The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT), ruled that Capital gain exemption cannot be denied when investment made within due date of filing Income Tax Returns (ITR).
The assessee, Munish Babaji Sawant sold a residential flat, however, the capital gain arising from the sale of the said flat was not reflected in the return of income, as the assessee believed that the gain was exempt under section 54 of the Income Tax Act.
However, the revised computation was placed on record during the course of the assessment proceedings, where in the assessee claimed the entire capital gains as exempt under section 54. The capital gains arising from the sale of residential house was invested in purchase of new house. However, the assessee did not deposit the amount of capital gains in the capital gains account scheme before the due date of filling return of income under Section 139(1) of the Income Tax Act.
The Assessing Officer noted that the assessee did not show the capital gains in his computation of income along with return of income and there is failure on the part of the assessee to deposit the capital gains in the capital gains account scheme before due date of furnishing return of income u/s 139(1).
Sub-Section (4) of Section 139 of the Act is, in fact, a proviso to Sub-Section (1) of Section 139 of the Act. Section 139 of the Act fixes the different dates for filing the returns for different assesses.
A reading of the aforesaid Sub-Section would show that if a person has not furnished the return of the previous year within the time allowed under Sub-Section (1) Le before 31st day of July of the Assessment Year, the assessee can file return before the expiry of one year from the end of the relevant Assessment Year.
The Tribunal of Amit Shukla, Judicial Member observed that “I hold that if the investment under Section 54 has been made within the time limit of date specified under Section 139(4), exemption cannot be denied. Thus, the claim of exemption under Section 54 is allowed to the Assessee.”
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