2019 (9) TMI 349 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - denial of claim of exemption under section 54 - exemption allowable for purchase of one residential house only - amount not deposited in capital gain account - whether s ale consideration is utilised for the construction or purchase of a new residential house before due date of filling of return under section 139(4)? - HELD THAT - Due date for furnishing return of income according to Section 139(1) of the Income Tax Act, 1961 was subject to extended period provided under Section 139(4) of the Income Tax Act. The assessee has filed the chart which shows that even some of the payments have been made for Flat Nos.489 and 490 after the extended period expired on 31st March 2015. The assessee despite taking specific plea before the CIT(A) and relied upon several decisions, the Ld. CIT(A) did not decide this issue in the light of decisions. Therefore, it requires actual verification how much assessee made payments after the extended period as per Law and whether the assessee would be entitled for deduction under section 54 as per the aforesaid decisions. Accordingly, set aside the Order of the Ld. CIT(A) as regards claim of exemption under section 54 in respect of Flat Nos.489 and 490 and restore the matter in issue to the file of Ld. CIT(A) with a direction to re- decide this issue as per Law, following the decisions of Ms. Jagriti Aggarwal 2011 (10) TMI 279 - PUNJAB AND HARYANA HIGH COURT and CIT vs. Ms. Jagtar Singh Chawla 2013 (4) TMI 499 - PUNJAB AND HARYANA HIGH COURT Exemption u/s 54 in respect of investment made by assessee-company in Flat K-1003 - such claim is not allowable in favour of assessee. Even according to the arguments of Learned Counsel for the Assessee, amendment in the Section is prospective in nature, therefore, it would not be allowed beneficial to the assessee. The language of Section 54 of the Income Tax Act is very clear that benefit under this provision could be extended in respect of investments made in one residential house in India. The authorities below, therefore, rightly denied the claim of exemption under section 54 in respect of Flat K-1003. The Orders of the authorities below to that extent are maintained and appeal of assessee is dismissed.

Summary

Issues Involved:
- Challenge against levy of penalty under section 271(1)(c) of the I.T. Act, 1961 for A.Y. 2013-2014.

Analysis:
1. Issue of Capital Gains and Exemption under Section 54:
- The assessee claimed exemption under section 54 of the I.T. Act for investments made from total long term capital gains earned on the sale of a flat. The assessing officer disallowed the claim for the third flat, resulting in an addition of &8377; 34,23,565.
- The Ld. CIT(A) upheld the disallowance for the third flat but allowed the claim for two flats as one residential unit. The assessee argued that the investment was made before the due date of filing the return under section 139(4) and cited relevant case laws.
- The ITAT held that the Ld. CIT(A) did not decide the issue of payments made after the extended period expired. The matter was restored to the Ld. CIT(A) for re-decision as per law, considering relevant judgments of the Punjab & Haryana High Court.

2. Interpretation of Section 139(1) and 139(4) for Deduction under Section 54:
- The ITAT referred to a judgment of the Punjab & Haryana High Court regarding the due date for filing the return of income under section 139(1) being subject to the extended period under section 139(4).
- The ITAT emphasized the need for verification of investments made by the assessee up to the extended period under section 139(4) and directed the Ld. CIT(A) to re-decide the issue in light of relevant case laws.

3. Claim of Exemption under Section 54 for Investment in Flat K-1003:
- The ITAT upheld the denial of the claim for exemption under section 54 in respect of Flat K-1003, as the language of the provision allows benefits for investments made in one residential house only.
- The amendment in the section was considered prospective, and the claim for the third property was not allowed in favor of the assessee.

4. Penalty under Section 271(1)(c):
- The penalty matter was restored to the Ld. CIT(A) for re-decision after the quantum appeal was decided, providing the assessee with a reasonable opportunity to be heard.
- The ITAT allowed the appeal of the assessee for statistical purposes, maintaining the orders of the authorities on the penalty issue.

In conclusion, the ITAT partially allowed the appeal of the assessee for statistical purposes in relation to the capital gains and exemption under section 54, while allowing the appeal on penalty matters. The judgment emphasized the need for a thorough re-examination of the issues in light of relevant legal provisions and case laws.