DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, JAIPUR, JAIPUR vs. MAHESH KUMAR JAJU, JAIPUR

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ITA 1198/JPR/2025Status: DisposedITAT Jaipur18 May 2026AY 2018-194 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that both the issue of Section 54F deduction and the inflated purchases required fresh examination. Therefore, the impugned order of the CIT(A) was set aside, and the matter was restored to the Assessing Officer for a fresh assessment on both issues.

What were the facts?

The Revenue appealed the CIT(A)'s order allowing a deduction under Section 54F and deleting an addition for inflated purchases. The CIT(A) had allowed a deduction of Rs. 8,83,86,000/- under Section 54F, which the Revenue contested on grounds of non-fulfillment of conditions and the nature of the advance payment. The Revenue also disputed the deletion of an addition related to inflated purchases.

What were the issues?

Whether the assessee fulfilled the conditions for claiming deduction under Section 54F, and whether the addition for inflated purchases was correctly deleted by the CIT(A).

Which sections of the Income-tax Act were involved?

Section 54F,Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, JAIPUR BENCHES, “B” BENCH, JAIPUR

Before: SHRI SANJAY GARG & SHRI RATNESH NANDAN SAHAY

Hearing: 23.03.2026Pronounced: 18.05.2026

Per Sanjay Garg, Judicial Member:

The present appeal has been preferred by the Revenue against the orders of National Faceless Appeal Centre (NFAC)/Ld. Commissioner of Income Tax (Appeals)(hereinafter referred to as “Ld. CIT(A)”)dated 26.06.2025, passed u/s 250 of the Income Tax Act,1961 (hereinafter referred to as “the Act”).

P a g e | 2 ITA No.1198/JPR/2025 Mahesh Kumar Jaju

2.

The Revenue has taken following grounds of appeal:-

1.

Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) was justified in allowing deduction u/s 54F of Rs.8,83,86,000/- without examining the fact whether assessee fulfill conditions laid down for claiming deduction u/s 54F. The ld. CIT(A) has also ignored the fact that even in the year under consideration, the assessee has purchased two new residential property?" 2. "Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) was justified in allowing deduction u/s 54F of Rs.8,83,86,000/- on the basis of advance of Rs. 10,00,00,000/- made by the assessee on 29.09.2018 without considering the fact that advance was made to M/s Shreedhar Infra Developers LLP which has been incorporated on 28/09/2018. Further, M/s Shreedhar Infra Developers LLP does not have any permission of construction of residential unit and does not have any plan on the date of receipt of advance?" 3. "Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) was justified in allowing deduction u/s 54F of Rs.8,83,86,000/- without considering the fact that advance was made to M/s Shreedhar Infra Developers LLP in which sons of the assessee are partner and land was contributed by them only one day before the receipt of advance from the assessee?" 4. "Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) was justified in accepting the argument of the assessee that residential property purchased by him was part of capital account?"

3.

A perusal of the above grounds of appeal would reveal that the Revenue has mainly raised two issues. Firstly, regarding the disallowance of deduction u/s 54F of the Act amounting to Rs.8,83,86,000/-, and secondly, the addition of Rs.6,60,18,000/- on account of inflated purchases. 4. So far as the issue relating to the disallowance of deduction U/s 54F is concerned, the Ld. DR has submitted that the Assessing Officer (in short, “the AO”) had rejected the assessee’s claim of capital gains arising from the conversion of a capital asset into stock-in-trade and had made an addition of Rs. 9,00,18,000/-, treating the said booking of capital gains as unexplained income of the assessee. Therefore, no

P a g e | 3 ITA No.1198/JPR/2025 Mahesh Kumar Jaju separate addition was required to be made u/s 54F of the Act. The Ld. DR, however, has submitted that the AO had given an observation that even the claim of the assessee u/s 54F of the Act was not admissible. So far as the second issue of inflated purchases is concerned, the plea of the Revenue is that the total amount has been shown at Rs.9,00,18,000/-, whereas the assessee had deducted TDS of only Rs.2,40,00,000/-. The AO was of the view that the balance amount shown by the assessee was on account of inflated purchases.

5.

The plea of the Ld. AR is that the Ld. CIT(A) has rightly deleted the addition so made by the Assessing Officer, holding that the AO had mistakenly treated the transaction relating to TDS deduction as a separate transaction, whereas the second transaction shown as purchase was, in fact, the same transaction through which the capital asset was converted into stock-in-trade. The Ld. DR, however, has submitted that it is not clear from the findings of the Ld. CIT(A) as to whether the said amount of Rs.9,00,18,000/- pertained to the same transaction of conversion of capital asset into stock-in-trade.

6.

After hearing both the ld. Representatives of the parties, we are of the view that both the issues require fresh examination at the hands of the AO. Therefore, the impugned order of the Ld. CIT(A) is set aside, and the matter on both the issues is restored to the file of the AO for assessment afresh. However, such restoration shall not entitle the AO to reopen any other issue. The AO will give detailed findings on both the

P a g e | 4 ITA No.1198/JPR/2025 Mahesh Kumar Jaju issues after giving due opportunity to the assessee to present his case and furnish the necessary details.

7.

With the above observation, the appeal of the Revenue is treated as allowed for statistical purposes.

Order is pronounced under provision of Rule 34 of ITAT Rules, 1963 on 18/05/2026.

Sd/- Sd/- (Ratnesh Nandan Sahay) (Sanjay Garg) Accountant Member Judicial Member Dated 18.05.2026 Mittali, Sr. PS

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