"Unheard: The Denial of Section 54 Exemption"

Court Name : Delhi High Court

Parties : Shashi Bala Sharma Vs ITO

Decision Date : 24 July 2023

Judgement ref : W.P.(C) 5136/2023

Terminally ill lady who has just sold her property. You've received a hefty sale consideration and rental income, but you haven't filed your income tax return for the relevant Assessment Year. The revenue department catches wind of this and initiates reassessment proceedings against you.

You file your return belatedly, disclosing the rental income and claiming exemption of long-term capital gain under Section 54 of the Act. But the revenue department isn't convinced. They issue a show cause notice, questioning why the exemption should not be denied since the sale consideration was used to purchase another property in your son's name, not yours.

You're given a short deadline to respond, but you manage to submit a detailed reply, citing various judicial precedents supporting your claim for exemption under Section 54. You also request a personal hearing to explain your situation.

But here's the kicker: The assessment order doesn't address these judicial precedents. Worse still, your request for a personal hearing is denied, violating the process mandated under Section 144B(6)(viii) of the Act and your right to a fair hearing.

The Delhi High Court, however, sees things differently. They set aside the assessment order and demand notice, remanding the matter back to the Assessment Officer. The court directs the officer to proceed in accordance with the law, giving due consideration to the judicial precedents you cited and granting you a fair opportunity to be heard.

So, what's the takeaway here? The right to a fair hearing is fundamental, even in tax matters. And when it comes to exemptions under Section 54, it's clear that the property doesn't necessarily have to be in your name.