AO Can’t Tax Unutilized Amount in CGAS a/c Before the Expiry of 3 Years from Date of Transfer of Asset | ITAT
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Case Details: Digamber Madhav Chaudhary vs. Deputy Commissioner of Income-tax - [2024] 168 taxmann.com 64 (Raipur-Trib.)
Judiciary and Counsel Details
- Ravish Sood, Judicial Member & Arun Khodpia, Accountant Member
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Praveen Khandelwal, CA for the Appellant.
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Dr. Priyanka Patel, Sr. DR for the Respondent.
Facts of the Case
During the year, the assessee sold a capital asset on which he had earned Long Term Capital Gain. Out of such capital gains, a sum was deposited under the Capital Gain Account Scheme (CGAS), 1988, and exemption under section 54F was claimed while furnishing the return of income.
The Assessing Officer (AO) observed that the assessee had, during the year under consideration, as well as in the immediately preceding and succeeding years, made withdrawals from the CGAS account. It was further observed that the assessee had paid taxes on the amounts withdrawn from his CGAS account in the respective years of withdrawal.
AO contended that the withdrawals made by the assessee from the CGAS account revealed an attempt on his part to defer his tax liability on LTCG. Accordingly, the AO made additions to the assessee’s income with respect to the premature withdrawal of the amount from the CGAS account.
On appeal, the CIT(A) upheld the order of the AO and the matter reached before the Raipur Tribunal.
ITAT Held
The Tribunal held that on a perusal of the CGAS, 1988 (the scheme), it was found that Para-9 prescribes that the amount deposited by the assessee in ”Account-B” and ”Account-A” of the said scheme can be withdrawn for utilising the same for the specified purpose, viz. purchase or construction of the new property.
Further, Para-13 provides that the assessee can close his account after obtaining the approval of the Assessing Officer, who has jurisdiction over his case. However, the scheme does not provide for the manner in which the premature withdrawals of the unutilised amount lying in the CGAS account are to be brought to tax. Rather, it is the ”1st proviso” to section 54F(4), which contemplates that in case an amount deposited in the CGAS is not utilised wholly or partly for the purchase or construction of the ”new asset” within the specified period, then the amount deposited in the CGAS shall be brought to tax in the hands of the assessee under section 45, as his income of the previous year, in which the period of three years from the date of the transfer of the original asset expires.
Accordingly, though the assessee was entitled to withdraw the unutilised amount in accordance with the scheme but the same would be liable to be assessed in his hand under section 45 during the previous year, in which the period of three years from the date of the transfer of the original asset expires.
In the present case, the unutilized amount lying in the assessee’s CGAS account was withdrawn by him in the immediately succeeding year as per the mandate of the ”1st proviso” to section 54F(4) could have only be brought to tax in the said latter year.
Therefore, the view taken by the AO could not be accepted, and the additions of LTCG made by the Assessing Officer were vacated.
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