RAMESH HARIBANSH SINGH,MUMBAI V. INCOME TAX OFFICER 28(2)(1), MUMBAI

ITA 4258/MUM/2024

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The case revolves around the disallowance of a deduction claimed under section 54 of the Income Tax Act, 1961, by the assessee, Ramesh Haribansh Singh, for the assessment year 2018-19. The assessee had sold a residential flat and claimed exemption under section 54 for the investment made in a new residential property. The Assessing Officer disallowed the claim due to the absence of a registered sale deed and doubts regarding the genuineness of the allotment. The CIT(A) upheld the disallowance on the grounds that the investment was made prior to the permissible period. However, the Tribunal found that the assessee had demonstrated substantial compliance with the requirements of section 54, including making payments and entering into a binding arrangement for the new property, despite the non-registration due to litigation.

• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Mumbai
• Assessment Year: 2018-2019
• Appeal Filed On: 22-08-2024
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEENA JEPH
• Assessee Lawyers: PRATEEK JAIN
• Keywords: Set aside; Additional evidence; Capital Gains
• Section: 143(3); 54

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “K (SMC)” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI SANDEEP SINGH KARHAIL (JUDICIAL MEMBER) ITA No. 4258/MUM/2024 Assessment Year: 2018-19 Ramesh Haribansh Singh, Plot No. 197/E Sai Amndal Lane Sector Vashi-400705. Vs. ITO-28(2)(1), IT-Office, Vashi Railway Station Building, Navi Mumbai. PAN NO. ADUPS 8077 N Appellant Respondent Assessee by : Mr. Prateek Jain Revenue by : Ms. Neena Jeph, CIT-DR Date of Hearing : 04/03/2026 Date of pronouncement : 26/03/2026 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against order dated 19.06.2024 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2018-19, raising following grounds : 1. On the facts and circumstance of the case and in law, ld. CIT(A) erred in confirming the action of ld.AO in not allowing claim of Printed from counselvise.com deduction u/s 54 of the Act for the reasons mentioned in the impugned order or otherwise. 2. On the facts and circumstance of erred in confirming the action of ld.AO in disallowing a sum of Rs. 11,51,904/- being long term capital gains as claimed by the appellant u/s 54 of the Act in the Return of Income, for the reasons mentioned in the impugned o 2. Briefly stated facts of the case are that the assessee is an individual. In the return of income filed u/s 139(1) of the Act on 25.03.2019, the assessee declared total income at Rs.8,02,953/ comprising of income from house property, other sources.. The return of income filed by the assessee was selected for limited scrutiny and statutory notices under the Income-tax Act, 1961 (in short ‘the Act’) were issue with. The Assessing Officer in the asses 23.02.2021 passed u/s 143(3) of the Act disallowed the claim of deduction u/s 54 of the Act amounting to Rs.11,51,904/ 3. On further appeal non-registration due to litigation could not be a val denial, nevertheless upheld the disallowance on the reasoning that the investment in the new property had been made prior to the permissible period prescribed under section 54. assessee is in appeal before the Tribunal raising reproduced above. 4. We have heard rival submissions of the parties and perused the relevant materials on record. deduction u/s 54 of the Act for the reasons mentioned in the impugned order or otherwise. 2. On the facts and circumstance of the case and in law, ld. CIT(A) erred in confirming the action of ld.AO in disallowing a sum of Rs. being long term capital gains as claimed by the appellant u/s 54 of the Act in the Return of Income, for the reasons mentioned in the impugned order or otherwise. Briefly stated facts of the case are that the assessee is an . In the return of income filed u/s 139(1) of the Act on 25.03.2019, the assessee declared total income at Rs.8,02,953/ income from house property, business profession and other sources.. The return of income filed by the assessee was selected for limited scrutiny and statutory notices under the tax Act, 1961 (in short ‘the Act’) were issue with. The Assessing Officer in the assessment order dated 23.02.2021 passed u/s 143(3) of the Act disallowed the claim of deduction u/s 54 of the Act amounting to Rs.11,51,904/ On further appeal, the learned CIT(A), while accepting that registration due to litigation could not be a val denial, nevertheless upheld the disallowance on the reasoning that the investment in the new property had been made prior to the permissible period prescribed under section 54. assessee is in appeal