CHANDER KANTA MAHESHWARI L/H OF LATE SHRI ASHOK KUMAR MAHESHWARI ,DELHI vs. ITO, WARD- 35(2), NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH “B”: NEW DELHI ] BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER A N D SHRI N. K. CHOUDHRY, JUDICIAL MEMBER (Through Video Conferencing) ITA. No. 448/Del/2018 (Assessment Year: 2013-14) Smt. Chander Kanta Income Tax Officer, Maheshwari, Legal Heir of Late Vs. Shri Ashok Kumar Maheshwari, Ward : 35 (2), 35/11, Shakti Nagar, Delhi –110 007. New Delhi. PAN: AAGPM0302F (Appellant) (Respondent)

Assessee by : N o n e; Department by: Ms. Sangeeta Yadav, Sr.D.R. Date of Hearing : 20/12/2021 Date of pronouncement : 19/01/2022 O R D E R PER N. K. CHOUDHRY, J. M.

address”,therefore we are constrained to decide this appeal as ex- parte.

3.1 Though the Assessee has claimed before the Assessing Officer that as per Hon’ble Delhi High Court judgment in the case of CIT Vs. R. L. Sood 245 ITR 727 (Del.), the benefit under Section 54 (1) shall be available where substantial amount has been made for purchase of new house and as per judgment of the Hon’ble Calcutta High Court in the case of CIT Vs. Smt. Bharti C. Kothari 244 ITR 352 (Cal.) deduction under Section 54 shall be available where payment for new flat has been made within period of three years from the date of sale of flat, howeverthe claim of the Assessee was denied by the Assessing Officer on the groundsthat the Assessee has filed his return of income on 29th March, 2014 i.e. after due date of filing of return of income and has claimed deduction under Section 54 of the Act to the extent of Rs.69,36,789/-, however, the Assessee neither deposited the amount of capital gain nor utilized the same before the due date of filing the return under Section 139(1) of the Act to the capital gain scheme account and it is clearly specified in Section 54 that if the investment is not made till the due date of filing the return of income then the amount of capital gain has to be deposited in the capital gain scheme account.

Further the AO also observed that the claim filed by the 3.2 Assesseeunder Section 54 of the Act does not stand substantiated with credible evidence and as per enquiry made by the office shows that truly speaking no investment towards purchase of flat was actually made by the Assessee.

3.3 Finally the Assessing Officer computed the long term capital gain at Rs.71,78,207/- instead of Rs.69,36,789/- as claimed by the Assessee and disallowed the same and added in the income of the Assessee.

4.1 Before the ld. Commissioner it was claimed by the Assessee that amount of Rs.72,15,255/- has been invested towards the purchase of flat at SunworldVanalika, up to the date of filing of the Income Tax Return on dated 29th March, 2014 i.e. as belated return filed under Section 139(4) of the Act and, therefore, the Assessee is entitled to get benefit of Section 54 of the Act. The Assessee also submitted various case laws in support of its case.

4.2 The ld. Commissioner partly accepted the claim of the Assessee to the extent of Rs.57,33,088/- invested up to 31st January, 2013 by observing that the Assessee shall be entitled to deduction under Section 54(1) of the Act for an amount invested till the due date of filing the return under Section 139(1) of the Act.

For ready reference, the concluding part of the impugned order is reproduced hereunder:-

“4.3.8 I have given due consideration to the facts of the case, submission of the Appellant and have also understood the provisions of law. The moot question to be decided in this case is whether the claim of exemption u/s Page | 3

