When AO Has Taken One Of The Possible Views The PCIT Is Prohibited From Adopting Different View: ITAT

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT), while quashing the revision order, held that when the Assessing Officer (AO) has taken one of several possible views, the Principal Commissioner of Income Tax (PCIT) is prohibited from adopting a different view.

The two-member bench of Aby V. Varkey (Judicial Member) and B.R. Baskaran (Accountant Member) relied on the decision of the Supreme Court in the case of Malabar Industrial Co., Ltd. v. CIT, in which it was ruled that if the AO has taken one of the possible views, then the assessment order cannot be considered to be prejudicial to the interests of revenue merely for the reason that the PCIT has a different view on the very same matter.

The appellant/assessee has sold 350 shares of M/s. Concord Enviro Systems Pvt. Ltd. earned long-term capital gains of Rs. 3.01 crores. The assessee owned a flat with his mother as co-owner. The assessee purchased the share of his mother by paying Rs. 3 crores, and he claimed the purchase as a deduction under Section 54F.

The PCIT noticed that the agreement for purchase has been entered on notarized stamp paper only, and the conveyance deed has not been registered to date. The PCIT took the view that the registration of a deed is compulsory for availing of the deduction under Section 54F.

The PCIT noted that Section 53A of the Transfer of Property Act would not apply in the absence of a registration of a conveyance deed. The assessee would not be entitled to a deduction. The assessor completed the assessment without inquiring about or verifying the assessee's claim for deduction.

The PCIT held that the assessment order passed by the AO was erroneous and prejudicial to the interests of the Revenue and accordingly initiated revision proceedings.

The assessee submitted that the assessing officer has made due inquiries with regard to the claim made under Section 54F. The assessee has also furnished all the relevant details, and the AO was very much aware of the fact that the conveyance deed has not been registered.

The assessee contended that the view taken by the AO is one of the possible views, and merely because the PCIT holds a different view of the matter, the assessment order cannot be held to be erroneous and prejudicial to the interests of revenue.

The department contended that the AO has not made proper inquiries with regard to the claim for deduction made under Section 54F. The PCIT was justified in initiating the revision proceedings.

The tribunal noted that the CIT cannot invoke his powers of revision under Section 263 if the Assessing Officer has conducted inquiries, applied his mind, and taken a possible view of the matter. If there was any inquiry and a possible view was taken, it would not give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has a different opinion on the matter.

The tribunal noted that if there are no materials on record on the basis of which it can be said that the Commissioner acted in a reasonable manner and could have come to a conclusion, the initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving inquiries in matters or orders that have already been concluded.

The ITAT quashed the revision order passed by the PCIT.

Case Title: Prerak Goel Versus PCIT

Citation: ITA No.787/Mum/2022

Date: 27.12.2022

Counsel For Appellant: Gaurav Bansal

Counsel For Respondent: Purushottam Tripuri

Click Here To Read The Order