ITAT Allows Fresh Review of Capital Gains Exemption Claimed Under Section 54F
The Income Tax Appellate Tribunal (ITAT), Mumbai, remanded the Rs 25.59 lakh short-term capital gains addition back to the Assessing Officer (AO) for fresh verification on the Section 54F exemption claim.
The assessee, Dollar Chunilal Modi HUF, sold an immovable property on 01.04.2012 for Rs 35,00,000. The written-down value (WDV) of this property was Rs 9,40,830. The assessee earned capital gains of Rs 25,59,170. The assessee reinvested this capital gain in a residential flat and claimed a deduction under Section 54F.
However, the AO rejected this exemption and taxed this amount as short-term capital gains just because the deduction claimed by the assessee HUF under section 54F was not made in the original Income Tax Return (ITR) furnished by the assessee. Therefore, the assessee filed an appeal before the CIT(A), which upheld the AO’s decision. Therefore, the assessee approached the Income Tax Appellate Tribunal (ITAT), Mumbai.
The Tribunal held that just the failure to claim the deduction in the original return cannot be the ground to reject the examination of the claim at the appellate stage. The court cited the Supreme Court’s previous judgment, which clarified that the section 54E/54F exemption is allowable even if it was claimed towards the capital gains arising from depreciable assets.
However, since the factual conditions of Section 54F, such as the timing of investment and quantum of investment, were not verified earlier, the Tribunal remanded the matter back to the Assessing Officer.
The Assessing Officer was directed to verify the claim after giving the assessee a fair opportunity of being heard and then pass a reasoned order.
Case Citation: M/s. Dollar Chunilal Modi HUF Vs ITO (ITAT Mumbai); I.T.A. No. 7189/Mum/2025; 19/01/2026; 2013-14
