2023 (4) TMI 803 - AT - Income Tax

Revision u/s 263 - deduction u/s 54B as well as under Section 54F - Whether AO examined both the issues thoroughly and took reasonable plausible and legally sustainable view? - HELD THAT - We find that the assessee furnished construction agreement and purchase deed of said house. The assessee has already filed copy of various notices issued by assessing officer and reply of assessee on record. Before us, the assessee vehemently submitted that assessing officer on verification of facts and examination of all the documents accepted the claim of assessee on deduction under Section 54B as well as under Section 54F of the Act. We find merit in the submissions of assessee that both the issues were examined by the assessing officer. Although, there is no detail discussions in the assessment order on both the issues. CIT at the time of revision observed that there is no sanction plan from the Municipal Committee and that there is mismatch in the balance sheet of assessee as on 31/03/2015 - We find that coordinate bench of Chennai Tribunal in B Siva Subramanian 2015 (1) TMI 49 - ITAT CHENNAI held that there is no condition in section 54F that building plan of residential house should be approved by Municipal Corporation or any other competent authority. Also in CIT Vs P V Narasimhan 1989 (9) TMI 58 - MADRAS HIGH COURT held that utilisation of sale proceed of one house to construct first floor after demolishing old structure of second house, the assessee would be entitled for exemption under section 54F. Thus, considering the above legal view by the Tribunal and High Court of Madras, we are of the view that the view taken by assessing officer in passively allowing relief to the assessee on the deduction/ exemption under section 54F is not erroneous Deduction u/s 54B, we find that the only objection raise by the assessing officer is that the assessee purchased new agriculture land prior to transfer of old agriculture land. We find that the sale consideration paid by the assessee is from the advance of Rs. 25.00 lakhs received on execution of agreement. This fact is clearly discernible from the bank statement of the assessee - We find that the combination of this bench in Atul K Patel 2021 (12) TMI 689 - ITAT SURAT by following the decision of Praveen P Bharucha 2013 (1) TMI 295 - BOMBAY HIGH COURT held that when part payment so received in advance, was utilized by the assessee in purchasing another agricultural land the assessee is entitled to claim exemption under section 54B of the Act. Thus Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the Pr CIT does not agree, it cannot be treated as an erroneous order unless the view taken by the Assessing Officer is legally not stainable. Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the revisionary order under Section 263 of the Income Tax Act.
2. Deduction under Section 54B of the Income Tax Act.
3. Deduction under Section 54F of the Income Tax Act.

Summary:

1. Validity of the Revisionary Order under Section 263:
The appeal by the assessee contested the order of the Principal Commissioner of Income Tax (Pr.CIT) under Section 263 of the Income Tax Act, 1961, which set aside the assessment order passed under Section 143(3). The Pr.CIT deemed the original assessment order erroneous and prejudicial to the interest of revenue due to lack of proper enquiry and non-application of mind by the Assessing Officer (AO).

2. Deduction under Section 54B:
The Pr.CIT identified that the assessee claimed a deduction of Rs. 30,31,390 under Section 54B for the purchase of agricultural land. The Pr.CIT noted that the deduction is available only if the new agricultural land is purchased within two years after the transfer of the original agricultural land. The assessee had purchased three pieces of land before the transfer, thus Rs. 15,52,740 of the deduction was disallowed. The assessee argued that the purchase was necessary to retain her status as a farmer under state laws, but the Pr.CIT found this contention devoid of merit.

3. Deduction under Section 54F:
The Pr.CIT observed that the assessee claimed a deduction of Rs. 82,95,685 under Section 54F for constructing a residential house. The Pr.CIT concluded that the assessee merely carried out construction on an existing house, which did not fulfill the conditions of Section 54F. The Pr.CIT noted discrepancies in the valuation and lack of an approved plan from the municipal authorities, deeming the AO's order as erroneous and prejudicial to the revenue.

Tribunal's Findings:
The Tribunal reviewed the submissions and evidence. It found that the AO had indeed examined the details and documents related to the deductions under Sections 54B and 54F. The Tribunal noted that the AO had taken a plausible and legally sustainable view, and there was no incorrect application of law or fact.

Deduction under Section 54B:
The Tribunal held that the assessee had utilized the sale consideration received in advance for purchasing new agricultural land, which complied with the conditions of Section 54B. The Tribunal referenced the decision in Atul K Patel Vs Pr.CIT, supporting the assessee's claim.

Deduction under Section 54F:
The Tribunal found that the assessee had demolished the old structure and constructed a new house, fulfilling the conditions of Section 54F. It cited precedents from the Madras High Court and the Chennai Tribunal, which supported the assessee's claim for deduction even without an approved municipal plan.

Conclusion:
The Tribunal concluded that the AO had adopted a permissible course of action and that the Pr.CIT's order under Section 263 did not meet the twin conditions of being erroneous and prejudicial to the interest of revenue. Therefore, the Tribunal set aside the Pr.CIT's order and allowed the appeal of the assessee.

Order:
The appeal of the assessee was allowed, and the order was pronounced on 17/04/2023 in open court.