DIGAMBER MADHAV CHAUDHARY THROUGH LEGAL HEIR HARSHAD DIAGMBAR CHAUDHARY,RAIPUR V. DY. COMMISSIONER OF INCOME TAX, CIRCLE 1(1), RAIPUR

ITA 412/RPR/2024

AI Insights

The case revolves around the taxation of Long Term Capital Gain (LTCG) arising from the sale of a capital asset by Digamber Madhav Chaudhary in A.Y. 2016-17. The assessee had deposited a significant amount in the Capital Gain Account Scheme (CGAS) and claimed exemption under Section 54F. Discrepancies arose when the Assessing Officer (A.O.) and the CIT(Appeals) brought an amount of Rs.1 crore, withdrawn in A.Y. 2018-19, to tax, which the assessee contested as double taxation and incorrect timing of tax liability. The Tribunal examined the application of Section 54F(4) and the relevant provisions of the CGAS, ultimately deciding in favor of the assessee by correcting the assessment year for the taxed amount to A.Y. 2019-20.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 35692 (ITAT-RAIPUR)
• Duration Of Justice: 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 09-10-2024
• Assessment Year: 2018-2019
• Appeal Filed On: 07-09-2024
• Other Referred Cases: P.N. Shetty vs. ITO, Avtar Krishen Jalla vs. ITO
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYANKA PATEL
• Assessee Lawyers: PRAVEEN KHANDELWAL
• Keywords: Capital asset; Capital Gains
• Section: 143(3); 143(2); 54F; 139

Judgement Text

"आयकर अपीलȣय अͬधकरण Ûयायपीठ रायपुर मɅ। IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI ARUN KHODPIA, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No. 412/RPR/2024 Ǔनधा[रण वष[ / Assessment Year : 2018-19 Digamber Madhav Chaudhary Through Legal Heir Harshad Digamber Chaudhary Behind Forest House, G.E. Road, Near Rani Sati Mandir, Raipur (C.G.)-492 001 PAN: ACOPC5165G .......अपीलाथȸ / Appellant बनाम / V/s. The Deputy Commissioner of Income Tax, Circle-1(1), Raipur (C.G.) ……Ĥ×यथȸ / Respondent Assessee by : Shri Praveen Khandelwal, CA Revenue by : Dr. Priyanka Patel, Sr. DR सुनवाई कȧ तारȣख / Date of Hearing : 09.10.2024 घोषणा कȧ तारȣख / Date of Pronouncement : 21.10.2024 2 Digamber Madhav Chaudhary through L/h. Harshad Digamber Chaudhary Vs. DCIT, Circle-1(1), Raipur ITA No. 412/RPR/2024 आदेश / ORDER PER RAVISH SOOD, JM: The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 13.08.2024, which in turn arises from the order passed by the A.O under Sec.143(3) r.w.s. 143(3A) & 143(3B) of the Income-tax Act, 1961 (in short ‘the Act’) dated 09.03.2021 for the assessment year 2018-19. The assessee has assailed the impugned order on the following grounds of appeal before us: “1. That on the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in determining the assessed income at Rs.3,31,69,120/- as against returned income of Rs.2,31,69,120/-. 2. That on the facts and in the circumstances of the case and in law, the ld. CIT(A), NFAC has erred in sustaining addition of Rs.1,00,00,000/- made by the assessing officer by applying provisions of section 54F(4) of the Act. 3. That on the facts and circumstances of the case, the action of the Ld. CIT(A) and Ld. Assessing Officer led to double addition of Rs.100,00,000/-on account of withdrawal from capital gain account scheme u/s 54F(4) of the Act. 4. The appellant craves to add, alter or delete any of the grounds of appeal during the course of appellate proceedings.” 2. Succinctly stated, the assessee had e-filed his return of income for A.Y.2018-19 on 29.09.2018, declaring an income of Rs.2,31,69,120/-. Thereafter, the case of the assessee was selected for scrutiny assessment u/s. 143(2) of the Act. 3 Digamber Madhav Chaudhary through L/h. Harshad Digamber Chaudhary Vs. DCIT, Circle-1(1), Raipur ITA No. 412/RPR/2024 3. The A.O. while framing the assessment observed that the assessee had disclosed Long Term Capital Gain (LTCG) of Rs.3,01,89,200/- in his return of income. The A.O. on a perusal of the details observed that the assessee in A.Y.2016-17 had sold a capital asset on which he had earned LTCG of Rs.9,90,32,248/-. It was further observed by him that the assessee had deposited a sum of Rs.6 crore in his bank account opened under the Capital Gain Account Scheme (CGAS), 1988, and had claimed exemption u/s. 54 of the Act. The A.O further observed that the assessee had during the year under consideration, as well as in the immediately preceding and succeeding years made withdrawals from the CGAS account, as under: A.Y Amount withdrawn 2017-18 2 crore 2018-19 3 crore 2019-20 1 crore The A.O. further observed that the assessee had paid taxes on the amounts withdrawn from his CGAS account in