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TMI Blog2019 (10) TMI 730X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he interest of the Revenue. The Pr.CIT accordingly invoked revisional jurisdiction conferred under s.263 of the Act to show cause the assessee on the alleged infirmity in the assessment order which is narrated hereunder for ease of reference: Please refer to order passed under section 143(3) of the Income Tax Act, 1961 for A.Y. 2014-15 on 27.12.2016 by the DCIT,Cirete-3(3), Ahmedabad thereby, accepting your returned income i.e. ₹ 1,26,94,100/- as per Return of income filed on 23.04.2015. On examination of records, it is noticed that your father, Late Pramodbhai Ratilal Shah, had entered into a development agreement with M/s Synthesis Engineers for the development and evolving of a project for construction of residential flats on the land situated at Bodakdev bearing Survey No. 123/2/3 and 123/4 against a consideration of ₹ 8,10,00,001/- on 30/03/2010. Upon demise of your father, you have inherited the rights in the said property alongwith your brother-in-law Shri Sandeep J Shah and both of you have entered into a deed of confirmation with m/s.Synthesis Engineers on 26/07/2011 thereby enhancing yours consideration to ₹ 13,47,83 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed wealth tax return for the intermediate period between the transaction i.e. AY 2011-12, AY 2012-13, AY 2013-14 duly including the said impugned investment in your statement of wealth. As per records available with the office and citing the fact that you have never claimed) to have filed any such return, it can be easily concluded that you were treating the impugned land as Stock-inTrade and gain accrued from the impugned transaction can only be treated as Business Income and not Long Term Capital Gain. (b) Does the act of the assessee amount to adventure in nature of trade:- You had inherited the property from your father upon his demise on 01/11/2010 and within 08 months, you had entered into another deed of confirmation with the developer i.e. M/s Synthesis Engineers thereby enhancing your consideration by 66% to the original consideration. This transaction cannot be said to be investment but is d Clear case of adventure, in nature of trade. The motive to enter into development agreement by the father of the assessee and its subsequent confirmation by the assessee is a clear indicative that the land has been acquired solely to make profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u have mentioned that you along with Shri Sandeep J Shah have purchased the entire super Structure of E Block which consists of 3 units for a consideration of ₹ 4,71,23,702/- and had accordingly claimed deduction u/s 54F of the Act. 4.1 In this connection, your attention is drawn towards the conditions laid down to claim deduction u/s 54F of the Act, extract of which is given as under:- Where, in the case of an assesses being an individual, the capital gain arises 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 after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house (hereafter in this section referred to as the new asset), the capital gain shall be deal 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. The Pr.CIT, in essence, raised two grounds for invoking jurisdiction under s.263 of the Act; (i) gain arising by virtue of development agreement in relation to land parcel is in the nature of business income as against the capital gains claimed by the assessee and (ii) deduction claimed under s.54F of the Act on account of the entire block of the residential project so developed is not in accordance with law and wrongly allowed by the AO without requisite inquiry. However, as stated on behalf of assessee in the course of hearing before Tribunal, the assessee is no longer aggrieved by the first ground concerning determination of nature of income arising from development agreement. The only controversy thus revolves around eligibility of deduction under s.54F of the Act only. 5. As regards the second issue towards eligibility of deduction under s.54F of the Act with which we are presently concerned with, the Pr.CIT observed that the entire super structure of the block in the project named Altius-II comprises of 3 independent units and thus cannot be regarded as a residential house contemplated under s.54F of the Act and hence, the assessee is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supplemental agreement and deed of confirmation to explain the whole gamut of transactions pertaining to transfer of land parcel and thereafter retrieving back a part of the land together with super structure constructed by the developer. 7.1 It was submitted that the controversy in the present case is limited to the eligibility of deduction under s.54F of the Act where the super structure comprises of 3 residential units. The learned Senior Counsel emphasized that notwithstanding the fact that the super structure of block E purchased by the assessee comprises of 3 residential units, the entire structure has been purchased by the assessee by a common deed of conveyance. As referred to earlier, all the 3 residential units is required to be understood combinedly as a residential house for the purposes of claim of deduction under s.54F of the Act. The learned Senior Counsel submitted that the Pr.CIT has wrongly construed 3 residential units as 3 residential houses instead of 1 conjoint residential house and consequently, disputed the eligibility of deduction under s.54F of the Act on the grounds of not meeting the criteria for eligibility of one residential house. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned CIT.DR, on the other hand, relied upon the order of the Pr.CIT. In furtherance, the learned DR submitted that the residential block purchased by the assessee comprises of three non-contiguous units with separate entrances etc. located on different floor albeit in the same block and therefore each unit is independent of another. Consequently, all the three units cannot be regarded as a residential house . The learned DR accordingly submitted that the AO has wrongly entertained the claim of the assessee for deduction under s.54F of the Act resulting in error which has caused prejudice to the interest of the Revenue. 9. We have carefully considered the rival submissions. Section 263 of the Act confers power upon the Pr.CIT/CIT to call for and examine the records of a proceeding under the Act and revise any order if he considers the same to be erroneous and prejudicial to the interests of the Revenue. The Pr.CIT can take recourse to revision under Section 263 of the Act where the assessment order is erroneous as well as prejudicial to the interest of Revenue. The twin conditions are required to be satisfied simultaneously. The Pr.CIT in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aneously notice that the assessee has placed reliance upon several judicial precedents namely; CIT vs. Smt. K. G. Rukminiamma (2011) 331 ITR 211 (Karnataka); CIT vs. Gita Duggal (2013) 357 ITR 153 (Delhi); CIT vs. Gita Duggal (2014) 52 taxmann.com 246 (SC), CIT vs. Syed Ali Adil (2013) 352 ITR 418 (AP) and CIT vs. Smt. V. R. Karpagam (2015) 373 ITR 127 (Madras) for the construction of expression a residential house in the context of Section 54 54F of the Act. Different Courts noted above 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 of the Act has been interpreted in a manner favourable to assessee and multiple residential units were inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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