Shri Bhupesh Navinchandra Raval, Ahmedabad V. ITO, Ward-5(3)(3), Ahmedabad

ITA 2287/AHD/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6512 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 12-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: NIRAV SHAH
• Keywords: Capital asset; Question of law; Benefit of exemption; Capital Gains
• Section: 54F; 139(1); 54; 139

Judgement Text

, . . , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ I.T.A. NO.2287/AHD/2017 ( / ASSESSMENT YEAR : 2013-14) SHRI BHUPESH NAVINCHANDRA RAVAL 302, SHREEJI VILLA APARTMENT SHYAMAL CROSS ROAD SATELLITE AHMEDABAD-380 015 / VS. THE ITO WARD-5(3)(3) AHMEDABAD ./ ./ PAN/GIR NO. : ABJPR 0165 M ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI NIRAV SHAH, AR / RESPONDENT BY : SHRI ANAND KUMAR, SR.DR ! / DATE OF HEARING 22/02/2019 '#$% ! / DATE OF PRONOUNCEMENT 22/02/2019 / O R D E R THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE O RDER OF LD.COMMISSIONER OF INCOME TAX(APPEALS), AHMEDABAD-5 [CIT(A) IN SHORT] DATED 14/07/2017 PASSED FOR ASSESSMENT YEAR (AY) 2013-14. 2. THOUGH THE ASSESSEE HAS TAKEN TWO GROUNDS OF AP PEAL, BUT HIS GRIEVANCE REVOLVES AROUND A SINGLE ISSUE; NAMELY, L D.CIT(A) HAS ERRED IN ITA NO.2287/AHD /2017 SHRI BHUPESH NAVINCHANDRA RAVAL VS. ITO ASST.YEAR 2013-14 - 2 - CONFIRMING DISALLOWANCE OF EXEMPTION AMOUNTING TO R S.13,62,433/- CLAIMED U/S.54(1) OF THE INCOME TAX ACT, 1961 (HERE INAFTER REFERRED TO AS 'THE ACT'). 3. THE REGISTRY HAS POINTED OUT THAT APPEAL IS TIM E-BARRED BY 30 DAYS. IN ORDER TO EXPLAIN THE OBJECTION OF REGISTR Y, ASSESSEE HAS SUBMITTED A LETTER CONTENDING THEREIN THAT WHILE FI LLING SERIAL NO.9 OF FORM NO.36, ASSESSEE HAS COMMITTED A TYPOGRAPHICAL ERROR ABOUT THE DATE OF COMMUNICATION OF CIT(A)S ORDER. HE HAS WRITTEN 14/07/2017 AS RECEIPT OF ORDER OF CIT(A), WHEREAS, IN FACT, IT WAS RECEIVED ON 14/08/2017. NECESSARY EVIDENCE HAS BEEN SUBMITTED TO THIS EFFECT. 4. CONSIDERING THE EXPLANATION OF THE ASSESSEE, I A M OF THE VIEW THAT THE APPEAL IS NOT TIME-BARRED. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAS FILED HIS RETURN OF INCOME ON 07/09/2013 ELECTRONICALLY DECLARING TO TAL INCOME AT RS.1,98,970/-. THE CASE OF THE ASSESSEE WAS SELECT ED FOR SCRUTINY ASSESSMENT AND NOTICE U/S.143(2) WAS ISSUED AND SER VED UPON THE ASSESSEE. 6. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED THAT AS SESSEE WAS CO-OWNER ALONG WITH 32 PERSONS OF AN IMMOVABLE PROPERTY. IT WAS SOLD ON ITA NO.2287/AHD /2017 SHRI BHUPESH NAVINCHANDRA RAVAL VS. ITO ASST.YEAR 2013-14 - 3 - 28/03/2013 FOR A SUM OF RS.9.83 CRORES. THE SHARE OF THE ASSESSEE OUT OF THE SALE CONSIDERATION WAS RS.21,09,437/-. THE ASS ESSEE CLAIMED EXEMPTION U/S.54 OF THE ACT ON THE GROUND