Capital gain exemption claimed under wrong Sec. can’t be denied: ITAT

Case Details: ITO v. Armine Hamied Khan - [2022] 142 taxmann.com 14 (Mumbai-Trib.)

Judiciary and Counsel Details

• • Pramod Kumar, Vice-President & Anikesh Banerjee, Judicial Member
  • Soumendu K Dash for the Appellant.
  • Yogendra N Thakkar & Deepak S Sukhija for the Respondent.

Facts of the Case

Assessee was a non-resident lady and had tenancy rights in a residential apartment in the posh South Mumbai locality of Warden Road. She surrendered these tenancy rights for a consideration of Rs 4,76,80,552. The funds so received by her, along with an additional amount of Rs 56,80,230, were invested in the purchase of a new residential flat in the upcoming Lower Parel area nearby.

While filing up the Income-tax return (ITR), instead of mentioning section 54F as the section in which the tax exemption of capital gain is claimed, she mentioned section 54. She tried attempted to correct the mistake when the scrutiny assessment proceedings were in progress.

However, the Assessing Officer (AO) rejected the claim on the ground that the assessee was trying to make a fresh claim during scrutiny. Said claim can be admissible only by way of filing a revised return of income. On appeal, the assessee got relief from the CIT(A). Aggrieved-AO filed the instant appeal before the Tribunal.

ITAT Held

The Tribunal held that where a claim for exemption was rightly made, but only a wrong section was quoted (section 54 instead of section 54F) while making a claim, it is sufficient that assessee brings it to AO’s notice during scrutiny assessment proceedings and requests AO to allow under the correct section.

Correcting a section during assessment proceedings does not amount to making a fresh claim and AO cannot refuse deduction/exemption on the ground that no revised return was filed by the assessee.

Therefore, the AO was indeed in error in adopting such a hyper-pedantic approach and in holding that there was a fresh claim for exemption under section 54F. The grievance raised by the AO was, therefore, devoid of any legally sustainable merits. It proceeded on the fallacious assumption that a change of section, on account of an inadvertent and bonafide error, under which the claim was made, by itself, amounts to a fresh claim.