Benefit of deduction u/s 54 of the Income Tax Act

This case concerns an individual who sold a property and claimed a deduction under Section 54F of the Income Tax Act on the resulting long-term capital gains. The tax authorities disallowed this deduction because the assessee failed to deposit the sale proceeds into a capital gains deposit account scheme as required by law. Consequently, the capital gains were added back to the assessee's income.

IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH “SMC”, HYDERABAD
(Through Virtual Hearing)

BEFORE SHRI A. MOHAN ALANKAMONY,
ACCOUNTANT MEMBER
ITA No.1418/Hyd/2019

A.Y. 2008-09
Begum Badarunnisa,
Warangal.
PAN: ANWPB 6589 Q
(Appellant) 

VS. 

Income Tax Officer,
Ward-5,
Warangal.
(Respondent)

Assessee by Shri G. Manikya Prasad
Revenue by Shri P. Suresh, DR

Date of hearing: 29/03/2021
Date of pronouncement: 01/07/2021

ORDER

This appeal is filed by the assessee against the order of the Ld. CIT(A)-3, Hyderabad in appeal No. 10300/ITO-5/WGL/CIT(A)-3/2018-19, dated 7/6/2019 passed U/s. 143(3) r.w.s 263 of the Act for the A.Y. 2008-09.

2. The assessee has raised six grounds in her appeal however, the crux of the issue is that:

“The Ld. CIT (A) has erred in sustaining the addition made by the Ld. AO towards LTCG of Rs. 12,26,790/- denying the benefit of deduction U/s. 54F of the Act.”

3. The brief facts of the case are that the assessee is an individual. The assessee failed to file her return of income for the relevant AY 2008-09. Subsequently, it was revealed that the assessee had sold her property thereby earning capital gain. Thereafter in response to the notice issued U/s. 148 dated 25/3/2015 the assessee filed her return of income on 29/6/2015 admitting LTCG of Rs. 3,29,460/- after claiming deduction U/s. 54/54F for Rs. 11,07,971/-. The assessee has stated to have purchased a new house property for Rs. 15,56,250/- on 6/6/2009. After due verification, the assessment was completed U/s. 143(3) r.w.s 147 of the Act 13/7/2015 accepting the returned income of the assessee. When the matter cropped up before the ld. CIT he observed that the assessee had not deposited the sale consideration of Rs. 15,56,250/- in the capital gains deposit account scheme as envisaged U/s. 54F(4) of the Act. Therefore, invoking his power U/s. 263, he set aside the assessment order and directed the Ld. AO to redo the assessment in accordance with law after allowing an opportunity to the assessee of being heard vide order dated 27/11/2017. The Ld. AO after examining the facts of the case arrived at the conclusion that the assessee had not deposited the sale proceeds of Rs. 15,56,350/- in the capital gains deposit accounts scheme maintained with any Nationalised Bank as per section 54F(4) of the Act and therefore, disallowed the claim of deduction and assessed the LTCG in the hands of the assessee at Rs. 12,26,790/-. On appeal, The Ld. CIT (A) confirmed the order of the Ld. AO by agreeing with his view by passing an ex-parte order.

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