The Hon'ble ITAT Ahmedabad in Umesh Sumanlal Shah v. Income-tax Officer [IT APPEAL NO. 967 (AHD.) OF 2023 [ASSESSMENT YEAR 2012-13] dated June 14, 2024 held that where the assessee had sold a property and invested the sale consideration in a new residential property, providing details along with registered sale and purchase deeds, there was a valid transfer within the meaning of section 2(47), and the assessee was entitled to relief under section 54.
Facts of the Case:
Umesh Sumanlal Shah, the assessee, filed a return of income for the Assessment Year 2012-13 on 21.03.2014, declaring a total income of Rs. 43,560. The return was initially processed under Section 143(1) of the Income Tax Act, 1961.
During the relevant assessment year, the assessee had sold an immovable property for Rs. 45,00,000. The Assessing Officer observed that the assessee had not furnished details of this transaction despite being issued a notice under Section 133(6) of the Act.
Consequently, the case was reopened under Section 147, and a notice under Section 148 was issued on 29.03.2019. In response, the assessee filed a return on 18.04.2019, again declaring a total income of Rs. 43,560.
The assessee had invested the sale consideration from the property in a new residential property and claimed exemption under Section 54 of the Income Tax Act. However, the Assessing Officer observed that the assessee had not purchased any residential property against the capital gain and disallowed the claim of deduction of Rs. 29,19,742 under Section 54.
The assessee appealed to the CIT(A), who dismissed the appeal. Subsequently, the assessee approached the ITAT, contending that he had paid the full consideration of Rs. 25,00,000 and taken possession of the new property in AY 2012-13, evidenced by bank statements and Municipal Tax bills showing the assessee's name as occupier.
Issue:
Whether the assessee was entitled to relief under section 54 for the purchase of a new residential property, considering the nature of the transfer and the documentation provided?
Held by the Tribunal:
The Hon'ble ITAT Ahmedabad in Umesh Sumanlal Shah v. Income-tax Officer [IT APPEAL NO. 967 (AHD.) OF 2023 held as under :
The ITAT noted that the assessee had shown the sale consideration of Rs. 45,00,000 in his original return of income under Long Term Capital Gain (LTCG) in the schedule.
The Tribunal observed that the assessee had provided details of the sale deed and purchase deed, which were registered documents, including registration fees and payment of Municipal Tax in the assessee's name.
The ITAT held that there was a valid transfer within the meaning of section 2(47) of the Income Tax Act, even by executing an agreement to sell.
The Tribunal relied on the Supreme Court judgment in Sanjeev Lal v. CIT [2014] (SC), which held that relief under section 54 should be granted when a valid transfer takes place, even if only through an agreement to sell.
The ITAT found that the decision in Suraj Lamp & Industries Pvt. Ltd., cited by the tax authorities to deny the exemption, was not applicable in this case.
The Tribunal emphasized that the payment of Municipal Tax and the bill to that extent was sufficient evidence of possession by the assessee.
The ITAT concluded that the observation of the Assessing Officer that the sale deed was not properly registered was not justifiable, given the evidence provided by the assessee.
The Tribunal held that the assessee was entitled to relief under section 54 in respect of the purchase of the new residential property, subject to fulfillment of other conditions.
Consequently, the ITAT allowed the appeal of the assessee, overturning the decisions of the Assessing Officer and the CIT(A).
Relevant Sections:
- "Section 54" of the Income-tax Act, 1961
- "Section 2(47)" of the Income-tax Act, 1961
Section 54 exemption on agreement to sell
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