Income Tax Appellate Tribunal - Chennai
Anil Kumar Goel,Chennai vs Acit, Ncc-7(1), Chennai on 8 April, 2026
आयकर अपील य अ धकरण, 'ए' यायपीठ, चे नई
IN THE INCOME TAX APPELLATE TRIBUNAL
'A' BENCH, CHENNAI
ी जॉज जॉज के, उपा य एवं ी एस.आर.रघुनाथा, लेखा सद$य के सम
BEFORE SHRI GEORGE GEORGE K, VICE PRESIDENT AND
SHRI S.R. RAGHUNATHA, ACCOUNTANT MEMBER
आयकर अपील सं./ITA No.: 2264/Chny/2025
&नधारण वष / Assessment Years: 2023-24
Anil Kumar Goel, ACIT,
7A, Old Tower Block, vs. Non-Corporate Circle -7(1),
Nandanam S.O, Chennai - 34.
Nandanam,
Chennai - 35.
[PAN: AAJPG-2552-Q]
(अपीलाथ(/Appellant) ()*यथ(/Respondent)
अपीलाथ( क+ ओर से/Appellant by : Shri. S. Muralidhar, CA
)*यथ( क+ ओर से/Respondent by : Dr. R. Mohan Reddy, CIT
सुनवाई क+ तार ख/Date of Hearing : 28.01.2026
घोषणा क+ तार ख/Date of Pronouncement : 08.04.2026
आदे श / O R D E R
PER S.R.RAGHUNATHA, AM:
The present appeal has been preferred by the assessee against the order dated 04.08.2025 passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (hereinafter referred to as the "Ld.CIT(A)"), arising out of the assessment order dated 03.03.2025 passed u/s.143(3) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") by the Assessment Unit of the National Faceless Assessment Centre, Delhi (hereinafter referred to as "the AO") for the Assessment Year 2023-24.
:-2-: ITA No. 2264/Chny/2025
2. The brief facts of the case, as borne out from the records, are that the assessee, an individual, filed his return of income for the impugned assessment year on 31.07.2023 declaring a total income of Rs.54,83,52,400/-. The case was selected for scrutiny under the Computer Assisted Scrutiny Selection (CASS) for the purpose of verification of the substantial deduction claimed u/s.54 of the Act. In pursuance thereof, notice u/s.143(2) of the Act was issued on 19.06.2024, followed by various notices u/s.142(1) of the Act.
3. It is evident from the assessment order that the assessee duly complied with and responded to the notices issued by the AO. Subsequently, the assessment was completed u/s.143(3) of the Act vide order dated 03.03.2025, wherein the total income of the assessee was determined at Rs.123,04,93,361/- as against the returned income, inter alia, by making the following additions to the Long-Term Capital Gains (LTCG) declared by the assessee:
i. Addition on account of cost of acquisition of Rs.2,40,26,231/-; ii. Addition on account of cost of improvement amounting to Rs.1,48,68,219/-;
iii. Addition on account of LTCG on sale of equity shares amounting to Rs.28,26,13,907/-; and iv. Addition on account of LTCG on sale of land amounting to Rs.36,06,32,604/-.
4. Aggrieved by the aforesaid additions made by the AO, the assessee preferred an appeal before the Ld.CIT(A). The Ld.CIT(A), vide order dated 04.08.2025, partly allowed the appeal of the assessee by deleting the addition of Rs.28,26,13,907/- made towards LTCG arising on sale of equity shares, while sustaining the remaining additions made by the AO in respect of cost of acquisition, cost of improvement, and LTCG on sale of land.
5. Being further aggrieved, the assessee is now in appeal before this Tribunal challenging the issues decided against him by the Ld.CIT(A). Having regard to the factual matrix of the case, we deem it appropriate to adjudicate the issues in a sequential and issue-wise manner as under.
