I filed a belated return and only invested after 31 July. Can the AO deny my 54 exemption?
Not on that ground, if the investment came before the belated return was filed. The Tribunal read sub-section (4) of section 139 as in substance a proviso to sub-section (1), so the section 54 reinvestment period runs to the extended filing date, and booking a flat with a builder counts as purchase even without possession or a registered deed.
Decided by the ITAT (ITAT Delhi 'C' Bench, Amit Shukla JM and O. P. Kant AM) on 2021-02-10, reported as [2021] 126 taxmann.com 160 / 188 ITD 922 (Delhi - Trib.) — IT Appeal No. 2656 (Delhi) of 2017 (AY 2011-12). It bears on section 54, section 139(1), section 139(4) of the Income Tax Act 1961, in Capital Gains Exemptions and Capital Gains matters.
This covers two disallowances that usually arrive together: investment after the 31 July due date, and no possession or sale deed because the builder is late. On the second point the Tribunal applied the line that payment of a substantial amount under an agreement of purchase gives the assessee substantial domain over the flat. It is a Tribunal decision resting on High Court authority it cites, so its weight comes from those cases rather than from itself.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee was one of three co-owners of a property at Sector 6, Panchkula, sold on 23 June 2010 for Rs. 4,75,00,000; her share of the capital gain was Rs. 78,80,819. She invested in a flat in the 'YOO' project of Eon Hadapsar Infrastructure Pvt. Ltd., Pune, jointly with the two other co-owners. Her payments totalled Rs. 89,50,000 and were made on 5 February 2010, 18 May 2011, 16 July 2012 and 29 August 2012, all clearing her bank account before 31 March 2013, the last date under section 139(4); the agreement with the builder was dated 15 October 2012 and her return was filed on 31 October 2012, the due date under section 139(1) having been 31 July 2012. Her assessment was reopened under section 148 because the two co-owners had been denied the same exemption, and in the reassessment of 25 March 2015 the Assessing Officer disallowed Rs. 78,80,819 on four grounds: the gain was neither invested nor deposited in the capital gains account scheme by the section 139(1) due date; booking a flat is not a purchase because construction was incomplete; the CBDT circulars treating booking as construction apply only to self-financing schemes of the Delhi Development Authority and like bodies, not private builders; and possession had not been taken nor a sale deed executed. The Commissioner (Appeals) upheld that, expressly differing from the Commissioner (Appeals) who had allowed the claim of the two co-owners. Before the Tribunal the Departmental Representative said construction was completed only in 2018.
The appeal was allowed and the Assessing Officer directed to allow the section 54 deduction. Two things were decided. First, because the investment was made before the due date for filing under section 139(4) — 31 March 2013 — the deduction could not be refused for failure to put the money into the capital gains account scheme by the section 139(1) due date. Second, because the entire payment was made within three years of the transfer of the original asset, the amount had to be treated as invested in purchase or construction; section 54 nowhere requires that construction be completed, the prime requirement being investment within the prescribed period, so the absence of possession and of a registered sale deed did not defeat the claim.
At para 11.2 the Bench set out section 54(2) and at para 11.2.1 took the Rajasthan High Court in Pr. CIT v. Shankar Lal Saini as holding that the due date for the capital gains account deposit is the date under section 139(4). It then reproduced the reasoning of the Punjab and Haryana High Court in Jagriti Aggarwal and in Jagtar Singh Chawla, which read section 139(4) as in substance a proviso to section 139(1) extending the time. At paras 11.3 and 11.3.1 it went to the payment schedule and found on the bank statements that all four payments had cleared before 31 March 2013, and at para 11.4 held, following those High Court decisions, that the deduction could not be denied for non-deposit in the scheme by the section 139(1) date. On the second limb, at paras 11.6 to 11.6.3 it set out CBDT Circulars 471 of 1986 and 672 of 1993, the Delhi High Court in CIT v. R.L. Sood — where payment of a substantial amount under an agreement of purchase gave the assessee substantial domain over the flat notwithstanding the builder's failure to give possession — and the Jaipur Bench in Ram Prakash Miyan Bazaz on booking with a private builder. At para 11.7 it held that entire payment within three years meant the amount had to be treated as invested in purchase or construction, that section 54 nowhere prescribes completion of construction, and that the assessee had complied in substance. At para 11.8 it set aside the Commissioner (Appeals) and directed the deduction to be allowed.
The provisions of section 54 nowhere prescribe construction of the house should be completed. The prime requirement is investment in new residential house within the prescribed period.
