In an assessee-friendly ruling, the Income Tax Appellate Tribunal (ITAT), Jaipur bench has held that the assessee can claim the benefit of capital gain deduction under section 54F of the Income Tax Act, 1961 during the re-assessment proceedings under section 147 and 148 of the Income Tax Act in case of non-filing of income tax returns.

The assessee, a farmer, could not file his income tax returns. Upon receiving a notice from the income tax department, he filed the return and claimed deduction under 54F of the Act towards the sale of the capital asset sold by the assessee as a co-owner of the property. However, both the Assessing Officer and the first appellate authority denied the benefit of the provision to the assessee.

Allowing the appeal of the assessee, the Tribunal noted that there is no dispute regarding the details of the capital asset sold by the assessee as a co-owner of the property.

“However, the assessee at the time of filing of the appeal before the L’d. CIT(A) has specifically raised an issue of claiming of deduction U/s 54F of the Act and claimed that the sale consideration has been used for the construction of a new residential house which is eligible for deduction U/s 54F of the Act. Having regard to the facts and circumstances, where the assessee is a farmer and a senior citizen, the claim of deduction U/s 54F of the Act cannot be denied without verification of the fact of the utilization of the sale consideration for construction of the house. Since it is a case of non-filing of return of income and the A.O. has issued notice U/s 148 of the Act for assessing the capital gain in the hands of the assessee, therefore, there is no bar in claiming the deduction U/s 54F of the Act against the capital gain proposed to be taxed by the A.O. in the proceedings U/s 147 of the Act,” the Tribunal said.