Appeal details
Counselvise Citation
[NaN] 107 COUNSELVISE.COM (IT) 2042 (ITAT-RAJKOT)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
8 month(s) 27 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
03-02-2022
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
DB
Assessment Year
2015-2016
Appeal Filed On
07-05-2021
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT Before: Shri Mahavir Prasad, Judicial Member and Shri Waseem Ahmed, Accountant Member [Conducted through E-Court at Ahmedabad] Kalpak A. Maniar HUF, Abhay Nivas, 14-Panchnath Plot, Rajkot PAN:AAHHM2200H (Appellant) Vs The Pr. CIT, Rajkot-1 (Respondent) Revenue by: Shri Anshu Prakash, CIT-D.R. Assessee by: Shri Mehul Ranpura, A.R. Date of hearing : 18-01-2022 Date of pronouncement : 03-02-2022 आदेश/ORDER PER : WASEEM AHMED, ACCOUNTANT MEMBER:- The captioned appeal has been filed at the instance of the assessee against the order of the ld. Principal Commissioner of Income Tax, Rajkot-1 ITA No. 68/Rjt/2021 Assessment Year 2015-16 I.T.A No. 68/Rjt/2021 A.Y. 2015-16 Page No Shri Kalpak A. Maniar HUF vs. Pr. CIT 2 passed under section 263 of the Income Tax Act, 1961 relevant to assessment year 2015-16. 2. The assessee has raised following grounds of appeal:- 1. The grounds of appeal mentioned hereunder are without prejudice to one another. 2. The order passed by Pr. Commissioner of Income tax, Rajkot-1 [hereinafter referred as to the "Pr.CIT"] is bad in law, invalid and requires to be quashed, the same may kindly be quashed. 3. Ld. Pr.CIT erred in law and on facts in exercising revisional jurisdiction ignoring the fact that the AO has made due inquiry and after satisfying, has finalized the assessment. Therefore, the order passed by Pr.CIT is requires to be quashed and may kindly be quashed. 4. The learned Pr. CIT erred on facts as also in law in alleging that the order u/s. 143(3) is erroneous and prejudicial to the interest of revenue as the AO failed to inquire and verify claim of deduction u/s.54F of the Act at Rs.1,25,00,000/-and thereby setting aside the order passed u/s. 143(3) of the Act dated 01.12.2017. The order passed u/s 263 of the Act by the learned Pr. CIT is totally unjustified on facts as also in law therefore the same may kindly be quashed.” 3. The relevant facts, in short, are that the assessee during A.Y. 2015-16 had sold immovable property for Rs. 1,25,06,250/- on 04-02-2015 and shown “NIL” income after claiming deduction u/s. 54F of Rs. 1,11,21,928/-. It was submitted that the assessee HUF has purchased a new residential house, flat No. A-101 in Patriya project for Rs. 1,25,50,000/- only. During the course of assessment proceedings, the ld. Assessing Officer issued show cause notice dated 14-07-2017 requesting the assessee to furnish details of immovable property sold during the year and also furnish complete details of deduction claimed u/s 54F of the Act along with documentary evidence. In response to the said notice, the assessee filed reply dated 28-07-2017 before I.T.A No. 68/Rjt/2021 A.Y. 2015-16 Page No Shri Kalpak A. Maniar HUF vs. Pr. CIT 3 the Assessing Officer wherein the assessee filed documentary evidences i.e. copy of ledger from the builder and proof of payment made to builder in support of its claim u/s 54F of the Act. The assessee further filed submission dated 27-11-2017 wherein the assessee filed detailed explanation regarding exemption u/s 54F of the Act and cited various judicial precedents in support of his claim. The ld. Assessing Officer after taking into consideration details filed by the assessee, granted deduction u/s 54F of the Act and accepted the return of income filed by the assessee. 4. The Pr. Commissioner of Income, Rajkot-1, initiated proceedings u/s. 263 of the Act vide notice dated 29/01/2020, in respect of the captioned assessment year on the ground that as per the provision of section 54F of the Act, the exemption is allowable if the assessee purchases the residential house within two years from the date on which transfer takes place. The Pr. CIT noted that in the instant set of facts, the assessee sold property on 04-02- 2015 for a sum of Rs. 1,25,06,250/- and showed “NIL” capital after claiming deduction u/s 54F of the Act of Rs. 1,11,21,928/- stating that the assessee had purchased new residential house by giving advance of 1,25,50,000/- in flat A-101 Patriya project. The assessee submitted receipts of advance booking given for Rs. 1,25,50,000/- on 26-08-2015 to Patriya project. Further, the assessee submitted registered deed No. 2150/2079 dated 27-03-2019 regarding the purchase of residential house flat no. A-101 in Patriya project for Rs. 1,25,00,000/-. The Pr. CIT in the 263 notice stated that since the assessee has failed to get the flat registered in the name of HUF, within time allowed u/s 54F of the Act, the claim of deduction u/s 54F is not allowable. Therefore, the assessment order passed by the Assessing I.T.A