TaxTMI 
TaxTMI 
2026 (8) TMI 1163
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....e Income-tax Act, 1961 dated 24.04.2025, without appreciating the fact that the order passed by the A.O. is neither erroneous nor prejudicial to the interest of revenue. 3. The Principal Commissioner of Income-tax has erred in passing Order u/s. 263 of the Income-tax Act, 1961 dated 24.04.2025, and issuing directions that exemption u/s. 54F was not admissible and the amount of Rs. 16,83,33,702 was taxable in A.Y.2022-23 without considering that A.O. had considered the investment was in multiple flats that were interconnected with a single access point, common living space and internal stairways qualifying it as a single residential unit, and after application of mind held that the provisions of Section 54F was available to the Assessee and hence the directions of Principal Commissioner of Income-tax were on account of change of opinion. 4. The Principal Commissioner of Income-tax has erred in passing Order u/s. 263 of the Income-tax Act, 1961 dated 24.04.2025, and issuing directions that Long term Capital gains of Rs. 16,83,33,702 was taxable in A.Y.2022 -23, on the grounds that Assessee had contravened the provisions of proviso a(ii) to sub- section (1) of Sectio....
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.... flats in "Samparna" at Bandra, Mumbai therefore assessee was not eligible for deduction u/s. 54F of the Act amounting to Rs. 39,96,80,216/- as assessee had failed to adhere to the conditions laid down in proviso (a)(i) to sub section (1) of Section 54 of the Act which prescribes that assessee could not " own more than one residential house other than the new asset on the date of transfer of the original asset" 4. In this regard the assessee categorically mentioned that with regard to deduction of Rs. 39,96,80,216/- u/s. 54F of the Act, the assessee had submitted that he had 'single residential unit' in Bangalore on 23.12.2020 i.e "Apas Valmark" and had no ownership of any other property in Bangalore. It was further submitted that six flats described by Ld. PCIT at "Apas Valmark" at Bangalore owned by assessee is a 'single residential unit'. It was submitted that on similar facts the case of the assessee for A.Y 2021-22 was revised by order u/s. 263 of the Act by Ld. PCIT and the said order was challenged by the assessee consequently, the Coordinate Bench of ITAT in its order dated 29.09.2025 in ITA No. 2169/Mum/2025 in the case of Sidhardha Bhaskar Shah Vs. PCIT under the simil....
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.... in the course of assessment proceeding itself. Replies given by the assessee along with documentary evidences are found to be satisfactory as recorded by the ld.Assessing Officer in Para 6 of his assessment order. On the very same issue, ld. PCIT has another view of assessee being not entitled to claim of deduction u/s. 54F having invested into multiple flats i.e. six flats on three different floors, two on each floor and thus, has held the assessment order to be erroneous insofar as prejudicial to the interest of revenue. 6.1. To understand the factual position, we perused the registered agreement to sell, placed in the paper book at page 36 and onwards,whereby the details of the property sold by the Vendor/Developer to the assessee is detailed in Para J of the said agreement. The said Para is extracted below for ready reference. "J. WHEREAS the Vendor/Developer herein has agreed to sell to the Purchaser/s the SCHEDULE 'B' PROPERTY and SCHEDULE 'C' PROPERTY for a valuable consideration and on certain mutually agreed lems and conditions as mentioned hereinafter a proportionale undivided share night title and interest in the Schedule A Property bei....
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....ng of six flats on three floors, two each with two parking for each flat. The total super built up area covered by the six flats is 20,190 square feet and which forms part of the "one triplex unit". Assessee also gets proportionate undivided share in the land in respect of the said property comprising of one triplex unit having six flats. 7. The issue of considering multiple flats on different floors of an apartment to be considered as one residential house had come up before the Hon'ble High Court of Delhi in the case of PCIT vs. Lata Goyal [2025] 174 taxmann.com 535 (Del), wherein on similar fact pattern, the claim of deduction u/s. 54F was allowed to the assessee. Facts of this case as noted in Para 4 of the order are that "assessee filed her return of income declaring income of Rs. 70,87,301/-.She claimed a deduction of Rs. 90 crores u/s. 54F asserting that the consideration received from the sale of shares of FITTJEE Limited, an unlisted company, the gains from which would otherwise be chargeable to tax as capital gains, was invested in acquiring a residential house property bearing the address E-27, Vasant Vihar, New Delhi, i.e., the new asset". In the assessment....
