Patna, June 6, 2025 – In a major relief for taxpayers, the Income Tax Appellate Tribunal (ITAT) Patna has ruled in favour of Seema S., a Patna-based taxpayer, allowing her exemption from long-term capital gains (LTCG) tax on the sale of her property worth ₹4.5 crore.
The tribunal’s decision highlights how a 1955 CBDT circular and settled case law principles can safeguard genuine taxpayers from technical mistakes in filing income tax returns.
Case Background
- Sept–Oct 2016: Seema sold her Patna property for ₹4.5 crore.
- Nov 2016: She invested ₹2.62 crore from the sale proceeds to buy a residential house in New Delhi.
- AY 2017–18: Filed her ITR, mistakenly claiming exemption under Section 54 instead of Section 54F.
- Dec 2019: AO denied exemption; CIT(A) later upheld the rejection.
- Nov 2024: Her appeal before CIT(A) was dismissed.
- June 6, 2025: ITAT Patna finally ruled in her favour.
What Went Wrong
Seema mistakenly claimed exemption under Section 54 (meant for sale of residential property) instead of Section 54F (applicable when land or non-residential property is sold and proceeds are invested in a house).
The Assessing Officer (AO) disallowed the exemption, citing incorrect section reference, and the CIT(A) upheld the order.
ITAT’s Observations
Judicial Member George Mathan and Accountant Member Rakesh Mishra noted:
- The mistake was clerical/technical, not substantive.
- The taxpayer had invested the entire proceeds into a residential house, fulfilling conditions under Section 54F.
- Appellate authorities are not bound by the revised-return limitation applicable to AOs; they can grant relief if facts support eligibility.
- CBDT Circular No. 14 (1955) mandates that officers must not take advantage of taxpayers’ ignorance and should guide them towards rightful reliefs.
The matter has been remitted back to the AO for verification, with directions to allow exemption under Section 54F.
Why This Matters
- Substance over form: Tax relief cannot be denied due to technical or clerical mistakes.
- Judicial precedent: Confirms appellate authorities’ power to grant rightful exemptions even if claimed under the wrong section.
- Taxpayer protection: Reinforces CBDT’s 1955 directive for a fair and facilitative approach by tax officers.
Expert Views
- “This judgment reaffirms that genuine entitlement should not be denied due to technical errors. Beneficial provisions like Sections 54 & 54F must be liberally interpreted.”
- “The ITAT rightly held that quoting the wrong section does not disentitle relief if substantive conditions are met.”
- “The tribunal protected taxpayer rights by recognising Section 54F eligibility despite clerical mistakes.”
- “A landmark ruling that ensures taxpayers are not deprived of exemptions due to typographical errors.”
Final Words:
The ITAT Patna’s June 6, 2025 ruling is a landmark judgement for taxpayers, reinforcing that technical errors should not override genuine eligibility. By invoking CBDT’s 1955 circular, the tribunal has once again ensured that tax justice prevails over procedural rigidity.
Source #ET
