Section 54F Exemption Survives COVID-Induced Delay: ITAT Agra Rules in Favour of Assessee in Vikram Singh vs ITO

Overview of the Dispute

The Income Tax Appellate Tribunal, Agra Bench, rendered a significant decision in Vikram Singh Vs ITO (ITAT Agra) concerning Assessment Year 2019-20, wherein the central question was whether an assessee could legitimately claim exemption under Section 54F of the Income Tax Act, 1961 when the purchase of a new residential flat was completed seven months and eighteen days after the statutory two-year window had closed. The Tribunal answered in the affirmative, taking into account the assessee's deteriorating health, the extraordinary disruption wrought by the COVID-19 pandemic, the Supreme Court's pandemic-related extension of limitation periods, and the well-established principle that Section 54F is a beneficial provision warranting a liberal construction.

The connected stay application bearing SA No. 05/Agr/2026 was rendered infructuous upon allowance of ITA No. 429/Agr/2026 and was accordingly dismissed.

Background: How the Matter Came Before the Tribunal

Original Return and Reopening of Assessment

The assessee had filed his return of income for A.Y. 2019-20 on 07.10.2019, declaring a total income of ₹6,98,350. Subsequently, the Department received information that he had transferred an immovable plot situated at Mauza Sirajmau, Tehsil and District Etawah, for a stated consideration of ₹9,00,000, whereas the stamp duty valuation of the same property stood at ₹15,73,000.

The plot had originally been acquired from M/s Friends Housing Company (P) Ltd., Etawah on 24.03.2009 at a cost of ₹14,400, and was later transferred to Smt. Asha Devi on 22.06.2018 at the agreed consideration of ₹9,00,000. Given the discrepancy between the transaction value and the stamp duty value, the case was selected for reopening. A notice under Section 148 of the Act was issued on 31.03.2023, and the assessee duly filed a return in response on 19.05.2023.

Assessment and Computation of Capital Gains

Following statutory notices under Section 143(2) and Section 142(1), the assessee submitted his return, PAN details, income computation, copy of the sale deed and purchase deed, Capital Gains Account Scheme details, bank statement of Bank of Baroda, and supporting documentary evidence for the exemption claimed under Section 54F.

The Assessing Officer adopted ₹15,73,000 as the deemed full value of consideration for the purpose of computing capital gains, in line with the stamp duty valuation, which the assessee did not contest. The long-term capital gains were computed as follows:

The taxable long-term capital gain of ₹6,72,569 was added to the assessee's income vide assessment order dated 14.03.2024 passed under Section 147/Section 144/Section 144B of the Act. The assessee's Section 54F claim in respect of this remaining taxable amount became the focal point of the subsequent appellate proceedings.

The Section 54F Claim: Purchase of Residential Flat

Details of the New Asset Acquired

The assessee had purchased a residential flat for a consideration of ₹55,00,000, with the sale deed being executed on 09.02.2021. Under Section 54F of the Income Tax Act, 1961, the new residential asset must be purchased within two years from the date of transfer of the original asset. Since the plot was sold on 22.06.2018, the two-year window expired on 21.06.2020. The flat was registered on 09.02.2021, meaning the acquisition was completed seven months and eighteen days beyond the prescribed deadline.

First Appellate Authority's Rejection

Before the CIT(A), NFAC (Delhi), the assessee advanced several arguments: