Alok Aradhe, J. :
This appeal under s. 260-A of the IT Act, 1961 (hereinafter referred to as 'the Act', for short) has been preferred by the Revenue. The subject-matter of the appeal pertains to the asst. yr. 2009-10. The appeal was admitted by a Bench of this Court vide order dt. 22nd Sept., 2015 on the following substantial question of law :
"Whether the Tribunal was correct in holding that the assessee is eligible for deduction of rupees 1 crore under s. 54EC without appreciating that the CIT directed the AO to disallowed the deduction to the extent of rupees 50 lakhs holding that the phrase "during any financial year" means during any financial year after the first day of April 2007 and the intention of law was to identify any one of the financial years following 1st April, 2007, and did not intend to include therein more than one financial year simultaneously "
2. The factual background in which the aforesaid substantial question of law arises for our consideration needs mention.
The assessee is an individual, who had derived income from Capital Gains and other sources. The assessee filed the return of income for the asst. yr. 2009-10 on 6th July, 2009 declaring total income of Rs. 1,32,59,530. The case was processed under s. 143(1) of the Act and subsequently, the case was selected for scrutiny. Thereafter, notice under s. 143(2) of the Act was issued. The AO by an order dt. 22nd Nov., 2011 concluded the assessment and accepted the income, which was declared by the assessee. The CIT by an order dt. 18th March, 2014 invoking the powers under s. 263 of the Act inter alia held that the assessee is eligible for deduction under s. 54EC of the Act to the extent of Rs. 50 lakhs whereas he has claimed deduction to the extent of Rs. 1 crore, which is in excess of the limit prescribed under the proviso to s. 54EC of the Act. Thus, the CIT concluded that the Order passed by the AO is erroneous and prejudicial to the interest of the Revenue. The Order passed by the AO was set aside and the matter was remitted to the AO.
3. Being aggrieved, the assessee thereupon filed an appeal before the Income Tax Appellate Tribunal (hereinafter referred to as 'the Tribunal', for short). The Tribunal by Order dt. 5th March, 2015 inter alia by taking note of the amendment made to s. 54EC of the Act w.e.f. 1st April, 2015 as well as Explanatory Memorandum to Finance (No. 2) Bill, 2014, inter alia held that the legislature itself has accepted the ambiguity in language of the proviso and has amended the law with prospective effect i.e., asst. yr. 2015-16. It was further held that for the assessment year prior to asst. yr. 2015-16 on interpretation of the provisions, it was possible for the assessee to claim deduction of Rs. 1 crore by investing Rs. 50 lakhs in each of the financial years but within six months from the date of transfer. Thus, it was held that the view taken by the AO was one of the possible view and therefore, the power under s. 263 of the Act in the fact situation could not have been exercised by the CIT. In the result, the Order passed by the CIT was quashed. In the aforesaid factual background, this appeal has been filed.
4. Learned counsel for the revenue submitted that the Tribunal grossly erred in holding that the assessee is eligible for deduction of Rs. 1 crore under s. 54EC of the Act for the assessment year under consideration. It is further submitted that the Tribunal committed an error in law in relying on the decision in the case of Vivek Jairazbhoy vs. Dy. CIT [IT Appeal No. 236 (Bang)] of 2012, dt. 14th Dec., 2012 without appreciating the fact that the decision, which was relied upon has not reached finality and the appeal is pending.
5. On the other hand, learned counsel for the assessee submitted that the view taken by the AO is one of the possible views and therefore, the CIT has rightly invoked the powers under s. 263 of the Act. It is further submitted that amendment to proviso to s. 54EC of the Act is prospective in nature. In this connection, reference has also been made to para No. 28.2 of Circular No. 3 of 2008 as well as Explanatory Note on the provisions relating to Direct Taxes in Finance Act, 2007 dt. 12th March, 2008 in support of the submission that Government intended to restrict the investment in a particular financial year and had thus fixed the limit of Rs. 50 lakhs as permissible investment in a particular year. It is further submitted that the intention of the Government was not to restrict the maximum amount of exemption permissible under s. 54EC of the Act.
6. We have considered the submissions made by learned counsel for the parties and have perused the records. Before proceeding further, it is apposite to take note of the relevant extract of s. 263 of the Act, which reads as under :
263. Revision of orders prejudicial to Revenue—(1) The CIT may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the AO is erroneous insofar as it is prejudicial to the interests of the Revenue, he, may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.
7. Thus, from close scrutiny of s. 263 of the Act, it is evident that twin conditions are required to be satisfied for exercise of revisional jurisdiction under s. 263 of the Act. Firstly, the order of the AO is erroneous and secondly, that it is prejudicial to the interest of the Revenue on account of error in the order of assessment.
8. The aforesaid provision was considered by the Supreme Court in Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC) : (2000) 159 CTR (SC) 1 and it was held that the phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the AO and every loss of revenue as a consequence of the order of the AO cannot be treated as prejudicial to the interest of revenue. It was further held that where two views are possible and the ITO has taken one view with which the CIT does not agree, the order passed by the AO cannot be treated as erroneous order prejudicial to the interest of the revenue. The principles laid down in the aforesaid decision were reiterated by the Supreme Court in CIT vs. Max India Ltd. (2007) 295 ITR 282 (SC) : (2007) 213 CTR (SC) 266 and recently in Ultratech Cement Ltd. vs. State of Rajasthan (2020) 117 taxmann.com 807.
9. In the backdrop of the well settled legal position, if the facts of the case in hand are examined, it is axiomatic that the view taken by the AO was one of the possible views. Therefore, the CIT has rightly invoked the powers under s. 263 of the Act.
10. In view of preceding analysis, the substantial question of law framed by a Bench of this Court is answered against the Revenue and in favour of the assessee.
In the result, the appeal fails and is hereby dismissed.