the respective years of withdrawal. Also, it was observed by him that the LTCG of Rs.3,01,89,200/-(supra) was partly set off by the assessee against the Short-Term Capital Loss (STCL) of Rs.85,76,594/- that was suffered by him during the subject year and the balance amount of LTCG of Rs.2,16,12,606/- was offered for tax. 4 Digamber Madhav Chaudhary through L/h. Harshad Digamber Chaudhary Vs. DCIT, Circle-1(1), Raipur ITA No. 412/RPR/2024 4. The A.O taking cognizance of the fact that the withdrawals made by the assessee from CGAS account revealed beyond doubt an attempt on his part to defer his tax liability on LTCG, thus, called upon him to put forth an explanation why the balance amount of LTCG of Rs.1 crore lying in his CGAS account and withdrawn by him in the succeeding year, i.e. A.Y.2019-20 may also not be brought to tax during the year under consideration. Although, the assessee tried to impress upon the A.O. that as per the mandate of Section 54F of the Act, the amount withdrawn from the CGAS account was rightly offered for tax in the respective year of withdrawal but the same did not find favor with him. The A.O. observed that the assessee by deferring his tax liability on the LTCG had offered the corresponding tax in installments. The A.O backed by his firm conviction that the assessee had made cash deposits in CGAS account, 1988 only for facilitating deferment of his tax liability, thus, made an addition of Rs. 1 crore (supra) and reworked out the LTCG in the hands of the assessee during the year under consideration at Rs. 4,01,89,200/-. Accordingly, the A.O vide his order passed u/s. 143(3) r.w.s 143(3A) & 143(3B) of the Act, dated 09.03.2021 determined the income of the assessee at Rs. 3,31,69,120/- (after allowing setting off STCL of (-) Rs.85,76,594/-). 5. Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals) but without success. For the sake of clarity, the observations of the CIT(Appeals) are culled out as under: 5 Digamber Madhav Chaudhary through L/h. Harshad Digamber Chaudhary Vs. DCIT, Circle-1(1), Raipur ITA No. 412/RPR/2024 “5. Examination of the issue and decision: 5.1 I have considered the facts of the case, assessment order, submission filed by the appellant and the available documents on record. All the grounds are being dealt together. The appellant, Shri Harshad Chaudhary, legal heir of Late Shri Digambar Madhav Chaudhary, filed an appeal against the assessment order passed under section 143(3) of the Income-tax Act, 1961, by the National e-Assessment Centre for the Assessment Year (AY) 2018-19. The primary issue in dispute is the addition of Rs. 1 crore under the head \"Capital Gains\" made by the Assessing Officer (AO). 5.2 The appellant contended that: 1. The addition of Rs.1 crore to the total income was erroneous as the amount was already taxed in AY 2019-20, leading to double taxation. 2. The AO failed to appreciate that the amount withdrawn from the Capital Gains Account Scheme was correctly offered to tax as per the provisions of section 54F(4) of the Act. 3. The appellant was within his rights to withdraw the amount from the Capital Gains Account Scheme and pay taxes on it in installments. 5.3 Upon perusal of the submissions made by the appellant, the assessment order, and the relevant provisions of the Income-tax Act, 1961, the following observations are made: The appellant had deposited Rs. 6 crore in the Capital Gains Account Scheme in AY 2016-17, claiming exemption under section 54F. The appellant withdrew Rs. 2 crore in AY 2017-18, Rs. 3 crore in AY 2018-19, and the remaining Rs. 1 crore in AY 2019-20. Each withdrawal was offered to tax in the respective years. Section 54F(4) states that if the amount deposited in the Capital Gains Account Scheme is not utilized for the purchase or construction of a residential house within the specified period, it shall be charged to tax as income of the previous year in which the period of three years from the date of transfer of the original asset expires. The appellant correctly offered the withdrawn amounts to tax in the respective years of withdrawal, aligning with the provisions of section 54F(4). The appellant relied on several judicial decisions to support his contention that the unutilized amount should be taxed in the year it was withdrawn. The judgments in the cases of P.N. Shetty vs. ITO 6 Digamber Madhav Chaudhary through L/h. Harshad Digamber Chaudhary Vs. DCIT, Circle-1(1), Raipur ITA No. 412/RPR/2024 and Avtar Krishen Jalla vs. ITO reaffirm that the unutilized amount in the Capital Gains Account Scheme should