2015 (3) TMI 641 - AT - Income Tax

Denial of claim for exemption under Section 54 / 54F - assessee failed to invest the capital gains of ₹ 70,16,326 before the due date of filing the return of income for Assessment Year 2008-09 i.e. 31.7.2008, as laid down u/s. 139(1) of the Act or to deposit the same by this date, i.e. 31.7.2008, in the Capital Gains Account Scheme of the Govt., the assessee is not eligible for exemption under Section 54 / 54F - CIT(A) allowed the claim - Held that - We find the co-ordinate bench of the ITAT, Bangalore in the case of Nipun Mehrotra (2007 (3) TMI 283 - ITAT BANGALORE-B ) held that if the sale consideration / capital gains is utilized for the purchase or construction of the new asset before the date of filing the return under Section 139(4) of the Act, the assessee is entitled to exemption under Section 54F of the Act. In the case on hand, the facts clearly establish that the assessee has utilized the sale consideration / capital gains for a) purchase of a residential site for ₹ 52,08,164 on 3.4.2008 and b) for cost of construction of the Ground to 2nd floor of the residential construction of the Ground to 2nd floor of the residential building upto 31.3.2010 amounting to ₹ 72,91,836. In this factual matrix, we are of the opinion that the assessee is eligible for exemption under Section 54F of the Act. In coming to this finding we draw support from the decision of the co-ordinate bench of the Tribunal in the case of Nipun Mehrotra (supra),wherein following the decision of the Hon'ble Gauhati High Court in the case of Rajesh Kumar Jalan (2006 (8) TMI 126 - GAUHATI High Court ), it was held that when the sale consideration / capital gains has been utilized for the purchase or construction of the new asset before the due date for furnishing the return of income under Section 139(4) of the Act, the assessee is entitled to exemption under Section 54F of the Act. The learned CIT (Appeals) in the impugned order has, also observed that the claim for exemption, in respect of the other co-sellers of the said property, has been allowed by the Department. In this view of the matter, following the decision of the co-ordinate bench of the ITAT, Bangalore in Nipun Mehrotra (supra), we find that revenue has failed to controvert the decision of the learned CIT (Appeals) and therefore uphold the impugned order of the learned CIT (Appeals). - Decided in favour of assessee.

Summary

Issues Involved:

1. Validity of the assessment proceedings initiated under Section 147 of the Income Tax Act, 1961.
2. Taxability of the amount received by the assessee on relinquishment of rights in property.
3. Eligibility for exemption under Section 54 / 54F of the Income Tax Act, 1961.
4. Compliance with the provisions of Section 54(1) and 54(2) regarding the deposit of capital gains in a Capital Gains Account Scheme.

Issue-wise Detailed Analysis:

1. Validity of the Assessment Proceedings Initiated under Section 147:

The Assessing Officer (AO) initiated proceedings under Section 147 upon noticing that the assessee had not filed a return of income for Assessment Year 2008-09, despite receiving an amount of Rs. 5,63,303 during the Financial Year 2007-08. The AO issued a notice under Section 148, to which the assessee responded by filing a return declaring a total income of Rs. 4,90,220.

2. Taxability of the Amount Received on Relinquishment of Rights in Property:

During the assessment, the AO found a credit of Rs. 1,25,00,000 in the assessee's bank account, which was explained as received for relinquishing rights in property under a Memorandum of Agreement with M/s. Kristal Projects (India) Ltd. The AO proposed to tax this amount as capital gains, but the assessee claimed it was exempt as the property was agricultural land. However, the AO rejected this claim, noting that the property was converted land and not agricultural, and thus taxable as capital gains.

3. Eligibility for Exemption under Section 54 / 54F:

The assessee claimed exemption under Section 54 / 54F, stating that the entire capital gains were invested in a new residential property. The AO rejected this claim, as the construction commenced after the due date for filing the return under Section 139(1), and the unutilized portion was not deposited in a Capital Gains Account Scheme. The CIT (Appeals) allowed the exemption, following the ITAT Bangalore's decision in Nipun Mehrotra V ACIT and directed the AO to verify the investment made in the new property.

4. Compliance with Section 54(1) and 54(2) Provisions:

The Revenue contested the CIT (Appeals)'s decision, arguing that the assessee did not comply with the requirement to deposit the capital gains in a Capital Gains Account Scheme before the due date under Section 139(1). The CIT (Appeals) considered the due date under Section 139(4) instead, which the Revenue argued was erroneous.

Judgment Analysis:

The Tribunal upheld the CIT (Appeals)'s decision, noting that the assessee had invested the entire capital gains in the new property before the due date under Section 139(4). It referenced the co-ordinate bench's decision in Nipun Mehrotra, which allowed exemption if the investment was made before the due date under Section 139(4). The Tribunal found no merit in the Revenue's arguments and dismissed the appeal.

Cross Objections by the Assessee:

The assessee's cross objections, supporting the CIT (Appeals)'s order, were dismissed as infructuous since the Revenue's appeal was dismissed.

Conclusion:

Both the Revenue's appeal and the assessee's cross objections for Assessment Year 2008-09 were dismissed. The Tribunal confirmed the CIT (Appeals)'s order allowing the assessee's claim for exemption under Section 54 / 54F, considering the investments made before the due date under Section 139(4).