Mrs. Tehmi Aspi Anklesaria, Pune V. Dy. CIT, Circle-4, Pune

ITA 731/PUN/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1195 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 17-08-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 25-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B; S K RASTOGI CIT HEERAJ JAIN
• Keywords: Principle of natural justice; Question of law; Cost of acquisition; Revenue expenditure
• Section: 54F; 54; 263

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE . . , , ' # BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.731/PN/2013 '% % / ASSESSMENT YEAR : 2008-09 MRS. TEHMI ASPI ANKLESARIA, 1980, CONVENT STREET, CAMP,PUNE 411 001 PAN NO.ADYPA9272B . / APPELLANT V/S DY.CIT, CIRCLE-4, PUNE . / RESPONDENT / APPELLANT BY : SHRI B.B. MANE/ SHRI RAGUNATHAN D. AIYAR / DEPARTMENT BY : SHRI S.K. RASTOGI, CIT HEERAJ JAIN & B / ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE O RDER DATED 11-01-2013 PASSED U/S.263 OF THE I.T. ACT BY THE CIT-II, PUNE RELATING TO ASSESSMENT YEAR 2008-09. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND FILED HER RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 30-03-2009 DECLARING TAXABLE INCOME OF RS.72,64,890/-. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS THE / DATE OF HEARING :17.08.2015 / DATE OF PRONOUNCEMENT:28.08.2015 2 ITA NO.731/PN/2013 AO NOTED THAT THE ASSESSEE HAS TRANSFERRED DEVELOPMEN T OF RIGHTS OF A LAND LOCATED AT SURVEY NO.162 AT VILLAGE MANJARI BK TO PARMAR INDUS ASSOCIATES. THE SALE CONSIDERATION WAS RS.4,12,00,000 /- AND THE STAMP DUTY VALUATION WAS RS.6,21,00,000/-. AS THE LA ND WAS OWNED BY THE ASSESSEE AND HER SON, THE ASSESSEE HAS TAKEN HER SHARE OF SALE CONSIDERATION AS HALF OF THE STAMP DUTY VALUA TION RATE, I.E. RS.3,10,05,000/-. THE ASSESSEE HAS CLAIMED DEDUCTION OF RS.77,82,600/- U/S.54(2) OF THE I.T. ACT FROM THE CAPITAL GAIN COMPUTED BY HER. ACCORDING TO THE AO THE DEDUCTION U/ S.54 OF THE ACT IS AVAILABLE ONLY IN RESPECT OF THE CAPITAL GAIN FROM T RANSFER OF A RESIDENTIAL HOUSE. SINCE THE ASSESSEE, IN HER COMPUTATION, HAS EVEN MENTIONED THAT THE SALE CONSIDERATION IS FROM SALE OF A RES IDENTIAL HOUSE THE AO HELD THAT THE CONTENTION OF THE ASSESSEE IS NOT CORRECT. THE ASSESSEE HAS ONLY TRANSFERRED HER AGRICULTURAL LAND AND THE DEDUCTION FOR PURCHASE OF A NEW PROPERTY HAS TO BE U/S .54F OF THE I.T. ACT. AFTER COMPUTING THE INDEXED COST OF ACQUISITION AT RS.34,71,300/- FROM THE SALE CONSIDERATION OF RS.3,10,50,000/- THE AO DETERMINED THE NET CAPITAL GAIN AT RS.2,25,78,700/-. AFTE R DEDUCTING AN AMOUNT OF RS.69,12,529/- BEING THE PROPORTION ATE REINVESTMENT OF RS.77,82,600/- IN RESIDENTIAL HOUSE U/S.54F T HE AO COMPUTED THE LONG TERM CAPITAL GAIN AT RS.2,06,66,172/-. 