Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, BANGALORE BENCH ‘C’
Before: SHRI VIJAYPAL RAO & SHRI JASON P BOAZShri D Muthukumar,
PER SHRI VIJAYPAL RAO, JUDICIAL MEMBER :
This appeal by the assessee is directed against the order dated 17/2/2014 of Commissioner of Income-tax (Appeals), Mysore, for the assessment year 2009-10.
The assessee has raised various grounds in this appeal.
However, the only effective issue arises from the grounds raised by the assessee is whether in the facts and circumstances of the case, the CIT(A) is justified in confirming the denial of exemption u/s 54F of the Act in respect of the capital gain.
The assessee is an individual and salaried employee. For the year under consideration, the assessee filed his return of income declaring a total income of Rs.7,59,059/-. During the course of scrutiny assessment, the AO noticed that the assessee has not disclosed capital gain arisen from sale of property to the tune of Rs.5,00,32,923/-. Accordingly, the AO issued show cause notice for assessment of the capital gain from the sale of property of Rs.4,99,00,000/-. Since the assessee did not respond to the notice of the AO, the assessment order was passed u/s 144 of the Income-tax Act whereby the AO made an addition of Rs.4,99,00,000/- to the total income of the assessee. The assessee challenged the action of the AO before the CIT(A) and submitted that due to the change of address and change of the employment, the assessee could not receive the notice issued by the AO and, therefore, there was non- appearance before the AO. Further the assessee submitted that the assessee’s share in the property in question is only 1/12th as the property in question is a ancestral property of HUF and the share of the assessee in the sale proceeds comes to 41,51,333/-. The CIT(A) issued a remand order and after consideration remand report of the AO found that the brother and father of the assessee had already disclosed the share in the sale proceeds of the property in their respective return of income, therefore, the CIT(A) directed the AO to make the addition in the hand of the assessee only to the extent of Rs.41,58,334/-. The CIT(A) has rejected the claim of exemption u/s 54F of the Act on the ground that assessee has purchased a flat on 15/1/2010, whereas the assessee has not deposited the sale proceeds in the prescribed bank or institution as specifically under the provision of the Act before the date of furnishing the return u/s 139(1).
Before us, the learned AR of the assessee has submitted that the assessee invested the entire sale proceeds for purchase of the new house property for Rs.42 lakhs vide agreement dated 23/6/2009 and thereafter a sale deed was executed on 15/1/2010. Since the assessee has purchased the new house property before the due date of filing of return u/s 139(4) of the Act, therefore, in view of the judgment of Hon’ble Jurisdictional High Court in the case of Fathima Bai Vs. ITO, 32 ITR 243, the deduction u/s 54F cannot be denied.
On the other hand learned DR has relied upon the order of the authorities below and submitted that when the assessee has not filed the return of income and also not disclosed the sale proceeds of the property in question then the assessee cannot claim the exemption u/s 54F on the ground that the investment was made by the assessee in the new house property before due date of filing of return u/s 139(4) of the Act.
We have considered the rival submission as well as relevant material on record. The AO has made the addition of Rs.499,00,000/- in the total income of the assessee for want of explanation and reply to the notice issued u/s 142(1). The assessment was completed u/s 144 of the Act. Before the CIT(A), the assessee has explained the reason for non appearance before the AO and also submitted that the assessee is having only 1/12th of share in the property in question and, therefore, the assessee share comes to Rs.41,58,333/-. The CIT(A) issued a remand order and after considering the remand report, it was found that the assessee’s share in the sale consideration for the property in question is 1/12th amounting to Rs.41,28,333/-. The CIT(A) has also noted the fact that the brother and father of the assessee have also disclosed their respective shares in the sale consideration of the property. Therefore, so far as the question to the share of the assessee is concerned, the CIT(A) has accepted the fact that the assessee is having 1/12th share in the capital asset in question. However, the claim of exemption u/s 54F was denied on the ground that the assessee has invested sale proceeds in the new house property vide sale deed dated 15/1/2010 which is beyond the furnishing of return u/s 139(1) and since the assessee has not deposited the sale proceedings in the prescribed bank account, therefore the assessee is not entitled for deduction u/s 54F.
7. This issue no longer resintigra, as the Hon’ble Jurisdictional High court in the case of Fathima Bai (Supra) has held as under:
The s. 54(1) declares that when the assessee sells any long-term capital asset, the assessee should purchase the building within one year before the transfer or within two years after the transfer by investing capital gains. In which event the assessee will not be liable for capital gain tax.
The s. 54(2) declares that within one year from the date of transfer if the capital gain is not invested in purchase of building, he should deposit the amount in the 'Capital Gain Account Scheme’ or else the assessee should invest the capital gains before filing of return within the permitted period under s. 139. In which event, the assessee will not be liable to pay capital gain tax.
9. The s. 139(4) declares that the assessee should file returns within the time prescribed, if he fails to file returns, he may file returns for any previous year at any time before expiry of one year from the end of relevant assessment year.
In the instant case, the due date for filing of return is 30th July, 1988. Under s. 139(4) the assessee was entitled to file return in the extended time, which is within 31st March, 1990.
11. The extended due date under s. 139(4) would be 31st March, 1990. The assessee did not file the return within the extended due date, but filed the return on 27th Feb., 2000. However, the assessee had utilised the entire capital gains by purchase of a house property within the stipulated period of s. 54(2) i.e., before the extended due date for return under s. 139. The assessee technically may have defaulted in not filing the return under s. 139(4). But, however, utilised the capital gains for purchase of property before the extended due date under s. 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.
The Gauhati High Court in CIT vs. Rajesh Kumar Jalan (2006) 206 CTR (Gau) 361 : (2006) 286 ITR 274 (Gau) has taken a similar view that the time-limit for deposit under the scheme or utilisation can be made before the due date for filing of returns under s. 139(4).
8. Thus, in view of the decision of Hon’ble High Court if the assessee has invested the sale proceeds in new residential house, within the period of filing the return of income u/s 139(4) then the claim of exemption u/s 54F cannot be denied on the ground that the assessee has failed to deposit the sale proceeds in the prescribed bank account. In the case in hand admittedly the assessee has invested the sale proceeds in purchase of new house property vide sale deed dated 15/1/2010 as referred in CIT(A) appeal in para 7 of the impugned order as under: “Regarding exemption claimed u/s 54F the appellant claims to have purchased a flat vide agreement of sale dated 23.6.2009 and absolute sale deed dated 15.1.2010.”
Once the assessee has invested the sale proceeds in the purchase of the new residential house within the period prescribed u/s 54F then in view of the judgment of the Hon’ble Jurisdictional High Court in the case of Fathima Bai (Supra), the claim of exemption u/s 54F cannot be denied to the assessee. Accordingly, we held that the assessee is entitled for the claim of exemption u/s 54F.
10. The next issue is regarding levy of interest u/s 234B and 234C.
Since levy of interest u/s 234B and 234C is mandatory and consequential in nature, no separate finding is required.
In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 24th Sept, 2015.