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TMI Blog2019 (3) TMI 1124X X X X Extracts X X X X X X X X Extracts X X X X ..... 4, was a possible view and therefore cannot be categorized as a erroneous view. In the present case, the Assessing Officer in the order dated 31.03.2014, had only, as rightly pointed out by the learned Single Judge taken a possible view and this cannot be projected or categorized as an erroneous view. The learned Single Judge had observed that the respondent was unnecessarily burdened by the fact that the subject flats were purchased by two separate sale deeds and had separate electricity meter connections. The issue at hand, before the Assessing Officer, in my opinion, was whether or not the subject flats form a single residential unit. It must be emphasised that in reaching such conclusion the Assessing Officer not only had the benefit of examining the survey report, but also all other connected documents, particularly, the materials provided by the Housing Society. The documents convincingly point to the fact that flats Nos.607 and 612 were conjoined into one single residential unit. In view of the reasons stated above, we find no reason to interfere with the order of the learned Single Judge. The issues raised on facts have been finally decided. A possible view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of ₹ 22,42,72,478/- in the first tranche including the aforementioned sum received in the form of advance. 6.The petitioner, to avail the benefit of Section 54F of the Act, decided to invest the amount received in two residential flats located in the Olumpus Building in Altamount Road, Cumbulla Hill, Mumbai [hereafter collectively called as flats ]. These flats bore Nos. 607 and 612. They were, according to the petitioner adjacent to each other. 7.The Housing Society issued a No Objection Certificate [in short NOC ] with respect to flat No.612 on 11.04.2006. The petitioner purchased the two flats by two separate sale deeds. Flat No.607 was purchased by sale deed dated 23.05.2006. Flat No.612 was purchased by sale deed dated 16.01.2007. 8.The petitioner claimed in the writ petition that he had commenced the modification and renovation works to convert the two adjoining flats into a single residential unit by or about June 2006. 9.The petitioner also claimed that the Housing Society also provided him only with one single vote in matters relating to adjudicating issues which arise in the Society since for all practical purposes, he was the owner of one flat t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(A) also dealt with the appeal preferred by the petitioner in respect of AY 2008-2009 as some of the issues were common to the two appeals preferred by him. The issue pertaining to the deduction claimed by the petitioner under Section 54F of the Act, arose only in the appeal preferred with respect to AY 2009-2010. 16.Challenging the order of CIT(A), the Revenue filed an appeal before the Income Tax Appellate Tribunal, Chennai, [in short the Tribunal ]. The Tribunal by common order dated 08.04.2015, dealt with the two appeals filed by the Revenue and dismissed the appeal pertaining to AY 2008-2009 and partly allowed the appeal pertaining to AY 2009-2010. 17.The Tribunal, had dealt with three aspects, namely, (i)The claim of the petitioner under Section 54F in relation to the investment in the flats. (ii)The investment made by the petitioner to a sum of ₹ 6.20 Crores in the Capital Gains Account scheme with Bank of India. (iii)The sum of ₹ 40 Lakhs paid by the petitioner for purchase of immovable property in Alibaug, Rajgad District, Maharashtra. 18.The Tribunal, observed that the Assessee had constructed a residential house in the Alibaug prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed that in the order, the CIT(A) had discussed the entire history of the transaction and also the material placed which included the Surveyor's report, whereby a categorical finding was returned that the two flats were conjoined into one flat and it was confirmed that it was a single residential unit. The Assessing Officer by order dated 31.03.2014, in the proceedings under Section 143(3) read with Section 147 of the Act, with relation to AY 2008-2009 had also come to the very same conclusion and had allowed deduction under Section 54F of the Act. 23.It was further observed by the learned Single Judge that while the Revenue, had preferred appeals to the Tribunal against the common order dated 29.07.2013 of the CIT(A), with relation to AY 2008-2009 and 2009-2010, it also simultaneously initiated proceedings under Section 263 of the Act, against the Order of the Assessing Officer, dated 31.03.2014. It was further observed that the Tribunal, was obliged to adjudicate the appeals preferred by the Revenue, with respect to both AY 2008-2009 and 2009-2010. The Tribunal, had considered not only the issue whether the said flats formed one residential unit, but also examined th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... single residential unit. 13.2. The size of the flat, or, that they had separate electricity meter connections would not, necessarily, lead to a conclusion that they were two separate residential units. The Assessing Officer was required to look at other attendant circumstances, which included the survey report, in reaching a conclusion in the matter. Notably, what was available on record, was not only the survey report, but also the material provided by the concerned HousingSociety. The survey report, as it appears, did advert to the fact that the subject flats formed a single residential unit. 13.3. The learned counsel for the Revenue has not assailed the survey report before me. Therefore, quite clearly, there was material available to the Assessing Officer to come to a possible view, if not, definite view that the subject flats formed a single residential unit. 13.4. If, that be the conclusion, then, clearly, the respondent had no jurisdiction to initiate proceedings under Section 263 of the Act and thereupon, proceed to pass the impugned order. 