3. THE LD.CIT EXAMINED THE RECORDS AND OBSERVED THAT WHILE FRAMING THE ASSESSMENT THE AO HAD ALLOWED THE DEDUCTION U/S.54F OF THE I.T. ACT TO THE EXTENT OF RS.69,12,528/- ON INVEST MENT OF RS.77,82,600/-. HE NOTED THAT THE ASSESSEE HAD PURCHAS ED 2 FLATS, I.E. FLAT NO.13 AND FLAT NO.14 IN THE PROJECT MAGNOLIA VIDE PU RCHASE DEED DATED 17-07-2008 FOR A TOTAL CONSIDERATION OF RS.77,8 2,600/-. THE BREAK-UP OF THE COST AS PROVIDED IN THE PURCHASE D EED WAS 3 ITA NO.731/PN/2013 RS.28,07,000/- TOWARDS FLAT NO.13 AND RS.45,93,000/- TOW ARDS FLAT NO.14. ACCORDING TO THE LD.CIT IN VIEW OF THE PROVISION S OF THE I.T. ACT THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION IN RESPECT OF INVESTMENT MADE IN ONLY ONE RESIDENTIAL HOUSE. SINCE THE AO APPEARED TO HAVE FAILED TO APPLY HIS MIND AND ALLOWED DED UCTION WITHOUT VERIFYING WHETHER FLAT NOS.13 AND 14 WERE INFACT O NE FLAT OR TWO FLATS, ALLOWANCE OF DEDUCTION U/S.54F FOR BOTH THE FLATS, I.E . FLAT NO. 13 AND 14 WITHOUT MAKING ANY VERIFICATION WHATSOEVER OR WITHOUT APPLICATION OF MIND APPEARED TO BE ERRONEOUS IN S O FAR AS IT WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE. HE THERE FORE ISSUED A NOTICE U/S.263 OF THE I.T. ACT TO THE ASSESSEE ASKING HIM TO EXPLAIN AS TO WHY THE PROVISIONS OF SECTION 263 OF THE I.T. ACT S HOULD NOT BE APPLIED IN THE CASE OF THE ASSESSEE. 4. IT WAS EXPLAINED THAT THE ASSESSEE HAD PURCHASED 2 FLATS WHICH WERE CONVERTED INTO ONE SINGLE FLAT BY THE PREVIOUS OWNERS MR. AZIZ ABDULHUSSEIN LAKHANI & MRS. ROSALIND AZIZ LAKHANI AND THE COMBINED SINGLE FLAT WAS PURCHASED BY THE ASSESSEE BY ON E SINGLE AGREEMENT DATED 17-07-2008. THE FLOOR SPACE MAP OF THE COMBINED FLAT WHEREIN THE EARLIER OWNERS WERE STATED TO HAVE CLOSE D THE ENTRANCE OF ONE FLAT WAS SUBMITTED. IT WAS SUBMITTED THA T AT THE TIME OF THE PURCHASE BY THE ASSESSEE THE FLATS HAD ONLY ONE ENTRANCE. THE ASSESSEE ALSO SUBMITTED THE FLOOR SPACE M AP OF FLAT NO. 13 & 14 AT THE TIME OF PURCHASE BY THE ORIGINAL BUYER S MR. NARSIMHAMURTI SRINIVAS & MRS. KRUPA SRINIVAS FROM THE BUILDER VIDE TWO AGREEMENTS DATED 04-04-1995 AND 07-04-1995. IT W AS EXPLAINED THAT THESE FLATS WERE SEPARATE WITH TWO ENTRANCES. HOWEVER, THE FLATS WERE RESOLD TO SHRI LAKHANI THROUGH TWO AGREEMENTS WH O IN TURN SOLD THE FLATS THROUGH ONE AGREEMENT TO THE ASSESSEE. IT WAS 4 ITA NO.731/PN/2013 ACCORDINGLY SUBMITTED THAT ONLY ONE UNIT HAVING ONE EN TRANCE WAS PURCHASED BY THE ASSESSEE AND THEREFORE, DEDUCTION U/S . 54F WAS RIGHTLY CLAIMED. IT WAS ALTERNATIVELY SUBMITTED THAT THE R ESIDENTIAL HOUSE IN SECTION 54 & 54F APPLIES TO THE FLATS BEING CONSE CUTIVELY NUMBERED UNDER ONE ROOF OCCUPIED BY THE MEMBERS OF ONE FAMILY ARE ELIGIBLE FOR DEDUCTION U/S. 54 WHILE COMPUTING LONG TERM CAPITAL GAINS. VARIOUS DECISIONS WERE ALSO RELIED UPON TO SUBSTANT IATE THAT RESIDENTIAL HOUSE CAN CONTAIN MORE THAN ONE RESIDENTIAL UN IT AND STILL CAN BE CONSIDERED AS A RESIDENTIAL HOUSE ONLY. 5. HOWEVER, THE LD.CIT WAS NOT SATISFIED WITH THE EXPLANAT ION GIVEN BY THE ASSESSEE. HE OBSERVED FROM THE RECORDS T HAT THERE IS NO DISPUTE THAT AT THE TIME OF CONSTRUCTION THERE WERE 2 FLA TS BEARING FLAT NO.13 AND FLAT NO.14 WHICH WERE PURCHASED BY THE OR IGINAL BUYER MR. NARSIMHAMURTI SRINIVAS AND MRS. KRUPA SRINIVAS FR OM THE BUILDER VIDE TWO AGREEMENTS DATED 04-04-1995 AND 0 7-04-1995. THESE FLATS WERE RESOLD TO MR. AZIZ ABDULHUSSEIN LAKHANI & MRS. ROSALIND AZIZ LAKHANI THROUGH TWO SEPARATE AGREEMENTS. EVEN THOUGH IT IS CLAIMED THAT THE COMBINED FLATS WERE PURCHASE D THROUGH SINGLE PURCHASE DEED THE DISTINCTION OF FLAT NO.13 AND FLAT NO.14 IS STILL MAINTAINED AND CLARIFIED IN THE PURCHASE DEED. THE FLAT NO.13 WAS PURCHASED FOR RS.28,07,000/- AND FLAT NO. 14 WAS PURCHASED FOR RS.45,93,000/- IN THE DEED ITSELF. HAD IT BEEN ONE FLAT/RESIDENTIAL HOUSE, AS CLAIMED BY THE ASSESSEE, ONE COMB INED AMOUNT SHOULD HAVE BEEN PAID. HE OBSERVED FROM THE FLOO R SPACE MAP FURNISHED DURING THE 263 PROCEEDINGS THAT THERE WER E TWO KITCHENS BEING MAINTAINED BY THE ASSESSEE. THE LD. CIT FURT HER OBSERVED THAT THERE WAS NO SATISFACTORY REPLY TO HIS Q UESTION AS TO WHY THERE WERE STILL TWO KITCHENS AND TWO ENTRANCES WH EN THE FLATS 5 ITA NO.731/PN/2013 WERE CLAIMED TO BE COMBINED. HE FURTHER NOTED THAT SINCE THERE WERE 2 DISTINCT FLATS THE COUNSEL OF THE ASSESSEE WAS NOT ABLE TO GIVE RESPONSE TO THE QUESTION WHETHER THERE WERE 2 ELECTRIC METERS AND TWO SEPARATE DOORS APART FROM THE TWO KITCHENS SHOWN IN THESE FLATS. THE LD. CIT FURTHER NOTED THAT THERE ARE HOST OF DECIS IONS BY VARIOUS COURTS WHERE IT HAS BEEN HELD THAT IN CASE THERE ARE N UMBER OF FLATS WHICH ARE ALTERED/CONNECTED SO AS TO MAKE THEM INTO ONE RESIDENTIA L HOUSE, DEDUCTION U/S.54F CANNOT BE DISALLOWED. HOWEVER, TH E FACTS IN THE INSTANT CASE ARE DIFFERENT. MERELY BECAUSE THE AS SESSEE HAS PURCHASED 2 FLATS THROUGH ONE REGISTERED DEED THE SAME WOULD NOT MAKE IT ONE FLAT/RESIDENTIAL UNIT WHEN THE SANCTITY OF THES E TWO FLATS HAS BEEN MAINTAINED IN THE REGISTERED DEED AND 2 KITCHEN S ARE STILL BEING MAINTAINED AS PER THE FLOOR SPACE MAP FURNISHED. IN ANY CASE THE AO HAS NOT VERIFIED THIS ISSUE AND NOT APPLIED HIS MIND AS TO WHETHER THERE WAS ONE OR TWO RESIDENTIAL UNITS AND ALLOWE D DEDUCTION TREATING THE TWO FLATS AS ONE RESIDENTIAL UNIT. H E, THEREFORE, WAS OF THE OPINION THAT THE ORDER OF THE AO IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. R ELYING ON VARIOUS DECISIONS HE SET ASIDE THE ORDER PASSED BY THE AO AND DIRECTED HIM TO FRAME THE