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2019 (1) TMI 1127 - AT - Income TaxDenial of exemption u/s 54F - non adherence to condition for availing exemption u/s 54F - non constructing the new house within three years from the date of transfer of the original land - proof of amount been deposited in an account in substantial compliance - Held that - The subject bank account of the assessee was attached by the Department from 1.12.2010 and remain attached atleast till 30.06.2012, therefore, there is no way the assessee could have met the deadline of 16.7.2011 for constructing the new house, being three years from the date of transfer of the original land and the period during which the bank account remain attached has to be excluded as no fault lies with the assessee. In the interim, the assessment order was passed by the Assessing officer on 5.12.2011. In such a situation, firstly, when the bank account of the assessee was attached, how can he be expected to have utilized the amount so deposited in the said account within the prescribed period and secondly, there is no way, the Assessing officer could have verified such utilization by the time he passed the assessment order. Hence, the utilization or non-utilization and any related non-compliance or failure on part of the assessee is an event subsequent to the year under consideration and the same cannot be made the basis for denial of exemption for the impunged assessment year once it has been demonstrated that the amount has been deposited in an account in substantial compliance with the provisions of sub-section (4) to section 54F. Thus in the entirety of facts and circumstances of the case, the assessee is held eligible for exemption under section 54F for the impugned assessment year and the Assessing officer is directed to allow the same. See ACIT vs Dr S. Sankaralingam 2018 (12) TMI 397 - ITAT CHENNAI - decided in favour of assessee
Issues Involved:
1. Jurisdiction and validity of additions and disallowances under Section 143(3). 2. Partial confirmation of addition on account of Long Term Capital Gain (LTCG) and denial of exemption under Section 54F. 3. Charging of interest under Sections 234B and 234D and withdrawal of interest under Section 244A. Detailed Analysis: 1. Jurisdiction and Validity of Additions and Disallowances: The assessee contested the jurisdiction and various other reasons for the additions and disallowances made under Section 143(3) of the Act. However, this ground was general in nature and did not require separate adjudication as per the tribunal's order. 2. Partial Confirmation of Addition on Account of LTCG and Denial of Exemption under Section 54F: The primary issue revolved around the denial of exemption under Section 54F of the Income Tax Act. The assessee had received compensation for compulsory acquisition of land and claimed exemption under Section 54F by depositing the sale consideration in a bank account, which was purportedly a Capital Gain Account Scheme (CGAS) account. The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] denied the exemption on the grounds that the account was a normal savings account and not a CGAS account. The tribunal examined the facts and found that: - The assessee had deposited the entire compensation amount in a new savings bank account opened specifically for this purpose. - The assessee was under the bona fide belief, supported by a certificate from the bank manager, that the account was a CGAS account. - The assessee had utilized the funds for purchasing a plot and constructing a residential house, demonstrating substantial compliance with the provisions of Section 54F. - The tribunal emphasized the legislative intent behind Section 54F, which is to encourage investment in residential housing and not to penalize technical breaches. The tribunal relied on various judicial precedents, including the cases of Kishore H. Galaiya vs. ITO and Jagtar Singh Chawla vs. ACIT, which supported the view that substantial compliance with the provisions should be considered, and technical defaults should be ignored. The tribunal also noted that the assessee's bank account was attached by the Department, preventing further utilization of the funds. This situation was beyond the assessee's control and invoked the doctrine of impossibility of performance. Ultimately, the tribunal held that the assessee was eligible for exemption under Section 54F for the impugned assessment year and directed the AO to allow the exemption. 3. Charging of Interest under Sections 234B and 234D and Withdrawal of Interest under Section 244A: The assessee contested the charging of interest under Sections 234B and 234D and the withdrawal of interest under Section 244A. These grounds were consequential to the main issue of exemption under Section 54F. Since the tribunal allowed the exemption under Section 54F, the interest-related issues were also resolved in favor of the assessee. Conclusion: The tribunal allowed the appeal of the assessee, granting exemption under Section 54F and resolving the consequential interest-related issues. The tribunal emphasized substantial compliance with legislative intent and the doctrine of impossibility of performance due to the attachment of the assessee's bank account.
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