Commissioner Of Income Tax-Ii, Chandigarh v. Ms. Jagriti Aggarwal

ITA No. 176 of 2011Date of decision: 3.10.2011 Commissioner of Income Tax-II, Chandigarh …Appellant vs. Ms. Jagriti Aggarwal ….Respondent CORAM: HON’BLE MR. JUSTICE HEMANT GUPTAHON’BLE MR. JUSTICE G.S. SANDHAWALIA Present: -Ms. Urvashi Dhugga, Advocate for the appellant-revenue.for the appellant-revenue. Ms. Radhika Suri, Advocate for respondent-assessee. HEMANT GUPTA, J. Revenue is in appeal aggrieved against an order passed by theIncome Tax Appellate Tribunal, Chandigarh Bench, Chandigarh (for shortthe ‘the Tribunal’) on 13.8.2010 in respect of Assessment Year 2006-2007.The Revenue has claimed the following substantial question oflaw, as arisen from the order of the Tribunal: “Whether in the facts and circumstances of the case and in aw the ITATwas justified in allowing the benefit of exemption under Section 44 of theIncome tax Act by wrongly interpreting Section 54 of the I.T. Act in whichthe due date for furnishing the return of income is mentioned as perSection 139(1) and not as per Section 139(4) of the Act?” The assessee sold her house property for Rs. 45 lacs andclaimed deduction under Section 54 of the Income Tax Act, 1961 (for short‘the Act’). The assessee was served with a otice under Section 142(1) of theAct, as to why the amount deducted be not added to her income as long termcapital gain, as the assessee failed to deposit the amount in Capital GainAccount Scheme and also failed to purchase house property before the due date of filing the return of income. The assessee contested the claim of theRevenue and asserted that she is not liable to deposit the amount in CapitalGain Deposit Scheme and that the due date of filing the return of income taxis not as specified in Section 139(1) but as specified in Section 139(4) of theAct. The Assessing Officer declined the claim of the assessee and returnedfinding that the assessee has concealed her particulars of income andinitiated proceedings for penalty as well. The appeal against the said order was accepted by theCommissioner of Income Tax (Appeals). It was found that the appellant haspurchased new residential property on 2.1.2007 and the due date as perSection 139(4) is 31.3.2007 and thus, the assessee has complied with theprovisions of Section 54 of the Act. It was held that Section 139 includesSub Section (4) as well. The said order of the Commissioner of Income Taxhas been affirmed in appeal as well. It may be noticed that the assessee sold her residential house on13.1.2006 for a sum of Rs. 45 lacs and purchased another property jontlywith Mr. D. P. Azad, her father-in-law on 2.1.2007 for a consideration ofRs. 95 lacs. The due date of filing of return as per Section 139(1) of the Actwas 31.7.2006, but the assessee filed her return on 28.3.2007 and thatextended due date of filing of return as per Section 139(4) is 31.3.2007. Section 54 of the Act contemplates that the capital gain arisesfrom the transfer of a long term capital asset, but if the assessee within aperiod of one year before or two years after the date on which the transfertook place purchases residential house, then instead of the capital gain, theincome would be charged in terms of provisions of Sub Section (1) ofSection 54. As per Sub-Section (2), if the amount of capital gains is not appropriated by the assessee towards the purchase of new asset within oneyear before the date on which the transfer of the original asset took place, orwhich is not utilized by him for the purchase or construction of the newasset before the date of furnishing the return of income under Section 139,the amount shall be deposited by him before furnishing such return not laterthan due date applicable in the case of assessee for furnishing the return ofincome under Sub Section (1) of Section 139 in an account in any suchBank or institution as may be specified. Relevant Sub-Section (2) of Section54 of the Act reads as under: appropriated by the assessee towards the purchase of new asset within oneyear before the date on which the transfer of the original asset took place, orwhich is not utilized by him for the purchase or construction of the newasset before the date of furnishing the return of income under Section 139,the amount shall be deposited by him before furnishing such return not laterthan due date applicable in the case of assessee for furnishing the return ofincome under Sub Section (1) of Section 139 in an account in any suchBank or institution as may be specified. Relevant Sub-Section (2) of Section54 of the Act reads as under: “(2) The amount of the capital gain which is not appropriated by theassessee towards the purchase of the new asset made within one yearbefore the date on which the transfer of the original asset took place, orwhich is not utilized by him for the purchase or construction of the newasset before the date of furnishing the return of income under Section 139,shall be deposited by him before furnishing such return such deposit beingmade in any case not later than the due date applicable in the case of theassessee for furnishing the return of income under Sub-Section (1) ofSection 139 in an account in any such bank or institution as may bespecified in, and utilized in accordance with, any scheme which theCentral Government may, by notification in the Official Gazettee, frame inthis behalf and such return shall be accompanied by proof of such deposit,and for the purposes of Sub-Section (1), the amount, if any, alreadyutilized by the assessee for the purchase or construction of the new assettogether with the amount so deposited shall be deemed to be the cost ofthe new asset: Provided that if the amount deposited under this Sub-Section is notutilized wholly or partly for the purchase or construction of the new assetwithin the period specified in Sub-Section (1), then,- (i)the amount not so utilized shall be charged under Section 45 as theincome of the previous year in which the period of three years from thedate of the transfer of the original asset expires; and (ii)the assessee shall be entitled to withdraw such amount inaccordance with the scheme aforesaid.” The question which arises is; whether the return filed by theassessee before the expiry of the year ending with the Assessment Year isvalid under Section 139(4) of the Act. Learned counsel for the revenue has argued that the assesseewas required to file return under Sub section (1) of Section 139 of the Act interms of Sub section (2) of Section 54 of the Act. It is contended that Subsection (4) is not applicable in respect of the assessee so as to avoidpayment of long terms capital gain.On the other hand, learned counsel for the respondent reliesupon a Division Bench judgment of Karnataka High Court reported asFathima Bai vs. Income Tax Officer (2009) 32 DTR 243, where insomewhat similar circumstances, it has been held that time limit for depositunder Scheme or utilization can be made before the due date for filing ofreturn under Section 139(4) of the Act. Learned counsel for the respondentalso relies upon a Division Bench judgment of Gauhati High Court reportedas Commissioner of Income Tax vs Rajesh Kumar Jalan (2006) 286 ITR274. Having heard learned counsel for the parties, we are of theopinion that Sub-Section (4) of Section 139 of the Act is, in fact, a provisoto Sub-Section (1) of Section 139 of the Act. Section 139 of the Act fixesthe different dates for filing the returns for different assesses. In the case ofassessee as the respondent, it is 31[st] day of July of the Assessment Year interms of clause (c) of the Explanation 2 to Sub-Section 1 of Section 139 ofthe Act, whereas Sub-Section (4) of Section 139 provides for extension inperiod of due date in certain circumstances. It reads as under: Having heard learned counsel for the parties, we are of theopinion that Sub-Section (4) of Section 139 of the Act is, in fact, a provisoto Sub-Section (1) of Section 139 of the Act. Section 139 of the Act fixesthe different dates for filing the returns for different assesses. In the case ofassessee as the respondent, it is 31[st] day of July of the Assessment Year interms of clause (c) of the Explanation 2 to Sub-Section 1 of Section 139 ofthe Act, whereas Sub-Section (4) of Section 139 provides for extension inperiod of due date in certain circumstances. It reads as under: “(4) Any person who has not furnished a return within the time allowed tohim under Sub-Section (1), or within the time allowed under a noticeissued under Sub-Section (1) of Section 142, may furnish the return forany previous year at any time before the expiry of one year from the end ofthe relevant assessment year or before the completion of the assessmentwhichever is earlier; Provided that where the return relates to a previous year relevant to theassessment year commencing on the 1[st] day of April 1988, or any earlierassessment year, the reference to one year aforesaid shall be construed as areference to two years from the end of the relevant assessment year”. A reading of the aforesaid Sub-Section would show that if aperson has not furnished the return of the previous year within the timeallowed under Sub-Section (1) i.e. before 31[st] day of July of the AssessmentYear, the assessee can file return before the expiry of one year from the endof the relevant Assessment Year. The sale of the asset having been taken place on 13.1.2006,falling in the previous year 2006-2007, the return could be filed before theend of relevant assessment year 2007-2008 i.e. 31.3.2007. Thus, Sub-Section (4) of Section 139 provides extended period of limitation as anexception to Sub-Section (1) of Section 139 of the Act. Sub-Section (4) is inrelation to the time allowed to an assessee under Sub-Section (1) to filereturn. Therefore, such provision is not an independent provision, butrelates to time contemplated under Sub-Section (1) of Section 139.Therefore, such Sub-Section (4) has to be read along with Sub-Section (1).Similar is the view taken by the Division Bench of Karnataka and GauhatiHigh Courts in Fatima Bai and Rajesh Kumar Jalan cases (supra)respectively. In view of the above, we find that due date for furnishing thereturn of income as per Section 139(1) of the Act is subject to the extendedperiod provided under Sub-Section (4) of Section 139 of the Act. Consequently, the question of law is answered against theRevenue and in favour of the assessee. Thus, the present appeal isdismissed. (HEMANT GUPTA)JUDGE 3.10.2011vimal/preeti (G.S.SANDHAWALIA) JUDGE