The Income Tax Appellate Tribunal (ITAT), Delhi Bench upheld the addition as the assessee failed to utilize the amount in the capital gain account within the statutory period.
The assessee, Avtar Krishen Jalla is an individual. It was noted by the AO that during the course of assessment proceedings for A.Y. 2010-11 that the assessee had sold a flat for Rs.70 lakhs during the F.Y. 2008-09 and earned long-term capital gain of Rs.50 lakhs which was deposited by him in capital gain account of SBI on due date. Out of this amount of capital gain the assessee has invested Rs.35.10 lakhs in new project within 36 months and could not utilize a sum of Rs.14.90 lakhs. It was seen that the assessee had filed his return of income for A.Y. 2012-13 declaring the returned income of Rs.18,49,027/- without offering the unutilized amount of Rs.14.90 lakhs to tax. Accordingly, the case of the assessee was reopened u/s 147 of the Act after taking prior approval u/s 151. In response to the notice issued u/s 148 dated 26th March, 2018, the assessee furnished the return of income declaring the total income at Rs.18,49,027/- which was the income originally returned.
During the course of assessment proceedings, the AO asked the assessee to explain the utilization of capital gain. The assessee stated that the capital gain was invested in time over a period of 36 months and the installments were paid as demanded from time to time, but, he could not get the allotment/possession of the flat as required within three years. The assessee accordingly surrendered an amount of Rs.14.90 lakhs for taxation with the condition that no penal action should be initiated against him. The AO accordingly determined the total income of the assessee at Rs.33,39,030/- by making an addition of Rs.14,90,000/- which the assessee could not utilize.
Mr. Upender Bhatt, the counsel for the assessee contended that the AO taxed the unutilized amount ignoring the belief of the assessee that the full amount could not be utilized because of the circumstances beyond the control of the assessee since the builder had delayed the project. He submitted that as per the agreement with the builder, he was supposed to hand over the flat within a period of 36 months. All the installments as demanded by the builder to the tune of Rs.35.10 lakhs were made from the capital gain account directly.
The coram of Accountant Member, R.K. Panda noted that the assessee has to utilize the amount deposited in the capital gain account for the purpose of purchase or construction of the new asset within the specified time for availing the benefit of capital gain. Here the assessee has made payments for the purchase of a flat. He has paid an amount of Rs.35.10 lakhs out of the capital gain of Rs.50 lakhs and the balance amount of Rs.14.90 lakhs was lying unutilized in the capital gain account scheme which was brought to tax by the Assessing Officer and the assessee himself had agreed before him during the course of assessment proceedings.
The ITAT said that the assessee has not utilized the amount lying in the capital gain account within the statutory period and in fact had surrendered the same during the course of assessment proceedings and, therefore, the said amount is liable to tax.
Subscribe Taxscan Premium to view the Judgment
Support our journalism by subscribing to Taxscan AdFree. We welcome your comments at info@taxscan.in