ASSESSMENT ORDER AFRESH AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE WITH RESPECT TO THE CLAIM O F DEDUCTION U/S.54F OF THE I.T. ACT. 6. AGGRIEVED WITH SUCH ORDER OF THE CIT THE ASSESSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. THE LD.CIT-II, PUNE ERRED IN LAW AND ON FACTS IN DIRECTING DISALLOWANCE OF DEDUCTION U/S.54F OF ITA, 1961 ALLEGI NG THAT DEDUCTION NEEDS TO BE ALLOWED ON PURCHASE OF ONLY ONE FLAT AND NOT A HOUSE PROPERTY CONTAINING 2 COMBINED FLATS. 6 ITA NO.731/PN/2013 2. THE LD.CIT-II, PUNE ERRED IN LAW IN ASSUMING JURISD ICTION U/S.263 W.R.T. DEDUCTION U/S.54F OF ITA, 1961, WITHOUT APPRE CIATING THE FACT THAT WHEN TWO POSSIBLE VIEWS ARE AVAILABLE, ADOPTING ONE VI EW DOES NOT LEAD TO ANY ERROR WHICH NEEDS TO BE CORRECTED BY RESORTING TO SECTION 263 OF THE ITA, 1961. 3. THE APPELLANT CRAVES LEAVE TO ADD/MODIFY/DELETE/A LTER ALL/ ANY OF THE GROUNDS OF APPEAL. 7. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY OPPOSED THE ORDER PASSED U/S.263 BY THE CIT. HE SUBMITTED THAT THE ASS ESSEE HAS SUBMITTED ALL DETAILS TO THE AO INCLUDING THE DEED OF ASSIGNM ENT. THE ASSESSEE HAD INADVERTENTLY CLAIMED DEDUCTION U/S.54 OF THE I.T. ACT WHICH WAS DENIED BY THE AO BUT HE ALLOWED PROPORTION ATE DEDUCTION U/S.54F OF THE ACT BY RESTRICTING SUCH DEDUCTIO N TO RS.69,12,528/- INSTEAD OF RS.77,82,600/-. THIS CLEARLY INDICATE S THAT THE AO HAS APPLIED HIS MIND AND IT IS ONLY MISCONCEP TION AND PREJUDICE OF THE CIT THAT THE AO HAS NOT APPLIED HIS MIND . REFERRING TO THE ORDER OF THE CIT HE SUBMITTED THAT THE LD.CIT H AS ACCEPTED THAT THE ASSESSEE HAS SUBMITTED FLOOR SPACE MAP WHEREIN FLAT NOS. 13 AND 14 HAVE BEEN COMBINED BY SELLER AND IT IS SINGLE RE SIDENTIAL HOUSE HAVING SINGLE ENTRANCE AND SINGLE KITCHEN. HE SUBMIT TED THAT EVEN IN ONE RESIDENTIAL HOUSE THERE CAN BE MORE THAN TW O SEPARATE KITCHENS AND MORE THAN ONE ELECTRIC METERS FOR DIFFERENT P URPOSES. HE ALSO DREW THE ATTENTION OF THE BENCH TO THE AMENDM ENT CARRIED OUT BY THE FINANCE (NO.2) ACT, 2014 TO THE PROVISIONS OF S ECTION 54F ACCORDING TO WHICH THE WORDS ONE RESIDENTIAL HOUSE IN I NDIA ARE ADDED. THIS ACCORDING TO THE LD. COUNSEL FOR THE ASSESSE E, CLEARLY INDICATES THAT PRIOR TO AMENDMENT AND AT THE TIME OF THE RELEVANT ASSESSMENT YEAR A RESIDENTIAL WORD WAS IN THE BODY OF THE SECTION WHICH INDICATES THAT THERE WAS NO RESTRICTION OF ONE RES IDENTIAL HOUSE. 