VINOD KRISHAN NAYAR ,CHANDIGARH V. DY. COMMISSIONER OF INCOME TAX, CIRCLE-4(1), CHANDIGARH , CHANDIGARH

ITA 1166/CHANDI/2025

AI Insights

The case revolves around the appeal by Shri Vinod Krishan Nayar against the order of the Commissioner of Income Tax (Appeals), which upheld the assessment made by the Assessing Officer. The assessment included substantive and protective additions under the head of capital gains, primarily disputing the cost of improvement and the deduction claimed for investment in a new flat under Section 54. The Tribunal examined the arguments and evidence presented, including the applicability of CBDT Circulars and relevant case law, ultimately deciding in favor of the assessee by allowing the deduction and deleting the additions made by the Assessing Officer.

• Duration Of Justice: 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2026
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Chandigarh
• Assessment Year: 2017-2018
• Appeal Filed On: 12-09-2025
• Other Referred Cases: Ms. Bhavna Cuccria (ITA No.341/Chd/2017 dated 23-05-2017), R.L. Sood (245 ITR 727), Pr. CIT vs. Akshya Sobti (423 ITR 321)
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RANJIT KAUR LD.
• Assessee Lawyers: TEJ MOHAN SINGH LD
• Keywords: Cost of acquisition; Capital Gains
• Section: 143(3); 54