No. 68/Rjt/2021 A.Y. 2015-16 Page No Shri Kalpak A. Maniar HUF vs. Pr. CIT 4 Officer for AY 2015-16 is prima facie erroneous in so far as it is prejudicial to the interest of the revenue. In response to the said notice, the assessee filed submission dated 17-03-2020 wherein it was submitted that during the course of assessment proceedings, the assessee had submitted reply dated 27-11-2017 wherein the said question was very well explained and discussed. Vide the above reply, the assessee had cited relevant judgments which state that the assessee is not required to get the title to the property “registered” for claiming exemption u/s 54F of the Act. The requirement of the section is limited to purchase of property and it does not require registered title to the property. Before the Pr. CIT, the assessee placed reliance of several judicial precedents in support of the above contention. The assessee further submitted that the ld. Pr. CIT in its notice dated 29-01- 2020 has itself observed that amount of Rs. 1,25,50,000/- has been invested on 26-08-2015 i.e. within stipulated time given u/s 54F of the Act. The ld. Pr. CIT vide 263 order dated 02-03-2021 observed that in the assessee’s case it is seen that there is no purchase of flat, no possession of flat and even no valid agreement to purchase the flat. The assessee has made only advance payment from which the assessee has not got any enforceable right for the purchase of flat. The facts and circumstances therefore indicate that order passed by ld. Assessing Officer is without application of mind and without conducting necessary inquiry. Accordingly, the ld. Pr. CIT set aside the assessment order with a direction to ld. Assessing Officer to enhance the assessed income by Rs. 1,11,21,928/-. 5. Being aggrieved by the order of ld. Pr. CIT, the assessee is in appeal before us. I.T.A No. 68/Rjt/2021 A.Y. 2015-16 Page No Shri Kalpak A. Maniar HUF vs. Pr. CIT 5 6. The ld. Authorized Representative before us submitted that so far as proposition regarding registration of purchase deed is concerned, this aspect was discussed with the Assessing Officer during the course of assessment proceedings and various decisions were cited in support of the contention that in order to claim exemption u/s. 54F of the Act, “registration” of purchase deed and the assessee being “registered” owner of the property is not mandated. The ld. Authorized Representative submitted that during the course of assessment proceedings, the ld. Assessing Officer had enquired about the claim of deduction u/s 54F of the Act and had required the assessee to produce documentary evidences in support thereof. The assessee had filed reply dated 28-07-2017 and another reply 27-11-2017 wherein the supporting documents as well as judicial precedents in support of the claim of the assessee were duly furnished. The ld. Assessing Officer after taking into consideration the reply filed by the assessee and time to time discussion allowed the claim of 54F exemption after due application of mind. The ld. Authorized Representative also cited before us various decisions in support of the proposition that ownership/registration of property is not a pre- requisite for claiming deduction u/s 54F of the Act and the intent of section 54F gets satisfied if the assessee is able to demonstrate that the property has been purchased. The ld. Authorized Representative drew our attention to its submission dated 01-03-2017 on page no. 11 of the paper book, copy of its reply dated 28-07-2017 at page no. 21 to 23 of the paper book and reply dated 21-11-2017 at page 75 of the paper book in support of contention that all the relevant details regarding the claim under section 54F of the Act were enquired into by the ld. Assessing Officer and suitable responses were filed I.T.A No. 68/Rjt/2021 A.Y. 2015-16 Page No Shri Kalpak A. Maniar HUF vs. Pr. CIT 6 during the course of assessment proceedings. Therefore, it cannot be said that in the instant set of facts the assessment order was passed without application of mind and the order is not erroneous or prejudicial to the interest of the Revenue. 7. The ld. Departmental Representative placed reliance on the arguments taken up by Pr. CIT in his 263 order. The ld. Departmental Representative submitted while the advance for purchase of property may have been made within time stipulated u/s 54F of the Act, the sale deed was registered on 27- 03-2019 which was beyond the period stipulated for making investments u/s 54F of the Act. This fact of non-registration of purchase deed was ignored by the ld. Assessing Officer and hence order passed by the Assessing Officer is without proper application of mind and hence the same is liable to be set aside u/s 263 of the Act. 8. We have heard the rival contentions and perused the materials available on record. The issue for consideration before us is the scope of enquiry under Explanation 2(a) to