AI Insights
The case revolves around the appeal by Annirutha Raghuveer against the order of the Commissioner of Income Tax, National Faceless Appeal Centre, which confirmed the disallowance of a deduction under section 54 of the Income-tax Act, 1961. The primary issue was the disallowance of a deduction of Rs.1,58,37,000 due to the late deposit of sale proceeds into the capital gain scheme account. The Tribunal examined whether the technical delay in depositing the proceeds should affect the substantive right of the assessee, who had otherwise complied with the conditions of section 54 by reinvesting in a new residential property.
Appeal Details
Counselvise Citation
[2025] 140 COUNSELVISE.COM (IT) 107018 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
CRN Number
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
26-02-2025
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Assessment Year
2014-2015
Judgement Text
"आयकर अपीलीय अिधकरण, ‘ए’ \u0001यायपीठ, चे\tई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH: CHENNAI \u0001ी एबी टी. वक , \u000bाियक सद\u0011 एवं एवं एवं एवं \u0001ी मनोज क ुमार अ\u0019वाल, लेखा सद\u0007 क े सम\u001d BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRIMANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER आयकरअपीलसं./ITA No. 2239/Chny/2024 िनधा\u000bरणवष\u000b/Assessment Year: 2014-15 Annirutha Raghuveer, No.18A/3, 2nd Floor, 1st Main Road, R.A. Puram, Chennai – 600 028. v. Income Tax Officer, Non- Corporate Ward -1(1), Chennai. [PAN: AGVPR-4048-L] (अपीलाथ\u000e/Appellant) (\u000f\u0010यथ\u000e/Respondent) अपीलाथ\u000e क\u0012 ओर से/ Appellant by : Mr. N. Arjun Raj, Advocate \u000f\u0010यथ\u000e क\u0012 ओर से /Respondent by : Smt. D. Babitha, JCIT सुनवाईक\u0012तारीख/Date of Hearing : 22.01.2025 घोषणाक\u0012तारीख /Date of Pronouncement : 26.02.2025 आदेश / O R D E R PER ABY T. VARKEY, JM: This appeal preferred by the assessee trust against the order of the Learned Commissioner of Income Tax, National Faceless Appeal Centre (NFAC), Delhi, (hereinafter in short \"the Ld.CIT(A)”) dated 09.08.2024 for assessment year (in short “AY\") 2014-15. 2. The only issue in this appeal of the assessee is that the Ld.CIT(A) erred in confirming the Rs.1,58,37,000/- with respect to the disallowance of deduction u/s. 54(2 of the Income-tax Act, 1961 (hereinafter in short “the Act”) depositing the residue sale proceeds in capital gain scheme account wi the stipulated period u/s. 139(1) of the Act. 3. The brief facts are that the assessee filed her return of income (RoI) on 07.05.2015 for AY 2014 the return (RoI) was selected for scrutiny u/s. 143(3) of t led to pass of an assessment order disallowed Rs.1,58,37,000/ sum in capital gain account scheme before the due date of filing of the RoI u/s. 139(1) of the Act. by order dated 31.12.2018 which was set aside by this Tribunal by order dated 26.11.2019 [in ITA No. 566/Chny/2019 the AO to verify whether the sold out property was undivided shares (UDS) or residential property. While giving effect to the order of the Tribunal (supra), the AO confirmed that the sold out property was a residential property and there the Act on the ground that assessee didn’t utilize/reinvest the capital gain [by purchase of new residential property date for filing of RoI u/s. 139(1) of the Act i.e. 31.07.2014 ITA No :: 2 :: The only issue in this appeal of the assessee is that the Ld.CIT(A) he disallowance made by the AO to the tune of with respect to the disallowance of deduction u/s. 54(2 tax Act, 1961 (hereinafter in short “the Act”) depositing the residue sale proceeds in capital gain scheme account wi the stipulated period u/s. 139(1) of the Act. The brief facts are that the assessee filed her return of income (RoI) on 07.05.2015 for AY 2014-15 declaring income of Rs.3,62,240/ was selected for scrutiny u/s. 143(3) of t led to pass of an assessment order dated 30.12.2016 by which the AO disallowed Rs.1,58,37,000/-, since, the assessee didn’t deposit the in capital gain account scheme before the due date of filing of the RoI u/s. 139(1) of the Act. On appeal the Ld.CIT(A) confirmed the same by order dated 31.12.2018 which was set aside by this Tribunal by order in ITA No. 566/Chny/2019] and restore the AO to verify whether the sold out property was undivided shares or residential property. While giving effect to the order of the , the AO confirmed that the sold out property was a residential property and thereafter he again denied exemption u/s. 54 of the Act on the ground that assessee didn’t utilize/reinvest the capital gain purchase of new residential property (at Neelankarai)] filing of RoI u/s. 139(1) of the Act i.e. 31.07.2014 ITA Nos.2239/Chny/2024 [AY 2014-15] AnniruthaRaghuveer The only issue in this appeal of the assessee is that the Ld.CIT(A) disallowance made by the AO to the tune of with respect to the disallowance of deduction u/s. 54(2) tax Act, 1961 (hereinafter in short “the Act”) for not depositing the residue sale proceeds