THAT HE H AS PURCHASED A NEW RESIDENTIAL HOUSE SITUATED AT FLAT NO.302, SECOND F LOOR, SHREEJI VILLA FLATS, VEJALPUR, AHMEDABAD FOR RS.49,00,000/-. THIS HOUSE WAS PURCHASED ON 18/03/2014 IN JOINT CAPACITY WITH HER WIFE. THE LD.ASSESSING OFFICER HAS DENIED THE EXEMPTION CLAIM ED BY THE ASSESSEE ON THE GROUND THAT THE HOUSE WAS NOT PURCHASED WITH IN ONE YEAR BEFORE THE DATE OF SALE I.E. IT OUGHT TO HAVE BEEN PURCHAS ED WITHIN ONE YEAR BEFORE 28/03/2013. HE COULD PURCHASE A HOUSE WITHI N TWO YEARS AFTER THE DATE OF SALE BUT, IN THAT CASE, AS PER SUB-SECTION (2) OF SECTION 54 OF THE ACT, HE HAS TO DEPOSIT THE SALE CONSIDERATION RECEI VED BY HIM IN AN ACCOUNT BEFORE THE DUE DATE OF FILING RETURN U/S.13 9(1) OF THE ACT. ACCORDING TO THE ASSESSING OFFICER, THOUGH ASSESSEE HAS PURCHASED THE HOUSE WITHIN TWO YEARS FROM THE DATE OF SALE BUT F AILED TO DEPOSIT THE AMOUNTS IN THE SPECIFIED ACCOUNT NOTIFIED BY THE CE NTRAL GOVERNMENT AND THEREFORE HE HAS NOT COMPLIED WITH CONDITIONS ENUME RATED IN SUB- SECTION(2) OF SECTION 54 OF THE ACT. THE LD.AO AC CORDINGLY DISALLOWED THE EXEMPTION CLAIMED BY THE ASSESSEE U/S.54 OF THE ACT. 7. ON APPEAL TO THE LD.CIT(A), DID NOT BRING ANY RE LIEF TO THE ASSESSEE. ITA NO.2287/AHD /2017 SHRI BHUPESH NAVINCHANDRA RAVAL VS. ITO ASST.YEAR 2013-14 - 4 - 8. BEFORE ME, LD.COUNSEL FOR THE ASSESSEE CONTENDED THAT IDENTICAL SITUATION HAS BEEN CONSIDERED BY THE DIVISION BENCH OF ITAT CHANDIGARH IN THE CASE OF MRS. SEEMA SABHARWAL VS. ITO WARD-4. HE PLACED ON RECORD COPY OF THE TRIBUNALS ORDER PASSED IN ITA N O.272/CHD/2017. HE POINTED OUT THAT ITAT HAS BASED ITS ORDER ON THE DE CISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. K.RAMAC HANDRA RAO AND OTHER ORDERS OF THE ITAT BOMBAY, CALCUTTA, ETC. HE ALSO PLACED ON RECORD COPY OF THE DECISION OF HONBLE KARNATAKA HI GH COURT IN THE CASE OF CIT VS. K.RAMACHANDRA RAO REPORTED AT (2015) 277 CTR 522 (KAR.). 9. ON THE STRENGTH OF THESE TWO DECISIONS, HE CONTE NDED THAT CONDITIONS PROVIDED IN SUB-SECTION(2) OF SECTION 54 ARE OBLIGATORY AND NOT MANDATORY. THE CONDITIONS PROVIDED IN THIS SUB-SEC TION WERE FOR THE OBJECTIVE TO KEEP A TRACK ON THE INTENTION OF THE A SSESSEE WHETHER HE IS GOING TO PURCHASE A NEW HOUSE FROM THE SALE PROCEED S OR NOT. BASIC EXEMPTION HAS BEEN GRANTED IN SUB-SECTION (1) OF SE CTION 54 OF THE ACT AND ASSESSEE HAS FULFILLING ALL THE CONDITIONS. 