7 ITA NO.731/PN/2013 8. REFERRING TO THE DECISION OF THE HONBLE BOMBAY HIGH C OURT IN THE CASE OF CIT VS. GABRIEL INDIA LTD. REPORTED IN 203 ITR 108 HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISION HAS HELD THAT THE POWER OF SUO MOTO REVISION U/S.263(1) WAS IN THE NATURE OF SUPERVISORY JURISDICTION AND COULD BE EXERCISED ONLY IF THE CIRCUMSTANCES SPECIFIED THEREIN EXISTED. FOR INVOKING THE JURISDICTION U/S.263 THE TWIN CONDITIONS, I.E THE ORDER OF TH E AO MUST BE ERRONEOUS AND IT MUST BE PREJUDICIAL TO THE INTE REST OF THE REVENUE MUST BE FULFILLED. THE HONBLE HIGH COURT IN THE SA ID DECISION HAS HELD THAT THE CIT CANNOT REVISE THE ORDER MERELY BECAUSE HE DISAGREES THE CONCLUSION ARRIVED AT BY THE AO. 9. THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE HELD PORTION OF THE ORDER WHICH READS AS UNDER : HELD, THAT THE INCOME-TAX OFFICER IN THIS CASE HAS M ADE ENQUIRIES IN REGARD TO THE NATURE OF THE EXPENDITURE INCURRED BY THE ASSESSEE. THE ASSESSEE HAD GIVEN A DETAILED EXPLANATION IN THAT REGAR D BY A LETTER IN WRITING. ALL THESE WERE PART OF THE RECORD OF THE C ASE. EVIDENTLY, THE CLAIM WAS ALLOWED BY THE INCOME-TAX OFFICER ON BEING SATISFIED WITH THE EXPLANATION OF THE ASSESSEE. THIS DECISION OF THE INCOME -TAX OFFICER COULD NOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER HE DID NOT MAKE AN ELABORATE DISCUSSION IN THAT REGARD. MOREO VER, IN THE INSTANT CASE, THE COMMISSIONER HIMSELF, COULD NOT SAY THA T THE ALLOWANCE OF THE CLAIM OF THE ASSESSEE WAS ERRONEOUS AND THAT THE EXPENDITURE WAS NOT REVENUE EXPENDITURE BUT AN EXPEN DITURE OF CAPITAL NATURE. HE SIMPLY ASKED THE INCOME-TAX OFFICER TO RE -EXAMINE THE MATTER. THAT WAS NOT PERMISSIBLE. THE TRIBUNAL WAS JU STIFIED IN SETTING ASIDE THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX UNDER SECTION 263. 10. REFERRING TO THE DECISION OF THE HONBLE DELHI HIGH COUR T IN THE CASE OF CIT VS. ASHISH RAJPAL REPORTED IN 320 ITR 67 4 HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISIO N HAS OBSERVED THAT MERELY BECAUSE THE ASSESSMENT ORDER D ID NOT REFER TO THE QUERIES RAISED DURING THE COURSE OF THE SCRUTINY AND THE 8 ITA NO.731/PN/2013 RESPONSE OF THE ASSESSEE THERETO, IT CANNOT BE SAID THA T THERE WAS NO ENQUIRY AND THAT THE ASSESSMENT WAS THEREFORE ERRONEO US AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. REFERRING TO THE FULL BENCH DECISION OF THE HONBLE GAUHATI HIGH COURT IN THE CA SE OF CIT VS. JAWAHAR BHATTARCHARJEE REPORTED IN 67 DTR 217 HE S UBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISION HAS EXPLA INED THE EXPRESSION ERRONEOUS ASSESSMENT IN CONTEXT OF SECTION 263 IS AN ASSESSMENT MADE ON WRONG ASSUMPTION OF FACTS OR ON INCO RRECT APPLICATION OF MIND OR WITHOUT DUE APPLICATION OF MIND OR WITHO UT FOLLOWING THE PRINCIPLES OF NATURAL JUSTICE. HE SUBMITTED THAT IN THE INSTANT CASE THERE IS ONE VENDOR AND ONE AGREEMENT EN TERED. EVEN THOUGH 2 SEPARATE CONSIDERATIONS WERE MENTIONED FOR ALL O THER PRACTICAL CONVENIENCE PURPOSES THE ASSESSEE HAS NOT C LAIMED ANY TIME THAT SHE HAS PURCHASED ONE FLAT BUT SHE HAS PURCH ASED 2 ADJACENT COMBINED FLATS AS ONE SINGLE RESIDENTIAL HOUSE TO INVEST HER CAPITAL GAINS. 11. REFERRING TO THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. MS. SUSHILA JHAVERI REPORTED IN 107 I TD 327 (AT) SB) HE SUBMITTED THAT THE SPECIAL BENCH IN THE SAID D ECISION HAS HELD THAT THE EXEMPTION U/S.54 AND 54F WOULD BE ALLOW ABLE WHERE MORE THAN ONE UNITS ARE PURCHASED WHICH ARE ADJ ACENT TO EACH OTHER AND ARE CONVERTED INTO ONE HOUSE FOR THE P URPOSE OF RESIDENCE BY HAVING COMMON PASSAGE, STAIR CASE, COMMON K ITCHEN ETC. THEN IT WOULD BE A CASE OF INVESTMENT IN ONE RESIDEN TIAL HOUSE AND CONSEQUENTLY THE ASSESSEE WOULD BE ENTITLED TO EXEMPTION. 12. REFERRING TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. DEVDAS NAIK REPORTED IN 49 TAXMANN.C OM 30 HE 9 ITA NO.731/PN/2013 SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISION HAS HELD THAT WHERE ACQUISITION OF 2 FLATS HAD BEEN DONE INDEPENDE NTLY BUT EVENTUALLY THEY WERE A SINGLE UNIT AND HOUSE FOR PURPOSE OF RESIDENCE, THE CLAIM OF DEDUCTION U/S.54 COULD NOT BE DENIE D. HE ACCORDINGLY SUBMITTED THAT THE ORDER PASSED U/S.263 OF THE ACT BE SET ASIDE AND THE APPEAL FILED BY THE ASSESSEE BE ALLOWED. 13. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE CIT. REFERRING TO THE DECISION OF THE HONBLE KERALA HIGH COURT IN THE CASE OF P.V. SREENIJ IN VS. CIT REPORTED IN 227 TAXMANN 176 HE SUBMITTED THAT THE HON BLE HIGH COURT IN THE SAID DECISION HAS HELD THAT WHERE ENTIRE MAT ERIAL AVAILABLE WITH DEPARTMENT WAS NOT CONSIDERED BY THE AO AND CERTAIN EXPENSES WERE ALLOWED IN EXCESS IT COULD NOT BE SAID THA T REVISION ORDER OF COMMISSIONER WAS A SUBSTITUTION TO THAT OF THE O PINION OF AO. HE SUBMITTED THAT THE AO DURING THE COURSE OF ASSE SSMENT PROCEEDINGS HAS NOT APPLIED HIS MIND REGARDING THE ALLOWABILIT Y OF DEDUCTION U/S.54F FOR 2 FLATS PURCHASED BY THE ASSESSEE . THEREFORE, THE LD.CIT WAS FULLY JUSTIFIED IN INVOKING JURISDICTION U/S.263 OF THE I.T. ACT. 14. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND T HE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDE RED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE IN THE INSTANT CASE HAS INVESTED HE R LONG TERM CAPITAL GAIN IN ACQUISITION OF 2 ADJACENT FLATS BEARING FLAT NO S. 13 AND 14 IN THE PROJECT MAGNOLIA VIDE PURCHASE DEED DATED 17-07- 2008 FOR A TOTAL CONSIDERATION OF RS.77,82,600/-. WE FIND THE AO, IN 10 ITA NO.731/PN/2013 THE BODY OF THE ASSESSMENT ORDER, ALLOWED DEDUCTION U/S .54F AT RS.69,12,528/- BEING THE PROPORTIONATE DEDUCTION U/S.54. WHILE ALLOWING DEDUCTION U/S.54F AT RS.69,12,528/- THE AO HAD ALSO REJECTED THE CLAIM OF DEDUCTION U/S.54(2) MADE BY THE ASSE SSEE AT RS.77,82,600/-. A COPY OF THE PURCHASE DEED WAS ALSO BEF ORE THE AO. THEREFORE, IT CANNOT BE SAID THAT THE