2025 (9) TMI 1437

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.... u/s.143(2) of the Act was issued on 11.08.2018. The assessee had sold an agricultural land and disclosed capital gains thereon in the return filed for the assessment year 2016-17. The assessee had also claimed deduction u/s.54F from the Long-Term Capital Gains arising from sale of land for the construction of new asset i.e., residential building. The claim of deduction u/s.54F of the Act was denied by the AO in the assessment concluded u/s.143(3) of the Act (order dated 28.12.2018) and the AO added Long Term Capital Gains to the returned income. The relevant finding of the AO reads as follows:- 3. The assessee has not submitted any evidences for the construction of residential house viz. Copy of construction approval from the competent authority, period of construction of house, date of completion of house construction and valuation report from an approved valuer. Therefore, the claim of deduction u/s 54F is denied. 4. Further, the assessee has explained that the source for the cash deposits made in the bank account during demonetisation period (08.11.2016 to 31.12.2016) was from the sale of lands and for the same land the deduction u/s 54F was claimed. The amoun....

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....ctly utilized the funds for house construction, which is argued to be substantive compliance. * However, substantive compliance cannot override a specific statutory requirement. The law mandates CGAS compliance, and failure to adhere to this requirement disqualifies the appellant from claiming the exemption. * The appellant's reliance on the concept of "substantial compliance" is misplaced, as the Supreme Court in CIT v. Hemsons Industries [(2001) 251 ITR 693 (SC)] has held that procedural requirements cannot be ignored even if the ultimate objective is achieved. 6.3.4. Judicial Precedents Supporting Mandatory CGAS Compliance: * CIT v. Ms. Jagriti Aggarwal [(2011) 339 ITR 610 (P&H HC)]: The court emphasized that deposit in CGAS is a statutory requirement for claiming exemption under Section 54F. * Bharati C. Kothari v. ITO [(2016) 69 taxmann.com 69 (Mumbai Trib.)]: It was held that failure to deposit unutilized capital gains in CGAS disentitles the assessee from exemption, regardless of actual construction. * CIT v. Sugamchand C. Shah [(2012) 211 Taxman 19 (Guj HC)]: The court reiterated that non-compliance with CGAS provisions ....

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.... ii. Hon'ble Madras High Court in the case of CIT vs. Umayal Annamalai reported in [2020] 118 taxmann.com 80 (Madras) Dt.22.07.2020 iii. Hon'ble Madras High Court in the case of CIT vs. Sardarmal Kothari reported in [2008] 302 ITR 286 (Mad) Dt.17.06.2008 iv. Hon'ble Karnataka High Court in the case of CIT vs. K. Ramachandra Rao reported in [2015] 56 taxmann.com 163 (Madras) Dt.14.07.2014 v. ITAT, Chennai Bench in the case of Seetha Subramaniam vs. ITO reported in [1996] 59 ITD 94 (Mad) dt. 25.04.1996 vi. ITAT, Kolkata Bench in the case of Sunayana Devi vs. ITO reported in [2017] 86 taxmann.com 72 (Kol) dt. 13.09.2017 6. As regards the claim of deduction u/s.54 of the Act should be calculated on the actual consideration and not on the deemed consideration u/s.50C of the Act, the Ld.AR relied on the Jaipur Bench order of the Tribunal in the case of ITO vs. Shri Raj Kumar Parashar in ITA No.11/JP/2016 (order dated 28.09.2017). 7. The Ld.DR on the other hand submitted that the impugned order is legally sustainable. The Learned Commissioner of Income Tax (Appeals) [Ld. CIT(A)] has undertaken a detailed examination of the facts, submissions, and ....

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.... during the course of assessment proceedings. The FAA on the other hand denied the benefit of deduction u/s.54F of the Act only for the reason the assessee did not deposit the sale consideration of the old asset namely, the agricultural land into the bank account under CGAS scheme. The assessee has produced cost of construction of new asset certified from an approved valuer and also proof that the construction of the new house has been completed well within the stipulated time namely three years from the date of sale of original asset. The Hon'ble Jurisdictional High Court in the case of Venkata Dilip Kumar vs. CIT reported in (2019) 419 ITR 298 (Madras) had held at para 17 of the judgment as under:- 17. The claim of the assessee for deduction of the disputed sum towards the additional construction cost was rejected only on the ground that the said sum was not deposited in the capital gain account. In view of my findings rendered supra, the Revenue is not justified in making such objection. On the other hand, it has to verify as to whether the said sum was utilised by the petitioner within the time stipulated under Section 54(1) for the purpose of construction. If it is fo....