Restriction Imposed on AO in Accepting New Claim otherwise than Through Return or Revised Return of Income not Applicable to Higher Appellate Authorities: ITAT Allows Deduction u/s 54 of Income Tax Act [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has allowed the deduction under Section 54 of the Income Tax Act holding that the restrictions on AO in accepting new claims otherwise than through the return of income or revised return of income would not be applicable to higher appellate authorities.

The deceased assessee, Gurdip Singh Kapur, along with other co-owners was the owner of a parcel of land at Vasant Vihar, New Delhi. The said plot of land was given for development to a developer. In lieu of cost of land, the assessee received an amount, one flat and two car parking in the developed structure. In the return of income filed for the assessment year under dispute, the assessee claimed long term capital loss.

Further, in the course of assessment proceedings, the assessee furnished a revised computation claiming deduction under Section 54 of the Income Tax Act in respect of cost of land to be paid to the assessee subsumed in the flat given to the assessee after development of the project. While completing the assessment, the Assessing Officer, in addition to the amount received by the assessee, also added the fair market value of cost of construction of the flat and adopted the sale consideration received.

After allowing benefit towards the cost inflation index, he determined the net long-term capital gain. As regards assessee’s claim of deduction under Section 54 of the Act, the Assessing Officer rejected such claim on the ground that the claim was not made either in the original return of income or in revised return of income. The DRP rejected the claim of the assessee.

Rajesh Mahna, appeared on behalf of the assessee and Sanjay Kumar appeared on behalf of the revenue.

The two-member Bench of G.S. Pannu, (President) and Saktijit Dey, (Vice-President) observed that the only reason, based on which, the Assessing Officer had rejected assessee’s claim of deduction under Section 54 of the Income Tax Act was that such claim could not be entertained as it was not made either in the original return of income or through revised return of income.

The Bench further referred to the decision of Supreme Court in case of Goetze (India) Ltd. which held that the restriction imposed on the Assessing Officer in accepting new claims made by the assessee otherwise than through the return of income or revised return of income was not applicable to higher appellate authorities. And the DRP, being in the status of a higher appellate authority, was empowered to entertain the assessee’s claim.

The Bench allowed the appeal filed by the assessee holding that the assessee was entitled to claim deduction under Section 54 of the Income Tax Act.

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