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Income Tax Appellate Tribunal, MUMBAI BENCH “F” MUMBAI
Before: SHRI VIKAS AWASTHY & SHRI OM PRAKASH KANT
PER OM PRAKASH KANT, AM
This appeal by the assessee is directed against revision order dated 17/03/2021 passed by the Ld. Principal Commissioner of Income-tax-8, Mumbai [in short ‘the ld. PCIT’] for assessment year
Upal Developers Pvt. Ltd. 2 ITA No. 871/M/2021 2015-16. The grounds raised by the assessee are reproduced as 16. The grounds raised by the assessee are reproduced as 16. The grounds raised by the assessee are reproduced as under:
1. On the facts and in the circumstances of the case and in law, the On the facts and in the circumstances of the case and in law, the On the facts and in the circumstances of the case and in law, the Hon'ble Principal Commissio Hon'ble Principal Commissioner of Income Tax 8 erred in ner of Income Tax 8 erred in invoking the provisions of Section 263 of the Act thereby invoking the provisions of Section 263 of the Act thereby invoking the provisions of Section 263 of the Act thereby assuming jurisdiction under the said provisions. The Hon'ble assuming jurisdiction under the said provisions. The Hon'ble assuming jurisdiction under the said provisions. The Hon'ble PCIT further erred in holding that the assessment completed in PCIT further erred in holding that the assessment completed in PCIT further erred in holding that the assessment completed in the case of appellant had been made without carrying out the case of appellant had been made without c the case of appellant had been made without c necessary enquires into the specified issue and hence, the necessary enquires into the specified issue and hence, the necessary enquires into the specified issue and hence, the assessment order so passed by the learned A.0 u/s. 143(3) of the assessment order so passed by the learned A.0 u/s. 143(3) of the assessment order so passed by the learned A.0 u/s. 143(3) of the Act dated 28.12.2017 is erroneous and prejudicial to the Act dated 28.12.2017 is erroneous and prejudicial to the Act dated 28.12.2017 is erroneous and prejudicial to the interest of the revenue. The appellant prays that the order of interest of the revenue. The appellant prays that the order of interest of the revenue. The appellant prays that the order of the Principal CIT us. 263 may kindly be quashed and the the Principal CIT us. 263 may kindly be quashed and the the Principal CIT us. 263 may kindly be quashed and the assessment order of the Ld. A.O dated 28.12.2017 may be assessment order of the Ld. A.O dated 28.12.2017 may be assessment order of the Ld. A.O dated 28.12.2017 may be restored. restored.
On the facts and in the circumstances of the case and in law, the On the facts and in the circumstances of the case and in law, the On the facts and in the circumstances of the case and in law, the Hon'ble Principal Commissioner of Income Tax - 8 erred in Hon'ble Principal Commissioner of Income Tax Hon'ble Principal Commissioner of Income Tax holding that the assessment order passed by the Ld. AO u/s. holding that the assessment order passed by the Ld. AO u/s. holding that the assessment order passed by the Ld. AO u/s. 143(3) of the Act dated 28.12.2017 is erroneous and prejudicial 143(3) of the Act dated 28.12.2017 is erroneous and prejudicial 143(3) of the Act dated 28.12.2017 is erroneous and prejudicial to the i to the interest of the revenue, and hence set aside the appellant nterest of the revenue, and hence set aside the appellant case back to the Ld. A.O. for making a fresh assessment. The case back to the Ld. A.O. for making a fresh assessment. The case back to the Ld. A.O. for making a fresh assessment. The appellant prays that the said action of Hon'ble Principal CIT appellant prays that the said action of Hon'ble Principal CIT appellant prays that the said action of Hon'ble Principal CIT may kindly be quashed. may kindly be quashed. 3. On the facts and in the circumstances of the case and in law, the On the facts and in the circumstances of the case and in law, the On the facts and in the circumstances of the case and in law, the Hon'ble Principal Commissioner of Income Tax 8 erred in Hon'ble Principal Commissioner of Income Tax 8 erred in Hon'ble Principal Commissioner of Income Tax 8 erred in holding that the Ld. A.O. has failed to make any inquiry into the holding that the Ld. A.O. has failed to make any inquiry into the holding that the Ld. A.O. has failed to make any inquiry into the taxability of revenue from operations of Rs. 29.58 crores taxability of revenue from operations of Rs. 29.58 crores taxability of revenue from operations of Rs. 29.58 crores
Upal Developers Pvt. Ltd. 3 ITA No. 871/M/2021 disregardi disregarding the enquiries made by the Ld. A.O. in fact and ng the enquiries made by the Ld. A.O. in fact and setting aside the appellant's case back to the Ld. A.0. for setting aside the appellant's case back to the Ld. A.0. for setting aside the appellant's case back to the Ld. A.0. for making a fresh assessment. The appellant prays that the said making a fresh assessment. The appellant prays that the said making a fresh assessment. The appellant prays that the said action of Hon'ble Principal CIT may kindly be quashed. action of Hon'ble Principal CIT may kindly be quashed. action of Hon'ble Principal CIT may kindly be quashed.
