Delhi ITAT: Capital Gains Deduction Will Not Be Refused for Failure to Deposit in the CGAS

The Delhi bench of the ITAT recently made a significant ruling. It said that individuals can claim deductions for capital gains, even if they haven’t deposited into a capital gain account scheme.

The case involved assessee, Sarita Gupta, a resident individual, of whom information was received by the Assessing Officer that the assessee’s dad sold an immovable property for Rs. 62,06,000 during the relevant year. Based on this information, the officer reopened the assessment by under section 147 of the Act.

During the assessment proceedings, the Assessing Officer requested detailed information regarding the properties sold and the resulting capital gain. Sarita Gupta provided all the necessary details, including the specifics of the property sale and the capital gain derived from it.

After thoroughly examining the information, the Assessing Officer received Sarita Gupta’s income tax return and completed the assessment accordingly.

However, after reviewing the assessment record, the Principal Commissioner of Income Tax (PCIT) observed that the amount of capital gain had not been deposited into the capital gain account scheme during the provisional term until it was utilized for the purchase or construction of a new property.

Taking this into consideration, the PCIT overruled the assessment directive and directed the disallowance of the deduction demanded as mentioned in section 54 of the Act.

Displeased with the decision, the assessee filed an appeal before the tribunal. During the adjudication process, the ITAT bench carefully examined the sale of the immovable property and the resulting capital gain that arose from the transaction. The Assessing Officer had already verified all the appropriate facts concerning the exemption for capital gains.

Furthermore, the reviewing authority expressed no doubts regarding the amount of capital gain generated by the assessee or the point that it had been invested within the prescribed time limit under section 54(1) of the Income Tax Act for the purchase or construction of a residential house.

The reviewing authority deemed the assessment order incorrect and detrimental in nature to the interests of the revenue solely on the basis that the capital gain had not been placed into the capital gain account scheme.

Consequently, the Income Tax Appellate Tribunal (ITAT) bench, consisting of Saktijit Dey (Vice-President) and M. Balaganesh (Accountant Member), concluded that individuals can claim deductions for capital gains even without depositing into the capital gain account scheme.

Therefore, the exercise of power under section 263 of the Income Tax Act to revise the assessment order in this case was deemed invalid. The assessee was represented by Sankalp Malik as her counsel, while Subhra Jyoti Chakraborty appeared on behalf of the revenue.