Loading judgment…
Facts
The Assessing Officer (AO) denied the assessee's claim for deduction under section 54F, making an addition of Rs. 93,35,464/-. The assessee appealed to the CIT(A). The CIT(A) agreed that the property transfer to the son was valid but then added Rs. 1,38,40,000/- by treating sale consideration of shares as income from other sources under section 56.
Held
The Tribunal held that the CIT(A) cannot create a new head of income and that the subsequent addition amounted to an enhancement of income without following due procedure. The CIT(A)'s action was not based on a correct understanding of the facts.
Key Issues
Whether the CIT(A) can create a new head of income and enhance the assessed income without following the prescribed procedure, and whether the sale consideration of shares is income from other sources.
Sections Cited
54F, 56, 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH, ‘B’: NEW DELHI
Before: SHRI CHALLA NAGENDRA PRASAD
ORDER
PER AMITABH SHUKLA, AM,
This appeal by the assessee is directed against the order of National Faceless Appeal Centre/Ld. Commissioner of Income Tax(Appeals), New Delhi, [hereinafter referred to as ‘ld. CIT(A)] dated 25.08.2025 arising out of assessment order dated 05.12.2017 passed under section 143(3) of the Income Tax Act, 1961, for the Assessment Year 2015-16. The word ‘Act’ herein this order would mean Income Tax Act, 1961.
The only issue emanating from the grounds of appeal
raised by the appellant in regarding the action of the ld. CIT(A) in making the addition of Rs.1,38,40,000/- treating the sale consideration received on sale of shares as income from other sources within the meanings of section 56. The ld. Counsel for the assessee argued that the impugned action of the ld. CIT(A) is not supported by contemporaneous law.
We have heard rival submissions in the light of material available on record. The ld. Counsel for the assessee submitted that in it’s case the ld. AO had made an addition of Rs.93,35,464/- by denying the assessee claim of deduction under section 54F of the Act. Attention was drawn to para-8 of the assessment order, wherein, the ld. AO had denied the claim of deduction on the premise that the assessee was having more than one residential unit and that the alleged transfer of property to the son was a sham transaction attempted to avoid taxation. The ld. Counsel further drew our attention to para-5.4 and 5.5 of the appellate order, wherein, the ld. CIT(A) concluded that the property was legally transferred by assessee to his son and that there was nothing wrong in the claim of the assessee. The ld. Counsel submitted that thereafter the ld. CIT(A) proceeded to examine the entire issue of share of sales of M/s Touching Hearts Properties Pvt. Ltd. So as to conclude that the assessee was liable for inclusion of amount of Rs.1,38,40,000/- under section 56 of the Act. The ld. Counsel vehemently argued
Page 2 of 4 that by the impugned action, the ld. CIT(A) has changed the head of income by raising a new head as well as contributed to enhancement of income.
Per contra, the ld. DR relied upon the orders of the lower authorities. The ld. DR argued that the action of ld. CIT(A) was correct and that the impugned controversy was emanating from the assessment order.
We have noted that the only controversy in the case was the denial of deduction under section 54F to the assessee by the ld. AO of Rs.93,35,464/-. This was the addition for which the assessee had approached ld. CIT(A). The AO had concluded that the assessee was having more than one residential unit and that the alleged transfer of property to the son was a sham transaction attempted to avoid taxation which was countered by ld. CIT(A) as per page-9 of his order. The controversy had thus reached its finality. The further discussions and conclusions drawn by ld. CIT(A) have therefore no limbs to stand. We are in agreement with the appellant assessee that the ld. CIT(A) cannot create a new head of income. We have also noted the impugned creation of new head of income and the consequent proposed addition tantamount to enhancement of income for which again necessary procedures were not complied. Accordingly, we are of the considered view that the action of the ld. CIT(A) is not based correct understanding of the facts of the case. We therefore set-aside and quash the order of the ld. CIT(A) and direct the ld. AO to allow the assessee, the deduction under section 54F of Rs.93,35,464/-. The Appeal of the assessee is therefore allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 08th April, 2026.