ORDER
Sunil Kumar Singh, Judicial Member. – The aforesaid stay application No. 05/Agr/2026 is related with ITA No. 429/Agr/2026, hence, both the matters are decided by this common order for the sake of convenience and brevity. The facts of ITA No. 429/Agr/2026 are only being narrated as under:
ITA No. 429/Agr/2026
2. This appeal is directed against the impugned order dated 30.03.2026 passed in appeal No NFAC/2018-19/10402671 by the ld. Commissioner of Income Tax, NFAC (Delhi) [(hereinafter referred to as the “CIT(A)] u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) for the A.Y. 2019-20, wherein ld CIT(A) has dismissed assessee’s appeal.
3 (i). The brief facts state that the appellant assessee filed return of income, for A.Y. 2019-20, on 07.10.2019, declaring total income of Rs. 6,98,350/-. Department had the information that the assessee had sold immovable property/ plot situated at Mauza Sirajmau, Teh & Distt- Etawah for the sale consideration of Rs. 9,00,000/- whereas the stamp duty value of the property was Rs. 15,73,000/-. The case was reopened u/s 147 of the Act by issuance of notice u/s 148 of the Act on 31.03.2023. Assessee filed return in response to notice u/s 148 of the Act on 19.05.2023. Statutory notices u/s 143(2) and 142(1) and show cause notices were issued to the assessee for his explanation. Assessee filed reply, alongwith copies of ITR, PAN, computation of income, copy of sale deed, capital gains account details, copy of purchase deed and bank statement of Bank of Baroda alongwith the supporting documentary evidence for the exemption claimed u/s 54F of the Act.
(ii) Assessee explained that the plot sold was purchased from M/s Friends Housing Company (P) Ltd., Etawah on 24.03.2009 for Rs. 14,400/-and later it was sold to Smt. Asha Devi on 22.06.2018 for a total sale consideration of Rs. 9,00,000/-. The capital gain was worked out on the basis of value mentioned in the sale deed. Assessee further admitted that the stamp duty value of the plot concerned was at Rs. 15,73,000/- as against the sale consideration of Rs. 9,00,000/-. After considering assessee’s submissions, ld Assessing Officer determined the capital gains on the basis of the value of Rs. 15,73,000/- as deemed to be the full value of the property as adopted for the purpose of stamp duty. Accordingly the long term capital gain was worked out, at Rs. 6,72,569/- and added in the income of the assessee, which is tabulated as under:
“Income from Capital Gain:
| Description |
Amount (Rs.) |
| Long Term Plot Sale Consideration |
15,73,000 |
| Less Index cost for purchase of Rs. 14400.00 |
29,431 |
| Total |
15,43,569 |
| Les: Exemptions Claimed NHAI – Exemption u/s 54EC |
8,71,000 |
| Taxable Long Term Capital Gains |
6,72,569 |
4. Aggrieved assessee, preferred an appeal before ld CIT(A) and submitted that the assessee purchased a new residential flat for Rs. 55,00,000/- on the basis of sale deed executed on 09.02.2021 and subsequently claimed exemption u/s 54F of the Act. However, the ld CIT(A) found that the assessee had purchased a new residential flat on 09.02.2021, while the plot was sold out on 22.06.2018, which was beyond the period of 2 years from the date of sale of plot on 22.06.2018, hence the new asset was acquired by a delay of 7 months and 18 days. Assessee further submitted that delay was caused due to fact that assessee is 65 years old being the patient of Allergic Rhinitis & Asthma. Assessee was also admitted for treatment from 05.05.2020 to 16.12.2020 due to severe infection. Doctor advised him to take complete rest as it was a period of global pandemic Covid 19. After treatment, when the assessee felt relief, he immediately contacted the seller of the residential flat and agreement to sale was executed on 17.12.2020. Assessee further pleaded that the delay of 7 months and 18 days was caused in purchasing the residential flat due to the reasons which were beyond the control of the assessee. The account details of the consideration of Rs. 55,00,000/- paid to the transferor by the assessee were also submitted before the ld CIT(A) and pleaded that the assessee is entitled to the claim of exemption in respect of entire capital gain u/s 54F of the Act. However, ld CIT(A) noted that the investment was made beyond the prescribed period of 2 years, as mentioned u/s 54F, which expired on 21.06.2020 and thus dismissed assessee’s appeal, confirming the additions made vide, assessment order dated 14.03.2024 passed u/s 147/144/144B of the Act.
