2021 (6) TMI 96 - AT - Income Tax

Deduction u/s 54F denied - non-payment from the capital gain account within the statutory period - HELD THAT - The assessee has to utilize the amount deposited in the capital gain account for the purpose of purchase or construction of the new asset within the specified time for availing the benefit of capital gain. Here the assessee has made payments for purchase of a flat. He has paid an amount of ₹ 35.10 lakhs out of the capital gain of ₹ 50lakhs and the balance amount of ₹ 14.90 lakhs was lying unutilized in the capital gain account scheme which was brought to tax by the Assessing Officer and the assessee himself had agreed before him during the course of assessment proceedings. Assessee has made payments subsequently, but, not utilised the capital gain amount lying in the capital gain account scheme before the specified date. Therefore, the action of the ld.CIT(A) confirming the addition is justified. In the instant case, the assessee has not utilised the amount lying in the capital gain account within the statutory period and in fact had surrendered the same during the course of assessment proceedings and, therefore, the said amount is liable to tax. - Decided in against assessee.

Issues Involved:
1. Reopening of assessment under Section 147 of the IT Act.
2. Taxability of unutilized capital gains amount.
3. Interpretation of Sections 54 and 54F of the IT Act.
4. Justification of the addition made by the Assessing Officer (AO).
5. Applicability of judicial precedents cited by the assessee.

Detailed Analysis:

1. Reopening of Assessment under Section 147 of the IT Act:
The case was reopened under Section 147 after obtaining prior approval under Section 151. The reopening was based on the observation that the assessee did not offer the unutilized capital gains amount of ?14.90 lakhs to tax in the return filed for AY 2012-13.

2. Taxability of Unutilized Capital Gains Amount:
The assessee sold a flat for ?70 lakhs, earning a long-term capital gain of ?50 lakhs, which was deposited in a capital gain account. The assessee invested ?35.10 lakhs in a new project but could not utilize ?14.90 lakhs within the stipulated period. The AO added this unutilized amount to the total income, which the CIT(A) upheld.

3. Interpretation of Sections 54 and 54F of the IT Act:
The assessee argued that the provisions of Sections 54 and 54F should be interpreted liberally, considering the delay caused by the builder in handing over the flat. The assessee cited various judicial precedents to support the claim that the benefit of Section 54 should not be denied due to circumstances beyond control.

4. Justification of the Addition Made by the AO:
The AO justified the addition of ?14.90 lakhs, stating that the assessee did not utilize the amount within the statutory period. The CIT(A) agreed, noting that the assessee himself had surrendered the amount during the assessment proceedings. The CIT(A) acknowledged that the assessee did not conceal income or furnish inaccurate particulars but upheld the addition due to non-compliance with the statutory timeframe.

5. Applicability of Judicial Precedents Cited by the Assessee:
The Tribunal examined the judicial precedents cited by the assessee, including decisions from Bal Kishan Atal vs. ACIT and others. However, it distinguished these cases, noting that in those instances, the benefit of Section 54/54F was allowed due to delays in handing over the flats where full or substantial payments were made. In contrast, the assessee in this case did not utilize the amount lying in the capital gain account within the statutory period.

Conclusion:
The Tribunal upheld the CIT(A)'s order, confirming the addition of ?14.90 lakhs to the assessee's income. The Tribunal concluded that the assessee did not utilize the capital gain amount within the specified period, and the surrender of the amount during the assessment proceedings justified its taxability. The appeal filed by the assessee was dismissed.

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