4. On the facts and in the circ On the facts and in the circumstances of the case and in law, the umstances of the case and in law, the Hon'ble Principal Commissioner of Income Tax 8 erred in Hon'ble Principal Commissioner of Income Tax 8 erred in Hon'ble Principal Commissioner of Income Tax 8 erred in stating that the entire revenue from operations of Rs. 29.58 stating that the entire revenue from operations of Rs. 29.58 stating that the entire revenue from operations of Rs. 29.58 crores was claimed by the appellant as business income and crores was claimed by the appellant as business income and crores was claimed by the appellant as business income and accepted by the Ld. A.O. and setting aside accepted by the Ld. A.O. and setting aside the appellant's case the appellant's case back to the Ld. A.O. for making a fresh assessment. The back to the Ld. A.O. for making a fresh assessment. The back to the Ld. A.O. for making a fresh assessment. The appellant prays that the said action of Hon'ble Principal CIT appellant prays that the said action of Hon'ble Principal CIT appellant prays that the said action of Hon'ble Principal CIT may kindly be quashed. may kindly be quashed.
5. On the facts and in the circumstances of the case and in law, the On the facts and in the circumstances of the case and in law, the On the facts and in the circumstances of the case and in law, the Hon'ble Principal Commissio Hon'ble Principal Commissioner of Income Tax 8 erred in ner of Income Tax 8 erred in directing the Ld. A.O. to treat the income from services provided directing the Ld. A.O. to treat the income from services provided directing the Ld. A.O. to treat the income from services provided by the appellant as Income from House Property without by the appellant as Income from House Property without by the appellant as Income from House Property without making any inquiry into said issue and setting aside the making any inquiry into said issue and setting aside the making any inquiry into said issue and setting aside the appellant's case back to the Ld. A.O. for making a fresh appellant's case back to the Ld. A.O. for making appellant's case back to the Ld. A.O. for making assessment. The appellant prays that the said action of Hon'ble assessment. The appellant prays that the said action of Hon'ble assessment. The appellant prays that the said action of Hon'ble Principal CIT may kindly be quashed. Principal CIT may kindly be quashed. 6. On the facts and in the circumstances of the case and in law, the On the facts and in the circumstances of the case and in law, the On the facts and in the circumstances of the case and in law, the Hon'ble Principal Commissioner of Income Tax 8 erred in Hon'ble Principal Commissioner of Income Tax 8 erred in Hon'ble Principal Commissioner of Income Tax 8 erred in issuing directions to the issuing directions to the Ld. A0 u/s. 263 of the Act for making a Ld. A0 u/s. 263 of the Act for making a fresh assessment based fresh assessment fresh assessment based based on erroneous facts, incorrect on on erroneous facts, erroneous facts, incorrect incorrect understanding of the case and without giving sufficient understanding of the case and without giving sufficient understanding of the case and without giving sufficient opportunity to the appellant to be heard. The appellant prays opportunity to the appellant to be heard. The appellant prays opportunity to the appellant to be heard. The appellant prays that the said action of Hon'ble Principal CI that the said action of Hon'ble Principal CIT may kindly be T may kindly be quashed. quashed.
Upal Developers Pvt. Ltd. 4 ITA No. 871/M/2021
7. The Appellant craves leave to add, alter, amend or withdraw The Appellant craves leave to add, alter, amend or withdraw The Appellant craves leave to add, alter, amend or withdraw any of the Grounds of Appeal
herein above and to submit any of the Grounds of Appeal herein above and to submit any of the Grounds of Appeal herein above and to submit further arguments, statements, documents and papers as may further arguments, statements, documents and papers as may further arguments, statements, documents and papers as may be considered necessary either at or before the hearing of the be considered necessary either at or before the hearing be considered necessary either at or before the hearing appeal. appeal.
2. At the outset, we may like to mention that Registry has pointed At the outset, we may like to mention that Registry has pointed At the outset, we may like to mention that Registry has pointed out delay of 5 days in filing the present appeal. The Ld. counsel out delay of 5 days in filing the present appeal. The Ld. counsel out delay of 5 days in filing the present appeal. The Ld. counsel submitted that delay is covered by the order of the Hon’ble Supreme submitted that delay is covered by the order of the Hon’ble Supreme submitted that delay is covered by the order of the Hon’ble Supreme Court in suo moto motion motion Miscellaneous Application No. 665/2021 pplication No. 665/2021 and hence appeal might be admitted. We find that appeal has been and hence appeal might be admitted. We find that appeal has been and hence appeal might be admitted. We find that appeal has been filed on 02.05.2021, with delay of 5 days, which is duly covered by filed on 02.05.2021, with delay of 5 days, which is duly covered by filed on 02.05.2021, with delay of 5 days, which is duly covered by the order of Hon’ble Supreme Court in Civil Appeal (supra). The the order of Hon’ble Supreme Court in Civil Appeal (supra). The the order of Hon’ble Supreme Court in Civil Appeal (supra). The delay in filing appeal is according delay in filing appeal is accordingly condoned and parties were and parties were directed to argue the appeal on the appeal on merit.
