TaxTMI 
TaxTMI 
2025 (9) TMI 1310
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....CIT initiated proceedings u/s 263 of the Act and held that the assessment framed by the AO vide order dated 29.12.2019 is erroneous and prejudicial to the interest of Revenue due to the reason that the AO has not conducted any enquiry or investigation before allowing the benefits of capital gains. Accordingly, the direction was given to the AO to pass a fresh assessment order u/s 263 of the Act dated 31.03.2022. The AO passed the impugned assessment order u/s 143(3) r.w.s. 263 of the Act and denied the deductions claimed by the assessee u/s 54 of the Act by holding that assessee has only made the agreement for purchase of property but no possession was ever given to the assessee. 3. The relevant issues under consideration are, the assessee sold an immovable property on 18.05.2016 for a consideration of Rs. 1,25,00,000/- on which long term capital gain of Rs. 92,57,020/- was declared in the return of income. The assessee claimed deduction arising out of abovesaid transaction by making an investment in immovable property of Rs. 1,22,57,020/- u/s 54 of the Act on account of advance made for purchase of residential plot in M/s. Chintel's International City (in short 'M/s. Chintel') ....
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....ssessee was provisionally allotted a plot with M/s Chintel's India Ltd on 27.05.2016with Plot No. L-001. Provisional allotment letter dated 27.05.2016 is placed in the paper book. d) Demand letter dated 27.05.2016 was issued by M/s Chintel's India Ltd (placed in the PB at page-10 of PB) for amount of Rs. 13,27,100/-, wherein it has been mentioned that amount of Rs. 12,27,100/- has been paid and balance of Rs. 1,00,000/- is payable. e) On 11.06.2016, Plot Buyer agreement was drafted and agreed upon (PB Pg-14-30), though it was finally received by the Assessee on 17.08.2019 only. f) Demand letter dated 01.07.2016 was issued by M/s Chintel's India Ltd (enclosed in the PB at page-11 of PB) for amount of Rs. 66,35,500/-, wherein it has been mentioned that amount of Rs. 13,27,100/- has been paid (payment acknowledgment enclosed in PB at page-12) and balance of Rs. 53,08,400/- is payable. g) On 04.08.2016, payment of Rs. 52,55,316/- (53,08,400-1% of TDS i.e 53084/-) was duly paid from HDFC bank account of husband of the Assessee (enclosed in the PB at page-31). The said transaction is even evident from Form 26AS of the Assessee enclosed in the PB at pag....
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....ed that as honest taxpayer, the assessee wanted to construct the House on the said residential site (which was allotted by M/s Chintel's India Ltd) within three years i.e. 19.05.2019 from the date of sale proceedings of 18.05.2016, however, the Builder M/s. Chintel failed to hand over the residential site within the stipulated time frame as per verbal and written promise from the date of agreement dated 27.05.2016 / 11thJune 2016 and the said fact was even placed before the AO as well as CIT(A). 10. Ld. AR further submitted that it is very interesting to note that based on assurance from Builder M/s. Chintel at the beginning of the third year, an Architect was hired by the assessee for the construction of house during September 2018 and in record he was paid non-refundable advance of Rs. 3,00,000 (BEZEL DESIG & Communication Pvt. Ltd.) which further proves the contention of the assessee. 11. He submitted that the deduction u/s 54 of the Act cannot be denied, as the delay in possession of residential site and further construction is delayed beyond three years due to the complete fault of the tricky and nefarious Builder M/s. Chintels Gurugram. He submitted that the provisions ....
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.... 13. A dominant factor to be seen in the present case is that the entire consideration received by the assessee on sale of her old property has been utilized for the purchase of the new property. The purchase value of the property is more than the long-term capital gains taxable in the hands of the assessee. This fact is very crucial. The conduct of the assessee unequivocally demonstrates that the assessee was in fact proceeding to construct a residential house, based on which the assessee had claimed exemption under section 54F. Therefore, what is the reality? The reality is that the assessee has spent the entire consideration received on the sale of property towards the construction of the residential house. It is true that the assessee could not construct the house. But she has purchased the land utilizing the entire consideration received on the sale of the old property. It means that the assessee has invested the entire consideration received on sale of the old asset in acquiring/constructing a residential house property. In the special facts and circumstances of the present case, therefore, it is necessary to hold that the amount utilized by the assessee to purchase the ....
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....he assessee. Thus, the AO and the CIT (A) have denied the exemption in view of the provision of section 54 and 54F of the Act. Further, the AO and the CIT (A) both have ignored the fact that the assessee has made a full payment to the developer and such payment was more than the amount of the deduction claimed by the assessee. Since, the delay was not on the part of the assessee but on the part of the developer and thus it was beyond the control of the assessee. In such circumstances, we are of the view that benefit of deduction cannot be denied to the assessee. Our view is supported by the judgment of coordinate bench of the ITAT in the case of Varun Seth vs. ACIT ITA No.1388/Del/2019 dated 14.05.2019, wherein it has been held as under:- "9. The real issue in the present case is that new residential house has not been constructed within a period of three years from the date of the transfer of the residential property which resulted in the long-term capital gain. On this issue, the assessee's contention has been that inspite of having made payment for the plot, the Jaypee (Developer) failed to offer possession and execute sale deed even up till the expiry of three years fr....