be taxed in the year it is withdrawn for purposes other than the purchase or construction of a residential house. The addition of Rs. 1 crore in AY 2018-19, which was already taxed in AY 2019-20, indeed results in double taxation, which is against the principles of the Income-tax Act. 5.4 Upon detailed examination of the submissions made by the appellant and the assessment order, the following detailed points are noted: The appellant contended that the withdrawals from the Capital Gains Account Scheme were correctly offered to tax in the respective years of withdrawal. However, the provisions of Section 54F(4) clearly state that the amount not utilized for the specified purpose within the stipulated period should be charged to tax as income of the year in which the period of three years from the date of transfer of the original asset expires. In this case, the original asset was transferred on 29/07/2015, and the period of three years expired on 28/07/2018, which falls in AY 2018-19. Therefore, the entire unutilized amount of Rs. 1 crore should be taxed in AY 2018-19, not AY 2019-20. The AO, in the assessment order, has correctly observed that the appellant withdrew amounts from the Capital Gains Account Scheme and failed to utilize the remaining Rs.1 crore for the construction/purchase of a residential house within the stipulated period. As per the proviso to section 54F(4), the unutilized amount should be charged to tax in the year the period of three years expires, which is AY 2018-19 in this case. Hence, the addition of Rs. 1 crore to the total income for AY 2018-19 is justified. The appellant relied on judicial precedents to argue that the withdrawals should be taxed in the respective years of withdrawal. However, these precedents do not override the clear provisions of section 54F(4), which mandate that the unutilized amount should be taxed in the year the three-year period expires. The AO's action is in line with the legislative intent and the provisions of the Act. The appellant's claim of double taxation is misplaced. The AO's addition of Rs.1 crore in AY 2018-19 is based on the clear provisions of section 54F(4). The appellant's decision to offer the amount to tax in AY 2019-20 does not alter the fact that, as per the Act, the amount should be taxed in AY 2018-19. There is no double taxation as the correct assessment year for taxing the unutilized amount is AY 2018-19. 7 Digamber Madhav Chaudhary through L/h. Harshad Digamber Chaudhary Vs. DCIT, Circle-1(1), Raipur ITA No. 412/RPR/2024 5.5 Based on the detailed analysis of the submissions made by the appellant, the provisions of the Income-tax Act, 1961, and the assessment order, it is concluded that the addition of Rs. 1 crore to the total income for AY 2018-19 by the AO is correct and justified. The appellant's grounds of appeal are dismissed. 5.6 The appeal filed by the appellant is dismissed, and the addition of Rs. 1 crore to the total income for AY 2018-19 is upheld. 6. In the result, appeal of the appellant is Dismissed.” 6. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 7. We have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions. 8. Controversy involved in the present appeal, for which, our indulgence had been sought by the assessee lies in a narrow compass, i.e. as to whether or not both the lower authorities are right in law and facts of the case in bringing the amount of Rs.1 crore, i.e. the amount withdrawn by the assessee from his CGAS account in the succeeding year i.e A.Y 2019-20 to tax during the year under consideration? 9. Before proceeding any further, we deem it fit to cull out Section 54F of the Act, which reads as under: “54F. (1) Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises 8 Digamber Madhav Chaudhary through L/h. Harshad Digamber Chaudhary Vs. DCIT, Circle-1(1), Raipur ITA No. 412/RPR/2024 from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, one residential house in India (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,— (a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45 ; (b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45: Provided that nothing contained in this sub-section shall apply where (a) the assessee,— (i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or (ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or (iii) constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and (b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head \"Income from house property\" Explanation.