Missed Section 54 in Initial ITR? ITAT Says You Can Still Claim It During Appellate Proceedings

ITAT Kolkata, in a recent significant ruling, highlighted that if a taxpayer fails to claim Section 54 exemption both in his/her initial and revised ITR, he/she is still entitled to relief, as such a claim can still be considered during appellate proceedings.

The tax authorities had denied Ricky Chandra’s exemption claim made under Section 54 of the Income-tax Act, 1961, on the grounds that the assessee had not claimed the said exemption, neither in his initial income tax return (ITR) filed under Section 139(1) of the Act nor in the revised return. Therefore, the assessee was not entitled to the refund of capital gain tax paid of Rs 16.70 lakh.

The assessee had initially declared its total income of Rs 1.66 crore in its income tax return (ITR) for the Assessment Year 2017-18. The assessee later realised that during the year in question, he had earned a long-term capital gain (LTCG) of Rs 83.54 lakh by selling a residential property on October 25, 2016, and purchased a new residential property on May 16, 2017.

However, he forgot to claim an exemption under Section 54. Therefore, to claim relief, he furnished a rectification application before the tax authorities, requesting them to allow the section 54 exemption in respect of the newly purchased property on May 16, 2017. However, the same was rejected, highlighting that such claims cannot be permitted by filing a request through a rectification application under Section 154.

When an appeal was made before the ITAT Kolkata, the tribunal noted that the assessee had fulfilled all requirements under Section 54, as the new property was purchased within the permitted time limit. The tribunal held that even if the Section 54 exemption was not claimed in the initial or revised return, such a claim can still be considered during appellate proceedings.

Consequently, citing an earlier ruling by the Apex Court in the case titled Goetze (India) Ltd vs CIT, the tribunal held that the assessee is entitled to relief under Section 54. The case has been remanded to the tax authorities for verification and proper calculation of the exemption amount. Thus, the appeal has been allowed for statistical purposes.