2023 (6) TMI 167 - AT - Income Tax

Tribunal upholds notice legality, validates assessment & exempts Section 54F compliance.

The Tribunal upheld the legality of the notice u/s 148 issued by the Assessing Officer, leading to the assessment being conducted based on the notice ... Exemption u/s 54 - LTCG - Assessee bought new house beyond period of three years - as per AO assessee made booking of new residential house as after due date of filing return of income and execution of sale deed of new house took place not within three years from the date of sale - HELD THAT:- Assessee has paid Rs. 28.00 lacs within three years form the date of sale of old house. The date and payment on various dates as recorded is not disputed by revenue. Such details of payment were furnished before lower authorities. Only the sale deed of new house was executed 18/12/2015. As decided in a recent decision in Harminder Kaur [2021 (2) TMI 580 - ITAT DELHI] while following the earlier decisions of Jagruti Aggarwal [2011 (10) TMI 279 - PUNJAB AND HARYANA HIGH COURT] held that where the assessee sold residential house and utilized the sale consideration for booking flat in housing project which was yet to be constructed, since assessee had made entire payment toward investment in new flat within period of three years from the date of transfer of original asset, amount was to be treated as invested in purchase / construction of new residential property and assessee is to be allowed exemption u/s 54. Also in Dr Dharmista Vs ITO [2022 (10) TMI 544 - ITAT MUMBAI] held that exemption u/s 54 should be allowed if the amount is invested on or before due date of filing return of income under section 139(4). Thus, direct AO to allow exemption u/s 54 to the assessee. Assessee appeal is allowed. Issues Involved:The issues involved in this case are the legality of notice u/s 148 of the Income Tax Act, 1961, the validity of reopening the assessment based on AIR and CIB information, the disallowance of exemption claimed under Section 54 of the Act, and the compliance with the provisions of Section 54F regarding the investment of capital gain in a new residential property.Issue 1: Validity of Notice u/s 148:The appeal was against the order of the learned National Faceless Appeal Centre (NFAC), Delhi/Commissioner of Income Tax (Appeals) for the Assessment Year (AY) 2011-12. The appellant challenged the legality of the Assessing Officer's action in issuing notice u/s 148 of the Income Tax Act, 1961, contending that it was illegal and bad in law, thus seeking to quash the assessment made on that basis.Issue 2: Reopening of Assessment based on Information:The Assessing Officer reopened the case for A.Y. 2011-12 on the basis of information indicating that the appellant sold an immovable property. The appellant contested the reopening of the assessment solely on the basis of AIR and CIB information, leading to the Assessing Officer passing an order u/s 143(3) r.w.s. 147 of the I.T. Act, 1961.Issue 3: Disallowance of Exemption under Section 54:The Assessing Officer disallowed the exemption claimed by the appellant under Section 54 of the Act, amounting to Rs. 28,00,000, on the grounds that the appellant did not comply with the conditions for claiming the deduction, specifically regarding the timeline and utilization of funds for the purchase of a new residential property.Judgment Details:The case involved the appellant's challenge against the legality of the notice u/s 148, the reopening of the assessment based on specific information, and the disallowance of exemption under Section 54 of the Income Tax Act, 1961. The appellant's contentions regarding compliance with Section 54F for investing capital gains in a new residential property were also a focal point of the case.Validity of Notice u/s 148:The appellant contested the legality of the notice u/s 148, arguing that it was issued unlawfully. However, the Tribunal upheld the Assessing Officer's actions, leading to the assessment being conducted based on the notice served upon the appellant.Reopening of Assessment based on Information:The Assessing Officer reopened the assessment relying on information related to the sale of an immovable property by the appellant. The appellant challenged this reopening, but the Tribunal found that the assessment was validly reopened based on the available information.Disallowance of Exemption under Section 54:The Assessing Officer disallowed the exemption claimed by the appellant under Section 54, citing non-compliance with the conditions for claiming the deduction. However, the Tribunal, after considering the appellant's submissions and relevant legal provisions, directed the Assessing Officer to allow the exemption under Section 54 to the appellant.Compliance with Section 54F:The appellant's compliance with the provisions of Section 54F regarding the investment of capital gains in a new residential property was a crucial aspect of the case. The Tribunal, after analyzing the facts and legal precedents, directed the Assessing Officer to allow the exemption under Section 54 to the appellant, thereby resolving this issue in favor of the appellant.