Farhat Shiekh Vs ITO (ITAT Mumbai)
Section 54F Relief Cannot Be Lost for Mentioning Section 54 – Wrong Section, Right Exemption of ₹8.80 Crore
Background
The assessee, a 76-year-old widow, filed her return of income for Assessment Year 2024-25 declaring total income of ₹14,71,660. She subsequently filed a revised return declaring the same income but correcting the fair market value of the original asset as on 1 April 2001.
During the relevant year, the assessee sold land measuring 4 Bighas and 16 Biswas situated at Village Satbari, Saket, New Delhi, for ₹9 crore. The land had been acquired in January 1994. After deducting the indexed cost of acquisition of ₹20,01,000, she computed long-term capital gains of ₹8,79,99,000.
The assessee invested the sale proceeds in a residential bungalow at Juhu, Mumbai, purchased from her two sons. An Agreement to Sell was executed on 6 June 2024, while the registered Deed of Transfer was executed on 21 May 2025. Both dates fell within the prescribed period calculated from the transfer of the original property on 21 December 2023.
However, while filing the return, the assessee inadvertently claimed the exemption under section 54 instead of section 54F.
Assessing Officer Denies the Entire Exemption
The case was selected for scrutiny to examine the substantial capital-gains exemption claimed in the return.
The Assessing Officer correctly observed that section 54 applies only where the original long-term capital asset transferred is a residential house. Since the assessee had transferred land, she was not eligible for exemption under section 54.
In response to the show-cause notice, the assessee explained that mentioning section 54 was a clerical and unintentional error. The applicable provision was section 54F because the original asset was land and the sale consideration had been invested in a residential house.
The assessee had already furnished the sale documents, computation of capital gains, Agreement to Sell, registered transfer deed, bank statements evidencing payments, and documents relating to TDS under section 194-IA. Thus, no new factual foundation was required for considering the correct claim.
Nevertheless, the Assessing Officer refused to entertain the substituted claim under section 54F and brought the entire capital gain of ₹8,79,99,000 to tax. The total income was assessed at ₹8,94,70,660, and penalty proceedings under section 270A were also initiated.
CIT(A) Invokes Goetze and Rejects the Claim
Before the CIT(A), the assessee reiterated that she had claimed the exemption in the return itself and that the mistake was confined only to mentioning the wrong section number.
She relied upon CBDT Circular No. 14(XL-35) dated 11 April 1955, which instructs departmental officers not to take advantage of an assessee’s ignorance and to assist taxpayers in securing legitimate reliefs available under law.
The CIT(A), however, relied upon the Supreme Court’s decision in Goetze (India) Ltd. v. CIT and held that the claim under section 54F could not be entertained without a revised return. The denial of exemption was therefore confirmed.
Goetze Does Not Restrict Appellate Authorities
The Mumbai Tribunal held that the CIT(A)’s reliance upon Goetze (India) was misplaced.
The restriction recognised in Goetze concerns the power of the Assessing Officer to entertain a fresh claim otherwise than through a revised return. The Supreme Court had expressly clarified that the decision did not deal with or restrict the powers of appellate authorities.
Relying upon the Bombay High Court’s decision in CIT v. Pruthvi Brokers & Shareholders Pvt. Ltd., the Tribunal held that the CIT(A) and the Tribunal possess jurisdiction to entertain an additional or corrected claim where the necessary facts and material are already available on record.
The appellate authorities are not prevented from granting a lawful relief merely because the assessee did not make the claim through a revised return.
It Was Not a New Claim, but Correction of Its Label
The Tribunal noted that the assessee had not omitted to claim the exemption altogether. She had expressly claimed exemption of ₹8,79,99,000 in the return, disclosed the transfer of the land and furnished particulars of the investment in the new residential property.
The substance and amount of the exemption remained unchanged. The assessee merely sought to correct its statutory description from section 54 to section 54F.
The Tribunal observed that the present case stood on a stronger footing than a case involving an entirely fresh claim at the appellate stage.
Reliance was placed upon DCIT v. Chandraprakash Mukutbihari Gupta, where exemption initially claimed under section 54EC was subsequently allowed under section 54F; ACIT v. Jai Kumar Gupta (HUF), where a claim under section 54F was permitted to be corrected to section 54; and Seema Srivastava v. ITO, which directly concerned an exemption wrongly claimed under section 54 instead of section 54F.
These decisions establish that an otherwise valid exemption cannot be denied merely because the assessee quoted the wrong provision.
Conditions of Section 54F Were Satisfied
The original asset was admittedly land and therefore a long-term capital asset other than a residential house. The new residential property was acquired within the period prescribed under section 54F.
The assessee furnished the Agreement to Sell, registered Deed of Transfer, bank statements and TDS documents during the assessment proceedings.
Although the CIT(A) made general observations regarding ownership of other residential houses, investment of the net consideration and compliance with section 54F(4), neither the Assessing Officer nor the CIT(A) recorded any specific finding that the assessee had violated any condition of section 54F.
The Tribunal also examined the ₹10 crore ceiling introduced under the second proviso to section 54F(1). Since the exemption claimed was ₹8,79,99,000, the statutory ceiling did not restrict the claim.
No Remand – Exemption Directed to Be Allowed
The Tribunal held that no useful purpose would be served by sending the matter back for another round of proceedings. All necessary documents were already on record, and no specific violation of section 54F had been identified.
It therefore directed the Assessing Officer to allow the exemption of ₹8,79,99,000 under section 54F and delete the corresponding addition.
Authors’ Comments
This is a significant decision distinguishing between an entirely new factual claim and correction of the statutory provision applicable to an already disclosed claim.
Tax liability must be determined according to the true nature of the transaction and the substantive provision of law—not merely according to the section number typed in the return. The Assessing Officer may reject an exemption claimed under an inapplicable provision, but the appellate authorities remain duty-bound to examine whether the disclosed facts qualify under the correct provision.
The ruling also reiterates that Goetze (India) does not curtail the powers of the CIT(A) or the Tribunal. A lawful claim should not perish merely because the return carries the wrong label.
However, the decision should not be understood to mean that every incorrect claim must automatically be allowed under another section. The assessee must still satisfy all the substantive conditions of the correct provision. Here, the relief was granted because the transaction, investment, relevant dates and supporting documents were already on record and no particular condition of section 54F was found to have been violated.
In short, the law taxes transactions, not typographical errors.
Cases Discussed
- CIT v. Pruthvi Brokers & Shareholders Pvt. Ltd. [2012] 23 taxmann.com 23 (Bombay) / [2012] 349 ITR 336 (Bom.)
- National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC)
- Jute Corporation of India Ltd. v. CIT [1991] 187 ITR 688 (SC)
- Goetze (India) Ltd. v. CIT [2006] 157 Taxman 1 / 284 ITR 323 (SC)
- DCIT v. Chandraprakash Mukutbihari Gupta, ITA No. 2130/Mum/2024, ITAT Mumbai
- ACIT v. Jai Kumar Gupta (HUF) [2019] 107 taxmann.com 180 (Mumbai)
- Seema Srivastava v. ITO, ITA No. 715/Pat/2024, ITAT Patna
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1. This appeal by the assessee is directed against the order dated 17.03.2026 passed by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as “the CIT(A)”], under section 250 of the Income-tax Act, 1961 [hereinafter referred to as “the Act”], for the assessment year 2024-25. The impugned appellate order arose from the assessment order dated 11.02.2026 passed by the National Faceless Assessment Unit [hereinafter referred to as “Assessing Officer”] under section 143(3) read with section 144B of the Act.
2. The assessee has raised the following grounds of appeal:
1. In the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) has erred in upholding the action of the Ld. Assessing Officer who erred in denying the deduction under the provisions of section 54F of the Income Tax Act, 1961 (“the Act”) merely because the Appellant had inadvertently mentioned details of deduction under section 54 in the return of income in place of section 54F of the Act.
2. In the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) has erred in upholding the above action of the Ld. Assessing Officer in utter disregard to the decision of Hon’ble Jurisdictional High Court in the case of CIT vs. Pruthvi Brokers & Shareholders [2012] 23 taxmann.com 23 (Bombay) wherein the Hon’ble High Court after considering the decision of Hon’ble Supreme Court in the case of Goetze (India) Ltd. vs. CIT [2006] 157 Taxman 1 (SC) held that the said decision does not impinge upon the power of the appeal authorities – as the issue in that case was limited to the power of the assessing officer and that the appeal authorities could consider additional claims raised before them as per the judgment of the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. vs. CIT [1998] 229 ITR 383 (SC).
3. In the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) has erred in upholding the action of the Ld. Assessing Officer in utter disregard to the binding circular issued by the Central Board of Direct taxes bearing No. 14(XL-35) dated 11.04.1955.
4. In the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) has erred in upholding the action of the Ld. Assessing Officer who erred in making addition of Rs. 8,79,99,000/- in utter disregards to the factual and legal matrix of the case; inter-alia by not following the ratio laid down in the case of :
(a) DCIT vs. Chandraprakash Mukutbihari Gupta [ITA No. 2130/MUM/2024](ITAT, Mumbai);
(b) ACIT vs. Jai Kumar Gupta (HUF) [2019] 107 taxmann.com 180 (Mumbai)/[28-02-2019];
(c) Seema Srivastava VS. ITO [ITA No.: 715/PAT/2024](ITAT, Patna);
And several other binding judicial precedents.
The appellant craves leave to add, alter, delete or modify all or any of the above grounds of appeal. All the above grounds are without prejudice to each other.
3. The facts, as emanating from the assessment order and the impugned appellate order, are that the assessee is an individual. She filed her original return of income for the assessment year 2024-25 on 26.07.2024 declaring a total income of Rs.14,71,660/-. The original return was processed under section 143(1) of the Act on 30.08.2024 without any variation in the returned income. Thereafter, the assessee filed a revised return on 13.12.2024 under section 139(5) of the Act declaring the same total income of Rs.14,71,660/-.
4. The case was selected for scrutiny through CASS for examination of the large deduction or exemption claimed under sections 54, 54B, 54EC, 54F, 54GB, etc.
5. During the relevant previous year, the assessee transferred land admeasuring 4 Bighas and 16 Biswas, situated in the Revenue Estate of Village Satbari, Tehsil Saket, New Delhi, known as “No. 10, Green Meadows, Satbari”, for a consideration of Rs.9,00,00,000/-. The property was stated to have been acquired by the assessee in January 1994. According to the particulars appearing in the return of income, the date of transfer was 21.12.2023. After reducing the indexed cost of acquisition of Rs.20,01,000/-, the assessee computed long-term capital gain at Rs.8,79,99,000/- and claimed exemption of the entire amount under section 54 of the Act. The assessment record further showed that the assessee had acquired a residential property being Bungalow No.4 in Udadhi Tarang Cottages Co-operative Housing Society Limited, Juhu Tara Road, Vile Parle (West), Mumbai. The property was acquired from her sons, Mr. Zia Shiekh and Mr. Wasim Shiekh. An Agreement to Sell was executed on 06.06.2024 and the registered Deed of Transfer was executed on 21.05.2025.
6. In response to the notices issued under section 142(1), the assessee furnished copies of the purchase deed and sale documents relating to the Satbari land, computation of capital gains, details of the consideration received, Agreement to Sell relating to the new residential property, registered Deed of Transfer dated 21.05.2025, bank statements evidencing payments to the joint bank account of Mr. Zia Shiekh and Mr. Wasim Shiekh, and the documents relating to deduction and deposit of tax under section 194-IA of the Act. The assessee submitted that the sellers, Mr. Zia Shiekh and Mr. Wasim Shiekh, held 50 per cent share each in the new residential property. She also furnished extracts of her IDFC Bank account reflecting the payments made in connection with the transaction. It was stated that any amount paid in excess of the consideration for the residential property was to be treated as a loan advanced to her sons.
7. The Assessing Officer issued a show-cause notice dated 31.12.2025 proposing to disallow the exemption of Rs.8,79,99,000/- claimed under section 54 of the Act on the ground that the original asset transferred by the assessee was land and not a residential house. In her reply dated 05.01.2026, the assessee submitted that the exemption had inadvertently been claimed under section 54 instead of the applicable provision of section 54F. She contended that this was a purely clerical and unintentional mistake. According to the assessee, all the primary facts concerning the transfer of the original asset, the consideration received, the investment in the new residential house and her eligibility for exemption stood fully disclosed in the return and in the supporting documents furnished during the assessment proceedings. The mistake was confined to the mention of section 54 instead of section 54F.
8. The Assessing Officer observed that the original asset transferred by the assessee was land measuring 4 Bighas and 16 Biswas situated at Village Satbari, Saket, and that the capital gain arising from its transfer did not qualify for exemption under section 54. According to the Assessing Officer, section 54 applied only where the capital gain arose from the transfer of a long-term capital asset being a residential house, the income from which was chargeable under the head “Income from house property”. Since the asset transferred by the assessee was land, the basic statutory condition of section 54 was held to be unfulfilled. As regards the explanation that section 54 had been mentioned instead of section 54F because of an inadvertent clerical mistake, the Assessing Officer stated that the assessee’s reply had been considered but was not acceptable under the Act. The Assessing Officer did not accept the substituted claim under section 54F and disallowed the exemption of Rs.8,79,99,000/- claimed in the return under section 54. Consequently, the long-term capital gain of Rs.8,79,99,000/- was brought to tax under the head “Capital gains”. The total income was assessed at Rs.8,94,70,660/- under section 143(3) read with section 144B of the Act. Interest under sections 234A, 234B, 234C and 234D was directed to be charged, as applicable, and penalty proceedings under section 270A were initiated for under-reporting of income in consequence of misreporting.
9. Aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A). Before the learned CIT(A), the assessee submitted that she was a 76-year-old senior citizen and a widow without any active source of income. It was explained that the original return filed on 26.07.2024 and the revised return filed on 13.12.2024 had both been processed under section 143(1) without any variation in the declared total income. The revised return had been filed to correct the fair market value of the original property as on 01.04.2001, which had initially been taken at Rs.50,00,000/- instead of Rs.5,00,000/-. The assessee reiterated that she had transferred the Satbari land under an Agreement to Sell dated 21.12.2023 for Rs.9,00,00,000/- and had thereafter entered into an Agreement to Sell dated 06.06.2024 for the purchase of the residential bungalow in Mumbai from Mr. Zia Shiekh and Mr. Wasim Shiekh. The consideration for the new property was stated before the learned CIT(A) to be Rs.9,60,00,000/-. It was further submitted that an amount equivalent to the entire sale consideration of Rs.9,00,00,000/- received on transfer of the Satbari land had been invested in the residential property within the period prescribed under section 54F. The registered Deed of Transfer was executed on 21.05.2025 and the stamp duty value of the bungalow was stated to be Rs.9,59,67,517.24/-.
10. The assessee contended that the nature of the original asset, its date of acquisition and transfer, the consideration received, the acquisition of the new residential property and the investment of the sale proceeds had not been disputed by the Assessing Officer. According to the assessee, the only error was the incorrect mention of section 54 instead of section 54F in the return of income. Such an inadvertent error, according to her, ought not to result in denial of a substantive exemption otherwise available under the Act. The assessee also placed reliance upon CBDT Circular No.14(XL-35) dated 11.04.1955 and submitted that the income-tax authorities were under an obligation not to take advantage of the ignorance or inadvertent mistake of a taxpayer and were required to assist the taxpayer in securing legitimate relief. It was accordingly contended that the Assessing Officer ought to have considered the correct claim under section 54F on the basis of the material already available on record. The assessee further contended that the incorrect reference to section 54 constituted a mistake apparent from the record capable of rectification under section 154. It was submitted that the record for this purpose included not merely the return or the assessment order but the entire material furnished in the assessment proceedings. The assessee accordingly requested that the addition of Rs.8,79,99,000/- be deleted and the exemption under section 54F be allowed.
11. The learned CIT(A) identified the substantive controversy as relating to the disallowance of exemption of Rs.8,79,99,000/- claimed in respect of long-term capital gain arising from the transfer of land. The learned CIT(A) held that the original asset transferred by the assessee was admittedly land and not a residential house. Since section 54 required the original asset to be a residential house, the claim made under section 54 in the return was held to be inadmissible.
12. As regards the alternative contention that the exemption should be allowed under section 54F, the learned CIT(A) held that the claim under section 54F had not been made either in the original return filed under section 139(1) or in the revised return filed under section 139(5). The learned CIT(A) relied upon the decision of the Hon’ble Supreme Court in Goetze (India) Ltd. v. CIT, 284 ITR 323 (SC). The learned CIT(A) further observed that the assessee had already availed herself of the opportunity to file a revised return but had not claimed exemption under section 54F even in that return. The claim under section 54F had been made only through written submissions filed during the assessment proceedings.
13. The learned CIT(A) also rejected the contention that the matter involved a mistake apparent from the record within the meaning of section 154. It was held that adjudication of the claim under section 54F would require examination of several statutory conditions, including the assessee’s ownership of any other residential house, the extent of investment of the net consideration and compliance with section 54F(4). Such examination would involve factual verification and application of law and, therefore, could not be treated as rectification of a simple clerical or arithmetical error.
14. The reliance placed upon CBDT Circular No.14(XL-35) dated 11.04.1955 was also rejected. According to the learned CIT(A), although the circular required the tax authorities to assist taxpayers in obtaining legitimate relief, it could neither override the express provisions of the Act nor permit allowance of a deduction which had not been claimed in accordance with the prescribed statutory procedure. The learned CIT(A) further held that appellate proceedings under section 250 were intended to examine the correctness of the assessment order with reference to the claims made in the return and the issues arising therefrom. According to the learned CIT(A), entertaining a claim under section 54F, which had not been made in the original or revised return, would amount to permitting modification of the return beyond the time prescribed under the Act.
15. On the aforesaid reasoning, the learned CIT(A) upheld the disallowance of exemption and confirmed the addition of Rs.8,79,99,000/-. The appeal of the assessee was accordingly dismissed.
16. Aggrieved by the said decision, the assessee is in appeal before us.
17. Before us, the learned Authorised Representative (AR) reiterated the facts and submissions advanced before the authorities below. He submitted that the assessee was otherwise entitled to exemption under section 54F of the Act and that the claim could not be denied merely because, while filing the return of income, the relevant particulars were inadvertently entered under section 54 instead of section 54F. According to him, this was merely an inadvertent punching error in the return of income. All the relevant facts and documents concerning the transfer of the original capital asset and the investment of the consideration in the new residential house were available before the Assessing Officer. Those documents, according to the learned AR, demonstrated that the assessee had complied with the conditions prescribed under section 54F.
18. The learned AR contended that the Assessing Officer, having regard to the material available on record, ought to have allowed the exemption which was lawfully admissible to the assessee. He submitted that the action of the Assessing Officer, as affirmed by the learned CIT(A), was contrary to CBDT Circular No.14(XL-35) dated 11.04.1955, which requires the income-tax authorities not to take advantage of the ignorance or inadvertent mistake of an assessee and to extend the relief legitimately admissible under the Act.
19. The learned AR further submitted that the learned CIT(A) had erred in applying the decision of the Hon’ble Supreme Court in Goetze (India) Ltd. v. CIT [2006] 157 Taxman 1 (SC). He contended that the restriction considered in that decision was confined to the power of the Assessing Officer to entertain a fresh claim otherwise than by way of a revised return and did not curtail the powers of the appellate authorities to entertain and adjudicate such a claim.
20. In support of this proposition, the learned AR relied upon the decision of the Hon’ble jurisdictional High Court in CIT v. Pruthvi Brokers & Shareholders [2012] 23 taxmann.com 23 (Bom.). The relevant proposition relied upon by the learned AR, as reproduced in the written submissions, reads as under:
“The said decision does not impinge upon the power of the appeal authorities. As the issue in that case was limited to the power of the assessing officer; the appellate authorities could consider additional claims raised before them as per the judgment of the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. vs. CIT [1998] 229 ITR 383 (SC).”
21. The learned AR accordingly submitted that the learned CIT(A), being an appellate authority, possessed the jurisdiction to examine and allow the claim under section 54F on the basis of the facts and material already forming part of the assessment record, notwithstanding that the exemption was mentioned under section 54 in the return of income.
22. The learned AR further submitted that claims under section 54F had been allowed in cases stated to involve an identical factual position. In this regard, he relied upon the following decisions:
a. DCIT v. Chandraprakash Mukutbihari Gupta, ITA No.2130/Mum/2024, ITAT Mumbai;
b. ACIT v. Jai Kumar Gupta (HUF) [2019] 107 taxmann.com 180 (Mumbai), dated 28.02.2019; and
c. Seema Srivastava v. ITO, ITA No.715/Pat/2024, ITAT Patna.
23. The learned Departmental Representative Relied on the orders of lower authorities.
24. We have considered the submissions of the learned AR, perused the orders of the authorities below and examined the judicial precedents placed on record. The controversy before us is whether the exemption of Rs.8,79,99,000/- can be denied merely because the assessee, while filing the return of income, mentioned section 54 instead of section 54F of the Act, although the transaction and the exemption claimed were disclosed and the relevant supporting documents were furnished during the assessment proceedings.
25. Facts are not in dispute. It is also borne out from the assessment order that the assessee furnished the sale deed relating to the original asset, the Agreement to Sell for the new residential property, the registered Deed of Transfer, bank statements evidencing the payments and documents relating to tax deducted under section 194-IA. The assessee expressly informed the Assessing Officer, in response to the show-cause notice, that the reference to section 54 was an inadvertent clerical error and that the claim was intended to be made under section 54F. Thus, it is not a case where the transaction or the claim for exemption was introduced for the first time before us without any foundational facts being available on record.
26. The Assessing Officer rejected the claim under section 54 because the original asset transferred was land and not a residential house. To that extent, the Assessing Officer was correct that section 54, as such, was not applicable. However, despite the assessee’s specific request, the Assessing Officer did not examine the claim under section 54F and merely observed that the reply of the assessee was “considered but not acceptable as per the IT Act”. No reason was recorded as to why section 54F was inapplicable to the disclosed transaction.
27. The learned CIT(A) upheld the disallowance principally on the ground that the claim under section 54F had not been made in the original or revised return and, by relying upon Goetze (India) Ltd. v. CIT [2006] 284 ITR 323 (SC), held that such a claim could not be entertained. The learned CIT(A) further observed that entertaining the claim in appellate proceedings would amount to permitting modification of the return beyond the statutory time limit.
28. In our considered view, the aforesaid approach of the learned CIT(A) is contrary to the binding decision of the Hon’ble jurisdictional High Court in CIT v. Pruthvi Brokers & Shareholders Pvt. Ltd. [2012] 23 taxmann.com 23 (Bom.)/[2012] 349 ITR 336 (Bom.). The Hon’ble High Court considered the decisions in National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC), Jute Corporation of India Ltd. v. CIT [1991] 187 ITR 688 (SC) and Goetze (India) Ltd. (supra). The relevant findings are reproduced below:
“10. A long line of authorities establish clearly that an assessee is entitled to raise additional grounds not merely in terms of legal submissions, but also additional claims not made in the return filed by it. It is necessary for us to refer to some of these decisions only to deal with two submissions on behalf of the department. The first is with respect to an observation of the Supreme Court in Jute Corpn. of India Ltd. v. CIT [1991] 187 ITR 688/[1990] 53 Taxman 85. The second submission is based on a judgment of the Supreme Court in Goetze (India) Ltd. v. CIT [2006] 157 Taxman 1.”
“11. (B) It is clear, therefore, that an assessee is entitled to raise not merely additional legal submissions before the appellate authorities, but is also entitled to raise additional claims before them. The appellate authorities have the discretion whether or not to permit such additional claims to be raised. It cannot, however, be said that they have no jurisdiction to consider the same. They have the jurisdiction to entertain the new claim. That they may choose not to exercise their jurisdiction in a given case is another matter. The exercise of discretion is entirely different from the existence of jurisdiction.”
“20. We wish to clarify that both the appellate authorities have themselves considered the additional claim and allowed it. They have not remanded the matter to the Assessing Officer to consider the same. Both the orders expressly direct the Assessing Officer to allow the deduction of Rs. 40,00,000/- under section 43B of the Act. The Assessing Officer is, therefore, now only to compute the respondent’s tax liability which he must do in accordance with the orders allowing the respondent a deduction of Rs. 40,00,000/- under section 43B of the Act.”
“21. The conclusion that the error in not claiming the deduction in the return of income was inadvertent cannot be faulted for more than one reason. It is a finding of fact which cannot be termed perverse. There is nothing on record that militates against the finding. The appellant has not suggested, much less established that the omission was deliberate, mala-fide or even otherwise. The inference that the omission was inadvertent is, therefore, irresistible.”
“22. It was then submitted by Mr. Gupta that the Supreme Court had taken a different view in Goetze (India) Ltd (supra). We are unable to agree. The decision was rendered by a Bench of two learned Judges and expressly refers to the judgment of the Bench of three learned Judges in National Thermal Power Comp. Ltd. (supra). The question before the Court was whether the appellant-assessee could make a claim for deduction, other than by filing a revised return. After the return was filed, the appellant sought to claim a deduction by way of a letter before the Assessing Officer. The claim, therefore, was not before the appellate authorities. The deduction was disallowed by the Assessing Officer on the ground that there was no provision under the Act to make an amendment in the return of income by modifying an application at the assessment stage without revising the return. The Commissioner of Income-tax (Appeals) allowed the assessee’s appeal. The Tribunal, however, allowed the department’s appeal. In the Supreme Court, the assessee relied upon the judgment in National Thermal Power Co. Ltd. (supra) contending that it was open to the assessee to raise the points of law even before the Tribunal. The Supreme Court held:
‘4. The decision in question is that the power of the Tribunal under section 254 of the Income-tax Act, 1961, is to entertain for the first time a point of law provided the fact on the basis of which the issue of law can be raised before the Tribunal. The decision does not in any way relate to the power of the Assessing Officer to entertain a claim for deduction otherwise than by filing a revised return. In the circumstances of the case, we dismiss the civil appeal. However, we make it clear that the issue in this case is limited to the power of the assessing authority and does not impinge on the power of the Income-tax Appellate Tribunal under section 254 of the Income-tax Act, 1961. There shall be no order as to costs.’”
“23. It is clear to us that the Supreme Court did not hold anything contrary to what was held in the previous judgments to the effect that even if a claim is not made before the assessing officer, it can be made before the appellate authorities. The jurisdiction of the appellate authorities to entertain such a claim has not been negated by the Supreme Court in this judgment. In fact, the Supreme Court made it clear that the issue in the case was limited to the power of the assessing authority and that the judgment does not impinge on the power of the Tribunal under section 254.”
29. The ratio of the aforesaid binding decision is that the restriction considered in Goetze (India) Ltd. (supra) is confined to the power of the Assessing Officer. It neither curtails the jurisdiction of the CIT(A) under section 251 nor the jurisdiction of the Tribunal under section 254 to entertain and decide an additional claim, provided the relevant facts and material are available on record. Consequently, the finding of the learned CIT(A) that the claim under section 54F could not be entertained in proceedings under section 250 is legally unsustainable.
30. We further find that the issue is substantially covered by the decision of the co-ordinate bench in DCIT v. Chandraprakash Mukutbihari Gupta, ITA No.2130/Mum/2024, order dated 07.11.2024. In that case, the assessee had claimed exemption under section 54EC instead of section 54F and corrected the claim during the assessment proceedings. The claim was rejected by the Assessing Officer for want of a revised return. The CIT(A) entertained and allowed the correct claim and the Tribunal affirmed that decision. The relevant findings in paragraphs 8.2, 8.3 and 9 read as under:
“8.2. Thus, the CIT(A) has accepted the claim of the Assessee that the Assessee is entitled to claim deduction under Section 54F of the Act. On perusal of the grounds raised by the Revenue we find that no infirmity has been pointed out by the Revenue in the claim of deduction under Section 54F of the Act on merits. It is not the case of the Revenue that the conditions specified in Section 54F of the Act are not satisfied in the case of the Assessee. The case set up by the Revenue is that the Assessing Officer could not have entertained or allowed the claim of the Assessee for deduction under Section 54F of the Act since the same was not made by way of the revised return.”
“8.3. We note that the Hon’ble Supreme Court had, in the case of National Thermal Power Co. Ltd. v. CIT: [1998] 229 ITR 383, held that the failure to make a claim in the return of income does not take away the power of the appellate authorities to consider a fresh claim, which is otherwise tenable in law, if the relevant material is available on record. In the case of Goetze (India) Ltd. Vs. Commission of Income Tax: [2006] 284 ITR 323 (SC), relied upon by the Learned Departmental Representative, the Supreme Court had negated the reliance by the assessee in that case on the judgment of the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. (supra) by observing that the said judgment did not in any way relate to the power of the Assessing Officer to entertain a claim for deduction otherwise than by filing a revised return. In the case of Pruthvi Brokers & Shareholders Pvt. Ltd (supra), after considering both the aforesaid judgments of Hon’ble Supreme Court, the Hon’ble Bombay High Court concluded that the judgment of the Hon’ble Supreme Court in the case Goetze (India) Ltd. (supra) does not impinge upon the power of the appellate authorities as the issue in that case was limited to the power of the assessing authority and that the appellate authorities could consider additional claims raised before them as per the judgment of the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. (supra).”
“9. In view of the above, we do not find any infirmity in the decision of the CIT(A) to entertain and allow claim of deduction under Section 54F of the Act. The order passed by the CIT(A) is in line with the abovesaid binding judgments of the Hon’ble Supreme Court and the Hon’ble Bombay High Court. The order passed by the CIT(A) does not call for any interference on this issue. Therefore, all the grounds raised by the Revenue are dismissed.”
31. The facts of the present appeal stand on a stronger footing in one material respect. The assessee herein did not omit to claim exemption altogether. The exemption of Rs.8,79,99,000/- was expressly claimed in the return, but the section under which it was entered was incorrect. The quantum of capital gain, the transfer of the original asset and the investment in the new residential property were disclosed. The assessee also clarified the error before completion of the assessment. The substance of the claim, therefore, remained the same. Only its statutory description was sought to be corrected.
32. The decision in ACIT v. Jai Kumar Gupta (HUF) [2019] 107 taxmann.com 180 (Mumbai)/[2019] 177 ITD 558 (Mumbai), order dated 28.02.2019, also supports the proposition that an exemption otherwise available under the correct provision cannot be denied merely because the assessee referred to an incorrect provision in the return. Paragraph 7 of that order reads as under:
“7. We have considered rival submissions and perused material on record. Undoubtedly, the issue in dispute hinges on assessee’s claim of deduction under section 54 of the Act. Insofar as the factual aspect relating to the aforesaid issue is concerned, undisputedly, the deduction claimed under section 54 of the Act is against the net long term capital gain arising out of sale of a residential property viz. Dhruv Malad Building. It is also a fact on record that in the return of income filed for the impugned assessment year the assessee had claimed deduction under section 54F of the Act. When the Assessing Officer referring to the provision contained under the first proviso to section 54F(1) of the Act proposed to disallow assessee’s claim of deduction, the assessee filed a revised computation of income claiming deduction under section 54 of the Act. However, the Assessing Officer rejected such claim of the assessee. While considering similar claim made by the assessee, learned Commissioner (Appeals) allowed it. Therefore, for resolving the disputed issue it is necessary to examine the provisions contained under section 54 and section 54F of the Act. On a reading of section 54 of the Act, it becomes clear that in respect of long term capital gain arising from transfer of a building being a residential house, the assessee is eligible to claim deduction if the long term capital gain is invested in purchase/construction of new residential house within the stipulated period. Whereas, as per section 54F of the Act, the capital gain arising from transfer of any other long term capital asset, not being a residential house, if invested in purchase/construction of a new residential house is eligible for deduction. Thus, it is very much clear, while section 54 of the Act is applicable to investment of long term capital gain arising from transfer of residential house, section 54F of the Act applies to long term capital gain arising from sale of assets other than residential house. In the facts of the present case, there is no dispute that capital gain arises from transfer of a residential house. That being the case, if the assessee invests the capital gain in purchase/construction of a new residential house, it is eligible to claim deduction under section 54 of the Act. Merely because the assessee, by ignorance of law or mistake, has claimed deduction under section 54F instead of section 54 of the Act, such ignorance of law/mistake on the part of the assessee cannot be utilized to its disadvantage by the Assessing Officer. The duty of the Assessing Officer is to correctly compute the real income of the assessee in accordance with the statutory provisions. While the Assessing Officer is empowered to disallow any deduction claimed by the assessee if it is not in accordance with provisions of Act, in the same manner, he is duty bound to allow deduction to the assessee if the assessee is eligible for such deduction under the provisions of the Act. Therefore, in the facts of the present case, since the capital gain arises from sale of residential house, the assessee is eligible to claim deduction under section 54 of the Act. That being the case, the restrictions imposed under the proviso to section 54F(1) will not apply to the assessee.”
33. Although the error in Jai Kumar Gupta (HUF) (supra) was in the converse direction, namely section 54F was mentioned instead of section 54, the governing principle applies with equal force. A mistake in mentioning the statutory provision cannot be used to deny an exemption which is otherwise admissible on the disclosed facts. The tax liability has to be determined in accordance with the substantive provisions applicable to the transaction and not merely on the basis of the section number entered in the return.
34. The decision of the Patna Bench in Seema Srivastava v. ITO, ITA No.715/Pat/2024, order dated 06.06.2025, deals directly with a claim entered under section 54 instead of section 54F. The relevant finding in paragraph 11 reads as under:
“11. We have considered the rival submission and have also gone through the order of the Hon’ble Supreme Court in the case of Goetze India Ltd. (supra) which has also been discussed in the case of CIT vs. Jai Parabolic Springs Ltd. (supra) by the Hon’ble Delhi High Court. As mentioned by the assessee the limitation for allowing the deduction by filing a revised return is applicable only to the Assessing Officer and not to the Appellate Authority, therefore, the Ld. CIT(A) ought to have allowed the deduction which was inadvertently claimed u/s 54 of the Act but the assessee was otherwise eligible for deduction u/s 54F of the Act. Since this is a purely legal issue and the mistake occurred at the level of the Ld. AO, the Ld. AR submitted that the matter may be sent back to the Ld. AO as he has disallowed the claim without specifying the fact that section 54F of the Act was not applicable. Hence, in view of the settled judicial principle that the claim under a wrong section does not bar the assessee from making the claim under the correct section if the assessee is otherwise eligible and further even though the deduction has to be claimed in the return of income for being allowed by the Ld. AO, however, this limitation is only for the Assessing Authority and the Appellate Authority can grant the exemption/deduction claimed if the facts on record convey so. Hence, since the assessee had purchased a residential house and she was eligible for deduction u/s 54F of the Act and had made calculations of capital gains and had submitted to same, accordingly it is deemed to be in the fitness of things that the order of the Ld. CIT(A) is hereby set aside and the matter is remitted to the Ld. AO to allow the claim u/s 54F of the Act and allow the requisite relief on the basis of evidence filed by the assessee as the assessee is eligible for the exemption under section 54F of the Act and in case any further evidence is required, the same may also be furnished by the assessee before him. The assessee shall be allowed a reasonable opportunity of being heard before deciding the issue in accordance with law.”
35. The factual resemblance between the present appeal and Seema Srivastava (supra) is evident. In both cases, the assessee transferred land, invested in a residential house, entered the claim under section 54 instead of section 54F and sought correction of the inadvertent error during the proceedings. The co-ordinate bench held that the restriction arising from the absence of a revised return did not bind the appellate authority and directed allowance of the claim under section 54F.
36. Turning to the merits of the present claim, the original asset was admittedly land and, therefore, a long-term capital asset other than a residential house. The assessee entered into an Agreement to Sell for the new residential house on 06.06.2024 and the registered Deed of Transfer was executed on 21.05.2025. Both dates fall within the period prescribed under section 54F with reference to the transfer of the original asset on 21.12.2023. The assessee also furnished the bank statements, Agreement to Sell, registered Deed of Transfer and tax deduction documents during the assessment proceedings.
37. The learned CIT(A) referred to the ownership of other residential houses, investment of the net consideration and section 54F(4) as matters requiring examination. However, no particular condition of section 54F was found to have been violated. There is no finding by either authority that the assessee owned more residential houses than permitted under the proviso to section 54F(1), that the new asset was acquired beyond the prescribed period, or that the documents furnished by the assessee were not genuine. A general observation that certain conditions would require examination cannot substitute a finding that any specified condition was not satisfied.
38. The assessment order records the consideration for the new property at one place as Rs.8,80,00,000/-. However, the Statement of Facts and written submissions reproduced in the impugned appellate order record the agreed consideration at Rs.9,60,00,000/- and the stamp duty value at Rs.9,59,67,517.24/-. The assessee stated that an amount equivalent to the entire sale consideration of Rs.9,00,00,000/- had been invested within the prescribed period. The Agreement to Sell, registered Deed of Transfer and payment documents were furnished before the Assessing Officer. Neither the Assessing Officer nor the learned CIT(A) recorded any finding that the actual investment was less than the net consideration or that the exemption required proportionate restriction.
39. The second proviso to section 54F(1), applicable from the assessment year under consideration, provides that where the cost of the new asset exceeds Rs.10,00,00,000/-, the amount exceeding Rs.10,00,00,000/- shall not be taken into account. The exemption claimed in the present case is Rs.8,79,99,000/- and is, therefore, below the statutory ceiling. The amendment does not operate to restrict the assessee’s claim.
40. We also find substance in the explanation that the reference to section 54 was inadvertent. The exemption amount was disclosed in the return itself. The transaction giving rise to the capital gain was disclosed. The acquisition of the new residential house was also disclosed and supported by documents. The assessee corrected the statutory reference in response to the show-cause notice before completion of the assessment. There is no finding that the explanation was mala fide or that the assessee sought to introduce a different transaction or a new factual foundation. In these circumstances, the mistake was one of statutory description and not an omission to disclose the income or the exemption claimed.
41. The object of assessment proceedings is to determine the correct taxable income in accordance with law. A legitimate exemption cannot be denied solely on account of an incorrect section number when the material facts necessary to determine the claim are already on record. The rejection of the claim solely for want of a revised return elevates the form of the claim above its substance. Such an approach cannot be sustained in view of the binding ratio in Pruthvi Brokers & Shareholders Pvt. Ltd. (supra).
42. The reliance placed by the learned CIT(A) on Goetze (India) Ltd. (supra) is, therefore, misplaced. Even assuming that the Assessing Officer could not entertain the substituted claim without a revised return, that restriction did not apply to the learned CIT(A) and does not apply to the Tribunal. The learned CIT(A) possessed the jurisdiction to entertain and adjudicate the claim under section 54F. His contrary finding in paragraph 6.7 of the impugned order is set aside.
43. Having regard to the admitted nature of the original asset, the acquisition of the residential property within the prescribed period, the disclosure of the claim in the return, the documentary material furnished during the assessment proceedings and the absence of any specific finding that a condition of section 54F was violated, we are of the considered view that no useful purpose would be served by restoring the substantive claim for another round of proceedings. The jurisdictional High Court in Pruthvi Brokers & Shareholders Pvt. Ltd. (supra) has expressly recognised that the appellate authority may itself consider and allow an additional claim instead of remanding it to the Assessing Officer.
44. We accordingly hold that the assessee’s claim cannot be rejected merely because section 54 was mentioned in the return instead of section 54F. The orders of the authorities below on this issue are set aside. The Assessing Officer is directed to allow exemption of Rs.8,79,99,000/- under section 54F of the Act and delete the corresponding addition. The Assessing Officer shall give effect to this direction while recomputing the total income of the assessee.
45. Consequently, grounds Nos.1 to 4 raised by the assessee are allowed.
46. In the result, the appeal of the assessee is allowed.
47. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on.16.09.2026.
