2025 (1) TMI 1006 - AT - Income Tax

Higher authorities entertain a fresh claim of the assessee where it was not claimed in the ITR but was claimed before the CIT(A) - Appellant has not made a claim for deduction u/s 54F during the assessment proceedings but simply submitted that he may be allowed deduction u/s. 54F HELD THAT - We observe that similar issue was considered and adjudicated in the case of R. Venkata Dhana Lakshmi 2021 (6) TMI 982 - ITAT VISAKHAPATNAM and decided the issue in favour of the assessee. Assessee is eligible for deduction under section 54F of the Act from the long-term capital gains though assessee has made a claim while filing the return of income in response to notice under section 148 of the Act Appellate Authorities are not barred from entertaining the fresh claim. Hence we set aside the order of the lower authorities and direct the Ld.AO to verify the facts regarding acquiring the new asset and allow deduction u/s.54F in respect of long-term capital gains. Accordingly the grounds raised by the assessee on this issue are allowed.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions addressed in this judgment are:

Whether the assessee is entitled to a deduction under Section 54F of the Income Tax Act for long-term capital gains, despite not claiming it in the original Income Tax Return (ITR).
Whether higher authorities, such as the Commissioner of Income Tax (Appeals) [CIT(A)] and the Income Tax Appellate Tribunal (ITAT), can entertain a fresh claim for deduction not initially made in the ITR but presented during appellate proceedings.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Entitlement to Deduction under Section 54F

Relevant Legal Framework and Precedents: Section 54F of the Income Tax Act provides for exemption from capital gains tax when the proceeds from the sale of a capital asset are reinvested in a residential property. The key requirement is that the investment must be made within a stipulated period, and if not, the amount should be deposited in a specified account.
Court's Interpretation and Reasoning: The tribunal considered the beneficial nature of Section 54F, emphasizing its intent to promote housing. It referenced prior judgments indicating that the deduction should be available if the reinvestment conditions are met, even if procedural requirements like depositing in a specified account are not strictly followed.
Key Evidence and Findings: The tribunal noted that the assessee had indeed reinvested the proceeds from the capital gains into a new residential property within the required timeframe, albeit without depositing the amount in the specified account.
Application of Law to Facts: The tribunal applied the principle that substantive compliance with the reinvestment requirement should suffice for claiming the deduction, aligning with precedents that prioritize the intent and outcome of the reinvestment over procedural lapses.
Treatment of Competing Arguments: The tribunal acknowledged the revenue authorities' stance on procedural non-compliance but leaned towards a liberal interpretation of Section 54F, focusing on the end utilization of the funds.
Conclusions: The tribunal concluded that the assessee is eligible for the deduction under Section 54F, directing the Assessing Officer (AO) to verify the facts regarding the acquisition of the new asset and allow the deduction accordingly.

Issue 2: Authority to Entertain Fresh Claims

Relevant Legal Framework and Precedents: The tribunal referenced the Supreme Court's decision in Goetze (India) Ltd. v. CIT, which allows appellate authorities to entertain fresh claims not made in the original ITR if all relevant facts are on record.
Court's Interpretation and Reasoning: The tribunal interpreted that appellate bodies have the discretion to consider fresh claims if it serves the interest of justice and aligns with the substantive provisions of the law.
Key Evidence and Findings: The tribunal noted that the assessee had made the claim for deduction during the assessment and appellate proceedings, providing all necessary details and justifications.
Application of Law to Facts: Applying the principle from Goetze and other relevant precedents, the tribunal found that the CIT(A) and ITAT are not barred from considering the fresh claim for deduction under Section 54F.
Treatment of Competing Arguments: The tribunal considered the revenue's reliance on procedural grounds to deny the claim but emphasized the broader judicial mandate to ensure just taxation based on substantive compliance.
Conclusions: The tribunal set aside the lower authorities' orders, allowing the fresh claim for deduction under Section 54F and directing the AO to verify and grant the deduction.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "The Section 54F is beneficial provision and should be interpreted liberally...the assessee is entitled for exemption Under Section 54F of the Act."
Core Principles Established: The tribunal reinforced the principle that beneficial provisions like Section 54F should be interpreted liberally to fulfill their legislative intent. It also established that appellate authorities have the discretion to entertain fresh claims when justified by the facts and circumstances of the case.
Final Determinations on Each Issue: The tribunal determined that the assessee is eligible for the deduction under Section 54F, and appellate authorities can entertain fresh claims not made in the original ITR, provided all relevant facts are on record.

The judgment underscores the importance of interpreting tax provisions in a manner that aligns with their intended purpose, ensuring that procedural lapses do not undermine substantive entitlements. The decision also highlights the appellate authorities' role in ensuring fair and just taxation by considering all relevant facts and claims presented during proceedings.

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