SEVUGAN PETHAPERUMAL,MADURAI vs. PCIT, MADURAI-1,, MADURAI

PDF

ITA 1196/CHNY/2025Status: DisposedITAT Chennai25 August 2025AY 2020-21Bench: the Ld.AO, the assessee had submitted that he is the owner of a property viz PY Mahal situated in Coimbatore and the rent received therefrom have been disclosed under the head income from other sources. The Ld.AO noted that the impugned property was rented out by the assessee to one M/s.Orient Hospital Pvt Ltd and had shown income of Rs.88 lakhs as income from other sources. As evident from page 3 of the assessment order, the Ld.AO conducted detailed enquiries between the period 08.12.2021 13 pages

AI SummaryAllowed

Facts

The assessee, an individual, filed a return for AY 2020-21, declaring rental income of Rs. 88 lakhs from PY Mahal under the head "income from other sources." The AO passed an order under Section 143(3) accepting this after conducting detailed inquiries, as the case was under limited scrutiny for "deduction from other sources." The PCIT subsequently invoked revisionary powers under Section 263, holding that the AO's order was erroneous and prejudicial to the revenue, contending that the rental income should have been taxed as "income from house property" and that the AO failed to make requisite inquiries.

Held

The Tribunal found that the AO had indeed conducted detailed inquiries and applied his mind within the scope of the limited scrutiny. Citing judicial precedents, the Tribunal held that Section 263 cannot be invoked merely because the PCIT holds a different opinion or perceives the inquiry as inadequate, especially when the original limited scrutiny was not for determining the head of income for rental property. Therefore, the invocation of revisionary powers by the PCIT was deemed not in order.

Key Issues

Whether the PCIT could invoke Section 263 to revise an AO's order that accepted rental income under 'other sources' after inquiries, given that the assessment was a limited scrutiny focused on 'deductions from other sources' and not the classification of rental income.

Sections Cited

263, 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI

Before: SHRI GEORGE GEORGE K & SHRI AMITABH SHUKLA

Hearing: 06.08.2025Pronounced: 25.08.2025

Assessment Years: 2020-21 Sevugan Pethaperumal, Principal Commissioner of Income No.41, First Main Street, Tax, Narayanapuram West, Madurai-1, Madurai, Madurai. Tamil Nadu-625 014. [PAN: AFJPP5984J] (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) अपीलार्थी की ओर से/ Assessee by : Shri G.Tarun, Advocate प्रत्यर्थी की ओर से /Revenue by : Shri Bipin C.N, CIT सुनवाई की तारीख/Date of Hearing : 06.08.2025 घोषणा की तारीख /Date of Pronouncement : 25.08.2025 आदेश / O R D E R PER AMITABH SHUKLA, A.M :

This appeal is filed by the assessee against the order bearing DIN & Order No.ITBA / REV / F / REV5 / 2024-25 / 1075052788(1) dated 26.03.2025 of the Learned Principal Commissioner of Income Tax [herein after “PCIT), Madurai, for the assessment year 2020-21. The reference to the word “Act” in this order hereinafter shall mean the Income Tax Act, 1961 as amended from time to time. 2.0 The only issue raised by the assessee through its grounds of appeal is regarding the revisionary powers invoked by the Ld. PCIT-1, Chennai u/s 263 of the Act. The assessee has assailed the order u/s 263 dated 26.03.2025 by which the Ld. PCIT, Madurai has held that the order u/s 143(3) dated 12.09.2022 is erroneous in as much as it is prejudicial to the interest of the Revenue and consequently directing to modify the assessment qua his directions given in para 8 to 8.1.0 of his order. Brief factual matrix of the case is that the assessee is an individual deriving income from salary and other sources. Return declaring Income of Rs.2,63,150/- was filed by the assessee on 25.08.2020. Order u/s 143(3) was passed by the Ld.AO on 12.09.2022 accepting returned income. Pertinently, the case was selected in the limited scrutiny category to examine the “deduction from other sources. Before the Ld.AO, the assessee had submitted that he is the owner of a property viz PY Mahal situated in Coimbatore and the rent received therefrom have been disclosed under the head income from other sources. The Ld.AO noted that the impugned property was rented out by the assessee to one M/s.Orient Hospital Pvt Ltd and had shown income of Rs.88 lakhs as income from other sources. As evident from page 3 of the assessment order, the Ld.AO conducted detailed enquiries between the period 08.12.2021 to 29.08.2022 before concluding that “keeping in view of the above facts and documents filed during the course of assessment proceedings, no adverse inference is drawn and returned income of the assessee is accepted. Total income as per computation sheet attached.”. Page - 2 - of 13 3.0 The Ld.PCIT invoked revisionary proceedings by issuing a show cause notice u/s 263. It was observed, inter-alia, in para 8.8 of his order, that the rental income disclosed by the assessee ought to have been taxed as income house property and was wrongly offered as income from other sources. While doing so, reliance was placed upon certain judicial precedents on the subject. In para 11 of his order, he concluded that the Ld.AO has failed to do requisite enquiries and verification into the issue and hence the order passed by him falls into the category of the same being erroneous in so far it is prejudicial to the interest of the Revenue. The assessee is before us assailing the above order. 4.0 It is the case of the assessee that the matter of rental income received by the assessee qua the property at PY Mahal was fully investigated by the Ld.AO before allowing the claims of the assessee. The Ld.Counsel has further argued, while placing a detailed paper book on record, that the said issue was thoroughly investigated by the Ld.AO by issuance of repeated show cause notices. The Ld.Counsel has submitted that it has filed all the required evidence. The assessee has placed on record copies of show cause notices issued by the Ld.AO as well as its own submissions and evidences made to assessing authority. The Ld. Counsel argued, relying upon judicial precedents covering the matter, that even on merits there is no case of Revenue to invoke revisionary proceedings. Thus it was argued when the claim of the Page - 3 - of 13 assessee per se is legally permissible under the provisions of the Act and the same was enquired into by the Ld.AO, the same cannot be revisited through the revisionary powers of the Ld.PCIT u/s 263 of the Act. It was accordingly pleaded that the 263 order may be set aside and quashed. 5.0 Per contra, the Ld.DR argued in favour of the revisionary order of Ld.PCIT u/s 263. It was vehemently argued that the Ld.AO has not made requisite enquiries into the issue. 6.0 We have heard the rival submissions in the light of material available on records. Before proceeding further, we deem it appropriate to briefly examine the statutory provisions u/s 263, 36(1)(vii) and section 37 which are seminal to the controversy. “……..Section - 263, Income-tax Act, 1961 - FA, 2025 E.-Revision by the 28[Principal Commissioner or] Commissioner* Revision of orders prejudicial to revenue. 29 263. (1) The 28[ 30[Principal Chief Commissioner or Chief Commissioner or Principal Commissioner] or] Commissioner may call for and examine 31 the record 32 of any proceeding under this Act, and if he considers that any order 32 passed therein by the 33[Assessing] Officer 34[or the Transfer Pricing Officer, as the case may be,] is erroneous 32 in so far as 32 it is 32prejudicial to the interests of the revenue 32, 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, 32pass such order thereon as the circumstances of the case justify, 35[including,- (i) an order enhancing or modifying the assessment or cancelling the assessment 32 and directing a fresh assessment; or (ii) an order modifying the order under section 92CA; or (iii) an order cancelling the order under section 92CA and directing a fresh