CLOSURE OF LONG TERM CAPITAL GAIN ACCOUNT

Your situation involves the closure of a Capital Gains Account Scheme (CGAS) account after paying the Long Term Capital Gains (LTCG) tax, but you're stuck because the bank is insisting on an NOC from the Income Tax Department, and the Assessing Officer (AO) is asking for construction expense bills, which you no longer have.

Here’s how you can proceed strategically:

✅ 1. Understand the Income Tax Officer’s Concern

The AO wants bills to:

• Verify your cost of acquisition/improvement (i.e., the construction cost of the commercial shed).

• Ensure you didn’t inflate expenses to reduce LTCG.

Since you can’t provide original bills, you need to present alternate acceptable documentation.

✅ 2. Use Alternate Documentation

a. Bank Statements as Primary Proof

You mentioned:

• Expenses were made from a specific bank account opened jointly with your partner.

• There is an MOU confirming the purpose of the account was shed construction.

These can help significantly. Prepare:

• Bank statements (highlight all relevant transactions).

• MOU between you and your partner stating the purpose of account.

• Payment details (to whom, what amount, what for — based on narration in statements).

b. Affidavit

Prepare a notarized affidavit stating:

• The approximate date and cost of construction.

• That the expenses were incurred genuinely.

• Bills are unavailable due to destruction after the 7-year retention period.

• All construction was funded from the mentioned bank account.

c. Photographic or Structural Evidence (if available)

If any photos, municipal approvals, construction contract copies, or any third-party certificates exist, they can strengthen your case.

✅ 3. Draft a Detailed Representation Letter

Include:

• Timeline (purchase, construction, rental, sale).

• Purpose of Capital Gains Account.

• Payment of LTCG tax.

• Inability to buy residential property.

• Need for withdrawal of remaining funds.

• Explanation for absence of bills.

• Offer of alternate proof (bank records, MOU, affidavit).

• Request for issuance of No Objection Certificate (NOC) for CGAS closure.

✅ 4. Follow Up With AO Politely But Firmly

Meet the AO personally (or through your CA) and:

• Submit your full representation with supporting documents.

• Request that he exercise discretion under Section 54F or 54 (whichever applies) and Rule 8 of the CGAS Rules, given your tax has already been paid.

✅ 5. File an RTI (If Needed)

If the AO continues to delay or remains uncooperative without legal basis, consider filing an RTI (Right to Information) to:

• Ask the reason for denial/delay in issuing NOC.

• Know what alternate proofs are acceptable in absence of bills.

This sometimes speeds up the process.

✅ 6. Bank’s Role

Once the AO gives the written NOC, provide it to the bank for CGAS account closure and withdrawal of remaining funds.

If your tax has already been paid, there is no ongoing exemption, and the AO is only verifying historical records — the NOC should not be denied unreasonably.

💡 Summary of What to Submit: