SMT. LATA PHULWANI,JAIPUR vs. PR. CIT-2, JAIPUR

PER VIJAY PAL RAO, JM : This appeal by the assessee is directed against the revision order dated 21st

January, 2020 passed by ld. PCIT under section 263 of the IT Act for the assessment

year 2015-16. The assessee has raised the following grounds :-

“ 1. On the facts and circumstances of the case the order passed by the learned Principal commissioner of Income Tax-2, Jaipur (PCIT-2) under section 263 of the IT Act is bad both in the eye of law and on facts.

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a. That the Ld. AO has conducted assessment proceedings properly and granted the relief u/s 54F after making proper inquiry and after considering all relevant details provided by the assessee with respect to the claim made by her. b. That the ld. PCIT has failed to appreciate the fact that AO has adopted one of the possible views of the matter and the jurisdiction under section 263 of the Act cannot be exercised merely to substitute the view taken by the AO. c. That the action of the ld. PCIT is in negation of overriding principles of natural justice which were explicitly required to be followed while exercising the power under section 263 of the Act. d. That ld. PCT grossly erred in invoking provisions of section 263 based merely on ‘Change of Opinion’. e. That the ld. PCIT grossly has erred both on facts and in law, in assuming the jurisdiction u/s 263 of the Income Tax Act, 1961 without considering the material fact that during the course of the assessment proceedings, the assessee had brought on record all the materials and evidences relating to the concerning issue and the same were duly verified by the AO before passing the Assessment Order in the case of the assessee.

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The hearing of the appeal is concluded through Video Conference due to prevailing

condition of COVID 19 pandemic.

The assessee is an Individual and filed her return of income on 30th March, 2.

2016 declaring total income of Rs. 1,50,41,430/-. The case was selected for scrutiny

under CASS and accordingly notice under section 143(2) was issued by the AO on

19.09.2016. Thereafter, the AO also issued notice under section 142(1) along with

the questionnaire on 14.07.2017. In response to the said notice, the assessee filed

the requisite details and documents as well as produced books of account for

examination and verification of the AO. The AO passed the assessment order under

section 143(3) on 18.12.2017 at the returned income of the assessee. Thereafter,

the ld. Principal Commissioner of Income Tax (PCIT) on perusal of the assessment

record noticed that the deduction under section 54F has been allowed by the AO in

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respect of purchase of agricultural land and construction of house which is not admissible. Accordingly, the ld. PCIT has issued a show cause notice dated 4th

February, 2019 under section 263 of the IT Act whereby proposed to modify the

order of the AO on the issue of allowing the deduction under section 54F of the Act.

The assessee filed her reply to the show cause notice and contended before the ld.

PCIT that this limited scrutiny was taken up by the AO only in respect of the large

investment in the property and deduction claimed under section 54F of the IT Act.

The assessee produced all the relevant details, documents as well as books of

account in support of the claim of deduction under section 54F which was duly

examined and verified by the AO and only when the AO was satisfied with the claim

of assessee, the assessment order was passed accepting the returned income. Thus

the assessee contended before the ld. PCIT that it is not a mere purchase of

agricultural land but a residential house was constructed on the said land and,

therefore, the deduction is available under section 54F of the Act. The AO has

conducted adequate enquiry on this issue and after satisfying himself has allowed

the claim. Therefore, the assessee objected to the invoking of the provisions of

section 263 by the ld. PCIT. The ld. PCIT did not accept the reply of the assessee

and also conducted a further enquiry in the matter through the AO and thereafter

passed the impugned order whereby the assessment order was set aside being

erroneous so far as prejudicial to the interests of the revenue and remitted back the

matter to the AO with the direction to pass the fresh order after taking into account

all necessary facts and details connected with the claim of deduction under section

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54F of the IT Act. Aggrieved by the impugned order, the assessee has filed the

present appeal.

wrongly invoked the provisions of section 263 of the IT Act as the matter was duly

examined by the AO during the scrutiny assessment and particularly when the case

was selected for limited scrutiny on the very issue of investment made in the

property as well as deduction claimed under section 54F of the Act. Thus the ld. A/R

of the assessee has contended that the AO called for the relevant details, documents

as well as books of account which were duly produced by the assessee during the

assessment proceedings. The AO has taken into consideration all the material

placed before him and after due application of law and consideration of facts, he

reached at the conclusion while passing the assessment order under section 143(3)

allowing the deduction under section 54F of the Act. The ld. A/R has further

contended that it was not a case of no enquiry conducted by the AO while

completing the assessment, rather the AO has conducted necessary and proper

enquiry before reaching at the conclusion. Thus the order passed by the AO under

section 143(3) of the Act was neither erroneous nor prejudicial to the interests of

the revenue. He has asserted that recourse to section 263 cannot be taken if the

impugned order is erroneous but not prejudicial to the interests of the revenue or if

it is prejudicial to the interests of the revenue but not erroneous. Both the

conditions are required to be satisfied for invoking the revisionary powers under

section 263 of the Act. Since the AO conducted a proper enquiry and examined all

the relevant evidences, details as well as books of account, it cannot be said that the

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order is erroneous for want of enquiry or application of mind by the AO. Hence, the

action under section 263 was not valid and liable to be quashed. The ld. A/R has

relied upon the decision of the Coordinate Bench of this Tribunal dated 11.09.2020

in case of Shri Rajendra Kumar Sharma vs. JCIT in ITA No. 358/JP/2015 and

submitted that the Tribunal has held that a deduction under section 54F cannot be

denied on the ground that the assessee got constructed a residential house on the

agricultural land. The Tribunal has considered various decisions on this point and

finally come to the conclusion that the deduction under section 54F is allowable in

respect of the amount invested in construction of residential house. Therefore, the

cost of acquisition of the plot together with cost of construction of the house will be

considered as cost of new asset for the purpose of allowing deduction under section

54F. Thus the AO has taken a possible view on the issue of allowability of deduction

under section 54F in respect of the investment made in construction of residential

house on agricultural land. Once the AO has taken a possible view, the ld. PCIT is

not allowed to invoke the provisions of section 263 of the Act merely because he

does not agree with the view taken by the AO. In support of his contention, he has

relied upon the following decisions :-

M/s. Malabar Industrial Co. vs. CIT, Kerala. (2000) 243 ITR 83 (SC)

Smt. Rajneet Sandhu vs. DCIT (2011) 16 taxmann.com 210 (Chandigarh)

M/s. Hari Om Stones C/o Sh. Om Prakash Sharma vs. PCIT, Alwar (2018) (4) TMI 393- ITAT Jaipur.

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Thus the ld. A/R has submitted that once the AO has conducted a proper enquiry

and examined all the details and evidences connected with the claim of deduction

under section 54F and allowed the claim, then the invoking of provisions of section

263 and passing the impugned order by the ld. PCIT is invalid and liable to be set

aside.

application of mind by the AO while passing the assessment order. He has further

submitted that the assessee has claimed the deduction under section 54F in respect

of the investment made in the purchase of agricultural land and a small construction

was made by the assessee on the said land which cannot be said to be a residential

house. He has referred to the impugned order of the ld. PCIT and submitted that

during the revision proceedings, the ld. PCIT has conducted an enquiry and found

that the construction on the agricultural land was not a residential house as it is not

inhabitable in the absence of the basic amenities. Thus the order of the AO is

erroneous for want of an enquiry as well as prejudicial to the interests of the

revenue as impermissible deduction under section 54F was allowed by the AO. The

ld. D/R has submitted that the valuation in respect of cost of construction of the

structure on the agricultural land is very negligible in comparison to the cost of the

land. Therefore, only to claim the deduction under section 54F, the assessee has

constructed a small structure which cannot be said to be a residential house. He has

relied upon the impugned order of the ld. PCIT as well as the decision of Cuttack Bench of the Tribunal in the case of Cuttack Development Authority vs. CIT dated 5th

March, 2018 in ITA No. 361/CTK/2014.

