2023 (4) TMI 109 - AT - Income Tax

Revision u/s 263 by CIT - disallowance of capital gains claimed u/s. 54F - main contention of the Ld. Pr. CIT is that the assessee has not complied with the conditions laid down u/s. 54F(4) where the assessee should deposit the net sale consideration on or before the due date of filing of return of income u/s.139(1) - HELD THAT - Section 54F(4) of the Act mandates that in the intermediary period of buying the residential house, the assessee shall deposit the amount under Capital Gain Account Scheme to avail the benefit of deduction U/s. 54F of the Act. In the instant case, the assessee has not deposited the net sale consideration under the Capital Gain Account Scheme however, as stipulated by the time frame U/s. 54F(1) - assessee has utilized the entire net sale consideration for the purpose of buying the residential property. Section 54F is a beneficial provision and should be interpreted liberally and Revenue Authorities have to see the end utilization of the net sale consideration in the way prescribed in section 54F - no hesitation to quash the order of the Ld. Pr. CIT passed U/s. 263 of the Act. Appeal of the assessee is allowed.

Summary

Issues involved:
The appeal challenges the order passed under section 263 of the Income Tax Act, 1961 by the Principal Commissioner of Income Tax, Visakhapatnam for the Assessment Year 2013-14.

Summary:

Issue 1: Disallowance of capital gains claimed under Section 54F of the Act
The assessee, deriving income from Real Estate Business, filed a belated return for AY 2013-14. Following a search operation, the Assessing Officer (AO) issued a notice under section 153A and completed the assessment accepting the income returned. The Principal Commissioner of Income Tax (Pr. CIT) found the order prima facie erroneous as the assessee claimed capital gains exemption under section 54F but failed to provide necessary details. The Pr. CIT set aside the assessment, directing the AO to re-do it after examining the claim. The appeal challenges this decision.

Details:
The assessee failed to deposit the net sale consideration in the Capital Gains Account Scheme before the due date of filing the return of income for AY 2013-14. However, the assessee purchased a flat within the prescribed time frame. The Pr. CIT found non-compliance with section 54F(4) and set aside the assessment. The assessee argued that the end utilization of the net sale consideration for buying the residential property should be considered, citing relevant case laws. The Tribunal agreed, interpreting section 54F liberally and quashing the Pr. CIT's order.

Decision:
The Tribunal allowed the appeal, emphasizing the importance of the end utilization of the net sale consideration as per section 54F of the Act. The order under section 263 was quashed, considering the beneficial nature of section 54F and following judicial precedents and case laws referred to by the assessee.

Judgment Date:
31st March, 2023.