Section 54F Claim Revived; ITAT Orders Fresh Verification by AO

For the 2018-19 assessment year, a Hindu Undivided Family (HUF) claimed a deduction of Rs. 11,61,500 under Section 54F, offsetting their long-term capital gains. The case went into limited scrutiny, with the Assessing Officer (AO) asking for the usual suspects: construction bills, vouchers, and property details. When the HUF failed to hand over the paperwork in time, the AO scrapped the deduction. The CIT(A) agreed, ruling that simply showing bank withdrawals isn’t the same as proving a house was actually built.

Issue Before Court: Can a Section 54F deduction be saved if the taxpayer fails to provide construction evidence during the initial assessment but produces it later?

Tribunal Decided: When the case reached the Tribunal, the HUF finally came prepared. They presented a full stack of evidence: approved building plans, municipal clearances, sale deeds, construction bills, and even photos of the finished property. They explained that medical emergencies and technical glitches during the online filing process had caused the earlier delays.

The Tribunal decided that justice should not be denied over a technicality if the evidence actually exists. Acknowledging that the taxpayer had “sufficient cause” for the initial silence, the Tribunal set aside the previous orders. The matter has been sent back to the AO to verify these new documents. If the construction is genuine, the deduction must be allowed, provided the taxpayer is given a fair chance to be heard this time around.

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