before the Tribunal raising We have heard rival submissions of the parties and perused the relevant materials on record. It is an undisputed position that Ramesh Haribansh Singh 2 ITA No. 4258/MUM/2024 deduction u/s 54 of the Act for the reasons mentioned in the impugned the case and in law, ld. CIT(A) erred in confirming the action of ld.AO in disallowing a sum of Rs. being long term capital gains as claimed by the appellant u/s 54 of the Act in the Return of Income, for the reasons mentioned in Briefly stated facts of the case are that the assessee is an . In the return of income filed u/s 139(1) of the Act on 25.03.2019, the assessee declared total income at Rs.8,02,953/- business profession and other sources.. The return of income filed by the assessee was selected for limited scrutiny and statutory notices under the tax Act, 1961 (in short ‘the Act’) were issued and complied sment order dated 23.02.2021 passed u/s 143(3) of the Act disallowed the claim of deduction u/s 54 of the Act amounting to Rs.11,51,904/-. , the learned CIT(A), while accepting that registration due to litigation could not be a valid ground for denial, nevertheless upheld the disallowance on the reasoning that the investment in the new property had been made prior to the Aggrieved, the assessee is in appeal before the Tribunal raising the grounds as We have heard rival submissions of the parties and perused It is an undisputed position that Printed from counselvise.com the assessee sold a residential flat on 23.01.2018 consideration of Rs.28,50,000/ cost of Rs.16,98,096/ Rs.11,51,904/- The assessee claimed exemption under section 54 on the ground that he had invested in a new residential p from M/s Super Construction Company for total consideration of Rs.3,63,00,000/-. The assessee payment of Rs.1,95,00,000/ new property. 4.1 The primary objection of the Assessing Of absence of a registered sale deed and the alleged doubt regarding the genuineness of the allotment. However, it is a settled legal position that registration of the conveyance deed is not a sine qua non for claiming deduction under se assessee has demonstrated substantial compliance by way of investment and acquisition of rights in the property. 4.2 Further, the assessee also submitted that due to pending litigation, the property could not be registered. The ass copy of the relevant court orders demonstrating the pending litigation. The Ld. CIT(A) though could not be registered ground was incorrect. acquisition of the new property prior to 01.0 property giving rise capital gain was the assessee sold a residential flat on 23.01.2018 consideration of Rs.28,50,000/- and after considering the indexed cost of Rs.16,98,096/-, computed long term capital gain of The assessee claimed exemption under section 54 on the ground that he had invested in a new residential p from M/s Super Construction Company for total consideration of The assessee claimed that that he had made payment of Rs.1,95,00,000/- upto 05.03.2018 against purchase of The primary objection of the Assessing Officer pertains to the absence of a registered sale deed and the alleged doubt regarding the genuineness of the allotment. However, it is a settled legal position that registration of the conveyance deed is not a sine qua non for claiming deduction under section 54, so long as the assessee has demonstrated substantial compliance by way of investment and acquisition of rights in the property. Further, the assessee also submitted that due to pending litigation, the property could not be registered. The ass copy of the relevant court orders demonstrating the pending litigation. The Ld. CIT(A) though admitted that since the property could not be registered , the disallowance made by the AO on this ground was incorrect. But the Ld. CIT(A) noted that acquisition of the new property prior to 01.04.2016 whereas giving rise capital gain was sold 23.01.2018. The Ld. Ramesh Haribansh Singh 3 ITA No. 4258/MUM/2024 the assessee sold a residential flat on 23.01.2018 for a sale after considering the indexed , computed long term capital gain of The assessee claimed exemption under section 54 on the ground that he had invested in a new residential property from M/s Super Construction Company for total consideration of that that he had made against purchase of ficer pertains to the absence of a registered sale deed and the alleged doubt regarding the genuineness of the allotment. However, it is a settled legal position that registration of the conveyance deed is not a sine qua ction 54, so long as the assessee has demonstrated substantial compliance by way of Further, the assessee also submitted that due to pending litigation, the property could not be registered. The assessee filed copy of