Tribunal upholds restriction on deduction; directs exemption under Section 54F per precedent

The Tribunal upheld the decision to restrict the deduction under Section 54F to Rs. 52,47,251. The appeal was dismissed, directing the AO to grant the exemption for the amount invested before the return filing due date, following the Humayun Suleman Merchant case precedent.

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Issues Involved:
1. Restriction of Deduction under Section 54F.
2. Genuine Mistake in Payment by Assessee's Husband.
3. Compliance with Section 54F(4) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Restriction of Deduction under Section 54F:
The primary issue was the restriction of the deduction under Section 54F of the Income Tax Act, 1961. The assessee claimed a deduction of Rs. 91,86,156/- but the learned Commissioner of Income Tax (Appeals) [CIT(A)] restricted it to Rs. 52,47,251/-. The assessee had earned a long-term capital gain of Rs. 92,66,395/- from the sale of shares and claimed to have invested in a new residential property valued at Rs. 91,86,156/-. The Assessing Officer (AO) observed that the assessee did not invest the full net consideration received from the sale of shares into the new property before the due date for filing the return under Section 139(1) of the Act, nor did she deposit the balance amount in the Capital Gain Account Scheme as specified by the Central Government. Consequently, the AO brought the balance amount of Rs. 42,08,060/- to tax under long-term capital gains. The CIT(A) upheld the AO's decision but allowed a deduction of Rs. 52,47,251/- for the amount invested before the due date of filing the return.

2. Genuine Mistake in Payment by Assessee's Husband:
The assessee contended that a cheque for Rs. 40,45,975/- issued by her husband to the builder was returned due to a mistake in the payee's name and rewriting of the date. This cheque was issued after the due date for filing the return under Section 139(1) of the Act. The CIT(A) noted that all previous cheques were correctly issued in the name of 'Windsor Park Collection Account' as per the agreement, and the cheque in question was issued to 'Kumar Builders' incorrectly. The CIT(A) did not accept this as a valid reason to grant the deduction under Section 54F for the returned cheque amount.

3. Compliance with Section 54F(4) of the Income Tax Act, 1961:
The assessee argued that Section 54F is a beneficial provision and should be liberally construed. The assessee claimed that the net sale proceeds could be invested in an under-construction residential property within three years from the date of transfer of the original asset. However, the Tribunal referred to the decision of the Hon'ble Bombay High Court in the case of Humayun Suleman Merchant, which held that Section 54F(1) is subject to Section 54F(4). This means that the unutilized amount of net consideration must be deposited in a specified account before the due date for filing the return under Section 139(1) to avail of the exemption. The Tribunal found that the assessee did not comply with this requirement and thus was not entitled to the full deduction claimed. The Tribunal also noted several discrepancies in the assessee's claim regarding the returned cheque, including the lack of evidence of sufficient funds in the bank, no receipt from Kumar Builders, and the fact that the issue was not raised before the AO or CIT(A).

Conclusion:
The Tribunal upheld the CIT(A)'s decision to restrict the deduction under Section 54F to Rs. 52,47,251/-. The appeal filed by the assessee was dismissed, and the Tribunal directed the AO to grant the exemption under Section 54F for the amount invested before the due date of filing the return after verifying the records. The Tribunal followed the binding precedent set by the Hon'ble Bombay High Court in Humayun Suleman Merchant's case.

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