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2018 (7) TMI 810 - AT - Income TaxEntitled to a deduction u/s 54F - assessee having neither disclosed the capital gains in the return of income nor claimed any deduction u/s 54F of the Act the assessee is not entitled to get any deduction u/s 54F - Held that - AO having now concluded that the assessee having neither disclosed the capital gains in the return of income nor claimed any deduction u/s 54F the assessee is not entitled to get any deduction u/s 54F in the same way he should not have added the capital gains to the income of the assessee since there was no disclosure of the same in the return of income. At any rate the first appellate authority ought to have considered the issue on merits since the decision of the Supreme Court in the case of Goetze (India) Ltd (2006 (3) TMI 75 - SUPREME COURT ) would not debar the first appellate authority to consider the fresh claim if any so as to arrive at the correct taxable income. Hon ble Madras High Court in the case of CIT vs. Indian Express (Madurai) Pvt Ltd (1982 (11) TMI 47 - MADRAS HIGH COURT) observed that unlike a law suit in civil appeals in tax litigation it cannot be treated as a lis between two rival parties but the job of the Assessing Officer is to arrive at the correct taxable income Merely on account of fact that the assessee has not claimed exemption the same could not have been denied. We therefore set-aside the orders passed by the A.O. and direct the A.O. to allow the claim of deduction u/s 54F of the Act.- Decided in favour of assessee.
Issues Involved:
1. Entitlement to deduction under Section 54F of the Income Tax Act. 2. Non-disclosure of capital gains in the return of income. 3. Powers and duties of the Assessing Officer (A.O.) and the First Appellate Authority. 4. Impact of judicial pronouncements and CBDT Circulars on the assessment process. Detailed Analysis: 1. Entitlement to Deduction under Section 54F of the Income Tax Act: The primary issue concerns whether the assessee is entitled to a deduction under Section 54F for investments made in constructing a residential house. The assessee argued that the sale receipts from the property were invested in a residential house, thus entitling them to a deduction under Section 54F. The A.O. initially accepted this claim during the assessment proceedings. However, the Revisional Authority found that the assessee neither claimed this exemption in the return of income nor declared the capital gains, thus challenging the allowance of such a deduction. 2. Non-Disclosure of Capital Gains in the Return of Income: The Revisional Authority noted that the assessee did not disclose the capital gains from the property sale in their return of income and did not claim any exemption under Section 54F. The authority emphasized that exemptions cannot be presumed and must be explicitly claimed in the return of income. Consequently, the assessment order was set aside, directing the A.O. to verify the utilization of the sale proceeds for constructing the house and whether the conditions under Section 54F were met. 3. Powers and Duties of the Assessing Officer (A.O.) and the First Appellate Authority: The A.O., following the Revisional Authority’s directions, concluded that since the assessee did not declare the transaction or claim the deduction in the return, the capital gains should be added as ‘undisclosed income.’ The First Appellate Authority upheld this view, stating that the Revisional Authority’s finding had achieved finality as the assessee did not appeal against it. However, the Tribunal noted that the A.O. and CIT (A) misinterpreted the Revisional Authority’s directions. The Tribunal emphasized that the A.O. should have considered the deduction claim during the reassessment, especially since the Revisional Authority directed a re-examination of the facts. 4. Impact of Judicial Pronouncements and CBDT Circulars on the Assessment Process: The assessee cited the Supreme Court’s decision in Goetze (India) Ltd vs. CIT, which restricts new claims before the A.O. but not before appellate authorities. The Tribunal also referred to CBDT Circular No. 14-XZ (35), which mandates tax officers to assist taxpayers in claiming their rightful exemptions. The Tribunal highlighted that the decision in Goetze (India) Ltd does not bar appellate authorities from considering new claims. Additionally, the Tribunal referenced various High Court decisions supporting the view that appellate authorities can allow deductions not claimed in the original return to ensure the correct taxable income is determined. Conclusion: The Tribunal concluded that the A.O. and CIT (A) erred in not considering the assessee’s claim for deduction under Section 54F. The Tribunal set aside the orders passed by the A.O. and directed the A.O. to allow the deduction, emphasizing that tax litigation aims to determine the correct taxable income, not merely to adhere to procedural lapses by taxpayers. The appeal filed by the assessee was allowed.
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