Briefly stated fact acts of the case are that against the return of that against the return of income filed by the assessee on 27/09/2015 declaring total loss of income filed by the assessee on 27/09/2015 declaring total loss of income filed by the assessee on 27/09/2015 declaring total loss of (-)₹2,25,17,751/-, the , the Assessing Officer completed assessment completed assessment under section 143(3) under section 143(3) of the Income-tax Act, 1961 (in short the , 1961 (in short the Act)
Upal Developers Pvt. Ltd. 5 ITA No. 871/M/2021 on 28/12/2017 determining total loss at on 28/12/2017 determining total loss at (-) )₹1,95,74,520/-. Thereafter, the Ld. PCIT called for the record and after perusal of the PCIT called for the record and after perusal of the PCIT called for the record and after perusal of the same, he was of the view that the a same, he was of the view that the assessment order dated ssessment order dated 28/12/2017 passed by the 28/12/2017 passed by the Assessing Officer was erroneous insofar was erroneous insofar as prejudicial to the interest of the as prejudicial to the interest of the Revenue, accordingly, he issued , accordingly, he issued notice under section 263 of the notice under section 263 of the Act proposing that no enquiry was proposing that no enquiry was carried out by the Assessing Offi Assessing Officer on the issue of income from on the issue of income from service charges of maintenance of mall as to whether the same service charges of maintenance of mall as to whether the same service charges of maintenance of mall as to whether the same should be taxed under the head “ hould be taxed under the head “profit and gains of the business or profit and gains of the business or profession” as declared by the assessee or should be taxed under the profession” as declared by the assessee or should be taxed under the profession” as declared by the assessee or should be taxed under the head “income from house p head “income from house property” as per law. According to According to Ld. PCIT, the Assessing Officer Assessing Officer has not verified the Memorandum Memorandum of Association (MOA) of the assessee company before completing the of the assessee company before completing the of the assessee company before completing the assessment for ascertaining true nature of the business of the assessment for ascertaining true nature of the business of the assessment for ascertaining true nature of the business of the assessee. In his view, any o assessee. In his view, any other income associated with leasing ther income associated with leasing should have been treated as income from house property by the should have been treated as income from house property by the should have been treated as income from house property by the Upal Developers Pvt. Ltd. 6 ITA No. 871/M/2021 assessee. The Ld. PCIT in the impugned order held that the PCIT in the impugned order held that the PCIT in the impugned order held that the assessment order passed by the assessment order passed by the Assessing Officer dated Assessing Officer 28/12/2017 is without making any enquiry and in absence of 28/12/2017 is without making any enquiry and in absence of 28/12/2017 is without making any enquiry and in absence of specific enquiry made by the specific enquiry made by the Assessing Officer or recording reasons or recording reasons for accepting assessee for accepting assessee’s submission without any appropriate submission without any appropriate evidence, it cannot be said that the documents submitted by th evidence, it cannot be said that the documents submitted by th evidence, it cannot be said that the documents submitted by the assessee were duly verified by the assessee were duly verified by the Assessing Officer Assessing Officer. The Ld. PCIT referred various decisions and thereafter in concluding para 6 of the referred various decisions and thereafter in concluding para 6 of the referred various decisions and thereafter in concluding para 6 of the impugned order held as under: impugned order held as under:
“6. In conclusion, the assessing officer has failed to make necessary In conclusion, the assessing officer has failed to make necessary In conclusion, the assessing officer has failed to make necessary enquiry and bring enquiry and bring on record all facts necessary for determining the true on record all facts necessary for determining the true character and nature of the income. Omission to do so has resulted in an character and nature of the income. Omission to do so has resulted in an character and nature of the income. Omission to do so has resulted in an order which is erroneous and prejudicial to the interest of revenue. In order which is erroneous and prejudicial to the interest of revenue. In order which is erroneous and prejudicial to the interest of revenue. In view of this I am of the view that the assessment order view of this I am of the view that the assessment order d. 28/12/2017 is d. 28/12/2017 is erroneous and prejudicial to the interest of revenue as per provisions of erroneous and prejudicial to the interest of revenue as per provisions of erroneous and prejudicial to the interest of revenue as per provisions of Explanation 2(a) to section 263(1) of the Income Tax Act.1961 and Explanation 2(a) to section 263(1) of the Income Tax Act.1961 and Explanation 2(a) to section 263(1) of the Income Tax Act.1961 and requires to be revised and set aside. Accordingly, the assessment is requires to be revised and set aside. Accordingly, the assessment is requires to be revised and set aside. Accordingly, the assessment is revised and set aside to the revised and set aside to the file of the Assessing Officer. The Assessing file of the Assessing Officer. The Assessing Officer is directed to frame the order de novo, as per observation made Officer is directed to frame the order de novo, as per observation made Officer is directed to frame the order de novo, as per observation made in thus order above in thus order above”.
