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Mrs. Tehmi Aspi Anklesaria Versus Dy. CIT, Circle-4, Pune

Revision u/s 263 - CIT-II, Pune directing disallowance of deduction u/s.54F alleging that deduction needs to be allowed on purchase of only one flat and not a house property containing 2 combined flats - Held that:- There is no dispute to the fact that the assessee in the instant case has invested her long term capital gain in acquisition of 2 adjacent flats bearing Flat Nos. 13 and 14 in the project Magnolia vide purchase deed dated 17-07- 2008 for a total consideration of ₹ 77,82,600/-. .....

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ts. Since at the prevailing time various decisions were available to the proposition that where more 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 t .....

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D 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 CIT-II, Pune relating to Assessment Year 2008-09. 2. Facts of the case, in brief, are that the assessee is an individual and filed her return of income for the impugned assessment year on 30-03-2009 declaring taxable income .....

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-. The assessee has claimed deduction of ₹ 77,82,600/- u/s.54(2) of the I.T. Act from the capital gain computed by her. According to the AO the deduction u/s.54 of the Act is available only in respect of the capital gain from transfer of a residential house. Since the assessee, in her computation, has even mentioned that the sale consideration is from sale of a residential house the AO held that the contention of the assessee is not correct. The assessee has only transferred her agricultur .....

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T examined the records and observed that while framing the assessment the AO had allowed the deduction u/s.54F of the I.T. Act to the extent of ₹ 69,12,528/- on investment of ₹ 77,82,600/-. He noted that the assessee had purchased 2 flats, i.e. Flat No.13 and Flat No.14 in the project Magnolia vide purchase deed dated 17-07-2008 for a total consideration of ₹ 77,82,600/-. The break-up of the cost as provided in the purchase deed was ₹ 28,07,000/- towards Flat No.13 and &# .....

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on 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 combin .....

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e builder vide two agreements dated 04-04-1995 and 07-04-1995. It was explained that these flats were separate with two entrances. However, the flats were resold to Shri Lakhani through two agreements who in turn sold the flats through one agreement to the assessee. It was accordingly submitted that only one unit having one entrance was purchased by the assessee and therefore, deduction u/s. 54F was rightly claimed. It was alternatively submitted that the residential house in section 54 & 54 .....

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hat at the time of construction there were 2 flats bearing Flat No.13 and Flat No.14 which were purchased by the original buyer Mr. Narsimhamurti Srinivas and Mrs. Krupa Srinivas from the builder vide two agreements dated 04-04-1995 and 07-04-1995. These flats were resold to Mr. Aziz Abdulhussein Lakhani & Mrs. Rosalind Aziz Lakhani through two separate agreements. Even though it is claimed that the combined flats were purchased through single purchase deed the distinction of Flat No.13 and .....

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y reply to his question as to why there were still two kitchens and two entrances when the flats were claimed to be combined. He further noted that since there were 2 distinct flats the counsel of the assessee was not able to give response to the question whether there were 2 electric 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 f .....

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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 deduction u/s.54 .....

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at when two possible views are available, adopting one view does not lead to any error which needs to be corrected by resorting to section 263 of the ITA, 1961. 3. The appellant craves leave to add/modify/delete/alter all/ any of the grounds of appeal. 7. The Ld. Counsel for the assessee strongly opposed the order passed u/s.263 by the CIT. He submitted that the assessee has submitted all details to the AO including the deed of assignment. The assessee had inadvertently claimed deduction u/s.54 .....

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ined by seller and it is single residential house having single entrance and single kitchen. He submitted that even in one residential house there can be more than two separate kitchens and more than one electric meters for different purposes. He also drew the attention of the Bench to the amendment carried out by the Finance (No.2) Act, 2014 to the provisions of section 54F according to which the words one residential house in India are added. This according to the Ld. Counsel for the assessee, .....

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ction 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 porti .....

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ly because in his order he did not make an elaborate discussion in that regard. Moreover, in the instant case, the Commissioner himself, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the Income-tax Officer to re-examine the matter. That was not permissible. The Tribunal was justified in setting aside the order passed by the Commissioner of Income-tax under sect .....

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Referring to the Full Bench decision of the Hon ble Gauhati High Court in the case of CIT Vs. Jawahar Bhattarcharjee reported in 67 DTR 217 he submitted that the Hon ble High Court in the said decision has explained the expression erroneous assessment in context of section 263 is an assessment made on wrong assumption of facts or on incorrect application of mind or without due application of mind or without following the principles of natural justice. He submitted that in the instant case there .....

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the said decision has held that the exemption u/s.54 and 54F would be allowable where more 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, stair case, common kitchen etc. then it would be a case of investment in one residential house and consequently the assessee would be entitled to exemption. 12. Referring to the decision of the Hon ble Bombay High Court in the case of CIT Vs. Devdas Naik repo .....

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f 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 proc .....

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nt case has invested her long term capital gain in acquisition of 2 adjacent flats bearing Flat Nos. 13 and 14 in the project Magnolia vide purchase deed dated 17-07- 2008 for a total consideration of ₹ 77,82,600/-. We find the AO, in the body of the assessment order, allowed deduction u/s.54F at ₹ 69,12,528/- being the proportionate deduction u/s.54. While allowing deduction u/s.54F at ₹ 69,12,528/- the AO had also rejected the claim of deduction u/s.54(2) made by the assessee .....

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would be a case of investment in one residential house and consequently the assessee would be entitled to deduction u/s.54F. The Special Bench of the Tribunal in the case of Ms. Sushila Jhaveri (Supra) was dated 17-04-2007 and the assessment order was passed on 30-06-2010. Therefore, the view taken by the AO in the given facts and circumstances cannot be said to be non application of mind. 15. The issue now stands decided in favour of the assessee by the decision of the Hon ble jurisdictional H .....

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Tribunal in paragraph 4 of 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 .....

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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 purpose of residence. This factual finding could have been made the basis for recording a conclusion in favour of the Assessee. We do not find that such a conclusion can be termed as perverse. Reliance placed by the Tribunal on the order passed by it in the case of Ms Sushil .....

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