Sri. Sabir Salim Ahmed, Bangalore V. ITO, Bangalore

ITA 941/BANG/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1624 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 28-07-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: GANESH RAO A K
• Assessee Lawyers: H GURUSWAMY ITP
• Keywords: Capital asset; Capital Gains
• Section: 54B; 54F; 54; 12; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO. 941/BANG/2010 ASSESSMENT YEAR : 2006 - 07 SRI SABIR SALIM AHMED, NO.E. 204, RAN KA CORNER, CAMBRIDGE LAYOUT, ULSOOR, BANGALORE 560 001. : APP ELL ANT VS. THE INCOME TAX OFFICER, WARD 11(1), BANGALORE. : RESPONDENT APP EL LA NT BY : SHRI H. GURUSWAMY, I.T.P. RESPONDENT BY : SHRI GANESH RAO A.K., ADDL.CIT(DR) O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER THE INSTITUTION OF THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE APPELLATE ORDER OF THE CIT (A) - I, BANGALORE IN ITA NO:222 /W - 11(1)/A - I/08 - 09 DATED: 7.6.2010 FOR THE ASSESSMENT YEAR 2006 - 07. 2. TH E ASSESSEE, AN INDIVIDUAL, HAS RAISED FIVE GROUNDS, IN WHICH GROUND NOS.1 AND 5 BEING GENERAL AND NO SPECIFIC ISSUES RAISED, THEY DO NOT SURVIVE FOR ADJUDICATION. IN THE REMAINING GROUNDS, THE ESSENCE OF THE ISSUE IS THAT THE CIT (A) OUGHT TO HAVE HELD T HAT THE ASSESSEE WAS ENTITLED FOR DEDUCTION ITA NO.941/BANG/10 PAGE 2 OF 12 ADMISSIBLE U/S 54 OF THE ACT FOR HAVING INVESTED THE SALE CONSIDERATION OF ORIGINAL ASSET IN PURCHASING OF A NEW RESIDENTIAL ASSET. 3. BRIEFLY STATED, THE ASSESSEE, IN HIS RETURN OF INCOME FOR THE ASSESSMENT Y EAR UNDER DISPUTE, ADMITTED AN INCOME OF RS.1.21 LAKHS, AFTER CLAIMING EXEMPTION OF RS.52.25 LAKHS U/S 54 OF THE ACT, AS HE HAD SOLD A RESIDENTIAL PROPERTY AT AURANGABAD FOR RS.65 LAKHS ON 15.9.05 AND THE SALE PROCEEDS WERE DEPOSITED IN HIS S.B. ACCOUNT AT CITI BANK ON 4.5.05, 12.9.05 AND ON 13.9.06 AGGREGATING TO RS.65 LAKHS. SIMULTANEOUSLY, HE HAD ENTERED INTO AGREEMENTS WITH ETA KARNATAKA ESTATES LTD. AND ETA CONSTRUCTIONS LTD. ON 10.3.2006 AND MADE PAYMENTS SPREAD OVER FROM 26.11.05 TO 31.12.06, AGGRE GATING TO RS.24.54 LAKHS TO PURCHASE A FLAT AT MAGADI ROAD, BANGALORE WHICH HE HAD SUBSEQUENTLY RELINQUISHED THE RIGHTS OVER THE SAID FLAT TO ONE SRINIVAS RAMASWAMY RAGHAVAN FOR RS.62 LAKHS ON 11.7.2007. CONSEQUENTLY, HE HAD ENTERED INTO AN AGREEMENT ON 1 2.3.2007 AND PAID AN ADVANCE OF RS.20 LAKHS FOR PURCHASE OF A FLAT AT E 204, RANKA CORNER APARTMENTS, CAMBRIDGE ROAD, ULSOOR FOR A TOTAL SALE CONSIDERATION OF RS.62 LAKHS. 3.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ACCORDING TO THE AO, THE ASSESSE E S A R ADMITTED THAT THE ASSESSEE HAD NOT DEPOSITED THE CAPITAL GAINS EITHER IN CAPITAL GAINS ACCOUNT OR IN ANY SCHEME SPECIFIED, BUT, DEPOSITED THE ENTIRE SALE CONSIDERATION IN HIS S.B. ACCOUNT. WHILE CONCLUDING THE ASSESSMENT, THE AO HAD RESTRICTED THE EXEMPTION OF CAPITAL GAINS U/S 54(1) OF THE ACT TO RS.15.33 LAKHS ONLY AS THE ASSESSEE ITA NO.941/BANG/10 PAGE 3 OF 12 HAD PAID ADVANCE (INVESTED) TO PURCHASE A NEW ASSET BEFORE THE DUE DATE FOR FILING THE RETURN OF INCOME AS ON 30.6.2006. 