SHRI BILAS CHAND,BATHINDA vs. INCOME TAX OFFICER, WARD1(1), BATHINDA

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR (SMC) BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER I.T.A. No. 399/Asr/2018 Assessment Year: 2016-17

Bilas Chand s/o Chanda Ram, vs. Income Tax Officer, #21813, Street No.1, Ward 1(1), Bathinda Near Shiv Mandir, Power House Road Bathinda [PAN: ABMPC 6938Q] (Appellant) (Respondent)

Appellant by : Sh. J. K. Gupta (Adv.) Respondent by: Sh. Charan Dass (D.R.) Date of Hearing: 22.02.2019 Date of Pronouncement: 29.04.2019

ORDER Per Sanjay Arora, AM: This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals), Bathinda ('CIT(A)' for short) dated 24.5.2018, dismissing the assessee’s appeal contesting his assessment u/s. 143(3) read with s.147 of the Income Tax Act, 1961 ('the Act' hereinafter) dated 09.3.2018 for the Assessment Year (AY) 2016-17.

2 ITA No. 399/Asr/2018 (AY 2016-17) Bilas Chand v. ITO 3. The facts of the case in brief are that the assessee, a salaried employee, filed his return of income for the relevant year on 17.7.2016 at Rs.3,27,757, claiming deduction u/ss. 80C and 80E at Rs.1,50,000 and Rs.1,50,472 respectively, i.e., against the gross total income (GTI) of Rs.6,28,229. The same stood processed on 31.7.2016 u/s. 143(1) at the returned income, and the assessee, accordingly, granted refund of Rs.26,780, i.e., in terms of his return. Thereafter, the assessee, was issued a notice u/s. 133(6) on 10.7.2017 (served on 11.7.2017) seeking information qua the claims preferred u/ss. 80C and 80E. The assessee responded thereto by stating that he had made wrong claims under these two sections, i.e., by mistake, and that he had revised his return accordingly on 17.7.2017 (refer para 5 of the assessment order). The said return, however, while retaining the claim for deduction u/s. 80C at Rs.1.50 lacs, altered that for deduction u/s. 80E to ‘Loss from house property’, at, though, the same sum of Rs.1,50,472, returning thus his income at the same amount (Rs.3,27,757). Thereafter, another return was filed on 08.8.2017, whereby the claims for deduction u/s. 80C and ‘Loss from house property’ were reduced to Rs.1,05,140 and Rs. Nil respectively, enhancing the admitted income to Rs.5,23,089, also enclosing along with challan for payment of Rs.28,000. Notice u/s. 148 was issued on 16.01.2018 with a view to bring the escaped income, to the extent it related to these two claims, to tax. The assessee responded by stating that the return filed on 08.8.2017 be regarded as the return in response to notice u/s. 148. In the view of the Assessing Officer (AO), the assessee had made wrong claims u/s. 80C (at Rs.44,860) and u/s. 80E (at Rs.1,50,472), being the instalment and interest paid on a housing bank loan in respect of house property on land belonging to his wife. The returns filed on 17.7.2017 and 08.8.2017 could not be regarded as valid returns u/s. 139 of the Act. He, accordingly, assessed the income at Rs.5,23,090, i.e., ‘disallowing’ these claims to the stated extent.

3 ITA No. 399/Asr/2018 (AY 2016-17) Bilas Chand v. ITO In appeal, the assessee, besides challenging the reassessment proceedings, again pressed for deduction u/s. 80C (at Rs.44,860), being the installment of the housing loan (in the name of his wife and himself), and interest on the said loan u/s. 24(b) at Rs.1,49,859 (stated to be the correct figure, i.e., instead of Rs.1,50,472). The ld. CIT(A) found no merit in the challenge to the reassessment proceedings. The return filed on 08.8.2017 was the starting point as far as the reassessment proceedings were concerned. The assessee having made no claim for the impugned deductions, i.e., Rs.44,860 (u/s. 80C) and Rs.1,49,859 (forming part of Rs.1,50,472) u/s. 24(b), per the return filed on 08.8.2017, he found no basis to the assessee’s said claims. The AO was wrong in ignoring the said return. Aggrieved, the assessee is in second appeal, raising the followings grounds:

