2019 (3) TMI 1124 - HC - Income Tax

Revision u/s 263 by CIT - possible view - Benefit of exemption u/s 54F - LTCG - investment in two residential flats - whether subject flats form a single residential unit? - arriving at possible view - HELD THAT - Tribunal had, after discussing three aspects namely, whether the subject flats formed one single residential unit and with respect to the claim of the respondent that he had invested in the Capital Gains Account Scheme, and the further claim of the respondent that he had invested money in the Alibaug property had confined the remand only to the last two aspects. The claim under Section 54F was not remanded for re-consideration as it had already been considered for AY 2008-2009. This is evident from perusing paragraph 12 of the Tribunal's order. Consequently, the Tribunal did not entertain the appeal of the Revenue, with respect to the challenge relating to the flats and the claim for deduction under Section 54F. The learned Single Judge also correctly held that the view taken by the Assessing Officer in the order dated 31.03.2014, was a possible view and therefore cannot be categorized as a erroneous view. In the present case, the Assessing Officer in the order dated 31.03.2014, had only, as rightly pointed out by the learned Single Judge taken a possible view and this cannot be projected or categorized as an erroneous view. The learned Single Judge had observed that the respondent was unnecessarily burdened by the fact that the subject flats were purchased by two separate sale deeds and had separate electricity meter connections. The issue at hand, before the Assessing Officer, in my opinion, was whether or not the subject flats form a single residential unit. It must be emphasised that in reaching such conclusion the Assessing Officer not only had the benefit of examining the survey report, but also all other connected documents, particularly, the materials provided by the Housing Society. The documents convincingly point to the fact that flats Nos.607 and 612 were conjoined into one single residential unit. In view of the reasons stated above, we find no reason to interfere with the order of the learned Single Judge. The issues raised on facts have been finally decided. A possible view had been arrived at stating that there was only one single residential unit. The appellant herein had not provided any additional material for us to hold a contrary view to the view held by the learned Single Judge. - Decided against revenue

Summary

Issues Involved:
1. Validity of the assessment order under Section 263 of the Income Tax Act, 1961.
2. Eligibility for deduction under Section 54F of the Income Tax Act, 1961 for the investment in two adjoining flats.
3. Jurisdiction of the Principal Commissioner of Income Tax to initiate proceedings under Section 263 of the Act.

Detailed Analysis:

1. Validity of the assessment order under Section 263 of the Income Tax Act, 1961:
The Principal Commissioner of Income Tax-5, Chennai, issued a show cause notice under Section 263 of the Income Tax Act, questioning the deduction claimed by the petitioner under Section 54F for the investment in two adjoining flats. The petitioner filed a reply, but the Principal Commissioner passed an order setting aside the assessment order dated 31.03.2014, which led to the filing of the writ petition. The learned Single Judge observed that the Tribunal had already dealt with the issue of whether the flats formed a single residential unit and had not remanded this issue for reconsideration. Therefore, the Principal Commissioner could not exercise powers under Section 263 to revisit the issue once again. The order under Section 263 was quashed, and the writ petition was allowed.

2. Eligibility for deduction under Section 54F of the Income Tax Act, 1961 for the investment in two adjoining flats:
The petitioner claimed deduction under Section 54F for the investment in two adjoining flats, which he had converted into a single residential unit. The Assessing Officer initially allowed the deduction, but later, the Principal Commissioner questioned the deduction under Section 263. The Tribunal, while adjudicating the appeals, observed that the flats formed a single residential unit and allowed the deduction under Section 54F. The learned Single Judge upheld this view, stating that the Assessing Officer's view was a "possible view" and not erroneous. The Tribunal's order, which was not challenged by the Revenue, confirmed that the two flats were conjoined into a single residential unit, making the petitioner eligible for the deduction under Section 54F.

3. Jurisdiction of the Principal Commissioner of Income Tax to initiate proceedings under Section 263 of the Act:
The learned Single Judge observed that the Principal Commissioner had no jurisdiction to initiate proceedings under Section 263, as the Tribunal had already adjudicated the issue of the flats being a single residential unit. The Tribunal's order was not challenged by the Revenue, and therefore, the Principal Commissioner could not revisit the issue under Section 263. The learned Single Judge also noted that the Assessing Officer's view was a "possible view," and thus, it could not be categorized as erroneous. The High Court upheld the learned Single Judge's decision, stating that the Principal Commissioner had no jurisdiction to initiate proceedings under Section 263 in this case.

Conclusion:
The High Court dismissed the appeal, upholding the learned Single Judge's order that quashed the Principal Commissioner's order under Section 263. The court confirmed that the petitioner was eligible for the deduction under Section 54F for the investment in the two adjoining flats, which were considered a single residential unit. The Principal Commissioner had no jurisdiction to initiate proceedings under Section 263, as the issue had already been adjudicated by the Tribunal.