10. ON THE OTHER HAND, LD.DR RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 11. I HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AN D HAVE GONE THOUGH THE RECORD CAREFULLY. A PERUSAL OF THE ORDER OF IT AT CHANDIGARH WOULD ITA NO.2287/AHD /2017 SHRI BHUPESH NAVINCHANDRA RAVAL VS. ITO ASST.YEAR 2013-14 - 5 - REVEAL THAT ITAT HAS CONSIDERED AN IDENTICAL SITUAT ION IN THE ABOVE CASE. IT HAS EXPLAINED THE SCOPE OF SECTION(2) OF SECTION 54 OF THE ACT ON THE STRENGTH OF VARIOUS DECISIONS INCLUDING THE DECISIO N OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF K.RAMACHANDRA RAO AS WELL IN THE CASE OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. SMT.BHARATI C.KOTHARI (2000) 160 CTR 165. I AM OF THE VIEW TH AT DIVISION BENCH OF THE ITAT HAS MADE A LUCID ENUNCIATION OF LAW WHILE EXPLAINING THE SCOPE OF SECTION 54(2). I CANNOT DO BETTER THAN TO EXTRA CT THE DISCUSSION MADE BY THE ITAT WHICH READ AS UNDER: 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND H AVE ALSO GONE THROUGH T H E R E C O R D S . A D M I T T E D L Y, T H E C A P I T A L G A I N H A D A R I S E N T O T H E A S S E S S E E O N 17.9.2012 AND THE AMOUNT WAS PA ID BY THE ASSESSEE TO THE BUILDER FOR P U R C H A S E O F A N E W H O U S E O N 9 . 9 . 2 0 1 4 I . E . W I T H I N 2 YE A R S O F T H E D A T E O F T R A N S A C T I O N O F S A L E O F T H E H O U S E P R O P E R T Y. T H E A S S E S S I N G O F F I C E R DENIED THE CLAIM BECAUSE AS PER THE AGREEMENT WITH THE BUILDER, THE H O U S E W A S T O B E C O M P L E T E D W I T H I N 4 YE A R S , W H E R E A S , A S P E R T H E PROVISIONS OF SECTION 54 OF THE ACT, THE HOUSE SHOULD HAVE BEEN C O N S T R U C T E D W I T H I N 3 YE A R S F R O M T H E D A T E O F R E C E I P T O F T H E C A P I T A L GAINS. THOUGH THE ASSESSEE HAS RELIED UPON VARIOUS CASES W HEREIN LIBERAL CONSTRUCTION HAS BEEN TAKEN BY THE TRIBUNAL AS WELL AS VARIOUS HIGH COURTS WHICH IS IN CONSONANCE OF THE OBJECT FOR WHICH THE EXEMPTION PROVISIONS OF SECTIONS 54 & 54F OF THE ACT HAVE BEEN ENACTED I.E TO PROMOTE PURCHASE AND CONSTRUCTI ON OF RESIDENTIAL HOUSES. VARIOUS COURTS HAVE HELD THAT IF ASSESSEE INVESTS THE AMOUN T IN PURCHASE / CONSTRUCTION OF BUILDING WITHIN THE STIPULATED PERIOD AND THE CONST RUCTION IS IN PROGRESS, THEN THE BENEFITS OF EXEMPTIONS, CANNOT BE DENIED TO THE ASS ESSEE. RELIANCE IN THIS RESPECT CAN BE PLACED ON THE DECISION OF THE JURISDICTIONAL HIG H COURT OF PUNJAB & H A R YA N A I N T H E C A S E O F ' M R S . M A D H U K A U L V S . C I T ' ITA NO. 89 OF 1999 VIDE ORDER DATED 17.1.2014 AND FURTHER ON THE DECISION O F THE HON'BLE CALCUTTA HIGH COURT IN 'CIT S BHARATI C.KOTHARI' (2000) 160 CTR 0 165 AND ALSO ON THE DECISIONS OF THE VARIOUS COORDINATE BENCHES OF THE TRIBUNAL. WE HAVE ALSO GONE THROUGH THE PROVISIONS OF SECTIONS 54 & 54F OF THE ACT AND WE DO NOT FIND ANY SUCH DISTINCTION AS DRAWN BY THE CIT(A) OR ANY SUCH DISSIMILARITY IN TH E WORDINGS OF THE PROVISIONS FROM WHICH ANY SUCH CONCLUSION CAN BE DRAWN THAT U/S 54F OF THE ACT THE INVESTMENT IS TO ITA NO.2287/AHD /2017 SHRI BHUPESH NAVINCHANDRA RAVAL VS. ITO