—For the purposes of this section,— \"net consideration\", in relation to the transfer of a capital asset, means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer.” (2) Where the assessee purchases, within the period of two years after the date of the transfer of the original asset, or constructs, within the period of three years after such date, any residential house, the income from which is chargeable under the head \"Income from house property\", other than the new asset, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a), or, as the case may be, clause (b), of sub-section (1), shall be deemed to be income chargeable under the head \"Capital gains\" relating to long-term capital assets of the previous year in which such residential house is purchased or constructed. (3) Where the new asset is transferred within a period of three years from the date of its purchase or, as the case may be, its construction, the amount of capital gain arising from the transfer of the original asset not charged under section 9 Digamber Madhav Chaudhary through L/h. Harshad Digamber Chaudhary Vs. DCIT, Circle-1(1), Raipur ITA No. 412/RPR/2024 45 on the basis of the cost of such new asset as provided in clause (a) or, as the case may be, clause (b), of sub-section (1) shall be deemed to be income chargeable under the head \"Capital gains\" relating to long-term capital assets of the previous year in which such new asset is transferred. (4) The amount of the net consideration which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit ; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset : Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,— (i) the amount by which— (a) the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of the new asset as provided in clause (a) or, as the case may be, clause (b) of sub-section (1), exceeds (b) the amount that would not have been so charged had the amount actually utilised by the assessee for the purchase or construction of the new asset within the period specified in sub-section (1) been the cost of the new asset, shall be charged under section 45 as income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and (ii) the assessee shall be entitled to withdraw the unutilised amount in accordance with the scheme aforesaid.” (emphasis supplied by us) It transpires on a careful perusal of the aforesaid statutory provision that the same contemplates that the net consideration received by the assessee 10 Digamber Madhav Chaudhary through L/h. Harshad Digamber Chaudhary Vs. DCIT, Circle-1(1), Raipur ITA No. 412/RPR/2024 on transfer of its capital asset, which is not appropriated by him towards the purchase of the “new asset” made within one year before the date on which the transfer of the original asset took place; or which is not utilized by him for the purchase or construction of the “new asset” before the date of furnishing the return of income u/s. 139 of the Act, shall be deposited by him before furnishing such return of income not later than the “due date” applicable in his case for furnishing the return of income under sub-section (1) of Section 139 of the Act in Capital Gain Account Scheme, 1988. In case, the amount deposited by the assessee in CGAS, 1988 is not utilized wholly or partly for the purchase or construction of the “new asset” within the period specified, then the unutilized amount shall be charged u/s. 45 of the Act as income of the previous year, in which the period of three years from the date of the transfer of the original asset expires. Accordingly, a perusal of Section 54F of the Act, reveals that though the assessee is entitled to withdraw the unutilized amount in accordance with the CGAS, 1988, but the same would be liable to be assessed in his hand u/s. 45 of the Act during the previous year, in which the period of three years from the date of the transfer of the original asset expires. 10. Although the Ld. AR had tried to impress upon us that as the withdrawals made from the CGAS account, 1988 had been carried out by the assessee with the approval of the A.O, and thus, had rightly been offered for tax in the respective years of withdrawals but we are unable to concur 11 Digamber Madhav Chaudhary through L/h. Harshad Digamber Chaudhary Vs. DCIT, Circle-1(1), Raipur ITA No. 412/RPR/2024 with the same. On a perusal of the CGAS, 1988 (as had been placed on record), we find that Para-9 lays down the procedure, as per which, the amount deposited by the assessee in “Account-B” and “Account-A” of the said scheme can be withdrawn for utilizing the same for the specified purpose, viz. purchase/construction of the new