section 263 and whether in the instant facts can it be said that the order passed by Ld. AO is without making inquiries or verification which should have been made, and hence erroneous and thus requiring revision by Pr. CIT u/s 263 of the Act. 9. An inquiry made by the Assessing Officer, considered inadequate by the Commissioner of Income Tax, cannot make the order of the Assessing Officer erroneous. In our view, the order can be erroneous if the Assessing Officer fails to apply the law rightly on the facts of the case. As far as I.T.A No. 68/Rjt/2021 A.Y. 2015-16 Page No Shri Kalpak A. Maniar HUF vs. Pr. CIT 7 adequacy of inquiry is considered, there is no law which provides the extent of inquiries to be made by the Assessing Officer. It is Assessing Officer’s prerogative to make inquiry to the extent he feels proper. The Commissioner of Income Tax by invoking revisionary powers under section 263 of the Act cannot impose his own understanding of the extent of inquiry. There are a number of judgments by various High Courts in this regard. 10. Delhi High Court in the case of CIT Vs. Sunbeam Auto 332 ITR 167 (Del.), made a distinction between lack of inquiry and inadequate inquiry. The Hon’ble court held that where the AO has made inquiry prior to the completion of assessment, the same cannot be set aside u/s 263 on the ground of inadequate inquiry. The relevant finding is as under: “12...... There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between “lack of inquiry” and “inadequate inquiry”. If there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of “lack of inquiry”, that such a course of action would be open. From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualisea case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. Cases may be visualised where the Income-tax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the I.T.A No. 68/Rjt/2021 A.Y. 2015-16 Page No Shri Kalpak A. Maniar HUF vs. Pr. CIT 8 Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. 15. Thus, even the Commissioner conceded the position that the Assessing Officer made the inquiries, elicited replies and thereafter passed the assessment order. The grievance of the Commissioner was that the Assessing Officer should have made further inquires rather than accepting the explanation. Therefore, it cannot be said that it is a case of ‘lack of inquiry’.” 11. In Gabriel India Ltd. [1993] 203 ITR 108 (Bom), law on this aspect was discussed in the following manner (page 113) “The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity.” 12. The Mumbai ITAT in the case of Sh. Narayan Tatu Rane Vs. ITO, I.T.A. No. 2690/2691/Mum/2016, dt. 06.05.2016 examined the scope of enquiry under Explanation 2(a) to section 263 in the following words:- “20. Further clause (a) of Explanation states that an order shall be deemed to be erroneous, if it has been passed without making enquiries or verification, which should have been made. In our considered view, this provison shall apply, if the I.T.A No. 68/Rjt/2021 A.Y. 2015-16 Page No Shri Kalpak A. Maniar HUF vs. Pr. CIT 9 order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Ld Pr. CIT cannot be taken as final one, without scrutinising the nature of enquiry or verification carried out by the AO vis-à-vis its reasonableness in the facts and circumstances of the case. Hence, in our considered view, what is relevant for clause (a) of Explanation 2 to sec. 263 is whether the AO has passed the order after carrying our enquiries or verification, which a reasonable and prudent officer would have carried out or not. It does not authorise or give unfettered powers to the Ld Pr. CIT to revise each and every order, if in his opinion, the same has been passed without making enquiries or verification which should have been made. In our view, it is the responsibility of the Ld Pr. CIT to show that the enquiries or verification conducted by the AO was not in accordance with the enquries or verification that would have been carried out by a prudent officer. Hence, in our view, the question as to whether the amendment brought in by way of Explanation 2(a) shall have retrospective or prospective application shall not be relevant.” 13. Before deciding the issue, it would be useful to refer to some Supreme Court decisions on this subject which would throw useful light on the scope of enquiry under Explanation (a) to section 263 of the Act. 14. Recently the Supreme Court of India in the case of Principal Commissioner of Income-tax, Surat-2 v. Shreeji Prints (P.) Ltd.