Section 54 Deduction Can be Claimed Even Without Filing Original Return: ITAT
The Income Tax Appellate Tribunal (ITAT), Mumbai, has clarified that the capital gain exemption under section 54 can be claimed even without filing the original Income Tax Return (ITR).
The assessee, Mohd Azam Hasan Sheikh, had purchased an immovable property but had not filed his ITR. Due to this, his case was reopened, and a notice under section 148 was issued. In response, the assessee filed a return declaring capital gains from the sale of a jointly owned residential property and claimed exemption under Section 54 after reinvesting the amount in another property.
However, the Assessing Officer (AO) denied the exemption claim, saying the benefit under section 54 is not an allowance, as the assessee had failed to file the original return.
This matter reached the ITAT, where the tribunal noted that the main reason for rejection was the non-filing of an original return. The Tribunal referred to earlier rulings and clarified that the provision of section 54F nowhere mentions the condition that the ITR must be filed on time to claim the deduction under section 54. Therefore, it said that the claim made in the ITR in response to the notice under section 148 cannot be rejected just because there was a delay in filing the return.
As a result, the Tribunal sent the case back to the Assessing Officer, directing him to re-examine the claim and allow the exemption if all conditions under Section 54 are fulfilled.
Case Citation: Mohd Azam Hasan Sheikh Vs Ward (2)(4) (ITAT Mumbai); ITA No.7998/M/2025; 09/04/2026; 2017-18
