Denial of Section 54F exemption for quoting wrong section without examining merits-ITAT remands case to AO

Denial of Section 54F exemption for quoting wrong section without examining merits of deduction claimed-ITAT remands the case to Assessing Officer  

ABCAUS Case Law Citation:
ABCAUS 2425 (2018) 07 ITAT

The instant appeal had been filed by the assessee against the order of the CIT(A) upholding  the denial of assessee’s claim of deduction u/s 54F of the Income Tax Act, 1961 (the Act).

During the scrutiny assessment proceedings, It was noticed that during the relevant year, the assessee had sold a plot and had claimed exemption of long term capital gain u/s 54 of the Act. The Assessing Officer required the assessee to show cause as to how the exemption u/s 54 of the Act was allowable as the property sold was not a property used for residence but was only a plot.

In response, the assessee submitted that the assessee’s claim should be considered u/s 54F of the Act which had inadvertently been mentioned as being claimed under section 54 in the computation of income and the return of income.

However, the Assessing Officer noted that the original return was filed belatedly, beyond the prescribed date for filing of the return as per section 139(1) of the Act and, therefore, revising the claim of deduction from section 54 to 54F could not be considered. The AO also noted that the revised claim of the assessee as per the reply was also beyond the prescribed period u/s 139(5) of the Act and, therefore, the claim was not allowable. The assessee’s plea for inadvertent mistake was also rejected.

Aggrieved, the assessee approached the First Appellate Authority who, although, noted that the assessee’s claim for deduction u/s 54F needed to be examined but all the same rejected the assessee’s claim and dismissed the appeal.

The Tribunal observed that the only mistake on the part of the assessee was incorrectly mentioning the section under which the deduction was being claimed. Also the Assessing Officer had rejected the assessee’s claim at the threshold itself on the ground that the assessee had claimed the deduction under the incorrect section of the Act and had not examined the merits of the claim of deduction.

The ITAT restored the issue to the file of the Assessing Officer for reexamining the claim of the assessee u/s 54F of the Act and directed the Assessing Officer to decide the issue as per provisions of law, notwithstanding the fact that the assessee had incorrectly mentioned the section under which the assessee was eligible for claim of deduction.

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