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2023 (1) TMI 753 - AT - Income TaxDenial of exemption u/s. 54 - Assessee had not disclosed capital gain in the return filed u/s 139(1) - Assessee should deposit the proceeds in the special capital gains account before the due date of filling of the return of income u/s. 139(1) which Assessee has failed to do so and Assessee has to satisfy the condition prescribed u/s. 54(2) - HELD THAT - There is no dispute that Assessee had earned capital gain on sale of flat and the same was invested in purchase of new house within the time provided u/s. 54. The entire purchase consideration was paid by 31st March, 2012 and possesion was obtained on 23.04.2012. However, in the return filed u/s 139(1) Assessee had not disclosed capital gain albeit had made a claim before the AO in the revised computation. We agree with the contention of that if a claim was not made in the return of income the same can be made during the course of assessment proceedings and the judgment of in case of GOETZE (India Ltd.) 2006 (3) TMI 75 - SUPREME COURT applies only to the power of the AO and not to the power of the appellate authorities to admit the claim. Whether the benefit or exemption from capital gain tax can be given, if the investment has been made in terms of section 54 within date specified u/s. 139(4); or can capital gain exemption be denied mearly because on account of failure on part of the Assessee to deposit the capital gains in the capital gains account scheme before the due date specified u/s 139 (1). Find that, this issue stands covered by the decision in the case of CIT vs. M/s. Jagriti Aggarwal 2011 (10) TMI 279 - PUNJAB AND HARYANA HIGH COURT Thus hold that if the investment u/s 54 has been made within the time limit of date specified u/s. 139(4), exemption cannot be denied. Thus, the claim of exemption u/s. 54 is allowed to the Assessee.
Issues Involved:
1. Denial of exemption under Section 54 of the Income Tax Act. 2. Requirement of depositing capital gains in the Capital Gains Account Scheme before the due date of filing the return under Section 139(1). Detailed Analysis: 1. Denial of Exemption under Section 54: The primary issue raised by the assessee relates to the addition of Rs. 29,40,881/- due to the denial of exemption under Section 54. The assessee sold a residential flat for Rs. 46,00,000/- on 04.06.2010 and did not reflect the capital gain in the initial return, believing it was exempt under Section 54. The revised computation claiming the exemption was submitted during the assessment proceedings. The capital gains were invested in a new house, with the purchase agreement dated 20.03.2012, full payment by 31.03.2012, and possession on 23.04.2012. However, the assessee did not deposit the capital gains in the Capital Gains Account Scheme before the due date of filing the return under Section 139(1), which was 31.07.2011. 2. Requirement of Depositing Capital Gains: The Assessing Officer (AO) denied the exemption under Section 54 based on two key points: - The capital gains were not shown in the initial computation of income. - The assessee failed to deposit the capital gains in the Capital Gains Account Scheme before the due date of filing the return under Section 139(1). The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, emphasizing that the claim under Section 54 is not automatic and must be made in the return of income. The CIT(A) also noted that the exemption requires strict compliance, including depositing the proceeds in the specified account before the due date under Section 139(1). Arguments by the Assessee: The assessee's counsel argued that: - The Supreme Court's decision in Goetze (India) Ltd. applies only to the AO's power and not to appellate authorities. - The investment under Section 54 made within the due date specified under Section 139(4) should not be denied exemption due to failure to deposit in the capital gains account before the due date under Section 139(1). This argument was supported by the judgment in Ms. Jagriti Aggarwal. - The procedural requirement under Section 54(2) should not override the substantial compliance with Section 54(1). This was supported by the judgment in Venkata Dilip Kumar. - The assessee was prevented from complying due to personal difficulties, including deputation to South Africa and his father's illness. Tribunal's Findings: The Tribunal agreed with the assessee's counsel, emphasizing that the claim can be made during assessment proceedings and that the Supreme Court's decision in Goetze (India) Ltd. does not restrict appellate authorities. The Tribunal found that the investment in the new house was made within the time specified under Section 54, and the failure to deposit in the capital gains account before the due date under Section 139(1) should not result in denial of exemption. This view was supported by the judgments in CIT vs. M/s. Jagriti Aggarwal and Venkata Dilip Kumar vs. CIT. Conclusion: The Tribunal held that the exemption under Section 54 cannot be denied if the investment is made within the time limit specified under Section 139(4). The claim of exemption under Section 54 was allowed to the assessee, and the appeal was decided in favor of the assessee. Order Pronounced: The orders were pronounced in the open court on 28.11.2022.
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