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2022 (5) TMI 1267 - AT - Income TaxRevision u/s 263 - admissibility of deduction under section 54F of the Act has been claimed for purchase of four residential house properties - whether the Assessing Officer has conducted sufficient enquiry to examine the correctness of claim of deduction under section 54F? - HELD THAT - In the light of the provisions of section 263 of the Act and a settled position of law, powers u/s 263 of the Act can be exercised by the Pr. Commissioner/Commissioner on satisfaction of twin conditions, i.e., the assessment order should be erroneous and also prejudicial to the interest of the Revenue. By 'erroneous' is meant contrary to law. Thus, this power cannot be exercised unless the Commissioner is able to establish that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Thus, where there are two possible views and the Assessing Officer has taken one of the possible views, no action to exercise powers of revision can arise, nor can revisional power be exercised for directing a fuller enquiry to find out if the view taken is erroneous. This power of revision can be exercised only where no enquiry, as required under the law, is done. It is not open to enquire in case of inadequate inquiry. We find that the Hon'ble Delhi High Court in the case of CIT vs. Anil Kumar 2010 (2) TMI 75 - DELHI HIGH COURT held that where it was discernible from record that the A.O has applied his mind to the issue in question, the ld. CIT cannot invoke section 263 of the Act merely because he has different opinion. On going through the show-cause notice, we find that the ld. PCIT has alleged that with regard to the claim of deduction under section 54F Assessing Officer failed to examine into the matter and passed the assessment order without proper verification of the facts. This observation that the Assessing Officer failed to examine the matter, in our view is devoid of any merit. Ld. PCIT should have appreciated that on multiple occasions, the Assessing Officer has issued notice to the assessee for furnishing the details and on each occasions replies have been filed by the assessee. Complete details of the documents of purchase of flats have been given. It is an undisputed fact that proper and detailed enquiry has been conducted by the Assessing Officer and when a reasonable enquiry has been conducted by the Assessing Officer (which even ld. PCIT has observed in the impugned order) and a permissible view has been taken by the ld. Assessing Officer, then there remains no scope for the ld. PCIT to invoke the jurisdiction under section 263 of the Act. It is also well settled that a permissible view taken by the ld. Assessing Officer may not be beneficial to revenue. Thus we are of the view that since the issue raised in the show-cause notice has already been examined by the ld. Assessing Officer in detail by conducting adequate enquiry calling for material evidence and other documents supporting the claim of deduction under section 54F of the Act, proper application of mind and taken a plausible view in light of the settled judicial precedence as referred by the ld. counsel for the assessee, there remains no scope for the ld. PCIT to invoke the jurisdiction under section 263 of the Act. We, therefore, quash the impugned proceedings carried out under section 263 of the Act and hold that assessment order under section 143(3) of the Act dated 13.12.2018 is neither erroneous nor prejudicial to the revenue and thus deserves to be restored. Thus the grounds of appeal filed by the assessee are allowed.
