REEMA CHAWLA,DELHI V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE INT. TAX 1(2)(1), NEW DELHI, DELHI

SA 59/DEL/2025

AI Insights

The case involves Mrs. Reema Chawla, a non-resident individual, who filed a stay application against an outstanding demand of income-tax and interest related to the assessment year 2022-23. The demand arose from the sale of her 50% share in a residential property, where she claimed exemption under section 54 of the Income Tax Act for reinvestment in a new residential unit. The Assessing Officer disallowed the deduction, leading to the appeal. The Tribunal had previously ruled in favor of the assessee for a similar issue in the assessment year 2020-21, which was upheld by the Delhi High Court. The Tribunal's decision to grant a stay was influenced by these precedents and the principle that recovery of demand against issues decided in favor of the assessee is unwarranted.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 26101 (ITAT-DELHI)
• Appeal Type: Stay Application
• Pronouncement Date: 07-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2022-2023
• Other Referred Cases: Rustam Homi Vakil v. ACIT, Srinivas R Desai v. ACIT, Expeditors International of Washington Inc. v. ACIT, Circle International Tax 1(2)(2), Delhi
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT KATOCH
• Assessee Lawyers: AJAY VOHRA
• Keywords: Set aside; Question of law; Capital Gains; Application of stay
• Section: 143(3); 54; 260A

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘D’ NEW DELHI BEFORE SHRI MAHAVIR SINGH, VICE-PRESIDENT AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER S.A. No.59/Del/2025 [Arising out of ITA No.306/Del/2025] Assessment Year: 2022-23 Mrs. Reema Chawla, A-47, Lower Ground, Floor, Hauz Khas, New Delhi-110016 PAN:AANPC3495N v. ACIT, Circle Int. Tax, 1(2)(1), New Delhi. (Appellant) (Respondent) ORDER PER RAMIT KOCHAR, AM: The Stay Application in SA No.59/Del/2025 for Assessment Year 2022-23 filed by the assessee has arisen out of ITA No.306/Del/2025. In the Stay Application, the assessee is seeking for stay of outstanding demand of income-tax and interest thereof of Rs.42,60,429/- till disposal of the appeal by the Tribunal. The Ld. Counsel for the assessee at the outset submitted that the assessee is an individual and is ‘Non-resident’. The assessee filed Assessee by Shri Ajay Vohra, Sr. Advocate, Sh. Deepesh Garg, Advocate and Ms. Aditi Garg, CA Department by Shri Amit Katoch, Sr. DR Date of hearing 07.02.2025 Date of pronouncement 07.02.2025 S.A.No.59/Del/2025 Arising out of ITA No. 306/Del/2025 2 | P a g e her return of income declaring total income of Rs.41,88,818/- on 29/07/2022 after claiming exemption u/s 54 of the Act. It is stated in the stay application that the assesse has sold her 50% share in a Residential house located at N-45, First Floor, Panchsheel Park, New Delhi-110017 , for Rs.6,00,00,000/-, earning long term capital gains of Rs.1,65,14,103/-. The assessee claimed exemption of capital gain of Rs.1,49,02,748/- u/s 54 of the Act. The said exemption being claimed qua expenditure on purchase of under construction residential unit at ‘The Camellais, DLF’ Phase-V, Gurugram. The assessee had purchased under consideration residential unit at ‘The Camellias, DLF, Phase V, Gurugram, and incurred expenditure of Rs.1,11,46,000/- during the year under consideration to make the residential unit habitable, pursuant to which final possession was received by the assessee from Builder/Developer on 01/04/2022, and further amount of Rs.37,56,748/- was spent towards payment of the costs of the aforesaid residential unit. The case of the assessee was selected by Revenue for framing scrutiny assessment u/s 143(3) read with Section 143(2). The AO while framing scrutiny assessment has disallowed deduction u/s 54 of the Act with respect to property purchased by the assessee by holding that the date of purchase of the property as per the agreement being 18/02/2016, lies outside the permissible period for purchase or construction as mandated under section 54 of the Act, and the date of possession (considered by AO to be 01/03/2021) of the residential unit does not lie within the three year period for the construction of a new property from the date of sale of residential house, i.e., 05/07/2021 , and further that the expenditure S.A.No.59/Del/2025 Arising out of ITA No. 306/Del/2025 3 | P a g e amounting to Rs.37,56,748/- has not been incurred for the purpose of interior works during the year. It was submitted that the payments were made to the builder towards the cost of the aforesaid residential unit, which was paid in financial year 2021- 22. It was submitted