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Income Tax Appellate Tribunal, “B” BENCH: KOLKATA
Before: Hon’ble Shri P. M. Jagtap & Hon’ble Shri A. T. Varkey, JM]
1 ITA No.365/Kol/2020 Shree Kumar Bangur, AY 2015-16
आयकर अपीलीय अधीकरण, �यायपीठ –“B” कोलकाता, IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH: KOLKATA [Before Hon’ble Shri P. M. Jagtap, Vice President and Hon’ble Shri A. T. Varkey, JM] I.T.A. No. 365/Kol/2020 Assessment Year: 2015-16 Shree Kumar Bangur Vs. Assistant Commissioner of Income- (PAN: AHHPB5719K) tax Circle-29, Kolkata. Appellant Respondent
Date of Hearing (Virtual) 15.07.2021 Date of Pronouncement 22.07.2021 For the Appellant Shri P. R. Kothari, FCA For the Respondent Shri Devi Saran Singh, CIT, DR
ORDER Per Shri A. T. Varkey, JM: This is an appeal preferred by the assessee against the order of the Ld. Pr. CIT-10, Kolkata dated 02.03.2020 for AY 2015-16 passed u/s. 263 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”).
The grounds of appeal of the assessee read as under:
“1. Against invocation of section 263: For that on the facts and circumstances of the case and in law, Ld. Principal Commissioner of Income tax (Pr. CIT) erred in invoking and passing impugned order under section 263 of the Income tax Act, 1961 in respect of the order of ld. Assessing Officer (A/O) passed u/s 143(3) of said Act which was not erroneous in so far as it was prejudicial to the interests of revenue in terms of said section 263 on all the three issues raised by Ld. Pr. CIT. 2. Against direction for de novo assessment regarding reduction claimed for maintenance compensation amounting Rs.407404/- from certain rental income: For that on the facts and circumstances of the case and in law, ld. Pr. CIT erred in directing Ld. A/O for de novo assessment regarding reduction claimed for maintenance compensation amounting Rs.407404/- from rental income from house property at Ashoka Towers, Mumbai while computing 'annual value' u/s 23 of Income tax Act, 1961. 3. Against direction for de novo assessment on the issue of notional rental income from undivided share of an unrented ancestral building:
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For that on the facts and circumstances of the case and in law, Ld. Pr. CIT erred in directing Ld. A/O for de novo assessment on the issue of notional rental income from undivided share of an unrented ancestral building at Didwana (Raj.) while computing 'annual value' u/s 23 of Income tax Act, 1961. 4. Against direction for de novo assessment on the issue of interest u/s 234B : For that on the facts and circumstances of the case and in law, Ld. Pr. CIT erred in directing Ld. A/O for de novo assessment on the issue of levying interest u/s 234B of Income tax Act though appellant was a senior citizen not having any income under the head 'Profit and Gains from business or profession'.” 3. First and foremost we take up the issue of jurisdiction of Ld. Pr. CIT to invoke section 263 of the Act without satisfying condition precedent as prescribed in section 263 of the Act i.e. without finding on the issues pointed out by the Ld. PCIT that AO’s order on those issues are erroneous as well as prejudicial to the interest of the revenue. For adjudicating this legal issue, we need to look into the show cause notice (SCN) given by the Ld. Pr. CIT which is placed at page 7 of the paper book, relevant portion of which reads as under:
Assailing the action of the Ld. Pr. CIT the Ld. AR Shri P. R. Kothari, FCA submitted that the issue/faults pointed out by the Ld. Pr. CIT are (a) the AO erred in allowing
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deduction claimed for maintenance/compensation amounting to Rs.4,07,404/- related to rental income when only standard deduction of 30% is allowable which amounts to double deduction (b) on the issue of notional rental income from undivided share of an unrented ancestral building and (c) on the issue of interest u/s. 234B of the Act. First of all, the Ld. A.R. pointed out that Ld. PCIT is wrong to observe in the SCN that assessee’s case was selected for ‘Limited Scrutiny’ whereas it was selected for ‘Complete Scrutiny’. Secondly according to the Ld. AR, the AO had made enquiry into the issue in respect of the deduction u/s. 24 of the Act of house property amounting to Rs.4,07,404/- by issuing notice u/s.142(1) of the Act dated 09.02.2017 which is placed at pages 14 and 15 of the paper book wherein the AO had asked as item no. 1 “computation of total income along with Hard copy of return”. Pursuant to the said direction from the AO, the assessee had filed the computation of total income along with the hard copy of income tax return which is found placed from pages 16 to 18 of the paper book wherein the assessee had filed the computation of total income before the AO and on a perusal of the same, it is evident that the income from house property is clearly given and the assessee’s claim of 30% standard deduction is evident from it (refer page 17 of paper book). Therefore, he contended that this issue has been taken note by the AO which fact is clear from the assessment order’s page one (1) itself wherein the AO has acknowledged that the Ld. AR of the assessee had appeared on different dates before him and filed different documents/evidence to explain the return. Moreover, according to the Ld. AR, this issue is permeating from earlier years and has come up before this Tribunal in assessee’s own case for AY 2004-05 in ITA No. 1187/Kol/2007 order dated 30.04.2008 wherein according to him, the Tribunal has allowed the issue in favour of the assessee and drew our attention to page no. 64 of the paper book wherein the Tribunal has dealt with the issue as under:
