Income Tax Act | S.54 Relief Cannot Be Denied Merely Due To Delay In Registration If Sale Proceeds Invested Within Time: ITAT Chennai

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) held that deduction under Section 54 of the Income Tax Act cannot be denied merely due to delay in registration if investment in new residential property is made within the prescribed time. Section 54 of the Indian Income Tax Act, 1961 offers individuals and Hindu Undivided Families (HUFs) an exemption from long-term capital gains tax. This exemption applies when they sell a residential house property and use the proceeds to buy or build another residential house in India. George George K (Vice President) stated that if the assessee has utilised the sale proceeds within the stipulated time, the assessee is entitled for deduction under Section 54 of the Act, provided the assessee has satisfied the other conditions stipulated under Section 54 of the Act. In the case at hand, the assessee/appellant is an individual and has not filed his income for the assessment year 2016-17. The assessee had sold an immovable property for a sum of Rs.60,00,000/-. Since the assessee had not filed his return of income, the AO (Assessing Officer) issued notice under Section148 of the Income Tax Act. In response to the notice issued, the assessee filed his return of income declaring a total income of Rs.7,65,720/- after claiming a deduction under Section 54 of the Act, stating that he had sold his residential house property for Rs.60,00,000/- on 21.09.2015 and purchased a new property on 25.12.2015. The AO completed the assessment under Section 147, read with Section 144B of the Act, by disallowing the deduction claimed under Section 54 of the Act. The AO held that the assessee had not furnished a copy of the sale deed to prove the date of sale, and 'transfer has not taken place for the new property' within one year as per section 54 of the Act. Aggrieved by the assessment order, the assessee preferred an appeal before the First Appellate Authority (FAA). Before the FAA, there was no compliance from the assessee, and hence, the FAA passed an ex parte order. The FAA confirmed the disallowance made by the AO. The counsel for the assessee submitted that the AO had disallowed the deduction since the date of registration of new property is 24.01.2019, which is after three years from the date of sale of old property (i.e, 16.09.2015). The counsel further argued that the assessee has utilized the sale amount for purchase of new asset within the stipulated time, though the registration has been executed after the stipulated time. The Tribunal referred to the case of CIT vs. Shakuntala Deli reported in [2016] 389 ITR 366 (Kar), where it was held that 'entire amount of long-term capital gains having been invested by assessee in purchasing new asset within two years as contemplated by section 54, assessee was entitled to exemption under Section 54 of the Act. It is immaterial that sale deed of property was not executed in favour of assessee within two years. In view of the above, the Tribunal allowed the appeal and remitted the matter back to the Assessing Officer. Case Title: Shri Indihaf Jamal Mohamed v. The Income Tax Officer Case Number: ITA No.: 2398/CHNY/2025 Counsel for Appellant/ Assessee: S.R. Srikrishna, CA Counsel for Respondent/ Department: P. Krishna Kumar, JCIT Click Here To Read/Download Order

Income Tax Act | S.54 Relief Cannot Be Denied Merely Due To Delay In Registration If Sale Proceeds Invested Within Time: ITAT Chennai

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