2019 (1) TMI 278 - AT - Income Tax

Deduction u/s 54F - property purchased was registered in the name of the assessee vide dated 10.10.2011 which is beyond the period prescribed under the provision of Section 54F - Held that - It is a fact on record that the assessee before the AO claimed to have invested ₹ 11.11 lacs. However, the assessee before the CIT(A) claimed the first time to have made the payment of ₹ 19.34 lacs out of which a sum of ₹ 8,34,000/- was paid in April & May 2011, i.e. the date beyond the period of three years but before getting the registration of the property. From the above, it is clear that the assessee has never filed anything about the payment of ₹ 8.34 lacs before the AO. Therefore, the same needs to be verified by the AO. Whether the assessee is eligible for deduction u/s 54F for the payment made beyond three years? - Held that - There was a delay on account of some dispute in the property which prevented the assessee from investing the money within the time as specified under section 54F of the Act. Thus, it is clear that the assessee could not comply with the provision of Section 54F of the Act which was beyond his control. Therefore we are of the view that the assessee is very much eligible for deduction u/s 54F for the amount which has been invested by him beyond the prescribed period but before getting the registration of the property provided there was sufficient reason which prevented the assessee for making in the investment within the prescribed time. The delay occurred due to the situation beyond the control of the assessee. Thus, he is eligible for deduction u/s 54F of the Act. - we direct the AO to verify the amount invested by the assessee and allow the exemption u/s 54F of the Act for the amount invested in the property beyond the prescribed period but before the registration of the property. - Decided in favour of assessee for statistical purposes.

Summary

Issues Involved:
1. Legality of the partial confirmation of exemption under Section 54F.
2. Validity of the reopening of the assessment under Section 147.
3. Eligibility for full exemption under Section 54F for the entire investment in the new property.

Issue-wise Detailed Analysis:

1. Legality of the Partial Confirmation of Exemption under Section 54F:
The primary issue raised by the assessee was that the Commissioner of Income Tax (Appeals) [CIT(A)] erred in granting only partial exemption under Section 54F of the Income Tax Act, 1961, amounting to ?4,73,936 out of the total claimed exemption of ?11,11,000. The assessee argued that the entire investment in the new property should be eligible for exemption. The assessee had claimed a long-term capital gain exemption under Section 54F on the sale of a co-owned property, where his share of the sale consideration was ?22,00,000, and the long-term capital gain was calculated at ?9,57,447. The assessee invested ?11,11,000 in a new property and claimed this amount as exempt. The Assessing Officer (AO) denied the exemption because the new property was registered beyond the prescribed period. However, the CIT(A) partially allowed the exemption, considering the investment made within the stipulated time, and restricted the exemption to ?4,73,936.

2. Validity of the Reopening of the Assessment under Section 147:
The assessee contested the validity of the reopening of the assessment under Section 147. The AO had reopened the assessment based on credible information and issued a notice under Section 148. The assessee filed a return in response to this notice, reflecting the sale transaction and claiming the deduction under Section 54F. The CIT(A) upheld the validity of the reopening, stating that the AO had followed due process by recording satisfaction and obtaining statutory approval before issuing the notice.

3. Eligibility for Full Exemption under Section 54F for the Entire Investment in the New Property:
The assessee argued that the entire investment of ?19,34,000 in the new property should be considered for exemption under Section 54F. The payments were made before the registration of the property, which was delayed due to litigation beyond the assessee's control. The CIT(A) acknowledged the special circumstances and allowed partial relief, but the assessee sought full exemption for the entire investment. The Tribunal noted that the assessee initially claimed an investment of ?11,11,000 before the AO and later claimed ?19,34,000 before the CIT(A). The Tribunal directed the AO to verify the additional investment of ?8,34,000, made beyond the prescribed period but before the property registration, and to allow the exemption accordingly. The Tribunal also considered precedents where courts held that the date of payment, not registration, is crucial for claiming exemption under Section 54F, especially in cases of unavoidable delays.

Conclusion:
The Tribunal allowed the appeal for statistical purposes, directing the AO to verify the additional investment and grant the exemption under Section 54F for the amount invested beyond the prescribed period but before the property registration, considering the special circumstances that caused the delay. This decision aligns with various judicial precedents that emphasize the intention and actions of the assessee in investing in a new residential property, even if registration is delayed due to factors beyond their control.