Issues Involved:
1. Initiation of proceedings under section 263 without the condition precedent. 2. Exceeding jurisdiction by the Principal Commissioner of Income Tax (Pr. CIT). 3. Partial enquiry conducted by the Assessing Officer (AO) regarding deduction under section 54F. 4. Invocation of section 263 without specifying the applicable phraseology. 5. AO's view on deduction under section 54F being one of the possible views. 6. Erroneous and prejudicial assessment order regarding deduction under section 54F. 7. Failure of the assessee to explain the claim of deduction under section 54F. 8. Non-consideration of replies submitted during the section 263 proceedings. 9. Ignoring jurisdictional High Court judgment regarding reasonable enquiry by AO. 10. Ignoring judgments relied upon by the appellant justifying the deduction under section 54F. 11. Setting aside the assessment order without pointing out specific errors. 12. Contrary findings regarding the claim of deduction under section 54F. 13. Inadvertent direction regarding allowance of deduction under section 54F. 14. Overall validity of the order. 15. Additional grounds to be urged during the appeal hearing. Detailed Analysis: 1. Initiation of Proceedings under Section 263: The assessee argued that the Pr. CIT initiated proceedings under section 263 without the necessary condition precedent. The Pr. CIT observed that the AO failed to properly verify the claim of deduction under section 54F for multiple residential properties, which led to the initiation of the proceedings. 2. Exceeding Jurisdiction: The assessee claimed that the Pr. CIT exceeded jurisdiction by addressing issues beyond those mentioned in the show-cause notice. The Tribunal found that the Pr. CIT's actions were based on the assessment records and the show-cause notice, which justified the initiation of the proceedings. 3. Partial Enquiry by AO: The Pr. CIT held that the AO conducted only a partial enquiry regarding the deduction under section 54F for four flats. The Tribunal noted that the AO had issued multiple notices and received detailed replies from the assessee, indicating that a reasonable enquiry was conducted. 4. Invocation of Section 263: The assessee contended that the Pr. CIT invoked section 263 without specifying which phraseology ("erroneous" or "prejudicial") was applicable. The Tribunal emphasized that both conditions must be satisfied for invoking section 263, and the Pr. CIT's order lacked clarity on this aspect. 5. AO's View on Deduction: The assessee argued that the AO's view on allowing the deduction under section 54F was one of the possible views. The Tribunal agreed, stating that when two views are possible, the AO's view should not be considered erroneous if it is a permissible view under the law. 6. Erroneous and Prejudicial Assessment Order: The Pr. CIT held that the assessment order was erroneous and prejudicial to the interest of revenue concerning the deduction under section 54F for two flats. The Tribunal found that the AO had conducted a detailed enquiry and allowed the deduction based on the facts and judicial precedents. 7. Explanation of Deduction Claim: The Pr. CIT held that the assessee failed to explain the claim of deduction under section 54F for two flats. The Tribunal noted that the assessee had provided detailed explanations and documentary evidence during the assessment proceedings, which the AO had considered. 8. Non-Consideration of Replies: The assessee claimed that the Pr. CIT did not consider the replies submitted during the section 263 proceedings. The Tribunal observed that the Pr. CIT had considered the replies but still found the assessment order erroneous and prejudicial to the revenue. 9. Ignoring Jurisdictional High Court Judgment: The assessee argued that the Pr. CIT ignored the jurisdictional High Court judgment, which held that reasonable enquiry by the AO precludes the invocation of section 263. The Tribunal agreed, citing the judgment in CIT vs. Mukul Kumar, which supported the assessee's contention. 10. Ignoring Judgments Justifying Deduction: The assessee contended that the Pr. CIT ignored relevant judgments justifying the deduction under section 54F. The Tribunal found that the AO had allowed the deduction based on judicial precedents, and the Pr. CIT's order lacked justification for ignoring these precedents. 11. Setting Aside Assessment Order: The assessee argued that the Pr. CIT set aside the assessment order without pointing out specific errors. The Tribunal noted that the Pr. CIT's order lacked specific findings on how the AO's order was erroneous and prejudicial to the revenue. 12. Contrary Findings: The assessee claimed that the Pr. CIT's findings regarding the claim of deduction under section 54F were contrary to the assessment records. The Tribunal found that the AO had conducted a detailed enquiry and allowed the deduction based on the facts and judicial precedents. 13. Inadvertent Direction: The assessee pointed out an inadvertent direction by the Pr. CIT regarding the allowance of deduction under section 54F. The Tribunal noted that this issue was addressed through a rectification petition filed by the assessee. 14. Overall Validity of the Order: The assessee argued that the entire order was invalid. The Tribunal found that the Pr. CIT's order lacked sufficient grounds to justify the invocation of section 263 and quashed the proceedings. 15. Additional Grounds: The assessee reserved the right to urge additional grounds during the appeal hearing. The Tribunal's decision on the primary grounds rendered this point moot. Conclusion: The Tribunal quashed the proceedings under section 263, holding that the assessment order was neither erroneous nor prejudicial to the revenue. The AO had conducted a reasonable enquiry and taken a permissible view based on the facts and judicial precedents. The appeal of the assessee was allowed.
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