the relevant court orders demonstrating the pending ince the property the disallowance made by the AO on this payment for the 4.2016 whereas 23.01.2018. The Ld. Printed from counselvise.com CIT(A) observed that the new asset is purchased one year before or original asset) took place 24.01.2017 cannot be taken for claim of exemption u/s 54 of the Act Accordingly, the Ld. CIT(A) confirm the Assessing Officer observing as “9.1 I have carefully gone through the assessment order, grounds of appeal, written submissions made by the appellant and additional evidence filed by him. AO in his order has not accepted the purchase of new asset as only booking letter was submitt the transaction being with related party, AO disallowed the deduction u/s 54. In totality of the situation, however, it cannot be denied that the appellant has invested in a new asset, on purchase of which deduction u/s 54 is being cla documents, as additional evidence, which shows why the sale deed could not be registered even after a lapse of 4 years. Appellant has also shown his bank account details in respect of payment made and ledger in the books o carefully perused the ledger. It shows that the initial payment for new asset, on which deduction u/s 54 is being claimed, has been made prior to 01.04.2016. The original asset leading to capital gain during the year was undisputedly sold on 23.01.2018. As per the provisions of section 54, however, deduction under this section is available only if the new asset is purchased one year before or....after the transfer (of original asset) took place. Therefore, any p 24.01.2017 cannot be taken for claim of exemption u/s 54 of the Act. Keeping the above in mind, the addition/ disallowance made by the AO is sustained, though with the above findings. 4.3 Before us, the Ld. counsel for the assessee submitted that the booking cum allotment letter Company demonstrated that property was purchased within the period of the one year prior to capital gain and therefore, the assessee fulfils the requirement of section 54 of the Act. observed that deduction under this section is available only if the new asset is purchased one year before or after the transfer (of original asset) took place, therefore, any purchase made prior to 24.01.2017 cannot be taken for claim of exemption u/s 54 of the Accordingly, the Ld. CIT(A) confirmed the disallowance made by the Assessing Officer observing as under: 9.1 I have carefully gone through the assessment order, grounds of appeal, written submissions made by the appellant and additional evidence filed by him. AO in his order has not accepted the purchase of new asset as only booking letter was submitted before him and as the transaction being with related party, AO disallowed the deduction u/s 54. In totality of the situation, however, it cannot be denied that the appellant has invested in a new asset, on purchase of which deduction u/s 54 is being claimed. Appellant has now submitted documents, as additional evidence, which shows why the sale deed could not be registered even after a lapse of 4 years. Appellant has also shown his bank account details in respect of payment made and ledger in the books of the seller entity for the new asset. I have carefully perused the ledger. It shows that the initial payment for new asset, on which deduction u/s 54 is being claimed, has been made prior to 01.04.2016. The original asset leading to capital gain during e year was undisputedly sold on 23.01.2018. As per the provisions of section 54, however, deduction under this section is available only if the new asset is purchased one year before or....after the transfer (of original asset) took place. Therefore, any purchase made prior to 24.01.2017 cannot be taken for claim of exemption u/s 54 of the Act. Keeping the above in mind, the addition/ disallowance made by the AO is sustained, though with the above findings.” Before us, the Ld. counsel for the assessee submitted that the booking cum allotment letter issued by the Super Construction Company demonstrated that property was purchased within the period of the one year prior to transfer of the property giving rise to capital gain and therefore, the assessee fulfils the requirement of section 54 of the Act. Ramesh Haribansh Singh 4 ITA No. 4258/MUM/2024 deduction under this section is available only if after the transfer (of , therefore, any purchase made prior to 24.01.2017 cannot be taken for claim of exemption u/s 54 of the the disallowance made by 9.1 I have carefully gone through the assessment order, grounds of appeal, written submissions made by the appellant and additional evidence filed by him. AO in his order has not accepted the purchase ed before him and as the transaction being with related