As per the brief facts of the case, the assessee’s return was selected for scrutiny, wherein the appellant was asked to provide the details of purchase/sale of property, and exemption claimed u/s 54. In response, the appellant submitted that the appellant had received the sale consideration during the relevant previous year as his share from sale of property. According to the appellant, the aforesaid sale transaction resulted in capital gains income. However, since the appellant had paid certain amount towards purchase of a residential flat, being payment towards the cost of purchase including, stamp duty, pre-possession charge, service tax etc., the appellant was entitled to claim deduction u/s 54 in respect of the same. Therefore, no capital gains income was chargeable to tax in the hands of the appellant. However, the AO rejected the aforesaid submission of the appellant and brought to tax capital gains income in the hands of the appellant. The AO noted that there was no registered sale deed evidencing purchase of new flat/asset. Further, the details of new flat/asset purchased mentioned in the possession letter were different from the flat/asset towards the purchase was said to have been made by the appellant. In the aforesaid discrepancies appellant’s claim for deduction u/s 54 could not be allowed.
The CIT(A) concurred with the AO and declined to grant any relief to the assessee.
The Bench noted that the appellant had clearly made payment for purchase of a new asset being a residential flat which consisted of (a) Payment against Flat (b) Payment against Service Tax (c) Payment against Taxes and (d) Payment against pre-possession charges.
The Bench observed that the appellant cannot be penalized for the mistake committed by the developer/seller by allotting flat to the appellant and thereafter selling the same Flat to someone else.
The Bench further observed that the developer/seller had accepted the aforesaid mistake and accommodated the Appellant by allotting a similarly placed flat in the same building.
The Bench also observed that the unregistered agreement for Sale of the flat was executed with the specified period of 2 years from the date of transfer of the original capital asset.
Therefore, on finding that CIT(A) is failed to understand the provisions of section 54, ITAT allowed the assessee’s appeal.
Counsel for Appellant/Taxpayer: Snehal Shah
Counsel for Respondent/Department: Sanyogita Nagpal
Case Title: Mukesh Harilal Mehta verses Income Tax Officer
Case Number: ITA No. 2256/MUM/2023
