Tribunal allowed Section 54GB deduction for investment in eligible startup, overturning disallowance due to misinterpretation of timelines, non-existent cap, and ignored evidence.

ORDER

Per Rahul Chaudhary, Judicial Member:

1. The present appeal preferred by the Assessee is directed against the Order, dated 25/11/2025, passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the ‘CIT(A)’], whereby the Ld. CIT(A) had dismissed the appeal of the Assessee against the Assessment Order, dated 23/02/2024, passed under Section 143(3) read with Section 144B of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’], for the Assessment Year 2022-2023.

2. The Assessee has raised following grounds of appeal: “On the facts and in the circumstances of the case and in law the Ld. NFAC/CIT(A) erred in confirming the following actions of the Assessing Officer”

i. passing order u/s 143(3) of the Act determining taxable income at Rs.1,71,96,581/- against returned income in a sum of Rs.23,80,340/-.

ii. making an addition of Rs.1,48,16,241/- by disallowing the deduction u/s.54GB of the Act.”

3. The relevant facts in brief are that for the Assessment Year 2022-2023, the Assessee filed return of income of 31/07/2022 declaring total income of INR.23,80,340/-. The case of the Assessee was selected for complete scrutiny on account of ‘Non- fulfilment of Requisite Condition(s) for claiming deduction u/s.54/54B/54F/54GB on Capital Gains (Non-business ITR)’. The Assessing Officer noted that the Assessee claimed deduction of INR.1,48,16,241/- under Section 54GB of the Act in respect of investment of INR.3.69 Cores made in equity shares of Autonymi Pvt. Limited [hereinafter referred to as ‘APL’]. Vide show cause notice, dated 19/12/2023, the Assessee was asked to explain why the Long Term Capital Gain exemption claimed under Section 54GB of the Act should not be disallowed due to non-fulfillment of the requisite conditions for claiming the aforesaid deduction. The relevant extract of the aforesaid show cause notice read as under:

“3. Cases where variation is proposed:

3.1. Complete description of issues involved (issue wise): On perusal of the submission and record available, it is seen that assessee had sold an immovable property to the tune of Rs.4,40,00,000/- on 02.09.2021 and determined capital gain of Rs.1,76,67,062/-. The Assessee has invested amount of Rs.3,69,00,000/- in New SMC (Autonymi Pvt. Limited) and claimed deduction of Rs.1,48,16,241/- under section 54GB of the Act. In this connection following observation has been made:

(i) As per section 54GB, assessee had to invest net consideration received on account of sale of residential plot i.e. Rs.4,40,00,000/- in the equity shares of new SMC during year, but she had invested only Rs.3,69,00,000/-.

(ii) Further, the provision of section 54GB of the Act shall not apply to any transfer of residential property made after the 31st March 2017. However, in this case transfer of residential plot was done on 02.09.2021.

(iii) Further, notice u/s.133(6) of the Act was issued on 08.12.2023 to the concerned SMC to furnish the relevant details/information such as details of investment, shareholding, new assets purchases etc. but no confirmation or compliance has been received till dated.

(iv) Further, as per provision of section 54GB maximum limit of investment is Rs.50 lakhs only, whereas assessee has invested much more than the prescribed limited.

In view of the above, facts, you are hereby show caused as to why the deduction u/s.54GB of the Act amounting to Rs.1,48,16,241/- should not be disallowed and the total capital gain of Rs.1,76,67,062/- earned on account of sale of residential plot should not be add back to your total income for the relevant assessment year as per provis