ASST.YEAR 2013-14 - 6 - BE CONSIDERED AND / OR THAT U/S 54 OF THE ACT, THE HOUSE MUST BE COMPLETED WITHIN THE STIPULATED PERIOD O F T H R E E YE A R S O R T H A T I N V E S T M E N T I S N O T B E C O N S I D E R E D . W E M A Y FURTHER POINT OUT HERE THAT EVE N THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT IS IN RELATION TO THE PROVISION S OF S E C T I O N 5 4 O N L Y, WHEREIN, THE HON'BLE CALCUTTA HIGH COURT HAS CATEGORICALLY H ELD THAT IF AGREEMENT FOR PURCHASE OF RESIDENTIAL FLAT IS MADE AND THE ENTIRE A M O U N T I S P A I D W I T H I N T H R E E YE A R S F R O M T H E D A T E O F S A L E , T H E B A S I C REQUIREMENT FOR CLAIMING RELIEF U/S 54(1) OF THE ACT IS TO BE TAKEN AS FULFI LLED. THE ISSUE, THUS, IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE VARIOUS DE CISIONS OF THE HON'BLE HIGH COURT. 5. NOW THE SECOND POINT ON WHICH CLAIM HAS BEEN DEN IED TO THE ASSESSEE IS THAT THE ASSESSEE DID NOT DEPOSIT THE AMOUNT OF SALE RECEIPT IN THE CAPITAL GAINS ACCOUNT SCHEME BEFORE THE DUE DATE FOR FILING OF RETURN U/S 139(1) OF THE ACT. 6. THE LD. COUNSEL FOR THE ASSESSEE IN THIS RESPECT HAS SUBMITTED THAT SINCE THE PROVISIONS OF SECTION 54 ARE BENEFICIAL PROVISIONS PROMOTING PURCHASE / CONS TRUCTION OF RESIDENTIAL HOUSES, HENCE, LIBERAL CONSTRUCTION SHOULD BE TAKEN TO THE PROVISIONS. HE HAS FURTHER SUBMITTED THAT SINCE THE ASSESSEE HA D COMPLIED WITH THE INVESTMENT OF THE AMOUNT EARNED IN PURCHASE / CONSTRUCTION OF OTH ER HOUSE, WITHIN THE STIPULATED PERIOD, HENCE, SUBSTANTIAL COMPLIANCE HAS BEEN MADE BY THE ASSESSEE. 7. ON THE OTHER HAND, LD. DR WHILE REFERRING TO THE PROVISIONS OF SECTION 54 OF THE ACT, HAS SUBMITTED THAT THE ASSESSEE WAS REQUIRED T O DEPOSIT THE CAPITAL GAINS IN THE RELEVANT SCHEME AND SINCE THE SAID REQUIREMENT UNDE R THE PROVISIONS WAS NOT COMPLIED WITH, HENCE, THE ASSESSEE IS NOT ENTITLED TO CLAIM FOR THE BENEFIT UNDER THE EXEMPTION PROVISIONS OF SECTION 54 OF THE ACT. 8. WE HAVE HEARD THE RIVAL CONTENTIONS. BEFORE DELI BERATING FURTHER ON THIS ISSUE WE WOULD LIKE TO REPRODUCE THE RELEVANT PROVISIONS OF SECTION 54 OF THE ACT HEREIN UNDER:- 'PROFIT ON SALE OF PROPERTY USED FOR RESIDENCE. 54. (1) SUBJECT TO THE PROVISIONS OF SUB-SECTION (2 ), WHERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, TH E CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG-TERM CAPITAL ASSET, BEING BUILDI NGS OR LANDS APPURTENANT THERETO, AND BEING A RESIDENTIAL HOUSE, THE INCOME OF WHICH IS CHARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' (HEREAFTER IN THIS SEC TION 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, THEN, INSTEAD OF THE CAPITAL ITA NO.2287/AHD /2017 SHRI BHUPESH NAVINCHANDRA RAVAL VS. ITO ASST.YEAR 2013-14 - 7 - GAIN BEING CHARGED