Shri Mahendra Pritamlal Joshi, Rajkot, Rajkot V. The Pr. CIT, International Taxation & Transfer Pricing (IT & TP), Ahmedabad, Ahmedabad

ITA 74/RJT/2021

• Counselvise Citation: [NaN] 107 COUNSELVISE.COM (IT) 2041 (ITAT-RAJKOT)
• Duration Of Justice: 8 month(s) 15 day(s)
• 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: 19-05-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Revision of order; Transfer pricing; Question of law; Valuation report; Prejudicial to interest; Revenue expenditure; Set aside; Capital Gains
• Section: 54; 263; 2; 143(3); 54F; 69A; 2(A)

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] Mahendra Pritamlal Joshi, A-403, Patria Projects, Govindbhai Solanki Vadi, Airport Road, Rajkot PAN:AYYPJ6721D (Appellant) Vs The Pr. CIT, International Taxation & Transfer Pricing ( IT & TP), Rajkot (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 ITA No. 74/Rjt/2021 Assessment Year 2015-16 I.T.A No. 74/Rjt/2021 A.Y. 2015-16 Page No Shri Mahendra Pritamlal Joshi vs. Pr. CIT 2 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 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, International Taxation & Transfer Pricing (IT & TP), Ahmedabad [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 (1) claim of deduction U/S.54F of the Act at Rs.1,25,00,000/- ; (2) justification of higher rate adopted than rate as per Rajkot Municipal Corporation; and (3) effect of rounding of purchase cost which resulted in reduction of capital gain at Rs.5,60,000/- and thereby setting aside the order passed u/s.143(3) of the Act dated 21.12.2017. 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 FY 2014-15, sold a jointly owned property in Chandra Kunj, Rajkot to a third party buyer on 8 th September 2014 for a consideration of Rs. INR 3,78,00,000/- I.T.A No. 74/Rjt/2021 A.Y. 2015-16 Page No Shri Mahendra Pritamlal Joshi vs. Pr. CIT 3 representing 1/5 th share in the ownership of the property. In order to avail capital gains exemption u/s 54 of the Income Tax Act, 1961 (Act), the assessee invested an amount of INR 3,44,00,000/- with a concern namely M/s Patria Projects, Rajkot for purchasing a Flat bearing No. A- 403 at Patria Building, Rajkot. During the course of assessment proceedings, the assessee submitted that though the sale deed is yet to be executed, but the assessee has already made payment of INR 3,44,00,000/- for purchase of new property and accordingly claimed deduction u/s 54 of the Act. The assessee also cited decisions of several High Courts to justify his position. The Ld. AO allowed exemption u/s 54 of the Act on the ground that the assessee had sold the property on 08.09.2014 and as per section 54F of the Act, the new property should have been acquired on or before 08.09.2017. Since the assessee is a non-resident, the possession of the property has been given through POA on 28.08.2015 and thus the condition laid down in section 2(47)(v) of the Act has been met. Accordingly, the claim of 54 exemption was allowed by Ld. AO. 4. The Pr. Commissioner of Income Tax (International Taxation and Transfer Pricing), Ahmedabad initiated proceedings u/s 263 of the Act in respect of the captioned assessment year. The reason for initiating the proceedings under section 263 of the Act was that on perusal of “Leave and License Agreement” dated 28.08.2015 executed between assessee and M/s Patria Properties Ltd., showing possession taken over by the assessee of aforesaid property, reveals that the immovable property being Flat No. A- 403 is a “Commercial Property” for operating it as a “Hotel Apartment” and it is not a residential property as claimed by the assessee. The provisions of I.T.A No. 74/Rjt/2021 A.Y. 2015-16 Page No Shri Mahendra Pritamlal Joshi vs. Pr. CIT 4 section 54 or 54F of the Act require the assessee to purchase or construct “residential house” in India. Since, the property purchased is a “commercial” property, provisions of section 54 of the Act have been violated. Further, the Pr. CIT also pointed out certain discrepancies in the Valuation Report furnished by the assessee. The Valuer has adopted Rs. 2,050/- per sq. mtr. as the land rate for the valuation of the property as on 01.04.1981, whereas the Rajkot Municipal Corporation fixed the land rate at Rs. 2,000/- per sq. mtr. in 1982. The Ld. AO has failed to examine these issues in the Valuation Report and accepted the same without any further enquiry. The Ld. Pr. CIT also observed that the assessee had furnished an unregistered document executed on stamp paper of INR 100 for the purchase of a new flat for which payment of INR 3,44,00,00/- was stated to have been made. However, since the assessee failed to execute and register a Purchase Deed, the assessee cannot be said to have acquired the said property which he was supposed to do on or before 08.09.2017. However, the Ld. AO did not verify these aspects