Upal Developers Pvt. Ltd. 7 ITA No. 871/M/2021
Before us, the Before us, the Ld. Counsel of the assessee submitted that of the assessee submitted that Assessing Officer has made complete enquiry on the issu has made complete enquiry on the issue and has made complete enquiry on the issu thereafter only accepted the claim of the assessee. The thereafter only accepted the claim of the assessee. The thereafter only accepted the claim of the assessee. The Ld. Counsel referred to notice dated 06/11/2017 issued in terms of section referred to notice dated 06/11/2017 issued in terms of section referred to notice dated 06/11/2017 issued in terms of section 142(1) of the Act, wherein wherein the Assessing Officer specifically asked specifically asked the assessee to justify as to why the income from o the assessee to justify as to why the income from other services was ther services was taken under the head taken under the head “profit and gains of the business profit and gains of the business”. The Ld. Counsel drawn our attention to paper drawn our attention to paper book page 26 to 27 book page 26 to 27 containing reply dated 13/11/2017 filed before the reply dated 13/11/2017 filed before the Assessing Officer Assessing Officer in response to notice under section 142(1) dated 06/11/2017. In the response to notice under section 142(1) dated 06/11/2017. In the response to notice under section 142(1) dated 06/11/2017. In the said reply the assessee explained that all the direct and ancillary said reply the assessee explained that all the direct and ancillary said reply the assessee explained that all the direct and ancillary cost related to construction of mall at Luck ed to construction of mall at Lucknow was capitaliz now was capitalized under the head building and no portion of the said cost under the head building and no portion of the said cost under the head building and no portion of the said cost was claimed as depreciation. Accordingly . Accordingly, income from leasing out of premises income from leasing out of premises and collecting rent was declared under the head and collecting rent was declared under the head and collecting rent was declared under the head “income from house property”. Apart from rental income the assessee company . Apart from rental income the assessee company . Apart from rental income the assessee company
Upal Developers Pvt. Ltd. 8 ITA No. 871/M/2021 also earned revenue by way of providing services also earned revenue by way of providing services also earned revenue by way of providing services for undertaking various commercial act activities in the mall, which were charged in the in the mall, which were charged in the form of common area maintenance form of common area maintenance (CAM) charges. The said receipt . The said receipt were charged separately from the lessee and offered under the head were charged separately from the lessee and offered under the head were charged separately from the lessee and offered under the head “profit and gains of business and profession profit and gains of business and profession”. The assessee relied on . The assessee relied on the decision of the Hon’ble decision of the Hon’ble Gujarat High Court in the case of High Court in the case of CIT Vs Sarabhai Private Limited 129 Taxmann 43 Sarabhai Private Limited 129 Taxmann 43 to support that to support that income from service services rendered to the tenant income from service services rendered to the tenant income from service services rendered to the tenants should be treated as profit and gains of the busines treated as profit and gains of the business. It was also submitted that as also submitted that assessee-company has followed this method of computation of company has followed this method of computation of company has followed this method of computation of income in earlier years and the income in earlier years and the Income-tax Department Department duly accepted the same in assessment under section 143(3) of the accepted the same in assessment under section 143(3) of the accepted the same in assessment under section 143(3) of the Act.
4.1 The Ld. Counsel Counsel further submitted that issue whether the that issue whether the income from services rendered by the assessee in mall premises income from services rendered by the assessee in mall premises income from services rendered by the assessee in mall premises should be taxed under the head profit and gains of the business under the head profit and gains of the business under the head profit and gains of the business arose in assessment years prior and subsequent to assessment year arose in assessment years prior and subsequent to assessment year arose in assessment years prior and subsequent to assessment year
Upal Developers Pvt. Ltd. 9 ITA No. 871/M/2021 under consideration i.e under consideration i.e. AY 2015-16. In assessment year 2012 assessment year 2012-13, assessment was reopened subsequent to the assessment order in assessment was reopened subsequent to the assessment order in assessment was reopened subsequent to the assessment order in the year under consideration, however such reopening was quashed the year under consideration, however such reopening was quashed the year under consideration, however such reopening was quashed by the Hon’ble Bombay High Court holding that reasons recorded by the Hon’ble Bombay High Court holding that reasons recorded by the Hon’ble Bombay High Court holding that reasons recorded were based on mere change of opinion. Sim were based on mere change of opinion. Similarly, in assessment year in assessment year 2013-14 also reopening was 14 also reopening was quashed on similar grounds. on similar grounds. The Ld. Counsel referred to the order of the Hon’ble High Court available on referred to the order of the Hon’ble High Court available on referred to the order of the Hon’ble High Court available on page 119 to 121 of the paper page 119 to 121 of the paper book and submitted that Hon’ble High book and submitted that Hon’ble High Court has held that the opinion Court has held that the opinion formed in assessment order under formed in assessment order under section 143(3) of the section 143(3) of the Act is one of opinion sustainable in law. The is one of opinion sustainable in law. The Ld. Counsel accordingly submitted that wherever two views are accordingly submitted that wherever two views are accordingly submitted that wherever two views are possible the Ld. PCIT is not justified in substituting his view in place PCIT is not justified in substituting his view in place PCIT is not justified in substituting his view in place of the view of the Assessing Officer Assessing Officer.
