The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) contended that Section 54F of the Income Tax Act, 1961 allows for a deduction on long-term capital gains when these gains are reinvested in residential property.
Bhupendrabhai Punjabhai Patel, the appellant-assessee, filed an appeal challenging the decision of Commissioner of Income Tax (Appeals) [CIT (A)] for the Assessment Year 2016-17 dated 06.10.2023. The Income Tax Assessing Officer (AO) incorrectly denied a Rs.75,80,923 deduction under section 54F, and the CIT(A) confirmed this through an ex-parte order. The Appellant could not submit their written submissions on time due to valid reasons.
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The Tribunal condoned the 125-day delay in filing the appeal, noting that the assessee, being not tech-savvy, missed notices sent via email and the departmental portal. This led to non-compliance before the CIT(A) and subsequently to the delay in filing the appeal.
The counsel for the assessee, argued that the CIT(A) dismissed the appeal without considering the details provided in Form No. 35. He stated that the CIT(A) was wrong to dismiss the appeal without examining its merits and cited the Bombay High Court case of CIT vs. Premkumar Arjundas Luthra (HUF) [2016] .The counsel requested that the case be sent back to the CIT(A) for a fresh review in accordance with the law.
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The Tribunal on hearing both sides of the case stated that the primary issue in this case concerns the deduction of Rs.75,80,923 claimed under Section 54F of the Income Tax legislation. The AO disallowed the claim on the grounds that the construction of the house was not completed within the stipulated 3-year period following the transfer of the original asset.
The assessee had declared a Long-Term Capital Gain ( LTCG ) of Rs.12,88,49,830 and claimed a deduction for investment in a residential house. The assessee deposited Rs.35 lakhs on 22.07.2016 into the Capital Gain Account, purchased a plot for Rs.42,51,220 on 17.02.2016, and incurred Rs.36,63,350 in construction expenses by 05.11.2018. The total claimed deduction of Rs.79,63,061 was thus within the 3-year timeframe.
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The Income tax appellate commissioner has dismissed the appeal without considering these facts, citing non-compliance. According to Section 250(6) of the Income tax law, the CIT(A) was required to provide a reasoned written decision on the points raised by the assessee.
The two-member bench comprising Suchitra Raghunath Kamble (Judicial Member) and Narendra Prasad Sinha (Accountant Member) directed the CIT(A) to adjudicate the matter afresh, decide the appeal on its merits, and provide the assessee with another opportunity to present their case. The assessee is expected to cooperate fully and should not seek adjournments without valid reasons.
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