‘1. That on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not giving the deduction of Rs. 44860/- u/s 80C of the Act on the installments of the HBA paid at Rs. 64500/- on the residential house constructed on the plot of his wife only by the assessee out of his salary income. 2. That on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not giving the deduction of Rs. 149859/- u/s 24(b) of the Act on account of the interest paid on HBA on the residential house constructed on the plot of his wife only by the assessee out of his salary income. 3. That on the facts and in the circumstances of the case and in law, the learned CIT(A) should have allowed both the deductions by considering the super constructions on the plot of his wife as benami. So, the assessee is the owner of super construction in the law. No money was paid by the wife of assessee but only by the assessee himself out of his salary income. 4. That on the facts and in the circumstances of the case and in law, the learned CIT(A) should have allowed both the aforesaid deductions as the appellate proceedings are continuous assessment proceedings and the claim was duly made before him through various grounds of appeal. 5. That any other relief may kindly be granted to the assessee to whom he is found entitled at the time of hearing of appeal.’

4 ITA No. 399/Asr/2018 (AY 2016-17) Bilas Chand v. ITO 4.1 Clearly, the appeal raises the issue on the merits of the two claims, i.e., u/s. 80C and u/s. 80E, at Rs.44,860 and Rs.1,49,859 respectively. The primary facts, stated hereinabove, are not disputed, and tabulated by the ld. CIT(A) at para 5.2 (pg. 6) of his order, as under:

Date of filing Gross Other Net taxable Deduction u/s 80 C of return total deduction/ income shown in income claims return 1,50,000/- out of the 1,50,472/-u/s 17/07/2016 6,28,229 3,27,760 total claim of Rs. 80E 194,812/- 1,50,472/- loss 17/07/2017 6,28,229 1,50,000/- 3,27,760 from House property 08/08/2017 6,28,229 1,05,140/- Nil 5,23,090

4.2 The first issue, not raised in appeal, that, however, arises, is whether the assessee’s said claims could at all have been agitated before the AO, or even in the appellate proceedings, in the facts and circumstances of the case? This is as only if the same could in law be, that the question of examining the said claims on merits would arise. There has in fact been no adjudication by the ld. CIT(A) on the merits of the claim/s in-as-much as he found that the assessee had not preferred the same per his return filed on 08.8.2017, which is to be regarded as the return furnished in response to notice u/s. 148. Reference in this regard is made to para 5.3 of his order, which reads as under: ‘5.3 Before parting with this order, it is imperative to consolidate the findings of the above order. The Assessing Officer in the impugned order made discussions of inadmissibility of two claims of Rs. 44,860/- and Rs.1,50,472/- u/s. 80C and 80E respectively. However, the Assessing Officer was empowered to act upon only and only on the return of income filed on 08/08/2017 because it was this return which was to be treated as return filed in response to reassessment notice. In this return of income, the claim of the appellant u/s. 80C was already reduced by an amount of Rs. 44,860/- (150000- 105140) therefore the observations of the Assessing Officer making this addition are irrelevant. Similarly, in the return dated 08/08/2017, there is no further claim either u/s. 80E or in respect of house property thus the

5 ITA No. 399/Asr/2018 (AY 2016-17) Bilas Chand v. ITO observations of Assessing Officer are irrelevant on this account also. The returned income filed by the appellant in the return of income filed on 08/08/2017 at Rs. 5,23,090/- should be treated as assessed income for the year under consideration.’ No pleadings in this respect, i.e., qua this issue, were, surprisingly, made during hearing and, consequently, not responded to by the other side. It is, nevertheless, incumbent on the Tribunal to consider this aspect as only an affirmative answer to this question would lead to the consideration of the assessee’s claims on merits, for which – the matter, in view of its non-adjudication, may perhaps have to be remitted back to the file of the first appellate authority for the purpose. In my considered view, the impugned order does not suffer from any infirmity. The reasons for the same are stated in the ensuing part of this order.

4.3 The returns filed on 17.7.2017 and 08.8.2017 being beyond the time permissible for filing a revised return, are not valid returns in law. The return filed on 08.8.2017, is, in view of the assessee’s submission, in response to notice u/s. 148 dated 16/1/2018, that the return filed on 08/8/2017 be treated as a return in response to notice u/s. 148, to be regarded as a return furnished in compliance of the said notice, and on the date on which the said letter stands submitted to the AO. Vide the same the assessee returns his income at Rs.5,23,090, withdrawing the claims u/ss. 80C and 80E, to the extent of Rs.44,860 and Rs.1,50,472 respectively. In fact, the said withdrawal/s validates the reassessment proceedings, not under challenge though before the Tribunal. The AO, in making the assessment at the returned income, has not effected any disallowance in assessment. The next question is if the said claims, consciously withdrawn, could be pressed in assessment. The matter, not addressed in the assessee’s pleadings, has several dimensions to it, including qua penalty u/s. 271(1)(c). Penalty, it is trite law, is to be with reference to the original return. A return, admitting additional income, would accordingly be of no consequence where filed on the detection of