4. AGGRIEVED, THE ASSESSEE TOOK UP THE ISSUE WITH THE CIT (A) FOR SUCCOR. AFTER SCRUPULOUS CONSIDERATION OF THE CONTENTIONS OF THE ASSESSEE AS RECORDED IN HIS IMPUGNED ORDER UNDER DISPUTE, THE LD. CIT (A) HAD OBSERVED THUS 7.2. THE ABOVE SHOWS FOR GETTING THE DEDUCTION U/S 54 OF I.T. ACT, THE ASS ESSEE HAS TO COMPLY WITH THE PROVISIONS OF SECTION 54(1) AS WELL AS SECTION 54(2) OF I.T. ACT. IN OTHER WORDS, NOT ONLY S.54 (1) IS SUBSTANTIVE BUT, I FIND S. 54(2) OF I.T. ACT IS ALSO A CHARGING AND SUBSTANTIVE PROVISION AND, THEREFORE, OBSERVANCE OF CON DITIONS LAID DOWN THEREIN IS MANDATORY TO GET THE DESIRED BENEFIT U/S 54 OF I.T. ACT. ALTHOUGH U/S 54, THE ASSESSEE IS GIVEN 2 YEARS TO PURCHASE THE HOUSE PROPERTY OR 3 YEARS FOR CONSTRUCTION OF THE HOUSE PROPERTY, BUT, THE CAPITAL GAIN ON THE TRANSFER OF THE ORIGINAL HOUSE PROPERTY IS TAXABLE IN THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE. THE RETURN OF INCOME OF THAT PREVIOUS YEAR IS TO BE SUBMITTED IN THE RELEVANT ASSESSMENT YEAR ON OR BEFORE THE SPECIFIED DATE. HENCE, THE ASSESSEE WILL HAVE TO TAKE A DECISION FOR THE PURCHASES/CONSTRUCTION OF THE HOUSE PROPERTY TILL THE DATE OF FURNISHING OF THE RETURN OTHERWISE THE CAPITAL GAIN WOULD BECOME TAXABLE. TO AVOID THE ABOVE SITUATION, THE I.T. ACT HAS SPECIFIED AN ALTERNATIVE IN THE FORM OF A DEPOS IT UNDER THE CAPITAL GAINS ACCOUNTS SCHEME. THE AMOUNT OF CAPITAL GAIN WHICH IS NOT UTILIZED BY THE ASSESSEE FOR THE PURCHASE OR CONSTRUCTION OF THE NEW HOUSE BEFORE THE DATE OF FURNISHING OF THE RETURN OF INCOME SHOULD BE DEPOSITED BY HIM UNDER THE CAPIT AL GAINS ACCOUNTS SCHEME, BEFORE THE DUE DATE OF FURNISHING THE RETURN. THE PROOF OF SUCH A DEPOSIT SHALL BE ATTACHED WITH THE RETURN. IN THIS CASE, THE AMOUNT ALREADY UTILIZED BY THE ASSESSEE FOR THE PURCHASE/CONSTRUCTION OF THE NEW HOUSE ALONG WITH THE AMOUNT SO DEPOSITED SHALL BE DEEMED TO THE COST OF THE NEW HOUSE AND SHALL BE ELIGIBLE FOR EXEMPTION. 7.3. THEREFORE TO HOLD THAT NON - OBSERVANCE OF SUCH A CONDITION SHOULD NOT BE TREATED TANTAMOUNT TO A TECHNICAL FAULT. ADMITTEDLY, NO AMOUNT HAS BEEN DEPOSITED IN THE CAPITAL GAINS ACCOUNTS, 1988. THEREFORE, I FIND AO IS JUSTIFIED IN RESTRICTING THE AMOUNT OF INVESTMENT UP - TO THE DUE DATE OF FILING THE RETURN. 4.1. TOTALLY AGGRIEVED BY THE FINDING OF THE LD. CIT (A), THE ASSESSEE HAS COME UP WITH T HE PRESENT APPEAL. 4.2. DURING THE COURSE OF HEARING, THE SPIRITED ARGUMENTS PUT - FORTH BY THE LD. A R ARE SUMMARIZED AS UNDER: ITA NO.941/BANG/10 PAGE 4 OF 12 - THE ASSESSEE HAD SOLD HIS RESIDENTIAL PROPERTY ON 15.9.05 FOR RS.65 LAKHS AND REINVESTED THE ENTIRE SUM IN ACQUIRING A NEW R ESIDENTIAL FLAT AT RANKA CORNER APARTMENTS WITHIN THE TIME LIMIT OF TWO EARS PRESCRIBED UNDER THE ACT; - THE AO TOOK A DIVERGENT VIEW THAT THE UNUTILIZED AMOUNT OF SALE PROCEEDS WAS