“We have carefully considered the issue in view of the material placed on record, the case laws cited by the learned counsel for the assessee and rival submissions. It is seen from the relevant pages of the paper book filed on record that the assessee had been assessed u/s. 143(3) for the assessment years 1992-93, 1994-95 and 2002-03. All other returns for various assessment years were accepted u/s. 143(1) as has been admitted by the assessee in the written submissions dated 12.6.07 filed on record. The learned DR could not challenge the submission of the assessee that in earlier years the deduction as per claim of the assessee for amenities provided to the tenants have been reduced from the gross rent while calculating the income of the assessee. The AO could not also bring any fresh material on record to justify the change in view on this issue. It could not also be challenged by the revenue that similar deductions have
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been allowed in the cases of other co-owners. Therefore, respectfully following the decisions cited by the learned counsel for the assessee as discussed above, we allow the claim of the assessee. The AO is directed to determine the income from house property after reducing Rs.1,55,159 from the assessee’s share of gross rent of the property. The alternative submission of the assessee to allow deduction u/s 24(a) of the Act @ 30% of Rs 1,55,159 is rejected accordingly” 5. The Ld. AR also pointed out that in the assessee’s own case for AY 1992-93, 1994- 95 and 2012-13, the department has been allowing this claim in scrutiny proceeding u/s 143(3) of the Act; and in the all other assessment years no disallowance was made though it was intimation under section 143(1) of the Act. Taking note of these facts, the AO had allowed the claim of the assessee and, therefore, there is no error on the part of the AO and it cannot be said that there was no enquiry and he referred to Hon’ble Calcutta High Court decision in the case of CIT Vs. J. L. Morrison India Ltd. 366 ITR 593 wherein the Hon’ble Calcutta High Court has held at Para 88 & 89 as under:
“88. The Assessing Officer was required to examine the return filed by the assessee in order to ascertain his income and to levy appropriate tax on that basis. When the Assessing Officer was satisfied that the return, filed by the assessee, was in accordance with law, he was under no obligation to justify as to why was he satisfied. On the top of that the Assessing by his order dated 28th March, 2008 did not adversely affect any right of the assessee nor was any civil right of the assessee prejudiced. He was as such under no obligation in law to give reasons. 89. The fact, that all requisite papers were summoned and thereafter the matter was heard from time to time coupled with the fact that the view taken by him is not shown by the revenue to be erroneous and was also considered both by the Tribunal as also by us to be a possible view, strengthens the presumption under clause (e) of section 114 of the Evidence Act. A prima facie evidence, on the basis of the aforesaid presumption, is thus converted into a conclusive proof of the fact the order was passed by the assessing officer after due application of mind.” 6. He also drew our attention to page 26 para 70 of the above order, wherein the Hon’ble High court taking note of the decision of the Apex court in the case of Malabar Industrial Co. Ltd. Vs. CIT 243 ITR 83 (SC) held that if the AO has taken a possible view, it cannot be said that the view taken by him is erroneous nor the order of the Assessing officer in that case can be set aside in revision. Thereafter the Hon’ble High court observed that “it has to be shown unmistakably that the order of the Assessing Officer is unsustainable. Anything short of that would not clothe the CIT with jurisdiction to exercise power under section 263 of the Act.” Therefore, he contended that the order of the AO could not have been disturbed by the Ld. Pr. CIT by invoking jurisdiction u/s. 263 of the Act.
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In respect of the other faults pointed out by the Ld. Pr. CIT, the Ld. AR of the assessee stated that the notional rental income from undivided share of the ancestral property which has not been given on rent cannot be brought to tax notionally. According to him, this ancestral property was still in the name of the ancestors which has been passed over from the last four generations and the share of assessee is still undetermined. And in the earlier years no such notional tax was levied, so since the facts are the same, and there is no change in law, the AO taking note of the rule of consistency did not make any addition on this issue. So, the AO’s action cannot be held to be erroneous.
