2021 (10) TMI 551 - AT - Income Tax

Tribunal allows deduction under Section 54, rejects exemption denial under Section 139 proviso

Smt. Ashaba Rajendrasinh Zala Versus CIT (A), Jamnagar

The case involved the denial of exemption/deduction under Section 54(1)(ii) and the rejection of the basic exemption claim under Section 139(1) proviso. ... Exemption u/s 54 - Claim of the assessee denied as assessee failure not to adhere to mandatory requirment to file the return of income for the year under consideration - Assessee's contention is this that the amendment of this proviso of Section 139(1) is applicable w.e.f. assessment 2020-21 which is not applied in the case of the applicant - HELD THAT:- We find merit and substance in the case made out by the assessee. It appears that the 6th Proviso of Section 139(1) after amendment is applicable for A.Y. 2020-21. The assessee's case is not coming unde the purview of such proviso. Hence, we hold that the assessee is entitled to such claim under Section 54 of the Act. We, therefore, allow the appeal by directing the Ld. AO to pass orders in accordance with law. - Decided in favour of assessee. Issues: Denial of benefit of exemption/deduction under Section 54(1)(ii); Rejection of basic exemption claim under Section 139(1) proviso; Applicability of Section 139(1) proviso amendment.Denial of benefit of exemption/deduction under Section 54(1)(ii):The case involved the denial of exemption/deduction amounting to Rs. 1,45,000 under Section 54(1)(ii). The assessee had purchased a plot of land and constructed a residential house, subsequently selling it and acquiring a new residential house. The assessment was completed under Section 147, with an addition made on account of short-term capital gain. The First Appellate Authority considered the cost of acquisition based on the District Valuation Officer's report. The CIT(A) allowed the appeal, directing the AO to consider the jantri value as the sale value and the cost of acquisition at Rs. 11,05,750. The benefit of basic exemption was not extended, citing the failure to file the return of income. However, the Tribunal held in favor of the assessee, stating that the amendment to Section 139(1) proviso was not applicable in the case, thus entitling the assessee to the claim under Section 54 of the Act.Rejection of basic exemption claim under Section 139(1) proviso:The Ld. CIT(A) rejected the claim of the assessee for the basic exemption of Rs. 1,45,000, emphasizing the mandatory requirement to file the income tax return, which the assessee had failed to do. This rejection was a pivotal issue in the case, leading to a dispute over the eligibility for the claimed deduction.Applicability of Section 139(1) proviso amendment:The Tribunal analyzed the applicability of the amendment to the 6th Proviso of Section 139(1), determining that it was applicable for A.Y. 2020-21, not covering the assessee's case. By referring to specific evidence in the Paper Book, the Tribunal found merit in the assessee's argument, concluding that the assessee was entitled to the claim under Section 54 of the Act. Consequently, the appeal was allowed, directing the Ld. AO to pass orders in accordance with the law.In conclusion, the judgment addressed the denial of exemption/deduction under Section 54(1)(ii), the rejection of the basic exemption claim under Section 139(1) proviso, and the applicability of the Section 139(1) proviso amendment. The Tribunal ruled in favor of the assessee, allowing the appeal and directing the AO to proceed accordingly.