Assessing Officer cannot use section 154 rectification to reconsider section 54F exemption already examined during original assessment

The ITAT Jodhpur quashed an order passed under section 154 of the Income Tax Act, ruling that the Assessing Officer incorrectly used rectification provisions to reconsider a section 54F exemption claim that had already been examined during original assessment proceedings under section 143(3). The tribunal held that section 154 does not permit review of decisions already considered on merit, as the assessee's claim was duly reflected in the return and properly addressed through order sheet entries in 2015. The rectification order dated 13.06.2018 was deemed bad in law, and the assessee's ground was allowed.

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Issues Involved:
1. Invocation of Section 154 of the Income Tax Act.
2. Addition under the head Long Term Capital Gains (LTCG) and disallowance of exemption under Section 54F.
3. Charging of interest under Section 234 of the Income Tax Act.
4. Procedural aspects and rights reserved by the appellant.

Summary of Judgment:

Issue 1: Invocation of Section 154 of the Income Tax Act
The assessee contended that the Assessing Officer (AO) erred in invoking Section 154, which is meant for rectifying mistakes apparent from the record. The AO issued a notice under Section 154 proposing rectification concerning the allowability of exemption under Section 54F, restricting it to Rs. 44,51,997/- from Rs. 65,06,891/-. The Tribunal held that the AO's action of invoking Section 154 was incorrect and bad in law because the issue had already been considered and decided during the original assessment under Section 143(3). The Tribunal emphasized that Section 154 does not permit revisiting claims already allowed and quashed the order passed under Section 154.

Issue 2: Addition under LTCG and Disallowance of Exemption under Section 54F
The assessee claimed exemption under Section 54F for investment in two residential houses. The AO disallowed the exemption to the extent of Rs. 20,54,894/-, which was upheld by the CIT(A). The Tribunal noted that the assessee's claim was considered during the original assessment, and the law in force up to AY 2014-15 allowed exemption for investment in more than one residential house. The Tribunal also referred to various case laws, including CIT v/s Geeta Duggal and CIT v/s D Ananda Basappa, which supported the assessee's claim. Consequently, the Tribunal allowed the assessee's claim for exemption under Section 54F.

Issue 3: Charging of Interest under Section 234
The Tribunal noted that the ground concerning the charging of interest under Section 234 was consequential in nature. Since the primary issues were resolved in favor of the assessee, this ground became infructuous.

Issue 4: Procedural Aspects and Rights Reserved by the Appellant
The appellant reserved the right to add, alter, amend, or withdraw any grounds of appeal. The Tribunal acknowledged the procedural aspects but primarily focused on the substantive issues.

Conclusion:
The Tribunal allowed the appeal of the assessee, quashing the order passed under Section 154 and allowing the exemption under Section 54F for investment in two residential houses. The grounds concerning the charging of interest and procedural rights were deemed consequential or general in nature.

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