2015 (4) TMI 939 - AT - Income Tax

Computation of Capital gain in respect of sale of residential house - Deduction u/s 54 of Income Tax Act, 1961 - Correct Section for claiming exemption not mentioned in the return - Held that - We are of the considered opinion that even if a wrong section was mentioned by the assessee in the return, it was the duty of the Assessing Officer to assist the tax payer in a reasonable way and to provide the relief if due to the assessee. This attitude rather will help the Revenue in assessing the income correctly. A correct advice by the Department would inspire the confidence of public at large. Even identical guidelines/instructions have been issued from time to time by the CBDT to its Officers (Circular No. 14(XL-35) dated 11.4.1955 and letter No. F.81/27/65-IT(B) dated 18.5.1965). If due to ignorance a wrong section has been mentioned by the assessee, it is the duty of the Assessing Officer to advise the assessee about the correct claim and also to assess the tax legitimately. This is the clear intention of the legislature. Without adverting further, we deem it appropriate to remand this file to the file of the learned Assessing Officer to examine the claim of the assessee afresh under provisions of section 54F of the Act, after providing due opportunity of being heard to the assessee. The assessee is also at liberty to furnish evidence, if any, to substantiate his claim. So far as the invocation of section 50C of the Act is concerned, the ld. CIT(A) held that the Assessing Officer rightly took the fair market value of the properties as adopted by the stamp valuation authority for computation of capital gain. Section 50C was inserted by the Finance Act, 2002 with effect from 1.4.2003. As per sub-clause (a) to sub-section (2) to section 50C, where the assessee claims before the Assessing Officer that the value adopted or assessed (or assessable) by the stamp valuation authority under sub-section (1) exceeds the fair value of the property as on the date of transfer, the Assessing Officer may refer the valuation of the capital asset to the Valuation Officer. Since we have remanded the issue of section 54F of the Act to the file of the learned Assessing Officer, therefore, the Assessing Officer is directed to examine the claim of the assessee on this point also. - Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
1. Applicability of section 50C versus sections 54/54F for capital gains exemption.
2. Correct sections mentioned for claiming deduction u/s 54/54F.
3. Duty of Assessing Officer to assist taxpayer in claiming legitimate relief.
4. Interpretation of provisions of section 54F regarding capital gain from commercial assets.

Analysis:

Issue 1: Applicability of section 50C versus sections 54/54F for capital gains exemption
The case involved a dispute regarding the applicability of section 50C in contrast to sections 54/54F for claiming capital gains exemption. The Assessing Officer found a variance between the market value and declared amount by the assessee. The Tribunal emphasized the importance of correctly advising taxpayers on the applicable sections to claim exemptions. It was noted that the provisions of section 54F allow for the utilization of capital gains from commercial assets for acquiring or constructing a residential house. The Tribunal remanded the issue to the Assessing Officer to re-examine the claim under section 54F, providing the assessee with a fair opportunity to substantiate the claim.

Issue 2: Correct sections mentioned for claiming deduction u/s 54/54F
The assessee had mentioned incorrect sections in the return for claiming deductions u/s 54/54F. The Tribunal acknowledged that the assessee had not correctly specified the sections but highlighted that the Assessing Officer should have guided the taxpayer appropriately. The Tribunal stressed that it is the duty of the Assessing Officer to assist taxpayers in claiming legitimate reliefs and to ensure correct assessment of taxes. The Tribunal referred to past circulars and guidelines from the CBDT emphasizing the importance of providing correct advice to taxpayers for instilling confidence in the tax system.

Issue 3: Duty of Assessing Officer to assist taxpayer in claiming legitimate relief
The judgment underscored the duty of the Assessing Officer to guide taxpayers in claiming legitimate reliefs and to assess taxes correctly. It was noted that even if a wrong section was mentioned by the assessee, the Assessing Officer should assist in rectifying the error and ensure that the taxpayer receives due relief. The Tribunal emphasized that such an approach would enhance the credibility of the tax administration and foster public trust in the system.

Issue 4: Interpretation of provisions of section 54F regarding capital gain from commercial assets
The Tribunal discussed the interpretation of provisions under section 54F concerning the utilization of capital gains from the transfer of commercial assets for acquiring or constructing a residential house. It was highlighted that the language used in the section does not differentiate between residential and commercial assets for claiming exemptions under section 54F. The Tribunal directed the Assessing Officer to examine the claim of the assessee under section 54F, considering the specific conditions and requirements outlined in the provision.

In conclusion, the Tribunal allowed the appeal of the assessee for statistical purposes, remanding the case to the Assessing Officer for a fresh examination of the claims under sections 54F and 50C, emphasizing the importance of providing proper guidance to taxpayers and ensuring correct assessment of taxes.