New Delhi: In a significant win 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 Rs 4.5 crore.
The verdict underscores that genuine taxpayers cannot be denied relief due to technical or clerical mistakes, with the tribunal drawing upon a 1955 CBDT circular and established judicial principles.
Case Snapshot
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Sept–Oct 2016: Seema sold her Patna property for Rs 4.5 crore.
Nov 2016: Invested Rs 2.62 crore in a residential house in New Delhi.
AY 2017–18: Filed ITR, but mistakenly claimed exemption under Section 54 instead of Section 54F.
Dec 2019: AO denied exemption; later upheld by CIT(A).
Nov 2024: Her appeal was dismissed again by CIT(A).
June 6, 2025: ITAT finally ruled in her favour.
What Went Wrong
The slip occurred because Section 54 applies to sale of residential property, while Section 54F applies to sale of land/non-residential property with reinvestment in a house. Despite her full compliance with Section 54F conditions, the AO and CIT(A) disallowed the exemption citing the wrong section.
ITAT’s Key Observations
The error was technical, not substantive.
Seema had fully complied with Section 54F requirements by reinvesting sale proceeds in a residential property.
Appellate authorities are not bound by the strictures applicable to AOs and can allow relief if facts justify it.
CBDT Circular No. 14 (1955) directs officers to guide taxpayers toward legitimate reliefs, not exploit ignorance.
The tribunal has remitted the matter back to the AO, directing exemption under Section 54F after verification.
Why This Ruling Matters
Substance over form: Tax relief cannot be denied for clerical lapses.
Judicial precedent: Confirms appellate bodies can correct such errors.
Taxpayer protection: Reaffirms CBDT’s long-standing principle of fairness.
The ITAT Patna’s June 2025 decision is a landmark precedent that strengthens taxpayer protection. By prioritising justice over procedure, and invoking the CBDT’s 1955 directive, the tribunal has ensured that technicalities cannot override genuine entitlements.
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