TO INCOME-TAX AS INCOME OF THE P REVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE, IT SHALL BE DEALT WITH IN ACCO RDANCE WITH THE FOLLOWING PROVISIONS OF THIS SECTION, THAT IS TO SAY,-- (I) IF THE AMOUNT OF THE CAPITAL GAIN IS GREATER TH AN THE COST OF THE RESIDENTIAL HOUSE SO PURCHASED OR CONSTRUCTED (HEREAFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET), THE DIFFERENCE BETWEEN THE AMOUNT OF THE CAPITAL GAIN A ND THE COST OF THE NEW ASSET SHALL BE CHARGED UNDER SECTION 45 AS THE INCOME OF THE PR EVIOUS YEAR; AND FOR THE PURPOSE OF COMPUTING IN RESPECT OF THE NEW ASSET ANY CAPITA L GAIN ARISING FROM ITS TRANSFER WITHIN A PERIOD OF THREE YEARS OF ITS PURCHASE OR C ONSTRUCTION, AS THE CASE MAY BE, THE COST SHALL BE NIL; OR (II) IF THE AMOUNT OF THE CAPITAL GAIN IS EQUAL TO OR LESS THAN THE COST OF THE NEW ASSET, THE CAPITAL GAIN SHALL NOT BE CHARGED UNDER SECTION 45; AND FOR THE PURPOSE OF COMPUTING IN RESPECT OF THE NEW ASSET ANY CAPITAL G AIN ARISING FROM ITS TRANSFER WITHIN A PERIOD OF THREE YEARS OF ITS PURCHASE OR CONSTRUC TION, AS THE CASE MAY BE, THE COST SHALL BE REDUCED BY THE AMOUNT OF THE CAPITAL GAIN. (2) THE AMOUNT OF THE CAPITAL GAIN WHICH IS NOT APP ROPRIATED 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 TH E 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 I NCOME 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 T HE 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 FO R 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 SU B-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 NOT SO UTILISED SHALL BE CHARGED UND ER SECTION 45 AS THE INCOME OF THE PREVIOUS YEAR IN WHICH THE PERIOD OF THREE YEARS FR OM THE DATE OF THE TRANSFER OF THE ORIGINAL ASSET EXPIRES; AND ITA NO.2287/AHD /2017 SHRI BHUPESH NAVINCHANDRA RAVAL VS. ITO ASST.YEAR 2013-14 - 8 - (II) THE ASSESSEE SHALL BE ENTITLED TO WITHDRAW SUC H AMOUNT IN ACCORDANCE WITH THE SCHEME AFORESAID. EXPLANATION.--[OMITTED BY THE FINANCE ACT , 1992, W.E.F. 1.4.1993' 9. A PERUSAL OF THE ABOVE REPRODUCED PROVISIONS OF SECTION 54 OF THE ACT REVEALS THAT IT DEALS WITH THE CAPITAL GAINS EARNED ON SALE OF P ROPERTY USED FOR RESIDENCE AND AS PER THE PROVISIONS OF SUB SECTION (1) OF SECTION 54 OF THE ACT, IF AN ASSESSEE, AFTER SALE OF HIS R E S I D E N T I A L P R O P E R T Y, H A S W I T H I N A P E R I O D O F O N E YE A R B E F O R E O R T W O Y E A R S A F T E R T H E D A T E O F S U C H T R A N S F E R O R W I T H I N A P E R I O D O F T H R E E YE A R S , CONSTRUCTS A R ESIDENTIAL HOUSE, THE CAPITAL GAINS WILL NOT BE CHARGED TO TAX UPTO THE EXTENT OF THE AMOUNT SPENT ON THE PURCHASE OR CONSTRUCTION OF RESIDENTIAL HOUSE. SUB SECTION (1) OF SECTION 54 OF THE ACT IS A SUBSTANTIVE PROVISION