5. Appellant assessee has raised following grounds under this second appeal:
“1. That the learned CIT(A) has erred both in law and on facts in confirming the disallowance of exemption claimed under section 54F of the Income-tax Act, 1961 amounting to Rs.6,72,569/-, without appreciating that the appellant had duly invested the entire net sale consideration in purchase of a new residential property, thereby fulfilling the substantive conditions prescribed under the Act.
2. That the learned CIT(A) has failed to appreciate that the delay of 7 months and 18 days in making the investment was due to circumstances beyond the control of the appellant, namely severe medical condition (asthma and allergic illness) coupled with the unprecedented COVID-19 pandemic, which constituted a reasonable and sufficient cause warranting liberal interpretation of the statutory provisions.
3. That the learned CIT(A) has erred in ignoring the medical evidence and supporting documents furnished by the appellant, which clearly established that the appellant was under continuous medical treatment and was incapacitated from undertaking property transactions within the prescribed time.
4. That the learned CIT(A) has erred in adopting a hyper-technical approach by strictly applying the time limit prescribed under section 54F, without considering the settled principle that beneficial provisions relating to exemption should be construed liberally to advance the cause of justice.
5. That the learned CIT(A) has failed to appreciate that the intention of the appellant to invest in a residential property was bona fide and evident, as the entire sale consideration was deposited in the Capital Gains Account Scheme and subsequently utilized for purchase of the residential flat.
6. That the learned CIT(A) has erred in not following judicial precedents wherein it has been held that delay in investment under section 54F, caused due to circumstances beyond the control of the assessee, should not defeat the claim of exemption, particularly when the investment has ultimately been made.
7. That the learned CIT(A) has erred in observing that no claim under section 54F was made before the Assessing Officer, without appreciating that all relevant facts and evidences were placed on record and the claim was duly raised during appellate proceedings, which is permissible in law.
8. That the impugned order is bad in law and on facts, as it disregards the principles of natural justice, equity, and fairness, and results in unjust taxation despite fulfillment of substantive conditions.
9. That the learned CIT(A) has failed to appreciate that procedural requirements, including time limits, should not defeat substantive rights, especially in extraordinary situations like COVID-19, where even statutory compliances across laws were relaxed by the Government.
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6. Perused the records. Heard ld AR for the appellant assessee and ld Sr DR for the respondent revenue.
7. The main point for determination, on the basis of the grounds raised under appeal, is as to whether ld CIT(A) has erred in confirming the disallowance of exemption of Rs. 6,72,569/- on account of delay of 7 months and 18 days in making investment in the new asset (residential flat) as required u/s 54F of the Act, ignoring assessee’s severe medical condition during global pandemic Covid 19?
8. Ld AR for the appellant assessee has submitted that assessee opened the capital gain account in the Bank of Baroda on 27.03.2019, where the entire sale consideration of the plot was deposited. Ld AR has further submitted that it was high time of global pandemic Covid 19 and due to the ill health of the assessee, the execution of the sale deed in respect of the new residential flat could not be completed within 2 years from the date of sale of plot on 22.06.2018. The delay of 7 months and 18 days cannot be made basis for disallowance of assessee’s rightful claim of exemption u/s 54F of the Act. Ld AR has further referred order dated 06.09.2024 passed by the Ahmedabad Bench of this tribunal in Vinodbhai Ugardas Patel v. DCIT [ITA No. 32/Ahd/2024, dated6-9-2024] and submitted that the Ahmedabad Bench of this tribunal has observed that section 54F of the Act is a beneficial provision and the delay in the completion of construction activity for the residential house will not disentitle the assessee from his claim of deduction u/s 54F of the Act. Ld AR thus submits to allow the appeal.
9. Ld Sr DR supports the impugned order.
10. We note that the revenue at no stage disputed certain facts in the instant case i.e. sale of original asset (plot) by the assessee on 22.06.2018 for the consideration of Rs. 9,00,000/- to which assessee agreed for taking the consideration as per stamp duty value at Rs. 15,73,000/-. The revenue has also not questioned the genuineness of the sale deed dated 09.02.2021 executed for the purchase of new asset (residential flat) for the consideration of Rs. 55,00,000/-. The only limited issue involved under appeal is that according to section 54F of the Act, the new asset (residential flat) should have been purchased within 2 years from the date of sale of the plot on 22.06.2018 as stipulated u/s 54F, which expired on 21.06.2020, therefore, the assessee’s claim has been denied by the revenue as the new asset was purchased by a delay of 7 months and 18 days.