and hence the assessment order is erroneous and prejudicial to the interests of the Revenue. Before the Pr. CIT, the assessee vide submission dated 18 th February 2020 submitted that the provisions of section 54 of the Act mandates “purchase” of residential property and does not mandate “ownership” of the property. The assessee cited various judicial precedents in support of the above contention. On the re-characterization of property as “commercial” property, the assessee submitted that perusal of copies of various judicial records viz. property tax notices / receipts, commencement certificate, completion certificate etc. suggests that the property is registered as a “residential” property under the provisions of the relevant Acts. Regarding basis for differential rate of fixed land rate, the assessee I.T.A No. 74/Rjt/2021 A.Y. 2015-16 Page No Shri Mahendra Pritamlal Joshi vs. Pr. CIT 5 submitted that since valuation exercise is undertaken for 1981, the rate available for 1982 for RMC viz. 2,000 per sq. metre was increased to INR 2,050/- per square meter for valuation purposes by the Independent Valuer. The Pr. CIT rejected the assessee’s submissions and vide order dated 25.03.2021 held that the order passed by the Ld. AO is erroneous and prejudicial to the interests of the Revenue and accordingly set aside the said order with a direction to make fresh assessment keeping in view the issues discussed above. 5. Being aggrieved by the order of the ld. Pr. CIT, the assessee is in appeal before us. 6. The ld. Authorized Representative before us submitted that so far as the proposition regarding registration of “purchase deed” is concerned, this aspect was discussed by the Ld. AO during the course of assessment proceedings and various decisions were cited in support of the contention that in order to claim exemption u/s 54 of the Act, “registration” of “purchase deed” and the assessee becoming registered “owner” of property is not mandated. The assessee had placed evidence on record to suggest that he had made payment for purchase of property during the stipulated period and it is also not disputed that the assessee had taken possession of property within the specified time. This discussion finds specific mention in the assessment order. On the contention of Pr. CIT that the property in question qualifies as “Commercial property” and not “residential property”, the Ld. AR pointed out that “Leave and License Agreement” on which reliance has been placed by Pr. CIT clearly suggests that the assessee intends to use the I.T.A No. 74/Rjt/2021 A.Y. 2015-16 Page No Shri Mahendra Pritamlal Joshi vs. Pr. CIT 6 said property as a “residential” property for his own purpose along-with his friends/relatives. The Ld. AR submitted that the assessee is a non-resident and he entered into a “Leave and License” Agreement with M/s Patria Hospitalities Pvt. Ltd allowing the latter to rent out the apartment as a service apartment only during the period when the assessee is not in India. However, the Agreement clearly mentions that the assessee will use the apartment for own residence including that of his friends/relatives, for a period of 180 days in each Financial Year. Thus, the contention that property in question is a “commercial” property is erroneous on facts and in law. The Ld. AR further placed reliance on the Notice/ Receipts of Municipal Corporation for property taxes, which specify the ‘purpose of usage’ of the property as ‘residential’ purpose for payment of property taxes. Further, the ‘commencement certificate’ and ‘completion certificate’ clearly specifies the property as ‘residential property’. The Ld. AR submitted that the fact that the tenant is letting out the property as a Service Apartment for part of the year would not convert a residential house to a commercial property. 7. On the discrepancies in the valuation report pointed out by Ld. Pr. CIT, the Ld. AR submitted that Rajkot Municipal Corporation (RMC) follows conservative rates for residential property. Accordingly, land rate of INR 2,050 per square metres for valuation purposes as against Rs. 2,000 per square metres adopted by RMC for 1982 was justified since valuation was to be observed for 1981. 8. On the other hand, the Ld. DR placed reliance on the arguments taken up by Pr. CIT in his order under section 263 of the Act. The Ld. DR pointed I.T.A No. 74/Rjt/2021 A.Y. 2015-16 Page No Shri Mahendra Pritamlal Joshi vs. Pr. CIT 7 out that since the Apartment was being used as service apartment by the tenant under Leave and License Agreement” i.e. for commercial exploitation, the property in question does not qualify as “residential house” and hence the conditions of section 54 of the Act have not been satisfied in the instant set of facts. The Ld. DR further submitted that registration of document is now necessary u/s 53A of Transfer of Property Act after amendment, which has not been done in the assessee’s case. Therefore, since the assessee has failed to execute and register a “purchase deed” in respect of the new flat, the assessee cannot be said to have acquired the said property which the assessee was supposed to do on or before 08.09.2017. Accordingly, the Pr. CIT is right in law and facts in setting aside the assessment proceedings u/s 263 of the Act, being erroneous and prejudicial to the interests of the Revenue. 