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record. We have carefully perused the assessment order passed by the AO under

section 143(3), show cause notice issued by the ld. PCIT under section 263 of the

Act as well as the impugned order passed under section 263. It is manifest from the

record that the case of the assessee was taken up for limited scrutiny as per the

notice issued under section 143(2) dated 19.09.2016, the relevant part of the said

notice listing the issues identified for examination are as under :-

“ This is for your kind information that the return of income for Assessment Year 2015-16 filed vide ack. No. 134831180300316 on 30/03/2016 has been selected for Scrutiny. Following issues have been identified for examination :-

i. Purchase of Property

ii. Deduction claimed under the head Capital Gains

Thus it is clear that the case was selected for limited scrutiny on the issue of

purchase of property and deduction claimed under the head Capital Gains. Both

these issues are inter-connected as the deduction under section 54F was claimed by

the assessee in respect of purchase of property and construction of residential house

on the said land. The AO, thereafter issued notice under section 142(1) dated

14.07.2017 along with a questionnaire. These facts are also evident from the

assessment order in para 1 and 2 as under :-

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“ Thereafter, the case was transferred to the office of the undersigned from the ITO Ward 4(1) Jaipur on 26.05.2017 and due to change of incumbent of charges, notice u/s 142(1) along with questionnaire issued on 14.07.2017 fixing the case of hearing on 20.07.2017 which was duly served upon the assessee on 15.07.2017. In response thereto, the CA/AR of the assessee Sh. Ajay Jain attended the proceedings from time to time and furnished required details/documents and also produced books of accounts, which were examined on test check basis. The case was discussed with him.

Thus in response to the notice issued under section 142(1), the assessee attended

the proceedings through her A/R and also furnished the required details/documents

as well as books of account which were examined by the AO. There is no dispute

that the AO has conducted the enquiry on the issue for which the case was selected

for scrutiny and after satisfying himself the AO finally concluded that the assessee

earned the income from capital gain and interest. The details and records produced

before him were examined and thereafter the returned income is accepted. Thus it

is not a case of lack of enquiry on the part of the AO. Though the AO has not

discussed the issue in elaborate manner, but once he was satisfied with the

supporting evidences produced by the assessee he has accepted the claim. The ld.

PCIT has invoked the provisions of section 263 by issuing the show cause notice dated 4th February, 2019 at pages 16 & 17 of the paper book as under :-

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Thus it is clear from the show cause notice issued under section 263 that the ld.

PCIT has invoked the provisions of section 263 only on the issue of allowability of

deduction under section 54F in respect of the investment made by the assessee

towards cost of agricultural land and construction of house. The sole ground for

initiating the proceedings under section 263 by the ld. PCIT is that in his view the

claim of deduction in respect of agricultural land is not admissible. As apparent from

the show cause notice that the scope of proceedings under section 263 was limited

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only on the issue of allowability of deduction under section 54F in respect of the

agricultural land acquired by the assessee and used for construction of house.

There was no allegation by the ld. PCIT about the lack of enquiry on the part of the

AO while passing the assessment order. Even otherwise, it is clear from the

assessment order that the case was selected for limited scrutiny only on the issue of

investment made in the agricultural land and deduction under section 54F of the IT

Act. Therefore, the question of lack of enquiry does not arise when the AO has

taken up the scrutiny and issued the notice under section 142(1) along with a

questionnaire calling for all the details relevant to the acquisition of the land as well

as of construction of house. It is also not in dispute that the assessee produced the

relevant details and evidences and specifically the purchase documents for acquiring

the agricultural land as well as the valuation report towards the cost of construction.

The ld. PCIT has also not doubted the facts as brought on record by the assessee

and considered by the AO while passing the assessment order. The provisions of

section 263 were invoked by the ld. PCIT due to the reason that he has a different

view regarding the allowability of deduction under section 54F in respect of the

investment made for purchase of agricultural land and construction of house.

There is no quarrel on the point that lack of enquiry renders the order of the AO as

erroneous so far as prejudicial to the interests of the revenue. However, when there

is no allegation and even otherwise it is manifest from the record that this is not a

case of lack of enquiry on the part of the AO but the AO after satisfying himself

about the claim of deduction under section 54F consequent upon the examination

and verification of the concerned details, evidences and books of account produced

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by the assessee, allowed the claim of the assessee. Further, though the ld. PCIT

has not alleged that there is inadequate enquiry on the part of the AO, however,

even in case there is inadequate enquiry on the part of the AO, the ld. PCIT can give

a concluding finding while passing the revision order after considering the complete

record as well as conducting a necessary enquiry. In this case the assessee has

contended before the ld. PCIT that the claim of deduction under section 54F is

eligible even if the residential house is constructed on the agricultural land. The crux

of the argument of the assessee has been reproduced by the ld. PCIT in para 5 of

the impugned order. Thus the assessee has cited various decisions in support of her

claim. The ld. PCIT has turned down the contentions of the assessee and has gone

further to verify the facts by conducting an enquiry. This exercise of the ld. PCIT in

conducting the enquiry to find the facts is beyond the scope of the proceedings initiated under section 263 by issuing the show cause notice dated 4th February,

2019. In the said show cause notice, the ld. PCIT has raised only one issue i.e.

purely a view regarding the allowability of the deduction under section 54F in

respect of the investment made for construction of house on agricultural land.

Whereas in the proceedings under section 263 the ld. PCIT has travelled beyond the scope of proceedings as initiated vide show cause notice dated 4th February, 2019.

Therefore, the proceedings which are beyond the scope of the revisional

proceedings, are not permissible as not an issue involved in the show cause notice.

the show cause notice issued under section 263 of the Act, then conducting a further

enquiry on the factual aspects of the investment made in purchase of agricultural

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land and construction of the house is beyond the jurisdiction of the ld. PCIT as

assumed by issuing show cause notice under section 263. The finding of the ld.

PCIT in the revision order ought to have been confined on the issue of allowability of

deduction under section 54F. Since the ld. PCIT was not agreeing with the view of

the AO regarding the claim of deduction under section 54F, at the outset, he was

required to give a concluding finding on the issue. On the contrary, the ld. PCIT has

remitted the issue to the AO in para 7 as under :-

“ 7. In view of the above I hold that the order passed by the AO in this case for the A.Y. 2015-16 on 18.12.2017 is erroneous in so far as it is prejudicial to the interests of revenue. The order dated 18.12.2017 passed u/s 143(3) of the Act deserves to be set-aside. AO will pass the order after taking into account all necessary facts and details connected with the claim of deduction u/s 54F of the Act and the claim of indexed cost of construction/improvements on the land sold by the assessee amounting to Rs. 18,18,483/- (pertaining to F.Y. 2007-08) and of Rs. 13,46,834/- (pertaining to F.Y. 2010-11).”

Thus while passing the revision order, the ld. PCIT himself was not sure about the

correctness of the claim and has remanded the matter to the record of the AO for

passing a fresh order. Hence he has not given a concluding finding whether the

order of the AO allowing the claim of deduction under section 54F after conducting

an enquiry is absolutely against the provisions of law. Once it is not a case of lack of

enquiry on the part of the AO, the said order cannot be held to be erroneous unless

the ld. PCIT holds and records the reason why it is erroneous. The pre-condition

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for invoking the jurisdiction under section 263 is that the ld. PCIT must come to the

conclusion that the order of the AO is erroneous and is unsustainable in law. When

the order passed by the AO is not erroneous for want of an enquiry, then it is

incumbent upon the ld. PCIT to give a concluding finding and reasons that the order

is not sustainable in law. An identical issue was considered by the Hon’ble

Jurisdictional High Court in case of CIT vs. Ganpat Ram Vishnoi, 296 ITR 292 (Raj.)