Judgement Text

"1 IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, CHANDIGARH PHYSICAL HEARING BEFORE HON’BLE SHRI RAJPAL YADAV, VICE PRESIDENT AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकर अपील सं. / ITA No.1166/CHANDI/2025 (िनधाŊरण वषŊ / Assessment Year: 2017-18) Shri Vinod Krishan Nayar C/o Tejmohan Singh (Advocate) #527, Sector – 10D Chandigarh - 160011 बनाम/ Vs. DCIT Central Circle - 4(1) Chandigarh ˕ायीलेखासं./जीआइआरसं./PAN/GIR No. ABUPN-7352-B (अपीलाथŎ/Appellant) : (ŮȑथŎ / Respondent) अपीलाथŎकीओरसे/ Appellant by : Sh. Tejmohan Singh (Advocate) – Ld. AR ŮȑथŎकीओरसे/Respondent by : Dr. Ranjit Kaur (Addl. CIT) - Ld. Sr. DR सुनवाईकीतारीख/Date of Hearing : 19-03-2026 घोषणाकीतारीख /Date of Pronouncement : 24-03-2026 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2017-18 arises out of an order of learned Commissioner of Income Tax (Appeals), NFAC [CIT(A)] dated 14-07-2025 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s 143(3) of the Act on 12-10-2019. In the assessment order, Ld. AO made substantive addition of Rs.115.19 Lacs besides making protective addition of Rs.15.09 Lacs. The same was made under the head capital gains. Printed from counselvise.com 2 2. The Ld. AR advanced arguments and referred to various documents as placed in the paper-book. The Ld. Sr. DR also advanced arguments in support of assessment order. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. Proceedings before lower authorities 3.1 The assessee sold a residential property viz. House No.663, Sector 33D, Chandigarh on 20-10-2016 for Rs.435 Lacs. The said property was purchased by assessee’s father on 04-10-2002 for Rs.34 Lacs. Subsequently, the property was transferred in assessee’s name after his father’s death. While computing capital gains, the assessee claimed cost of improvement for Rs.0.65 Lacs & Rs.2.64 Lacs in FYs 2006-07 & 2011-12 respectively. The total indexed cost of acquisition and improvement was worked out at Rs.90.76 Lacs. The assessee made investment in new flat and deposited sum in capital gains account scheme besides making investment in REC Bonds u/s 54EC. The subject matter of dispute before us is claim of cost of improvement and deduction in new flat u/s 54 as claimed by the assessee for Rs.110 Lacs. 3.2 During assessment proceedings, the assessee could not furnish bills and receipts to support improvements and accordingly, the same was denied by Ld. AO. The investment in new flat was in the shape of purchase agreement dated 14-06-2016 with ATS Builders for purchase of residential flat at ATS Casa Espana, Sector 121, Distt. Mohali which was under-construction. The Ld. AO, after perusal of agreement, Printed from counselvise.com 3 observed, that the completion period of the apartment was within 42 months with a grace period of 3 months from the date of agreement. As per extant provisions of Sec.54, the house property was to be purchased within 2 years from the date of sale of property. The property was sold on 20-10-2016 but the sale deed of new property was not registered within the stipulated period. Accordingly, the assessee was show-caused. 3.3 The assessee contended that it made substantial payment of Rs.110 Lacs within one year before sale of house. The construction of the new flat was completed within three years as certified by the builder and the delay happened due to unavoidable circumstances. The copy of builder’s certificate was furnished. The assessee referred to CBDT Circular No.471 dated 15-10-1986 and Circular No.672 dated 16-12- 1993 which clarified that purchase of flat from private builders would fall in the category of construction of flat and therefore, time period of 3 years would be available to the assessee to lay claim on deduction u/s 54. 3.4 However, Ld. AO noted that the assessee entered into apartment buyer agreement on 14-06-2016. But till date, the assessee did not fully purchase the apartment and did not take possession of the same. The registered deed was not made. The assessee’s investment would fall in the category of purchase and not construction of apartment. Therefore, the assessee would have 2 years period to lay claim on impugned deduction. The CBDT circular as referred to by the assessee would apply only if the acquisition of flat / residential house was under self- Printed from counselvise.com 4 financing scheme by the local authorities etc. The circular was not with regard to purchase of apartment from private builder. Therefore, the circular would not help the case of the assessee. 3.5 Even if the case was to be considered as construction, the acquisition was not completed within 3 years from the date of transfer. As per builder certificate, the date of possession was scheduled in December, 2020. A per the agreement, the new apartment was to be handed over by 14-12-2019 / 14-03-2020. Even this new time period was beyond three years and therefore, the said claim was denied to the assessee. 3.6 The Ld. AO also disputed the quantum of deduction on the ground that as per the agreement, the assessee paid Rs.94.90 Lacs (including GST) for the flat whereas it made claim of Rs.110 Lacs. Therefore, there was excess claim to the extent of Rs.15,09,691/-. The same was accordingly added to assessee’s income on protective basis. Finally, the Long-Term Capital Gains (LTCG) were re-computed and the assessment was framed. 3.7 The Ld. CIT(A) allowed stamp duty and registration charges paid on purchase of original property during FY 2002-03 but denied cost of improvement for want of any evidence from the assessee. The Ld. AO’s action in denying deduction u/s 54 was endorsed. However, protective addition was deleted on the ground that substantive addition of Rs.110 Lacs was confirmed. Aggrieved, the assessee is in further appeal before us. Printed from counselvise.com 5 Our findings and Adjudication 4. So far as the claim of improvement is concerned, undisputedly, the assessee is unable to furnish any document to support the same. In the absence of any such document, this claim has rightly been denied by Ld. AO. Therefore, we endorse the findings of lower authorities to that extent. The corresponding grounds as raised by the assessee stand dismissed. 5. So far as the claim of deduction u/s 54 is concerned, upon perusal of records, it could be seen that the property under consideration has been sold by the assessee on 20-10-2016. To lay claim impugned deduction u/s 54, the assessee has entered into Apartment Buyer Agreement on 14-06-2016 wherein the assessee has been allotted residential apartment bearing no.03GF2 on Ground Floor of Tower No.3. The total cost of the flat has been fixed at Rs.92.25 Lacs and the assessee is required to pay further sum towards maintenance deposit, power back up and External Development charges. All these charges are integral to the cost of the new flat. The total cost is thus fixed at Rs.100.36 Lacs. As per para 4.1 of the agreement, the buyer has already paid a sum of Rs.28,74,940/- to the builder and the remaining payment was to be made in various installments. The payment as detailed on Page No.43 would show that the assessee has made substantial payment of Rs.89.25 Lacs well before the date of sale i.e., 20-10-2016. Another payment of Rs.6.04 Lacs has also been made by 31-03-2017. As per para 6.2, the developer endeavor to complete the construction of the apartment Printed from counselvise.com 6 within 42 months with a grace period of 3 months from the date of this agreement. On these facts, it could be well said that the assessee made sufficient compliance to lay claim on impugned deduction u/s 54. The co-ordinate bench of Chandigarh Tribunal in the case of Ms. Bhavna Cuccria (ITA No.341/Chd/2017 dated 23-05-2017) held that substantial investment in the new asset is sufficient compliance. The assessee would be entitled for deduction despite the fact that the construction was not completed within 3 years. For the same, the bench referred to the case law of Delhi High Court in the case of R.L. Sood (245 ITR 727) wherein it was held that when the assessee invested substantial amount in the new property within the specified period, the assessee could be said to have complied with the requirements of Sec.54 and merely because the possession of the property was not handed over to the assessee within the specified period, the said benefit could not be denied. The bench referred to various other decisions also to arrive at such a conclusion. This case law duly supports the case of the assessee. The case law of Hon’ble Delhi High Court in the case of Pr. CIT vs. Akshya Sobti (423 ITR 321) also supports the case of the assessee wherein Hon’ble Court considered CBDT Circular Nos. 471 dated 15-10-1986 and Circular No.672 dated 16-12-1993. In that case, the assessee had booked a flat with a private builder and the assessee was required to make the payment in installments. The builder was to construct unfinished bare shell of the flat and the buyers were to make it livable on their own. The Hon’ble Court held that it was to be considered as a case of Printed from counselvise.com 7 construction of new residential house and not purchase of flat. Since the flat was allotted to the assessee by the builder, the same would fall in the category of ‘other institutions’ as mentioned in the said circulars. Respectfully following these decisions, we would hold that the assessee would be eligible to claim impugned deduction of Rs.110 Lacs. The substantive addition as well as protective addition as made by Ld. AO stands deleted. We order so. The Ld. AO is directed to re- compute the income of the assessee. No other ground has been urged in the appeal. 6. The appeal stand partly allowed. Order pronounced on 24th March, 2026. -Sd- -Sd- (RAJPAL YADAV) (MANOJ KUMAR AGGARWAL) VICE PRESIDENT ACCOUNTANT MEMBER AS Dated: 24/03/2026 आदेश की Ůितिलिप अŤेिषत /Copy of the Order forwarded to : 1. अपीलाथŎ/Appellant 2. ŮȑथŎ/Respondent 3. आयकरआयुƅ/CIT 4. िवभागीयŮितिनिध/DR 5. गाडŊफाईल/GF ASSISTANT REGISTRAR ITAT CHANDIGARH Printed from counselvise.com "