:-3-: ITA No. 2264/Chny/2025 Issue No.1: Disallowance of cost of acquisition of Rs.2,12,69,640/-
The facts, in brief, are that during the year under consideration, the assessee sold 34 plots of land for a total sale consideration of Rs.39,95,56,234/-. While computing the long-term capital gains, the assessee declared the taxable capital gain at Rs.NIL after claiming the following deductions:
i. Expenses in connection with transfer: Rs.29,180/-
ii. Indexed cost of acquisition: Rs.2,40,26,231/- iii. Indexed cost of improvement: Rs.1,48,68,219/- iv. Long-term capital gains: Rs.36,06,32,604/- v. Less: Exemption claimed under section 54F: Rs.36,06,32,604/- vi. Taxable capital gains: NIL
6. During the course of assessment proceedings, the AO disallowed the indexed cost of acquisition amounting to Rs.2,40,26,231/- on the ground that the assessee failed to furnish proper documentary evidence in support of the claim.
7. On appeal, the Ld.CIT(A) partly sustained the disallowance to the extent of Rs.2,12,69,640/-, which is now under challenge before this Tribunal.
8. The Ld.CIT(A), while confirming the addition, observed that the assessee failed to furnish a satisfactory reply to the show cause notice issued during the assessment proceedings. It was noted that the property in question was purchased vide registered sale deed dated 14.03.2001 for a consideration of Rs.10,00,000/- jointly by the assessee and another co-owner. As per the said sale deed, the market value of the property was also stated to be Rs.10,00,000/-
. The assessee, however, claimed indexed cost of acquisition at Rs.2,40,26,231/- by adopting a higher fair market value (FMV). The Ld.CIT(A) observed that as per section 55 of the Act, in respect of assets acquired prior to 01.04.2001, the assessee has the option to adopt either the actual cost or the FMV as on 01.04.2001, whichever is higher. However, such FMV cannot exceed the stamp duty value.
:-4-: ITA No. 2264/Chny/2025
9. According to the Ld.CIT(A), since the sale deed itself reflected the market value at Rs.10,00,000/-, the assessee was not justified in adopting a higher value based on stamp duty valuation. Accordingly, the cost of acquisition was restricted by adopting Rs.10,00,000/- as the base value, and the indexed cost was recomputed. Consequently, the disallowance of Rs.2,12,69,640/- was sustained.
10. The Ld.AR submitted that the Ld.CIT(A) erred in overlooking crucial documentary evidence available on record.
11. It was contended that although the sale consideration mentioned in the sale deed dated 14.03.2001 was Rs.10,00,000/-, the stamp duty value of the property as on that date was Rs.1,03,36,000/-, as evidenced by the endorsement made by the Sub-Registrar on the reverse of the sale deed. The assessee had also paid deficit stamp duty of Rs.13,43,680/- and deficit registration charges of Rs.1,03,360/- based on such higher valuation.
12. It was further submitted that the stamp duty value as on 01.04.2001 was Rs.94/- per sq. ft., as certified by the Sub-Registrar vide certificate dated 06.04.2022. Since the property was acquired prior to 01.04.2001, the assessee was entitled, in terms of section 55(2)(b), to adopt the FMV as on 01.04.2001 as the cost of acquisition.
13. The Ld.AR submitted that the assessee rightly adopted the guideline value of Rs.94/- per sq. ft. as on 01.04.2001 and computed the cost of acquisition accordingly at Rs.72,58,680/-, which, after indexation, resulted in Rs.2,40,26,231/-.
14. It was argued that the Ld.CIT(A) erred in treating Rs.10,00,000/- as the FMV as on 01.04.2001 by ignoring the stamp duty valuation and the Sub-
:-5-: ITA No. 2264/Chny/2025 Registrar's certificate. The adoption of actual consideration instead of FMV as permitted under the Act was contrary to law.
15. The Ld.AR further submitted that all relevant documents, including the registered sale deed and the Sub-Registrar's certificate, were duly furnished before the AO as well as the Ld.CIT(A), but were not properly appreciated.
16. Accordingly, it was prayed that the disallowance of Rs.2,12,69,640/- sustained by the Ld.CIT(A) be deleted and the indexed cost of acquisition as claimed by the assessee be allowed.
17. Per contra, the Ld.DR relied upon the orders of the AO and the Ld.CIT(A) and submitted that the assessee failed to substantiate the claim with adequate evidence during assessment proceedings. It was thus prayed that the order of the Ld.CIT(A) be upheld.
