Delhi tribunal rules fresh capital gains deduction claims are invalid unless made in revised return

The Delhi Income Tax Appellate Tribunal clarifies that taxpayers cannot claim fresh capital gains exemptions after a notice under Section 148 unless such claims are included in a revised return, impacting property-related tax appeals.

The Delhi bench of the Income Tax Appellate Tribunal has said an assessing officer cannot entertain a fresh capital gains deduction claim made only in a return filed after a notice under Section 148, unless the claim was also made in a revised return. The ruling came in the case of Poonam Raghav, who challenged an assessment for 2016-17 after tax officials rejected her attempt to seek relief under Section 54 of the Income Tax Act.

Raghav argued that ₹8.50 lakh received from Rahul Arora formed part of the sale consideration for a residential property in Faridabad and that the money had been reinvested in new homes bought from the Omaxe Group. On that basis, she sought to enlarge the declared sale consideration to ₹31 lakh and claim the capital gains exemption available for reinvestment in a residential property. The assessing officer refused, saying the deduction had not been claimed in the original return and was raised for the first time only in the response to the reopening notice.

The Commissioner of Income Tax (Appeals), sitting through the National Faceless Appeal Centre, upheld that view, finding that a taxpayer cannot raise a new exemption claim in a return submitted after reopening when it was omitted from the original filing. A two-member tribunal bench comprising Judicial Member Madhumita Roy and Accountant Member Krinwant Sahay agreed, saying the fresh claim could not be considered in assessment proceedings and finding no fault in the lower authority’s reasoning. The appeal was dismissed.

The decision adds to a stream of Delhi tribunal rulings shaping how capital gains exemptions are applied in property-related cases. In one recent matter reported by The Economic Times, the tribunal sided with a taxpayer who had used sale proceeds from unlisted shares to buy a Delhi home, holding that a deposit into the Capital Gains Account Scheme was unnecessary once the property had already been purchased before the income tax filing deadline. Other Delhi rulings have also focused on the mechanics of capital gains computation, including allowing indexed cost of improvement, recognising payments to occupants for vacant possession as deductible transfer costs and permitting set-off of capital losses against long-term gains.