AO HAS NOT AP PLIED HIS MIND ON THE ISSUE OF APPLICABILITY OF DEDUCTION U/S.54F ON ACC OUNT OF 2 ADJACENT FLATS. SINCE AT THE PREVAILING TIME VARIOUS DE CISIONS WERE AVAILABLE TO THE PROPOSITION THAT WHERE MORE THAN O NE UNITS ARE PURCHASED WHICH ARE ADJACENT TO EACH OTHER AND ARE C ONVERTED INTO ONE HOUSE FOR THE PURPOSE OF RESIDENCE BY HAVING COMMON PASSAGE, COMMON KITCHEN ETC. THEN IT WOULD BE A CASE OF INVESTMENT IN ONE RESIDENTIAL HOUSE AND CONSEQUENTLY THE ASSESSEE WOULD B E ENTITLED TO DEDUCTION U/S.54F. THE SPECIAL BENCH OF THE TRIBUNAL IN THE CA SE OF MS. SUSHILA JHAVERI (SUPRA) WAS DATED 17-04-2007 AND THE ASSESSMENT ORDER WAS PASSED ON 30-06-2010. THEREFOR E, THE VIEW TAKEN BY THE AO IN THE GIVEN FACTS AND CIRCUMSTANCES CANNOT BE SAID TO BE NON APPLICATION OF MIND. 15. THE ISSUE NOW STANDS DECIDED IN FAVOUR OF THE ASSESS EE BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF DEVDAS NAIK (SUPRA) WHERE IT HAS BEEN HELD THAT WHERE AC QUISITION OF 2 FLATS HAD BEEN DONE INDEPENDENTLY BUT EVENTUALLY TH EY WERE A SINGLE UNIT AND HOUSE FOR PURPOSE OF RESIDENCE CLAIM U/S.54 COULD NOT BE DENIED. THE RELEVANT OBSERVATION OF THE HONBLE HIGH COURT READS AS UNDER : 4. WE ARE UNABLE TO AGREE. WE FOUND THAT THE EVIDE NCE BASED ON WHICH THE CLAIM WAS GRANTED BY THE COMMISSIONER OF INCOME TA X (APPEALS) AND THE INCOME TAX APPELLATE TRIBUNAL HAS BEEN NOTED BY THE TRIBUNAL IN PARAGRAPH 4 OF ITS ORDER. PRIOR THERETO, THE FACT UAL POSITION HAS ALSO BEEN NOTICED THAT THE ASSESSEE ALONGWITH HIS WIFE JOINTL Y OWNED 11 ITA NO.731/PN/2013 BUNGALOW. THE BUNGALOW WAS SOLD AT RS.3/- CRORES. WITH THIS SUM, THEY BOUGHT THREE FLATS, ONE IN THE ASSESSEE'S NAME, ANOTHER I N THE NAME OF ASSESSEE AND HIS WIFE AND THIRD IN THE NAME OF THE WIFE. THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 54 ON PURCHASE OF TWO FLATS IN WHICH HE IS EITHER A SOLE OWNER OR A JOINT OWNER. THOUGH TH ESE FLATS WERE ACQUIRED UNDER TWO DISTINCT AGREEMENTS AND FROM DIFFE RENT SELLERS, WHAT HAS BEEN NOTED BY THE TRIBUNAL AS ALSO THE COMMI SSIONER OF INCOME TAX (APPEALS) IS THAT THE MAP OF THE GENERAL L AYOUT PLAN AS WELL AS INTERNAL LAYOUT PLAN IN REGARD TO FLAT NOS.L 03 AN D 104 INDICATE THAT THERE IS ONLY ONE COMMON KITCHEN FOR BOTH THE FLATS. THE FLATS WERE CONSTRUCTED IN SUCH A WAY THAT ADJACENT UNITS OR FLATS CAN BE COMBINED INTO ONE. HOWEVER, ADMITTED FACT IS THAT THE FLATS WE RE CONVERTED INTO ONE UNIT AND FOR THE PURPOSE OF RESIDENCE OF THE ASSESSEE . IT IS IN THESE CIRCUMSTANCES, THE COMMISSIONER HELD THAT THE ACQUISITIO N OF THE FLATS MAY HAVE BEEN DONE INDEPENDENTLY BUT EVENTUALLY THE Y ARE A SINGLE UNIT AND HOUSE FOR THE PURPOSE OF RESIDENCE. THIS FACTUAL FINDING COULD HAVE BEEN MADE THE BASIS FO R RECORDING A CONCLUSION