18. We have heard the rival submissions and perused the material available on record, including the paper book filed by the assessee. The issue for our consideration is whether the assessee is justified in adopting the fair market value (FMV) as on 01.04.2001 based on the stamp duty valuation for the purpose of computing the indexed cost of acquisition. It is an admitted fact that the assessee acquired the property vide registered sale deed dated 14.03.2001, i.e., prior to 01.04.2001. Therefore, in terms of section 55(2)(b) of the Act, the assessee is entitled to substitute the actual cost of acquisition with the FMV of the property as on 01.04.2001, at his option.
19. On perusal of the records, we find merit in the contention of the assessee that the Ld.CIT(A) erred in adopting the value of Rs.10,00,000/- as the FMV of the property. The said figure represents merely the sale consideration recorded in the sale deed and cannot be conclusively regarded as the fair market value, particularly when there exists contemporaneous evidence to the contrary.
:-6-: ITA No. 2264/Chny/2025
20. We note that the registered sale deed itself contains an endorsement by the Sub-Registrar evidencing that the stamp duty value of the property as on the date of purchase was Rs.1,03,36,000/-, on which the assessee had paid the deficit stamp duty and registration charges. This clearly demonstrates that the value adopted for stamp duty purposes was substantially higher than the apparent consideration.
21. Further, the assessee has placed on record a certificate issued by the Sub-Registrar dated 06.04.2022 specifying that the guideline value of the property as on 01.04.2001 was Rs.94/- per sq. ft. The said certificate has not been controverted by the Revenue by bringing any cogent material on record.
22. In our considered view, the guideline value issued by the competent statutory authority, i.e., the Sub-Registrar, constitutes a reliable and reasonable basis for determining the FMV as on 01.04.2001. The action of the Ld.CIT(A) in disregarding such evidence and adopting the apparent consideration mentioned in the sale deed, without any supporting material, is not in accordance with law.
23. We further observe that the provisions of section 55(2)(b) of the Act confer a statutory right upon the assessee to adopt the FMV as on 01.04.2001, and such FMV cannot be arbitrarily restricted to the stated sale consideration, especially when higher valuation for stamp duty purposes is evidenced on record.
24. In light of the foregoing facts and circumstances, we hold that the assessee has correctly adopted the FMV as on 01.04.2001 based on the Sub- Registrar's certificate and has rightly computed the indexed cost of acquisition at Rs.2,40,26,231/-. Accordingly, the disallowance of Rs.2,12,69,640/- sustained by the Ld.CIT(A) is hereby deleted. In the result, the ground raised by the assessee is allowed.
:-7-: ITA No. 2264/Chny/2025 Issue No.2: Disallowance of cost of improvements of Rs.1,48,68,219/-
25. The AO, on perusal of the computation of capital gains furnished by the assessee in respect of sale of property, observed that the assessee had claimed a sum of Rs.1,48,68,219/- under the head "cost of improvement," comprising expenses towards layout approval, stamp duty, and building plan approval. In the absence of supporting documentary evidence, as noted by the AO, the said claim was disallowed.
26. On appeal, the Ld.CIT(A) upheld the disallowance made by the AO. The Ld.CIT(A) observed that the receipts evidencing payment of statutory charges to CMDA and Greater Chennai Corporation were not in the name of the assessee but in the name of one Shri Rohit Bagmar. Further, it was noted that the stamp duty pertaining to the partition deed had been paid by another individual, Shri Vikram Bagmar, Director of Royal Land Developers Pvt. Ltd., and not by the assessee. On the aforesaid grounds, the addition made by the AO was sustained.
27. Aggrieved by the order of the Ld.CIT(A), the assessee is in further appeal before us.
28. The Ld.AR submitted that the impugned expenditures were, in substance, incurred by the assessee, though initially paid by the aforesaid persons. It was contended that the assessee had reimbursed these amounts through banking channels (RTGS), and the relevant bank statements evidencing such reimbursements had already been furnished before the AO as well as the Ld. CIT(A).
