This document provides a detailed analysis of the Income Tax Appellate Tribunal’s final decision on the case between Gurdip Singh Kapur Legal Heir Smt. Nirmal Kapur and ACIT, International Taxation Circle -2(1)(2), New Delhi, concerning the assessment year 2017-18. The case number is ITA 2616/DEL/2022, presided over by President Shri G.S. Pannu and Vice-President Shri Saktijit Dey.
The appeal filed by the assessee, represented by legal heir Smt. Nirmal Kapur, was directed against the final assessment order dated 30.08.2022 passed under section 143(3) read with section 144C(13) of the Income-tax Act, 1961, for the assessment year 2017-18. The primary issue in this case was the disallowance of deduction claimed under section 54 of the Income Tax Act.
During the hearing on 24.07.2023, the Revenue was represented by Sh. Sanjay Kumar, Sr. DR, and the assessee was represented by Sh. Rajesh Mahna, Advocate, and Sh. Vikram Kakkar, Advocate. The Tribunal proceeded to adjudicate the appeal based on the materials on record and submissions made by both parties.
The Registry notified a delay of two days in filing the appeal. The assessee filed a petition seeking condonation of delay, stating that the delay occurred due to the legal heir being permanently based in the USA and the time taken in exchanging signed documents. Considering the reasonable cause, the Tribunal condoned the delay and admitted the appeal for adjudication on merits.
The sole ground of appeal raised by the assessee was:
“Ld. CIT(A) has erred in confirming addition of Rs. 12,30,000/- made by the Ld. AO by invoking the provisions of section 68.”
The deceased assessee, along with other co-owners, owned a parcel of land at Vasant Vihar, New Delhi, which was given for development to a developer. In lieu of the cost of land, the assessee received Rs.1,03,00,000/-, one flat, and two car parking spaces in the developed structure. In the return of income filed, the assessee claimed long-term capital loss. However, during assessment proceedings, the assessee furnished a revised computation claiming deduction under section 54 of the Act.
The assessee argued that the deduction under section 54 should be allowed as the sale consideration received for the land was invested in a new flat received from the developer. The Assessing Officer rejected the claim, stating that it was not made in the original or revised return of income, relying on the decision of the Hon’ble Supreme Court in Goetze (India) Ltd. v. CIT (2006) 284 ITR 323(SC).
The Tribunal observed that the assessee received a new residential dwelling in lieu of the cost of land and the consideration received from the transfer of the original asset should be considered towards investment in the new property under section 54 of the Act. The Tribunal noted that the restriction imposed by the Supreme Court in the Goetze case is not applicable to higher appellate authorities.
The Tribunal held that the assessee is entitled to claim deduction under section 54 of the Act and directed the Assessing Officer to allow the claim after verifying the computational aspects as per the revised computation furnished by the assessee.
Order pronounced in the open court on 24th July, 2023.
(G.S. PANNU)
PRESIDENT
(SAKTIJIT DEY)
VICE-PRESIDENT
This case highlights the importance of considering the substantive merits of a claim for deduction under section 54 and ensures that tax liabilities are appropriately adjusted when investments are made in new residential properties. The decision underscores the need for fair treatment and thorough verification of claims in tax matters.
The appellant, represented by legal heir Smt. Nirmal Kapur, challenged the addition made by the AO under section 68 of the Income Tax Act, 1961, for the assessment year 2017-18. The CIT(A) dismissed the appeal, confirming the addition and disallowing the deduction under section 54.
The appellant argued that the CIT(A)’s confirmation of the addition and disallowance of the deduction under section 54 was incorrect. They asserted that the CIT(A) did not address the substantive issues raised in the appeal on their merits.
The Tribunal observed that the CIT(A) dismissed the appeal based on an erroneous factual finding. The Tribunal found no material evidence from the Revenue to support the claim that the appellant had not requested the adjustment of tax liability from the received consideration. Consequently, the Tribunal decided to remand the case back to the CIT(A) for a decision on its merits.
The Tribunal’s decision in the case of Gurdip Singh Kapur Legal Heir Smt. Nirmal Kapur vs ACIT, International Taxation Circle -2(1)(2), New Delhi, reaffirms the importance of addressing the substantive merits of a case rather than relying on procedural assumptions. The restoration of the case to the CIT(A) for a fresh decision ensures a fair and just resolution based on accurate facts.
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