party, AO disallowed the deduction u/s 54. In totality of the situation, however, it cannot be denied that the appellant has invested in a new asset, on purchase of which imed. Appellant has now submitted documents, as additional evidence, which shows why the sale deed could not be registered even after a lapse of 4 years. Appellant has also shown his bank account details in respect of payment made and f the seller entity for the new asset. I have carefully perused the ledger. It shows that the initial payment for new asset, on which deduction u/s 54 is being claimed, has been made prior to 01.04.2016. The original asset leading to capital gain during e year was undisputedly sold on 23.01.2018. As per the provisions of section 54, however, deduction under this section is available only if the new asset is purchased one year before or....after the transfer (of urchase made prior to 24.01.2017 cannot be taken for claim of exemption u/s 54 of the Act. Keeping the above in mind, the addition/ disallowance made by the Before us, the Ld. counsel for the assessee submitted that the by the Super Construction Company demonstrated that property was purchased within the of the property giving rise to capital gain and therefore, the assessee fulfils the requirement of Printed from counselvise.com 4.4 In the present case, the assessee has placed on record the booking/allotment letter, bank statements evidencing payment, and ledger accounts of the seller enti any cogent material on record to disprove the genuineness of these documents. Mere suspicion arising from the fact that the seller is a related entity cannot, in the absence of contrary evidence, justify denial of a statutory deduction. 4.5 The objection of the learned CIT(A) is confined to the timing of investment, observing that certain payments were made prior to the permissible period of one year preceding the transfer. In this regard, it is pertinent to note that the rel acquisition or purchase of a new residential property within the prescribed time, and not the isolated timing of individual instalments. 4.6 Once it is demonstrated that the assessee has entered into a binding arrangement statutory period, and such intention is supported by actual payments through banking channels, the requirement of “purchase” stands satisfied. The law does not mandate that the entire consideration must be pa 4.7 It is well settled through judicial precedents that booking or allotment of a property, coupled with substantial payment, confers enforceable rights and constitutes “purchase” for the purposes of In the present case, the assessee has placed on record the booking/allotment letter, bank statements evidencing payment, and ledger accounts of the seller entity. The Revenue has not brought any cogent material on record to disprove the genuineness of these documents. Mere suspicion arising from the fact that the seller is a related entity cannot, in the absence of contrary evidence, justify y deduction. The objection of the learned CIT(A) is confined to the timing of investment, observing that certain payments were made prior to the permissible period of one year preceding the transfer. In this regard, it is pertinent to note that the relevant test under section 54 is the acquisition or purchase of a new residential property within the prescribed time, and not the isolated timing of individual Once it is demonstrated that the assessee has entered into a binding arrangement for acquisition of the new property within the statutory period, and such intention is supported by actual payments through banking channels, the requirement of “purchase” stands satisfied. The law does not mandate that the entire consideration must be paid strictly within the stipulated period. It is well settled through judicial precedents that booking or allotment of a property, coupled with substantial payment, confers enforceable rights and constitutes “purchase” for the purposes of Ramesh Haribansh Singh 5 ITA No. 4258/MUM/2024 In the present case, the assessee has placed on record the booking/allotment letter, bank statements evidencing payment, and ty. The Revenue has not brought any cogent material on record to disprove the genuineness of these documents. Mere suspicion arising from the fact that the seller is a related entity cannot, in the absence of contrary evidence, justify The objection of the learned CIT(A) is confined to the timing of investment, observing that certain payments were made prior to the permissible period of one year preceding the transfer. In this regard, evant test under section 54 is the acquisition or purchase of a new residential property within the prescribed time, and not the isolated timing of individual Once it is demonstrated