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....payment of tax on the long term capital gain. If a person, who gets some excess amount upon transfer of his old residential premises and thereafter purchases or constructs a new premises within the time stipulated under section 54 of the Act, the Legislature does not want him to be burdened with tax on the long-term capital gain and, therefore, relief has been given to him in respect of paying income-tax on the long-term capital gain. The intention of the Legislature or the purpose with which the said provision has been incorporated in the Act, is also very clear that the assessee should be given some relief. Though it has been very often said that common sense is a stranger and an incompatible partner to the Income-tax Act and it is also said that equity and tax are strangers to each other, still this court has often observed that purposive interpretation should be given to the provisions of the Act. In the case of Oxford University Press v. CIT [2001] 3 SCC 359 this court has observed that a purposive interpretation of the provisions of the Act should be given while considering a claim for exemption from tax. It has also been said that harmonious construction of the provisions wh....
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....) Girish L Ragha. Panajivs Department Of Income Tax (ITA NO. 116/PNJ/2014) -Tax Appeal no.66 of 2015 Bombay High Court. 69 taxmann.com 95 "Section 54 of the Income-tax Act, 1961 - Capital gains - Profit on sale of property used for residence (Time period for Investment) - Assessee sold residential property - He entered into an agreement with a builder for purchase of a flat and invested sale proceeds in it within prescribed period of two years - He was required to get house and occupancy certificate within two years - After purchase of property, there was a civil suit filed by other parties and assessee could not complete construction and licence for constructing house was accordingly issued after 4 years - Whether since assessee had invested money within stipulated period and delay in obtaining occupancy certificate was beyond control of assessee, assessee would be entitled for deduction under section 54 - Held, yes [Para 3] [In favour of assessee]." f) Similarly we also rely upon the following case laws: i) In the case of CIT v. Mrs. Shakuntala Devi [2016] 389 ITR 366/75 taxmann.com 222 (Karn.) it was held that the date of agreement to purchase should b....
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....g the construction of residential house and requires to be construed liberally for achieving that purpose. The intention of the Legislature was to encourage investments in the acquisition of a residential house and completion of construction or occupation is not the requirement of law. The words used in the section are 'purchased' or 'constructed'. The condition precedent for claiming benefit u/s. 54F is that the capital gain should be parted by the assessee and invested either in purchasing a residential house or in constructing a residential house. Merely because the sale deed had not been executed or that construction is not complete and it is not in a fit condition to be occupied does not disentitle the assessee to claim section 54F relief. vii) In the case of Smt. Rajneet Sandhu v. Dy. CIT [2012] 49 SOT 7/[2016] 16 taxmann.com 210 (Chandigarh) where the construction of the house was not completed within the prescribed period, it was held that section 54F does not prescribe that the residential house should be completed within the prescribed period and benefit under section 54F was allowed. It was further held that thrust was on investment and not on co....
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....only advance is given the benefit still will be available for exemption u/s. 54F. Refer -Vishal Dutt v. ITO [2016] 68 Taxmann.com 337 (Mum. - Trib.). xi) In the case of Mrs. Seetha Subramanian v. Asstt. CIT [1996] 59 ITD 94 (Mad. - Trib.) it was held that the intention of the Legislature was to invest in the acquisition of a residential house and completion of construction or occupation is not required. In order to get the benefit under section 54F, the assessee need not complete the construction of the house and occupy the same. Similar views have been expressed in the under mentioned cases also: Asstt. CIT v. M. Raghuraman [2018] 91 taxmann.com 11/169 ITD 315 (Chennai - Trib.), Smt. Babitha Kemparaje ors v. CIT [2017] 86 taxmann.com 43/167 ITD 125 (Bangalore - Trib.), Bhavna Cuccria v. ITO [2017] 82 taxmann.com 306/165 ITD 124 (Chandigarh - Trib.), Kannan Chandrasekar v. ITO [2017] 82 taxmann.com 284/165 ITD 223 (Chennai - Trib.). xii) PCIT vs Dilip Ranjrekar (101 Taxmann.com 114) (Karnatka HC) "Where AO rejected assessee's claim for deduction under sec. 54 on ground that construction of new property was not completed within a period of three years ....
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.... of the lower authorities. 17. Considered the rival submissions and material placed on record. We observe that the issue under consideration is, the assessee has sold a property and claimed deduction u/s 54F of the Act. We observe that assessee has booked residential plot from M/s. Chintel on 27.05.2016 and assessee was granted provisional allotment letter dated 12.07.2015 and the same is placed in the paper book. Accordingly, assessee made payment to M/s. Chintel in three installments totaling to Rs. 1,25,54,366/- and the relevant evidence of payments are already placed on record. Accordingly, assessee claimed the deduction u/s 54F of the Act. The issue under consideration is, the AO observed that as per the provisions of section 54F, the assessee need to purchase the residential house within one year before or two years after the sale or construct a residential house within three years from the date of original sale. The issue under consideration is that assessee could not complete the construction of the residential house due to the reason that M/s. Chintel has not handed over the respective plot of land to the assessee and the assessee was not able to start the construction.....
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....l of the assessee the same plot was never handed over to the assessee even beyond the period of limitation allowed u/s 54/54F of the Act i.e. 3 years from the sale of original asset. As per the records available on record, the assessee had invested all the sale consideration in purchase of the abovesaid plot and due to the reasons beyond the control of the assessee, the assessee could not commence the construction of the residential house. It is also brought to our notice that the assessee had finally gave up the rights on the abovesaid plot and purchased the residential property beyond the period of limitation. From the above facts available on record, it is beyond the control of the assessee to construct the residential property within the period allowed u/s 54F of the Act. 21. In the similar situation, Hon'ble Karnataka High Court in the case of CIT vs. Sambandam Udaykumar (2012) 19 taxmann.com 17 held that section 54F is a beneficial provision for promoting construction of residential house and in the given case also, assessee has utilized the funds for the purpose of construction of residential house and all the funds were utilized within the period of three years. Merely b....