9. 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. 10. 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 adequacy of inquiry is considered, there is no law which provides the extent I.T.A No. 74/Rjt/2021 A.Y. 2015-16 Page No Shri Mahendra Pritamlal Joshi vs. Pr. CIT 8 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 to the extent of inquiry conducted by the AO. There are a number of judgments by various High Courts in this regard. 11. 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 “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 I.T.A No. 74/Rjt/2021 A.Y. 2015-16 Page No Shri Mahendra Pritamlal Joshi vs. Pr. CIT 9 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 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’.” 12. 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. 13. 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:- I.T.A No. 74/Rjt/2021 A.Y. 2015-16 Page No Shri Mahendra Pritamlal Joshi vs. Pr. CIT 10 “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 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.” 14. 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. 15. 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 I.T.A No. 74/Rjt/2021 A.Y. 2015-16 Page No Shri Mahendra Pritamlal Joshi vs. Pr. CIT 11 by an assessment order dated 14th March 2016. The respondent company received unsecured loans from M/s. GeorgettTradecom Pvt Ltd and M/s. PurbaAgro 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.” 16. 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 revised assessment order after making addition to assessee's income under section 69A of the Act in respect of on-money receipts. However, the 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 I.T.A No. 74/Rjt/2021 A.Y. 2015-16 Page No Shri Mahendra Pritamlal Joshi vs. Pr. CIT 12 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 income. The Assessing Officer completed assessment by making addition of said amount to assessee's income. The Principal Commissioner passed a revised 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 revised 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” 17. 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 I.T.A No. 74/Rjt/2021 A.Y. 2015-16 Page No Shri Mahendra Pritamlal Joshi vs. Pr. CIT 13 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” 18. 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, the order revised 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 revised the assessment 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 order passed by Commissioner under section 263 of the Act. The High Court upheld the order passed by Tribunal. The Supreme Court on consideration of above facts held that SLP filed against High Court's order was liable to be dismissed. The Supreme Court made the following observations, while passing the order:- I.T.A No. 74/Rjt/2021 A.Y. 2015-16 Page No Shri Mahendra Pritamlal Joshi vs. Pr. CIT 14 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 the Assessing Officer had carried out detailed enquiries and taken a plausible view. 19. It may be useful to refer to recent jurisdictional Hon’ble 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 of the Act. 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 the instant case multiple residential units would be included within the sphere of section 54F of the Act. 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 I.T.A No. 74/Rjt/2021 A.Y. 2015-16 Page No Shri Mahendra Pritamlal Joshi vs. Pr. CIT 15 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 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." I.T.A No. 74/Rjt/2021 A.Y. 2015-16 Page No Shri Mahendra Pritamlal Joshi vs. Pr. CIT 16 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 section 54F of the Act to the assessee. 20. The Ld. AR has cited the decision of Shri Basheer Noorullah Khan Vs CIT (ITAT Bangalore) in ITA No. 575/Bang/2019 in support of his 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. 21. A similar view was also taken by the Delhi ITAT in the case of ITO Vs Smt. Swati Oberoi (ITAT Delhi) (2021) in ITA No. 4150/Del/2018, wherein it was held that the benefit of deduction under Section 54F of the 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: I.T.A No. 74/Rjt/2021 A.Y. 2015-16 Page No Shri Mahendra Pritamlal Joshi vs. Pr. CIT 17 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. 