IN FAVOUR OF THE ASSESSEE. WE DO NOT FIND THA T SUCH A CONCLUSION CAN BE TERMED AS PERVERSE. RELIANCE PLACED BY THE TRIBUNAL ON THE ORDER PASSED BY IT IN THE CASE OF MS SUSHILA M JHAVERI (SUPRA) AND WHICH REASONING FOUND FAVOUR WITH THIS COURT IS NOT ER RONEOUS OR MISPLACED. THE LANGUAGE OF THE SECTION HAS BEEN NOTED IN BOTH THE DECISIONS AND IT HAS BEEN HELD THAT SO LONG AS THERE IS A RESIDENTIAL UNIT OR HOUSE, THEN THE BENEFIT OR DEDUCTION CANNOT BEDEN IED. IN THE PRESENT CASE, THE UNIT WAS A SINGLE ONE. THE FLATS WERE CONSTRUC TED IN SUCH A WAY THAT THEY COULD BE COMBINED INTO ONE UNIT. ONCE THE RE IS A SINGLE KITCHEN THEN, THE PLANS CAN BE RELIED UPON. WE DO NOT THINK THAT THE CONCLUSION IS IN ANY WAY IMPOSSIBLE OR IMPROBABLE SO AS TO ENTERTAI N THIS APPEAL. IN THIS PECULIAR FACTUAL BACKDROP, THIS APPEAL DOES NOT R AISE ANY SUBSTANTIAL QUESTION OF LAW. THE APPEAL IS DEVOID OF AN Y MERIT AND IS DISMISSED. NO ORDER AS TO COSTS. 16. WE FURTHER FIND MERIT IN THE ARGUMENTS ADVANCED BY TH E LD. COUNSEL FOR THE ASSESSEE THAT THE WORDS CONSTRUCTED, ONE RESIDENTIAL HOUSE IN INDIA SHALL BE SUBSTITUTED FOR CONSTR UCTED A RESIDENTIAL HOUSE BY THE FINANCE (NO.2) ACT, 2014 W.E.F., 01-0 4- 2005 WHICH CLEARLY INDICATES THAT PRIOR TO THE AMENDMEN T AND AT THE RELEVANT TIME THERE WAS NO RESTRICTION OF ONE RESIDENTIAL HOUSE . 17. SINCE IN THE INSTANT CASE ALTHOUGH THE AO HAS NOT WR ITTEN IN SPECIFIC WORDS BUT HAS ALLOWED THE CLAIM OF DEDUCTION U/S.54 F IN RESPECT OF 2 ADJACENT FLATS, THEREFORE, THE VIEW TAKEN BY THE AO IN OUR OPINION IS A POSSIBLE VIEW. IT IS THE SETTLED PROPOSITION OF LAW THAT FOR INVOKING THE JURISDICTION U/S.263 THE TWIN CONDITION S 12 ITA NO.731/PN/2013 NAMELY, THE ORDER IS ERRONEOUS AND THE ORDER MUST BE PREJUDICIAL TO THE INTEREST OF THE REVENUE MUST BE SATISFIED. IN THE INSTANT CASE THE ORDER OF THE AO MAY BE PREJUDICIAL TO THE INTEREST OF THE REVENUE BUT IT CANNOT BE SAID TO BE ERRONEOUS SINCE VARIOUS JUDICIAL D ECISIONS SUPPORT THE CASE OF THE ASSESSEE THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S.54F IN RESPECT OF 2 ADJACENT UNITS. WE THE REFORE HOLD THAT THE LD.CIT IN THE FACTS OF THE PRESENT CASE IS NOT JUSTIFIED IN INVOKING THE JURISDICTION U/S.263 OF THE I.T. ACT. WE ACCOR DINGLY SET ASIDE THE ORDER OF THE CIT AND ALLOW THE GROUNDS RAISED BY THE ASSESSEE. 18. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28-08-2015. SD/- SD/- ( VIKAS AWASTHY ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE ; DATED : 28 TH AUGUST, 2015. ( )'+ , / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. & ( ) , / THE CIT-II, PUNE 4. 5. ) ,,-, -, / DR, ITAT, A PUNE; 1 / GUARD FILE. / BY ORDER , ) , //TRUE C ) , //TRUE COPY// 34 , - / SR. PRIVATE SECRETARY -, / ITAT, PUNE