Coming to the next fault i.e. non-computation of interest u/s. 234B of the Act, the Ld. AR submitted that the assessee is a senior citizen and, therefore, he need not have to deposit advance tax since he is exempted u/s. 207(2) of the Act and since the assessee is not getting any profit and gains from any business or profession. So, he is exempt from giving any advance tax. So, according to Ld. A.R., therefore, the question of interest u/s. 234B of the Act does not arise and, therefore, the action of the AO in not levying interest u/s 234 of the Act cannot be held to be erroneous as well as prejudicial to the interest of the revenue and, therefore, according to the Ld. AR, the action of the Ld. Pr. CIT to invoke revisional jurisdiction u/s. 263 of the Act is without jurisdiction and is bad in law, therefore, need to be quashed.
Per contra, the Ld. CITDR Devi Saran Singh vehemently opposed the submission of Ld. A.R. and supporting the decision of the Ld. Pr. CIT submitted that no enquiry whatsoever has been conducted by the AO in respect of the three issues raised by the Ld. Pr. CIT, therefore, relying upon the deeming provisions declared by the Statute under Explanation (2)(a) and (b) of section 263 of the Act submitted that the AO could not have allowed the claim of standard deduction without conducting enquiry and verification. And the AO could not have allowed the deduction without enquiry. According to him, non- enquiry triggers the deeming provision declared therein which makes the order of AO as per law erroneous as well as prejudicial to the Revenue. In such a case, the Ld. PCIT is bound by law to treat the assessment order framed by AO on issues which has not been enquired by the AO as erroneous as well as prejudicial to the Revenue. So the condition precedent
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required to assume jurisdiction to exercise & interdict in the action of AO u/s 263 of the Act stands satisfied on all the faults pointed out by the Ld. Pr. CIT, since the action of the AO needs to be deemed to be erroneous as well as prejudicial to the interest of the revenue because he has not bothered to enquire about these faults and, therefore, he does not want us to interfere in the order of the Ld. Pr. CIT.
We have heard rival submissions and gone through the facts and circumstances of the case. Before we advert to the facts and law involved in this lis before us, let us revise the law governing the issue before us. The assessee has challenged in the first place, the very usurpation of jurisdiction by ld. Principal CIT to invoke his revisional powers enjoyed u/s 263 of the Act. Therefore, first we have to see whether the requisite jurisdiction necessary to assume revisional jurisdiction is existing in this case before the Pr. CIT rightfully exercises his revisional power. For that, we have to examine as to whether in the first place the order of the Assessing Officer found fault by the Principal CIT is erroneous as well as prejudicial to the interest of the Revenue. For that, let us take the guidance of judicial precedence laid down by the Hon’ble Apex Court in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the CIT. The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer’s order was passed on incorrect assumption of fact; or (ii) incorrect application of law; or (iii)Assessing Officer’s order is in violation of the principle of natural justice; or (iv) if the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated the issue before him;[ because AO has to discharge dual role of an investigator as well as that of an adjudicator ]then in aforesaid any event the order passed by the Assessing Officer can be termed as erroneous order. Coming next to the second limb, which is required to be examined as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon’ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. “prejudicial to the interest of the revenue’’ has to be read in conjunction with an erroneous
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order passed by the Assessing Officer. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue “unless the view taken by the Assessing Officer is unsustainable in law”.
When we examine this case on the judicial precedent cited (supra) we note that the Ld. Pr. CIT has invoked his jurisdiction since the AO has not enquired into the three faults pointed out by him in his show cause notice. Even though the Ld. AR tried to convince us that by filing the computation of income pursuant to his notice u/s 142(1) of the Act wherein the income from house property is evident at page 17 and claim of standard deduction is also visible, so it can be assumed that the AO has enquired into this issue of allowability of Rs.4,07,404/- (Maintenance Compensation) along with standard deduction of 30% u/s. 24 of the Act. However we cannot accept the contention of the Ld. AR that merely by filing of computation of income, the claim of standard deduction in respect of house property has been enquired into by the AO because we note that there is no query in this respect or even in respect of the house property has been sought by the AO in the notice u/s 142(1) of the Act and moreover, the AO has asked the assessee to file only copy of the computation of income which assessee did and from filing of the same we cannot say that AO had enquired into the claim of deduction. Even though he brought to our notice that this issue is permeating from earlier years and the Tribunal has given relief to the assessee still the Ld. CITDR contended that since there was no enquiry what so ever from AO on the issues raised by Ld. PCIT, the Explanation (2) of section 263 of the Act (relevant portion only) is attracted, so we reproduce the same which reads as under:
