Case Law Details
Annapurna Dibbur Girish Vs ACIT (ITAT Bangalore)
The ITAT Bangalore held that claiming deduction under the wrong section (Section 54 instead of 54F) is not fatal, and restored the matter for fresh examination, while also knocking down the penalty.
The assessee had sold properties and claimed deduction of ₹2.03 crore under Section 54, which the AO denied on the ground that the correct provision was Section 54F, resulting in addition to income.
Although the CIT(A) dismissed the appeal as time-barred (delay of 1226 days), the Tribunal took a lenient view in the interest of natural justice, noting that substantial demand was involved and the assessee deserved one more opportunity.
Importantly, the Tribunal observed that mere quoting of a wrong section does not defeat a legitimate claim, if otherwise eligible under law. It therefore remanded the matter back to the AO for de novo assessment to examine eligibility under the correct provision.
Consequently, since the quantum issue itself was restored, the penalty u/s 270A automatically failed and was set aside.
The appeal was thus allowed for statistical purposes, reinforcing that substance prevails over technical errors.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
These appeals are filed by the assessee against the order of CIT(A) (NFAC, Delhi), vide DIN and Order No. ITBA/NFAC/S/250/2025-26/1080264951(1) dated 02.09.2025 for Assessment Year 2017-18, arising out of the order passed under section 143(3) of the Act on 26.11.2019 and vide DIN and Order No.ITBA/NFAC/S/250/2025-26/1081514736(1) dated 07.10.2025 arising out of the penalty order passed under section 270A of the Act on 05. 01.2022 respectively.
2. Brief facts of the case are that assessee being an individual, filed return of income admitting total income of Rs.17,21,270/- for the Assessment Year 2017-18 on 28.06.2017. The return was summarily processed under section 143(1) of the Act. Subsequently, the case was selected for limited scrutiny under CASS for the following reasons:
1. Deduction / Exemption from capital gain.
2. Investment in immovable property.
3. Capital gain / loss on sale of property.
3. Thereafter, notice under section 143(2) of the Act dated 02.08.2018 was issued and served on the assessee. It was noticed that assessee has sold a joint commercial property and another residential house and claimed deduction u/s 54 of the Act for Rs.1,75,00,000/- and Rs.72,50,000/- respectively. Thereafter, notice under section 142(1) of the Act dated 14.08.2019 was issued along with detailed questionnaire. In response, assessee furnished required information. On perusal of the submission furnished by the assessee, the AO noticed that assessee has claimed deduction under section 54 of the Act instead of claiming deduction under section 54F of the Act. He, therefore, denied the claim of the assessee and made addition of Rs.2,03,69,760/-.
4. On being aggrieved by the order of the learned AO, assessee carried the matter in appeal before the learned CIT(A) with a delay of 1226 days which included the period covered by the Covid 19 pandemic. The learned CIT(A) found that there is no sufficient cause furnished by the assessee for the delay in filing the appeal before him and therefore dismissed the appeal as time barred.
5. On being aggrieved by the order of the learned CIT(A), assessee is in appeal before the Tribunal raising various grounds. The learned AR submitted that learned CIT(A) ought to have condoned the delay since the delay was only 510 days if the Covid pandemic period is excluded as per directions of Hon’ble Supreme Court. He further submitted that assessee could not respond to the notice of the learned CIT(A) due to ill health arising out of covid pandemic. He, therefore, pleaded that the delay may be condoned and issue may be remitted to the file of learned AO.
6. Per contra, the learned DR fully submitted that the order of the learned AO under section 143(3) of the Act was passed on 26.11.2019 and the appeal before the First Appellate Authority ought to have been filed on 25.12.2019. the covid limitation period allowed by the Hon’ble Supreme Court commences only on 15.03.2020. Therefore, the assessee does not have any sufficient cause for the delay. He further pleaded that order of the Revenue authorities be upheld.
7. We have heard the rival contentions and perused the material available on record. Admittedly, assessee has failed to file the appeal in time which expired before the Covid pandemic i.e., on 25.12.2019. Various judicial pronouncements have held that once the limitation period commences, any subsequent event cannot enable or disable the same. However, in the interest of natural justice, considering the huge demand, we are of the view that assessee shall be provided with one more opportunity before the learned AO to substantiate the claim made by the assessee. Further, we also notice that the learned AO has denied the deduction claimed by the assessee under section 54 instead of section 54F of the Act. Various judicial pronouncements have held that claiming the wrong section cannot be fatal to the assessee if the claim is genuine. We therefore direct the learned AO to examine the claim in accordance with applicable provisions of the Act after examining the documents furnished by the assessee. We therefore remand the matter back to the file of learned AO for de-novo assessment as per aforesaid directions after affording adequate opportunity of being heard to the assessee. Thus, the grounds raised by the assessee are statistically allowed.
8. With respect to appeal in ITA No.2357/Bang/2025 arising out of the penalty order passed under section 270A of the Act, we find that since the quantum appeal is remanded back to the file of the learned AO, the penalty order does not have legs to stand and does not survive. Thus, the grounds raised in the penalty appeal are disposed off.
9. In the result, appeal in ITA No.2367/Bang/2025 is allowed for statistical purposes and appeal in ITA No.2857/Bang/2026 is dismissed.
Pronounced in the open court on the date mentioned on the caption page.
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