[2021] 130 taxmann.com 294 (SC) dismissed SLP filed by the assessee against order passed by High Court holding that where assessee-company had received unsecured loans from two different companies and Assessing Officer had made inquiries in detail and accepted genuineness of same, such view of Assessing Officer being a plausible view could not be considered erroneous or prejudicial to interest of revenue. The facts of this case were that respondent assessee has filed its return of income showing total income of Rs. 62,55,900/- which was assessed under section 143(3) of the Act, 1961 by an assessment order dated 14th March 2016. The respondent company received unsecured loans from M/s Georget Tradecom Pvt Ltd and M/s. I.T.A No. 68/Rjt/2021 A.Y. 2015-16 Page No Shri Kalpak A. Maniar HUF vs. Pr. CIT 10 Purba Agro Food Pvt Ltd amounting to Rs. 2.49 Crore and the Assessing Officer allowed these unsecured loans. The Principal Commissioner of Income-tax invoked section 263 of the Act, 1961 for revising the assessed income of the respondent assessee. It was noticed by the PCIT that the unsecured loans obtained by the respondent assessee are shown as investment in the name of the assessee in the share application as well as in the balance sheet of the respective companies. The PCIT passed an order under section 263 of the Act directing the Assessing Officer to pass fresh assessment order under section 143(3) of the Act, 1961 on the aspect of unsecured loans shown by the respondent assessee. The Hon’ble Supreme Court made the following observation while deciding the issue in favour of the assessee:- “Thus, the Tribunal has considered in detail the aspect of revisional power to be exercised by the PCIT in the facts of the case and has given a finding of facts that the Assessing Officer has made inquiries in detail and after applying mind, accepted the genuineness of loans received by the respondent assessee from the aforesaid two companies and such view of the Assessing Officer is a plausible view, and therefore, the same cannot be said to be erroneous or prejudicial to the interest of the Revenue.” 15. The Supreme Court in another recent case of Principal Commissioner of Income-tax 2 v. Shree Gayatri Associates*[2019] 106 taxmann.com 31 (SC), held that where Pr. CIT passed a revisional order making addition to assessee's income under section 69A in respect of on- money receipts, however, said order was set aside by Tribunal holding that AO had made detailed enquiries in respect of on-money receipts and said view was also confirmed by High Court, SLP filed against decision of High Court was liable to be dismissed. The facts of this case were that pursuant to search proceedings, assessee filed its return declaring certain unaccounted I.T.A No. 68/Rjt/2021 A.Y. 2015-16 Page No Shri Kalpak A. Maniar HUF vs. Pr. CIT 11 income. The Assessing Officer completed assessment by making addition of said amount to assessee's income. The Principal Commissioner passed a revisional order under section 263 on ground that Assessing Officer had failed to carry out proper inquiries with respect to assessee's on money receipt. In appeal, the Tribunal took a view that Assessing Officer had carried out detailed inquiries which included assessee's on money transactions and Tribunal thus set aside revisional order passed by Commissioner. The High Court upheld Tribunal's order. The Supreme Court while dismissing the SLP filed by the Department held as under:- “We have heard learned counsel for the Revenue and perused the documents on record. In particular, the Tribunal has in the impugned judgment referred to the detailed correspondence between Assessing Officer and the assessee during the course of assessment proceedings to come to a conclusion that the Assessing Officer had carried out detailed inquiries which includes assessee's on-money transactions. It was on account of these findings that the Tribunal was prompted to reverse the order of revision. No question of law arises. Tax Appeal is dismissed” 16. The Supreme Court in the recent case of Principal Commissioner of Income-tax-2, Meerut v. Canara Bank Securities Ltd[2020] 114 taxmann.com 545 (SC), dismissed the Revenue’s SLP holding that 263 proceedings are invalid when AO had made enquiries and taken a plausible view in law, with the following observations:- “Having heard learned counsel for the parties and having perused the documents on record, we see no reason to interfere with the view of the Tribunal. The question whether the income should be taxed as business income or as arising from the other source was a debatable issue. The Assessing Officer has taken a plausible view. More importantly, if the Commissioner was of the opinion that on the available facts from record it could be conclusively held that income arose from other sources, he could and ought to have so held in the order of revision. There was simply no necessity to remand the proceedings to the Assessing Officer when no further inquiries were called for or directed” I.T.A No. 68/Rjt/2021 A.Y. 2015-16 Page No Shri Kalpak A. Maniar HUF vs. Pr. CIT 12 17. The Supreme Court in the case of Principal Commissioner of Income-tax--8 Mumbai v. Sumatichand Tolamal Gouti [2019] 111 taxmann.com 287 (SC) held that where High Court upheld Tribunal's order