2017 (11) TMI 1966 - AT - Income Tax

Exemption u/s 54 - assessee did not file her return of income - neither the net sale consideration was utilised towards construction of new property nor was the same kept in the Capital Gain Account Scheme - whether claim can be availed only in respect of the entire capital gains utilized within the time prescribed u/s 139(1) and not 139(4)? - HELD THAT - The assessee has not filed her return of income within the time allotted u/s.139(1) of the Act i.e. 31.07.2010 on the reason that the income of assessee was below the taxable limit. However the assessee invested the entire consideration in the purchase and construction of a new residential property before the time allotted to file her return of income u/s.139(4). The argument of ld.D.R is having no merit. The income of assessee if excluded the capital gain that the impugned amount of addition is below the taxable income. Being so the assessee is not liable to file her return u/s.139 of the Act. Since the assessee has invested the impugned amount in construction of a new residential house within the time is allowed u/s.139(4) of the Act the assessee is entitled u/s.54F - Decided in favour of assessee.

Summary

Issues:
1. Dismissal of appeal by Commissioner of Income-tax (Appeals)
2. Eligibility for exemption u/s 54 and 54F
3. Completion of construction within the specified time frame
4. Reopening of assessment u/s 147

Issue 1: Dismissal of Appeal by Commissioner of Income-tax (Appeals)
The appellant contested that the Commissioner erred in summarily dismissing the appeal. The Commissioner's decision was based on the requirement that exemption u/s 54 can only be claimed if the capital gains are utilized within the time prescribed under section 139(1) and not 139(4). The appellant argued that the flat was acquired within one year prior to the transfer and payments were made over time. The Commissioner also failed to grant exemption u/s 54F for payments made up to the due date for filing the return of income u/s 139(1).

Issue 2: Eligibility for Exemption u/s 54 and 54F
The Assessing Officer rejected the claim of exemption u/s 54F, stating that the conditions under subsections (1) and (4) were not met. The Commissioner upheld this decision, emphasizing the requirement to file the return of income within the due date to qualify for the deduction. The Commissioner noted that the net sale consideration should have been utilized for the purchase or construction of a new property within the due date for filing the return of income u/s 139(1). Since the appellant failed to meet these conditions, the deduction was denied.

Issue 3: Completion of Construction Within Specified Time Frame
The Commissioner found that the construction of the new house property was incomplete within three years from the date of sale of the original asset. The appellant's claim for deduction based on payments made before the sale of the original asset was also rejected. The Commissioner concluded that the appellant was ineligible for the deduction u/s 54F due to non-completion of construction within the specified period.

Issue 4: Reopening of Assessment u/s 147
The Assessing Officer reopened the assessment u/s 147, as the appellant did not file the return within the prescribed time and did not meet the conditions for exemption u/s 54F. However, the appellant argued that since the income was below the taxable limit, she was not required to file the return u/s 139. The appellant contended that she invested the amount in the construction of a new residential property within the extended due date u/s 139(4) and was entitled to the deduction u/s 54F. The Tribunal allowed the appeal, stating that the appellant had made the investment within the specified time and was eligible for the deduction.

In conclusion, the Tribunal allowed the appeal, emphasizing that the appellant had invested in the construction of a new residential property within the allowed time frame under section 139(4) and was entitled to the deduction u/s 54F.