DCIT-17(1), MUMBAI, ROOM NO. , KAUTILYA BHAWAN vs. CHANDRAPRAKASH MUKUTBIHARI GUPTA, GROUND FLOOR, MOHAMMED BLDG.,

The relevant facts are in brief that the Assessee filed return of income for the Assessment Year 2016-17 on 31/01/2017 declaring income of INR.74,77,900/-. The case of the Assessee was selected for regular scrutiny. During the assessment proceedings, the Assessing Officer noted that the Assessee had transferred tenancy rights of a Flat No.7B, admeasuring 1000 sq.ft of carpet area on the Ground Floor of Mohammad Building during the relevant previous year for a consideration of INR.6,00,00,000/- and had offered to tax Long Term Capital Gain of INR.50,00,000/- after claiming exemption of INR.5,50,00,000/- under Section 54EC of the Act. When the Assessee was asked to substantiate the claim of deduction of INR.5,50,00,000/- under Section 54EC of the Act, the Assessee claimed that the Assessee was entitled to deduction under Section 54 of the Act and had incorrectly mentioned Section 54EC in the return of income. Subsequently, vide notice dated 05/11/2018, the Assessee was asked to show caused why deduction claimed by the Assessee under Section 54 of the Act should not be disallowed since 2 Assessment Year 2016-2017 the above said deduction was available in case of sale of residential property and not for sale of tenancy rights. In reply to the said notice, the Assessee claimed deduction under Section 54F of the Act. It was submitted on behalf of the Assessee that the tenancy rights were held by the Assessee for more than three years and therefore, the tenancy rights constituted Long Term Capital Assets. The sale consideration from transfer of aforesaid tenancy rights was deposited in the Capital Gain Account and was subsequently, utilized for the purchase of a residential house property within the time specified under Section 54F of the Act. Since all the conditions specified under Section 54F of the Act were satisfied, the Assessee was entitled to claim deduction under Section 54F of the Act. However, the Assessing Officer was not convinced with the explanation furnished by the Assessee and rejected the claim of deduction under Section 54F of the Act on the ground that the Assessee had failed to file revised return of income and had only made claim of deduction under Section 54F of the Act by way of filing a letter during the assessment proceedings. Thus, vide an Assessment Order, dated 20/12/2018, passed under Section 143(3) of the Act, the Assessing Officer made an addition of 5,50,00,000/- in the hands of the Assessee as taxable Long Term Capital Gains.

Being aggrieved, the Assessee preferred the appeal against the Assessment Order, dated 20/12/2018 before the CIT(A). During the appellate proceedings, the Assessee reiterated the submissions made before the Assessing Officer. After examining the claim of deduction under Section 54F of the Act, the CIT(A) concluded that the Assessee was entitled to claim deduction under Section 54F of the Act and therefore, addition of INR.5,50,00,000/- made by the Assessing Officer was deleted.

Being aggrieved, the Revenue has now preferred the present appeal before this Tribunal on the grounds reproduced at paragraph 2 3 Assessment Year 2016-2017 above.

The Departmental Representative submitted that it is admitted position that the Assessee had failed to claim the deduction under Section 54F of the Act in the return of income filed by the Assessee for the Assessment Year 2016-2017, and had claimed the benefit of Section 54EC of the Act by filing a letter during the assessment proceedings. The Assessing Officer had noted that in the return of income the Assessee had claimed deduction under Section 54EC of the Act which was admittedly not available to the Assessee. During the assessment proceedings the Assessee revised the claim of deduction from Section 54EC of the Act to claim of deduction under Section 54 of the Act and thereafter, to the claim of deduction under Section 54F of the Act. Since no revised return was filed by the Assessee, the Assessing Officer could not have entertain the claim made by the Assessee during the assessment proceedings by merely filing a letter in view of the judgment of the Hon’ble Supreme Court in the case of Goetze (India) Ltd. Vs. CIT [2006] 284 ITR 323 (SC). Thus, the Learned Departmental Representative supported the order passed by the Assessing Officer and submitted that the addition of INR.5,50,00,000/- made by the Assessee holding the same to be taxable Long Term Capital Gain be restore.

