The Income Tax Appellate Tribunal ( ITAT ) recently held that section 54 of the Income Tax Act 1961 are benevolent provisions therefore, requires liberal interpretation and the assessee is entitled to get the benefit of the benevolent provisions.
The aforesaid observation was made by the Delhi ITAT, when an appeal was filed by the assessee Raj Kumar Bhutani, against the order under section 271(1)(c) Income Tax Act 1961,passed by the Assessing officer for the assessment year 2010-11.
In the above case assessee Raj Kumar Bhutani, Filed his return of income and declared Long-term Capital Gain (LTCG) was nil and claimed exemption under section 54F of the Income Tax Act 1961.After determining, the assessing officer found that there is a difference in Long term Capital Gain. Thereafter AO observed that assessee had committed default of furnishing inaccurate particulars of income and was liable for imposition of penalty under section. 271(1)(c) of the Income Tax Act 1961.
Section 54 F of Income Tax Act 1961 provides that in case of Long time Capital Gain which earn from selling or transfer of any capital assets other than house property shall attract exemption under the section.
Rajiv Saxena, counsel for assessee submitted that assessee clearly showed amount of sale of the properties and investments made towards construction of residential house and bonafidely admitted she had failed to deposit the entire consideration within time, however, she had paid the entire tax demand as computed by the Assessing Officer.
Jeetender Chand, counsel for revenue contented that “As per provision of section 54F for claiming full exemption in respect of the LTCG, the assessee ought to have utilized full amount of consideration in construction of the new asset or have deposited the same before furnishing of her return of income (before due date) in specified bank account”
After considering the contentions of the both parties the division bench of the ITAT compraising Pradip Kumar Kedia, (Accountant Member) and Choudhry, (Judicial Member) allowed the appeal filed by the assessee and observed that “There is no doubt that the provisions of section 54F of the Act are benevolent provisions and therefore, requires liberal interpretation. In that sense, the assessee is entitled to get the benefit of the benevolent provisions”. Therefore just because the assessee could not deposit the consideration amount/capital gains in specified bank account that did not entail levy of penalty automatically.
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