11. We note that Ahmedabad Bench of this tribunal, vide order dated 06.09.2024, passed in Vinodbhai Ugardas Patel (supra) has held as under:
“7. The facts pertaining to the same being that the assessee had alongwith other co-owners sold land in the impugned year for Rs.2,29,46,000/-, his share in the same being Rs. 64,75,000/- The assessee had computed capital gains earned thereon and claimed exemption thereof under section 54F of the Act on account of investment of the capital gains in a new residential property amounting to Rs.59,32,904/-. The AO noted that the assessee had purchased two plots of land prior to the selling of old asset for Rs.67,19,250/- and Rs.67,14,600/- and noting that the investment in land had been made prior to the selling of original asset, and also noting that no documentary evidences towards construction of the residential house, which was necessary condition for claiming exemption under section 54F of the Act, was filed by the assessee, he denied the assessee’s claim of exemption. The same was confirmed by the Id.CIT(A) in the first round, but the ITAT restored the issue back to the AO to verify the entire issue de novo and satisfy himself that conditions of the section 54F of the Act had been complied with by the assessee. The ITAT, at the same time, noted that mere delay in construction and completion of the construction activities of the residential house will not act as fetter for allowability of section 54F of the Act. The order of the ITAT was placed before us, and the findings are contained in para 8 to 11 of the order as under:
8. We have considered the rival submissions. The controversy in the instant case revolves around the eligibility of deduction of S. 54F in the facts of the case. In this instant case, the assessee has claimed deduction under section 54F on the ground that a plot of land has been purchased on which residential house was constructed by the assessee. It is the case of the assessee that the assessee is entitled to the benefit of benevolent provision of section 54F on deployment of net consideration arising on sale of ‘original asset’ (transfer of a long term capital asset not being a residential house) for the purpose of construction of residential house notwithstanding delay in construction within the stipulated period of 3 years. At the threshold, we find ourselves in agreement with the proposition canvassed on behalf of the assessee that section 54F of the IT Act is a beneficial provision for promoting the construction of residential house and therefore requires to be construed liberally for achieving that purpose. The intention of literature is to encourage|| investments in the acquisition of residential house and completion of construction or occupation is not the strict requirement of the law so long as the consideration has been appropriated for construction of a residential house. The condition of construction of residential house within a period of 3 years has been somewhat read down and relaxed by the judicial precedents as relied upon by the assessee. We, thus observe that merely because the construction could not be completed within a stipulated period of three years after the date of transfer of original asset as contemplated under section 54F of the Act, this by itself would not act as an handicap for availing benefit of 54F.
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11. Thus, in the totality of circumstances, we consider it expedient that the matter is examined afresh after granting proper opportunity of being heard to the assessee. It will be open to the AO to verify the entire issue de novo and satisfy himself that the conditions of section 54F of the Act have been duly complied with. However, in the same vain, we clarify that mere delay in completion of construction activity of the residential house will not act as a fetter for eligibility of deduction under section 54F of the Act. The issue is thus set aside and remitted back to the file of the AO in terms of directions noted above.
8. As is evident from the above, the ITAT interpreted the provision of section 54F of the Act and reading down the stipulation contained therein of completion of construction of residential house within three years held that merely because the construction could not be completed within three years, exemption under section 54F could not be denied. However, at the same time, it was noted that the facts relating to the amount invested by the assessee in the construction of new asset were not available on record, and accordingly, pointing out that, though the completion of new construction would not act as fetter for claiming exemption under section 54F of the Act, however, at the same time, the ITAT restored the issue to the file of the AO to denovo examining the claim of exemption of the assessee.”
12. The relevant para 7.3 of order dated 12.08.2026, passed in Dinesh Arora v. ITO [ITA No. 4760/Del/2025, dated 12-8-2026], reads as under:
“7.3 Further, the Hon’ble Delhi High Court in the case of
CIT v.