NOT DEPOSITED IN THE CAPITAL GAINS DEPOSIT ACCOUNT WHEREAS IT WAS DEPOSITE D IN THE ASSESSEE S S.B. ACCOUNT WHICH WAS AGAINST THE SPIRIT OF S.54 (1) OF THE ACT AND THEREFORE, HE HAD RESTRICTED THE EXEMPTION TO ONLY RS.15.33 LAKHS ONLY WHICH HAS BEEN RATIFIED BY THE CIT (A); - BY INADVERTENCE THE UNUTILIZED AMOUNT OF SALE PROCEE DS WAS DEPOSITED IN S.B. ACCOUNT INSTEAD OF CAPITAL GAIN DEPOSIT ACCOUNT. HOWEVER, THE ASSESSEE HAD FULFILLED THE CONDITIONS LAID DOWN U/S 54F OF THE ACT BY REINVESTING THE SALE PROCEEDS IN PURCHASING A NEW RESIDENTIAL HOUSE WITHIN THE TIME LIMIT OF TWO YEARS PERMITTED UNDER THE ACT; THAT THE ASSESSEE WAS UNDER BONA FIDE IMPRESSION THAT THE UNUTILIZED PORTION OF SALE PROCEEDS WERE REQUIRED TO BE DEPOSITED IN THE BANK WITHOUT BEING AWARE THAT SUCH AMOUNT WAS REQUIRED TO BE DEPOSITED SPECIFICALLY IN THE CAP ITAL GAIN DEPOSIT ACCOUNT.; - THAT THE NON - DEPOSIT OF THE UNUTILIZED AMOUNT OF SALE PROCEEDS IN CAPITAL GAIN DEPOSIT ACCOUNT WAS A TECHNICAL LAPSE FOR WHICH, THE ASSESSEE SHOULD NOT BE PENALIZED IN NOT EXTENDING DEDUCTION ADMISSIBLE U/S 54F OF THE ACT AS TH E ENTIRE SALE PROCEEDS WERE INVESTED IN PURCHASING A NEW RESIDENTIAL HOUSE; THAT THE ASSESSEE WAS ENTITLED FOR EXEMPTION U/S 54F OF THE ACT IN SPITE OF A TECHNICAL DEFAULT OF NOT DEPOSITING THE UNUTILIZED AMOUNT OF SALE PROCEEDS INTO THE CAPITAL GAIN DEPOS IT ACCOUNT; - RELIES ON THE CASE LAWS: (A) CIT V. SMT. BHARATHI C.KOTHARI (2000) 244 ITR 352 (CAL) & (B) JAGANATH SINGH LODHA V. ITO (2004) 85 TTJ (JOD) 173. 4.3. ON THE OTHER HAND, THE LD. D R WAS VERY VEHEMENT IN HIS INSISTENCE THAT THE ASSESSEE HAD GROSSLY FAILED TO INVEST THE SALE PROCEEDS OF HIS ORIGINAL ASSET IN CAPITAL GAIN DEPOSIT ACCOUNT WITHIN THE SPECIFIED PERIOD AS PRESCRIBED UNDER THE ACT. AS THE ASSESSEE HAD NOT FULFILLED AS OUTLINED IN THE PROVISIONS OF S.54(2) OF THE ACT SO AS TO AVAIL THE CAP ITAL GAINS EXEMPTION U/S 54 (1) OF THE ACT, THE AO WAS WITHIN HIS REALM TO RESTRICT THE EXEMPTION TO THE EXTENT OF RS.15.33 LAKHS WHICH HAS BEEN DULY RATIFIED BY THE LD. CIT(A) IN HIS IMPUGNED ORDER WHICH IS UNDER CHALLENGE. THE ASSESSEE, IT WAS ARGUED, SHOULD HAVE NO GRIEVANCE TO THE STAND OF THE ITA NO.941/BANG/10 PAGE 5 OF 12 AUTHORITIES BELOW. IT WAS, THEREFORE, EARNESTLY PLEADED THAT THE ACTIONS OF THE AO AS WELL AS THE CIT (A) REQUIRE TO BE SUSTAINED. 5. THE ARGUMENTS PUT - FORTH BY THE RIVAL PARTIES HAVE BEEN DULY TAKEN NOTE OF , ATTENTIVELY PERUSED THE RELEVANT RECORDS AND THE PAPER BOOK FURNISHED BY THE LD. A R DURING THE COURSE OF HEARING AS WELL. 5.1. BASICALLY, THE STAND OF THE AO WAS THAT THE ASSESSEE HAD PAID ADVANCE OF RS.15.33 LAKHS ONLY AS ON 30.6.2006 I.E., BEFORE T HE DUE DATE FOR FILING OF HIS RETURN OF INCOME OUT OF SALE CONSIDERATION OF THE ORIGINAL ASSET. THUS, THE ASSESSEE INVESTED ONLY RS.15.33 LAKHS TO PURCHASE A NEW ASSET BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME AND ALSO HE HAD FAILED TO INVEST TH E BALANCE