holding that AO had made detailed enquiries while allowing assessee's claim for deduction of business expenditure and, thus, revisional order passed by Commissioner was not sustainable, SLP filed against High Court's order was liable to be dismissed. The facts of this case were that in course of assessment, Assessing Officer allowed assessee's claim for deduction of certain expenditure on purchase of CDs on Jain Religion by expending an amount of Rs. 10.4 crores, after due examination. The Commissioner passed revisional order holding that Assessing Officer had not carried out any enquiries as to nature of expenditure being capital or not. The Tribunal, however, allowed assessee's appeal holding that Assessing Officer had carried out detailed enquiries and taken a view which was a plausible view. Accordingly, Tribunal set aside revisional order passed by Commissioner. The High Court upheld order passed by Tribunal. The Supreme Court on consideration of above facts held that SLP filed against High Court's order was to liable to be dismissed. The Supreme Court made the following observations, while passing the order:- “It is by now well settled that, the Commissioner can exercise revisional powers under Section 263 of the Act only when it is found that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of Revenue. In the present case, the Tribunal noted the observations of the Assessing Officer in the order of remand to the effect that Jain munis do not advocate spread of religion through use of computers, source of electronic media is usually shunned, very small section of the community uses computer technology for religious purposes as plenty of printed literature is available in the market. All these factors led to the market value of the CDs declining dramatically. It was on account of these reasons, that the assessee had incurred substantial loss arising out of reduction in the value of stock lying at the end of the year. The Tribunal, therefore noted that I.T.A No. 68/Rjt/2021 A.Y. 2015-16 Page No Shri Kalpak A. Maniar HUF vs. Pr. CIT 13 the Assessing Officer had carried out detailed enquiries and taken a plausible view.” 18. It may be useful to refer to recent jurisdictional Gujarat High Court decision in the case of Principal Commissioner of Income Tax-3 v. Minal Nayan Shah [2020] 121 taxmann.com 30 (Gujarat). The facts of this case were that the assessee sold land and invested sale consideration for purchase of a block of residential project. The assessee claimed exemption under section 54F and the same was allowed by the assessing officer. The Principal Commissioner noticed that block purchased consisted of three independent units located on separate floors and hence, he invoked section 263 and concluded that assessee was not eligible for deduction under section 54F. The Tribunal observed that three units were located on different floors of same structure and were purchased by assessee by a common deed. The Tribunal held that in instant case multiple residential units would be included within sphere of section 54F. The Tribunal, while holding that the assessment order is not erroneous and prejudicial to the interests of the Revenue, observed as below: “9.1 As pointed out on behalf of the assessee, two pre-requisites must coexist before the designated authority could exercise the revisional jurisdiction conferred on him namely; the order should be (I) erroneous & (ii) the error must be such that it is prejudicial to the interests of the Revenue. However, an erroneous order does not necessarily mean an order with which the Pr. CIT is unable to agree. The AO while passing an order of assessment, performs judicial functions. An order of assessment passed by the AO cannot be interfered only because an another view is also possible on the issue as held in CIT v. Greenworld Corporation [2009] 181 Taxman 111 (SC). If in given facts and circumstances of the case, two views are possible and one view as legally plausible has been adopted by the AO then existence of other possible view alone would not be sufficient to exercise powers under s.263 of the Act, by the Pr. CIT/CIT concerned. Hence, there can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the AO. It is only when an order is erroneous and causing prejudice, that I.T.A No. 68/Rjt/2021 A.Y. 2015-16 Page No Shri Kalpak A. Maniar HUF vs. Pr. CIT 14 the Section will be attracted. An incorrect assumption of facts or incorrect application of law will satisfy the requirements of the order being erroneous. ..... 