ENACTED WITH THE PURPOSE OF P ROMOTING PURCHASE / CONSTRUCTION OF RESIDENTIAL HOUSES. HOWEVER, SUB SECTION (2) OF SECTION 54 IS AN ENABLING PROVISION WHICH PROVIDES THAT THE ASSESSEE SHOULD DEPOSIT THE AMOUNT EARNED FROM CAPITAL GAINS IN A SCHEME FRAMED IN THIS RESPECT BY THE CENTRAL G OVERNMENT TILL THE AMOUNT IS INVESTED FOR THE PURCHASE / CONSTRUCTION OF THE RES IDENTIAL HOUSE. THIS PROVISION, IN OUR VIEW, HAS BEEN ENACTED TO GATHER THE REAL INTEN TION OF THE ASSESSEE TO INVEST THE AMOUNT IN PURCHASE / CONSTRUCTION OF A RESIDENTIAL HOUSE. AS PER THE PROVISIONS OF SUB S E C T I O N ( 1 ) O F S E C T I O N 5 4 , T H E A S S E S S E E H A S B E E N G I V E N T W O YE A R S T I M E T O P U R C H A S E A N D T H R E E YE A R S T I M E T O C O N S T R U C T A R E S I D E N T I A L H O U S E SUBSEQUENT TO THE DATE OF TRANSFER OF THE ORIGINAL ASSET. AT THE TIME OF THE ASSESSMENT PROCEEDINGS, SUBSEQUENT TO T HE DATE OF TRANSFER OF THE ORIGINAL ASSET, AN ASSESSEE MAY CLAIM THAT HE WILL INVEST TH E AMOUNT IN PURCHASE / CONSTRUCTION OF A NEW HOUSE, THOUGH NOT HAVE TAKEN ANY STEPS TOW ARDS THAT DIRECTION TILL THEN. IN SUCH A SCENARIO, THERE SHOULD NOT BE ANY METHOD OR PROCEDURE BEFORE THE ASSESSING OFFICER THROUGH WHICH HE COULD GATHER THE REAL INTE NTION OF THE ASSESSEE, AS THE ASSESSEE, BY SAYING SO, MAY DELAY THE TAXATION OF T HE CAPITAL GAINS E A R N E D A T L E A S T F O R T H R E E YE A R S F R O M T H E D A T E O F T R A N S F E R O F O R I G I N A L ASSET . HENCE, SUB SECTION (2) PUTS AN EMBARGO TO THE ASSES SEE TO CASUALLY CLAIM THE BENEFIT OF SECTION 54 AT THE TIME OF ASSESSMENT, WITHOUT BEING ANY ACT D ONE TO SHOW HIS REAL INTENTION OF PURCHASING / CONSTRUCTING A NEW RESIDE NTIAL UNIT. SUB SECTION (2), THEREFORE, GOVERNS THE CONDUCT OF THE ASSESSEE THAT THE ASSESSEE SHOULD PUT THE AMOUNT OF CAPITAL GAINS IN AN ACCOUNT IN ANY SUCH BANK OR INSTITUTION SPECIFICALLY NOTIFIED IN THIS RESPECT AND THAT THE RETURN OF THE ASSESSEE SH OULD BE ACCOMPANIED BY SUBMITTING A PROOF OF SUCH DEPOSIT, HENCE, SUB SECTION (2) IS AN ENABLING PROVISION WHICH GOVERNS THE ACT OF THE ASSESSEE, WHO INTENDS TO CLAIM THE B ENEFIT OF THE EXEMPTION PROVISIONS OF SECTION 54 . THE REAL PURPOSE OF THE ENABLING PROVISION IS THE COMPLIANCE OF THE SUBSTANTIAL PROVISION OF SUB SECTION (1) TO SECTION 54 OF THE ACT. SUB SECTION (2), IN ITA NO.2287/AHD /2017 SHRI BHUPESH NAVINCHANDRA RAVAL VS. ITO ASST.YEAR 2013-14 - 9 - FACT, REGULATES THE PROCEDURE FOR THE SUBSTANTIVE R IGHTS OF THE EXEMPTION PROVISIONS U/S 54 OF THE ACT. THIS ENABLING SECTION, IN OUR VI EW, CANNOT ABRIDGE OR MODIFY THE SUBSTANTIVE RIGHTS GIVEN VIDE SUB SECTION (1) OF SECTION 54 OF THE ACT, OTHERWISE, THE REAL PURPOSE OF SUBSTANTIVE PROVISION I.E. SUB