ASHOKA ROOF GARDNES P.LTD,MUMBAI vs. CIT 2, MUMBAI

Brief facts are that, the assessee company is engaged in the business of providing sites for advertisements and all related services to the Cellular companies. The assessee company owns premises at Ashoka Shopping Centre, Mumbai. It has filed its 2 अशोका �फ गाड�स �ाइवेट �ल�मटेड Ashoka Roof Gardens P Ltd. 25.09.2008 declaring a total income of Rs.2,76,450/-. The said return was duly processed under section 143(1) on 20.07.2009. Thereafter, assessee’s case was selected for scrutiny wherein, the assessee was required to justify the payment received from various Cellular Companies for installing their instruments on the terrace owned by the assessee. The AO specifically required the assessee to explain as to why the income earned should not be treated as ‘income from house property’ instead of ‘business income’. In response, the assessee submitted detailed explanation which has been incorporated by the AO at page 2 of his order. The AO after examining the details and submissions of the assessee along with agreements entered by the assessee with the Cellular Companies accepted the nature of compensation to be assessed under the head “business income” and accordingly, the returned income was accepted. The relevant explanation of the assessee as well as AO’s finding in this regard in the assessment order is reproduced hereunder:- “In response to the same, the assessee representative vide letter dated 23.11.2010 has submitted that:- “The above mentioned assessee company is in the business of providing Site and related Service to Cellular companies. The Company is in the business since 2005 and regularly assessed. The income received from Cellular Companies is accounted as Business Income. The payment received from 3 Cellular Companies for installing their Instruments in the Terrace Premises should not be treated as Income from House Property for the following reasons: 1. The Assessee Company’s main business is Providing Site and all related Service to the Cellular Companies, with this object, the Company had purchased terrace Premises.

2. Terrace Premises are open and do not have any coverings. The Assessee Company’s major source of Income is Payments received from this Cellular Companies.

After completion of the assessment specifically on the issue of assessability of income, whether to be taxed as business income or income from house property in the aforesaid manner, the Ld. CIT issued a show cause notice under section 263 for revision of the assessment order. The issue raised in the said notice reads as under:- “In the P&L account, you have shown receipt of compensation at Rs.18,30,000/- and interest on Fixed Deposit at Rs.4,14,207/-. It is seen that you have shown compensation received as business income and claimed huge business expenses. The compensation has been received by you for letting out the terrace space and should be assessed under the head ‘Income from House Property’ as against ‘Business Income’ shown by you. It is also seen that you have not carried on any business activity during the previous year or 4 अशोका �फ गाड�स �ाइवेट �ल�मटेड Ashoka Roof Gardens P Ltd. preceding previous year and hence no business expenses are allowable except statutory expenses allowable in respect of income assessed under the head ‘Income form House Property’. Accordingly the total income should have been assessed as under: Rental Income Rs.18,30,001/- Less: Deduction u/s 24 Rs. 5,49,000/- Income from House Property Rs.12,81,001/- Income from other sources Interest on Fixed Deposit Rs. 4,14,207/- Total Income Rs.16,95,208/- Therefore, the total income was required to be assessed at Rs.16,95,208/- instead of Rs.2,76,450/- as determined in the assessment order. Thus there is under assessment of income to the tune of Rs.14,18,758/-.

In response, the assessee submitted that, it has received sum of Rs.18,30,000/- from Cellular Companies like, (i) Hutchison Essar; (ii) Bharti Tele Ventures Ltd.; and (iii)Mahanagar Telephone Nigam Ltd.(MTNL), in the form of ‘service charges’ for the facilities provided to them. It was submitted that these amounts were received in the regular course of business activity and, therefore, the income as well as the expenses claimed directly related to the earning of such income only. The AO in the course of the assessment proceedings had specifically enquired upon the nature of income and also about the head of the income in which it was liable to be assessed. After calling for the details and the assessee’s reply, the Ld. AO has taken a possible view and categorically accepted the amount received from the Cellular Companies to be 5 अशोका �फ गाड�स �ाइवेट �ल�मटेड Ashoka Roof Gardens P Ltd. Income”. In support, various case laws was also relied upon by the assessee that, if a possible views has been taken by the AO, then CIT cannot exercise revisionary jurisdiction to cancel or set-aside the assessment on a different view. However, the Ld. CIT held that, though the AO had made enquiries, however, he has not applied his mind to check, whether the income received from respective Cellular Companies was assessable under the head “income from house property” or under the head ‘business income or profession’. After referring to the following decisions: (i) Home Builders vs JCIT -131 ITD 91 (Mum); (ii) Matru Ashish Co-op Housing Soc. Ltd. vs ITO -144 TTJ 446(Mum); and ; (iii) Sohan Singh vs ITO -16 ITD 272 (Del). He held that there is no application of mind by the AO on this issue and accordingly, he directed the AO to complete the assessment by assessing the income as income from house property.