9.3 An inquiry on the issue contemplated under section 263 r.w. Explanation 2 of the Act has its limits implicit in it. It is only a very gross case of inadequacy in inquiry or where inquiry is per se mandated on the basis of record available before AO and such inquiry was not conducted which resulted an error fatal to the interest of the Revenue, the revisional power so conferred can be exercised to invalidate the action of the AO. The AO is not expected to chase will of the wisp to find out something adverse to the assessee on each and every transaction. What is significant is the lack/inadequacy of inquiry should result in a substantive error or a visible abnormality resulting in loss of Revenue. The claim of the assessee towards deductibility under s.54F of the Act cannot be regarded to be erroneous in the light of judicial precedents and therefore lesser degree of inquiry made on the issue per se would not cover the situation in the sweep of expression 'erroneous'. A plausible view admitted in assessment stage in exercise of quasi-judícial function cannot be dislodged in a light hearted manner in the name of inadequacy in inquiries or verification as perceived in the opinion of the revisional authority. 9.4 On a broader reckoning of facts and law enunciated in this regard, we find merit in both the pleas raised on behalf of the assessee i.e. the alleged inadequacy in inquiry has not resulted in perceptible error when tested in the light of judicial precedents, secondly and without prejudice, the claim of the assessee under s.54F of the Act is certainly plausible in law and thus the action of the AO is not open to attack on the grounds of being arbitrary and capricious. Section263 of the Act does not visualize a case of substitution of the judgment of the Revisional Commissioner for that of AO unless the decision of the AO is found to be erroneous. The claim under s.54F of the Act being plausible, the foundation for exercise of revisional jurisdiction in our view does not exist. We thus find merit in the plea of the assessee towards lack of authority of Pr. CIT to exercise jurisdiction conferred under s.263 of the Act in the instant case. The revisional order is accordingly set aside and quashed." 18.1 On consideration of above facts and findings of order of Tribunal, the Gujarat High Court held that Assessing Officer was justified in allowing exemption under section54F to assessee 19. The Ld. AR has cited the decision of Shri Basheer Noorullah Khan Vs CIT(ITAT Bangalore) ITA No. 575/Bang/2019 in support of his I.T.A No. 68/Rjt/2021 A.Y. 2015-16 Page No Shri Kalpak A. Maniar HUF vs. Pr. CIT 15 contention that it is not mandatory to become owner (viz. registration of property) of the property for the purpose of claiming exemption u/s 54 of the Act. The relevant extracts of the judgment read as below:- “On this aspect of the matter, this subsequent judgment of Hon’ble Apex Court does not make difference because as per this subsequent judgment of Hon’ble Apex Court rendered in the case of CIT Vs. Balbir Singh Maini (supra), the assessee has not become the owner of the property in question because there is no registered sale deed executed by the vendor but as per the judgment of Hon’ble Delhi High Court, becoming the owner of the property in question is not required for the purpose of section 54 of the IT Act. Section 54F of the IT Act is parametria with section 54 of the IT Act. Hence, we respectfully follow this judgment of Hon’ble Delhi High Court and decide the Issue in favour of the assessee.” 20. A similar view was taken by the Delhi ITAT in the case of ITO Vs Smt. Swati Oberoi (ITAT Delhi) (2021) ITA No. 4150/Del./2018, wherein it was held that the benefit of deduction under Section 54F of the IT Act cannot be denied to the Respondent merely on the ground that conveyance deed has not yet been got registered particularly when the Respondent is proved to be in possession of the property. The Delhi ITAT observed as below:- “13. In view of what has been discussed above, we are of the considered view that benefit of deduction u/s 54F of the Act cannot be denied to the assessee merely on the ground that conveyance deed has not yet been got registered particularly when the assessee is proved to be in possession of the property in question out of which she was already owner in possession of 1/3rd share since 2008 after making a complete payment of the sale consideration to the vendors and has duly proved her possession over the property by way of electricity and water charges bills. So, we find no reason to interfere into the impugned order passed by the ld. CIT (A) allowing deduction to the assessee u/s 54F of the Act, hence appeal filed by the Revenue is dismissed.” 