Mistaken exemption reference cannot be rejected mechanically when the taxpayer disclosed the transaction and sought correction on merits.

Where an assessee has disclosed the transaction and investment in the return but cited the wrong exemption provision, the tax authority must consider whether the claim is admissible under the provision actually applicable and cannot reject it mechanically. A timely request to correct the statutory reference and have the long-term capital gains exemption examined on the proper basis requires consideration on merits. Rejection without addressing the alternative exemption claim was held to show non-application of mind and to be unsustainable. The assessment and related orders were set aside, and the matter was remitted for fresh adjudication with liberty to place all relevant material on exemption eligibility.

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Issues: Whether the authorities were justified in rejecting the assessee's claim without considering the request to treat the exemption as one under Section 54EB and whether the assessment required fresh consideration of the long-term capital gains exemption claim.

Analysis: The assessee had disclosed the transaction and the investment in the return but had cited the wrong exemption provision. The reply to the revisional notice specifically sought correction of that mistake and asked for examination of the claim under the appropriate provision. None of the authorities considered whether the assessee was entitled to exemption under any other applicable provision, and the claim was rejected in a mechanical manner. Such an approach was held to be unfair and to disclose non-application of mind.

Conclusion: The rejection of the claim was unsustainable. The assessment and the orders of the authorities below were set aside and the matter was directed to be reconsidered afresh, with the assessee permitted to place all relevant material regarding exemption on investment of long-term capital gains.

Final Conclusion: The appeal succeeded and the assessment issue was remitted for fresh adjudication on the exemption claim.

Ratio Decidendi: Where an assessee has disclosed the material transaction and seeks timely correction of a mistaken statutory reference, the tax authority must consider the claim under the provision actually applicable and cannot reject it mechanically without examining entitlement on merits.

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