2019 (3) TMI 85 - AT - Income Tax

Revision u/s 263 - eligibility of the assessee to claim deduction under section 54F - HELD THAT - It is not clear from the record as to whether the AO has examined the claim for deduction under section 54F and allowed the same after due application of mind. We notice that the Principal CIT has expressed certain views with regard to the contentions of the assessee and has also directed the AO to redo the assessment in the light of observations made by him. We are of the view that the AO should be given free hand in this matter. Accordingly, we modify the order passed by the Principal CIT and direct the AO to examine the issue of deduction u/s 54F of the Act in accordance with the law, without being influenced by the observations made by the learned Principal CIT in the impugned revision order - Appeal filed by the assessee is partly allowed.

Summary

Issues:
1. Validity of revision order passed by learned Principal CIT challenging deduction under section 54F of the Act.
2. Ownership of residential property located at Berlie Street, Bangalore for the purpose of claiming deduction under section 54F of the Act.

Analysis:
Issue 1: The revision order challenged the validity of the deduction under section 54F of the Act. The learned Principal CIT initiated revision proceedings under section 263 of the Act after finding that the assessee owned more than one residential property on the date of sale of the capital asset, which was a condition for claiming the deduction. It was held that the assessment order passed by the AO was erroneous and prejudicial to the interest of the Revenue due to lack of proper enquiry and verification by the AO. The assessee contended that the property in question did not belong to her but to her husband, and she was only included in the purchase deed for sentimental reasons and loan purposes. However, the learned Principal CIT held that the AO failed to examine the claim adequately, leading to the revision order setting aside the assessment order on the issue of deduction under section 54F and directing the AO to re-examine it.

Issue 2: The ownership of the residential property located at Berlie Street, Bangalore was a crucial factor in determining the eligibility for claiming the deduction under section 54F of the Act. The assessee argued that she was not the owner of the property and had only lent her name for sentimental reasons. However, the learned Principal CIT observed that the assessee had not explicitly stated her lack of ownership in the property during the assessment proceedings. The revision order highlighted the failure of the AO to conduct a proper enquiry into the claim made by the assessee, leading to the order being deemed erroneous and prejudicial to the Revenue's interest. The tribunal acknowledged the views expressed by the learned Principal CIT but directed the AO to re-examine the issue without being influenced by the observations made in the revision order, emphasizing the need for a fresh assessment in accordance with the law.

In conclusion, the tribunal partly allowed the appeal filed by the assessee, modifying the order passed by the learned Principal CIT and instructing the AO to re-examine the issue of deduction under section 54F of the Act independently of the observations made in the revision order.