6 ITA No. 399/Asr/2018 (AY 2016-17) Bilas Chand v. ITO the escaped income (viz. Mahavir Metal Works v. CIT [1973] 92 ITR 513 (P&H); CIT v. J.K.A. Subramania Chettiar [1977] 110 ITR 602 (Mad)), as apparently obtains in the instant case. The assessee, however, could argue that he having admitted his ‘mistake’ by filing a return on 08.8.2017 withdrawing the impugned claims, the same, being prior to the issue of notice u/s. 148, be regarded as voluntary, saving penalty. Another aspect that would arise for consideration is if the assessee could approbate and reprobate; it being clear that the withdrawal of the impugned claims is a result of a conscious decision, claiming their preference to be in fact a mistake. A bonafide mistake saves penalty (The Hoshiarpur Distt. Coop. Milk Producers Union Ltd. v. Dy. CIT, in ITA No. 207/Asr/2018, dated 24.04.2019). So, however, the said aspects, obtaining and relevant in the regular proceedings, do not arise in the instant proceedings, being reassessment proceedings, the scope of which is limited to bringing the escaped income to tax, which is admitted by the assessee by returning the escaped income, which defines the purview of these proceedings. The said proceedings, as explained in CIT v. Sun Engineering Works (P.) Ltd. [1992] 198 ITR 297 (SC), are for the benefit of the Revenue. As such, even assuming that the assessee could have made these claims, since withdrawn, in the regular proceedings – without though issuing any finding in this respect, which would require consideration and resolution of the issue/s raised, he could not do so in the instant, reassessment proceedings.

Conclusion 5. The first issue, delineated above (para 4.2), is therefore answered in the negative, i.e., that the assessee could not agitate these claims in the instant proceedings, either before the assessing or an appellate authority. I, accordingly, for the reasons afore-stated, decline interference. The ld. counsel for the assessee,

7 ITA No. 399/Asr/2018 (AY 2016-17) Bilas Chand v. ITO Sh. Gupta, would during hearing raise arguments in favour of the assessee’s claims, i.e., on merits, which were contested by the ld. DR. The same, as afore- explained, do not arise for consideration in view of their non-relevancy, given the fact of withdrawal of the said claims – stating them to be made by mistake, per return u/s. 148, and the nature and purview of the reassessment proceedings as explained by the Apex Court in Sun Engineering Works (P.) Ltd. (supra). The legal competence to raise such claims – raise as it does pertinent issues, stated supra, would also need to be resolved, i.e., even if the present were not reassessment proceedings. On merits, without issuing any final findings, it may be mentioned that the Hon’ble jurisdictional High Court has expressed a different view per its’ decisions, as in Jai Narayan v. ITO [2008] 306 ITR 335 (P&H) and CIT v. Dinesh Verma [2015] 133 Taxmann 409 (P&H), discountenancing the view expressed by the Hon’ble Madras High Court in CIT v. V. Natarajan [2006] 287 ITR 271 (Mad) in upholding the exemption u/s. 54 (on the purchase of a residential house by an assessee in the name of his wife) on capital gains arising to him on the sale of his residential house. Needless to add, a house property is inconceivable without land underneath, or rights therein, with there being nothing on record, or even a claim or mention of having acquired, legally, the said rights, in the present case. Even as these issues do not arise in view of, as afore-stated, the non- maintainability thereof in the instant proceedings, the same are noticed only in view of the completeness of this order, with a view to highlight the various aspects to the matter that may need to be suitably addressed.

I decide accordingly.

8 ITA No. 399/Asr/2018 (AY 2016-17) Bilas Chand v. ITO 6. In the result, the assessee’s appeal is dismissed. Order pronounced in the open court on April 29, 2019 Sd/- (Sanjay Arora) Accountant Member Date: 29.04.2019 /GP/Sr. Ps. Copy of the order forwarded to: (1) The Appellant: Bilas Chand S/o Chanda Ram #21813, Street No.-1, Near Shiv Mandir, Power House Road Bathinda (2) The Respondent: Income Tax Officer, Ward 1(1), Bathinda (3) The CIT(Appeals), Bathinda (4) The CIT concerned (5) The Sr. DR, I.T.A.T