2022 (12) TMI 1280 - AT - Income Tax

Tribunal quashes revision order on Section 54F deduction, emphasizes conveyance deed not mandatory.

Shri Prerak Goel Versus Pr. CIT-19, Mumbai

Shri Prerak Goel Versus Pr. CIT-19, Mumbai - TMI Issues Involved:1. Validity of the revision order passed by the Principal Commissioner of Income Tax (PCIT).2. Entitlement to deduction under Section 54F of the Income Tax Act.3. Requirement of registration of conveyance deed for claiming deduction under Section 54F.4. Scope of revision proceedings under Section 263 of the Income Tax Act.Issue-wise Detailed Analysis:1. Validity of the revision order passed by the Principal Commissioner of Income Tax (PCIT):The assessee challenged the revision order dated 30/03/2022 passed by the PCIT-19, Mumbai, which related to the assessment year 2016-17. The PCIT examined the assessment record and noticed that the assessee had claimed exemption under Section 54F of the Income Tax Act against the long-term capital gain arising on the sale of shares, which had been accepted by the Assessing Officer (AO). The PCIT took the view that the registration of the conveyance deed is compulsory for availing deduction under Section 54F and initiated revision proceedings under Section 263 of the Act, holding the assessment order as erroneous and prejudicial to the interest of the Revenue.2. Entitlement to deduction under Section 54F of the Income Tax Act:The assessee sold 350 shares of M/s. Concord Enviro Systems Pvt. Ltd., earning a long-term capital gain of Rs. 3.01 Crores. The assessee claimed deduction under Section 54F for purchasing his mother's share in a flat by paying Rs. 3.00 Crores. The PCIT noted that the agreement for purchase was on notarized stamp paper and the conveyance deed was not registered. The PCIT concluded that the assessee was not entitled to the deduction under Section 54F due to the unregistered conveyance deed.3. Requirement of registration of conveyance deed for claiming deduction under Section 54F:The assessee argued that the AO made proper inquiries and accepted the claim for deduction under Section 54F after due application of mind. The assessee cited the case of Sureshchandra Agarwal, where it was held that the registration of the conveyance deed is not mandatory for availing deduction under Section 54F, as long as the sale proceeds were used to purchase a new residential house. The PCIT, however, disagreed and directed the AO to verify the legal provisions regarding the unregistered sale deed and the payment made by the assessee.4. Scope of revision proceedings under Section 263 of the Income Tax Act:The Tribunal referred to the principles laid down by the Hon'ble Bombay High Court in the case of Grasim Industries Ltd. v. CIT and the Supreme Court in Malabar Industrial Co. Ltd. v. CIT, which state that the Commissioner cannot invoke revision powers under Section 263 if the AO has conducted inquiries, applied his mind, and taken a possible view of the matter. The Tribunal noted that the AO had raised specific queries and received replies from the assessee regarding the unregistered conveyance deed. The Tribunal held that the AO had conducted proper inquiries and taken a plausible view, which cannot be considered erroneous merely because the PCIT had a different opinion.Conclusion:The Tribunal concluded that the AO's decision to allow the deduction under Section 54F was one of the possible views, supported by the Tribunal's earlier decision in Sureshchandra Agarwal. Since the AO had conducted proper inquiries and the view taken was plausible, the revision order passed by the PCIT was quashed. The appeal filed by the assessee was allowed, and the revision order was set aside.