Pre-2015 Capital Gains Exemption: ITAT Delhi Validates Section 54 Relief on Multiple Properties in Bela Sahni Case
The interpretation of tax statutes, particularly concerning exemptions and deductions, often hinges on the specific phrasing utilized by the legislature during a given assessment year. A classic example of this interpretative evolution is found within the provisions of Section 54 and Section 54F of the Income Tax Act 1961. The recent judicial pronouncement by the Income Tax Appellate Tribunal (ITAT), Delhi Bench, in the matter of Bela Sahni Vs DCIT, provides a comprehensive analysis of how these provisions must be applied for transactions occurring prior to the restrictive amendments introduced by the Finance Act 2014.
This analytical summary delves into the tribunal's decision to delete a substantial disallowance of Rs. 91,48,775/-, reaffirming the principle that substantive amendments restricting assessee benefits cannot be applied retroactively.
Factual Matrix of the Dispute
The controversy revolves around the tax return filed by an individual assessee for the Assessment Year (AY) 2013-14.
The Original Transaction and Reinvestment
The assessee was a co-owner of an ancestral property situated at E-8, Defence Colony, New Delhi. This prime real estate was alienated for a total consideration of Rs. 37,01,00,000/-. Out of this total sale value, the assessee received her designated one-third share, amounting to Rs. 12,67,00,000/-.
Seeking to mitigate the incidence of Long-Term Capital Gains (LTCG) tax, the assessee strategically reinvested her portion of the sale proceeds into residential real estate. Specifically, she acquired two distinct properties located in Noida:
- A residential property bearing the address C-5, Sector-47, Noida, purchased for Rs. 4,10,65,000/- (transaction dated 24.01.2013).
- An additional residential unit situated at Wishtown Klassic, Jaypee Greens, Noida, acquired for an investment of Rs. 91,48,775/-.
In her original return of income filed on 18th July 2013, which declared a total income of Rs. 6,38,22,730/-, the assessee claimed a consolidated deduction under Section 54 of the Income Tax Act 1961 amounting to Rs. 5,02,13,775/-. This claim encompassed the investment made in both Noida properties.
Reassessment Proceedings Initiated by the Revenue
The tax department, acting upon intelligence received from the ITO (I&CI)-3, New Delhi, scrutinized the assessee's investments during the financial year 2012-13. Consequently, the jurisdictional Assessing Officer (AO) invoked the provisions of Section 147 of the Income Tax Act 1961 to reopen the assessment, operating under the belief that income chargeable to tax had escaped assessment.
A formal notice under Section 148 was issued to the assessee on 31.03.2021. The assessee responded by filing a return on 31.12.2021, declaring a marginally revised income of Rs. 6,38,22,728/-. Because this return was submitted beyond the statutorily permitted timeframe, the AO classified it as invalid and proceeded to finalize the assessment ex-parte under Section 144 of the Act, utilizing the data provided in the delayed return for computation purposes.