Assessee, an individual, derived income from Capital Gains and other sources. Assessees case was selected for scrutiny and notice under S.143(2) of the Act was issued. AO concluded the assessment and accepted the income declared. CIT invoking the powers under S. 263 of the Act 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 section 54EC of the Act and concluded that the Order passed by the AO is erroneous and prejudicial to the interest of the revenue setting aside remitted back the matter to the AO.

On appeal, Tribunal held that the legislature itself has accepted the ambiguity in language of the proviso and has amended the law with prospective effect. It was further held that for prior Assessment Years 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 views and therefore, the power under S 263 of the Act in the fact situation could not have been exercised by the CIT quashed the order.

On Departments appeal, High Court held that 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. Considering SC decision in Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83(SC) it was held that that order of the AO cannot be treated as prejudicial to the interest of revenue. High Court further held that it is axiomatic that the view taken by the AO was one of the possible views and ruled favour of the assessee. (ITA No. 343 of  2015 dt. 19-11-2020) (AY. 2009-10)