TaxTMI 
TaxTMI 
2025 (6) TMI 699
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....CASS due to the assessee's sale of immovable property during the year and the discrepancy observed in the capital gain computation. The main reason for scrutiny was that the sale consideration shown in the Income Tax Return (ITR) was lower than the valuation by the Stamp Duty Authority. Consequently, notice under Section 143(2) of the Act was issued on 18.09.2017 and served via speed post, with a hearing fixed on 03.10.2017. Subsequently, notice under Section 142(1) of the Act along with a questionnaire was issued on 27.09.2017, but the same was returned unserved. Another notice under Section 142(1) of the Act was issued on 03.11.2017 and served personally, fixing the hearing for 10.11.2017. 2.1. The assessee submitted a written reply on 01.12.2017, along with a copy of the ITR acknowledgment, computation of total income, and supporting documents related to the claim of deductions under Sections 54 and 54B of the Act. Upon verification of records, it was found that the assessee, along with five other co-owners, had sold an immovable property located at Village: Jagatpur, Sub-District: Ahmedabad-13 (City), District: Ahmedabad. The total sale consideration for the property was Rs.....
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...., the transaction in question was executed beyond the permissible time limit, rendering the claim ineligible. 2.4. In response to the show-cause notice dated 15.12.2017, the Authorized Representative (AR) of the assessee attended the office on 20.12.2017 and submitted a written reply vide letter dated 20.12.2017, along with various supporting documents. The assessee, in his response, primarily sought to justify the deductions claimed under Sections 54B and 54F of the Act, and provided explanations regarding the genuineness of the capital gain computation. 2.5. The assessee contended that the land in question was an agricultural land and was used for agricultural purposes before its sale. In support of this claim, it was submitted that the land was mentioned as agricultural in the 7/12 Uttara revenue records, where the assessee was cultivating Jowar. The assessee argued that, since the land was used for agricultural purposes, it should be considered as an agricultural asset for the purpose of exemption under Section 54B of the Act. Accordingly, the AR requested the AO to treat the land as an agricultural land and allow the deduction under Section 54B. Regarding the cost of acq....
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.... No. 359, dated 10.05.1983, issued by the Central Board of Direct Taxes (CBDT), which stated that if an assessee invests the sale consideration in specified assets, including advance payments made before the transfer of the original asset, such investments should be considered eligible for exemption under Section 54B of the Act. The assessee enclosed a copy of this circular as "Annexure B" and requested the AO to allow the deduction based on the principles laid down therein. 2.10. Additionally, the assessee placed reliance on judicial precedents, particularly the decision of the Income Tax Appellate Tribunal (ITAT) in the case of Ramesh Narhari Jakhadi vs. Income-tax Officer, where the ITAT Pune had allowed the exemption under Section 54B in a similar case. The assessee argued that the present case was identical and, therefore, should be treated in line with the ITAT ruling. 2.11. Subsequent to the reply dated 20.12.2017, the Authorized Representative (AR) of the assessee once again attended the office on 27.12.2017 and submitted another written reply vide letter dated 27.12.2017, along with additional documents in response to the issues raised in the show- cause notice. The ....
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....with stamp duty of Rs. 7,12,013/- being paid vide cheque number 26097882 dated 07.12.2013 and another cheque number 26097888 dated 29.01.2014. These payments were claimed as forming part of the reinvestment eligible for deduction under Section 54B of the Act. 2.16. Additionally, the assessee relied on the decision of ITAT Pune in the case of Ramesh Narhari Jakhadi vs. Income-tax Officer, wherein the ITAT had taken into account CBDT Circular No. 359, dated 10.05.1983, and allowed the deduction under Section 54B of the Act, even where the investment was made before the date of transfer of the asset. The assessee reproduced relevant portions of the circular, arguing that an advance payment made towards the purchase of agricultural land should be treated as an eligible investment under Section 54B of the Act. A copy of the circular was enclosed as Annexure-4. 2.17. The assessee also requested that deduction of Rs. 10,50,000/- paid on 17.04.2013 vide cheque number 147364 be considered under Section 54B of the Act as well as Rs. 19,50,000/- paid on 23.03.2017 and 27.03.2017 through cheque numbers 60019304 and 60019308, respectively. The assessee contended that since the sale procee....
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....should qualify for deduction under Section 54B of the Act. 3.2. Relating to exemptions claimed by the assessee under section 54F of the Act, the AO observed that the assessee had claimed a deduction of Rs. 25,08,037/- under Section 54F towards investment in a residential house at Jagatpur Village, purchased from Jabuben Naranbhai Rabari on 10.12.2012. Upon examination of the purchase details, the AO found that as per Section 54F(1) of the Act, the investment in a new residential property must be made within one year before or two years after the date of sale of the original asset. In the assessee's case, the original asset was sold on 07.07.2014, meaning that the investment should have been made between 07.07.2013 and 07.07.2016. However, the assessee purchased the new residential property on 10.12.2012, which was beyond the prescribed time limit. The AO calculated the correct claim u/s 54F of the Act, as follows: Particulars Amount (Rs.) Total investment in residential house claimed by the assessee 32,67,375/- Less: Investment not made within the prescribed time limit (transaction executed on 10.12.2012 instead of after 07.07.2013) 7,70,000/- Net eligible i....