in para 7 to 12 as under :-

“ 7. In this connection, it would be relevant to refer to the material which was relied by the Tribunal to set aside the order of the CIT. The Tribunal noticed that as per the record of the proceedings; on 16-10-1995, the Assessing Officer required the assessee to produce documents or material in relation to 10 different items, which included the details of capital contributed by partners, details of purchases made in excess of Rs. 20,000 with evidence, confirmation of unsecured loans, amongst other matters, which the Assessing Officer desired to enquire into. The assessee has produced desired information by 15-11-1995. There-after, the case was adjourned to 22-11-1996 and 1-12-1995. On 5-12-1995, the Assessing Officer studied the sundry creditors, unsecured loans and desired to furnish affidavits of unsecured loans and details of interest paid and the case was adjourned to 19-1-1996. On 19-1-1996, the Assessing Officer again required the assessee to furnish the details of partners capital accounts and also to produce voucher for expenses and the matter was adjourned for 23-1-1996. On 23-1-1996, the case was discussed and finalised. After that, assessment was completed by passing assessment order. These matters clearly indicate that the Assessing Officer particularly made reference to the matters, which the CIT has opined were not inquired. Thus, according to the Tribunal, the foundation to exercise power under section 263 of the Income-tax Act, was not existing. 8. We are of the opinion in the aforesaid circumstances on the finding reached by the Assessing Officer, no question of law really arises for consideration in this appeal. 9. It is true that in a given case not holding of any enquiry, which is relevant for assessment may indicate non-application of mind by Assessing Officer or furnish the ground for taking action under section 263 by the CIT. In this connection, reference may be made in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 831 (SC), wherein the CIT opined that the ITO

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has passed the order of "nil" assessment without application of mind. The High Court accepted this part of the assertion made by the CIT in his order that the ITO has failed to apply his mind to the case in all perspectives and the order passed by him was erroneous. The High Court has also found that the assessment order was passed without application of mind. The High Court rightly held that the exercise of jurisdiction by the CIT under section 263(1) was justified. 10. From the record of the proceedings, in the present case, no presumption can be drawn that the Assessing Officer had not applied its mind to the various aspects of the matter. In such circumstances, without even prima facie laying foundation for holding that assessment order is erroneous and prejudicial to interest in any matter merely on spacious ground that the Assessing Officer was required to make an enquiry, cannot be held to satisfy the test of existing necessary condition for invoking jurisdiction under section 263 of the Income- tax Act. 11. Undoubtedly, the jurisdiction under section 263 is wide and is meant to ensure that due revenue ought to reach the public treasury and if it does not reach on account of some mistake of law or fact committed by the Assessing Officer, the CIT can cancel that order and require the concerned Assessing Officer to pass a fresh order in accordance with law after holding a detailed enquiry. But when enquiry in fact has been conducted and the Assessing Officer has reached a particular conclusion, though reference to such enquiries has not been made in the order of the assessment, but the same is apparent from the record of the proceedings, in the present case, without anything to say how and why the enquiry conducted by the Assessing Officer was not in accordance with law, the invocation of jurisdiction by the CIT was unsustainable. As the exercise of jurisdiction by the CIT is founded on no material, it was liable to be set aside. Jurisdiction under section 263 cannot be invoked for making short enquiries or to go into the process of assessment again and again merely on the basis that more enquiry ought to have been conducted to find something. 12. The finding of the Tribunal that the ITO had passed assessment order after relevant enquiries and considering the aspects of the matter required by the CIT to be considered by him is a finding of fact and on the basis of which, the jurisdiction assumed by the CIT being non-existent must be held to be not sustainable. Consequently, the appeal fails and is hereby dismissed.”

