Income Tax Appellate Tribunal - Chandigarh
Gurkanwal Kaur,Chandigarh vs Income Tax Officer, Ward-1(3), ... on 11 May, 2026
आयकर अपीलीय अिधकरण,च ीगढ़ ायपीठ, च ीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, 'A' CHANDIGARH
BEFORE SHRI LALIET KUMAR, JUDICIAL MEMBER AND
SHRI KRINWANT SAHAY, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA No. 881/CHD/2024
िनधारण वष / Assessment Year : 2016-17
Gurkanwal Kaur, The Income Tax Officer,
C/o Shri Tej Mohan Singh, Advocate, Vs Ward 1(3),
# 527, Sector 10-D, Chandigarh. Chandigarh.
ायी लेखा सं./PAN NO: ANFPK2336R
अपीलाथ /Appellant थ /Respondent
Assessee by : Shri Tej Mohan Singh, Advocate
Revenue by : Shri Vivek Vardhan, Addl. CIT Sr.DR
Date of Hearing : 04.05.2026
Date of Pronouncement : 11.05.2026
PHYSICAL HEARING
ORDER
PER LALIET KUMAR, JM
This appeal by the assessee is directed against the order passed u/s 250 of the Income Tax Act, 1961 by the Ld. CIT(A)/NFAC, Delhi da ted 11.07.2024 for the as sessment year 2016 -17 confirming the addition made by the Assessing Officer by restricting the deduction claimed by the assessee u/s 54F of the Act.
ITA-881/CHD/2024 2
2. Briefly stated, the facts of the case are that the assessee is an individual who filed return of income declaring total inco me at Rs.20,75,450/ -. The case was selected fo r limited scrutiny under CASS to exami ne the deduction claimed u/s 54F of the Act. D uring the year under consideration, the assessee sold an immovable property for a consideration of Rs.1,20,96,000/- a nd earned long term capital gain amounting to Rs.1,10,01,913/-. Against the said capital gain, the assessee claim ed deduction u/s 54F of the Act amounting to Rs.1,00,87,016/- o n account of inves tment made in a residential house property.
3. During the course of assessment proceedings, the Asse ssing Officer observed that out of the total investment made towards acquisition of the residential property, only an amount of Rs.15,00,000/ - had been paid before the due date prescribed u/s 139(1) of the Act and the remaining amount was paid subsequent ly. The Assessing Officer further observed that the assessee ha d not depo sited the unutiliz ed amount in the Capital Gain Ac count Sche me before the due date prescribed u/s 139(1) and the refore restricted the deduction allowable u/s 54F to Rs.13,78,105/ - and consequently made addition of Rs.87,08 ,911/- under the head "Capital Gains".
ITA-881/CHD/2024 3
4. While making the addition, the Assessing Offi cer in para 4.5 of the assessment order furt her referred to certain a lleged contradictions between the detai ls furnished by the assesse e and the information obtained from the developer. The As sessing Officer observed that whereas the assessee had referred to Flat No.82 in Towe r-3, the developer had referred to Flat No.131-A in Tower No.1. It was also obs erved that there w as variat ion in the date of r eceipt of the last installment as reflected by the assessee and by the developer and further th at the assessee had stated t hat posse ssion was not taken to avoid maintenance charges wherea s the developer had stated that possession was to be handed over on 14.07 .2018 pend ing registration. On the basis of the aforesai d observations and for non-deposit of the amount in the Capital Gain Account Sche me, the claim of deduction u/s 54F was partl y disallow ed by the Assessing Officer.
5. Aggrieved against the assessment order, the assessee carried the m atter in appeal before the Ld. CIT(A). The Ld. C IT(A), however, confirmed the action o f the Assessing Officer primarily on the ground that the assessee had failed to deposit the unutilized capital gain amount in t he Capital Gain Account Scheme before the due date pre scribed u/s 139(1) of the Act and therefore the ITA-881/CHD/2024 4 assessee was not entitled to deduction u/s 54F in respect of the amount invest ed subsequently.