AMOUNT OF CAPITAL GAINS EITHER IN CAPITAL GAINS ACCOUNT OR IN ANY SCHEME SPECIFIED BY THE CENTRAL GOVERNMENT AS PER THE PROVISIONS OF S.54(2) OF THE ACT AND, THUS, THE AO HAD RESTRICTED THE EXEMPTION OF CAPITAL GAINS U/S 54(1) OF THE ACT TO THE E XTENT OF RS.15.33 LAKHS ONLY. ON HIS PART, THE LD. CIT (A) HAD ILLUSTRATED THE CONDITIONS PRESCRIBED U/S 54 OF THE ACT TO BE FULFILLED TO AVAIL SUCH EXEMPTION WHICH THE ASSESSEE HAD FAILED TO DO SO AND, THEREFORE, HE UPHELD THE STAND OF THE AO ON THE ISSU E. 5.2. BEFORE US, THE ASSESSEE HAD CANDIDLY ADMITTED THAT THE UNUTILIZED PORTION OF CAPITAL GAINS WAS NOT DEPOSITED INTO CAPITAL GAINS DEPOSIT ACCOUNT EITHER NOT DELIBERATELY OR CONSCIOUSLY, BUT, INADVERTENTLY AND, THUS, PLEADED FOR RELIEF. ITA NO.941/BANG/10 PAGE 6 OF 12 5.3. L ET US HAVE A GLANCE AT WHAT THE PROVISIONS OF S. 54(2) OF THE ACT SAY: S.54 (2) THE AMOUNT OF THE CAPITAL GAIN 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 TH E 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 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 UTILIZED 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 PURPOSE OF SUB - SECTION (1), THE AMOUNT, IF ANY, ALREADY UTILIZED BY T HE 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: 5.4. AS RIGHTLY HIGH - LIGHTED BY THE LD. CIT (A), NON - FULFILLMENT OF THE CONDITIONS LAID DOWN IN THE PRO VISIONS OF ACT TO AVAIL SUCH AN EXEMPTION CANNOT BE CATEGORIZED AS A TECHNICAL FLAW. THE VERY INTENTION OF THE LEGISLATURE - IN ALLOWING SUCH AN EXEMPTION WAS IN LIEU OF FULFILLING CERTAIN CONDITIONS LAID DOWN IN THE ACT - WOULD BE DEFEATED AND BECOME FAR CE, IF THE ASSESSEE S PLEA OF TECHNICAL FLAW WERE TO BE CONCEDED. AS A MATTER OF FACT, THE AO WAS MAGNANIMOUS IN HIS ENDEAVOUR IN ADMITTING THE EXEMPTION OF CAPITAL GAINS TO THE EXTENT OF RS.15.33 LAKHS BEING ADVANCE PAID AS ON 30.6.2006 FOR A NEW ASSET. 5.5. WE SHALL NOW PERUSE THE CASE LAWS ON WHICH THE ASSESSEE HAS BEEN BANGING ON WITH A STRONG RELIANCE: (A) IN THE CASE OF CIT V. SMT. BHARATI C.KOTHARI REPORTED IN (2000) 244 ITR 352 (CAL), THE HON BLE COURT HAD OBSERVED THAT - 9. THE PURPOSE BEHIND THE EXEMPTION U/S 54(1) IS THAT IF ANY ASSESSEE SELLS HIS RESIDENTIAL HOUSE AND PURCHASES A NEW HOUSE AGAINST THOSE SALE CONSIDERATIONS THAT CAPITAL GAIN TAX ARISING OUT OF THE SALE OF THE EARLIER HOUSE SHOULD NOT BE TAXED. WHETHER ASSESSEE HIMSELF CONSTRUCTS THE ITA NO.941/BANG/10 PAGE 7 OF 12 HOUSE OR HE GETS IT CONSTRUCTED BY A CONTRACTOR OR 3 RD PARTY THAT DOES NOT MAKE ANY DIFFERENCE. THE BASIC REQUIREMENT FOR PURPOSE OF RELIEF U/S 54(1), THE ASSESSEE SHOULD INVEST THE SALE PROCEEDS IN THE CONSTRUCTION OF RESIDENTIAL HOUSE, WHICH HAS BEEN CONSTRUCTED FOR ASSESSEE. KEEPING IN VIEW OF THE ABOVE OBSERVATIONS AND REASONS GIVEN BY THE TRIBUNAL, NO CASE IS MADE OUT FOR INTERFERENCE. WITH DUE RESPECTS, WE WOULD LIKE TO POINT OUT THAT THE HON BLE COURT HAD D EALT WITH THE PROVISIONS OF S.54(1) OF THE