INCOME TAX ACT, 1961

Section 263

Revision under section 263 - Erroneous and prejudicial order - Allowability of deduction under section 54F on purchase of three independent houses vide a single deed - Issue whether decided by AO on wrong assumption of facts or incorrect application of facts

Pr. CIT set aside assessment order framed under section 143(3) by invoking revisionary jurisdiction under section 263. According to Pr.CIT, assessee by purchasing three independent houses vide a single deed could be said to have erroneously claimed the exemption under section 54F and was not eligible to claim exemption for purchase/construction of only one residential house.Held: Different Courts have echoed that expression 'a residential house' would encompass different residential units located on the different floors of the same building. Thus, when issue of eligibility of deduction under section 54F is tested on the touchstone of prevailing judicial dicta, action of AO cannot be discredited as incorrect application of law or wrong assumption of facts. Since one of requisite conditions for the exercise of power under section 263 that Pr.CIT should consider the assessment order to be erroneous and prejudicial to the interest of revenue was not satisfied in instant case, invocation of revisionary jurisdiction was invalid.