SECT ION (1) WILL GOT DEFEATED. THE PRIMARY GOAL OF EXEMPTION PROVISIONS OF SECTION 54 IS TO PROMOTE HOUSING. THE PROCEDURAL AND ENABLING PROVISIONS OF SUB-SECTION ( 2) THUS CANNOT BE STRICTLY CONSTRUED TO IMPOSE STRICT LIMITATIONS ON THE ASSES SEE AND IN DEFAULT THEREOF TO DENY HIM THE BENEFIT OF EXEMPTION PROVISIONS. IN OUR VIE W, IF THE ASSESSEE AT THE TIME OF ASSESSMENT PROCEEDINGS, PROVES THAT HE HAS ALREADY INVESTED THE CAPITAL GAINS ON THE PURCHASE / CONSTRUCTION OF THE NEW RESIDENTIAL HOUS E WITHIN THE STIPULATED PERIOD, THE BENEFIT UNDER THE SUBSTANTIVE PROVISIONS OF SECTION 54(1) CANNOT BE DENIED TO THE ASSESSEE. ANY DIFFERENT OR OTHERWISE STRICT CONSTRU CTION OF SUB SECTION (2), IN OUR VIEW, WILL DEFEAT THE VERY PURPOSE AND OBJECT OF THE EXEM PTION PROVISIONS OF SECTION 54 OF THE ACT. OUR ABOVE VIEW, IS FORTIFIED WITH THE DECI SION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SHRI K RAMACHANDRA RAO , ITA NO. 47 OF 2014 C/W ITA NO. 46/2014, ITA NO. 494/2013 AND ITA NO. 495/2013, DECIDED VIDE ORDER DATED 14.7.2014 WHEREIN THE HON'BLE HIGH COURT HAS DIRECT LY DEALT WITH THIS ISSUE WHILE INTERPRETING THE IDENTICAL WORDED PROVISIONS OF SECTION 54F(2) OF THE ACT. THE FOLLOWING QUESTION OF LAW WAS FRAMED BY THE HON'BLE HIGH COURT ON THIS ISSUE:- '2) WHEN THE ASSESSEE INVESTS THE ENTIRE SALE CONSI DERATION IN CONSTRUCTION OF A RESIDENTIAL HOUSE WITHIN THREE YEARS FROM THE DATE OF TRANSFER CAN HE BE DENIED EXEMPTION UNDER SECTION 54F ON THE GROUND THAT HE D ID NOT DEPOSIT THE SAID AMOUNT IN CAPITAL GAINS ACCOUNT SCHEME BEFORE THE DUE DATE PRESCRIBED UNDER SECTION 139(1) OF THE IT ACT?' 10. THE SAID QUESTION HAS BEEN ANSWERED BY THE HON' BLE HIGH COURT IN THE FOLLOWING WORDS:- 'AS IS CLEAR FROM SUB SECTION (4) IN THE EVENT OF T HE ASSESSEE NOT INVESTING THE CAPITAL GAINS EITHER IN PURCHASING THE RESIDENTIAL HOUSE OR IN CONSTRUCTING A RESIDENTIAL HOUSE WITHIN THE PERIOD STIPULATED IN SECTION 54 F(1), IF THE ASSESSEE WANTS THE BENEFIT OF SECTION 54 F, THEN HE SHOULD DEPOSIT THE SAID CAPIT AL GAINS IN AN ACCOUNT WHICH IS DULY NOTIFIED BY THE CENTRAL GOVERNMENT. IN OTHER W ORDS IF HE WANT OF CLAIM EXEMPTION FROM PAYMENT OF INCOME TAX BY RETAINING T HE CASH, THEN THE SAID AMOUNT IS TO BE INVESTED IN THE SAID ACCOUNT. IF THE INTENTIO N IS NOT TO RETAIN CASH BUT TO INVEST IN CONSTRUCTION OR ANY PURCHASE OF THE PROPERTY AND IF SUCH INVESTMENT IS MADE WITHIN THE PERIOD STIPULATED THEREIN, THEN SECTION 54 F(4) IS NOT AT ALL ATTRACTED AND THEREFORE THE CONTENTION THAT THE ASSESSEE HAS NOT DEPOSITED THE AMOUNT IN THE BANK ACCOUNT AS ITA NO.2287/AHD /2017 SHRI BHUPESH NAVINCHANDRA RAVAL VS. ITO ASST.YEAR 2013-14 - 10 - STIPULATED AND THEREFORE, HE IS NOT ENTITLED TO THE BENEFIT EVEN THOUGH HE HAS INVESTED THE MONEY IN CONSTRUCTION IS ALSO NOT CORRECT.' 