in capital gain scheme account within The brief facts are that the assessee filed her return of income (RoI) 15 declaring income of Rs.3,62,240/-. Later, was selected for scrutiny u/s. 143(3) of the Act, which dated 30.12.2016 by which the AO , since, the assessee didn’t deposit the said in capital gain account scheme before the due date of filing of the n appeal the Ld.CIT(A) confirmed the same by order dated 31.12.2018 which was set aside by this Tribunal by order and restored to the file of the AO to verify whether the sold out property was undivided shares or residential property. While giving effect to the order of the , the AO confirmed that the sold out property was a denied exemption u/s. 54 of the Act on the ground that assessee didn’t utilize/reinvest the capital gain before the due filing of RoI u/s. 139(1) of the Act i.e. 31.07.2014; and in such a scenario, according to him, Rs.1,58,37,000/- in the capital gain account scheme of filing RoI u/s. 139(1) of the Act; same on 11.08.2014 of R after the due date on 31.07.2014, the AO Capital Gains (LTCG) claimed by the assessee. On appeal, the Ld.CIT(A) has confirmed the action of AO in the second round by earlier order of his predecessor. Aggrieved, the assessee is before us. 4. We have heard both the parties and perused the records. We note that assessee has sold her residentia consideration of Rs.2,24,80,000/ claimed LTCG of Rs.1,56,91,000/ received, the assessee deposited i.e. Rs.1.08 crores [i.e. 14.08.2014]. The assessee construction of new residential house at Neelankarai total cost of Rs.2,00,75,384/ exemption claimed u/s. 54 of the Act on the ground that ass utilize/invest the capital gain for purchase of new residential property at Neelankarai within the due date u/s. 139(1) of the Act 31.07.2014; and had 2014. Therefore, the AO ITA No :: 3 :: according to him, the assessee ought to have deposited in the capital gain account scheme before the due date of filing RoI u/s. 139(1) of the Act; and since, the assessee deposited the same on 11.08.2014 of Rs.90 lakhs, & on 14.08.2014 Rs.18.50 lakhs after the due date on 31.07.2014, the AO disallowed the Long Term Capital Gains (LTCG) claimed by the assessee. On appeal, the Ld.CIT(A) action of AO in the second round by reproducing the order of his predecessor. Aggrieved, the assessee is before us. We have heard both the parties and perused the records. We note that assessee has sold her residential flat on 23.01.2014 for a sale consideration of Rs.2,24,80,000/- and from such a transaction, Rs.1,56,91,000/-. Out of the sale the assessee deposited under the capital gain account scheme i.e. Rs.90 lakhs on 11.08.2014 and Rs.18.50 lakhs e assessee is also seen to have invested the construction of new residential house at Neelankarai which was built of Rs.2,00,75,384/-. However, the AO has denied the exemption claimed u/s. 54 of the Act on the ground that ass the capital gain for purchase of new residential property at Neelankarai within the due date u/s. 139(1) of the Act i.e. on or before belatedly deposited it only in 11th erefore, the AO denied exemption claimed u/s. 54 of the Act ITA Nos.2239/Chny/2024 [AY 2014-15] AnniruthaRaghuveer the assessee ought to have deposited before the due date ince, the assessee deposited the on 14.08.2014 Rs.18.50 lakhs viz disallowed the Long Term Capital Gains (LTCG) claimed by the assessee. On appeal, the Ld.CIT(A) reproducing the order of his predecessor. Aggrieved, the assessee is before us. We have heard both the parties and perused the records. We note l flat on 23.01.2014 for a sale- from such a transaction, she sale-consideration under the capital gain account scheme Rs.90 lakhs on 11.08.2014 and Rs.18.50 lakhs on invested the said sum for which was built for a . However, the AO has denied the exemption claimed u/s. 54 of the Act on the ground that assessee didn’t the capital gain for purchase of new residential property at i.e. on or before th& 14thAugust, claimed u/s. 54 of the Act which impugned action cannot be countenanced because the assessee has fulfilled all the substantive claiming the deduction, “capital gain scheme account” the delay of 14 days in depositing the sum in the “capital gain scheme” cannot come in the way of the claim, where the assessee has fulfilled the substantive conditions by investing the sum for building a property within the period allowed by law; and the breach of the condition of depositing the same can be term cannot be a fetter for denying the deduction u/s. 54 of the Act. In this regard, it is noted that simil the case of ACIT vs Justice T.S. Arunachalam AY 2014-15 dated 30.01.2018, wherein the Tribunal deposit the amount in capital gain account scheme lapse on the part of the assessee and therefore, the benefit of section 54 of the Act cannot be denied 8. We have heard the rival submissions and carefully perused the materials available on record. In the decision o Chennai Bench of the Tribunal has allowed the benefit of