Bangalore ITAT Restores Section 50C and Section 54F Issues; Dismissal of Appeal for Non-Prosecution Held Unjustified
Case Background
Case: Smt. Parvathamma Vs ITO (ITAT Bangalore)
**ITA No.😗* 2075/Bangalore/2025
Assessment Year: 2016–17
Order Date: 18th June 2026
The Bangalore Bench of the Income Tax Appellate Tribunal delivered a significant ruling, holding that the Commissioner of Income Tax (Appeals) [CIT(A)] was not justified in dismissing an appeal solely on the ground of non-prosecution, particularly when substantive legal issues involving Section 50C and Section 54F of the Income-tax Act, 1961 were involved and remained unaddressed on merits.
Background Facts of the Case
Smt. Parvathamma, an individual assessee, filed her return of income for Assessment Year 2016–17 on 23.12.2016, declaring a total income of Rs. 2,72,630/-. Her case was subsequently selected for limited scrutiny, and the Assessing Officer issued notices requiring her to substantiate the capital gains computation and the deduction claimed under Section 54F of the Income-tax Act, 1961.
In response, the assessee submitted relevant documents including the sale deed, income computation, bank statements, and a property valuation report.
The Property Transaction
The assessee had sold a property to M/s. Reddy Structures Private Limited on 01.12.2015 for a declared sale consideration of Rs. 1,56,30,000/-. However, the Assessing Officer observed that the stamp duty guidance value of the property was Rs. 1,87,20,000/–, which was higher than the declared sale price. Accordingly, the Assessing Officer invoked Section 50C of the Income-tax Act, 1961 and adopted the higher stamp duty value as the deemed full value of consideration for the purpose of computing capital gains.
Investment in New Residential Property
On 18.03.2016, the assessee purchased a new residential property for Rs. 71,93,000/-, with additional stamp duty, registration charges, and related costs bringing the total acquisition cost to Rs. 76,68,265/-. Construction of a residential house on the newly acquired site commenced in May 2016 and was completed in June 2017 at a total construction cost of Rs. 1,20,10,000/-. The assessee began residing in the newly constructed property on 05.06.2017.
The claim for deduction under Section 54F of the Act amounting to Rs. 75,95,955/- was denied by the Assessing Officer on the ground that:
- The assessee had not furnished evidence demonstrating completion of construction before the due date of filing the return of income; and
- The capital gains amount had not been deposited in the Capital Gains Account Scheme before the due date.
The Assessing Officer accordingly computed capital gains by adopting net sale consideration of Rs. 1,87,20,000/-, reduced by cost of acquisition of Rs. 19,834/- and investment in new property of Rs. 75,95,955/-. The assessment was completed by order dated 17.12.2018 under Section 143(3) of the Income-tax Act, 1961.