6. Before u s, the Ld. Counsel for the assessee submitted that the entire amount of capital gain stood investe d in acquisition/construction of the residentia l house property w ithin the ov erall statutory period prescr ibed under section 54F of the Act and therefore the exemption could not be denied merely on account of no n-deposit of the amount in t he Capital Gain Account Scheme. It was further submitted that section 54F being a beneficial provision de serves liberal interpretation and subst antial compliance having been made by the assessee, the d eduction ought to be allowed.
7. Per contra, the Ld. Sr. DR strongly relied upon the orders of the lower authorities and more particularly referred to para 4.5 of the assessment order. The Ld. Sr. DR submitted tha t the Asse ssing Officer had pointed out material discrepancies in t he claim of the assessee with regard to the details of the property, the pay ments made and the aspect of possession of the flat and therefo re the authorities bel ow had ri ghtly disallowed the claim to the extent the amount was not deposited in the Capital Gain Acco unt Sche me.
8. We have heard the rival submissions and perused the material available on record. We had also specifica lly called upon both the ITA-881/CHD/2024 5 parties to furnish their respective repor ts/explanations on the contradictions pointed out by the Assessi ng Officer in para 4.5 of the assessment order. In response thereto, the assessee furnished duly authenti cated documents issued by the seller/dev eloper wher ein Flat N o.82 in To wer-3 was specifically mentioned. The said documentary evidence w as confronted to the Ld. Sr. DR, however, the Revenue could no t controvert the same by bringing any material contrary thereto on record. Therefore, the objection raised by the Assess ing Officer with regard to discrepancy in the flat number stands adequately explained and does not survive any longer.
9. Be that as it may, we furt her note that the principal basis adop ted by the Ld. CIT( A) for sustaining the disallo wance was not founded upon the aforesaid discrepancies noted by the Asse ssing Officer. The disallowance has essentially been co nfirmed o n the technical objection that since the assessee had not deposite d the unut ilized cap ital gain amount in the Capital Gain Account Sche me before the due date prescribed u/s 139(1) of the Act, the assessee was disentitled from claiming deduction u/s 54F of the Act.
10. In our considered opinion, such an approach adopted by the Ld. CIT(A) is highly pedantic and hyper-technical. It is a s ettled proposition of law that the provisions of section 54F are beneficial ITA-881/CHD/2024 6 provisions enacted with the object of encouraging investment in residential ho using and therefor e deserve liberal construction so as to advance the cause of justice rather than frus trate the same on m ere techn icalities. The essence and substance o f the provision is that the assessee should invest the capital g ain amount in acquisition or construction of a residential house withi n the stipulated period. Once the substantive condition stands fulfilled, mere non-deposit of the amou nt in the Capital Gain Account Sche me, though may constitut e a venial or tec hnical breach, cann ot be allowed to defeat a legitimate claim otherwise ava ilable to the assessee under the statute.
11. In the p resent case, it is an undisputed position tha t the assessee has i nvested the entire amount in the re sidential house property within the stat utory per iod prescribed under sectio n 54F of the Act. The Revenue has also not disputed the genuineness of such investm ent. Therefore, denying the exempt ion mere ly on account of non-compliance with a procedural requirement would amount to elevating form over substance, which is impermi ssible while interpreting a beneficial provisio n intended to pr omote residential investment.
12. Considering the entirety of t he facts and circum stances of the case and in the light of the discussion made herei nabove, we are ITA-881/CHD/2024 7 of th e considered opin ion that the approach adopted by the Ld. CIT(A) is devo id of merit. Accordingly, the orders passed by the Assessing Officer as well as the Ld. CIT(A) are set aside and the addition of Rs. 87,08,911/- made under the head "Capital Gains" is directed to be deleted.
13. In the res ult, the appeal of the assessee is allowed.
Order pronounced on 11.05.2026.
Sd/- Sd/- (KRINWANT SAHAY) (LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER "Poonam"
आदे श की ितिलिप अ ेिषत/ Copy of the order forwarded to :
1. अपीलाथ / The Appellant
2. थ / The Respondent
3. आयकर आयु / CIT
4. िवभागीय ितिनिध, आयकर अपीलीय आिधकरण, च ीगढ़/ DR, ITAT, CHANDIGARH
5. गाड फाईल/ Guard File Assistant Registrar