section 54 of the Act because the assessee had fulfilled all the conditions prescribed under section 54 of the Act barring the deposit of account\" as prescribed under section 54(2) of the Act. In that decision reliance was also placed in the decision of Hon'ble Apex Court in the case of MotilalPadampatSugarmillCo.Ltd. Vs. State of Uttar Pradesh &Ors wherein held that 'thus there is n said that everyone is presumed to know the law, but there is no such Maxim known disputed that the assessee had not fulfilled the conditions prescribed under section 54 of the Act barring the deposit of the sale proceeds in the \"capital gain scheme account\". Moreover, the facts reveal that th entire sale proceeds in his savings bank account maintained with nationalized ITA No :: 4 :: action cannot be countenanced because the assessee has substantive conditions prescribed u/s. 54 of the Act claiming the deduction, barring the deposit of the sale proceeds in “capital gain scheme account” by few days i.e. 14 days. According to us, the delay of 14 days in depositing the sum in the “capital gain scheme” cannot come in the way of the claim, where the assessee has fulfilled the substantive conditions by investing the sum for building a property within the period allowed by law; and the breach of the condition depositing the same can be termed as technical/venial breach, which a fetter for denying the deduction u/s. 54 of the Act. In this is noted that similar issue had come up before this Tribunal in the case of ACIT vs Justice T.S. Arunachalam – ITA No. 2455/Chny/2017 15 dated 30.01.2018, wherein the Tribunal held that the delay to deposit the amount in capital gain account scheme was only a technic lapse on the part of the assessee and therefore, the benefit of section 54 be denied to the assessee by holding as under: 8. We have heard the rival submissions and carefully perused the materials available on record. In the decision of ShriMadhuvan Prasad Vs. ITO, supra the Chennai Bench of the Tribunal has allowed the benefit of section 54 of the Act because the assessee had fulfilled all the conditions prescribed under section 54 of the Act barring the deposit of the sale proceeds in the \"capital gain scheme prescribed under section 54(2) of the Act. In that decision reliance was also placed in the decision of Hon'ble Apex Court in the case of MotilalPadampatSugarmillCo.Ltd. Vs. State of Uttar Pradesh &Ors wherein no presumption that every person knows the law. presumed to know the law, but that is not a correct statement known to the law. In the given case before us also, it is not disputed that the assessee had not fulfilled the conditions prescribed under section 54 of the Act barring the deposit of the sale proceeds in the \"capital gain scheme account\". Moreover, the facts reveal that the assessee had deposited the entire sale proceeds in his savings bank account maintained with nationalized ITA Nos.2239/Chny/2024 [AY 2014-15] AnniruthaRaghuveer action cannot be countenanced because the assessee has conditions prescribed u/s. 54 of the Act for sale proceeds in the by few days i.e. 14 days. According to us, the delay of 14 days in depositing the sum in the “capital gain scheme” cannot come in the way of the claim, where the assessee has fulfilled the substantive conditions by investing the sum for building a residential property within the period allowed by law; and the breach of the condition ed as technical/venial breach, which a fetter for denying the deduction u/s. 54 of the Act. In this ar issue had come up before this Tribunal in ITA No. 2455/Chny/2017 held that the delay to only a technical lapse on the part of the assessee and therefore, the benefit of section 54 by holding as under: 8. We have heard the rival submissions and carefully perused the materials f ShriMadhuvan Prasad Vs. ITO, supra the Chennai Bench of the Tribunal has allowed the benefit of section 54 of the Act because the assessee had fulfilled all the conditions prescribed under section 54 the \"capital gain scheme prescribed under section 54(2) of the Act. In that decision reliance was also placed in the decision of Hon'ble Apex Court in the case of MotilalPadampatSugarmillCo.Ltd. Vs. State of Uttar Pradesh &Ors wherein it was law. It is often correct statement In the given case before us also, it is not disputed that the assessee had not fulfilled the conditions prescribed under section 54 of the Act barring the deposit of the sale proceeds in the \"capital gain e assessee had deposited the entire sale proceeds in his savings bank account maintained with nationalized bank out of which he has constructed his house. The only small lacuna assessee had made is that the assessee though had placed the entire sale procee nationalized bank he has not transferred the same in the ·capital gain scheme account'. Considering these facts of the case and the decisions of the Tribunal and the Hon'ble Apex Court cited above, we are of the considered view that for this small technical lapse of the assessee, the benefit of section 54 should not be denied. Section 54 of the Act is a beneficial provision and a beneficial interpretation has to be made as far as possible for giving benefit to the assessee. The assessee has procee but has only made a small technical breach which we are of the considered view should not disentitle the assessee tor the benefit of section 54 of the Act. Therefore, we hereby direct the l section 54 of the Act to the assessee and accordingly delete the addition made by him which was further sustained by the learned Commissioner of Income (Appeals). 