29. The Ld.AR further elaborated that the assessee had claimed the following amounts under the head "cost of improvement":
:-8-: ITA No. 2264/Chny/2025
30. A sum of Rs.1,02,46,000/- paid towards CMDA layout approval charges on 29.10.2021. In support, reliance was placed on the CMDA receipt dated 29.10.2021. It was submitted that the payment was initially made by Shri Rohit Bagmar, who was subsequently reimbursed by the assessee through RTGS on 29.11.2022, as evidenced by the assessee's bank statement.
31. A sum of Rs.21,70,000/- paid to the Greater Chennai Corporation on 26.11.2021 towards scrutiny fees and improvement charges. The corresponding receipt issued by the Corporation was placed on record. This payment was also initially made by Shri Rohit Bagmar and later reimbursed by the assessee as part of a consolidated payment.
32. A sum of Rs.36,48,910/- being 50% share of stamp duty paid on the partition deed dated 15.04.2021. The total stamp duty paid was Rs.72,97,820/- . It was submitted that the initial payment was made by Shri Vikram Bagmar and subsequently reimbursed by the assessee through RTGS on 22.11.2022, including incidental expenses.
33. The Ld. AR submitted that all primary documents, including statutory receipts and bank statements evidencing reimbursement, had been duly furnished before the lower authorities. It was contended that the disallowance was made merely on the ground that the receipts were not in the name of the assessee, without appreciating the factual position.
34. Addressing the observations of the Ld.CIT(A), the Ld.AR submitted that Shri Rohit Bagmar had acted as the power agent of the assessee under a registered Power of Attorney dated 10.06.2021, which authorized him, inter alia, to make applications and payments to statutory authorities on behalf of the assessee. Consequently, the payments made by him and receipts obtained in his name were in a representative capacity on behalf of the assessee.
:-9-: ITA No. 2264/Chny/2025
35. It was further submitted that the stamp duty payment made by Shri Vikram Bagmar was also in a representative capacity, being the power agent of the co-owner, and that the assessee had duly reimbursed his share of the expenditure.
36. The Ld. AR also furnished confirmation letters from both Shri Rohit Bagmar and Shri Vikram Bagmar affirming the fact of reimbursement. It was submitted that these confirmations constitute additional evidence.
37. With regard to the observation of the Ld.CIT(A) concerning the Memorandum of Understanding (MOU) dated 11.06.2021 between Shri Rohit Bagmar and M/s.Royal Land Developers Pvt. Ltd., the Ld. AR contended that the said agreement is extraneous to the issue under consideration, as the assessee is not a party thereto and has not placed reliance on the same for any claim. It was submitted that the said MOU has no bearing on the computation of capital gains of the assessee and ought to be disregarded.
38. In view of the above submissions, the Ld.AR pleaded that the statutory payments made towards CMDA charges, Corporation fees, and stamp duty, having been ultimately borne by the assessee, are allowable as cost of improvement and the disallowance sustained by the Ld.CIT(A) deserves to be deleted.
39. Per contra, the Ld.DR supported the orders of the lower authorities.
40. We have heard the rival submissions and perused the material available on record. The issue for our consideration is whether the assessee is entitled to claim the impugned amounts towards statutory payments as "cost of improvement" while computing capital gains.
:-10-: ITA No. 2264/Chny/2025
41. It is an undisputed fact that the payments towards CMDA layout approval charges, Greater Chennai Corporation fees, and stamp duty on the partition deed were actually made, as evidenced by the respective statutory receipts placed on record. The sole basis for disallowance by the lower authorities is that such receipts were not in the name of the assessee but in the names of Shri Rohit Bagmar and Shri Vikram Bagmar.
42. However, from the material placed before us, it is evident that Shri Rohit Bagmar was acting as the duly authorized power agent of the assessee under a registered Power of Attorney, which specifically empowered him to incur such statutory expenses on behalf of the assessee. Similarly, Shri Vikram Bagmar had made the stamp duty payment in connection with the partition deed involving the assessee and the co-owner, and the assessee has reimbursed his proportionate share.
43. The assessee has also furnished bank statements evidencing reimbursement of the aforesaid amounts through RTGS to the respective persons. The fact of reimbursement has not been controverted by the Revenue. In our considered view, merely because the initial payments were made by authorized representatives or related parties, and receipts were issued in their names, the same cannot be a ground to deny the claim when it is established that the expenditure was incurred wholly and exclusively in connection with the property and ultimately borne by the assessee.