ACT WHEREAS THE PROVISIONS OF SUB - SECTION (2) OF S.54 OF THE ACT HAVE NOT CROPPED UP AND, THUS, THE IMPLICATIONS OF SUCH PROVISIONS WERE NOT DISCUSSED BY THE HON BLE COURT. WE ARE, THEREFORE, OF THE VIEW THAT THE RULING OF THE COURT CITED ABOVE CANNOT COME TO THE RESCUE OF THE PRESENT ASSESSEE AS THE ISSUE UNDER CONSIDERATION IS ON A DIFFERENT FOOTING. (B) IN THE CASE OF JAGAN NATH SINGH LODHA V. ITO (2004) 85 TTJ (JOD) 173, THE FINDING OF THE HON BLE JODHPUR BENCH WAS THAT 10. THE CLEAR - CUT OF THE CASE OF THE ASSESSEE IS THAT THE ASSESSEE HAD INVESTED AN AMOUNT OF RS. 4,01,000. THE FACT THAT THE PURCHASE PRICE AND TAKING POSSESSION OF THE FLAT AT LODHA TOWER, JODHPUR BY 30TH MARCH, 1996 WHEN THE PLO T AT JAIPUR WAS SOLD ON 4TH JAN., 1995 FOR RS. 5 LAKHS, IN VIEW OF THE AFORESAID DECISIONS, THIS AMOUNT OF RS. 4,01,000 INVESTED BY THE ASSESSEE IN THE PURCHASE OF FLAT IS TO BE HELD EXEMPT UNDER S. 54F. THE INTENTION OF THE ASSESSEE FROM THE VERY BEGINNIN G WAS TO PURCHASE A FLAT. WHEN DUE TO CERTAIN UNAVOIDABLE CIRCUMSTANCES, THE CONTRACT DID NOT MATERIALIZE, IT CANNOT BE SAID THAT THERE WAS ANY HANKY PANKY ON THE PART OF THE ASSESSEE TO AVOID PAYMENT OF TAX. THE ASSESSEE ULTIMATELY PURCHASED A FLAT WITHIN TWO YEARS FROM THE SALE OF PLOT. THE DEFAULT COMMITTED BY THE ASSESSEE WAS A TECHNICAL DEFAULT THAT THE ASSESSEE DID NOT DEPOSIT THE AMOUNT MEANT FOR REINVESTMENT IN THE CAPITAL GAIN ACCOUNT SCHEME BEFORE FILING RETURN UNDER S. 139 OF THE ACT. KEEPING IN VIEW THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE DECISIONS RELIED BY THE LEARNED AUTHORIZED REPRESENTATIVE, WE ARE OF THE CONSIDERED OPINION THAT THE AMOUNT OF RS. 4,01,000 OUT OF RS. 5 LAKHS WHICH WERE ULTIMATELY INVESTED WITHIN THE ST IPULATED TIME IS TO BE EXEMPT FROM TAX ALTHOUGH THE ASSESSEE FAILED TO TECHNICALLY DEPOSIT THE SAME IN THE CAPITAL GAIN ACCOUNT. THE INTENTION OF THE ACT AS WELL AS THE INTENTION OF THE ASSESSEE IS TO BE CONSIDERED IN A RIGHT PERSPECTIVE . IT IS NOT THE CAS E OF THE DEPARTMENT THAT THE ASSESSEE WANTED TO UTILIZE THE AMOUNT FOR OTHER PURPOSE THAN TO PURCHASE A HOUSE WITHIN TWO YEARS TO THE EXTENT IT HAS BEEN UTILISED. AS A RESULT, WE DELETE THE ADDITION OF RS. 4,01,000 OUT OF RS. 5 LAKHS AS PER RULES AND SUSTA IN THE REMAINING AMOUNT. THUS THIS GROUND OF APPEAL IS PARTLY ALLOWED. ITA NO.941/BANG/10 PAGE 8 OF 12 WE HAVE DULY PERUSED THE FINDING OF THE HON BLE JODHPUR TRIBUNAL CITED SUPRA. AT THIS JUNCTURE, WE WOULD LIKE TO ANALYZE THE PROVISIONS OF S.54F OF THE ACT TO DETERMINE AS TO WHETHER THE PRESENT ASSESSEE S CASE FALLS WITHIN THE SPHERE OF THE SAID ACTION. FOR APPRECIATION OF FACTS , TH E R ELEVANT PORTIONS OF SECTION 54F OF THE ACT AND CAPITAL GAINS ACCOUNTS SCHEME, 1988 ARE REPRODUCED HERE IN BELOW: 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 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 , A RESIDENTIAL HOUSE (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, - (3) WHERE