Man sold unlisted shares, bought Rs 5.65 cr house, faced income tax scrutiny; he fought back and won in ITAT Delhi despite low income declaration
Jun 8, 2026
Synopsis
Mr. Bansal successfully appealed a tax demand after claiming Section 54F exemption on Rs 7.59 crore long-term capital gains from unlisted shares. The ITAT Delhi ruled that depositing unutilized funds in the Capital Gains Account Scheme was unnecessary as the property was purchased before filing the ITR. The tribunal also clarified ownership of a single residential unit and independent computation of capital gains.
When Mr. Bansal from Badarpur Khadar, Delhi who had sold unlisted shares for Rs 7.88 crore, realising a capital gain of Rs 7.59 crore, and subsequently invested Rs 5.65 crore in a Delhi residential property and claimed Section 54F tax exemption, he got into trouble with the Income Tax Department.
The tax authorities had denied the Section 54F LTCG tax exemption, citing reasons such as the investment not being made within the ITR filing due date, failure to deposit unutilised funds in the Capital Gains Account Scheme (CGAS), and alleged ownership of multiple residential properties.
Feeling aggrieved, he had filed an appeal in CIT (A). When CIT (A) rejected his appeal, he filed an appeal in ITAT Delhi.
The ITAT Delhi ruled in his favour and clarified in its judgement clarified that Section 54F(4) requires deposit in the Capital Gains Account Scheme (CGAS) only if the sale proceeds are not utilised before filing the Income Tax Return (ITR).
The Assessing Officer (AO) and CIT(A) denied the Section 54F tax exemption on multiple grounds:
• The investment was not made within the due date of ITR filing under Section 139(1),
• The unutilised amount was not deposited in the Capital Gains Account Scheme,
• He owned more than one residential house, and
• Capital gains should be computed after setting off losses across all share transactions.
• Now, since Mr. Bansal had already purchased the new property before filing his ITR, the ITAT Delhi deemed the deposit of the long term gains unnecessary. Advocates V P Gupta, and Anunav Kumar represented his case before ITAT Delhi. On April 17, 2026, he won the case in ITAT Delhi.
Summary of the judgement and how he won the case
Chartered Accountant Suresh Surana told ET Wealth Online that this case (Delhi ITAT, AY 2016-17,ITA No.5568/Del/2025) revolves around the allowability of exemption under Section 54F of the Income-tax Act, 1961 in respect of long-term capital gains arising from sale of unlisted shares.
The ITAT Delhi ruled in his favour after examining both the factual matrix and the legal position. On the issue of utilisation of sale proceeds, the ITAT Delhi held that Section 54F(4) requires deposit in the Capital Gains Account Scheme (CGAS) only when the amount is not used before the date of furnishing the ITR.
Surana says since Mr Bansal had already used the funds for buying the residential property before filing the ITR under Section 139(4), thus there was no need to deposit the amount separately. The ITAT also clarified that the reference to "Section 139" in Section 54F(4) includes Section 139(4), and is not restricted to Section 139(1).
Bansal owned 1/3rd share in a house in Preet Vihar, Delhi and the remaining shares were owned by his brothers. However, the ITAT Delhi rejected the tax department's contention that he owned more than one residential house and held that he merely held a 1/3rd undivided share in a single residential property jointly with his brothers, which constituted one contiguous residential unit.
As a result, the requirement under Section 54F about owning no more than one residential house (other than the new asset) was met.
Also, while computing capital gains, the Tribunal determined that each capital asset should be evaluated independently. Section 54F applies to gains arising from transfer of "any long-term capital asset", and therefore gains from profitable transactions cannot be mandatorily netted off with losses from other transactions before granting exemption. Loss-making assets fall outside the scope of Section 54F for exemption purposes.
The Tribunal further noted that in an identical case involving the assessee's brother on similar facts, exemption under Section 54F had already been allowed by the CIT(A), lending further support to the assessee's claim.
Mihir Tanna, associate director, S.K Patodia LLP, says that this judgement highlights an important difference in two criteria provided in income tax provisions for claiming Section 54F tax exemption.
According to Tanna, this judgement provides that the amount not utilised for the purchase of the new asset before the date of furnishing the ITR, must be deposited not later than the due date of furnishing the original ITR in a specified bank account bank. The word "original" is not mentioned before the due date for utilising money.
Tanna says: "So in simple words, if you are reasonably sure that amount will be utilised in new property by the due date of belated ITR, there is no need to deposit money in a specified bank account before the due date of original income tax return."
[The Economic Times]
