2023 (5) TMI 733 - AT - Income Tax

Exemption u/s 54F OR 54 - New claim - assessee submitted that the assessee was eligible for the benefit u/s 54 but due to a bonafide and inadvertent typographical mistake, the claim was made erroneously u/s 54F - HELD THAT - As the claim made by the assessee u/s 54 was not a new claim. Accordingly, we hold that the conclusion arrived by learned CIT(A) and the AO that the assessee s claim u/s 54 of IT Act is a new claim is, factually wrong in the specific facts and circumstances of the present appeal before us. Assessee had already made this claim in the return of income, although, in an inadvertent and bonafide typographical mistake, the section under which the benefit was claimed, was erroneously mentioned as 54F instead of section 54 which is the correct section. Issue in dispute in the present appeal before us is squarely covered in favour of the assessee by cases of Shrikar Hotels (P.) Ltd. 2017 (2) TMI 679 - ALLAHABAD HIGH COURT , Natraj Stationery Products (P.) Ltd. 2008 (11) TMI 48 - HIGH COURT DELHI , Malayala Manorama Co. Ltd. 2018 (8) TMI 198 - KERALA HIGH COURT , Armine Hamied 2022 (9) TMI 35 - ITAT MUMBAI and Jai Kumar Gupta (HUF) 2019 (3) TMI 466 - ITAT MUMBAI Thus we direct the Assessing Officer to compute benefit u/s 54 of IT Act on merits, having regard to applicable law and relevant facts and circumstances; and we order the Assessing Officer to allow assessee s claim u/s 54 of IT Act accordingly. Appeal of the assessee stands allowed for statistical purposes.

Summary

Issues Involved:
The judgment involves issues related to the incorrect claim of deduction under section 54F instead of section 54 of the Income Tax Act, and the subsequent disallowance of the claim by the Assessing Officer and the CIT(A).

Assessment Order and Claim Disallowance:
The Assessing Officer passed an assessment order determining the total income of the assessee and disallowed the claim under section 54/54F of the IT Act. The assessee sold a residential house and invested the amount in the purchase of a residential flat. The Assessing Officer disallowed the claim as the assessee erroneously claimed the benefit under section 54F instead of section 54, which was the correct section applicable. The addition of Rs.1,05,00,000/- was made based on this discrepancy.

Appeal to CIT(A) and Subsequent Appeal to ITAT:
The assessee filed an appeal before the CIT(A) challenging the disallowance of the claim. However, the CIT(A) dismissed the appeal stating that the assessee could not amend the return to make a new claim for deduction. Subsequently, the assessee filed an appeal before the Income Tax Appellate Tribunal (ITAT) against the CIT(A)'s order.

Arguments Before ITAT and Judicial Precedents:
During the ITAT proceedings, the assessee argued that the claim under section 54F was a typographical mistake, and the correct claim should have been under section 54. The assessee relied on various judicial precedents to support the argument that such typographical errors should not lead to the disallowance of legitimate claims under the Income Tax Act.

Decision of ITAT:
After considering the arguments and the precedents cited, the ITAT held that the claim made by the assessee under section 54 of the IT Act was not a new claim but a typographical error. The ITAT found that the assessee was indeed eligible for the benefit under section 54, and the disallowance was solely based on a technical ground. Therefore, the ITAT directed the Assessing Officer to compute the benefit under section 54 of the IT Act on merits and allow the assessee's claim accordingly. The appeal of the assessee was allowed for statistical purposes.

Conclusion:
The ITAT's decision clarified that the typographical error in claiming the benefit under the incorrect section should not result in the disallowance of legitimate claims. The judgment emphasized the importance of considering the substance of the claim rather than technical errors in such matters.

(Order pronounced in the open court on 11/05/2023)