2019 (10) TMI 730 - AT - Income Tax

Revision u/s 263 - lack of inquiry into certain vital aspects concerning eligibility of deduction under s.54F - HELD THAT - Different Courts in different issues have echoed that expression a residential house would encompass different residential units located on the different floors of the same building. On facts, we note that all the three units are located on the different floors of the same structure and purchased by the assessee by a common deed of conveyance. In the facts and circumstances, plurality of opinion about the allowability of deduction surely exists even if it is presumed for a moment that view adopted by the AO in favour of the assessee is not singular or absolute. In the circumstances, where the language couched in Section 54F has been interpreted in a manner favourable to assessee and multiple residential units were included within the sphere of Section 54F, we see no wrong in the action of the AO in seeing the issue in a wider spectrum. When the issue of eligibility of deduction u/s 54F is tested on the touchstone of prevailing judicial dicta, the action of the AO cannot be discredited as incorrect application of law or wrong assumption of facts. Relevant facts concerning the purchase of super structure comprising of three different units were duly placed and available on record. AO was not found to be totally oblivious of the relevant facts. Thus, there is an apparent plausibility about the assent of mind of AO on admissibility of claim having regard to the law existing at the relevant time. In these circumstances, the AO can be safely presumed to have adopted a view which was plausible though not necessarily agreeable to the Revisional Commissioner. 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-judicial 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. Section 263 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 u/s 263 in the instant case. The revisional order is accordingly set aside and quashed.- Decided in favour of assessee

Issues Involved:
1. Revisional jurisdiction of the Principal Commissioner of Income Tax (Pr.CIT) under Section 263 of the Income Tax Act.
2. Classification of income from the development agreement as business income versus capital gains.
3. Eligibility of deduction under Section 54F of the Income Tax Act.

Detailed Analysis:

1. Revisional Jurisdiction of Pr.CIT under Section 263:
The appeal challenges the revisional jurisdiction invoked by the Pr.CIT under Section 263 of the Income Tax Act. The Pr.CIT set aside the assessment order passed by the Assessing Officer (AO) under Section 143(3) for AY 2014-15, directing a fresh assessment due to perceived lack of inquiry into the eligibility of deduction under Section 54F. The Pr.CIT contended that the AO's order was erroneous and prejudicial to the interest of the Revenue.

2. Classification of Income from Development Agreement:
The Pr.CIT argued that the income arising from the development agreement related to a land parcel should be treated as business income rather than capital gains. However, during the Tribunal hearing, the assessee conceded this point, and the controversy was limited to the eligibility of deduction under Section 54F.

3. Eligibility of Deduction under Section 54F:
The Pr.CIT observed that the assessee's purchase of the entire E Block, comprising three independent residential units, did not qualify as "a residential house" under Section 54F. Consequently, the Pr.CIT deemed the AO's acceptance of the deduction claim erroneous and without requisite inquiry.

Arguments by the Assessee:
The assessee's Senior Counsel argued that the AO had indeed conducted inquiries regarding the long-term capital gains and the Section 54F deduction, as evidenced by the notice under Section 142(1) and subsequent responses. The Senior Counsel emphasized that the entire structure was purchased by a common deed, and judicial precedents supported the interpretation of "a residential house" to include multiple units within the same building. The Counsel cited several court decisions, including those from Karnataka, Delhi, Andhra Pradesh, and Madras High Courts, which supported the assessee's position.

Tribunal's Findings:
The Tribunal noted that the AO had made inquiries and considered relevant documents during the assessment. The Tribunal also acknowledged the judicial precedents favoring the assessee's interpretation of "a residential house" to include multiple units. The Tribunal concluded that the AO's view was plausible and legally tenable, even if not agreeable to the Pr.CIT. The Tribunal emphasized that Section 263 cannot be invoked merely because the Pr.CIT disagrees with the AO's plausible view.

Conclusion:
The Tribunal found that the AO's assessment order was neither erroneous nor prejudicial to the Revenue's interest. The Tribunal held that the Pr.CIT's invocation of Section 263 was unjustified and quashed the revisional order.

Result:
The appeal of the assessee was allowed, and the revisional order under Section 263 was set aside.

Order Pronounced:
The order was pronounced in open court on 15/10/2019.

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