22. Further in the case of CIT vs. Sambandam Udaykumar ( Hon’ble Karnataka High Court) Income Tax Appeal No. 175 of 2012, a similar issue had come up for consideration before the Hon’ble Karnataka High Court wherein the 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 of the Act though the Tribunal granted it. On appeal by the department to the High Court, The Karnataka High held dismissing the appeal: 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) I.T.A No. 74/Rjt/2021 A.Y. 2015-16 Page No Shri Mahendra Pritamlal Joshi vs. Pr. CIT 18 23. 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 to make any enquiry altogether or the order demonstrates non-application of mind. 24. Now, in the facts before us, the case of the assessee was selected through CASS selection for limited scrutiny, where one of the purposes for initiation of assessment was to scrutinize the deduction claimed under the head “capital gains”. The ld. Assessing Officer issued notice dated 20-09- 2016 wherein the issue of deduction under the head “capital gains” was put up before the assessee. Further, the ld. Assessing Officer issued notice dated 23-05-2017 seeking further information in connection with certain points relating to the return of income and asking the assessee to attend his office. In response thereto, the assessee filed reply dated 15.06.2017 wherein the agreement made with M/s. Patriya project for making payment against purchase of residential property to claim exemption u/s 54 of the Act was furnished. Further, the assessee vide reply dated 12-12-2017 gave a detailed I.T.A No. 74/Rjt/2021 A.Y. 2015-16 Page No Shri Mahendra Pritamlal Joshi vs. Pr. CIT 19 explanation regarding claim u/s 54F of the Act in which the assessee placed reliance on various judicial precedents in support of his contention that for claiming exemption u/s. 54F of the Act, all that is required is that the amount should be invested within the stipulated time after transfer of sale of property and section 54F does not require ownership of the property through registered purchase deed. The Assessing Officer after taking into record the various submissions filed by the assessee from time to time, passed the assessment order allowing the claim of exemption to the assessee u/s 54F of the Act. Therefore, from the perusal of the facts, it can be seen that it is a case where the issue of exemption claimed by the assessee u/s 54F of the Act has been analyzed by the Assessing Officer during the course of assessment proceedings. During the course of assessment proceedings, the assessee submitted before Ld. AO that not only the consideration for purchase of property has been paid within stipulated time lines, but possession of the property has been taken by the POA on 28-08-2015 i.e. before the 08-09-2017 which was the time stipulated under section 54F of the Act. After consideration of the submissions and discussions during the course of assessment proceedings, the ld. Assessing Officer allowed the claim of the assessee. Now, in our view, the ld. Assessing Officer has examined the aspect of claim of deduction u/s. 54F of the Act and it is not a case that relief has been granted without considering the issue or that there has been a complete 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, as supported by various judgments cited before the ld. Assessing Officer as well as before us to the effect that ownership of property through registered purchase deed is not a pre-requisite for claiming I.T.A No. 74/Rjt/2021 A.Y. 2015-16 Page No Shri Mahendra Pritamlal Joshi vs. Pr. CIT 20 exemption 54F of the Act, then, the assessment order cannot set aside as the same cannot be said to be erroneous or prejudicial to the interest of the Revenue. On the issue of re-characterization of the property as “commercial”, in our view, the Ld. AR has placed on record substantial material to demonstrate that the property as per Municipal records was recorded as “residential” property. Even the “Leave and License” Agreement on which reliance has been placed demonstrates that the assessee may use the property for purpose of his own residence for part of the year. The fact that the tenant to whom the property has been given on lease may use it as a Service Apartment to earn revenue should not re-characterize the property as “commercial” in nature. The Ld. AO during the course of assessment proceedings made due enquiries and after considering the submissions/ replies filed by the assessee, passed an order in which he took a legally plausible view, as supported by judicial precedents on the subject. We thus find no error in the order of Ld. AO so as to justify initiation of 263 proceedings by the Ld. Pr. CIT. The Ground of appeal raised by the assessee is thus allowed. 25. 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