21. Further in the case of CIT vs. Sambandam Udaykumar (Karnataka High Court) Income Tax Appeal No. 175 of 2012, a similar issue had come up for consideration before the Karnataka High Court wherein the I.T.A No. 68/Rjt/2021 A.Y. 2015-16 Page No Shri Kalpak A. Maniar HUF vs. Pr. CIT 16 assessee sold shares for Rs. 4.18 crores and within 12 months invested Rs. 2.16 crores thereof to construct a house property and claimed exemption u/s 54F. However, as even after the expiry of 3 years of the date of transfer, the construction of the house was not complete and sale deed not executed, the AO & CIT (A) denied relief u/s 54F though the Tribunal granted it. On appeal by the department to the High Court, the High Court, dismissing the appeal held:- “S. 54F is a beneficial provision for promoting the construction of residential house & requires to be construed liberally for achieving that purpose. The intention of the Legislature was to encourage investments in the acquisition of a residential house and completion of construction or occupation is not the requirement of law. The words used in the section are ‘purchased’ or ‘constructed’. The condition precedent for claiming benefit u/s 54F is that the capital gain should be parted by the assessee and invested either in purchasing a residential house or in constructing a residential house. Merely because the sale deed had not been executed or that construction is not complete and it is not in a fit condition to be occupied does not disentitle the assessee to claim s. 54F relief (Sardarmal Kothari 302 ITR 286 (Mad) followed)” 22. From an analysis of the above judicial precedents, the principle which emerges is that the phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an Assessing Officer adopts one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Assessing Officer has taken one view with which the Commissioner of Income-tax does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the Assessing Officer is unsustainable in law, or the AO has completely omitted I.T.A No. 68/Rjt/2021 A.Y. 2015-16 Page No Shri Kalpak A. Maniar HUF vs. Pr. CIT 17 to make any enquiry altogether or the order demonstrates non-application of mind. 23. Now, in the facts before us, the case of the assessee selected for limited scrutiny where one of the purchases for initiation of assessment was to scrutinize the deduction claim under the head “capital gain”. Vide notice dated 14-07-2017, the ld. Assessing Officer asked the assessee to furnish detail of sale of immoveable property along with copy of sale and purchase deed, relevant documents etc. and also asked the assessee to furnish complete details of deduction claimed u/s. 54F along with documentary evidences. In response to the captioned notice, the assessee filed reply dated 28-07-2017 wherein he furnished details of investments of Rs. 1,25,50,000/- out of capital generated from sale of property and claimed proportionate deduction of Rs. 1,11,21,928/- u/s. 54F of the act. The assessee vide the above submission also submitted related documentary evidences i.e. copy of ledger from the builder and proof of payment made to builder. Further, vide submission dated 27-11-2017, the assessee filed detailed explanation regarding exemption u/s. 54F wherein the assessee submitted that the assessee had invested capital gain in new residential house amounting to Rs. 1,25,50,000/- as per section 54F within stipulated period. The assessee also attached a notarized copy of receipt for consideration paid on account of purchase of property. In the above submission, the assessee also placed reliance on several judicial precedents including that of Hon’ble Karnataka High Court in the case of Sambandam Udaykumar in support of his contention that intention u/s. 54F was to encourage investments in the acquisition of residential house and merely because the sale deed has not I.T.A No. 68/Rjt/2021 A.Y. 2015-16 Page No Shri Kalpak A. Maniar HUF vs. Pr. CIT 18 been registered, does not disentitle claim of section 54F relief. The ld. Assessing Officer took on record the submissions filed by the assessee and allowed the claim of section 54F deduction in the assessment order. We also notice that in the instant set of facts that the assessee HUF sold its property on 04-02-2015 and on 26-08-2015 it gave advance booking amount of Rs. 1,25,50,000/- to Patriya Project for investment in new property which was within the stipulated time of two years given in u/s 54F. Subsequently, the flat was registered on 27-03-2019 in the name of the assessee. On perusal of these facts, it is seen that the ld. Assessing Officer had examined the aspect of claim of deduction u/s. 54F during the course of assessment proceedings and it is not a case that relief has been granted without considering the issue or that there has been a non-application of mind. Also, as noted above, it is a settled principle of law that if the view taken by the Assessing Officer is a plausible view, then the assessment order cannot be set aside as the same cannot be said to be erroneous or prejudicial to the interest of the Revenue. We thus find no error in the order of ld. Assessing Officer so as to justify initiation of 263 proceedings by the ld. Pr. CIT. The grounds of appeal raised by the assessee are thus allowed. 24. In the result, appeal filed by assessee is allowed. Order pronounced in the open court on 03-02-2022 Sd/- Sd/- (MAHAVIR PRASAD) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad : Dated 03/02/2022
