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TMI Blog2020 (10) TMI 407X X X X Extracts X X X X X X X X Extracts X X X X ..... r of ITO cannot be treated as prejudicial to the interests of the revenue if the ITO adopted one of the course permissible in law and it has resulted in loss of revenue or two views are possible and the ITO has taken one view with which the ld. CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law. The view taken by the AO is a possible view though may not be the only view. Further once the issue of allowability of deduction under section 54F is a debatable issue and the AO has taken a possible view, then the ld. PCIT is not permitted to invoke the provisions of section 263 merely because he does not agree with the view of the AO. Hence we hold that the impugned order passed by the ld. PCIT is not sustainable and the same is liable to be set aside. - Decided in favour of assessee. - ITA No. 246/JP/2020 - - - Dated:- 6-10-2020 - SHRI VIJAY PAL RAO, JM And SHRI VIKRAM SINGH YADAV, AM Assessee by : Shri Himanshu Goyal (CA), Ms. Preeti Lohiya (CA) Ms. Praneti Agarwal (CA) Shri Narendra Mulchandani (CA) Revenue by : Shri Amrish Bedi (CIT) ORDER PE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... residential house on the same and the same is eligible to claim the deduction u/s 54F of the Act. 5. That the ld. PCIT has erred in proposing to disallow the indexed cost of construction expenses of ₹ 18,18,483/- made by the assessee in the F.Y. 2007-08 ignoring the fact that assessee has provided the all relevant details to prove the said transaction genuine. 6. That the ld. PCIT has erred in proposing to disallow the indexed cost of construction expenses of ₹ 13,46,834/- made by the assessee in the F.Y. 2010-11 ignoring the fact that assessee has provided the all relevant details to prove the said transaction genuine. 7. That the ld. PCIT has erred in law and on facts in ignoring the principal of law that the beneficial provisions must be considered liberally. 8. That the ld. PCIT has erred in proposing the disallowance ignoring the fact that the appellant has invested the entire consideration received by her in purchase residential house and has rightly claimed deduction under section 54F. 9. That the appellant craves leave to add, alter and/or amend any ground of appeal as and when considered necessary. The hearing of the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment order was set aside being erroneous so far as prejudicial to the interests of the revenue and remitted back the matter to the AO with the direction to pass the fresh order after taking into account all necessary facts and details connected with the claim of deduction under section 54F of the IT Act. Aggrieved by the impugned order, the assessee has filed the present appeal. 3. Before us, the ld. A/R of the assessee has submitted that the ld. PCIT has wrongly invoked the provisions of section 263 of the IT Act as the matter was duly examined by the AO during the scrutiny assessment and particularly when the case was selected for limited scrutiny on the very issue of investment made in the property as well as deduction claimed under section 54F of the Act. Thus the ld. A/R of the assessee has contended that the AO called for the relevant details, documents as well as books of account which were duly produced by the assessee during the assessment proceedings. The AO has taken into consideration all the material placed before him and after due application of law and consideration of facts, he reached at the conclusion while passing the assessment order under section 143(3) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Hari Om Stones C/o Sh. Om Prakash Sharma vs. PCIT, Alwar (2018) (4) TMI 393- ITAT Jaipur. Thus the ld. A/R has submitted that once the AO has conducted a proper enquiry and examined all the details and evidences connected with the claim of deduction under section 54F and allowed the claim, then the invoking of provisions of section 263 and passing the impugned order by the ld. PCIT is invalid and liable to be set aside. 4. On the other hand, the ld. CIT D/R has submitted that it is a clear case of non application of mind by the AO while passing the assessment order. He has further submitted that the assessee has claimed the deduction under section 54F in respect of the investment made in the purchase of agricultural land and a small construction was made by the assessee on the said land which cannot be said to be a residential house. He has referred to the impugned order of the ld. PCIT and submitted that during the revision proceedings, the ld. PCIT has conducted an enquiry and found that the construction on the agricultural land was not a residential house as it is not inhabitable in the absence of the basic amenities. Thus the order of the AO is erroneous for want ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of the undersigned from the ITO Ward 4(1) Jaipur on 26.05.2017 and due to change of incumbent of charges, notice u/s 142(1) along with questionnaire issued on 14.07.2017 fixing the case of hearing on 20.07.2017 which was duly served upon the assessee on 15.07.2017. In response thereto, the CA/AR of the assessee Sh. Ajay Jain attended the proceedings from time to time and furnished required details/documents and also produced books of accounts, which were examined on test check basis. The case was discussed with him. 2. The assessee earned income from capital gain and interest. During the course of assessment proceedings written submissions were filed placed on file and other details were produced which were examined on test check basis. After discussion with the A/R of the assessee, the returned income is accepted. Thus in response to the notice issued under section 142(1), the assessee attended the proceedings through her A/R and also furnished the required details/documents as well as books of account which were examined by the AO. There is no dispute that the AO has conducted the enquiry on the issue for which the case was selected for scrutiny and after satisfyin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the reason that he has a different view regarding the allowability of deduction under section 54F in respect of the investment made for purchase of agricultural land and construction of house. There is no quarrel on the point that lack of enquiry renders the order of the AO as erroneous so far as prejudicial to the interests of the revenue. However, when there is no allegation and even otherwise it is manifest from the record that this is not a case of lack of enquiry on the part of the AO but the AO after satisfying himself about the claim of deduction under section 54F consequent upon the examination and verification of the concerned details, evidences