Per contra the Learned Authorised Representative for the Assessee relied upon the submissions made before the CIT(A). Placing reliance upon the judgment of Hon’ble Bombay High Court in the case of CIT Vs. Pruthvi Brokers & Shareholders Pvt. Ltd.: 349 ITR 336, the Authorized Representative for the Assessee submitted that the CIT(A) was permitted to entertain the claim of deduction under Section 54F of the Act even though no revised return was filed by the Assessee. Even if the claim of deduction under Section 54F of the Act is considered to be additional claim of deduction made during the appellate proceedings before the Tribunal, the CIT(A) had 4 Assessment Year 2016-2017 the jurisdiction/power to entertain the same as all the facts were on record and pleaded during the assessment proceedings. As per the judgemnet of Hon’ble Supreme Court in the case of Goetze (India) Ltd. (Supra), only the Assessing Officer was barred from entertaining a fresh claims during the assessment proceedings except by way of revised return, whereas no such embargo was placed upon the appellate authorities. He submitted that the CIT(A) had after examining all the relevant documents and details accepted the claim for deduction under Section 54F of the Act made by the Assessee and the Revenue has no disputed this on merits.

We have considered the rival submissions and perused the material on record.

The orders of the CIT(A) and the Tribunal clearly indicate that both the appellate authorities had exercised their jurisdiction to consider the additional claim as they were entitled to in view of the various judgments on the issue, including the judgment of the Supreme Court in National Thermal Power Corpn. Ltd. (supra). This is clear from the fact that these judgments have been expressly referred to in detail by the CIT(A) and by the Tribunal.

We wish to clarify that both the appellate authorities have themselves considered the additional claim and allowed it. They have not remanded the matter to the Assessing Officer to consider the same. Both the orders expressly direct the Assessing Officer to allow the deduction of Rs. 40,00,000/- under section 43B of the Act. The Assessing Officer is, therefore, now only to compute the respondent's tax liability which he must do in accordance with the orders allowing the respondent a deduction of Rs. 40,00,000/- under section 43B of the Act.

The conclusion that the error in not claiming the deduction in the return of income was inadvertent cannot be faulted for more 7 Assessment Year 2016-2017 than one reason. It is a finding of fact which cannot be termed perverse. There is nothing on record that militates against the finding. The appellant has not suggested, much less established that the omission was deliberate, mala-fide or even otherwise. The inference that the omission was inadvertent is, therefore, irresistible.

It was then submitted by Mr. Gupta that the Supreme Court had taken a different view in Goetze (India) Ltd ( supra). We are unable to agree. The decision was rendered by a Bench of two learned Judges and expressly refers to the judgment of the Bench of three learned Judges in National Thermal Power Comp. Ltd. (supra). The question before the Court was whether the appellant-assessee could make a claim for deduction, other than by filing a revised return. After the return was filed, the appellant sought to claim a deduction by way of a letter before the Assessing Officer. The claim, therefore, was not before the appellate authorities. The deduction was disallowed by the Assessing Officer on the ground that there was no provision under the Act to make an amendment in the return of income by modifying an application at the assessment stage without revising the return. The Commissioner of Income-tax (Appeals) allowed the assessee's appeal. The Tribunal, however, allowed the department's appeal. In the Supreme Court, the assessee relied upon the judgment in National Thermal Power Co. Ltd. (supra) contending that it was open to the assessee to raise the points of law even before the Tribunal. The Supreme Court held :

It is clear to us that the Supreme Court did not hold anything contrary to what was held in the previous judgments to the effect that even if a claim is not made before the assessing officer, it can be made before the appellate authorities. The jurisdiction of the appellate authorities to entertain such a claim has not been negated by the Supreme Court in this judgment. In fact, the 8 Assessment Year 2016-2017 Supreme Court made it clear that the issue in the case was limited to the power of the assessing authority and that the judgment does not impinge on the power of the Tribunal under section 254.” (Emphasis Supplied)

In view of the above, we do not find any infirmity in the decision of the CIT(A) to entertain and allow claim of deduction under Section 54F of the Act. The order passed by the CIT(A) is in line with the abovesaid binding judgments of the Hon’ble Supreme Court and the Hon’ble Bombay High Court. The order passed by the CIT(A) does not call for any interference on this issue. Therefore, all the grounds raised by the Revenue are dismissed.

In result, the present appeal preferred by the Revenue is dismissed.