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.... (d) Deduction of Rs. 99,00,000/- claimed by the brother - Further, it was observed that the assessee's brother, Shri Baldevji Ramaji Thakor, had claimed a deduction of Rs. 99,00,000/- in his own return of income towards investment in the same agricultural land. The claim was allowed in scrutiny assessment by ITO Ward-3(2)(1), Ahmedabad, vide assessment order dated 30.11.2017. Since the property was already considered for exemption in the brother's assessment, the deduction of Rs. 52,60,000/- claimed by the assessee was disallowed, as it would result in a double deduction for the same investment. 3.5. Thus, out of the total claimed exemption of Rs. 1,12,19,000/-, the AO allowed only Rs. 19,17,001/- under Section 54F of the Act, after making necessary disallowances for ineligible investments and applying the proportionate exemption formula. The entire exemption claimed under Section 54B of the Act was disallowed, and the balance Rs. 93,01,999/- was added back to the assessee's total income. 4. Aggrieved by the order of the AO, the assessee preferred an appeal before CIT(A). During the appellate proceedings before the CIT(A), the assessee challenged the disallowances m....
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....5. The CIT(A) examined the entire matter and dismissed the assessee's appeal confirming the AO's findings in entirety. The disallowances under Sections 54B and 54F of the Act, as well as the enhancement of LTCG, were upheld. 6. Not satisfied with the order of CIT(A), the assessee preferred an appeal before us with following grounds of appeal: 1. That on facts and in law the learned Commissioner of Income tax (Appeals) has grievously erred in confirming the disallowance of claim of deduction u/s 54F of the Act of Rs. 5,91,036/- while computing the long-term capital gains. 2. That on facts and in law the learned Commissioner of Income tax (Appeals) has grievously erred in confirming the disallowance of claim of deduction u/s 54B of the Act of Rs. 87,11,000/- while computing the long-term capital gains. 3. That on facts, and in law, the entire claim of deductions u/s 54F and u/s 54B of the Act ought to have been allowed as prayed for. 4. The appellant craves leave to add, alter, amend any ground of appeal. 7. During the course of the hearing before us, the Authorized Representative (AR) of the assessee explained the facts of the case and conte....
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....ue to minor deviations in timing or ownership structure. 7.1. In support of ownership of the new assets in the name of brother the AR stated that the investment made in the name of relative should be allowed considering the qualifying nature of the asset purchased. The AR argued that in case of beneficial provisions the purposive construction is to be preferred as against literal construction. The AR placed reliance on the decision of Delhi Bench in the case of Simran Bagga Vs. ACIT [2024] 158 taxmann.com 265 (Delhi - Trib.) where the residential property was purchased in the name of spouse to claim benefit u/s 54 and the same was allowed by the tribunal. In the said decision the Co-ordinate Bench was guided by the decisions of other Co-ordinate Benches. In the case of N Ram Kumar Vs. Asstt. CIT [2012] 138 ITD 317, the assessee purchased flat in the name of the minor daughter and in the case of Krishnappa Jayaramaiah Vs. ITO [2021] 189 ITD 15 the assessee purchased residential property in the name of his married widowed daughter. 8. The Departmental Representative (DR), on the other hand, relied on the orders of lower authorities and stated that the definition of family does ....
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....esent case, it is undisputed that the assessee received the sale proceeds in a staggered manner over multiple years, from 2012 to 2016, and accordingly reinvested the capital gains in a residential property and agricultural land as and when funds were available. The delay in reinvestment was not due to any intentional non-compliance but was a consequence of the phased receipt of sale consideration, which directly influenced the timing of investments. Given these circumstances, we find that the delay in reinvestment is merely procedural and not substantive, as the intent and purpose of the law-to encourage reinvestment of capital gains into specified assets-have been duly fulfilled. Therefore, the investment made by the assessee should not be disallowed merely on technical grounds of timing, particularly when the capital gains have ultimately been utilized for the intended purpose. Accordingly, we hold that the exemption under Sections 54F and 54B of the Act cannot be denied solely on the ground of non-adherence to strict time limits, and the assessee is entitled to claim the deduction in respect of investments made beyond the prescribed time period. 9.4. We direct the AO to re-c....
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....hile granting exemptions. However, we find that this analogy is misplaced. The Hindu Succession Act, 1956 (as amended in 2005), grants a widowed daughter equal inheritance rights in the property of her father and husband because she is classified as a Class I legal heir. In contrast, a brother is not a Class I heir in Hindu succession unless the property is inherited jointly under HUF law or through a will. The principle of family ownership in succession law does not override the explicit ownership requirement under Section 54B of the Act, which mandates that the land must be purchased in the name of the assessee himself. Therefore, we hold that the assessee cannot claim the exemption under Section 54B of the Act for land purchased in the name of his brother, as the statute does not recognize such an arrangement for the purpose of exemption. 10.3. The assessee has further contended that the rectification order passed under Section 154 of the Act in the case of his brother, dated 10.01.2018, reducing the exemption previously allowed to the brother, should be considered while deciding his own claim under Section 54B of the Act. However, upon a careful review of the sequence of eve....