THE NEW ASSET IS TRANSFER RED 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 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 UTILIZED 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 ASSE SSEE 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 UTILIZED IN ACCORDANCE WITH, ANY SCHEME WHICH THE CENTRAL GOVERNMENT MAY, BY NOTIFICATION IN THE OFFICI AL GAZETTE, FRAME IN THIS BEHALF AND SUCH RETURN SHALL BE ACCOMPANIED BY PROOF OF SUCH DEPOSIT; AND, FOR THE PURPOSE OF SUB - SECTION (1), THE AMOUNT, IF ANY, ALREADY UTILIZED BY THE ASSESSEE FOR THE PURCHASE OR CONSTRUCTION OF THE NEW ASSET TOGETHER WITH TH E AMOUNT SO DEPOSITED SHALL BE DEEMED TO BE THE COST OF THE NEW ASSET: ITA NO.941/BANG/10 PAGE 9 OF 12 PROVIDED THAT IF THE AMOUNT DEPOSITED UNDER THIS SUB - SECTION IS NOT UTILIZED WHOLLY OR PARTLY FOR THE PURCHASE OR CONSTRUCTION OF THE NEW ASSET WITHIN THE PERIOD SPECIFIED IN SUB - SECTIO N (1), THEN, - 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 CAPITAL GAINS ACCOUNTS SCHEME 1988. THE FOLLO WING SCHEME HAS BEEN FRAMED BY ISSUING NOTIFICATION NO.GSR 724(E), DATED 22 ND JUNE, 1988: - 4. TYPES OF DEPOSITS . (1) THERE SHALL BE TWO TYPES OF DEPOSITS ACCOUNTS, NAMELY: - (I) DEPOSIT ACCOUNT - A AND (II) DEPOSIT ACCOUNT - B . (2) THE DEPOSIT MADE UNDER ACCOUNT - A SHALL BE IN THE FORM OF SAVINGS DEPOSIT AND SUBJECT TO THE OTHER PROVISIONS OF THIS SCHEME, WITHDRAWALS UNDER THIS ACCOUNT CAN BE MADE FROM TIME TO TIME BY THE DEPOSITOR. (3) THE DEPOSIT MADE UNDER ACCOUNT - B SHALL BE IN THE FORM OF TERM DEPOSIT WITH AN OPTION TO THE DEPOSITOR TO KEEP THE DEPOSIT AS CUMULATIVE OR NON - CUMULATIVE DEPOSIT. EXCEPT AS PROVIDED UNDER PARAGRAPH 7 AND PARAGRAPH 9, WITHDRAWALS UNDER THIS ACCOUNT CAN BE MADE ONLY AFTER THE EXPIRY OF THE PERIOD FOR WHICH THE DEPOSIT UNDER THIS ACCOUNT HAS BEEN MADE AND ACCEPTED. (4) SUCH DEPOSITS MAY BE MADE IN ONE LUMP SUM OR IN INSTALLMENTS AT ANY TIME ON OR BEFORE THE DUE DATE OF FURNISHING THE RETURN OF INCOME UNDER SUB - SECTION (1) OF SECTION 139 OF THE ACT AS IS APPLICABLE IN THE CASE OF THE DEPOSITOR. 9. WITHDRAWAL FROM THE ACCOUNT. (1) A DEPOSITOR HAVING ACCOUNT - A MAY, AT ANY TIME AFTER MAKING THE INITIAL SUBSCRIPTION, IF HE SO DESIRES, APPLY IN FORM C OR AS NEAR THERETO AS POSS IBLE, TOGETHER WITH THE PASS BOOK TO THE DEPOSIT OFFICE FOR THE WITHDRAWAL OF AMOUNT FROM THE BALANCE TO HIS CREDIT IN ACCOUNT - A, SUBJECT TO THE OTHER PROVISIONS OF THIS SCHEME. (2) ON RECEIPT OF AN APPLICATION UNDER SUB - PARAGRAPH (1) THE DEPOSIT OFFICE SH ALL, SUBJECT TO THE PROVISIONS OF SUB - PARAGRAPH (3), PERMIT THE WITHDRAWAL AND ENTER THE AMOUNT WITHDRAWN IN THE PASS BOOK. (3) AT THE TIME OF ANY WITHDRAWAL FROM ACCOUNT - A, OTHER THAN THE INITIAL WITHDRAWAL, THE DEPOSITOR SHALL FURNISH IN FORM D IN DUPLIC ATE THE DETAILS REGARDING THE MANNER AND EXTENT OF UTILISATION OF THE AMOUNT OF IMMEDIATELY PRECEDING WITHDRAWAL. THE DEPOSIT OFFICE WILL RETAIN ONE COPY OF FORM D AND RETURN THE OTHER COPY TO THE DEPOSITOR AFTER DULY AUTHENTICATING IT. ITA NO.941/BANG/10 PAGE 10 OF 12 (4) WHERE THE AMOUN T OF WITHDRAWAL REFERRED TO IN SUB - PARAGRAPH (2) EXCEEDS RUPEES TWENTY - FIVE THOUSAND, THE DEPOSIT OFFICE SHALL MAKE PAYMENT TO THE DEPOSITOR, SUBJECT TO THE FULFILMENT OF THE CONDITIONS PRESCRIBED IN SUB - PARAGRAPH (3), BY WAY OF CROSSED DEMAND DRAFT DRAWN IN FAVOUR OF THE PERSON TO WHOM THE DEPOSITOR INTENDS TO MAKE THE PAYMENT. (5) A DEPOSITOR INTENDING TO MAKE WITHDRAWAL FROM HIS DEPOSIT IN ACCOUNT - B, SHALL FIRST APPLY IN THE MANNER PRESCRIBED IN SUB - PARAGRAPH (2) OF PARAGRAPH 7 FOR TRANSFER OF THE AMOUNT STANDING TO HIS CREDIT IN ACCOUNT - B TO ACCOUNT - A AND MAY WITHDRAW THE REQUISITE AMOUNT IN THE SAME MANNER AND SUBJECT TO THE SAME CONDITIONS AS STIPULATED IN SUB - PARAGRAPHS (1) AND (3) AFTER THE AMOUNT STANDING TO THE CREDIT IN HIS ACCOUNT - B HAS BEEN CRED ITED TO HIS ACCOUNT - A BY THE DEPOSIT OFFICE. (6) IN CASE THE APPLICATION UNDER SUB - PARAGRAPH (5) IS MADE BEFORE THE EXPIRY OF THE SPECIFIC PERIOD FOR WHICH THE DEPOSIT IN ACCOUNT - B WAS MADE, SUCH WITHDRAWAL WILL BE TREATED AS PREMATURE WITHDRAWAL, AND THE AMOUNT OF INTEREST ACCRUED, IF ANY, SHALL BE CALCULATED SUBJECT TO THE PROVISIONS OF SUB - PARAGRAPH (4) OF PARAGRAPH 8. (7) ON RECEIPT OF THE APPLICATION UNDER SUB - PARAGRAPH (5), THE DEPOSIT OFFICE SHALL TRANSFER THE AMOUNT DUE AND PAYABLE, TOGETHER WITH T HE AMOUNT OF INTEREST ACCRUED, IN ACCOUNT - B, TO ACCOUNT - A IN THE SAME MANNER AND SUBJECT TO THE SAME CONDITIONS AS STIPULATED IN PARAGRAPH 7 AND THEREAFTER ALLOW THE REQUEST FOR WITHDRAWAL MADE BY THE DEPOSITOR IN THE SAME MANNER AND SUBJECT TO THE SAME CO NDITIONS AS STIPULATED IN SUB - PARAGRAPHS (1), (2), (3) AND (4). EXPLANATION : FOR THE REMOVAL OF DOUBTS, IT IS HEREBY CLARIFIED THAT THE DEPOSIT OFFICE SHALL REFUSE THE DEPOSITOR TO WITHDRAW ANY AMOUNT LYING IN HIS ACCOUNT, IN CASE OF FAILURE ON HIS PART TO FURNISH ALL THE DETAILS AS REQUIRED BY SUB - PARAGRAPH (3). UTILISATION OF THE AMOUNT OF WITHDRAWAL. 10. (1) A DEPOSITOR, WITHDRAWING ANY AMOUNT OUT OF THE DEPOSIT MADE IN PURSUANCE OF SUB - SECTION (2) OF SECTION 54 OR SUB - SECTION (2) OF SECTION 54B OR SUB - S ECTION (2) OF SECTION 54D OR SUB - SECTION (4) OF SECTION 54F OR SUB - SECTION (2) OF SECTION 54G, SHALL UTILISE THE WHOLE OR ANY PART OF THE AMOUNT SO WITHDRAWN FOR THE PURPOSES SPECIFIED IN SUB - SECTION (1) OF THE SECTION IN RELATION TO WHICH THE DEPOSIT HAS BEEN MADE. (2) THE AMOUNT WITHDRAWN SHALL BE UTILISED BY THE DEPOSITOR WITHIN SIXTY DAYS FROM THE DATE OF SUCH WITHDRAWAL FOR THE PURPOSES SPECIFIED IN SUB - PARAGRAPH (1) AND THE AMOUNT OR ANY PART THEREOF WHICH HAS NOT BEEN SO UTILISED SHALL BE RE - DEPOSITE D IN ACCOUNT - A IMMEDIATELY THEREAFTER. CLOSURE OF ACCOUNT. (1) IF A DEPOSITOR DESIRES TO CLOSE HIS ACCOUNT, A APPLICATION SHALL BE MADE WITH THE APPROVAL OF