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Non-filing of Income Tax Return can’t be a ground to deny Capital Gain Exemption

In ITA No.64/Bang/2019, Assessment Year : 2009-10, Smt. Tupel Raja Iyengar Shakuntala vs ITO, Bangalore, the assessee sold a residential property but had not filed a return of income for the relevant assessment year. The Assessing Officer, on receipt of information, re-opened the assessment by holding that the assessee escaped income exigible to tax, by way of the above transaction of sale of the property.

The Tribunal noted that the assessee had filed the computation of capital gains before the CIT(A). As per this computation, it is seen that the assessee had computed the long-term capital gains (LTCC) at Rs.19,54,873/- on the sale proceeds of the said property at Rs.46,65,000/-, after claiming the indexed cost of acquisition. It is also seen that the assessee had purchased a residential property for a consideration of Rs.37,50,830/- on 22.05.2008, i.e., within 7 days from the sale of original property on 16.05.2008.The Tribunal found that the AO, after examination of details/documents filed by the assessee before the CIT(A); has reported in his remand report dated 30.01.2018, that the documents produced by the assessee have been examined.

It was further noted that no adverse remarks have been made by the AO with regard to the computation of LTCG as well as the entitlement to claim an exemption under section 54 of the Act.

Thus the Tribunal held that it is, clear that the AO was satisfied with the sale/purchase of the said properties and the investment benefit available to the assessee under section 54 of the Act. In the remand report, the AO has only remarked that there is a claim for exemption under section 54 of the Act and that no return of income has been filed by the assessee for Assessment Year 2009-10. In my view, this remark by the AO cannot be a factor to deny the assessee its legitimate claim for exemption under section 54 of the Act. There is no prohibition under the Act on the assessee in claiming an exemption under section 54 of the Act in case it has not filed a return of income. Such a legal claim can be put forth at any stage of assessment/appellate proceedings and should be considered on merits in the light of the details/documents/ corroborative evidence filed in this regard and the benefit of the capital gain exemption cannot be denied to a taxpayer on the ground that the income tax return is not filed declaring such income.

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