and books of account produced by the assessee, allowed the claim of the assessee. Further, though the ld. PCIT has not alleged that there is inadequate enquiry on the part of the AO, however, even in case there is inadequate enquiry on the part of the AO, the ld. PCIT can give a concluding finding while passing the revision order after considering the complete record as well as conducting a necessary enquiry. In this case the assessee has contended before the ld. PCIT that the claim of deduction under section 54F is eligible even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the land sold by the assessee amounting to ₹ 18,18,483/- (pertaining to F.Y. 2007-08) and of ₹ 13,46,834/- (pertaining to F.Y. 2010-11). Thus while passing the revision order, the ld. PCIT himself was not sure about the correctness of the claim and has remanded the matter to the record of the AO for passing a fresh order. Hence he has not given a concluding finding whether the order of the AO allowing the claim of deduction under section 54F after conducting an enquiry is absolutely against the provisions of law. Once it is not a case of lack of enquiry on the part of the AO, the said order cannot be held to be erroneous unless the ld. PCIT holds and records the reason why it is erroneous. The pre-condition for invoking the jurisdiction under section 263 is that the ld. PCIT must come to the conclusion that the order of the AO is erroneous and is unsustainable in law. When the order passed by the AO is not erroneous for want of an enquiry, then it is incumbent upon the ld. PCIT to give a concluding finding and reasons that the order is not sustainable in law. An identical issue was considered by the Hon ble Jurisdictional High Court in case of CIT vs. Ganpat Ram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he High Court has also found that the assessment order was passed without application of mind. The High Court rightly held that the exercise of jurisdiction by the CIT under section 263(1) was justified. 10. From the record of the proceedings, in the present case, no presumption can be drawn that the Assessing Officer had not applied its mind to the various aspects of the matter. In such circumstances, without even prima facie laying foundation for holding that assessment order is erroneous and prejudicial to interest in any matter merely on spacious ground that the Assessing Officer was required to make an enquiry, cannot be held to satisfy the test of existing necessary condition for invoking jurisdiction under section 263 of the Incometax Act. 11. Undoubtedly, the jurisdiction under section 263 is wide and is meant to ensure that due revenue ought to reach the public treasury and if it does not reach on account of some mistake of law or fact committed by the Assessing Officer, the CIT can cancel that order and require the concerned Assessing Officer to pass a fresh order in accordance with law after holding a detailed enquiry. But when enquiry in fact has been conduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer has taken one view with which the CIT may not agree; the said orders cannot be treated as an erroneous order prejudicial to the interest of Revenue unless the view taken by the Assessing Officer is unsustainable in law. In such matters, the CIT must give a finding that the view taken by the Assessing Officer is unsustainable in law and, therefore, the order is erroneous. He must also show that prejudice is caused to the interest of the Revenue. The Hon ble High Court has laid out a fine distinction between the orders where no enquiry has been made by the AO from the order based on inadequate enquiry. Therefore, where the AO has made an enquiry and taken a possible/permissible view, then the said order cannot be treated as erroneous and prejudicial to the interests of the revenue unless the view taken by the AO is unsustainable in law. The Hon ble Supreme Court in case of Malabar Industrial Co. Ltd. vs. CIT, 243 ITR 83 (SC) has held that an order of ITO cannot be treated as prejudicial to the interests of the revenue if the ITO adopted one of the course permissible in law and it has resulted in loss of revenue or two views are possible and the ITO has taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T. Act, 1961 and so assessee is not entitled to claimed deduction u/s 54F. As per our considered view, benefit of Section 54F cannot be denied on the ground that land on which construction done was agriculture in nature. Reliance is placed on the judgements in case of Vishnu Trading Co. 259 ITR 724 (Raj.), Narendra Mohan Uniyal 34 SOT 152 (Del.), Shyam Sunder Mukhija Vs. ITO 38 ITD 125 (JPR) and ACIT Vs. Om Prakash Goyal (2012) 53 SOT 158 (JPR). In the case of Narendra Mohan Uniyal (Supra) it is held that It is crystal clear from the plain reading of ss. 54 and 54F that exemption is allowable in respect of amount invested in the construction of a residential house. There is no any rider under s. 54F that no deduction would be allowed in respect of investment of capital gains made on acquisition of land appurtenant to the building or on the investment on land on which building is being constructed. When the land is purchased and building is constructed thereon, it is not necessary that such construction should be on the entire plot of land, meaning thereby a part of the land which is appurtenant to the building and on which no construction is made, there is no denial of exemption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee invested a sum of ₹ 1,15,00,000/- in purchase of land for construction of a residential house. The deduction u/s 54F amounting to ₹ 83,54,434/- has been claimed on account of said investment in the land; copy of the agreement to purchase and registered purchase deed were verified before the A.O.. The assessee got constructed a residential house in the F.Y. 201213 i.e. within the statutory time limit allowed by the Act i.e. before the due date of February, 2014. Copy of bills for construction of house alongwith Map of the house was filed before the A.O.. The total area of land is about 4090 sq.mtr. and the constructed area is about 1504 sq.ft. No approval is required for construction of the above said residential house. Copy of regi s tered sale deed i s al so f i led before the A.O. We found that i t was a res ident ial uni t , therefore, the as ses see i s ent i t led for c laim of deduct ion U/s 54F of the Ac t amount ing to Rs . 83,54,434/ - . Thus it is clear that the Tribunal has referred and relied upon various decisions on the point of allowability of deduction under section 54/54F of the Act in respect of the investment made in construction of house ..... X X X X Extracts X X X X X X X X Extracts X X X X
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