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TMI Blog2015 (9) TMI 1010X X X X Extracts X X X X X X X X Extracts X X X X ..... than one units are purchased which are adjacent to each other and are converted into one house for the purpose of residence by having common passage, common kitchen etc. then it would be a case of investment in one residential house and consequently the assessee would be entitled to deduction u/s.54F. It is the settled proposition of law that for invoking the jurisdiction u/s.263 the twin conditions namely, the order is erroneous and the order must be prejudicial to the interest of the revenue must be satisfied. In the instant case the order of the AO may be prejudicial to the interest of the revenue but it cannot be said to be erroneous since various judicial decisions support the case of the assessee that the assessee is entitled to deduction u/s.54F in respect of 2 adjacent units - Decided in favour of assessee. - ITA No.731/PN/2013 - - - Dated:- 28-8-2015 - SHRI R.K. PANDA AND SHRI VIKAS AWASTHY, JJ. For The Appellant : Shri B.B. Mane/Shri Ragunathan D. Aiyar For The Department : Shri S.K. Rastogi, CIT ORDER PER R.K. PANDA, AM : This appeal filed by the assessee is directed against the order dated 11-01-2013 passed u/s.263 of the I.T. Act by the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de in only one residential house. Since the AO appeared to have failed to apply his mind and allowed deduction without verifying whether Flat Nos.13 and 14 were infact one flat or two flats, allowance of deduction u/s.54F for both the flats, i.e. Flat No. 13 and 14 without making any verification whatsoever or without application of mind appeared to be erroneous in so far as it was prejudicial to the interest of the revenue. He therefore issued a notice u/s.263 of the I.T. Act to the assessee asking him to explain as to why the provisions of section 263 of the I.T. Act should not be applied in the case of the assessee. 4. It was explained that the assessee had purchased 2 flats which were converted into one single flat by the previous owners Mr. Aziz Abdulhussein Lakhani Mrs. Rosalind Aziz Lakhani and the combined single flat was purchased by the assessee by one single agreement dated 17-07-2008. The floor space map of the combined flat wherein the earlier owners were stated to have closed the entrance of one flat was submitted. It was submitted that at the time of the purchase by the assessee the flats had only one entrance. The assessee also submitted the floor space map of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meters and two separate doors apart from the two kitchens shown in these flats. The Ld. CIT further noted that there are host of decisions by various courts where it has been held that in case there are number of flats which are altered/connected so as to make them into one residential house, deduction u/s.54F cannot be disallowed. However, the facts in the instant case are different. Merely because the assessee has purchased 2 flats through one registered deed the same would not make it one flat/residential unit when the sanctity of these two flats has been maintained in the registered deed and 2 kitchens are still being maintained as per the floor space map furnished. In any case the AO has not verified this issue and not applied his mind as to whether there was one or two residential units and allowed deduction treating the two flats as one residential unit. He, therefore, was of the opinion that the order of the AO is erroneous as well as prejudicial to the interest of the revenue. Relying on various decisions he set aside the order passed by the AO and directed him to frame the assessment order afresh after giving due opportunity to the assessee with respect to the claim of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon ble High Court in the said decision has held that the power of suo moto revision u/s.263(1) was in the nature of supervisory jurisdiction and could be exercised only if the circumstances specified therein existed. For invoking the jurisdiction u/s.263 the twin conditions, i.e the order of the AO must be erroneous and it must be prejudicial to the interest of the revenue must be fulfilled. The Hon ble High Court in the said decision has held that the CIT cannot revise the order merely because he disagrees the conclusion arrived at by the AO. 9. The Ld. Counsel for the assessee drew the attention of the Bench to the held portion of the order which reads as under : Held, that the Income-tax Officer in this case has made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given a detailed explanation in that regard by a letter in writing. All these were part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfied with the explanation of the assessee. This decision of the Income-tax Officer could not be held to be erroneous simply because in his order he did not make an elaborat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Bombay High Court in the case of CIT Vs. Devdas Naik reported in 49 taxmann.com 30 he submitted that the Hon ble High Court in the said decision has held that where acquisition of 2 flats had been done independently but eventually they were a single unit and house for purpose of residence, the claim of deduction u/s.54 could not be denied. He accordingly submitted that the order passed u/s.263 of the Act be set aside and the appeal filed by the assessee be allowed. 13. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT. Referring to the decision of the Hon ble Kerala High Court in the case of P.V. Sreenijin Vs. CIT reported in 227 taxmann 176 he submitted that the Hon ble High Court in the said decision has held that where entire material available with department was not considered by the AO and certain expenses were allowed in excess it could not be said that revision order of Commissioner was a substitution to that of the opinion of AO. He submitted that the AO during the course of assessment proceedings has not applied his mind regarding the allowability of deduction u/s.54F for 2 flats purchased by the assessee. Therefore, the L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f its order. Prior thereto, the factual position has also been noticed that the Assessee alongwith his wife jointly owned bungalow. The bungalow was sold at ₹ 3/- crores. With this sum, they bought three flats, one in the Assessee's name, another in the name of Assessee and his wife and third in the name of the wife. The Assessee claimed deduction under section 54 on purchase of two flats in which he is either a sole owner or a joint owner. Though these flats were acquired under two distinct agreements and from different sellers, what has been noted by the Tribunal as also the Commissioner of Income Tax (Appeals) is that the map of the general layout plan as well as internal layout plan in regard to flat Nos.l 03 and 104 indicate that there is only one common kitchen for both the flats. The flats were constructed in such a way that adjacent units or flats can be combined into one. However, admitted fact is that the flats were converted into one unit and for the purpose of residence of the Assessee. It is in these circumstances, the Commissioner held that the acquisition of the flats may have been done independently but eventually they are a single unit and house for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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