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2017 (4) TMI 1182 - AT - Income TaxClaim of deduction u/s 54F - Held that - The assessee cannot get the benefit of Section 54F of the unutilized amount to the tune of ₹ 41,27,149/- as the said amount has not been invested by the assessee in the purchase/construction of new residential house property at Mahabaleshwar till the date of filing of return on 18-08-2011 nor the same has been deposited by the assessee in capital gain account with bank as stipulated u/s 54F(4) of 1961 Act. The assessee had claimed that she issued cheque to the Builder to the tune of ₹ 40,45,975/- dated 12th August, 2011 which was returned back to the assessee by the said builder namely Kumar Builders a month later on 12-09-2011 with the comments cheque sent back as favoring is wrong and date is also rewritten . The assessee has prayed that benefit of said cheque amount of ₹ 40,45,975/- should be granted to assessee u/s 54F of 1961 Act as it shows that the assessee made the payment on 12-08-2011 but due to some technical errors , cheque was returned by builder after one month . As per agreement dated 17-01-2011 , the assessee was required to issue the cheques in favour of Windsor Park Collection account . All other cheque were issued by the assessee in favour of Windsor Park Collection account except this cheque which was stated to be returned by builder after one month due to technical reasons. Contention of the assessee of having paid defective cheque of ₹ 40,45,975/- to the builder namely Kumar Builder which was not encashed by the said builder due to technical defects in cheque does not inspire confidence and cannot be accepted to the extent of granting exemption u/s 54F of 1961 Act due to reasons cited above. Thus, based on our above detailed discussions and reasoning and keeping in view factual matrix of the case, the assessee will be entitled to benefit u/s 54F of 1961 Act of the amount which was invested by the assessee in acquiring the aforesaid new under construction residential property till the date of filing of return of income on 18-08-2011 for which the AO is directed to grant exemption u/s 54F of 1961 Act after verification of records Decided against the assessee.
Issues Involved:
1. Restriction of Deduction under Section 54F. 2. Genuine Mistake in Payment by Assessee's Husband. 3. Compliance with Section 54F(4) of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Restriction of Deduction under Section 54F: The primary issue was the restriction of the deduction under Section 54F of the Income Tax Act, 1961. The assessee claimed a deduction of ?91,86,156/- but the learned Commissioner of Income Tax (Appeals) [CIT(A)] restricted it to ?52,47,251/-. The assessee had earned a long-term capital gain of ?92,66,395/- from the sale of shares and claimed to have invested in a new residential property valued at ?91,86,156/-. The Assessing Officer (AO) observed that the assessee did not invest the full net consideration received from the sale of shares into the new property before the due date for filing the return under Section 139(1) of the Act, nor did she deposit the balance amount in the Capital Gain Account Scheme as specified by the Central Government. Consequently, the AO brought the balance amount of ?42,08,060/- to tax under long-term capital gains. The CIT(A) upheld the AO's decision but allowed a deduction of ?52,47,251/- for the amount invested before the due date of filing the return. 2. Genuine Mistake in Payment by Assessee's Husband: The assessee contended that a cheque for ?40,45,975/- issued by her husband to the builder was returned due to a mistake in the payee's name and rewriting of the date. This cheque was issued after the due date for filing the return under Section 139(1) of the Act. The CIT(A) noted that all previous cheques were correctly issued in the name of 'Windsor Park Collection Account' as per the agreement, and the cheque in question was issued to 'Kumar Builders' incorrectly. The CIT(A) did not accept this as a valid reason to grant the deduction under Section 54F for the returned cheque amount. 3. Compliance with Section 54F(4) of the Income Tax Act, 1961: The assessee argued that Section 54F is a beneficial provision and should be liberally construed. The assessee claimed that the net sale proceeds could be invested in an under-construction residential property within three years from the date of transfer of the original asset. However, the Tribunal referred to the decision of the Hon'ble Bombay High Court in the case of Humayun Suleman Merchant, which held that Section 54F(1) is subject to Section 54F(4). This means that the unutilized amount of net consideration must be deposited in a specified account before the due date for filing the return under Section 139(1) to avail of the exemption. The Tribunal found that the assessee did not comply with this requirement and thus was not entitled to the full deduction claimed. The Tribunal also noted several discrepancies in the assessee's claim regarding the returned cheque, including the lack of evidence of sufficient funds in the bank, no receipt from Kumar Builders, and the fact that the issue was not raised before the AO or CIT(A). Conclusion: The Tribunal upheld the CIT(A)'s decision to restrict the deduction under Section 54F to ?52,47,251/-. The appeal filed by the assessee was dismissed, and the Tribunal directed the AO to grant the exemption under Section 54F for the amount invested before the due date of filing the return after verifying the records. The Tribunal followed the binding precedent set by the Hon'ble Bombay High Court in Humayun Suleman Merchant's case.
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