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TMI Blog2019 (9) TMI 1234X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee had sold a residential flat on 9th February 2014, for declared sale consideration of Rs. 30 lakh. However, the stamp duty authority has determined the value of the property at Rs. 46,24,848, for the purpose of stamp duty valuation. He found that after claiming indexation benefit, the total long term capital gain of Rs. 30,08,473, accrued to the assessee. As against the long term capital gain arising at his hands, the assessee claimed deduction under section 54 of the Act on account of purchase of a new residential flat for an amount of Rs. 45,38,000. Referring to the provisions of section 54(1) of the Act, learned Principal Commissioner observed, for claiming deduction the assessee is required to purchase the new residential house within a period of one year before or two years after the date on which the transfer took place. He observed, if the assessee does not purchase the residential house within a period of one year prior to the date of transfer or has not utilized the capital gain in purchase of new house within the due date of filing of return of income under section 139(1) of the Act, such capital gain has to be deposited in capital gain account scheme of the Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice dated 9th June 2016, issued under section 142(1) of the Act. He submitted, in the said notice, the Assessing Officer had enquired about the purchase of residential house by the assessee. He submitted, in reply to the said notice, the assessee had furnished his reply on 15th June 2016, mentioning the details of payment made towards purchase of new house. He submitted, through e-mail dated 16th June 2016, the Assessing Officer had specifically enquired into the compliance with the conditions set out in section 54(2) of the Act. He submitted, in response to the said query, the assessee furnished his reply on 21st June 2016, stating that the condition of section 54(2) of the Act has not been violated. Thus, he submitted, in course of assessment proceedings, the Assessing Officer had not only enquired into the factual details but also the legal aspect relating to assessee's claim of deduction under section 54 of the Act. He submitted, in the course of assessment proceedings, the assessee had not only submitted its reply justifying the claim of deduction under section 54 of the Act, but has also cited relevant case laws holding that if the capital gain is utilized in purchase of ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s subsequent to the date of the assessment order. Therefore, by virtue of such decision of the Hon'ble Jurisdictional High Court the assessment order cannot be considered to be erroneous and prejudicial to the interest of Revenue. In support of such contention, he relied upon the decision of the Tribunal, Mumbai Bench, in Gajendra Kumar T. Agarwal v/s ITO, 11 ITR (Trib.) 640 (Mum.). Thus, he submitted, the order passed under section 263 of the Act should be set aside. 6. The learned Departmental Representative submitted, the Assessing Officer has failed to apply his mind to the relevant statutory provisions as well as the judicial precedents on the issue resulting in wrongful allowance of assessee's claim of deduction 54(1) of the Act even though all the conditions of section 54 of the Act were not complied. The learned Departmental Representative submitted, the decision of the Hon'ble Jurisdictional High Court in Humayun Suleman Merchant (supra) clearly clinches the issue in favour of the Revenue. He submitted, though in various judicial precedents it has been held that there is no requirement of depositing capital gain in capital gain account scheme if the capital gain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns (1), (4) and (5). Secondly, if it is not done so, it has to be deposited in a capital gain account scheme before the due date of furnishing of return of income as provided under section 139(1) of the Act. 8. In the facts of the present case, though, the assessee had filed his return of income within the due date provided under section 139(1) of the Act, however, by that time he has not utilized the capital gain in purchase of new property. Therefore, as per the provision of section 54(2) of the Act, the unutilized capital gain should have been deposited in capital gain account scheme. At this juncture, it is necessary to examine the decisions relied upon by the assessee. 9. In Rajesh Kumar Jalan (supra), the Hon'ble Gauhati High Court has held that reading of section 54(2) of the Act would make it clear that it encompasses not only section 139(1) of the Act but section 139(4) and 139(5) of the Act as well. However, what the decision implies is, investment towards purchase of new house made before the actual date of filing of return of income even under section 139(4) of the Act would satisfy the condition of section 54(2) of the Act. 10. In case of Fathima Bai (supra), it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid legal principle to the facts of the present case, it can be seen that till the actual date of filing of return of income by the assessee for the impugned assessment year, the capital gain had not been utilized for purchase of new residential house. That being the case, the assessee was required to deposit the unutilized capital gain in capital gain account scheme within the due date of filing of return of income under section 139(1) of the Act. Thus, prima facie, the conditions of section 54(2) of the Act have not been complied. No doubt, during the assessment proceedings, the Assessing Officer enquired into the claim of deduction under section 54(1) of the Act and did raise a query regarding compliance with the conditions of section 54(2) of the Act. It is also a fact that the assessee had submitted his reply in response to the query raised by the Assessing Officer. However, while allowing assessee's claim of deduction under section 54(1) of the Act, the Assessing Officer has not properly applied the statutory provision as contained under section 54 of the Act. That being the case, the decision of the Assessing Officer in allowing assessee's claim of deduction under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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