HUF status and section 54 relief cannot be newly pleaded at reference stage to alter assessment basis.

A new plea that would change the basis of assessment could not be introduced for the first time in reference proceedings when the assessee had consistently proceeded on the footing of a Hindu undivided family. The Court held that such a fundamental shift in status and ownership could not be raised at that stage. On section 54, the relief was confined to an individual assessees using the house as a self-occupied residence and meeting the statutory reinvestment conditions; it was not available on the assessee's pleaded HUF status. The reference was answered in favour of the Revenue, and the claimed capital gains exemption was denied.

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Issues: (i) Whether a new plea not raised before the Tribunal could be permitted to be raised for the first time in the reference proceedings to alter the basis of assessment. (ii) Whether the capital gain arising from the sale of the residential house was exempt under section 54 of the Income-tax Act, 1961.

Issue (i): Whether a new plea not raised before the Tribunal could be permitted to be raised for the first time in the reference proceedings to alter the basis of assessment.

Analysis: The assessee had filed the return and pursued the assessment on the footing that it was a Hindu undivided family. The new contention sought to change that very foundation and to recast part of the property as the separate property of the karta on the basis of succession under section 8 of the Hindu Succession Act, 1956. The Court held that such a fundamental change could not be introduced at the reference stage after the same status had proceeded throughout the assessment and appellate process.

Conclusion: The new plea could not be permitted. The finding was against the assessee.

Issue (ii): Whether the capital gain arising from the sale of the residential house was exempt under section 54 of the Income-tax Act, 1961.

Analysis: Section 54 applies where the assessee is an individual and the house property was used for the assessee's own residence, with reinvestment made within the prescribed period. The Court held that the language "the assessee or a parent of his" confines the relief to individuals and excludes a Hindu undivided family. Since the assessee had proceeded as a Hindu undivided family, the exemption was unavailable on that footing.

Conclusion: The exemption under section 54 was not available. The finding was against the assessee.

Final Conclusion: The questions referred were answered in favour of the Revenue, and the assessee was held not entitled to the claimed capital gains exemption on the basis on which the case had been assessed and carried forward.

Ratio Decidendi: A party cannot, at the reference stage, displace the assessment framework consistently adopted below by raising a fundamentally new plea, and section 54 relief is confined to cases where the statutory conditions are satisfied on the assessee's own pleaded status.

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