27.In the result, the learned Single Judge, quashed the impugned order and allowed the writ petition. W.A.No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at consequently, the appellant cannot revise the same under Section 263 of the Act. It was strenuously argued and claimed that whether the purchase of two flats can be considered as purchase of one residential unit or purchase of two separate residential units had not been considered by the Assessing Officer and consequently, the appellant was well within his powers to initiate proceedings under Section 263 of the Act. 32.Mr.M.P.Senthilkumar, learned counsel for the respondent/writ petitioner, seriously disputed the contentions raised by Ms.Hema Muralikrishnan. The learned counsel also submitted a synopsis of dates and events and also an additional typed set of papers, wherein he had given the sequence of events prior to the purchase of two residential flats. The learned counsel stated that a No Objection Certificate had been issued by the Olumpus Co-operative Society Limited, with respect to flat No.612 on 11.04.2006 and immediately thereafter, on 20.04.2006, the respondent herein had intimated to the Secretary of the Housing Society, the scope of the renovation work in flat Nos.612 and 607. Among other works it included breaking the wall between second bedroom of 612 and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale of shares on 05.05.2007. The learned counsel supported the order of learned Single Judge and urged the Court to uphold the same. Discussion and Findings: 36.The respondent, Abhijit Bhandari, had in the writ petition assailed the order of the appellant herein dated 26.02.2016, in C.No.2(24)/263/PCIT-5/CR- 5/2015-16, with respect to the AY 2008-2009. The appellant was a principal shareholder of a company by name RIDM. He entered into a SPA dated 17.07.2006, along with other shareholders, with other entity by name Accor Services. It was agreed under that SPA that initially 70% of the shareholding of the RIDM would be sold by way of tranche. The second and third tranches would comprise sale of 20% and 10% respectively of the equity stake in RIDM. They were to be sold in three consecutive years namely, AY-2007-2008, AY-2008- 2009 and AY-2009-2010. 37.The respondent had received an advance of ₹ 15,82,86,273/- relating to AY 2007-2008 towards sale of 70% of shareholding of RIDM. The total consideration was ₹ 22,42,72,478/- and the date of sale was 05.05.2007. The respondent sought to avail the benefit under Section 54F of the Act. Section 54 is in chapter-IV o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or 66 [two years] after the date on which the transfer took place 65 purchased, or has within a period of three years after that date 67[constructed, one residential house in India](hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,- (a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45; (b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45: Provided that nothing contained in this sub-section shall apply where: (a) the assessee,-- (i) owns more than one residential house, other than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . When the respondent sought reasons for issuance of notice under Section 148 of the Act, it was informed that claim made by him under Section 54F of the Act, was the reason of issuance of the notice. 45.The respondent then filed his objections. The Assessing officer, passed the assessment order under Section 143(3) read with Section 147 of the Act, on 31.03.2014. The Assessing Officer had made the following observations and had sustained the claim made by the respondent. 3.4..... With regard to the merits of the case the assessee vide letter dated 09.07.2013 submitted that the assessee had sold the shares of the Royal Images Direct Marketing Private Limited shares on 05.05.2007. Annual Return filed by the said company to the ROC reflecting the above fact has already been submitted at the time of assessment. A copy of the same has been attached with this letter for your reference. This being the case for purchase of the flats by the assessee on 23.05.2006 and 16.01.2007 is well within the limits of one year, as prescribed by the sub section Section (sic) 54F of the Income Tax Act, 1961. For the above reasons, the deduction allowed under Section 54F cannot be withdrawn. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Loyalty Programs. The property purchased consist of two adjacent flats Flat No.612 and Flat.No.607 in Olympus Apartments, 5 C, Altamount Road, Mumbai 26, combine together to make a single residential unit, the assessee claimed deduction u/s 54F during the AY 2008-09 for the said investment and the same was accepted by the Assessing Officer during the scrutiny assessment proceedings and allowed the investment as deducted u/s 54F. The assessee has sold his balance share holding in Royal Images Direct Marketing Pvt.Ltd, on 14.07.2008 (AY 2009-10). The appellant has deposited ₹ 6,10,00,000/- on the balance long term capital received during the AY under consideration in Capital gains Accounts scheme (CGAS) as specified u/s 54F of IT Act for the purpose of claiming deducting u/s 54F. The AO had disallowed in the claim on the ground that the assessee was in possession of more than one residential unit at the time of investment in a new residential property and hence the deduction claimed u/s 54F was denied. The property purchased by the appellant