that the builder buyer agreement was entered into for residential unit in the ‘The Camellias DLF, Phase-V, Gurgaon, on 18.02.2016. The payments to the builder was made by the assessee from 2016-2021. It was submitted that the possession of bare shell unit which was inhabitable was handed over by the Builder/developer to the assessee , on 01.03.2021. It was submitted that the assessee incurred expenditure during the year under consideration to make the aforesaid residential unit habitable. The said expenditure being incurred within 3 years from the date of sale of old property is eligible for benefit of deduction u/s 54. It was submitted that for Asst. Year 2020-21, the assessee has made payments for the same DLF flat and claimed deduction u/s 54 of the Act. AO denied the deduction u/s 54 , but the Tribunal in ITA No. 398/Del/2023 in assessee’s own case has held in favor of the assessee , and Tribunal granted benefit of deduction u/s 54 of the Act by holding that the builder had handed over possession of the flat on 01/03/2021 without completing interior and fit outs , and therefore the assessee had to incur expenditure to make the flat habitable. The Tribunal relied upon the decisions of ITAT, Mumbai in the case of Rustam Homi Vakil v. ACIT, (2016) 158 ITD 588(Mum) and decision of ITAT, Ahmedabad in the case of Srinivas R Desai v. ACIT (2013) 145 ITD 12, wherein Tribunal in those cases held that expenditure incurred to make the house habitable (within three years of the date of sale of old property) is S.A.No.59/Del/2025 Arising out of ITA No. 306/Del/2025 4 | P a g e eligible for benefit of deduction u/s 54. It was submitted that the Tribunal decision in ITA Nos. 398/Del/2023 for assessment year 2020-21, was challenged by Revenue before Hon’ble Delhi High Court, and the appeal filed by the Revenue u/s 260A was dismissed by the Hon’ble Delhi High Court in ITA No.168/2024 vide order dated 11.03.2024 , by holding that no substantial question of law has arisen and hence, there is no reason for Hon’ble High Court to interfere in the matter in the ITAT order dated 11/08/2023.Thus, it was submitted that the expenditure of Rs. 1,11,46,000/- incurred to make the residence habitable within 3 years from the date of sale of old property is allowable as deduction u/s 54. It was submitted that the Builder has issued occupation and use certificate on 01.04.2022 , after completion of the construction for making the resident unit habitable .Thus, it was submitted that the amount incurred by the assessee of Rs. 37,56,748/- is allowable as deduction as the said amount paid towards cost of new residential flat before the date of sale of original asset is eligible for deduction u/s 54. Thus, the learned counsel for the assessee prayed that in assessee’s own case, the matter is decided in favour of the assessee by ITAT for assessment year 2020-21 , and the appeal filed by Revenue with Hon’ble Delhi High Court stood dismissed by the Hon’ble High Court, prayers were made by learned counsel for the assessee to stay outstanding demand of income-tax and interest thereon aggregating to Rs. 42,60,429/-. 2. The Ld. Sr. DR has relied on the orders of the lower authorities and prayed for rejecting the stay application. The ld. Sr. DR S.A.No.59/Del/2025 Arising out of ITA No. 306/Del/2025 5 | P a g e submitted that the Bench can take appropriate decision in this matter. 3.After hearing both the parties and perusing the material on record , We have observed that the assessee has made out a prima facie case for grant of stay of outstanding demand of income-tax and interest thereon. The ITAT has decided the issue in favour of the assessee in the assessment year i.e. ay:2020-21 and appeal filed by Revenue with Hon’ble Delhi High Court stood dismissed. No-doubt, we have noted that while for ay:2020-21, the contentions raised by the assessee were that date of grant of possession by builder was 01.03.2021. It was claimed that it was bare shell unit which was uninhabitable. Now , it is stated that final possession was received by assessee from the Builder on 01.04.2022 by way of grant of occupation and use certificate after completion of the construction for making the residential unit habitable, and accordingly claim of deduction u/s 54 is claimed to be have been set up by the assessee for the year under consideration. The amount of expenditure of Rs. 1,11,46,000/- were claimed by the assessee to have been incurred to make the residence habitable within 3 years from the date of sale of old property is allowable as deduction u/s 54. The amount incurred by the assessee of Rs. 37,56,748/- is claimed to be allowable as deduction as the said amount was