Ravinder Kumar Arora [2012] 342 ITR 38 though on different facts held that objective of section 54F of the Act, (where the material portion of the section is identical to section 54 of the Act, regarding the stipulated time limit of investment and the wording of the term ‘a residential house’) held that Section 54F of the Act is a beneficial provision which should be interpreted liberally in favour of the exemption/deduction to the taxpayer and deduction should not be denied on hyper technical ground. In this regard the relevant extract of the order is reproduced as under:
“10. Even when we look into the matter from another angle, facts remain that the assessee is the actual and constructive owner of the house. In CIT v. Podar Cement (P.) Ltd. 226 ITR 625 (SC), the Supreme Court has also accepted the theory of constructive ownership. Moreover, Section 54F mandates that the house should be purchased by the assessee and it does not stipulate that the house should be purchased in the name of the assessee only. Here is a case where the house was purchased by the assessee and that too in his name and wife’s name was also included additionally. Such inclusion of the name of the wife for the above-stated peculiar factual reason should not stand in the way of the deduction legitimately accruing to the assessee. Objective of Section 54F and the like provision such as Section 54 is to provide impetus to the house construction and so long as the purpose of house construction is achieved, such hyper technicality should not impede the way of deduction which the legislature has allowed. Purposive construction is to be preferred as against the literal construction, more so when even literal construction also does not say that the house should be purchased in the name of the assessee only. Section 54F of the Act is the beneficial provision which should be interpreted liberally in favour of the exemption/deduction to the taxpayer and deduction should not be denied on hyper technical ground. Andhra Pradesh High Court in the case of Mir Gulam Ali Khan v. CIT [1987] 165 ITR 228 /[1986] 28 has held that the object of granting exemption under Section 54 of the Act is that an assessee who sells a residential house for purchasing another house must be given exemption so far as capital gains are concerned. The word “assessee” must be given wide and liberal interpretation so as to include his legal heirs also. There is no warrant for giving too strict an interpretation to the word “assessee” as that would frustrate the object of granting exemption.
11. We also find judgments of other High Courts giving benefit of Section 54F(1) of the Act when the house of the assessee is purchased jointly with his wife. In the case of CIT v. Natarajan [2006] 287 ITR 271 (Mad.), though this case was decided in relation to Section 54 of the Act, the said Section is pari materia of Section 54F(1) of the Act. Likewise, the Punjab & Haryana High Court in the case of CIT v. Gurnam Singh [2010] 327 ITR 278 took the same view while discussing the provisions of Section 54 of the Act which is again pari materia of Section 54F(1) of the Act.
12. We, thus, answer the question in favour of the assessee and dismiss this appeal with cost quantified @ Rs. 10,000/-.”
(emphasis supplied by us)”
13. We take judicial notice of the fact that the delayed period matches with the time, when the global pandemic Covid 19 was at its peak. This fact has also been taken care of by Hon’ble Supreme Court in Cognizance for Extension of Limitation, In re 307/441 ITR 722 (SC)/ Misc. app. No. 21/2022 in Misc. app No. 665/2021 in suo-moto W.P(c) No. 3/2020 in civil original jurisdiction and in re-cognizance of extension of limitation with miscellaneous application No. 29/2022, in miscellaneous application No. 655/2021 in suo-moto petition(c) no. 03/2020 and vide para 5(1) of its order dated 10.01.2022, directed that its order dated 23.03.2020 is restored and in continuation of the subsequent order dated 08.03.2021, 27.04.2021 and 23.09.2021, it is directed that the period from 15.03.2020 till 28.02.2022 shall stand excluded for the purpose of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi judicial proceedings after exclusion of the aforesaid duration.
14. That apart, section 54F of the Act, is a beneficial provision and should be interpreted liberally in favour of assessee’s claim of deduction. The circumstances prevailing at the time of falling of stipulated period prescribed u/s 54F were beyond the control of the assessee. According to the above referred Apex Court’s order dated 10.01.2022, the period from 15.03.2020 till 28.02.2022 was excluded for the purpose of limitation prescribed under general or special laws in respect of judicial or quasi judicial proceedings. Ld CIT(A) was not right in ignoring the aforesaid directions of the Supreme Court. The delay of 7 months and 18 days falls between the aforesaid period between 15.03.2020 to 28.02.2022, hence stood excluded/condoned for the purpose of counting the period for compliance in respect of stipulated condition of two years. The appellant assessee would therefore become entitled for the claim of deduction u/s 54F of the Act. The aforesaid point is accordingly determined in favour of the assessee and against the respondent revenue. The appeal is liable to be allowed.
S.A. 05/Agr/2026
15. This stay application is related to aforesaid ITA No. 429/Agr/2026. Since we have allowed assessee’s appeal, this stay application becomes infructuous and liable to be dismissed as such.
16. In the result, assessee’s appeals viz. ITA No. 429/Agr/2026 is allowed and SA No. 05/Agr/2026 is dismissed as infructuous.
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