11. THOUGH THE HON'BLE HIGH COURT IN RELATION TO TH E ISSUE OF CLAIM OF EXEMPTION U/S 54F OF THE ACT HAS HELD THAT WHAT MATTERS IS THE IN TENTION OF THE ASSESSEE TO PURCHASE / CONSTRUCT NEW HOUSE. THE HON'BLE KARNATAKA HIGH COU RT HAS HELD THAT IF THE INTENTION IS NOT TO RETAIN CASH BUT TO INVEST IN CONSTRUCTION OR ANY PURCHASE IN PROPERTY AND IF SUCH INVESTMENT IS MADE WITHIN THE PERIOD STIPULATE D THEREIN, THAN SECTION 54F(4) IS NOT AT ALL ATTRACTED. WE MAY CLARIFY HERE THAT PROV ISIONS OF SECTION 54(2) ARE ALMOST IDENTICALLY WORDED AS IN S E C T I O N 5 4 F ( 4 ) O F T H E A C T . A D M I T T E D L Y, I N T H I S C A S E , T H E A S S E S S E E H A S INVES TED THE AMOUNT FOR THE PURCHASE / CONSTRUCTION OF THE HOUSE WITHIN THE STIPULATED PER IOD AS ALSO OBSERVED ABOVE WHILE DECIDING THE FIRST ISSUE. THE ASSESSEE HAS PROVED S UCH INVESTMENT DURING THE ASSESSMENT PROCEEDINGS AND, THUS, THE ASSESSEE HAS COMPLIED WITH THE REQUIREMENT OF SUBSTANTIVE PROVISIONS AND, THUS, IS ENTITLED TO TH E CLAIM OF EXEMPTION U/S 54F OF THE ACT. IN VIEW OF THIS, WE DIRECT THE ASSESSING OFFIC ER TO GRANT EXEMPTION TO THE ASSESSEE AS PERMISSIBLE UNDER THE PROVISIONS OF SAECITON54 O F THE ACT. 11.1. IN THE LIGHT OF ABOVE, IF FACTS OF THE PRESE NT CASE ARE BEING LOOKED INTO, THEN IT WOULD REVEAL THAT LAND WAS SOLD BY AS SESSEE ON 28/03/2013 AND NEW RESIDENTIAL HOUSE WAS PURCHASED ON 18/03/20 14, I.E. WITHIN ONE YEAR FROM THE DATE OF SALE OF THE IMMOVABLE PROPERT Y. THE ONLY LAPSE ON THE PART OF THE ASSESSEE ALLEGED BY THE ASSESSING O FFICER IS THAT HE FAILED TO DEPOSIT THE AMOUNTS IN SPECIFIED ACCOUNT. THIS VERY ASPECT HAS BEEN CONSIDERED BY THE ITAT. THEREFORE, RESPECTFULLY FO LLOWING THE ORDER OF DIVISION BENCH, I ALLOW THIS APPEAL OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO GRANT EXEMPTION U/S.54 OF THE ACT TO THE ASSESSEE. ITA NO.2287/AHD /2017 SHRI BHUPESH NAVINCHANDRA RAVAL VS. ITO ASST.YEAR 2013-14 - 11 - 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE COURT ON 22 ND FEBRUARY-2019 AT AHMEDABAD. SD/- ( RAJPAL YADAV ) JUDICIAL MEMBER AHMEDABAD; DATED 22/ 02 /2019 (!.., .*../ T.C. NAIR, SR. PS !'#' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. +,- . / CONCERNED CIT 4. . ( ) / THE CIT(A), AHMEDABAD-5 5. 123 * *,- , ! ,-% , + / DR, ITAT, AHMEDABAD 6. 356 7 / GUARD FILE. / BY ORDER, 1 * //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION ..22.2.19 (DICTATION-PAD 14- PA GES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER ..23.2.19 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.22.2.19 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 22.2.19 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER