TaxTMI 
TaxTMI 
2026 (6) TMI 1083
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....icating that income chargeable to tax had escaped assessment, the AO initiated reassessment proceedings u/s. 147 of the Act by issuing a notice u/s. 148 of the Act. In response thereto, the assessee filed his return of income on 08.05.2024. Thereafter, statutory notices u/s. 143(2) and 142(1) of the Act were issued and duly served upon the assessee. 3. In compliance with the notice issued u/s. 142(1) of the Act, the assessee furnished a reply dated 23.01.2025 along with copies of the sale deed relating to the property sold and the purchase deed pertaining to the property acquired by him. Upon examination of the documents so furnished, the AO observed that while computing long-term capital gains arising from the sale of an immovable property, the assessee had claimed exemption of Rs. 5,59,239/- u/s. 54 of the Act. According to the AO, the assessee had invested the sale proceeds in a vacant plot of land, which by itself did not qualify for exemption u/s. 54 of the Act. The AO further noted that the assessee had not deposited the unutilised capital gains in the Capital Gains Account Scheme as prescribed under the Act. Consequently, the AO proposed to disallow the exemption claimed ....
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....returned income of Rs. 8,02,830/-, disallowance of exemption u/s. 54 of the Act amounting to Rs. 5,59,239/-, and addition u/s. 56(2)(x) of the Act amounting to Rs. 7,42,251/-. 8. Aggrieved by the above assessment order, the assessee preferred an appeal before the Ld.CIT(A). The Ld.CIT(A) vide the impugned appellate order dated 20.11.2025 dismissed the appeal of the assessee by upholding the additions made by the AO in completing the assessment. 9. With regard to the disallowance of exemption u/s. 54 of the Act amounting to Rs. 5,59,239/-. The Ld.CIT(A) observed that the assessee had sold a property situated at NOIDA on 09.07.2019 for a consideration of Rs. 48,00,000/-. After claiming indexed cost of acquisition of Rs. 42,40,761/-, the resultant long-term capital gain was computed at Rs. 5,59,239/-. Subsequently, the assessee purchased a plot of land measuring 1,851 sq.ft. situated in the layout known as VGN Victoria Park, Ambattur Village, Chennai, on 21.06.2019 for a consideration of Rs. 94,38,249/-. The purchase was partly financed through a loan amounting to Rs. 49,85,876/-. 10. Before the Ld.CIT(A), the assessee contended that the said plot had been acquired for the pu....
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....introduced by the Finance Act, 2020 was applicable only from AY 2021-22 and therefore could not be extended to AY 2020-21. Consequently, the addition u/s. 56(2)(x) of the Act was sustained. 13. The assessee challenged the validity of the reassessment proceedings initiated u/s. 147 and 148 of the Act before the Ld.CIT(A). Upon examination of the assessment records, the Ld.CIT(A) held that the AO had valid reasons to believe that income chargeable to tax had escaped assessment, particularly in view of the fact that the assessee had not filed a return of income for the relevant assessment year. The Ld.CIT(A) further recorded a finding that the statutory requirements prescribed u/s. 147, 148 and 144C of the Act had been duly complied with. Accordingly, the challenge to the validity of the reassessment proceedings was rejected. 14. Thus, vide order dated 20.11.2025 passed u/s. 250 of the Act, the Ld.CIT(A) dismissed all the grounds raised by the assessee and confirmed the additions made by the AO. Aggrieved by the aforesaid order of the Ld.CIT(A), the assessee has preferred the present appeal before this Tribunal. 15. The Ld.AR, appearing on behalf of the assessee submitted tha....
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....tation periods across judicial and quasi-judicial proceedings on account of the pandemic. The principle underlying such extensions is that no person should suffer adverse legal consequences due to circumstances beyond his control caused by COVID-19. The same beneficial principle deserves to be applied while interpreting the time limits prescribed u/s. 54 of the Act. 21. The Ld.AR further submitted that the Ld.CIT(A) erroneously restricted the benefit only to CBDT Notification No.35/2020. The said notification was intended to provide minimum statutory relief and cannot curtail the wider equitable and beneficial interpretation available u/s. 54 of the Act. According to the Ld.AR that once the assessee demonstrates bona fide intention and actual construction of a residential house, exemption cannot be denied merely because the construction was completed after a marginal delay attributable to unprecedented pandemic conditions. The Ld.AR therefore submitted that the exemption u/s. 54 of the Act amounting to Rs. 5,59,239/- ought to be allowed in full. 22. With regard to the addition of Rs. 7,42,251/- made u/s. 56(2)(x) of the Act. The Ld.AR submitted that the assessee purchased the....
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....e disallowance of exemption claimed u/s. 54 of the Act amounting to Rs. 5,59,239/- and the addition of Rs. 7,42,251/- made u/s. 56(2)(x) of the Act. 28. We shall first deal with the issue relating to the denial of exemption u/s. 54 of the Act. The undisputed facts emerging from the record are that the assessee sold a residential property situated at Noida on 09.07.2019 and earned long-term capital gains of Rs. 5,59,239/-. Prior to the transfer of the original asset, the assessee had purchased a plot of land on 21.06.2019 at Ambattur, Chennai, with the intention of constructing a residential house thereon. The assessee has consistently maintained before the authorities below that the said plot was acquired exclusively for the purpose of construction of a residential house and that the construction was ultimately completed during the year 2023. The authorities below have not disputed either the purchase of the plot or the eventual construction of the residential house. The exemption has been denied solely on the ground that the construction was not completed within a period of three years from the date of transfer of the original asset. 29. At this stage, it would be relevant t....
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....approach is unduly restrictive. The notification merely grants a statutory extension in specified situations and cannot be interpreted so as to curtail the scope of the beneficial provision contained in section 54 of the Act. Once the assessee establishes bona fide investment in a residential project and demonstrates that the delay in completion was occasioned by extraordinary circumstances beyond his control, the exemption cannot be denied on hyper-technical considerations. Beneficial provisions should be interpreted in a manner that advances the object of the legislation rather than frustrates it. 33. We also find merit in the contention of the assessee that substantial compliance with the requirements of section 54 of the Act is sufficient. The assessee had acquired the plot, obtained statutory approvals and ultimately constructed the residential house thereon. The investment in the residential project is thus not in dispute. In such circumstances, denying exemption merely because the construction stood completed beyond the stipulated period, particularly when such delay substantially coincided with the COVID-19 disruptions, would defeat the very object underlying section 54 ....