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2018 (9) TMI 616 - ITAT MUMBAIRevision u/s 263 - AO has failed to examine whether assessee’s claim of deduction u/s 54 in respect of two flats purchased by him is in compliance to the conditions mentioned under the said provision - order to be erroneous and prejudicial to the interests of Revenue - Held that:- If the Assessing Officer allows assessee’s claim after considering the fact that the two flats have been converted to one residential unit having single entrance and one kitchen, the view adopted by the Assessing Officer cannot be considered to be erroneous since it is a possible view. That being the case, one of the conditions of section 263 of the Act is not fulfilled. Therefore, the assessment order cannot be subjected to the proceedings under section 263 of the Act. As per the provision of section 54 of the Act, applicable to the impugned assessment year, “a residential house” does not mean one residential house. This interpretation has been given in various judicial precedents, a few of which have been cited before us by the learned Authorised Representative. In these decisions, it has been held that if the flats purchased by the assessee are adjacent or contiguous to each other and are used as a single residential unit having common entrance and common kitchen, they have to be considered as a single residential unit satisfying the condition of section 54 of the Act. Directions of the Principal Commissioner of Income-tax to the Assessing Officer while setting aside the assessment order is conflicting and contradictory. While in Para–6 of the impugned order, he has directed the Assessing Officer to examine the claim of the assessee, to the effect that the two flats are single units, and decide the issue after affording opportunity of being heard to the assessee, whereas, in Para–7 of the order, he has directed the Assessing Officer to restrict the deduction under section 54 of the Act to one flat at ₹ 54,12,800. Once the learned Principal Commissioner of Income-tax directs the AO to restrict the deduction under section 54 of the Act to one flat, the other direction for examining assessee’s claim that the residential unit is a single unit becomes redundant. - Decided in favour of assessee
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