated 25th February, 2014 stating that he has sold his car Audi Q7 to Shri Sumit Jolly, from whom he has received cash of ₹26 lakhs which was deposited in his savings bank account. Shri Sumit Jolly attended the office of the Assessing Officer in response to summons under Section 131 of the Act, and he stated that he has not purchased any car from the assessee but, the Assessing Officer treated the entire cash deposited as unexplained and added to the returned income of the assessee.
Aggrieved, assessee is in appeal before the Tribunal. We noted from the submissions of the assessee as well as the case material on record that the assessee has filed following documents evidencing the sale of car, inter-alia, being:-
(a) Delivery Note dated 20.10.2010 duly signed by the buyer.
(b) Form 29 and Form 30 along with the proof of address of the said buyer.
(c) Transfer Registration Certificate issued by the Transport Department, MLO, Govt. of Delhi, Sheikh Sarai, New Delhi clearly evidencing that the title in the said car has been transferred.
Learned Counsel for the assessee submitted before us the delivery receipt dated 20th October, 2010, address proof of Raheja Continental in the shape of MTNL bill dated 8th June, 2011 and Form 29 and 30 i.e., notice of transfer and application for transfer of ownership dated 20th March, 2014. The assessee also submitted copy of car registration in the name of Raheja Continental, which is enclosed in assessee's paper book page 147. It was contended that assessee sold his Audi Q7 car to Raheja Continental for a sum of ₹26 lakhs and deposited the sale proceeds in cash in his savings bank account. Learned Counsel explained that the Assessing Officer as well as learned CIT(A) both were confused by the name Shri Sumit Jolly, who facilitated the sale as an agent and arranged the buyer but, he was neither the purchaser nor involved in the payment. Learned Counsel for the assessee further argued that Shri Sumit Jolly, being an agent, was only involved in engaging a buyer and actual buyer was Raheja Continental who purchased this car and made payment in cash of ₹26 lakhs. From these very documents and evidences, it is clear that the car was actually registered in the name of Raheja Continental, which was transferred vide Form No.29 and 30 i.e., notice of transfer and application for transfer of ownership dated 20th March, 2014. In view of the overwhelming evidences, we are of the view that the assessee has sold this car i.e., Audi Q7 to Raheja Continental for a sum of ₹26 lakhs and deposited cash on 23rd October, 2010 in his bank account with Barclays Bank. The assessee has also enclosed delivery receipt dated 27th October, 2010, by virtue of which, he has sold this car and received cash. We find that both the lower authorities i.e., the Assessing Officer and learned CIT(A) have erred in considering these evidences and in making addition. Hence, we delete the addition and allow this issue of assessee's appeal.
In the result, the appeal of the Revenue is dismissed and the appeal of the assessee is allowed. Decision pronounced in the open Court on 15th December, 2025.