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....he residential house should be built in a particular manner, the Income-tax authorities cannot insist upon such a requirement. Hon'ble Court further elaborated that a person may construct a house according to his plans and requirements. Hon'ble Court thus, concluded that how or why the physical structuring of the new residential house, whether it is lateral or vertical, should come in the way of considering the building as residential house. According to the Hon'ble Court, the fact that the residential house consist of several independent units, cannot be permitted to act as an impediment to the allowance of the deduction u/s. 54 and 54F. 7.3. Hon'ble Delhi High Court further referred to the decision of another Hon'ble High Court of Madras in the case of CIT vs. Gumanmal Jain [2017] 394 ITR 666 (Mad). This decision was also rendered in the context of construing whether the new asset purchased is a residential house, an expression used in section 54 and 54F of the Act. Hon'ble Court noted that this decision would be equally applicable for construing the term 'one residential house' as used in clause (i) of the proviso to section 54F. Thus, Hon'bl....
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....tial unit. The said judgment, thus, proceeds on a different fact situation." 22. It is also relevant to refer to the decision of the coordinate bench of this court in CIT v. Gita Duggal [2013] 30 taxmann.com 230/214 Taxman 51/357 ITR 153 (Delhi)/2013 SCC OnLine Del 752 where this court has held as under: - "11. There could also be another angle. Section 54/54F uses the expression "a residential house". The expression used is not "a residential unit". This is a new concept introduced by the Assessing Officer into the section. Section 54/54F requires the assessee to acquire a "residential house" and so long as the assessee acquires a building, which may be constructed, for the sake of convenience, in such a manner as to consist of several units which can, if the need arises, be conveniently and independently used as an independent residence, the requirement of the section should be taken to have been satisfied. There is nothing in these sections which require the residential house to be constructed in a particular manner. The only requirement is that it should be for the residential use and not for commercial use. If there is nothing in the section which requires th....
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.... they may fall within the definition of a residential house." 24. The Madras High Court also held a similar view in CIT v. Gumanmal Jain [2017] 80 taxmann.com 21/394 ITR 666 (Madras)/2017 SCC OnLine Mad 13653. 25. The aforesaid decisions were rendered in the context of construing whether the new asset purchased is 'a residential house' - an expression used in Section 54 and 54F of the Act. However, the said decisions would be equally applicable for construing the term 'one residential house' as used in clause (i) of the proviso to Section 54F of the Act. We say so because in Pawan Arya (supra) as well as in Gita Duggal (supra) and Mrs Kamla Ajmera (supra), the term 'a residential house' has been construed to mean 'one residential house'. We find it difficult to accept that, in the given facts, different floors of a house are required to be considered as multiple residential houses. 26. In view of the above, we find no infirmity with the decision of the learned ITAT in holding that the Assessee could not be denied the deduction under Section 54F of the Act on the ground that she holds more than one residential unit. ....
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....f Revenue. We also place our reliance on the decision of Hon'ble Supreme Court in the case of CIT(A) vs. Max India Ltd. [2007] 295 ITR 282 (SC) which also covers the case of the assessee. 8.2. Considering the facts on record and the discussion made above vis-à-vis the judicial precedents relied upon, we hold that the revisionary proceedings invoked by ld. PCIT and the revisionary order passed thereafter, is not in accordance with the provisions of section 263 and is liable to be quashed. Accordingly, the impugned order is set aside and quashed. Grounds raised by assessee in this respect are allowed. 9. In the result, appeal of the assessee is allowed. 6. Since the facts are similar in the year under consideration therefore applying the principles laid down by the decision of Hon'ble Supreme Court in the case of Radhasoami Satsang Vs. CIT, 193 ITR 321, we are also of the view that the fundamental aspect or a core finding of the fact as already been established in the earlier decision of the Coordinate Bench of ITAT and the factual position in the year under consideration is also same therefore we are bound to follow the "Doctrine of Binding Precedents....