property. Further, Para- 13(1) of the CGAS, 1988 provides that the assessee remains at a liberty to close his account after obtaining the approval of the Assessing Officer (A.O) who has jurisdiction over his case. However, the CGAS, 1988 does not provide for the manner in which the premature withdrawals of the unutilized amount lying in the CGAS account is to be brought to tax. Rather, it is the “1st proviso” to Section 54F(4) of the Act, which contemplates that in case an amount deposited in the CGAS, 1988 is not utilized wholly or partly for the purchase or construction of the “new asset” within the specified period, then the amount deposited in the CGAS, 1988 shall be brought to tax in the hands of the assessee u/s. 45 of the Act, as his income of the previous year, in which the period of three years from the date of the transfer of the original asset expires. 11. As per the aforesaid mandate of law, the amount parked by the assessee in the CGAS account, which had not been utilized for the purchase or construction of the new residential house within the prescribed period, has to be brought to tax in the previous year, in which the period of three years from the date of the transfer of the original asset expires. As in the 12 Digamber Madhav Chaudhary through L/h. Harshad Digamber Chaudhary Vs. DCIT, Circle-1(1), Raipur ITA No. 412/RPR/2024 present case before us, the assessee had transferred the “capital asset: i.e the unlisted shares and securities of HDIPL on 29.07.2015 for a consideration of Rs.9,54,14,386/- [Rs.7,26,51,511/- (+) Rs. 2,27,62,875/-] and had, inter alia, claimed exemption u/s. 54F of the Act of Rs.6 crore that was deposited by him in Capital Gain Account Scheme, 1988, therefore, the period of three years from the date of transfer of the aforesaid “original asset” expires on 29.07.2018, i.e. during the period relevant to A.Y.2019-20. Accordingly, we are of the view that as per the mandate of the “1st proviso” to Section 54F(4) of the Act, the amount that was not utilized by the assessee for the specified purpose, for which, the same was deposited in CGAS, 1988, i.e. for the purchase or construction of a residential house can only be brought to tax in Assessment Year 2019-20. 12. As the assessee by preferring the present appeal has sought our indulgence on the limited issue, i.e. as to whether or not, the A.O/CIT(Appeals) are right in law and facts of the case in treating the amount of Rs.1 crore (supra), which during the subject year was lying in the assessee’s CGAS account, 1988 and was withdrawn by him in the immediately succeeding year, i.e. A.Y.2019-20, as his income under the head LTCG for the year under consideration i.e A.Y 2018-19 therefore, we confine and circumscribe our adjudication to the said extent. As per our aforesaid deliberations the amount of Rs.1 crore (supra), i.e. the unutilized amount lying in the assessee’s CGAS account, 1988 that was withdrawn by 13 Digamber Madhav Chaudhary through L/h. Harshad Digamber Chaudhary Vs. DCIT, Circle-1(1), Raipur ITA No. 412/RPR/2024 him in the immediately succeeding year, i.e. A.Y.2019-20, as per the mandate of the “1st proviso” to Section 54F(4) of the Act could have only be brought to tax in the said latter year. 13. We, thus, are unable to concur with the view taken by the lower authorities who had brought the amount of Rs.1 crore (supra) to tax as LTCG in the hands of the assessee u/s. 45 of the Act during the year under consideration, i.e A.Y 2018-19. We, thus, in terms of our aforesaid observations vacate the addition of LTCG of Rs.1 crore made by the A.O. Thus, the Grounds of appeal Nos. 2 & 3 raised by the assessee are allowed in terms of our aforesaid observations. 14. Grounds of appeal Nos. 1 & 4 being general in nature are dismissed as not pressed. 15. In the result, appeal of the assessee is allowed in terms of our aforesaid observations. Order pronounced in open court on 21st day of October, 2024. Sd/- Sd/- ARUN KHODPIA RAVISH SOOD (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) रायपुर/ RAIPUR ; Ǒदनांक / Dated : 21st October, 2024. **#SB, Sr. PS आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant. 14 Digamber Madhav Chaudhary through L/h. Harshad Digamber Chaudhary Vs. DCIT, Circle-1(1), Raipur ITA No. 412/RPR/2024 2. Ĥ×यथȸ / The Respondent. 3. The CIT(Appeals)-1, Raipur (C.G.) 4. The Pr. CIT, Raipur-1 (C.G) 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, रायपुर बɅच, रायपुर / DR, ITAT, Raipur Bench, Raipur. 6. गाड[ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलȣय अͬधकरण, रायपुर / ITAT, Raipur. "