TaxTMI 
TaxTMI 
2026 (7) TMI 1397
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.... had not originally filed his return of income for Assessment Year 2011-12. The case was reopened by the Assessing Officer on the basis of information available in the departmental system reflecting sale of an immovable property for a consideration of Rs. 1,20,00,000/-. After recording reasons and obtaining approval under section 151 of the Act, notice under section 148 was issued on 23.03.2018. In response thereto, the assessee filed his return of income electronically on 03.11.2018 declaring total income of Rs. 2,110/-. 3. During the reassessment proceedings, the Assessing Officer noticed that the assessee, along with two other co-owners, had sold a residential flat during the relevant previous year for a total consideration of Rs. 1,20,00,000/- and the assessee's share in the property was 33.33%. The Assessing Officer observed that the assessee had not disclosed the capital gains arising from the said transaction in the return of income filed in response to notice issued under section 148 of the Act. Notices under sections 142(1) and 143(2) were issued and served upon the assessee. In response thereto, the assessee furnished the computation of income and copies of the pur....
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....see carried the matter in appeal before the learned CIT(A). During the appellate proceedings, the assessee reiterated the submissions advanced before the Assessing Officer and relied upon various judicial precedents in support of the claim under section 54. It was submitted that the assessee had invested the entire long-term capital gains in a residential flat under construction at Ghatkopar, Mumbai and that the delay in completion and registration of the flat was attributable to the builder and was beyond the control of the assessee. It was further contended that investment in an under-construction property amounted to construction of a residential house for the purposes of section 54. The assessee also submitted that the omission to claim exemption under section 54 in the return of income was merely an inadvertent and bona fide procedural lapse. According to the assessee, all relevant particulars relating to capital gains and the claim for exemption had been furnished before the Assessing Officer through the computation of income and, therefore, the substantive claim ought not to be denied on technical grounds. It was also pleaded that the appellate authorities possess plenary po....
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....ssioner of Income-tax (Appeal) erred in rejecting claim of exemption under section 54 and treating Long Term Capital Gain of Rs. 24,80,391 as taxable, holding that the Your Appellant did not claim exemption under section 54 in Return of Income without appreciating that the Computation of Total Income submitted to the Assessing Officer had all the details of capital gains including claim of exemption, and not filling the columns of capital gains in form of Return of Income was mere accidental in as much as erroneous on part of the professional filing Return of Income. 3. On the facts and circumstances of the case and in law, learned Commissioner of Income-tax (Appeal) failed to appreciate that appellate authorities have plenary powers to admit a legal claim, even if not made in the return; and learned Commissioner of Income-tax (Appeal) failed to appreciate that the Appellant was senior citizen, and that non-disclosure of capital gains in the return was a bonafide, inadvertent procedural lapse, with all material facts already on record during assessment. 4. Your Appellant craves leave to add to, amend, alter, modify, and / or delete any of the above grounds of appe....
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....ution of the conveyance deed occurred solely on account of the builder and was beyond the control of the assessee. It was contended that once the assessee had invested the capital gains within the prescribed period, exemption under section 54 could not be denied merely because the builder failed to complete the project within the stipulated period. 13. The learned AR further drew our attention to page 13 of the paper book and submitted that the booking advance paid to M/s Wadhwa Builders amounting to Rs. 35,84,350/- had been duly disclosed in the balance sheet and formed part of the records furnished before the Assessing Officer. It was therefore contended that the investment in the new residential property stood fully evidenced from contemporaneous records and that the authorities below erred in denying exemption under section 54 despite the availability of complete documentary evidence demonstrating utilization of the capital gains for acquisition of a new residential house. 14. In support of the aforesaid contentions, the learned Authorised Representative placed reliance upon various decisions of the co-ordinate Benches of the Tribunal and submitted that the controversy in....
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....y because possession of the flat was not handed over within three years due to delay on the part of the builder. The Tribunal observed that the material test is investment in the new residential house and acquisition of domain over the property and not the actual delivery of possession within the prescribed period. 17. Reliance was also placed upon the recent decision of the Co-ordinate Bench in the case of Seema Heera v. ACIT in ITA No. 517/Mum/2024 dated 10.07.2024. The learned Authorised Representative submitted that in that case the Assessing Officer himself accepted in the remand report that all the statutory conditions prescribed under section 54 stood satisfied but the claim was denied solely because the assessee had not filed the return of income. The Tribunal, while examining the scope of the decision of the Hon'ble Supreme Court in Goetze (India) Ltd. v. CIT, observed that the restriction laid down therein applies only to the powers of the Assessing Officer and does not curtail the powers of appellate authorities to entertain a lawful claim. It was therefore contended that even assuming there was an omission in the return of income, the appellate authorities were f....
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....ied upon by the learned AR. The controversy involved in the present appeal lies in a narrow compass. The assessee claims exemption under section 54 of the Act in respect of long-term capital gains arising from transfer of his share in a residential property, whereas the Revenue has denied the claim on two grounds, namely: (i) that the new residential property was registered only on 05.02.2014, beyond the period prescribed under section 54, and (ii) that the claim under section 54 was not made in the return of income filed in response to notice under section 148 and was raised only during assessment proceedings through a computation of income. 22. Before adverting to the legal position, it would be appropriate to examine the factual matrix emerging from the record. The assessee sold his share in the residential property on 18.06.2010. Simultaneously, the assessee invested the sale proceeds in a residential project developed by Wadhwa Residency Private Limited by booking Flat No. 503, 5th Floor, Boulevard-3, Ghatkopar (West), Mumbai. The booking memo dated 13.06.2010 was produced before the authorities below and forms part of the paper book. More importantly, the assessee has plac....
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....eld that booking of a flat with a builder has to be treated as construction of a residential house and once the assessee has invested the capital gains within the stipulated period, exemption cannot be denied merely because possession was not handed over within three years due to delay on the part of the builder. Similarly, in Manoj Khaturia v. ITO, the Bench held that where the assessee had invested the entire consideration in a residential project and the builder failed to complete construction, the assessee could not be penalised for circumstances beyond his control. The Bench observed that section 54F being a beneficial provision must receive a liberal interpretation to advance the legislative intent of encouraging investment in residential housing. The same principle has recently been reiterated by the Co-ordinate Bench in Pranav Bhawnath Jha v. ITO, wherein it was held that investment in an under-construction project constitutes construction of a residential house and the date of commencement of construction is immaterial so long as the investment satisfies the statutory requirements. 27. Applying the aforesaid principles to the facts of the present case, we find that the ....
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....details, balance sheet and supporting documentary evidences evidencing investment in the new residential property. 30. Thus, this is not a case where the assessee sought to raise a fresh claim unsupported by material on record. On the contrary, all primary facts relating to the transfer of the original asset, computation of capital gains and investment in the new residential house were duly disclosed before the Assessing Officer. The omission was only that the relevant entries were not reflected in the return form. The assessee, who is stated to be approximately 87 years old, explained that the omission occurred on account of an inadvertent mistake while filing the return. Be that as it may, the fact remains that all material particulars were available before the Assessing Officer. 31. The reliance placed by the authorities below upon the decision of the Hon'ble Supreme Court in Goetze (India) Ltd. v. CIT is, in our view, misplaced. The Hon'ble Supreme Court itself clarified that the decision was confined to the powers of the Assessing Officer and did not impinge upon the powers of appellate authorities. The appellate authorities, including the Tribunal, possess wide ....