IN INCOME TAX APPELLATE TRIBUNAL BENCH, BENGALURU BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER and SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA No.1221/Bang/2015 (Assessment year: 2009-10) Shri Joe Lazar, Divine No.2085, Sector 1, 24th Main, HSR Layout, Bengaluru-34. Appellant PAN:ABEPJ6874C Vs. Asst. Commissioner of Income-tax, Circle 13(1), Bangalore. Respondent Appellant by : Shri G.Sathyanarayana, CA. Respondent by : Shri S.S.Parida, CIT(DR). Date of hearing : 22/08/2016 Date of pronouncement : 07/10/2016 O R D E R Per INTURI RAMA RAO, AM : This is appeal filed by assessee directed against order of learned Commissioner of Income-tax(Appeals)-V, Bangalore [CIT(A)] dated 5th March 2014 for assessment year 2009-10. 2. There is delay of 115 days in filing present appeal. assessee filed affidavit for condonation of delay stating that delay has occurred on account of pre-occupation of his tax counsels who were to prepare memo of appeal before this Tribunal. Therefore, it is prayed that delay has occurred ITA No.1221/Bang/2015 Page 2 of 8 on account of factors which are beyond control of assessee and delay be condoned. learned Departmental Representative has no serious objection for condonation of delay. 3. In circumstances, keeping in view interests of justice, we condone delay and appeal is admitted for hearing. 4. assessee had initially raised following grounds of appeal: Subsequently, assessee prayed for admission of following amended grounds of appeal: ITA No.1221/Bang/2015 Page 3 of 8 5. Briefly facts of case are that assessee is individual deriving income from salary, income from house property, capital gains and other sources. Return of income for assessment year 2009-10 was filed on 28/7/2009 declaring total income of Rs.53,80,495/-. After processing said return of income u/s 143(1) of Income-tax Act,1961 [ Act for short], case was selected for scrutiny and assessment was completed u/s 143(3) vide order dated 17/12/2011 at total income of Rs.76,36,191/-. While doing so, Assessing Officer [AO] had denied claim for exemption u/s 54F of Rs.22,55,696/- by holding that assessee had not furnished ITA No.1221/Bang/2015 Page 4 of 8 any details with documentary evidence for investment of said amount. 6. Being aggrieved, appeal was preferred before CIT(A) who, vide impugned order, had dismissed appeal by holding as under: ITA No.1221/Bang/2015 Page 5 of 8 Thus, appeal came to be dismissed by CIT(A) by holding that new house property at No.104, Shankara at Industrial Extension, 3rd stage, Fort Mohalla, Mysore, was not purchased within period of one year before date on which transfer of asset in respect of capital gains was offered to tax. CIT(A) also had taken note of fact that entire sale consideration was deposited in capital gains deposit scheme and subsequently it was utilized for acquisition of agricultural land. Therefore, he inferred that no amount was invested in acquisition of any new residential house and denied exemption u/s 54F of Act and confirmed addition made by AO. 7. Being aggrieved, assessee is before us in present appeal. 7.1 Learned counsel for assessee submitted that assessee had invested sum of Rs.22,54,696/- towards cost of improvement of flat purchased in Mysore on 17th March 2007 to make it habitable condition. assessee had also ITA No.1221/Bang/2015 Page 6 of 8 undertaken additional work like modification, alteration, interior and cabin work. Therefore, additional cost incurred should be treated as investment in residential house property as investment was made only to make house habitable. Without prejudice to this argument, it was further argued that sale consideration of Rs.45 lakhs was deposited in capital gains scheme. In case, where assessee had failed to utilise amount withdrawn from capital gains scheme for purpose of investment in residential house, same should be brought to tax in previous year in which said period of 3 years expires from date of transfer of original asset, as per plain provisions of sub-section (4) of section 54F of Act. Thus, he submitted that in any event, addition is not warranted. 7.2 On other hand, learned Departmental Representative relied on orders of lower authorities. 8. We heard rival submissions and perused material on record. only issue in this appeal is to adjudicate whether assessee is eligible for deduction of exemption u/s 54F to extent of Rs.22,54,696/-. There is no dispute on amount of capital gains arising on account of sale of residential plot in HSR layout. There is no dispute about amount of consideration received on account of sale of such property. entire sale consideration was deposited in capital gains deposit scheme with SBI, Koramangala Branch, Bangalore. Subsequently, this money ITA No.1221/Bang/2015 Page 7 of 8 was used to purchase coffee land at Eachoor village, Kotur village, Balliamandur village, Ponnumpet, Kodagu District, However, claim of assessee was that he purchased residential flat No.104, Shankara at Industrial Extension, 3rd Stage, Fort Mohalla, Mysore, on 17th March 2007 for consideration of Rs.29,99,240/- including cost incurred towards modification, alteration and interior works. Therefore, exemption u/s 54F should be granted in respect of such investments. claim of exemption u/s 54F on account of purchase of this new house can be allowed only when new asset was bought within period of one year before date of sale of this residential plot. In this case, residential plot was sold on 17/06/2008 in respect of which capital gains had arisen whereas new residential house i.e. apartment at Mysore was purchased on 17/03/2007 i.e. more than one year before sale of plot. On plain reading of provisions of section 54F(1) this exemption cannot be allowed. However, there is merit in submission of assessee that amount deposited in capital gains deposit scheme, if it is not utilized, wholly or partly for purpose of construction of new asset within period specified in sub-section (1), then amount of capital gains arising from transfer of original asset not charged u/s 45 on account of deposit made in capital gains deposit scheme shall be charged as capital gains of previous year in which period of 3 years from date of transfer of ITA No.1221/Bang/2015 Page 8 of 8 original asset had expired. However, fact that deposit of sale consideration in capital gains deposit scheme are not borne out of assessment record. Therefore, we deem it fit and proper to remand matter back to file of AO to verify whether sale consideration was deposited in capital gains scheme before due date for filing of return of income. If so made, to verify whether deposit was utilized in accordance with scheme? If not, to bring amount of capital gains not charged to tax in year of sale of asset but in year of expiry period of 3 years from date of sale of asset, to tax. With this direction, matter is set aside to file of AO for de novo assessment in accordance with law. 9. In result, appeal filed by assessee is partly allowed for statistical purposes. Order pronounced in open court on this 07th October, 2016 sd/- sd/- (VIJAY PAL RAO) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER Place : Bengaluru. D t e d : 07/10/2016 srinivasulu, sps Copy to : 1 Appellant 2 Respondent 3 CIT(A)- Bangalore 4 CIT 5 DR, ITAT, Bangalore. 6 Guard file By order Assistant Registrar Income-tax Appellate Tribunal Bangalore Joe Lazar v. Asst. Commissioner of Income-tax, Circle 13(1), Bangalore