4.2 In assessment year 2017 In assessment year 2017-18 and 2018-19 the Assessing Officer Assessing Officer has accepted the claim of the assessee of income from service under has accepted the claim of the assessee of income from service under has accepted the claim of the assessee of income from service under the head “profit and gains of the business profit and gains of the business”. The Ld. Counsel Counsel referred
Upal Developers Pvt. Ltd. 10 ITA No. 871/M/2021 to assessment order for to assessment order for assessment year 2017-18 and 2018 18 and 2018-19 placed on paper book page book pages 174 -176 and 177-179 respectively. 179 respectively. The Ld. Counsel submitted submitted that the revenue itself has considered the assessment of income under the head assessment of income under the head “profit and gains of the profit and gains of the business and profession business and profession” and therefore action of the ion of the Ld. PCIT in setting aside the assessment is not justified. setting aside the assessment is not justified.
The Ld. DR on the other hand relied on the order of the DR on the other hand relied on the order of the DR on the other hand relied on the order of the Ld. PCIT and submitted that PCIT and submitted that the Assessing Officer was required to was required to inquire the MOA of the assessee company for true nature of the inquire the MOA of the assessee company for true nature of the inquire the MOA of the assessee company for true nature of the ‘head of income’ under which service charges would be assessable. ‘head of income’ under which service charges would be assessable. ‘head of income’ under which service charges would be assessable.
We have heard rival submission of parties and perused the We have heard rival submission of parties and perused the We have heard rival submission of parties and perused the relevant material on record. relevant material on record.
6.1 For an assessm For an assessment order to be held liable to revision under ent order to be held liable to revision under section 263 of the Act, the twin conditions section 263 of the Act, the twin conditions, firstly, , firstly, order to be a erroneous and secondly, order secondly, order prejudicial to the interest of the prejudicial to the interest of the Upal Developers Pvt. Ltd. 11 ITA No. 871/M/2021 Revenue, should be satisfied simultaneously. The Hon’ble Delhi High should be satisfied simultaneously. The Hon’ble Delhi High should be satisfied simultaneously. The Hon’ble Delhi High Court in the case of GEE VEE Enterprises Private Limited versus GEE VEE Enterprises Private Limited versus GEE VEE Enterprises Private Limited versus CIT [1975] 99 ITR 375 (Delhi [1975] 99 ITR 375 (Delhi) held that the CIT may consider the may consider the order of the Income Tax Officer as erroneous not only because it order of the Income Tax Officer as erroneous not only because it order of the Income Tax Officer as erroneous not only because it contains some apparent error of reasoning or of law or of fact on the contains some apparent error of reasoning or of law or of fact on the contains some apparent error of reasoning or of law or of fact on the face of it but also because it is a stereo face of it but also because it is a stereo-typed order which simply typed order which simply accepts what the assessed has stated accepts what the assessed has stated in his return and fails to make in his return and fails to make inquiries which are called for in the circumstances of the case. inquiries which are called for in the circumstances of the case. inquiries which are called for in the circumstances of the case. The Hon’ble Delhi High Court referred to the two decision of the Hon’ble Hon’ble Delhi High Court referred to the two decision of the Hon’ble Hon’ble Delhi High Court referred to the two decision of the Hon’ble Supreme Court in the case of Supreme Court in the case of Rampyari Devi Saraogi v. pyari Devi Saraogi v. Commissioner of Income Tax Commissioner of Income Tax, (1968)67 I.T.R. 84 (12), , (1968)67 I.T.R. 84 (12), and Tara Devi Aggarwai v. Commissioner of Income Tax Devi Aggarwai v. Commissioner of Income Tax, (1973) 88 IT , (1973) 88 ITR 323 (13) and observed that and observed that it is not necessary for the Commissioner it is not necessary for the Commissioner to make further inquiries before cancelling the assessment order of to make further inquiries before cancelling the assessment order of to make further inquiries before cancelling the assessment order of the Income Tax Officer. The Commissioner can regard the order as the Income Tax Officer. The Commissioner can regard the order as the Income Tax Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the erroneous on the ground that in the circumstances of the case the erroneous on the ground that in the circumstances of the case the Upal Developers Pvt. Ltd. 12 ITA No. 871/M/2021 Income Tax Officer should have made further inquiries before er should have made further inquiries before er should have made further inquiries before accepting the statements made by the assessed in his return. accepting the statements made by the assessed in his return. accepting the statements made by the assessed in his return.
