Capital Gain Exemption u/s 54 wrongly claimed under section 54F allowed

Capital Gain Exemption u/s 54 wrongly claimed under section 54F allowed being bonafide typographical mistake

ABCAUS Case Law Citation:
ABCAUS 3739 (2023) (05) ITAT

Important Case Laws relied upon:
ITO v Anirudh Ashok Jajoo
Shrikar Hotels (P.) Ltd. vs. Commissioner of Income-tax 79 taxmann.com 63
Commissioner of Income-tax vs. Natraj Stationery Products (P.) Ltd. 177 Taxman 168  
CIT vs Malayala Manorama Co. Ltd. [2018] 96 taxmann.com 498
Income Tax Officer vs. Armine Hamied  
Assistant Commissioner of Income vs Jai Kumar Gupta

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming disallowance of deduction claimed under section 54 of the Income Tax Act, 1961 (the Act).

The assessee had sold a residential house & invested the amount in purchase of a residential flat. In respect of the resultant capital gain, the assessee claimed benefit/exemption u/s 54F of the Act in the return of income. 

The Assessing Officer issued a show cause notice to the assessee as to why the exemption u/s 54F may not be disallowed in its  case  as  the  sale  is  of  residential  house  and  the  exemption  u/s  54F  is applicable against the sale/transfer of capital asset not being a residential house.

Assessee submitted that inadvertently the deduction was claimed u/s 54F though the assessee was eligible for benefit u/s 54 of the Act. The assessee placed reliance on the order of the Coordinate Bench.

However, the Assessing Officer took adverse view of the fact that the assessee claimed benefit erroneously u/s 54F of the Act instead of claiming the benefit u/s 54 of Act which was the correct section under which the assessee was eligible for benefit, and made the impugned addition by disallowing the deduction u/s 54 of the Act.

The Tribunal opined that the assessee’s claim for benefit u/s 54 of   the Act made during assessment proceeding, and during appellate proceedings before the CIT(A) and again during the appellate proceedings before the Bench is not a new claim.  

The ITAT observed that assessee had already made this claim in the return of income though, in an inadvertent and bonafide typographical mistake, the section under which the benefit was claimed, was erroneously mentioned as 54F of the Act instead of section 54 of the Act which was the correct section.

The Tribunal also observed that the claim of the assessee was eligible for benefit u/s 54 of the Act had not been disputed on facts having regard to the transactions made by the assessee.

The ITAT noted that the assessee’s claim u/s 54 of Act was not allowed by the Assessing Officer and by the CIT(A) only on the technical ground that the assessee made the claim u/s 54F of the Act instead of section 54 of the Act.  The ITAT was already of the view that the claim made by the assessee u/s 54 of the Act was not a new claim.  

Further, the Tribunal observed that the issue in dispute was squarely covered in favour of the assessee by judicial precedents.

ITAT held that the conclusion arrived by CIT(A) and the Assessing Officer that the assessee’s claim u/s 54 of the Act was a new claim was, factually wrong in the specific facts and circumstances of the case.

Accordingly, the ITAT ordered the Assessing Officer to allow assessee’s claim u/s 54 of the Act.

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