Section 54 r.w. section139 and 143 – There is no bar/restriction in provisions of section 139(5) that assessee cannot file a revised return after issuance of notice u/s. 143(2). The AO could not reject assessee’s claim for deduction u/s. 54 raised in revised return on ground that said return was filed after issuance of notice u/s. 143(2)

Mahesh H. Hinduja vs. ITO ITA No. 
176/Mum/2017 A.Y.: 
2011-12. Dated: 20^th June, 2018.

Section 54
r.w. section139 and 143 – There is no bar/restriction in provisions of section
139(5) that assessee cannot file a revised return after issuance of notice u/s.
143(2). The AO could not reject assessee’s claim for deduction u/s. 54 raised
in revised return on ground that said return was filed after issuance of notice
u/s. 143(2)

FACTS

The assessee filed his return declaring
certain taxable income. Subsequently, the assessee filed a revised return of
income in which while offering long-term capital gain, he claimed deduction of
the said amount u/s. 54 towards investment of an amount in a new residential
house. The AO taking a view that revised return of income was filed after
issuance of notice u/s. 143(2), held that the said revised return being
invalid, assessee’s claim for deduction u/s. 54 could not be allowed. Aggrieved
by the assessment order, the assessee preferred an appeal to the CIT(A). The
CIT(A) confirmed the said disallowance.

HELD

The Tribunal held that in the original
return of income the assessee had neither declared the long-term capital gain
nor has claimed deduction u/s. 54. Therefore, the assessee filed a revised
return of income within the time prescribed u/s. 139(5) declaring net long-term
capital gain of Rs.49,96,681, though, it was claimed as deduction u/s. 54
towards investment in a new residential house.

A careful
reading of the provisions contained u/s. 139(5) would make it clear that if an
assessee discovered any omission or wrong statement in the original return of
income, he could file a revised return of income within the time limit as per
section 139(5). There was no bar/restriction in the provisions of section
139(5) that the assessee could not file a revised return of income after
issuance of notice u/s. 143(2) of the Act. The assessee could file a revised
return of income even in course of the assessment proceedings, provided, the
time limit prescribed u/s. 139(5) was available. That being the case, the
revised return of income filed by the assessee u/s. 139(5) could not be held as
invalid.

When the
assessee had made a claim of deduction u/s. 54 of the Act, it was incumbent on
the part of the Departmental Authorities to examine whether assessee was
eligible to avail the deduction claimed under the said provision. The
Departmental Authorities were not expected to deny assessee’s legitimate claim
by raising technical objection. In view of the aforesaid, the impugned order of
the CIT(A) was set aside and the issue was restored to the file of the AO for
examining and allowing assessee’s claim of deduction u/s. 54 subject to
fulfilment of conditions of section 54.