6.2 The Hon’ble Delhi High Court The Hon’ble Delhi High Court (supra) justified making of justified making of inquiries by the Assessing Officer observing as under: inquiries by the Assessing Officer observing as under: inquiries by the Assessing Officer observing as under:
“(14) The reason is obvious. The (14) The reason is obvious. The position and function of the Income Tax Officer position and function of the Income Tax Officer is very different from that of a civil court. The statements A made in a pleading is very different from that of a civil court. The statements A made in a pleading is very different from that of a civil court. The statements A made in a pleading proved by the mininum amount of evidence may he accepted by a civil court in proved by the mininum amount of evidence may he accepted by a civil court in proved by the mininum amount of evidence may he accepted by a civil court in the absence of any rebuttal. The civil court is the absence of any rebuttal. The civil court is nuctral. It simply gives decision on nuctral. It simply gives decision on the basis of the pleading and evidence which comes before it. The Income Tax the basis of the pleading and evidence which comes before it. The Income Tax the basis of the pleading and evidence which comes before it. The Income Tax Officer is not only an adjudicator but also an investigator. He cannot remain Officer is not only an adjudicator but also an investigator. He cannot remain Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but passive in the face of a return which is apparently in order but calis for further calis for further inquiry. It is his duty to assertain the truth of the faets stated in the return inquiry. It is his duty to assertain the truth of the faets stated in the return inquiry. It is his duty to assertain the truth of the faets stated in the return when the circumstances of the case are such as to provoke an inquiry. The when the circumstances of the case are such as to provoke an inquiry. The when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word "erroneous" in meaning to be given to the word "erroneous" in section 263 emerges out of this emerges out of this contract. It is because it is incumbent on the Income Tax Officer to further contract. It is because it is incumbent on the Income Tax Officer to further contract. It is because it is incumbent on the Income Tax Officer to further investigate the facts stated in the return when cireuinstances would make such investigate the facts stated in the return when cireuinstances would make such investigate the facts stated in the return when cireuinstances would make such an inquiry prudent that the word "erroneous" in an inquiry prudent that the word "erroneous" in section 263 section 263 includes the failure to make such an inquiry. The order becomes erroneous because such an failure to make such an inquiry. The order becomes erroneous because such an failure to make such an inquiry. The order becomes erroneous because such an inquiry has not been made and not because there is any thing wrong with the inquiry has not been made and not because there is any thing wrong with the inquiry has not been made and not because there is any thing wrong with the order if all the facts stated order if all the facts stated therein are assumed to be correct. Nor can ii be said that it was necessary for the Commissioner to himself make Nor can ii be said that it was necessary for the Commissioner to himself make Nor can ii be said that it was necessary for the Commissioner to himself make such inquiry before cancelling the order of assessment. such inquiry before cancelling the order of assessment.”
Upal Developers Pvt. Ltd. 13 ITA No. 871/M/2021 6.3 Similarly, Hon’ble Calcutta High Court in the case of , Hon’ble Calcutta High Court in the case of , Hon’ble Calcutta High Court in the case of CIT Central-1 Vs Maithan I 1 Vs Maithan International (Cal) IT Appeal No. 53 of IT Appeal No. 53 of 2012 has observed as under : has observed as under :
“It is not the law that the Assessing Officer occupying the position of an “It is not the law that the Assessing Officer occupying the position of an “It is not the law that the Assessing Officer occupying the position of an investigator and adjudicator can discharge his functions by perfunctory or investigator and adjudicator can discharge his functions by perfunctory or investigator and adjudicator can discharge his functions by perfunctory or inadequate investigation. Such a inadequate investigation. Such a course is bound to result in erroneous and course is bound to result in erroneous and prejudicial orders. Where the relevant enquiry was not undertaken, as in this prejudicial orders. Where the relevant enquiry was not undertaken, as in this prejudicial orders. Where the relevant enquiry was not undertaken, as in this case, the order is erroneous and prejudicial too and therefore revisable. case, the order is erroneous and prejudicial too and therefore revisable. case, the order is erroneous and prejudicial too and therefore revisable. Investigation should always be faithful and fruitful. Unless Investigation should always be faithful and fruitful. Unless all truthful areas of all truthful areas of enquiry are pursued the enquiry cannot be said to have been faithfully enquiry are pursued the enquiry cannot be said to have been faithfully enquiry are pursued the enquiry cannot be said to have been faithfully conducted.” 6.4 The Hon’ble Delhi High Court has again emphasized in the case The Hon’ble Delhi High Court has again emphasized in the case The Hon’ble Delhi High Court has again emphasized in the case of ITO versus DG Housing Projects Ltd. ITA 179/2011 ITO versus DG Housing Projects Ltd. ITA 179/2011 ITO versus DG Housing Projects Ltd. ITA 179/2011 that where there is complete lack there is complete lack of enquiry on the part of the Assessing Officer. of enquiry on the part of the Assessing Officer. The assessment order is erroneous The assessment order is erroneous the relevant observation of the he relevant observation of the Hon’ble High Court are as under Hon’ble High Court are as under :
“A distinction must be drawn in the cases where the Assessing Officer does not “A distinction must be drawn in the cases where the Assessing Officer does not “A distinction must be drawn in the cases where the Assessing Officer does not conduct an enquiry; as lack conduct an enquiry; as lack of enquiry by itself renders the order erroneous and of enquiry by itself renders the order erroneous and prejudicial to the interests of the Revenue and cases where the Assessing Officer prejudicial to the interests of the Revenue and cases where the Assessing Officer prejudicial to the interests of the Revenue and cases where the Assessing Officer conducts an enquiry but the finding recorded is erroneous and which is also conducts an enquiry but the finding recorded is erroneous and which is also conducts an enquiry but the finding recorded is erroneous and which is also prejudicial to the interests of the Revenue. prejudicial to the interests of the Revenue. In the latter cases, the Commissioner In the latter cases, the Commissioner
