1 week ago
Delhi ITAT Quashes Time-Barred Reassessment in Section 54 Dispute
Raj Kumar sold an old home and claimed a tax break for building a new one.
The tax department rejected the break because construction of the new home began before the old home was sold.
Kumar appealed the decision.
His lawyer also argued that the tax department had sent its legal notice too late.
The tribunal calculated that only 33 days remained for the notice to be issued.
That time ended on 9 July 2022.
The notice was issued on 23 July 2022, which was too late.
The tribunal therefore cancelled the notice and the reassessment based on it.
Raj Kumar sold his Paschim Vihar residential flat on 9 October 2013 for ₹53 lakh.
He claimed a Section 54 exemption after investing about ₹47.38 lakh in land and construction of a Tilak Nagar house.
The Assessing Officer rejected the exemption because construction had begun on 31 October 2012, before the sale.
The ITAT found that only 33 days remained to issue a fresh Section 148 notice after applying TOLA and Supreme Court rulings.
Because the notice issued on 23 July 2022 exceeded the limitation period ending 9 July 2022, the ITAT quashed the reassessment.
- Who
- Raj Kumar and the Income Tax Department, with the appeal decided by the Delhi Income Tax Appellate Tribunal.
- What
- The ITAT quashed a reassessment and Section 148 notice after finding the notice was issued beyond the limitation period.
- Where
- The case concerned properties in Paschim Vihar and Tilak Nagar, Delhi, and was decided by the Delhi ITAT.
- When
- The ITAT pronounced its order on 3 August 2026; the disputed fresh notice was issued on 23 July 2022.
- Why
- The tribunal found that the surviving 33-day period for issuing the notice expired on 9 July 2022.
Taxpayer’s Position
Tax Department’s Position
Section 54 exemption
Taxpayer’s Position
Kumar claimed an exemption after investing about ₹47.38 lakh in a new residential house and supported the investment with bank records and vendor invoices.
Tax Department’s Position
The Assessing Officer and CIT(A)/NFAC rejected the exemption because construction began before the original property was sold.
Capital-gains treatment
Taxpayer’s Position
Kumar challenged the assessment, which treated the entire ₹53 lakh sale consideration as short-term capital gain and denied indexed acquisition cost.
Tax Department’s Position
The Assessing Officer applied the short-term capital-gain treatment after rejecting the Section 54 claim and indexed-cost benefit.
Validity of reassessment notice
Taxpayer’s Position
Kumar argued that the Section 148 notice was barred by limitation under the Supreme Court’s Rajeev Bansal ruling.
Tax Department’s Position
The Assessing Officer issued the Section 148A(d) order and fresh Section 148 notice on 23 July 2022, but the ITAT found the surviving limitation period had already expired.
Key facts
- Case
- Raj Kumar vs ITO, ITA No. 3396/Del/2026
- Original property
- Residential flat in Paschim Vihar, purchased on 20 July 2005 for ₹6.48 lakh including stamp duty
- Sale
- The flat was sold on 9 October 2013 for ₹53 lakh
- New house investment
- About ₹47.38 lakh was invested in land and construction in Tilak Nagar
- Construction start
- 31 October 2012, before the sale of the original property
- Remaining limitation
- The ITAT determined that 33 days remained after applying TOLA and the Supreme Court’s Rajeev Bansal ruling
- Deadline and notice
- The surviving period expired on 9 July 2022; the fresh Section 148 notice was issued on 23 July 2022
Sources
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