An assessee (Senior citizen) sold a residential house property in feb 2015 and claimed exemption in return filed for AY 2015-16 u/s 54 by depositing the capital gain of Rs 3.2cr in capital gain account scheme in prescribed time.
In march 2017, assesee died without utilisizing the said amount. Till the date of death he neither purchased nor started construction of new house property. But stipulated period for construction of new house property is FEB 2018.
Now legal heir wants to withdraw the amount as per notification no 743, dated 6-5-1966 i.e “Regarding the taxability of the unutilised deposit amount in the case of an individual who dies before the expiry of the stipulated period, the board has clarified that in such cases the said amount cannot be taxed in the hands of the deceased. This amount is not taxable in the hands of legal heirs also as the unutilised portion of the deposit does not partake of the character of income in their hands but is only a part of the estate devolving upon them.”
But when request made to Income Tax Department to direct the bank to allow withdrawal of unutilised amount, it refuses the same and contending that the said amount will be taxable as assessee has not purchased nor initiated construction. Can AO levy tax on this capital gain in AUGUST 2017 when expiry of stipulated period is FEB 2018.
Is contention of department is valid?
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