44. We also find merit in the contention of the assessee that the observations of the Ld.CIT(A) regarding the MOU between Shri Rohit Bagmar and M/s.Royal Land Developers Pvt. Ltd. are not germane to the issue under consideration, as the assessee is not a party to the said agreement and has not relied upon it for substantiating the claim.
:-11-: ITA No. 2264/Chny/2025
45. In view of the foregoing facts and circumstances, we hold that the statutory payments towards CMDA charges, Corporation fees, and stamp duty, having been substantiated with documentary evidence and having been ultimately borne by the assessee, are allowable as cost of improvement.
46. Accordingly, the disallowance made by the AO and sustained by the Ld.CIT(A) is directed to be deleted, and the ground raised by the assessee is allowed.
Issue No.3: Denial of exemption of Rs.36,06,32,604/- claimed u/s.54F of the Act:
47. The assessee derived long-term capital gains on the sale of plots situated at Sholinganallur over three assessment years, namely A.Y. 2022-23, A.Y. 2023- 24 (the year under appeal), and A.Y. 2024-25. It is an admitted position that in A.Y. 2022-23, the assessee did not claim exemption u/s.54F of the Act. However, in A.Y.2023-24, the assessee claimed exemption of Rs.36,06,32,604/- u/s.54F of the Act, and in A.Y. 2024-25, a further sum of Rs.4,23,45,627/- was claimed under the said provision.
48. During the year under consideration, the assessee sold 34 plots of land and received net sale consideration amounting to Rs.39,95,27,054/-. In compliance with the provisions of section 54F(4) of the Act, the assessee deposited a sum of Rs.39,95,30,000/- (being slightly in excess of the net consideration) under the Capital Gains Account Scheme (CGAS) with Canara Bank and Punjab National Bank, within the due date prescribed for filing the return of income u/s.139(1) of the Act, i.e., on or before 31.07.2023.
49. The details of deposits made with Canara Bank aggregating to Rs.15,95,42,000/- and Punjab National Bank aggregating to Rs.23,99,88,000/- are placed on record. Thus, the total deposits under CGAS amounted to Rs.39,95,30,000/-. Based on the aforesaid compliance, the assessee claimed :-12-: ITA No. 2264/Chny/2025 exemption u/s.54F of the Act in respect of the capital gains arising during the year under appeal. The AO, however, denied the claim of exemption u/s.54F of the Act on the ground that the assessee had not furnished adequate documentary evidence in support of the claim.
50. Aggrieved, the assessee preferred an appeal before the Ld.CIT(A), who upheld the action of the AO. The Ld.CIT(A) observed that the assessee had not purchased a residential property within the prescribed period of two years and that the new property was acquired only on 29.03.2025. The Ld.CIT(A) further held that the assessee had not utilized the amounts deposited in the CGAS account and had closed the said accounts prior to making the investment.
51. Being further aggrieved, the assessee is in appeal before this Tribunal.
52. The Ld.AR submitted that the relevant year of transfer of the Sholinganallur plots falls in A.Y. 2023-24, the year under appeal, and that the first of the plots was sold on 01.04.2022. It was contended that the assessee intended to reinvest the net sale consideration in a residential house property within the period of three years as stipulated u/s.54F of the Act.
53. It was further submitted that since the investment could not be completed before the due date for filing the return of income, the assessee duly deposited the entire net consideration in the CGAS accounts before 31.07.2023, thereby satisfying the mandatory requirement u/s.54F(4) of the Act. The Ld.AR pointed out that these deposits were duly verified by the Ld.CIT(A) and recorded in the appellate order.
54. Accordingly, it was contended that for A.Y. 2023-24, the only condition required to be fulfilled was the deposit of the net consideration in the CGAS account, which stood complied with, and therefore the assessee was entitled to exemption u/s.54F of the Act.
:-13-: ITA No. 2264/Chny/2025
55. The Ld.AR further submitted that the observations of the Ld.CIT(A) regarding non-utilization of the CGAS funds or failure to acquire property within the stipulated time are not relevant for the year under appeal. It was contended that any violation of the conditions relating to utilization would attract the provisions of the proviso to section 54F(4) of the Act, whereby the unutilized amount would be taxed in the year in which the period of three years expires, and not in the year of claim.
56. On merits of subsequent events, the Ld.AR submitted that the assessee had, in fact, complied with the requirements of section 54F of the Act. The assessee entered into a registered Agreement for Sale dated 01.04.2024 with M/s.Total Environment Habitat Private Limited for purchase of a residential unit in the project "Pursuit of a Radical Rhapsody" and paid a sum of Rs.40 crores from his personal bank account.
57. Subsequently, due to delay in completion of the said project, the assessee opted for an alternative property in another project of the same group, namely "Windmills of Your Mind". The earlier agreement was cancelled vide deed dated 26.03.2025, and the consideration paid was adjusted towards the new property.
58. The assessee ultimately acquired the residential property vide registered sale deed dated 29.03.2025 for a total consideration including further payment of Rs.5,20,14,000/-. It was submitted that the acquisition of the residential property on 29.03.2025 falls within the prescribed period of three years from the date of transfer, i.e., 01.04.2022 to 31.03.2025, thereby fully satisfying the requirements of section 54F of the Act.
59. The Ld.AR also submitted that appropriate permissions were obtained for withdrawal of CGAS deposits. In respect of Canara Bank, the assessee filed Form G before the AO and obtained approval for withdrawal. In respect of :-14-: ITA No. 2264/Chny/2025 Punjab National Bank, withdrawals were permitted upon submission of supporting evidence.
60. Thus, it was contended that both on legal and factual grounds, the assessee had complied with the provisions of section 54F of the Act, and the denial of exemption by the lower authorities is unsustainable. The Ld. AR also placed reliance on judicial precedents (decision of the Chennai Tribunal in the case of Arthur Jagaraj Devepragasam Vs.DCIT, in ITA No.710/Chny/2025 dated 24.07.2025 and Ranjit V Srivatsaa Vs.ITO, ITA No.1755/Chny/2025 dated 14.01.2026) to submit that once the amount of capital gain is duly deposited in the CGAS within the prescribed time, the exemption cannot be denied in the year of claim, and any subsequent non-compliance, if at all, can only be examined in the relevant subsequent year in terms of the statutory provisions.
61. Per contra the ld.DR supported the orders of the authorities and prayed for confirming the same.
62. We have carefully considered the rival submissions, perused the material available on record, and gone through the orders of the lower authorities. The short issue arising for consideration is whether the assessee is entitled to exemption u/s.54F of the Act in A.Y. 2023-24, being the year under appeal. It is an undisputed fact that the assessee had derived long-term capital gains on the sale of 34 plots of land during the relevant previous year and had received net sale consideration amounting to Rs.39,95,27,054/-. It is further not in dispute that the assessee, having not utilized the said consideration for purchase or construction of a residential house before the due date prescribed u/s.139(1) of the Act, had deposited a sum of Rs.39,95,30,000/- under the Capital Gains Account Scheme (CGAS) with Canara Bank and Punjab National Bank on various dates prior to 31.07.2023.
:-15-: ITA No. 2264/Chny/2025
63. The aforesaid deposits have not been doubted either by the AO or by the ld.CIT(A). In fact, the Ld.CIT(A) has himself recorded the details of such deposits in the appellate order. Therefore, the primary condition stipulated u/s.54F(4) of the Act, namely, deposit of the unutilized net consideration in the notified scheme before the due date for filing the return of income, stands duly complied with. The AO denied the exemption on the ground of lack of documentary evidence, and the Ld.CIT(A) confirmed the same on the reasoning that the assessee had not acquired a residential property within the prescribed period and had not utilized the CGAS deposits.