“Revision of orders prejudicial to revenue. 263. (1) The Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far 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,
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including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation 2.—For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal [Chief Commissioner or Chief Commissioner or Principal] Commissioner or Commissioner,— (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim;”
From a perusal of the aforesaid Explanation (2) clause (a) and (b) of section 263 of the Act it can be seen that if AO passes an order without making enquiries or verification or the AO has passed the order allowing any relief without inquiring into the claim, then it has been declared by the statute that such an order passed by the AO shall be deemed to be erroneous in so far as it is prejudicial to the interest of the revenue. In the light of the aforesaid dictum of law, declaring an act of an AO to be deemed it to be erroneous as well as prejudicial to the interest of the revenue in case, if AO does not enquire, the action of the Ld. Pr. CIT cannot be found to be erroneous. Be that as it may be, even if we don’t look at the deeming provision of law, still it has to be kept in mind that AO while making an assessment of the income of an assessee has the dual role of an investigator as well as that of an adjudicator. So, if he fails to discharge any of this duty then it vitiates the assessment order. So, if an AO fails to investigate on an issue then it is a failure/omission on the part of his as an investigator, consequently his omission to enquire on an issue regarding assessment of assessee is erroneous as well as prejudicial to the Revenue. Here in this case, if the assessee had on query of AO (which fact could have been discerned from a perusal of the notice/ order sheet entries of AO) and pursuant to the same, if the assessee had replied by pointing out to AO that the issues are permeating from earlier years and the issue has been settled by higher Appellate Forums and it has been accepted by the department, then there being no change in facts or law, then in that scenario the issues could not have been racked up again by the Ld. PCIT u/s 263 of the Act, because the AO has applied his mind on the issue and his decision is based on the principle of consistency, then, the AO’s action cannot be then branded as erroneous. It has to be kept in mind that the rule of consistency is insisted to be followed because there should be finality in law on issues which keeps recurring or there will be no end to litigation. However, in this case the AO has not made any enquiry on the issues raised by the Ld. PCIT, so he failed to discharge his duty as an
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investigator, so the order of AO is erroneous. The decision cited by the Ld. A.R. of the Hon’ble Jurisdictional High Court does not come to the rescue of the assessee because in that case, at Para 89(supra) the admitted fact was that AO had summoned all requisite papers and heard the assessee several times, which has been taken note by the Hon’ble High Court. Moreover at para 76 of this order, the Hon’ble High Court has taken note of the contents of the AO’s notice u/s 142(1) of the Act and the reply of the assessee on the issue raised by CIT u/s 263 of the Act, therefore the Hon’ble High Court upheld the action of Tribunal quashing the CIT’s order passed u/s 263 of the Act. That is not the case of this assessee before us. It is a case of no-enquiry at all on these issues and it is not the case of the assessee that AO was made aware that issues have been settled by the Tribunal and accepted by the department. In the light of the above facts since the AO has not made any enquiry into the faults pointed out by the Ld. Pr. CIT, the order passed by the AO has to be treated as erroneous as well as prejudicial to the interest of the revenue. Therefore, the Ld. Pr. CIT gets jurisdiction to invoke revisional jurisdiction u/s. 263 of the Act and thus the legal issue raised by the assessee is dismissed. The other issues raised in the other grounds need factual enquiry and verification, so we are not examining the merits of those grounds. So, those grounds of the assessee preferred against the merits of all the issues raised by the Ld. PCIT stand dismissed. Therefore, we do not find any infirmity in the order passed by the Ld. Pr. CIT and the impugned order of the Ld. Pr. CIT is upheld. However, before parting we direct the AO that while he gives effect to the Ld. PCIT’s order, he has to take into consideration the rule of consistency raised by the assessee and decide the issue in accordance to law. Needless to say that the contentions of the assessee on each issues should be considered by the AO while deciding all issues and the issues settled by this Tribunal cannot be disturbed without there being any change in fact or law and in accordance to principles of consistency and in accordance to law. The assessee is at liberty to file written submission and documents before the AO to substantiate its claim/stand on the issues raised by the Ld. PCIT and the AO is directed to pass a speaking order in accordance to law. The appeal of assessee is dismissed.
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In the result, the appeal of the assessee is dismissed as indicated above.
Order is pronounced in the open court on 22nd July, 2021.
Sd/- (P. M. Jagtap) Sd/- (A. T. Varkey) Vice President Judicial Member Dated: 22nd July, 2021 Jd.(Sr.P.S.)
Copy of the order forwarded to: 1. Appellant – Shri Shree Kumr Bangur, 16, Alipore Road, Kolkata-700 027. 2 Respondent –. ACIT, Circle-29, Kolkata. 3. Pr.CIT-10, Kolkata
DR, Kolkata Benches, Kolkata (sent through e-mail)
/True Copy, By order, Senior Pvt. Secretary/DDO