Tribunal Remits Case to Assessing Officer to Verify Compliance with Section 54 Conditions
In a significant ruling, the Income Tax Appellate Tribunal (ITAT) Chennai has granted relief to Shri Indihaf Jamal Mohamed, a retired Assistant Registrar from the University of Madras, allowing the deduction claimed under Section 54 of the Income Tax Act, 1961, despite delays in the registration of the new property. The Tribunal's decision highlights the importance of investment timelines over registration formalities for tax deductions related to capital gains from the sale of residential property.
The case originated when the Income Tax Department received information about the sale of an immovable property by the assessee for Rs. 60,00,000, yet no income return was filed for the assessment year 2016-17. Following a notice issued under Section 148, Mohamed declared his income, claiming a deduction under Section 54, having reinvested the proceeds in a new residential apartment within the stipulated time.
However, the Assessing Officer (AO) disallowed the deduction, citing the absence of a registered sale deed within the prescribed timeframe. The First Appellate Authority (FAA) upheld this decision in an ex-parte order due to non-compliance from the assessee, leading Mohamed to appeal before the ITAT.
Presiding over the case, Vice President Shri George George K. acknowledged that the reinvestment was made promptly, with payments completed within one year from the sale date, albeit registration was delayed due to the builder's actions. Citing precedents, including the Hon'ble Jurisdictional High Court's judgment in CIT v. Sardarmal Kothari and others, the Tribunal emphasized that completion or registration is not mandatory for claiming deductions under Section 54, provided the capital gains are reinvested within the stipulated period.
The Tribunal remitted the case back to the AO to verify compliance with Section 54 conditions, allowing Mohamed another opportunity to substantiate his claim with necessary documentation. This decision underscores the judicial trend favoring investment timelines over procedural delays in granting tax exemptions.
Legal representatives for both parties presented arguments, with Shri S.R. Srikrishna representing the appellant and Shri P. Krishna Kumar for the respondent, the Income Tax Officer, Non-Corporate Ward 10(6).
The judgment reiterates the ITAT's commitment to ensuring equity and justice, providing taxpayers with avenues for relief amidst procedural complexities.
Bottom Line:
Income Tax - Deduction under Section 54 - Requirement is investment in new residential property within stipulated time, not necessarily registration of property within the same time frame.
Statutory provision(s): Income Tax Act, 1961 Section 54