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Handle my notice → Ask a CA on WhatsAppNot on that ground, if the investment came before the belated return was filed. The Tribunal read sub-section (4) of section 139 as in substance a proviso to sub-section (1), so the section 54 reinvestment period runs to the extended filing date, and booking a flat with a builder counts as purchase even without possession or a registered deed. This was decided by the ITAT (ITAT Delhi 'C' Bench, Amit Shukla JM and O. P. Kant AM) and bears on section 54, section 139(1), section 139(4) of the Income Tax Act 1961. It is reported as [2021] 126 taxmann.com 160 / 188 ITD 922 (Delhi - Trib.) — IT Appeal No. 2656 (Delhi) of 2017 (AY 2011-12). This covers two disallowances that usually arrive together: investment after the 31 July due date, and no possession or sale deed because the builder is late. On the second point the Tribunal applied the line that payment of a substantial amount under an agreement of purchase gives the assessee substantial domain over the flat. It is a Tribunal decision resting on High Court authority it cites, so its weight comes from those cases rather than from itself. If it applies to you, the first step is this: Fix the two dates on record and show the sequence: date of investment first, date the belated return was filed second.
The assessee was one of three co-owners of a property at Sector 6, Panchkula, sold on 23 June 2010 for Rs. 4,75,00,000; her share of the capital gain was Rs. 78,80,819. She invested in a flat in the 'YOO' project of Eon Hadapsar Infrastructure Pvt. Ltd., Pune, jointly with the two other co-owners. Her payments totalled Rs. 89,50,000 and were made on 5 February 2010, 18 May 2011, 16 July 2012 and 29 August 2012, all clearing her bank account before 31 March 2013, the last date under section 139(4); the agreement with the builder was dated 15 October 2012 and her return was filed on 31 October 2012, the due date under section 139(1) having been 31 July 2012. Her assessment was reopened under section 148 because the two co-owners had been denied the same exemption, and in the reassessment of 25 March 2015 the Assessing Officer disallowed Rs. 78,80,819 on four grounds: the gain was neither invested nor deposited in the capital gains account scheme by the section 139(1) due date; booking a flat is not a purchase because construction was incomplete; the CBDT circulars treating booking as construction apply only to self-financing schemes of the Delhi Development Authority and like bodies, not private builders; and possession had not been taken nor a sale deed executed. The Commissioner (Appeals) upheld that, expressly differing from the Commissioner (Appeals) who had allowed the claim of the two co-owners. Before the Tribunal the Departmental Representative said construction was completed only in 2018. The matter was decided on 2021-02-10 by the ITAT (ITAT Delhi 'C' Bench, Amit Shukla JM and O. P. Kant AM). On those facts the ITAT held as follows. The appeal was allowed and the Assessing Officer directed to allow the section 54 deduction. Two things were decided. First, because the investment was made before the due date for filing under section 139(4) — 31 March 2013 — the deduction could not be refused for failure to put the money into the capital gains account scheme by the section 139(1) due date. Second, because the entire payment was made within three years of the transfer of the original asset, the amount had to be treated as invested in purchase or construction; section 54 nowhere requires that construction be completed, the prime requirement being investment within the prescribed period, so the absence of possession and of a registered sale deed did not defeat the claim.
At para 11.2 the Bench set out section 54(2) and at para 11.2.1 took the Rajasthan High Court in Pr. CIT v. Shankar Lal Saini as holding that the due date for the capital gains account deposit is the date under section 139(4). It then reproduced the reasoning of the Punjab and Haryana High Court in Jagriti Aggarwal and in Jagtar Singh Chawla, which read section 139(4) as in substance a proviso to section 139(1) extending the time. At paras 11.3 and 11.3.1 it went to the payment schedule and found on the bank statements that all four payments had cleared before 31 March 2013, and at para 11.4 held, following those High Court decisions, that the deduction could not be denied for non-deposit in the scheme by the section 139(1) date. On the second limb, at paras 11.6 to 11.6.3 it set out CBDT Circulars 471 of 1986 and 672 of 1993, the Delhi High Court in CIT v. R.L. Sood — where payment of a substantial amount under an agreement of purchase gave the assessee substantial domain over the flat notwithstanding the builder's failure to give possession — and the Jaipur Bench in Ram Prakash Miyan Bazaz on booking with a private builder. At para 11.7 it held that entire payment within three years meant the amount had to be treated as invested in purchase or construction, that section 54 nowhere prescribes completion of construction, and that the assessee had complied in substance. At para 11.8 it set aside the Commissioner (Appeals) and directed the deduction to be allowed. In the words reproduced by the source cited on this page: "The provisions of section 54 nowhere prescribe construction of the house should be completed. The prime requirement is investment in new residential house within the prescribed period." The decision followed or applied Pr. CIT v. Shankar Lal Saini [2018] 89 taxmann.com 235 / 253 Taxman 308 (Raj.); CIT v. Jagtar Singh Chawla [2013] 33 taxmann.com 38 / 215 Taxman 154 (Punj. & Har.); CIT v. R.L. Sood [2000] 108 Taxman 227 (Delhi); Ram Prakash Miyan Bazaz v. Dy. CIT [2014] 45 taxmann.com 550 / 65 SOT 22 (JP - Trib.)(URO).