Thus the Hon’ble High Court has held that the ld. CIT can cancel the order of the AO

and require the concerned AO to pass a fresh order in accordance with the law after

holding a detailed enquiry. But when the enquiry in fact has been conducted and

the AO has reached a particular conclusion, though reference to such enquiries has

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not been made in the order of assessment, but the same is apparent from the

record of the proceedings, the invocation of jurisdiction by the ld. CIT was

unsustainable. A similar view has been taken by the Hon’ble Delhi High Court in

case of ITO vs. D.G. Housing Projects Ltd. 343 ITR 329 in para 18 as under :-

“18. It is in this context that the Supreme Court in Malabar Industrial Co. Ltd. v. Commissioner of Income Tax, [2000] 243 ITR 83 / 109 Taxman 66 (SC), had observed that the phrase 'prejudicial to the interest of Revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of Revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of Revenue. Thus, when the Assessing Officer had adopted one of the courses permissible and available to him, and this has resulted in loss to Revenue; or two views were possible and the Assessing Officer has taken one view with which the CIT may not agree; the said orders cannot be treated as an erroneous order prejudicial to the interest of Revenue unless the view taken by the Assessing Officer is unsustainable in law. In such matters, the CIT must give a finding that the view taken by the Assessing Officer is unsustainable in law and, therefore, the order is erroneous. He must also show that prejudice is caused to the interest of the Revenue.”

The Hon’ble High Court has laid out a fine distinction between the orders where no

enquiry has been made by the AO from the order based on inadequate enquiry.

Therefore, where the AO has made an enquiry and taken a possible/permissible

view, then the said order cannot be treated as erroneous and prejudicial to the

interests of the revenue unless the view taken by the AO is unsustainable in law.

The Hon’ble Supreme Court in case of Malabar Industrial Co. Ltd. vs. CIT, 243 ITR

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83 (SC) has held that an order of ITO cannot be treated as prejudicial to the

interests of the revenue if the ITO adopted one of the course permissible in law and

it has resulted in loss of revenue or two views are possible and the ITO has taken

one view with which the ld. CIT does not agree, it cannot be treated as an

erroneous order prejudicial to the interests of the revenue unless the view taken by

the ITO is unsustainable in law. As it is clear from the impugned order that the

assessee has relied upon various decisions and further the assessee has also relied

upon the recent decision of the Coordinate Bench of this Tribunal in case of Shri

Rajendra Kumar Sharma vs. JCIT in ITA No. 358/JP/2015 wherein the Tribunal has

held in paras 4 & 5 as under :-

“4. We have heard and considered the rival contentions and perused the material placed on record. From the record, we found that the assessee claimed deduction of Rs. 83,54,434/- u/s 54F from the LTCG declared by it. The assessee made investment of Rs. 1,15,00,000/- in purchase of land and constructed residential house thereon. The area of land was 4090 Sq.mt. and construction thereon is of 1504 Sq. ft. The A.O. on these facts issued a show cause notice to assessee as given in assessment order to which assessee replied which is given in page — 6 of assessment order. The A.O. on following grounds denied the claim of assessee:

(a) The land is agricultural and not residential.

(b) The construction of residential house without approval of plan by Govt. Authority.

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(c) The assessee has also not submitted any electricity and water connection evidence.

(d) The land was registered in the name of assessee on 28-3-13 i.e. beyond the period specified in Section 54F (4) and so assessee not complied conditions laid down therein. The agreement to purchase land executed on 2-6-2011 claimed by assessee has no evidentiary value as payment of consideration shown in cash.

(e) The bills for construction are lacking details and contain no detail of work done and each payment made therefor was in cash for less than Rs. 20,000/-.

(f) The Inspector physically verified the property and found there is only boundary wall with gate and on whole land there was little construction, with walls and Tin shed roofing and construction is about 700-800 Sq.ft as against 1504 Sq.ft. construction claimed by assessee. The Ld. A.O. in assessment order gave scanned photographs stated to have been taken by Inpsector on site visit.

