TaxTMI 
TaxTMI 
2026 (8) TMI 365
X X X X Extracts X X X X
X X X X Extracts X X X X
....the delay in filing the original return u/s. 139 due to unforeseen circumstances. That the order passed by the NFAC (Appeals), Delhi dated 18.09.2025, confirming the addition of Long-Term Capital Gains (LTCG) and denying deduction under section 54 of the Income-tax Act, 1961 ("the Act"), is illegal, bad in law, contrary to facts, and liable to be quashed. The deduction claimed u/s. 54 of the Income Tax Act of Rs. 67,91,537/- should be allowed. 2. On facts and circumstances of the case and in law, the NFAC (Appeals) failed to appreciate that the appellant had duly discharged the tax liability in 2018 itself, and the omission to file return in time occurred due to unavoidable circumstances (sudden disappearance of accountant), which is a reasonable cause and establishes bona fides of the appellant. 3. On the facts and circumstances of the case and in law the NFAC (appeals) misinterpreted the Supreme Court judgment in CIT vs. Sun Engineering Works (P) Ltd. (198 ITR 297) (1992). The appellant contends that the reassessment proceedings were initiated to assess escaped income, and the claim of deduction u/s. 54 was directly related to the LTCG arising from the sale of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... information emanating from quarterly TDS statements filed by the deductor, which reflected that the assessee had received salary income of Rs. 60,95,500/- and Rs. 59,00,000/-, rental income amounting to Rs. 12,00,000/-, and had entered into transactions involving purchase and sale of immovable property for considerations of Rs. 3,15,50,000/- and Rs. 1,00,00,000/- respectively. On the basis of the aforesaid information, the Assessing Officer recorded reasons to believe that income chargeable to tax had escaped assessment and, accordingly, issued notice under section 148 of the Act on 30.03.2021. In response thereto, the assessee filed his return of income on 10.04.2021. 2.1 During the reassessment proceedings, the Assessing Officer noticed that the salary income of Rs. 60,95,500/- was duly declared in the return filed in response to the notice under section 148 and, therefore, no separate addition was made on that count. With regard to rental income of Rs. 12,00,000/-, it was observed that the assessee had declared only 50% thereof, contending that the remaining 50% belonged to his mother, Smt. Saroj Bajaj. Though the Assessing Officer noted that the assessee had claimed cred....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ong Term Capital Gain from the sale of the residential property and which was further invested in the another residential property within the time frame as specified under section 54 of the Act. 4.2 The claim of the assessee was rejected by the lower authorities solely on the ground that such deduction was not claimed in the original return, which admittedly was never filed. The learned Commissioner of Income-tax (Appeals) placed reliance on the decision of the Hon'ble Supreme Court in CIT v. Sun Engineering Works (P.) Ltd. (198 ITR 297) to hold that a claim not made in the original proceedings cannot be permitted in reassessment proceedings. The relevant findings of the Ld. CIT(A) is reproduced as under: "7.4 It is seen that the appellant has not offered the above discussed income in the regular ITR as no return had been filed voluntarily thereby willfully attempting to evade tax. It was only after the re assessment proceedings initiated against the appellant, filed its ITR and claimed the deductions u/s. 54 of the Act. Reliance is placed on the Supreme Court judgment in 198 ITR 0297, (1992) CIT vs SUN ENGINEERING WORKS (P) LTD, where in the apex court held that the ob....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d in the original assessment proceedings. It is only the under-assessment which is set aside and not the entire assessment when reassessment proceedings are initiated. The ITO cannot make an order of reassessment inconsistent with the original order of assessment in respect of matters which are not the subject matter of proceedings under section 147. An assessee cannot resist validly initiated reassessment proceedings under this section merely by showing that other income which had been assessed originally was at too high a figure except in cases under section 152(2). The words 'such income' in section 147 clearly refer to the Income which is chargeable to tax but has 'escaped assessment and the ITO's jurisdiction under the section is confined only to such income which has escaped assessment. It does not extend to reconsidering generally the concluded earlier assessment. Claims which have been disallowed in the original assessment proceeding cannot be permitted to be reagitated on the assessment being reopened for bringing to tax certain income which had escaped assessment because the controversy on reassessment is confined to matters which are relevant only in resp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ding of the coordinate Bench is reproduced as under: "9. We now in the backdrop of our aforesaid observations that the 'return of income filed by the assessee after the expiry of the time period specified in the notice as 148 continues to be a 'return of income filed u/s. 148, though involving some delay, would now deliberate upon the validity of the claim of the assessee raised u/s. 54F. We have perused the statutory provision contemplated u/s. 54F and are of the considered view that the same does not cast any statutory obligation on the part of assessee to file his return of income within the stipulated time period contemplated u/s. 139 or 148 of the 'Act', as a precondition for entitling him to claim exemption under the said statutory provision. We are of the considered view that the reference to the term dues date' for furnishing of return of income u/s. 139 as contemplated in section 54F(4) is in context of the time limit within which the amount which had not been appropriated by the assessee towards making of investment in the purchase and/or construction of the new residential house is permitted to be deposited in the Capital Gains Account Scheme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of being heard to the assessee to substantiate his aforesaid claim. The Ground of appeal no. 1 raised by the assessee is allowed for statistical purposes." 4.5 Further, it has been brought to our notice that in the case of the assessee's wife, Smt. Ritu Bajaj, arising out of similar facts, the Assessing Officer has accepted the claim of deduction under section 54 made for the remaining 50% part of the investment in new residential property in the return filed pursuant to notice under section 148. This also lends support to the assessee's contention that the claim cannot be rejected in limine. 4.6 In view of the foregoing discussion, we hold that the assessee is entitled, in law, to claim deduction under section 54 of the Act in the return of income filed in response to notice under section 148, provided the substantive conditions prescribed under the said section are duly satisfied. The lower authorities were, therefore, not justified in rejecting the claim solely on the ground that no original return under section 139(1) was filed. 4.7 Accordingly, we set aside the orders of the lower authorities on this issue and restore the matter to the file of the Assessing Officer fo....