TaxTMI 
TaxTMI 
2026 (9) TMI 1871
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.... ld PCIT-2, Agra, in exercise of power u/s 263 of the Act, held the assessment dated 09.05.2016 as erroneous in so far as it is prejudicial to the interest of revenue on the ground that the assessment remained without making inquiries and verification in respect of the assessee's claim of deduction of long term capital gain u/s 54F of the Act on the sale of property. Ld PCIT directed the assessing officer for making a fresh assessment after inquiries/ verification in respect of assessee's claim of long term capital gain, vide order dated 31.03.2019 passed u/s 263 of the Act. (ii) Thereafter, the assessing officer initiated the assessment proceedings in compliance of order u/s 263 of the Act, dated 31.03.2019 by issuance of show cause notice, seeking assessee's explanations on two points - firstly, as to why the payment of Rs. 25,00,000/- made on 02.05.2015 for the purchase of plot without withdrawing the said amount from the capital gain account be not disallowed, secondly, the assessee withdrew only Rs. 45,00,000/- from the capital gain account till 31.12.2015, which was not sufficient till the said construction dated 09.03.2016. (iii) The assessee submitted his reply and co....
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.... years form the date of earning the capital gain. 3. That the learned Commissioner of Income Tax (Appeals) has grossly erred in law and on facts in not accepting the Nagar Nigam assessment as a conclusive proof of completion of the house under reference, whereas assessment of house is only done by the said Autonomous body when the house is found to have been completed. 4. That the learned Commissioner of Income Tax (Appeals), NFAC has blatantly failed to appreciate that entire payments of capital gain have been utilised in the construction of the work duly supported by the copies of the ledger Accounts and the Bank statement duly furnished before both the lower authorities. 5. That the learned Commissioner of Income Tax (Appeals) has wrongly and illegally held that the later withdrawals and the closing balances were ostensibly for outstanding payments which contravenes section 54(F) of the Income Tax Act, 1961, whereas on the contrary there are enough material and evidences available on record to prove that these payments were exclusively utilised for the construction of the house within the prescribed period of time." 5. Perused the records. Heard ld ....
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....rces and the purchase of plot beyond 2 years from the sale of assessee's original asset on 16.04.2013 does not disqualify the assessee from her claim of exemption u/s 54F because the residential house was constructed on the plot by 09.03.2016 i.e. before the stipulated period of 3 years from the date of sale of original asset as provided u/s 54F(1) of the Act. 9. Ld AR has referred - (i) CIT Faridabad v. Shri Kapil Kumar Agarwal, 2015 (12) TMI 1075 (P&H- H.C.) order dated 04.11.2015, (ii) ITA No. 13/VNS/2024, Vikesh Garg v. DC-ACIT (2) Gorakhpur, 2024 (10) TMI 1564 (ITAT-Varanasi), order dated 22.10.2024, and (iii) CIT v. Sardarmal Kothari and Another, 2008 (6) TMI 15 (Mad- H.C.), in support of his arguments. 10. Ld CIT DR has supported the impugned order. 11. The revenue has rejected assessee's claim mainly on the grounds that assessee failed to prove completion of the construction of the residential house within 3 years period ending on 15.04.2016. Further that the major construction payments were made from other sources. 12. It transpires from the perusal of records that the disallowance of exemption of Rs. 59,58,600/- claimed by the assessee u/s 54F of the Act on lo....
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....roperty during the period specified under Section 54F of the Act in order to get benefit thereunder. Section 54F of the Act nowhere envisages that the sale consideration obtained by the assessee from the original capital asset is mandatorily required to be utilized for the purchase or construction of a house property. No provision has been made by the statute that in order to avail benefit of Section 54F of the Act, the assessee has to utilize the amount received by him on sale of original capital asset for the purposes of meeting the cost of the new asset. Once that is so, the assessee was entitled for benefit under section 54F of the Act." 15. The coordinate bench of this tribunal in Vikesh Garg (supra) has held as under: "7. We heard rival contentions and perused the record. The Ld.AR submitted that the claim u/s 54F is allowable to the assessee u/s 54F (4) of the Act. The said sub-section reads as under:- "Sec. 54F (4): The amount of the net consideration which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him ....
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....said deposit shall arise only after expiry of three years from the date of transfer of the original asset. 8. Accordingly, we are of the view that the tax authorities are not right in taking into consideration the events that took place in the subsequent years. Accordingly, we are of the view that they are not justified in rejecting the deduction claimed by the assessee u/s 54F of the Act. With regard to the events that took place subsequently, i.e., purchase of land, the Ld.AR disputed the assertion of the AO that the said land consisted of residential building. He submitted that the same was watchman out house, which cannot be considered to be a house. He further submitted that the assessee has started construction of the building thereon subsequently. In any case, in our view, all these facts need to be examined only in the subsequent years and not during the year under consideration. Accordingly, we set aside the order passed by Ld.CIT(A) on this issue and direct the AO to allow deduction u/s. 54F of the Act claimed by the assessee." 16. In view of the aforesaid decisions, we are of the consistent view that in order to avail benefit of section 54F of the Act, the as....