In a recent decision, the Mumbai bench of the Income-tax Appellate Tribunal (ITAT) has ruled in favor of taxpayer Mukesh Harilal Mehta, affirming his entitlement to claim section 54 deduction in his Income-tax (I-T) return for the financial year 2014-15, despite a mistake made by the builder in allotting the flat.
The case revolved around Mehta’s claim for exemption under Section 54 of the Income-tax Act, which provides relief on long-term capital gains arising from the sale of a residential property if the proceeds are reinvested in another residential property within stipulated timeframes.
Mehta fulfilled the conditions outlined in Section 54, having reinvested the capital gains from the sale of his property in the purchase of a new residential flat. However, during the assessment process, the I-T officer raised objections, citing discrepancies in the documentation related to the new flat’s allocation.
Despite the absence of a registered sale deed for the new flat and inconsistencies in the possession letter, which differed from the initially intended flat, the ITAT deemed the denial of exemption unjustified. The tribunal emphasized that Mehta should not be penalized for the builder’s error in allocating the flat.
The ruling underscores the principle of equity and fairness in tax assessments, reaffirming the taxpayer’s right to claim legitimate deductions under the law, regardless of administrative lapses or errors committed by third parties.
