2025 (4) TMI 343 - AT - Income Tax

Appellate authority can allow Section 54F deduction even when not claimed in original return

ITAT Mumbai upheld CIT(A)'s decision allowing deduction u/s 54F despite assessee not claiming it in original return or filing revised return. Tribunal ... Denial of deduction u/s.54F - assessee neither claimed the said deduction in original return of income filed nor has filed any revised return of income - CIT(A) has accepted the claim of the Assessee that the Assessee is entitled to claim deduction u/s 54F - HELD THAT:- We note that in the case of National Thermal Power Co. Ltd. [1996 (12) TMI 7 - SUPREME COURT] held that the failure to make a claim in the return of income does not take away the power of the appellate authorities to consider a fresh claim, which is otherwise tenable in law, if the relevant material is available on record. We do not find any infirmity in the decision of the CIT(A) to entertain and allow claim of deduction u/s 54F - Decided in favour of assessee. 1. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in this judgment were:Whether the CIT(A) was justified in allowing the deduction under Section 54F of the Income Tax Act, 1961, when the assessee did not claim this deduction in the original or revised return of income.Whether the CIT(A) erred in allowing the deduction under Section 54F without considering the precedent set by the Supreme Court in Goetze (India) Ltd. Vs. CIT, which mandates that deductions must be claimed through a revised return.Whether the change in the claim of deduction from Section 54EC to Section 54 and subsequently to Section 54F was inadvertent or deliberate.2. ISSUE-WISE DETAILED ANALYSISRelevant legal framework and precedents:The relevant sections of the Income Tax Act, 1961, include Section 54EC, Section 54, and Section 54F, which pertain to deductions on capital gains. The case of Goetze (India) Ltd. Vs. CIT was pivotal, establishing that claims for deductions must be made through a revised return during assessment proceedings. However, the appellate authorities have the discretion to entertain new claims based on the judgments in National Thermal Power Co. Ltd. v. CIT and CIT Vs. Pruthvi Brokers & Shareholders Pvt. Ltd.Court's interpretation and reasoning:The Tribunal considered the applicability of the Goetze (India) Ltd. case, which restricts the Assessing Officer from entertaining claims not made via a revised return. However, it distinguished this from the powers of appellate authorities, which are not similarly restricted. The Tribunal relied on the judgment in Pruthvi Brokers & Shareholders Pvt. Ltd., which clarified that appellate authorities could consider fresh claims if the facts are on record.Key evidence and findings:The assessee initially claimed a deduction under Section 54EC, which was incorrect for the transaction involved. During assessment proceedings, the assessee revised the claim to Section 54 and then to Section 54F, justifying it with relevant documentation, including the sale agreement, deposit of sale consideration in a capital gains account, and the purchase deed for a new asset. The CIT(A) found these documents satisfactory and allowed the deduction under Section 54F.Application of law to facts:The Tribunal applied the legal principle that appellate authorities have the jurisdiction to entertain new claims even if not made in the original or revised return, provided the claims are substantiated by facts on record. The Tribunal found that the CIT(A) correctly exercised this jurisdiction, as the assessee fulfilled the conditions for deduction under Section 54F.Treatment of competing arguments:The Revenue argued that the deduction could not be allowed as it was not claimed in a revised return, citing Goetze (India) Ltd. The Tribunal countered this by referencing the broader powers of appellate authorities, as upheld in Pruthvi Brokers & Shareholders Pvt. Ltd., allowing them to consider claims based on available records.Conclusions:The Tribunal concluded that the CIT(A) was correct in allowing the deduction under Section 54F, as the assessee met all the necessary conditions and the appellate authority had the jurisdiction to entertain the claim despite the absence of a revised return.3. SIGNIFICANT HOLDINGSThe Tribunal upheld the CIT(A)'s decision, emphasizing the distinction between the powers of assessing officers and appellate authorities. It reiterated that while assessing officers are bound by the requirement of a revised return as per Goetze (India) Ltd., appellate authorities can entertain new claims based on the judgments in National Thermal Power Co. Ltd. and Pruthvi Brokers & Shareholders Pvt. Ltd.Core principles established:The Tribunal reinforced the principle that appellate authorities have the discretion to consider additional claims if the facts are on record, even if such claims were not made in the original or revised return. This principle supports the flexibility of appellate proceedings to ensure justice based on substantive merits rather than procedural technicalities.Final determinations on each issue:The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to allow the deduction under Section 54F. It found no merit in the Revenue's arguments, as the appellate authority's actions were consistent with established legal precedents.