54 by the Assessee was as per the provisions of law or not. The Assessee sold the original asset on 10.12.2012 for a consideration of Rs. 1,00,00,000/-. The Assessee could claim the exemption u/s 54 if he had 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, a residential house. The Assessee has given the details of investment in the flat at Vanalika in the paper book, page no. 2. Admittedly, the Assessee has filed return belatedly i.e. beyond the time stipulated u/s 139(1) of the I.T. Act, 1961. Up to 31.01.2013, the Assessee has made the payment of Rs.57,33,088/-. Next date of payment is 23.01.2014 which is beyond the due date of filing of return. The Assessee has not deposited the balance amount of capital gain in Capital Gain Account. Therefore, whatever investment has been made before the due date of filing of the return, that amount only can be considered for deduction u/s 54. Hence, the amount which will qualify for considering the deduction is Rs.57,33,088/- including the payment made to M/s PGSD / Lalit Kumar. The observation of the Assessing Officer that the payments were not made to builder are not relevant because the builder has ultimately acknowledged the payment towards the sale of flat. The Assessing Officer has failed to prove his allegation that the Assessee used colorable device to claim the exemption and the transactions are sham. Therefore, those observations are dismissed. Another important question in this case is whether the Assessee would be entitled to the deduction even if the construction has not been completed within Two years from the date of the sale of die original asset and the possession has not been handed over to the Assessee. In the case of CIT vs. Kuldeep Singh (2014), 49 taxmann.com 167 (Delhi) the Hon’ble Court held that the Assessee was entitled to claim exemption u/s 54 in respect of amount invested for purchase of property under flat buyers agreement, even when legal title in properly was not passed or transferred to Assessee within a period of Two years from the date of sale A the first property. In the case of CIT vs. Smt. SunitaAggarwal (2006), 284 ITR 20, Hon’ble Delhi High Court held that exemption u/s 54 can be claimed even if the residential units of a house are purchased from different persons. Hon’ble ITAT, Bangalore held that for claiming exemption u/s 54, possession or ownership has nothing to do with the case as long as the sum of capital gains stands transferred to the seller for the. purchase of a new flat. As, this fulfills the condition of section 54 (Shakuntala Devi vs. DDIT (2009) - TIOL - 221 - ITAT - Bang).The Hon’ble Delhi High Court applied

the same analogy where the Assessee made substantial payment within the prescribed time and thus acquired substantial domain over the property, although the builder failed to handover the possession within the stipulated period [CIT vs. R.L. Sood (2000), 245 ITR 727 (Del)]. The Karnataka High Court held that when Assessee invests sale consideration in purchase of a residential property within prescribed time period, he is entitled to claim deduction and, in such a case, extent of construction of residential building and facilities provided in such building are not relevant [CIT Vs. Dr. R. Balaji (2014) 41 taxmann.com 411 (Kar)].

4.3.9 In view of the above facts of the case and the decisions of the Courts, I am of the considered view that the Assessee shall be entitled to deductionu/s 54(1) for an amount invested till the due date of filing ofreturn u/s139(1) of the I.T. Act, 1961. As already stated the Assessee has investedRs.57,33,088/- in the purchase of the residential property before the due dateof filing of return. As far as, the sum of refund amounting to Rs.39,786/- isconcerned, it is stated that the same was part of the cost. Therefore, thisamount has to be first deducted from the cost of acquisition, only then the indexed cost of acquisition is to be worked out on the balance amount ofcost of acquisition. The Assessing Officer has also done the same exercise,therefore, that does not call for any interference. The Assessing Officer hascomputed Long Term Capital Gain at Rs.71,78,207/-. The Assessee hasinvested Rs.57,33,088/- only till the due date of filing of return u/s 139(1) of I. T. Act. In view of the discussion made above, the Assessee is not entitled for deduction on the amount of Rs.14,45,119/- (Rs.71,78,207/- minus Rs.57,33,088/-). “

The Assessee being aggrieved has preferred the instant 5. appeal raising the following grounds of appeal:-

“1. That CIT(Appeals) has erred in law and facts of the case in allowing part/short deduction u/s 54 on capital gain.

8.1 Hon’ble Punjab & Haryana High Court in the case of CIT Vs. JagritiAggarwal (2011) 339 ITR 610 (P&H) dealt with an identical issue and while relying upon Hon’ble Gauhati High Court judgment in the case of CIT Vs. Rajesh Kumar Jalan (2006) 286 ITR 274 held and justified the utilization of the capital gain for purchase of property before the extended due date under Section 139(4) of the Act.

Hon’ble Punjab & Haryana High Court again in the case of 8.2 CIT Vs. Jagtar Singh Chawla{ITA No. 71 of 2012 (O&M) date of

Decision: 20.3.2013} while relying upon the judgments passed by the same high court in CIT Vs. Jagtar Singh Chawla and Hon’ble Gauhati High Court in the case of CIT Vs. Rajesh Kumar Jalan (2006) 286 ITR 274, dealt with the same issue and held as under:-

A Division Bench of the Gauhati High Court in a case reported as Commissioner of Income Tax v. Rajesh Kumar Jalan (2006) 286 ITR 274, held that only Section 139 of the Act is mentioned in Section 54(2) of the Act in the context that the unutilized portion of the capital gain on the sale of property used for residence should be deposited before the date of furnishing the return of the Income Tax under Section 139 of the Act and that it would include extended period to file return in terms of Sub Section 4 of Section 139 of the Act. It was held as under:- “From a plain reading of sub-section (2) of Section 54 of the Income-tax Act, 1961, it is clear that only section 139 of the Income-tax Act, 1961, is mentioned in section 54(2) in the context that the unutilized portion of the capital gain on the sale of property used for residence should be deposited before the date of furnishing the return of the Income-tax under section 139 of the Income-tax Act. Section 139 of the Incometax Act, 1961, cannot be meant only section 139(1), but it means all sub- sections of section 139 of the Income-tax Act, 1961. Under sub-section (4) of section 139 of the Income- tax Act any person who has not furnished a return within the time allowed to him under sub-section (1) of Section 142 furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment year whichever is earlier.”