Before us, Ld. Counsel submitted that AO had issued a show cause notice specifically to examine this issue of income received from cellular companies, copy of which is placed in the paper book at page 18. The assessee’s reply in response has also been placed at page 19 & 20, the relevant extract of which have been incorporated by the AO also in his order. Besides this, he has again enquired upon the details of the compensation received from the three Cellular Companies along with the agreements entered by the assessee with them. That apart, he also scrutinized upon the “objects” as given in the MOU of the assessee company while examining the activity of the assessee vis-a-vis the payment received from the three companies. Thus, when specific enquiry has been made on the same issue which is a subject matter of revision and assessee has given specific reply then, Ld. CIT cannot acquire a jurisdiction under section 263 to cancel or revise the assessment order. In support he relied upon the decision of Hon’ble Supreme Court in the case of Malabar Industrial 6 अशोका �फ गाड�स �ाइवेट �ल�मटेड Ashoka Roof Gardens P Ltd. Development Corp., reported in 243 ITR 82 and in case of CIT v Max India Ltd., reported in 295 ITR 282.

On the other hand, Ld. DR strongly relied upon the order of the CIT and submitted that from the nature of payment and the fact that assessee has merely let out the terrace for installation, the income earned should have been treated as assessable under the head “Income from house property” and not as business income.

We have heard the rival contentions and considered the material placed on record. From the perusal of the impugned order we find that, nowhere the Ld. CIT has pointed out as to how the order of the AO is either erroneous in law or on facts and has also not brought on record what prejudice is cause to the interest of the revenue. The Ld. CIT while exercising revisionary jurisdiction under section 263 has to give a very definite finding about the assessment order being erroneous in so far as it is prejudicial to the interest of the revenue. Once he has accepted that the AO has carried out the enquiry and taken a definite stand, then the same cannot be held to be erroneous either on the ground that there is an inadequate enquiry or view taken is not correct, then, unless it is shown that the view taken by the AO was erroneous in law or on facts, he cannot exercise revisionary jurisdiction u/s 263. Here in this case there was a proper examination and enquiry by the AO precisely on the same issue of assessability of income received from cellular companies which have been raked up by the Ld. CIT in his notice. Once the AO has specifically raised the query and assessee in response has furnished the reply along with details and evidences which has been examined by the AO and thereafter has accepted the claim of the assessee and held that the income is assessable under the head “income from house property”, then the Ld. CIT cannot hold that the view taken by the AO is not correct and income should have been assessed under the head business 7 अशोका �फ गाड�स �ाइवेट �ल�मटेड Ashoka Roof Gardens P Ltd. income, that is, some other possible view should be taken. This precisely has been ruled against the Department by the Hon’ble Supreme Court in the case of Malabar Industrial Dev. (supra). The relevant observation and the finding of the Hon’ble Apex Court is as under: “The phrase ‘prejudicial to the interest of the revenue’ has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the revenue”. Further, this principle has been reiterated by Hon’ble Supreme Court in the case of CIT v Max India Ltd. (supra) also. In this case also, the Hon’ble Apex Court has held that where the AO has adopted one of the courses permissible in law and where two views are possible and the AO has taken one of the view with which Commissioner does not agree, it cannot be treated as erroneous order prejudicial to the interest of the revenue, unless the view taken by the AO is unsustainable in law. Here in this case, it cannot be held that view taken by the AO is not a possible view or unsustainable in law. Thus, in our considered opinion, the impugned order u/s 263 cancelling/revising the assessment order 8 अशोका �फ गाड�स �ाइवेट �ल�मटेड Ashoka Roof Gardens P Ltd. 26.09.2010 cannot be sustained and same is accordingly quashed. Resultantly, grounds raised