It was decided by the ITAT on 2021-02-10 and is reported as [2021] 126 taxmann.com 160 / 188 ITD 922 (Delhi - Trib.) — IT Appeal No. 2656 (Delhi) of 2017 (AY 2011-12). Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 54, section 139(1), section 139(4), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was allowed and the Assessing Officer directed to allow the section 54 deduction. Two things were decided. First, because the investment was made before the due date for filing under section 139(4) — 31 March 2013 — the deduction could not be refused for failure to put the money into the capital gains account scheme by the section 139(1) due date. Second, because the entire payment was made within three years of the transfer of the original asset, the amount had to be treated as invested in purchase or construction; section 54 nowhere requires that construction be completed, the prime requirement being investment within the prescribed period, so the absence of possession and of a registered sale deed did not defeat the claim. It arises in Capital Gains Exemptions and Capital Gains matters, on section 54, section 139(1), section 139(4) of the Income Tax Act 1961, and was decided by ITAT Delhi 'C' Bench, Amit Shukla JM and O. P. Kant AM. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. File the booking letter, allotment and payment receipts to establish a substantial payment under an agreement of purchase. Do not concede that possession or a registered sale deed is a pre-condition for section 54. If any part of the gain is still unutilised, deposit it in the capital gains account rather than resting the whole claim on this order.
Still good law. Applied by the Delhi Bench in Raj Kumar v. ITO, IT Appeal No. 3092 (Delhi) of 2024, order dated 11 June 2025, which set out this order at length and held that the facts being identical the assessee was entitled to the section 54 deduction, directing the Assessing Officer to allow it. Raj Kumar was in turn followed in ACIT v. Ajaya Bharadwaj [2026] 187 taxmann.com 514 (Delhi - Trib.), IT Appeal No. 5169 (Delhi) of 2025, order dated 27 January 2026, where the Revenue's appeal on the same point was dismissed. It must still be read against Humayun Suleman Merchant v. CCIT (Bombay High Court), which holds that a deposit in the capital gains account scheme remains mandatory for the unutilised amount under section 54F(4). No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The opposite view is in this library as Humayun Suleman Merchant v CCIT (Bombay High Court), which holds a capital gains account deposit mandatory for the unutilised amount and rejects the reasoning this order relies on for section 54F(4). Two points on the order itself. The investment here was not made on the agreement date of 15 October 2012 — payments ran from February 2010 to August 2012 and all cleared before 31 March 2013, which is what the finding rests on. And the second limb of the holding is that section 54 does not require construction to be completed, not that possession is irrelevant in the abstract: the Bench's point was that the whole price had been paid within three years of the transfer. The High Court authorities the order relies on, including Jagriti Aggarwal and Rajesh Kumar Jalan, are recorded here only as cited within it, not from their own judgment text. A Tribunal decision, and the later decisions applying it are Tribunal decisions too. The High Court authorities it relies on, including Jagriti Aggarwal and Rajesh Kumar Jalan, are corroborated here only as cited within this order, not from their own judgment text. Whether the Revenue appealed this order was not traced. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was allowed and the Assessing Officer directed to allow the section 54 deduction. Two things were decided. First, because the investment was made before the due date for filing under section 139(4) — 31 March 2013 — the deduction could not be refused for failure to put the money into the capital gains account scheme by the section 139(1) due date. Second, because the entire payment was made within three years of the transfer of the original asset, the amount had to be treated as invested in purchase or construction; section 54 nowhere requires that construction be completed, the prime requirement being investment within the prescribed period, so the absence of possession and of a registered sale deed did not defeat the claim.
TaxSphere, “Harminder Kaur v ITO”, https://taxnotice.vittsphere.com/caselaw/case/harminder-kaur-v-ito-54-belated-return/ (validity last checked 2026-08-19)
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I sold my house, bought the new one after 31 July but before the end of the assessment year, and never opened a Capital Gains Account — do I lose the section 54 exemption?
I did not put the unused capital gain into the capital gains account scheme by the due date under section 139(1). Have I lost the section 54 exemption?
A court order delayed my sale deed. Does my s.54 exemption run from the agreement to sell?
I got two independent floors from the builder. Is that one residential house for 54?