The said judgment was relied upon by a Division Bench of the Karnataka High Court in FathimaBai v. ITO, ITA No.435 of 2004 Decided on 17th October 2008, wherein it was held to the following effect:-

“11. The extended due date under section 139(4) would be 31.3.1990. The assessee did not file the return within the extended due date, but filed the return on 27.2.2000. However, the assessee had utilized the entire capital gains by purchase of a house property within the stipulated period of section 54(2) i.e., before the extended due date for return under section 139 theassessee technically may have defaulted in not filing the return under section 139(4). But, however, utilized the capital gains for purchase of property before the extended due date under section 139(4). The contention of the revenue that the deposit in the scheme should have been made before the initial due date and not the extended due date is an untenable contention.”

A Division Bench of this Court in which one of us (Hemant Gupta, J.) was a member, had an occasion to consider the provisions of Section 54(2) of the Act, wherein it has been held that subsection(4) of Section 139 of the Act is in fact a proviso to Section 139(1) of the Act. Therefore, since the Assessee has invested the sale proceeds in a residential house within the extended period of limitation, the capital gain is not payable. The judgments in Rajesh Kumar Jalan’s case and FathimaBai’s case (supra) were referred to. It has been held as under:-

“Having heard learned counsel for the parties, we are of the opinion that sub-section (4) of Section 139 of the Act is, in act, a proviso to sub-section (1) of Section 139 of the Act. Section 139 of the Act fixes the different dates for filing the returns for different assesses. In the case of assessee as the respondent, it is 31st day of July, of the Assessment Year in terms of clause (c) of the Explanation 2 to sub- section 1 of Section 139 of the Act, whereas sub-section (4) of Section 139 provides for extension in period of due date in certain circumstances. It reads as under:-

“(4) Any person who has not furnished a return within the time allowed to him under sub-section (1), or Page | 8

within the time allowed under a notice issued under subsection (1) of Section 142, may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment whichever is earlier; Provided that where the return relates to a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, the reference to one year aforesaid shall be construed as a reference to two years from the end of the relevant assessment year.” A reading of the aforesaid sub-section would show that if a person has not furnished the return of the previous year within the time allowed under sub-section (1) i.e. before 31st day of July of the Assessment Year, the Assessee can file return before the expiry of one year from the end of ever relevant Assessment Year.” In the present case, the Assessee has proved the payment of substantial amount of sale consideration for purchase of a residential property on or before 31.3.2008, that is within extended period of limitation of filing of return. Only a sum of Rs.24 lacs was paid out of total sale consideration of Rs. Two Crores on 23.4.2008, though possession was delivered to the assessee on execution of the power of attorney on 30.3.2008. Since the assessee, has acquired a residential house before the end of the next Financial Year in which sale has taken place, therefore, the assessee is not liable to pay any capital gain. Such is the view taken by the Income Tax Appellate Tribunal. In view of the above, we do not find any merit in the present appeal. Hence, the same is dismissed.

From the judgments referred above, it is clear that the 8.3 deduction under section 54F of the Act can be claimed to the extent of amount of capital gain utilized till the filing of the

return under Section 139(4) of the Act. As in the instant case, the ld. Commissioner allowed the deduction under Section 54 of the Act to the extent of Rs.57,33,088/- only which was invested/utilized by the Assessee till the due date of filing the return under Section 139(1) of the Act and therefore, respectfully following the mandates of the Hon’ble High Courts, we are inclined to allow the deduction under Section 54F of the Act to the extent of amount of capital gain invested/utilized till the filing of the return by the Assessee on 29th March, 2014 under Section 139(4) of the Act, hence ordered accordingly.

Order pronounced in the open court on 19/01/2022.

-Sd/- -Sd/- (R. K. PANDA) ( N. K. CHOUDHRY ) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated:19/01/2022. *MEHTA* Copy forwarded to 1. Appellant; 2. Respondent; 3. CIT 4. CIT (Appeals) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi.