The assessee an Individual had filed return for relevant AY. During the course of assessment, AO noticed that assessee had sold two plots for a sale consideration of Rs. 30,00,000/-. It was noticed that these plots were purchased on 9.5.1995 for a sale consideration of Rs.2,22,250/-. The AO sought explanation of the assessee as to why the capital gain arising from these sale of plots was not offered for tax. The explanation given by the assessee was not acceptable by the AO. Therefore, he made addition of Rs. 23,79,120/- on account of long term capital gain not offered for taxation. Before AO, the explanation of the assessee was that the assessee was entitled for deductions u/s 54F of the Act. Therefore, no long term capital gain tax was payable by the assessee. On appeal, CIT(A) upheld the AO's order.

Tribunal held that,

++ as per the provisions of the Act, the assessee was required to deposit the entire sale consideration in the claim of deposit of capital gain accounts on or before due date of filing of his return. Moot question to be decided is whether the assessee would be entitled for benefit of section 54F of the Act even he does not deposit the sale consideration as contemplated u/s 54F(4) of the Act. The coordinate bench in the case of Ashok Kapasiawala Vs. ITO, while relying upon the judgement of the Karnataka High Court in the case of CIT Vs. K. Ramachandra Rao, answered the question in favour of assessee i.e. when the assessee had invested the entire sale consideration in construction of a residential house within the three years from the date of transfer. Could he be denied exemption under section 54F on the ground that he did not deposit the said amount in capital gain account scheme before the due date prescribed u/s. 139(1) of the Act;

++ in the present case, the plot was sold on 27.2.2012. Due date of filing of return was 29.9.2012. Payment made to builder of Rs.10 lakhs on 3.10.2012. Further payment made to the builder of Rs.15 lakhs on 2.11.2012 and agreement for purchase was registered on 3.12.2012. It is the case of the assessee that the sale consideration was utilised within one year from the date of sale of the original asset. Under these facts, it is argued that in the light of the judgement of the Karnataka High Court and followed by the coordinate bench, the A.O. ought to have given benefit of the deduction u/s 54 of the Act. The revenue has not brought any contrary binding precedent, therefore, respectfully following the ratio laid down by the Karnataka High Court in the case of CIT Vs. K. Ramachandra Rao, AO was directed to allow deduction u/s 54F of the Act and delete the addition.

(See 2019-TIOL-436-ITAT-INDORE)