that the assessee has entered into a for acquisition of the new property within the statutory period, and such intention is supported by actual payments through banking channels, the requirement of “purchase” stands satisfied. The law does not mandate that the entire id strictly within the stipulated period. It is well settled through judicial precedents that booking or allotment of a property, coupled with substantial payment, confers enforceable rights and constitutes “purchase” for the purposes of Printed from counselvise.com section 54. The emphasis is on the substance of the transaction rather than its form. 4.8 In the present case, the material on record clearly establishes that the assessee had entered into an arrangement for acquisition of a residential property and had made substantial Though the Assessing Officer has raised issue of the booking/allotment letter issued by the partnership firm, but he has not brought any evidence on record which could hold that said allotment letter was not genuine. In absence of any such evide merely on the basis of the presumption it could not be held that such booking letter was not genuine. Thus, t disproved the transaction nor brought any material to show that the claim is sham or colourable. 4.9 In these circumsta merely on technical grounds would defeat the beneficial object of the provision, which is to promote reinvestment in residential housing. 4.10 In view of the foregoing discussion, we hold that the assessee has fulfilled the conditions prescribed under section 54 of the Act. The disallowance made by the Assessing Officer and sustained by the learned CIT(A) is unsustainable in law. e emphasis is on the substance of the transaction In the present case, the material on record clearly establishes that the assessee had entered into an arrangement for acquisition of a residential property and had made substantial Though the Assessing Officer has raised issue of the booking/allotment letter issued by the partnership firm, but he has not brought any evidence on record which could hold that said allotment letter was not genuine. In absence of any such evide merely on the basis of the presumption it could not be held that such booking letter was not genuine. Thus, the Revenue has neither disproved the transaction nor brought any material to show that the claim is sham or colourable. In these circumstances, denial of deduction under section 54 merely on technical grounds would defeat the beneficial object of the provision, which is to promote reinvestment in residential In view of the foregoing discussion, we hold that the assessee filled the conditions prescribed under section 54 of the Act. The disallowance made by the Assessing Officer and sustained by the learned CIT(A) is unsustainable in law. Ramesh Haribansh Singh 6 ITA No. 4258/MUM/2024 e emphasis is on the substance of the transaction In the present case, the material on record clearly establishes that the assessee had entered into an arrangement for acquisition of a residential property and had made substantial payments. Though the Assessing Officer has raised issue of the booking/allotment letter issued by the partnership firm, but he has not brought any evidence on record which could hold that said allotment letter was not genuine. In absence of any such evidences merely on the basis of the presumption it could not be held that he Revenue has neither disproved the transaction nor brought any material to show that nces, denial of deduction under section 54 merely on technical grounds would defeat the beneficial object of the provision, which is to promote reinvestment in residential In view of the foregoing discussion, we hold that the assessee filled the conditions prescribed under section 54 of the Act. The disallowance made by the Assessing Officer and sustained by Printed from counselvise.com 4.11 Accordingly, the impugned order is set aside and the addition is deleted. The grounds raised by the assessee are allowed. 5. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on Sd/- (SANDEEP SINGH KARHAIL JUDICIAL MEMBER Mumbai; Dated: 26/03/2026 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Accordingly, the impugned order is set aside and the addition unds raised by the assessee are allowed. In the result, the appeal of the assessee is allowed. ounced in the open Court on 26/03/2026. Sd/ (SANDEEP SINGH KARHAIL) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Ramesh Haribansh Singh 7 ITA No. 4258/MUM/2024 Accordingly, the impugned order is set aside and the addition unds raised by the assessee are allowed. In the result, the appeal of the assessee is allowed. /03/2026. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai Printed from counselvise.com "