relating to two different apartments which are adjacent to each other pertains to the AY 2008-09 wherein the Assessing Officer has examine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se notice under Section 263 of the Act, on 15.12.2015, questioning the deduction made under Section 54F to a sum of ₹ 4,88,78,900/- which was the amount invested in the two flats. The respondent herein filed a reply. The impugned order was then passed on 26.02.2016 by the appellant, whereby the assessment order dated 31.03.2014, was set aside. This related to AY 2008-2009 and passed under Section 143(3) read with under Section 147 of the Act. The show cause notice was passed under Section 263 of the Act. 50.The respondent had filed the writ petition challenging the impugned order. The learned Single Judge has observed as follows in his order dated 02.06.2017: 10. The Tribunal, therefore, while adjudicating upon the appeals preferred by the Revenue for both AYs, i.e., AY 2008-2009 and 2009-2010, was required to deal with the issue, which is, as to whether the subject flats formed one single residential unit. 11. The fact that this issue came before the Tribunal is quite evident, if, one were to peruse the paragraph 9 of the impugned order dated 08.04.2015. For the sake of convenience, the same is extracted hereafter : ..... 9. In the remand report, it was st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tained from the Municipal Corporation of competent Authority for construction of residential property for treating the assessee's agricultural land as residential area. 11.1. A perusal of the aforesaid extract would show that the Tribunal was considering, not only the issue as to whether or not the subject flats formed one residential unit, but also, was looking at the investment made by the petitioner in the Alibaug property, on which, a residential structure had been built by him. 11.2. Furthermore, a perusal of paragraph 8 of the Tribunal's order would also establish that it was also examining the petitioner's claim that he had invested ₹ 6.10 crores in a Capital Gains Account scheme via the Bank of India. This aspect is evident from the perusal of the following extract of the Tribunal's order dated 08.04.2015 : .... 8. We have heard both the parties and perused the orders of the authorities below. In our opinion, the Assessing Officer mixed up with the investment on two flats at Mumbai. the Commissioner of Income-tax (Appeals) observed that the assessee has earned capital gains on sale of shares during the year under consideration and dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advance towards purchase of Alibaug property. 12.2. The issue with regard to the claim of deduction under Section 54F of the Act, (which arose, as correctly argued on behalf of the Revenue, in its appeal filed qua A.Y. 2009-2010), was not remanded for reconsideration, as the same had already been considered in AY 2008-2009. This is quite evident upon perusing paragraph 10 of the Tribunal's order. The relevant observations made, in this regard, have already been extracted hereinabove by me. 12.3. Having regard to the aforesaid, in my view, the Tribunal in its wisdom, thought it fit not to entertain the appeal of the Revenue, with regard to its challenge laid to the deduction claimed by the petitioner vis-a-vis the subject flats under Section 54F of the Act. 12.3. Therefore, in my opinion, since, the Revenue did not assail the order of the Tribunal dated 08.04.2015, the respondent could not have exercised powers under Section 263 of the Act to revisit the issue once again, by setting aside the order dated 31.03.2014, passed by the Assessing Officer under Section 143(3) read with Section 147 of the Act. 51.As had been correctly observed by the learned Single j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous insofar as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation - x x x 6.A bare reading of this provision makes it clear that the prerequisite to exercise of jurisdiction by the Commissioner suo moto under it, is that the order of the Income-tax Officer is erroneous insofar as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied of twin conditions, namely, (i). the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the revenue. If one of them is absent -- if the order of the Income-tax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue -- recourse cannot be had to Section 263(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Income-tax [67 ITR 84] and in Smt. Tara Devi Aggarwal Vs. Commissioner of Income-tax, West Bengal [88 ITR 323]. 54.In the present case, the Assessing Officer in the order dated 31.03.2014, had only, as rightly pointed out by the learned Single Judge taken a possible view and this cannot be projected or categorized as an erroneous view. 55.We hold that there is no infirmity in the order under challenge. The learned Single Judge had observed as follows: 13.1..........According to me, it appears that the respondent was unnecessarily burdened by the fact that the subject flats were purchased by two separate sale deeds and had separate electricity meter connections. The issue at hand, before the Assessing Officer, in my opinion, was whether or not the subject flats form a single residential unit. 56. It must be emphasised that in reaching such conclusion the Assessing Officer not only had the benefit of examining the survey report, but also all other connected documents, particularly, the materials provided by the Housing Society. The documents convincingly point to the fact that flats Nos.607 and 612 were conjoined into one single residential unit. 57.In view o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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