stated to be paid towards cost of new residential flat before the date of sale of original asset which is claimed to be eligible for deduction u/s 54. These requires investigation of facts , and the Tribunal is the last fact finding authority. The appeal filed by the assessee for impugned S.A.No.59/Del/2025 Arising out of ITA No. 306/Del/2025 6 | P a g e assessment year is pending for disposal before ITAT, Delhi Bench, Delhi. It will be relevant to refer here to the order of Hon’ble Delhi High Court dated 29th July, 2022 in M/s Expeditors International of Washington Inc. v. ACIT, Circle International Tax 1(2)(2), Delhi in WP(C) 11032/2022 & C.Mo. No. 32314/2022, wherein Hon’ble High Court held as under: “1. Present writ petition has been filed challenging the Order dated 14th July, 2022 passed under Section 254 of the Income Tax Act, 1961 (hereinafter referred to as the 'Act') in SA No. 180/Del/2022 in ITA No. 1464/Del/2022, whereby the Petitioner has been directed to pay an amount of Rs.5 crores against the outstanding demand for the Assessment Year 2018-19. 2. Learned counsel for the Petitioner states that the challenge is primarily on the ground that said order has been passed arbitrarily as the payment has been directed against additions which stand covered in favour of the Petitioner by a series of decisions rendered by the Tribunal in the Petitioner's own case in previous seven assessment years. 3. Issue notice. Mr.Sunil Kumar Agarwal, learned Senior Standing Counsel, accepts notice on behalf of the Respondents. He states that for grant of stay, not just the prima facie case but balance of convenience and irreparable loss/injury have also to be made out. In support of his submission, he relies upon the judgment of the Supreme Court in Assistant Collector of Central Excise, Chandan Nagar, West Bengal vs. Dunlop India Ltd. & Ors., (1985) 1 SCC 260. 4. In the present case, the fact that the additions stand covered in favour of the Petitioner by a series of decisions rendered by the Tribunal for the last seven assessment years is not in dispute. 5. This Court finds that the Central Board of Direct Taxes (CBDT) has itself issued Instruction No.1914 dated 02nd February, 1993 giving guidelines for Stay of Demand. One of the Guidelines for grant of complete stay is \"if the demand in dispute relates to issues that have been decided in assessee's favour by an appellate authority or court earlier.....\" S.A.No.59/Del/2025 Arising out of ITA No. 306/Del/2025 7 | P a g e 6. Further the impugned Order is in the teeth of the decisions of this Court which have categorically held that recovery of demand against issues which have been decided in favour of Assessee is wholly unwarranted. 7. Consequently, keeping in view the Guidelines/Instruction issued by the CBDT subsequent to the judgment of the Supreme Court in Dunlop India Ltd.(supra), the condition of deposit of Rs.5 crore imposed by the Tribunal vide impugned order dated 14th July, 2022 is set aside and the matter is directed to be heard by the Tribunal as expeditiously as possible. With the aforesaid direction, the present writ petition along with pending application stands disposed of.” Thus, After considering the aforesaid order of Hon’ble Delhi High Court and without commenting on the merits of the issue involved in the appeal, we grant stay of outstanding demand of Rs. 42,60,429/- towards income-tax and interest thereon for a period of 180 days or till the disposal of the appeal in ITA No. 306/Del/2025 for Asst. Year 2022-23 , whichever is earlier. We once again clarify that we have not commented on the merits of the issue. Further, that the assessee will fully co-operate in speedy disposal of the appeal by ITAT, and the assessee will not seek any un-necessary adjournments before the Tribunal in the appellate proceedings in ITA No. 306/Del/2025. On breach of conditions, the stay shall stand vacated . The appeal of the assessee in ITA no. 306/Del/2025 for assessment year 2022-23 is directed to be fixed for hearing before “D’ Bench, Delhi on 27.03.2025. The date of hearing was announced in open court in the presence of both the parties. The terms of stay were announced by Division Bench during the course of hearing of stay application in open Court. We order accordingly. S.A.No.59/Del/2025 Arising out of ITA No. 306/Del/2025 8 | P a g e 4. In the result, Stay Application filed by the assessee is allowed in the manner as indicated above. Order pronounced in the open court on 07th February, 2025. Sd/- S Sd/- Sd/-Sd/- (MAHAVIR SINGH) (RAMIT KOCHAR) VICE PRESIDENT ACCOUNTANT MEMBER Dated: 07th February, 2025. PK/Sps Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi "