Case Law Details
Varadhan Sureshbabu Vs ACIT (ITAT Chennai)
The ITAT Chennai held that a legitimate deduction claim cannot be denied merely because it was not correctly claimed in the return, and remanded the matter for fresh examination of Section 54F deduction.
In this case, the assessee had sold a property and initially claimed deduction under Section 54, though the property was commercial in nature. During assessment, the assessee sought to claim deduction under Section 54F, but was unable to revise the return.
The Assessing Officer rejected the claim and recomputed capital gains. The CIT(A) also upheld the denial relying on the Supreme Court ruling in Goetze (India) Ltd., stating that fresh claims cannot be entertained without a revised return.
However, the Tribunal noted that the fact of investment/construction was already on record and admitted by the AO, and therefore, denial solely on technical grounds was not justified. It emphasized that substantive eligibility must be examined over procedural lapses.
Accordingly, the ITAT set aside the issue and remanded the matter to the AO to verify the details and allow deduction under Section 54F in accordance with law, after providing reasonable opportunity to the assessee.
The appeal was thus allowed for statistical purposes, reinforcing that correct legal entitlement should not be defeated by wrong section reference in return.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal by the assessee are against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi, (in short “CIT(A)”) passed u/s. 250 of the Income Tax Act, 1961 (in short “the Act”) dated 27.10.2025 for Assessment Year (AY) 2017-18.
2. The assessee is an individual and filed the return of income for AY 2017-18 on 08.05.2017 declaring total income of Rs.23,58,080/-. The case was selected for limited scrutiny and the statutory notices were duly served on the assessee. The assessee during the year under consideration has sold along with his spouse property for a consideration of Rs.7,00,00,000/-. The assessee in the return of income has offered capital gains at Rs.23,58,080 after claiming deduction u/s. 54. The Assessing Officer (AO) called on the assessee as to why the deduction u/s. 54 of the Act cannot be denied since the property sold is a commercial property. The assessee submitted that he is trying to file revised the return claiming deduction under section 54F instead of 54 and that is unable to do it. The AO did not accept the submissions of the assessee and proceeded to recompute the long-term capital gain to make an addition of Rs.1,29,10,753/-. Aggrieved, the assessee filed the appeal before the CIT(A). The CIT(A) upheld the decision of the AO and also denied the deduction under section 54F to the assessee stating that new claims cannot be accepted by placing reliance on the decision of Hon’ble Supreme Court in the case of Goetze (India) Ltd vs CIT [(2006) 284 ITR 323 (SC)]. Aggrieved, the assessee is in appeal before the tribunal.
3. We heard the Ld. DR and perused the material on record. We notice that the deduction u/s. 54F of the Act has been denied by the assessee on the ground that it is a fresh claim. However from the order of the AO it is clear that the assessee in the return of income has claimed deduction under section 54 of the Act instead of section 54F of the Act. Further from the perusal of the order of the AO, we notice that the AO has admitted the fact that the assessee has spent certain amount on construction. We also noticed that the CIT(A) has denied the deduction on the ground that it is a fresh claim. In our considered view, the said contention to deny the deduction is not correct when the fact that the assessee has expended certain amount is admitted. Considering the overall facts and circumstances peculiar to the assessee’s case, we are of the considered view that impugned issue needs fresh examination. Therefore we remit the appeal back to the AO with a direction to call for the required details for computing the long-term capital gains and to allow deduction u/s. 54F of the Act in accordance with law. Needless to say that the assessee be given reasonable opportunity of being heard. It is ordered accordingly.
4. In result the appeal of the assessee is allowed for statistical purposes.
Order pronounced on 27thday of February, 2026 at Chennai.
Author Bio
