ITAT deletes Addition since Assessee appropriated and Utilized the Amount of Capital Gain before the Due Date of Filing of Return of Income [Read Order]

In the case of Arun Kumar Jain vs. Income Tax Officer, Delhi bench of Income Tax Appellate Tribunal has deleted the addition made by the Assessing Officer during the assessment period since the Assessee appropriated and utilized the amount of Capital Gain before the due date of filing of the return of income.

The assessee in the present case is an individual Mr.Arun Kumar Jain has filed his return of income for the assessment year and declared a total income at Rs.1,56,420. The Assessee has sold his flat for a consideration of Rs.98,50,000. Further, he purchased a residential flat in the joint name of the Assessee and his wife for a total consideration of Rs.80 lakhs and all the payments were made from his bank account.

During the course of assessment proceedings, the Assessing Officer (AO) has noticed that on the basis of documentary evidence submitted by assessee showing the long-term capital gain of Rs.62,93,349. The AO was of the opinion that as per section 54(2) of the Income Tax Act 1961 the amount of capital gain, which is not utilized by him for the purchase of new asset before the date of furnishing the income tax returns under section 139 of the Act. Further he observed that the Assessee has not deposited the unutilized amount in capital gain account before filing the returns, therefore benefit of capital gain to the tune of unutilized amount and not deposited in capital gain account will not be given to the assessee and it will be charged to tax under section 45 of the Income Tax Act and accordingly he made addition of Rs.12,93,349 under the head long-term capital gains.

On appeal, the CIT(A) also confirmed the addition made by the AO. Thereafter the Assessee carried the matter before the Tribunal by appeal and counsel for the Assessee advocate  K. Sampath submitted that the assessee utilized the amount of the capital gain before the due date of filing of the return of income. Therefore, the addition should be deleted.

After considering the above narrated facts and circumstances of the case the Tribunal bench comprising of Judicial Member Bhavnesh Saini observed that while perusing the available materials on records it is clear that the Assessee has filed his returns on 26th July 2015 and there may be some terms of payment of consideration to the vendor and the availability of the funds with the assessee. Even the payment of Rs.50 lakhs was made in two instalments. Therefore, it may not be a good reason to reject the explanation of assessee because assessee made further payment even after July 2014 as per the sale deed.

The division bench further observed that while considering the totality of the facts and circumstances, it is clear that assessee had made payment of Rs.25 lakhs to the vendor on 30th July 2014 and if the cheque is encashed immediately thereafter on 1st August 2014, there is nothing wrong in the explanation of assessee. Therefore it can be concluded that assessee appropriated and utilized the amount of capital gain before the due date of filing of the return of income and accordingly the bench deleted the addition made by the AO on account of long-term capital gain.