SUSHIL TIWARI,PANCHKULA vs. INCOME TAX OFFICER, WARD-3, PANCHKULA

The facts of the case are that the assessee is an individual deriving income under the heads “Income from House Property”, “Business or Profession”, “Capital Gains” and “Other Sources”. During the year under consideration, the assessee sold ancestral agricultural land for a consideration of ₹8,00,00,000 vide sale deed dated 18.09.2017. Against the resultant capital gains, the assessee claimed deduction/exemption under sections 54F and 54B of the Act.

During the assessment proceedings, the Assessing Officer required the assessee to furnish details and supporting evidence in respect of the deductions claimed under sections 54F and 54B. The assessment order records that although the assessee furnished certain documents, the Assessing Officer considered that sufficient supporting evidence in respect of the claims had not been furnished. Consequently, the claims under sections 54F and 54B were disallowed and an aggregate addition of ₹6,36,28,000 was made to the returned income. The assessment was accordingly completed determining the assessed income at ₹6,69,79,260, after making disallowance of ₹2,63,71,500 under section 54F and ₹3,72,56,500 under section 54B.

Aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A). The assessee contended that the relevant documents had been furnished and that the disallowance was made without properly considering the documentary evidence.

In the appellate proceedings, the assessee furnished, inter alia, the sale deed of the agricultural land sold, purchase deeds of the agricultural properties acquired for claiming deduction under section 54B, documents relating to the residential property

The learned CIT(A) partly accepted the claim under section 54B. In respect of investment of ₹2,20,00,000, the learned CIT(A) found that the investment in agricultural land had been made within the prescribed time and allowed the claim to that extent. The remaining claim of ₹1,72,56,500 was not accepted for want of supporting documentary evidence.

As regards the amount of ₹1,36,52,000 deposited in the Capital Gains Accounts Scheme, the learned CIT(A) accepted the deposit as eligible for exemption for the year under consideration, subject to verification of subsequent utilisation in accordance with section 54B/54EC. With regard to the claim under section 54F, the learned CIT(A) noted that the assessee had shown income from more than one property under the head “Income from House Property”, including the property situated at SCO-7, Dhakoli, Zirakpur. Proceeding on the basis that the assessee owned more than one residential house on the date of transfer of the original asset, the learned CIT(A) held that the assessee failed to satisfy the condition prescribed under the proviso to section 54F and accordingly upheld the disallowance of ₹2,63,71,500.

On the issue of deduction under section 54B, the learned AR submitted that the assessee had furnished copies of the purchase deeds in respect of three agricultural lands purchased against the agricultural land sold. It was submitted that, despite the relevant documents having been furnished, the benefit of deduction was not allowed in respect of two purchase deeds, namely:

As regards section 54F, the learned AR submitted that the learned CIT(A) had denied the benefit on the premise that the assessee owned more than one residential house, principally because SCO No. 7, Dhakoli, Zirakpur had been treated as a residential property. It was submitted that the said property was a Shop-cum-Office and was commercial in nature. The learned AR therefore submitted that the said property could not be treated as a residential house for applying the restriction contained in section 54F. The assessee also relied upon the documentary material furnished in support of both claims. The record shows that before the appellate authority the assessee had specifically furnished purchase deeds and other documents in support of the deductions claimed.

Upon considering the rival submissions, this Tribunal, vide order dated 13.08.2026, found that the issues under sections 54B and 54F required verification of the relevant documents and factual position. Accordingly, in the interest of justice, the Tribunal directed the Assessing Officer to examine the relevant documents and submit a comprehensive report on both issues after providing due opportunity to the assessee. The assessee was granted liberty to place before the Assessing Officer copies of the

The ld. DR had placed on record copy of the Remand Report filed by the AO which is to the following effect :

We have carefully considered the rival submissions, the orders of the authorities below, the material available on record and the factual report furnished pursuant to our order dated 13.08.2026. The assessee had invested ₹2,63,71,500 in the purchase of a new residential property and claimed exemption under section 54F. The purchase deed and other supporting material were placed on record. The learned CIT(A), however, denied the claim on the ground that the assessee owned more than one residential house on the date of transfer of the original asset.

We accordingly hold that the assessee cannot be denied the benefit of section 54F merely by treating SCO-7 as a residential property when the factual verification undertaken pursuant to the direction of this Tribunal establishes that the said property is commercial in nature. Accordingly, the disallowance of ₹2,63,71,500 under section 54F is deleted and the assessee's claim is allowed, subject to satisfaction of the remaining statutory conditions, if any.

The assessee claimed deduction under section 54B on account of investment in agricultural land purchased after the sale of the original agricultural land. The learned CIT(A) had allowed

Before us, the learned AR specifically relied upon the purchase deeds dated 02.07.2018 for ₹80,00,000 and 01.08.2018 for ₹45,00,000, which, according to the assessee, had not been given due consideration by the lower authorities. Pursuant to our order dated 13.08.2026, the relevant documents and factual position were examined. It has been confirmed before us that the properties in question were agricultural properties and were purchased by the assessee. The Revenue has pointed out that two of the properties are situated in an urban area. However, the report furnished pursuant to the direction of the Bench confirms their agricultural character. Mere location of an agricultural property in an urban area, in the absence of material establishing that the property was not agricultural in character, cannot by itself be a sufficient basis for denying the benefit claimed under section 54B.

The documentary evidence regarding the purchase of agricultural land having been examined and the agricultural nature and purchase by the assessee having been confirmed, we find that the assessee has established the factual basis of the claim. Accordingly, the claim under section 54B is allowable to the extent of the eligible investment established by the purchase deeds and other material placed on record, including the

The grounds relating to levy of interest under sections 234A, 234B and 234C are consequential in nature and shall stand modified in accordance with the final computation of income pursuant to this order.

As regards initiation of penalty proceedings under section 270A, the same is premature at this stage and does not require independent adjudication.

In view of the foregoing discussion, and particularly having regard to the factual verification undertaken pursuant to the Tribunal's order dated 13.08.2026, we hold as under:

Accordingly, the grounds relating to sections 54B and 54F are allowed and the corresponding disallowances sustained by the learned CIT(A) are deleted to the extent indicated above.

In the result, the appeal of the assessee is allowed.