The A.O. thus concluded that investment was purely in land and not a residential house as required u/s 54F of I. T. Act, 1961 and so assessee is not entitled to claimed deduction u/s 54F. As per our considered view, benefit of Section 54F cannot be denied on the ground that land on which construction done was agriculture in nature. Reliance is placed on the judgements in case of Vishnu Trading Co. 259 ITR 724 (Raj.), Narendra Mohan Uniyal 34 SOT 152 (Del.), Shyam Sunder Mukhija Vs. ITO 38 ITD 125 (JPR) and ACIT Vs. Om Prakash Goyal (2012) 53 SOT 158 (JPR). In the case of Narendra Mohan Uniyal (Supra) it is held that "It is crystal clear from the plain reading of ss. 54 and 54F that exemption is allowable in respect of amount invested in the construction of a residential house. There is no any rider under s. 54F that no deduction would be allowed in respect of investment of capital gains made on acquisition of land

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appurtenant to the building or on the investment on land on which building is being constructed. When the land is purchased and building is constructed thereon, it is not necessary that such construction should be on the entire plot of land, meaning thereby a part of the land which is appurtenant to the building and on which no construction is made, there is no denial of exemption on such investment. In this connection reference may be made to Cir. No. 667 dated 18- 10-1993 (204 ITR (ST) 103) issued by CBDT which has clarified that for the purpose of computing exemption u/s 54 or 54F, the cost of the plot together with cost of the building will be considered as cost of new asset, provided the acquisition of the plot and also the construction thereon are completed within the period specified in these sections. There is no need of approval of plan from competent authorities if construction is within limits on agricultural land and it is not a condition laid down in Section 54F for construction of residential house. The construction on land is meant for residential house. The assessee could complete the construction of the residential house within three years and if any facility lacking in the constructed residential house the same could be completed within in that period. There is water supply from well and temporary electric connection in the residential house constructed by assessee. The construction of residential house is 1553.50 Sq.ft. and not having proper bills for construction cannot be taken adversely against him for purposes of Section 54F. These facts are evident from the valuation report of Regd. Valuer a copy of which is submitted. The Inspector of department furnished vague details without any physical inspection of building and took only photographs. The assessee has only to invest net sale consideration in purchase or construct a residential house and therefore registration or legal ownership is not necessary which is evident from Circular No. 471 dated 15-10-1986 issued by CBDT and from judgements of Balraj Vs. CIT 254 ITR 22 and CIT Vs. Laxmi Chand 211 ITR 804 and various other judgements on the issue. Thus, agreement to purchase copy of which submitted proves domain and control of assessee on the land in the hands of assessee and satisfies the connotation of purchase of land for construction of residential house. WE found from the record that the

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assessee had invested Rs. 1,15,00,000/-in construction of residential house and, therefore entitled to claimed deduction u/s 54F. The Ld. A.O. is wrong and has erred in law in disallowing the claimed deduction of Rs. 83,54,434/- u/s 54F the Act, which deserves to be allowed.

Thus it is clear that the Tribunal has referred and relied upon various decisions on

the point of allowability of deduction under section 54/54F of the Act in respect of

the investment made in construction of house on agricultural land. Therefore, the

view taken by the AO is a possible view though may not be the only view. Further

once the issue of allowability of deduction under section 54F is a debatable issue

and the AO has taken a possible view, then the ld. PCIT is not permitted to invoke

the provisions of section 263 merely because he does not agree with the view of the

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AO. Hence in the facts and circumstances of the case as well as the foregoing

discussion about the settled principles of law laid down in various decisions, we hold

that the impugned order passed by the ld. PCIT is not sustainable and the same is

liable to be set aside.

Order is pronounced in the open court on 06/10/2020.

Sd/- Sd/- (foØe flag ;kno) (fot; iky jkWo ½ (VIKRAM SINGH YADAV ) (VIJAY PAL RAO) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member

Jaipur Dated:- 06/10/2020. Das/ आदेश की प्रतिलिपि अग्रेषित@ब्वचल वf जीम वतकमत वितूंतकमक जवरू

सहायक पंजीकार@ Aेेपेजंदज. त्महपेजतंत