1999 (4) TMI 108 - AT - Income Tax

Summary

Issues Involved:
1. Rejection of assessee's appeal against the order passed by the Assessing Officer under section 154.
2. Compliance with the Capital Gains Account Scheme 1988.
3. Validity of the adjustment made under section 143(1)(a).
4. Plea of ignorance of law by the assessee.

Detailed Analysis:

1. Rejection of Assessee's Appeal Against the Order Passed by the Assessing Officer Under Section 154:
The appeal was directed against the Commissioner (Appeals) order, which upheld the Assessing Officer's decision under section 154. The Assessing Officer had made an adjustment of Rs. 1,06,240 to the returned income, allowing benefit under section 54F only for the amount spent up to the date of filing the return. The unutilized amount was required to be deposited in the "Capital Gains Account Scheme 1988," which the assessee failed to do. The Commissioner (Appeals) found no mistake apparent from the record and justified the Assessing Officer's action.

2. Compliance with the Capital Gains Account Scheme 1988:
The assessee claimed that the entire amount received from the sale was utilized within the stipulated period for constructing a residential house. However, the assessee did not deposit the unutilized amount in the "Capital Gains Account Scheme 1988" as required by law. The Assessing Officer issued a deficiency letter seeking clarification on the nature of the bank account, but the assessee failed to provide the necessary proof of deposit under the scheme. The Tribunal held that knowing the law and not complying with it cannot be excused as a technical breach, and the provisions of sub-section (4) of Section 54F must be followed.

3. Validity of the Adjustment Made Under Section 143(1)(a):
The Tribunal examined whether the adjustment made by the Assessing Officer under section 143(1)(a) was valid. The adjustment was based on the information available in the return, which indicated that the assessee had not complied with the requirement of sub-section (4) of section 54F. The Tribunal concluded that the adjustment and subsequent rejection of the application under section 154 were valid, as the claim made under section 54F was prima facie inadmissible. The Tribunal distinguished this case from others, noting that a defect letter had been duly sent to the assessee.

4. Plea of Ignorance of Law by the Assessee:
The assessee argued that ignorance of the law should be excused, citing a letter from the bank manager stating unawareness of the scheme. However, the Tribunal found that the assessee knew about the scheme but did not comply with it. The Tribunal referred to the Supreme Court's decision, which does not allow ignorance of the law as a defense in every situation. The Tribunal concluded that the assessee's non-compliance could not be considered a mere technical breach, and the legal requirement of depositing under the "Capital Gains Account Scheme 1988" was mandatory.

Conclusion:
The Tribunal dismissed the appeal, upholding the actions of the Assessing Officer and the Commissioner (Appeals). The Tribunal emphasized that compliance with the legal provisions was necessary and that the adjustment made under section 143(1)(a) was justified based on the information provided in the return. The plea of ignorance of the law was not accepted, and the assessee's failure to deposit the unutilized amount in the specified scheme was deemed a substantive non-compliance.