Upal Developers Pvt. Ltd. 14 ITA No. 871/M/2021 has to examine the order or the decision taken by the Assessing Officer on the has to examine the order or the decision taken by the Assessing Officer on the has to examine the order or the decision taken by the Assessing Officer on the merits and then form an opinion on the merits that the order passed by the merits and then form an opinion on the merits that the order passed by the merits and then form an opinion on the merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interests Assessing Officer is erroneous and prejudicial to the interests of the Revenue. In of the Revenue. In the second set of cases, the Commissioner cannot direct the Assessing Officer to the second set of cases, the Commissioner cannot direct the Assessing Officer to the second set of cases, the Commissioner cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is conduct further enquiry to verify and find out whether the order passed is conduct further enquiry to verify and find out whether the order passed is erroneous or not.” 6.5 Further, we also find that i Further, we also find that in terms of Explanation n terms of Explanation-2 below section 263 of the Act, which has been made eff section 263 of the Act, which has been made eff section 263 of the Act, which has been made effective from assessment year 2015 assessment year 2015-16 w.e.f. 01.06.2015, an assessment order is an assessment order is deemed to be erroneous insofar as prejudicial to the interest of the deemed to be erroneous insofar as prejudicial to the interest of the deemed to be erroneous insofar as prejudicial to the interest of the Revenue, if the Assessing Officer Revenue, if the Assessing Officer fails to carry out the to carry out the inquiries, which ought to have been carried out in the facts and circumstances which ought to have been carried out in the facts and circumstances which ought to have been carried out in the facts and circumstances of the case. The Ld. PCIT has also relied on the various decision to PCIT has also relied on the various decision to PCIT has also relied on the various decision to hold that in case of lack of enquiry by the hold that in case of lack of enquiry by the Assessing Officer Assessing Officer, the assessment order is rendered erroneous i assessment order is rendered erroneous insofar as prejudicial to the nsofar as prejudicial to the interest of the revenue. interest of the revenue.
6.6 In view of the above judicial precedents and the amendment In view of the above judicial precedents and the amendment In view of the above judicial precedents and the amendment introduced by the P introduced by the Parliament by way of Explanation arliament by way of Explanation-2, if the Upal Developers Pvt. Ltd. 15 ITA No. 871/M/2021 Assessing Officer fails in carrying out the enquiry which ought to fails in carrying out the enquiry which ought to fails in carrying out the enquiry which ought to have been carried in the f arried in the fact and circumstances of the case, then and circumstances of the case, then assessment order is obviously erroneous insofar as prejudicial to assessment order is obviously erroneous insofar as prejudicial to assessment order is obviously erroneous insofar as prejudicial to the interest of Revenue. the interest of Revenue.
6.7 In the instant case, the Ld In the instant case, the Ld. AO issued query letter specifically letter specifically asking assessee to explain the reason for considering charges assessee to explain the reason for considering charges assessee to explain the reason for considering charges received from various services under the head received from various services under the head “business income business income” and the assessee also replied and explained and the assessee also replied and explained in detail re in detail reasons for treating such service c treating such service charges under the head “business income business income”. The assessee is considering the said service charges under the business essee is considering the said service charges under the business essee is considering the said service charges under the business income for last many years and that income for last many years and that treatment had been accepted by had been accepted by the Revenue. According to the assessee, the According to the assessee, the Assessing Officer Assessing Officer did not warrant requirement of verifying MOA of the assessee c warrant requirement of verifying MOA of the assessee c warrant requirement of verifying MOA of the assessee company, but the Ld. PCIT is of the view that before accepting the claim of service PCIT is of the view that before accepting the claim of service PCIT is of the view that before accepting the claim of service charges to be taxed under the head “profit an charges to be taxed under the head “profit an charges to be taxed under the head “profit and gain of business/profession, the , the Assessing Officer was required to verify was required to verify
Upal Developers Pvt. Ltd. 16 ITA No. 871/M/2021 the MOA of the company the MOA of the company so as to ascertain the differ so as to ascertain the different area of objects in which the assessee could have carried out the business. objects in which the assessee could have carried out the business. objects in which the assessee could have carried out the business. In view of this facts and s and circumstances, we are of the opinion that , we are of the opinion that when the Assessing Officer Assessing Officer was made aware of the f aware of the fact that this issue was examined in earlier in scrutiny proceeding and accepted issue was examined in earlier in scrutiny proceeding and accepted issue was examined in earlier in scrutiny proceeding and accepted by the Department and and in the year under consideration in the year under consideration, there was no change in facts or new information etc s or new information etc. came before him, which came before him, which could trigger or warrant him to ask for the MOA of the could trigger or warrant him to ask for the MOA of the could trigger or warrant him to ask for the MOA of the company, therefore the instant case does fall in the category of no enquiry case case does fall in the category of no enquiry case or complete lack of inquiry case. or complete lack of inquiry case.
