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2021 (3) TMI 1251 - AT - Income TaxRevision u/s 263 - addition as made u/s 54F - HELD THAT - AO has either ignored the said proviso or the deduction so allowed is in violation of the said provision to section 54F of the Act and therefore, the order so passed by the AO cannot be held as erroneous due to ignorance or incorrect application of law. All the relevant facts in respect of both the residential houses have been considered and provisions of law have been rightly applied by the AO and deduction u/s 54F has been allowed to the extent of assessee s share in respect of one residential house. The 'prejudice' that is contemplated under section 263 is the prejudice to the Income Tax administration as a whole. The revision has to be done for the purpose of setting right distortions and prejudices caused to the Revenue in the above context. The fundamental principles which emerge from the several cases regarding the powers of the CIT u/s 263. AO had made full and complete enquiries with regard to claim of deduction raised by the assessee u/s 54F of the Act as we have discussed in detail mentioning the specific paras in the order of the assessment, we are of the view that the order passed by the Pr.CIT u/s 263 of the Act by holding that the AO had not applied correct provisions of law while finalizing the assessment indicating lack of enquiries or verification is thus not sustainable in law and therefore, we quash the order of the ld. CIT(A) passed U/s 263 - Appeal of the assessee is allowed
Issues Involved:
1. Validity of the revisional jurisdiction exercised under Section 263 of the Income Tax Act, 1961. 2. Eligibility for deduction under Section 54F of the Income Tax Act, 1961. 3. Examination and inquiry conducted by the Assessing Officer (AO) during the assessment process. 4. The impact of pending appeal before CIT(A) on the proceedings under Section 263. Detailed Analysis: 1. Validity of the Revisional Jurisdiction Exercised Under Section 263: The primary issue is whether the Principal Commissioner of Income Tax (Pr.CIT) was justified in invoking Section 263 to revise the assessment order passed by the AO. The assessee argued that once an appeal has been filed before the CIT(A), the Pr.CIT cannot exercise revisional powers on the same issue. The Tribunal referenced several judicial precedents, including Oil India Vs. CIT 138 ITR 836 (Cal) and Haryana Paper Distributors Pvt. Ltd. V. Pr. CIT 412 ITR 515 (Guj), which support the principle that the Pr.CIT cannot revise an order that is already under appeal. However, it was noted that the appeal filed by the assessee was pending and not yet decided, allowing the Pr.CIT to exercise jurisdiction on matters not considered and decided in the appeal. 2. Eligibility for Deduction Under Section 54F: The assessee claimed deduction under Section 54F for investments made in two flats, arguing that they constituted "A House" for his family. The AO had allowed partial deduction, restricting it to one residential house as per the provisions of Section 54F. The Pr.CIT contended that the AO failed to apply the correct provisions of law, thereby making the order erroneous and prejudicial to the interest of revenue. The Tribunal examined the AO's detailed assessment and concluded that the AO had indeed considered all relevant facts and applied the law correctly, allowing deduction only for one house. 3. Examination and Inquiry Conducted by the AO: The Tribunal found that the AO had made thorough inquiries regarding the assessee's claim under Section 54F, issuing questionnaires and examining the responses. The AO's detailed assessment order indicated that the AO had considered the nature of the investments and the legal provisions before allowing the deduction. The Tribunal emphasized that an order cannot be deemed erroneous if the AO has conducted a proper inquiry and applied the law correctly, even if the Pr.CIT disagrees with the AO's conclusions. 4. Impact of Pending Appeal Before CIT(A): The assessee argued that the initiation of proceedings under Section 263 was barred due to the pending appeal before the CIT(A). The Tribunal clarified that the Pr.CIT's powers under Section 263 extend to matters not considered and decided in the appeal. Since the appeal was pending and not yet decided, the Pr.CIT was within his rights to invoke Section 263. However, the Tribunal found that the AO had already conducted a thorough inquiry and applied the law correctly, making the Pr.CIT's intervention unwarranted. Conclusion: The Tribunal quashed the order passed by the Pr.CIT under Section 263, concluding that the AO had made a proper inquiry and applied the law correctly in allowing the deduction under Section 54F. The Tribunal held that the assessment order was neither erroneous nor prejudicial to the interest of revenue, and thus, the Pr.CIT's revisional jurisdiction under Section 263 was not justified. Order Pronounced: The appeal of the assessee was allowed, and the order of the Pr.CIT was quashed. The other grounds raised by the assessee were deemed academic and not adjudicated.
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