64. In our considered view, the approach adopted by the lower authorities is not in accordance with the scheme of section 54F of the Act. At this stage, it is pertinent to note that section 54F provides a two-fold compliance mechanism:
(i) For the year of transfer, the assessee is required to either utilize the net consideration for purchase/construction of a residential house before the due date of filing the return of income or deposit the unutilized amount in the CGAS as per section 54F(4) of the Act;
(ii) For subsequent years, the assessee is required to utilize the amount so deposited within the prescribed period of three years from the date of transfer, failing which the unutilized amount is liable to be taxed in the year in which such period expires, as per the proviso to section 54F(4) of the Act.
65. In the present case, for the year under appeal, the assessee has admittedly complied with the requirement of depositing the entire net consideration in the CGAS within the due date prescribed u/s.139(1) of the Act. Therefore, the condition precedent for claiming exemption u/s.54F of the Act for A.Y. 2023-24 stands satisfied. The denial of exemption by the Ld.CIT(A) on the ground that the assessee did not acquire the residential property within two years or that the property was ultimately acquired on 29.03.2025 is, in our view, misplaced. The statute itself provides a time limit of three years for construction, :-16-: ITA No. 2264/Chny/2025 and the compliance of such condition is not required to be examined in the year of transfer, but only upon expiry of the stipulated period.
66. Further, the observation of the Ld.CIT(A) that the assessee did not utilize the CGAS deposits and had closed the accounts is also not relevant for adjudicating the claim of exemption in the year under appeal. Even assuming there was any violation in utilization, the consequence thereof is specifically provided in the proviso to section 54F(4) of the Act, which mandates taxation of the unutilized amount in the year in which the period of three years expires. Such alleged violation cannot be a ground to deny exemption in the initial year when the statutory requirement of deposit has been fulfilled.
67. Be that as it may, from the material placed on record, it is evident that the assessee had, in fact, reinvested the consideration in acquisition of a residential property within the prescribed period. The assessee initially entered into a registered agreement dated 01.04.2024 with a builder for purchase of a residential unit and made substantial payments. Subsequently, due to delay in completion of the project, the assessee acquired an alternative residential property from the same group vide registered sale deed dated 29.03.2025.
68. The date of first transfer being 01.04.2022, the period of three years expired on 31.03.2025. The acquisition of the residential property on 29.03.2025 is thus well within the time prescribed u/s.54F of the Act. Therefore, even on merits, the assessee has duly complied with the conditions of the said provision.
69. We also find merit in the contention of the Ld.AR that the source of investment, i.e., whether from CGAS or from personal funds, is not material, so long as the net consideration is ultimately invested in the residential property within the stipulated period. The subsequent withdrawal of CGAS deposits, with due permissions, further substantiates the bonafides of the assessee.
:-17-: ITA No. 2264/Chny/2025
70. In light of the above discussion and respectfully following the Decisions of the Chennai Tribunal in the case of Arthur Jagaraj Devepragasam Vs.DCIT, in ITA No.710/Chny/2025 dated 24.07.2025 and Ranjit V Srivatsaa Vs.ITO, ITA No.1755/Chny/2025 dated 14.01.2026, we hold that the assessee has complied with the conditions prescribed u/s.54F of the Act both at the stage of deposit u/s.54F(4) of the Act as well as with regard to reinvestment within the stipulated time. Accordingly, the denial of exemption u/s.54F of the Act by the AO and sustained by the Ld.CIT(A) is not sustainable in law. In the result, the ground of appeal raised by the assessee is allowed, and the AO is directed to grant exemption u/s.54F of the Act as claimed.
71. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 08th April, 2026 at Chennai.
Sd/- Sd/-
(जॉज जॉज के) (एस. आर. रघुनाथा)
(GEORGE GEORGE K) (S.R.RAGHUNATHA)
उपा य /VICE PRESIDENT लेखा सद$य/ACCOUNTANT MEMBER
चे ई/Chennai,
िदनां क/Dated, the 08th April, 2026
JPV
आदे श की ितिलिप अ ेिषत/Copy to:
1. अपीलाथ /Appellant
2. थ /Respondent
3.आयकर आयु /CIT- Chennai/Coimbatore/Madurai/Salem
4. िवभागीय ितिनिध/DR
5. गाड फाईल/GF PRASANNA VANI JETTY Digitally signed by PRASANNA VANI JETTY Date: 2026.04.10 14:49:44 +05'30'