6.8 The another argument has been taken by the The another argument has been taken by the Ld. counsel Ld. counsel that considering income from mall services under the head profit and considering income from mall services under the head profit and considering income from mall services under the head profit and gains of the business is one of the view gains of the business is one of the view sustainable in law sustainable in law. He submitted that the assessee before the submitted that the assessee before the Assessing Officer Assessing Officer in support of its claim has relied on the decision of the Hon’ble of its claim has relied on the decision of the Hon’ble of its claim has relied on the decision of the Hon’ble Gujarat High Court in the case of CIT Vs Sarabhai P CIT Vs Sarabhai P. Ltd. (supra) supra). He submitted
Upal Developers Pvt. Ltd. 17 ITA No. 871/M/2021 that Hon’ble Jurisdictional Jurisdictional High Court in the case of assessee in the case of assessee while quashing notice under section 148 of the quashing notice under section 148 of the Act in earlier assessment in earlier assessment year has held that opinion formed by th has held that opinion formed by the Assessing Officer Assessing Officer in original assessment year was not original assessment year was not unsustainable in law and therefore sustainable in law and therefore reopening of the assessment on the same material was based on reopening of the assessment on the same material was based on reopening of the assessment on the same material was based on change of opinion. In In view of the judgment of the Supreme Court in of the Supreme Court in Malabar Industrial Co. Co. (2000) 243 ITR 83 (SC) it is now a settled it is now a settled principle that where the principle that where the Assessing Officer has adopted one of the has adopted one of the courses permissible in law or where two views are possible and the courses permissible in law or where two views are possible and the courses permissible in law or where two views are possible and the Assessing Officer has taken one view with which the Commissioner has taken one view with which the Commissioner has taken one view with which the Commissioner does not agree, it cannot does not agree, it cannot be treated as an erroneous order be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by prejudicial to the interests of the Revenue unless the view taken by prejudicial to the interests of the Revenue unless the view taken by the Assessing Officer Assessing Officer is unsustainable in law. In Commissioner of Commissioner of Income Tax vs. Gabriel India Ltd., 203 ITR 108 Income Tax vs. Gabriel India Ltd., 203 ITR 108 a Division Bench a Division Bench of Hon’ble Bombay High C Hon’ble Bombay High Court observed that Section 263 does not observed that Section 263 does not Upal Developers Pvt. Ltd. 18 ITA No. 871/M/2021 empower the Comm empower the Commissioner to substitute his judgment for that of ment for that of the Assessing Officer, unless the decision is held to be erroneous. , unless the decision is held to be erroneous. , unless the decision is held to be erroneous.
6.9 We find that Ld. Ld. PCIT has not brought on record as how the PCIT has not brought on record as how the view of the Assessing Officer Assessing Officer to treat the income from services to treat the income from services rendered to mall tenant under the head profit and gains of the rendered to mall tenant under the head profit and gains of the rendered to mall tenant under the head profit and gains of the business/profession is an unsustainable view in law. The Ld. CIT business/profession is an unsustainable view in law. The Ld. CIT business/profession is an unsustainable view in law. The Ld. CIT-DR also could not explain as how income received from rendering also could not explain as how income received from rendering also could not explain as how income received from rendering services to mall tenant for common area maintenance should not be mall tenant for common area maintenance should not be mall tenant for common area maintenance should not be treated under the head profit and gains of the business. treated under the head profit and gains of the business. treated under the head profit and gains of the business. We find that Hon’ble Gujarat High Court in the case of Hon’ble Gujarat High Court in the case of CIT vs. Sarabhai Private Sarabhai Private Limited (supra) has held that income received by an assessee to has held that income received by an assessee to has held that income received by an assessee to different services rendered to the tenants should be treated as profit ifferent services rendered to the tenants should be treated as profit ifferent services rendered to the tenants should be treated as profit and gains of the business or profession, therefore clearly this is one and gains of the business or profession, therefore clearly this is one and gains of the business or profession, therefore clearly this is one of the possible view of the possible view which the Assessing Officer has taken and therefore Ld. PCIT is not justified in revising the PCIT is not justified in revising the order of the PCIT is not justified in revising the Upal Developers Pvt. Ltd. 19 ITA No. 871/M/2021 Assessing Officer holding it to be holding it to be erroneous insofar as prejudicial to insofar as prejudicial to the interest of the revenue. the interest of the revenue.
6.10 In view of the above discussion, the grounds raised by the In view of the above discussion, the grounds raised by the In view of the above discussion, the grounds raised by the assessee in its appeal are allowed. assessee in its appeal are allowed.
In the result, the appeal of the asses In the result, the appeal of the assessee is allowed. see is allowed.