Jurisdictional challenge and section 54 deduction fail where belated objection and incomplete compliance with investment conditions are shown.

A belated jurisdictional objection to the Assessing Officer's territorial or pecuniary authority is barred by section 124(3) unless the statutory conditions for such a challenge are met, so the assessment was not treated as void ab initio. Section 54 relief for a new residential house requires compliance with the statutory investment conditions; an allotment letter and part payment are insufficient unless the acquisition is shown to fall within a qualifying construction or self-financing-type scheme, and any unutilised amount must be deposited in the notified account. On these facts, the jurisdictional challenge and the claim for full section 54 deduction both failed.

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Issues: (i) Whether the assessment was void ab initio for want of jurisdiction in the Assessing Officer. (ii) Whether the assessee was entitled to full deduction under section 54 on the basis of the allotment letter and partial payment made towards the new flat.

Issue (i): Whether the assessment was void ab initio for want of jurisdiction in the Assessing Officer.

Analysis: The assessee raised the jurisdictional objection only at the appellate stage. The statutory scheme under section 124(3) of the Income-tax Act, 1961 bars challenge to the Assessing Officer's jurisdiction after the stipulated period. The objection was treated as one relating to territorial or pecuniary jurisdiction, for which prejudice and failure of justice must be shown. The authorities and precedents relied upon by the assessee were held to be inapplicable on the facts.

Conclusion: The jurisdictional challenge was rejected and the assessment was not held void ab initio.

Issue (ii): Whether the assessee was entitled to full deduction under section 54 on the basis of the allotment letter and partial payment made towards the new flat.

Analysis: Deduction under section 54 was claimed on the footing that an allotment letter conferred sufficient title, with reliance placed on CBDT Circular No. 471 and Circular No. 672. The Tribunal held that those circulars apply where the purchase scheme is akin to the self-financing scheme of the DDA or similar cooperative/institutional schemes. The assessee did not establish that the flat was acquired under such a comparable scheme. Only part payment had been made, the unutilized amount was not deposited in the notified account as required, and the decision cited by the Revenue was found applicable.

Conclusion: The claim for full deduction under section 54 was rejected and the addition sustained by the lower authorities was upheld.

Final Conclusion: The appeal failed on both the jurisdictional objection and the merits of the capital gains claim, leaving the addition intact.

Ratio Decidendi: A belated objection to the Assessing Officer's territorial or pecuniary jurisdiction is barred by section 124(3) unless statutory conditions are met, and section 54 relief for investment in a new residential house requires compliance with the statutory conditions and proof that the acquisition falls within a qualifying construction or allotment scheme.

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