THE ASSESSING OFFICER WHO HAS JURISDICTION OVER THE DEPOSITOR TO THE DE POSIT OFFICE IN FORM G OR AS NEAR THERETO AS POSSIBLE, AND THE DEPOSIT OFFICE SHALL PAY THE AMOUNT OF BALANCE INCLUDING INTEREST ACCRUED, TO THE CREDIT IN THE ACCOUNT OF THE DEPOSITOR BY MEANS OF CREDITING SUCH AMOUNT TO ANY BANK ACCOUNT OF THE DEPOSITOR. ITA NO.941/BANG/10 PAGE 11 OF 12 2. FROM THE ABOVE, IT IS CLEAR THAT THE ASSESSEE CAN GAIN RELIEF UNDER THE ACT (IN THIS CASE AS OPTED BY THE ASSESSEE) IF HE CONSTRUCTS A RESIDENTIAL HOUSE WITHIN THREE YEARS FROM THE DATE OF SALE OF THE ORIGINAL ASSET . HOWEVER, THE ASSESSEE IS BOUND TO D EPOSIT THE AMOUNT OF NET CONSIDERATION WHICH IS NOT APPROPRIATED OR UTILIZED TOWARDS CONSTRUCTION OF THE NEW ASSET IN ANY SUCH PLAN OR INSTITUTION AS MAY BE SPECIFIED IN, BEFORE THE DATE OF FURNISHING THE RETURN OF INCOME UNDER SECTION 139 AND UTILIZE SU CH AMOUNT 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. FOR THAT PURPOSE THE CENTRAL GOVERNMENT HAS NOTIFIED CAPITA L GAINS ACCOUNTS SCHEME, 1988 GSR 724(E) DATED 22.6,1988 AND FOR THE LIST OF AUTHORIZED BRANCHES (EXCEPT RURAL BRANCHES) OF THE BANKS SPECIFIED TO RECEIVE DEPOSITS AND MAINTAIN ACCOUNTS GSR 725(E) DATED 22.6.1988. 3. THUS, THE ACT COMPELS THE ASSESSEE TO DEPOSIT THE UNUTILIZED AMOUNT IN THE PRESCRIBED SCHEME DURING THE PERIOD OF THREE YEARS GRANTED FOR CONSTRUCTION OF THE RESIDENTIAL HOUSE. FURTHER IT IS CLEAR THAT THE CONDITIONS MENTIONED IN THE SCHEME ARE ALSO ESSENTIAL FOR COMPLIANCE OF SECTION 54F OF THE ACT. FROM THE SCHEME IT IS APPARENT THAT THE AMOUNT WITHDRAWN SHALL BE UTILIZED BY THE DEPOSITOR WITHIN 60 DAYS FROM THE DATE OF SUCH WITHDRAWAL FOR THE PURPOSE SPECIFIED IN SUB - PARAGRAPH (1) AND THE AMOUNT OR ANY PART THEREOF WHICH HAS NOT BEEN SO UT ILIZED SHALL BE DEPOSITED BACK IN ACCOUNT A IMMEDIATELY THEREAFTER. THEREFORE, COMPLIANCE OF THIS CLAUSE IN THE SCHEME BY THE ASSESSEE IS ESSENTIAL TO CLAIM BENEFIT U/S. 54F OF THE ACT. 5.6. IN THE INSTANT CASE, THE ASSESSEE HAD NOT COMPLIED WITH THE SCHEME ACCOUNT BY DEPOSITING THE SALE CONSIDERATION INTO THE SCHEME ACCOUNT WITHIN THE PRESCRIBED PERIOD AND ALSO IN OVERALL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE ISSUE AS DELIBERATED UPON IN THE FORE - GOING PARAGRAPHS, WE ARE OF THE UNAN IMOUS VIEW THAT THE FINDING OF THE LD. CIT (A) IN UPHOLDING THE AO S STAND IN RESTRICTING THE EXEMPTION U/S 54(1) OF THE ACT TO THE EXTENT OF RS.15.33 LAKHS IS FULLY JUSTIFIED AND, THUS, NO INTERFERENCE IS CALLED FOR . IT IS ORDERED ACCORDINGLY. 6. IN TH E RESULT, THE ASSESSEE S APPEAL IS DISMISSED . ITA NO.941/BANG/10 PAGE 12 OF 12 PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF JANUARY, 2011 . SD/ - SD/ - ( GEORGE GEORGE K. ) ( A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, T HE 21 ST JANUARY, 2011 . DS/ - COPY TO: BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE. 1. APP EL LANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE