Loading judgment…
Facts
The appellant sold an immovable property and purchased another, claiming a deduction under section 54. However, the appellant did not file a return of income. The Assessing Officer (AO) denied the deduction, relying on the Goetz (India) Ltd. case. The CIT(A) also denied the claim.
Held
The Tribunal held that while the AO might be barred from entertaining a claim not made in the return, the appellate authority can consider such claims. Relying on the Sun Engineering Works (P) Ltd. case, the Tribunal directed the AO to allow the deduction under section 54 and recompute capital gains.
Key Issues
Whether a deduction under section 54 can be claimed before an appellate authority even if not claimed in the original return of income, especially when no return was filed.
Sections Cited
54, 148, 148A, 139(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Mumbai “D” Bench, Mumbai.
Before: Shri Pawan Singh (JM) & Shri Omkareshwar Chidara (AM)
From the assessment order, it is observed that the appellant did not file Return of Income and there is information that the appellant purchased an immovable property of Rs. 68,26,100/- and also sold an immovable property at Rs. 90 lakhs. As the appellant did not file Return of Income, a notice under section 148 of the Income Tax Act was issued to the appellant on 16.4.2022. An opportunity of being was provided to the appellant by issuing a show-cause notice under section 148A(b) of the Act was issued to 2 Mangala Shivadas Dindokar the appellant on 23.3.2022 to show-cause as to why notice under section 148 of the Act should not be issued as the income escaped the assessment. As the appellant did not respond to the notice, a notice under section 148 of the Act was issued. The appellant did not file Return of Income in response to the said notice. But a letter was submitted with regard to the sale and purchase of house property and computation of capital gains working was also enclosed as no business activity has been conducted, appellant requested the Revenue to close the above issue. As per working given by the appellant there was no capital gain. The Ld. AO, not being satisfied with the working of appellant, reference was made to the valuation officer through Technical Unit to ascertain value of property and valuation report was still pending on the date of completion of assessment. The Ld. AO has stated that the cost of acquisition computed is subject to the valuation report and rectification will be done and once valuation report is received. The Ld. AO has finally placed reliance on the decision of Hon'ble Supreme Court in the case of Goetz (India) Ltd. Vs. CIT (284 ITR 323) and held that no new claim would be entertained because the appellant has not filed Return of Income under section 139(1) or 148 of the Act. To sum up, the Ld. AO denied the claim of deduction under section 54 of the Act by placing reliance on the decision of Hon'ble Supreme Court in the case of Goetz (India) Ltd. (supra).
Aggrieved by the order of the Ld.AO, an appeal was filed before Ld. CIT(A) and raised a ground that the appellant is entitled to raise fresh claim before appellate authority even if such claim was not made earlier in the Return of Income. From the order of Ld. CIT(A), it is observed that the Ld. AO was directed to consider valuation report given by the valuation officer and to recompute ‘long term capital gains’ by considering the cost of acquisition as valued by the valuation officer in the valuation report.
3.1. As the appellant has claimed exemption under section 54 of the Act during the appeal proceedings, Ld. CIT(A) denied the claim by placing reliance of the decision of Goetz (India) (supra).
3 Mangala Shivadas Dindokar
Aggrieved by the order of Ld. CIT(A), an appeal was further filed with the ITAT by raising ground that the Ld. AO may be directed to compute capital gain under section 54 of the Act in accordance with law.
During the proceedings before the ITAT, Ld. AR of the appellant has stated that the decision of Hon'ble Supreme Court in the case of Goetz (India) Ltd. (supra) is not applicable to the appellate authority and only the Ld. AO is barred from entertaining claim which was not made in the Return of Income and thus order of Ld. CIT(A) is not as per the provisions of law. Ld. AR of the appellant has relied on the decision of CIT Vs. Pruthvi Brokers & Shareholders P. Ltd. 349 ITR 336 (Bom) for the proposition that the decision of Goetz (India) Ltd. is not applicable to the appellate authority and hence appellate authority should take into consideration ground raised by the appellant and adjudicate the proceedings as per law.
Ld. DR relied upon the decision of CIT Vs. Sun Engineering Works (P) Ltd. 198 ITR 297 (SC) by stating that reopening proceedings of the Revenue should not be utilized by the appellant for his benefit. In response to this contention of Ld. DR, Ld. AR has stated that the decision of Hon'ble Supreme Court in the case of Sun Engineering works (P) Ltd. (supra) actually favours the appellant and argued that paragraph 39 of this decision states that the appellant cannot seek relief in respect of item which is not connected with the escaped income and is it open to the appellant to put forward the claim for deduction of any expenditure in respect of the income to be taxed. In other words, if any income is taxed, then related deductions and expenditure should also be allowed as per law.
The arguments of both the parties are heard. The Bench decides that the argument of Ld. AR is correct with regard to interpretation of decision rendered by Hon'ble Supreme Court in the case of Sun Engineering Works (P) Ltd.(supra). Even though, the Return of Income was not filed, Ld. CIT(A)
4 Mangala Shivadas Dindokar can entertain claim of deduction as per law and bar was imposed on only AO. This case of Sun Engineering Works (P) Ltd.(supra) specifically says that the claims not connected with the income which is to be taxed only should not be entertained during the reassessment proceedings. In view of the same, the appellant is entitled to claim deduction under section 54 of the Act as per law. With these directions, the Ld. AO is directed to compute taxable income under section 54 of the Act after taking into account deductions claimed by the appellant and recompute capital gains as per law.
The appeal of appellant is allowed for statistical purposes Order pronounced in the open Court on 30/09/2025.