5. Since, the assessee has constructed the new residential house within three years from the date of transfer of original asset deposited Rs.1.08 crores in the “capital gain scheme account” with a delay of 14 days, the claim of deduction u/s. 54 of the been denied to the assessee Tribunal in ACIT vs Justice T.S. Arunachalam (Supra), deletion of addition made by the AO. 6. In the result, appeal filed by the assessee is allow Order pronounced on the Sd/- (मनोज क ुमार अ\u0019वाल (MANOJ KUMAR AGGARWAL लेखासद\u0007य/ACCOUNTANT MEMBER चे\u0003ई/Chennai, \u0005दनांक/Dated: 26th February JPV, Sr.PS ITA No :: 5 :: bank out of which he has constructed his house. The only small lacuna assessee had made is that the assessee though had placed the entire sale procee nationalized bank he has not transferred the same in the ·capital gain scheme account'. Considering these facts of the case and the decisions of the Tribunal and the Hon'ble Apex Court cited above, we are of the considered view that for this apse of the assessee, the benefit of section 54 should not be denied. Section 54 of the Act is a beneficial provision and a beneficial interpretation has to be made as far as possible for giving benefit to the assessee. The assessee has proceeded to comply with the provisions of section 54 of the Act but has only made a small technical breach which we are of the considered view should not disentitle the assessee tor the benefit of section 54 of the Act. ereby direct the learned Assessing Officer to grant the benefit of section 54 of the Act to the assessee and accordingly delete the addition made by him which was further sustained by the learned Commissioner of Income Since, the assessee has constructed the new residential house within three years from the date of transfer of original asset deposited Rs.1.08 crores in the “capital gain scheme account” with a the claim of deduction u/s. 54 of the Act couldn’t have been denied to the assessee by respectfully following the decision of this Tribunal in ACIT vs Justice T.S. Arunachalam (Supra), deletion of addition made by the AO. In the result, appeal filed by the assessee is allowed. Order pronounced on the 26th day of February, 2025, in Chennai. अ\u0019वाल) MANOJ KUMAR AGGARWAL) /ACCOUNTANT MEMBER Sd/ (एबी टी. (ABY T. VARKEY \tयाियकसद\u0007य/JUDICIAL MEMBER February, 2025. ITA Nos.2239/Chny/2024 [AY 2014-15] AnniruthaRaghuveer bank out of which he has constructed his house. The only small lacuna assessee had made is that the assessee though had placed the entire sale proceeds in the nationalized bank he has not transferred the same in the ·capital gain scheme account'. Considering these facts of the case and the decisions of the Tribunal and the Hon'ble Apex Court cited above, we are of the considered view that for this apse of the assessee, the benefit of section 54 should not be denied. Section 54 of the Act is a beneficial provision and a beneficial interpretation has to be made as far as possible for giving benefit to the assessee. ded to comply with the provisions of section 54 of the Act but has only made a small technical breach which we are of the considered view should not disentitle the assessee tor the benefit of section 54 of the Act. ssessing Officer to grant the benefit of section 54 of the Act to the assessee and accordingly delete the addition made by him which was further sustained by the learned Commissioner of Income Tax Since, the assessee has constructed the new residential house within three years from the date of transfer of original asset and deposited Rs.1.08 crores in the “capital gain scheme account” with a Act couldn’t have respectfully following the decision of this Tribunal in ACIT vs Justice T.S. Arunachalam (Supra), and direct the ed. , in Chennai. Sd/- . वक ) ABY T. VARKEY) /JUDICIAL MEMBER आदेशक\r\u000eितिलिपअ\u0014ेिषत/Copy to 1. अपीलाथ\u0014/Appellant 2. \u0015\u0016थ\u0014/Respondent 3. आयकरआयु\u001b/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय\u0015ितिनिध/DR 5. गाड\u000bफाईल/GF ITA No :: 6 :: Copy to: , Chennai / Madurai / Salem / Coimbatore. ITA Nos.2239/Chny/2024 [AY 2014-15] AnniruthaRaghuveer , Chennai / Madurai / Salem / Coimbatore. "
Other Referred Cases
ACIT vs Justice T.S. Arunachalam, Motilal Padampat Sugar Mill Co. Ltd. Vs. State of Uttar Pradesh & Ors
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