TaxTMI 
TaxTMI 
TaxTMI 
2019 (10) TMI 730
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....ct. 3. Briefly stated, the assessee, an individual, derives income from house property, capital gain and other sources. The return of income of the assessee for AY 2014-15 was subjected to scrutiny assessment and consequently, assessment order was framed under s.143(3) of the Act. The AO completed the assessment and accepted the income declared as per return of income amounting to Rs. 1,26,94,100/- as assessed income without any adjustment. On verification of assessment records, the Pr.CIT found that the assessment order passed by the AO is erroneous and prejudicial to the 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. Rs. 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 ag....
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.... death on 01/1 1/2010 and since, as per the Development Agreement entered by your late father on 30/03/2010, the impugned land had already been valued at Rs. 8,10,00,001/- and your shares works out to Rs. 4,05,00,000/- which is above the wealth tax limit. Hence, the moment you had inherited the property, you became liable for payment of wealth tax. As you had claimed to have effected the sale transaction of the impugned land in the AY 2014-15, you should have filed 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 confir....
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....t be modified u/s. 263 of the Act by directing a fresh assessment. 4. Without prejudice to the above and as an alternative recourse, it has further been noticed from the case records that the deduction u/s 54F has been claimed on account of purchased of the entire Block E of the scheme in the name and style 'Altius-II'. Vide Para 3 of your submission dated 14.12.2016 you 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 Rs. 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 (h....
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....Authorized Representative, on 29/01/2019 at 12.30 PM. However, it is clarified that personal appearance is not compulsory and furnishing of written submission completed in all respect shall be treated as sufficient compliance." 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 structu....
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.... by the Pr.CIT. The learned Senior Counsel also referred to the development agreement for transfer of land belonging to the assessee alongwith attendant 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....
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....to set aside the assessment framed in the absence of cause of action. 8. 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 ....
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....y 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 included w....