Mohd Azam Hasan Sheikh Vs Ward 42(2)(4) (ITAT Mumbai)
ITAT Mumbai: Sec 54 Claim Cannot Be Denied Merely for No Original Return-Allowed in Reassessment
The Mumbai ITAT held that deduction under Section 54 cannot be denied merely because the assessee failed to file the original return under Section 139(1), if the claim is made in a return filed in response to notice under Section 148 and relates to the escaped income.
In this case, the assessee declared long-term capital gains in the return filed during reassessment proceedings and claimed exemption under Section 54 on reinvestment in a residential property. The AO and CIT(A) rejected the claim solely on the ground that no original return was filed.
The Tribunal clarified that as per Supreme Court ruling in Sun Engineering Works, claims directly connected to escaped income can be made in reassessment proceedings. Since the exemption under Section 54 was intrinsically linked to the capital gains brought to tax, the claim was legally admissible.
It was further observed that Section 54 does not mandate filing of return within Section 139 time limits as a precondition for claiming exemption.
Accordingly, the ITAT set aside the orders of lower authorities and restored the matter to the AO to verify whether the conditions under Section 54 are satisfied and allow the claim accordingly.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
