M/s. G Crop Private Limited, Bangalore V. Principal Commissioner of Income Tax, Bangalore

ITA 1017/BANG/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6478 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 16-09-2020
• Assessment Year: 2014-2015
• Appeal Filed On: 10-05-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MUZAFFAR HUSSAIN
• Assessee Lawyers: J K KAMDAR
• Keywords: Gift; Diversion of income; Assessment record; Reason to believe; Speculative transactions; Set aside
• Section: 143(3); 142(1); 14A; 13; 147; 6; 263

Judgement Text

ITA NO.1017 /BANG/2019 M/S. G. CORP PVT. LTD., BANGALORE IN THE INCOME TAX APPELLATE TRIBUNAL BBENCH: BANGALORE BEFORE SHRI B. R. BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO.1017/BANG/2019 ASSESSMENTYEAR: 2014-15 M/S. G. CORP PVT. LTD. NO.21/19, CRAIG PARK LAYOUT OFF M.G. ROAD BENGALURU PAN NO : AABCG4084A VS. PRINCIPAL COMMISSIONER OF INCOME-TAX BENGALURU APPELLANT RESPONDENT APPELLANT BY : SHRI J.K. KAMDAR, A.R. RESPONDENT BY : SHRI MUZAFFAR HUSSAIN, D.R. DATE OF H EARING : 16.09.2020 DATE OF PRONOUNCEMENT : 18.09.2020 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE REVISION ORDER DATED 28.3.2019 PASSED BY LD. PRINCIPAL CIT-3 , BENGALURU U/S 263 OF THE ACT FOR ASSESSMENT YEAR 2014-15. 2. THE FACTS RELATING TO THE ISSUE ARE STATED IN BRIEF . THE ASSESSMENT IN THE HANDS OF THE ASSESSEE FOR THE YEA R UNDER CONSIDERATION WAS COMPLETED BY THE A.O. ON 6.12.201 6 U/S 143(3) OF THE INCOME-TAX ACT,1961 ['THE ACT' FOR SHORT]. THE LD. PRINCIPAL CIT, BY THE EXAMINATION OF THE ASSESSMENT RECORD NO TICED THAT THE A.O DID NOT EXAMINE FOLLOWING THREE ISSUES: ITA NO.1017 /BANG/2019 M/S. G. CORP PVT. LTD., BANGALORE PAGE 2 OF 13 A) IT IS OBSERVED THAT THE RENTALS IN RELATION TO 1 MG MALL ARE COLLECTED BY M/S LIDO MALLS MANAGEMENT PVT. LTD.,(L IDO). OF THESE, 2% IS RETAINED BY LIDO AND BALANCE 98% IS DI STRIBUTED AMONGST THE ASSESSEE COMPANY AND OTHER CO-OWNERS. T HE ASSESSEE HAS REFLECTED ONLY 98% OF THE RECEIPTS FOR THE PURP OSE OF COMPUTING HOUSE PROPERTY INCOME, ALTHOUGH ENTIRE RECEIPTS OF 100% OF ITS SHARE SHOULD HAVE BEEN TAKEN INTO ACCOUNT FOR ARRIV ING AT THE ANNUAL VALUE OF THE PROPERTY. B) THE ASSESSEE HAS GIVEN THE WORK OF MAINTENANCE RELA TING TO THE BUILDING GIVEN ON LEASE BY IT TO LIDO. AS PER THE A GREEMENT WITH THE TENANTS THEY ARE REQUIRED TO PAY THE COMMON AREA MA INTENANCE CHARGES DIRECTLY TO LIDO AND THIS MAINTENANCE CHARG E IS NOT BEING REFLECTED BY THE ASSESSEE AS PART OF ITS ANNUAL VAL UE OF THE PROPERTY. IN THIS REGARD, IT IS IMPORTANT TO LOOK INTO THE DE CISION OF HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF SUNIL KUMAR GUPTA VS. ACIT (2016) .73 TAXMANN.COM 374 (PUNJAB & HARYANA HIGH COURT) WHERE IT HAS BEEN HELD THAT MAINTENANCE CHAR GES WOULD FORM PART OF THE ANNUAL LET OUT VALUE OF THE PROPER TY. C) THE ASSESSEE IS CLAIMING AN EXPENDITURE OF RS.3,44, 17,926/- AS INTEREST AGAINST THE HOUSE PROPERTY INCOME. HOWEVER , IT IS OBSERVED THAT IN ME INITIAL PERIOD A LOAN WAS TAKEN BY THE A SSESSEE FOR ITS CONSTRUCTION ACTIVITIES. AFTER THE COMPLETION OF PR OJECT, THE FINANCE LOAN WAS CONVERTED BY THE BANK TO LEASE RENTAL DISC OUNTING FACILITIES SO THAT RENTAL COLLECTION COULD BE UTILIZED TO REPA Y THE LOAN FACILITIES. THE AO HAS NOT EXAMINED THE FACT WHETHER THE PAYMEN T OF RS.3,44,17,926/- AND CLAIMED AS EXEMPTION U/S 24 IN CLUDES THE PRINCIPAL AS WELL AS INTEREST.) 3. DURING THE COURSE OF REVISION PROCEEDINGS, THE LD. PRINCIPAL CIT ACCEPTED THE EXPLANATIONS FURNISHED BY THE ASSE SSEE WITH REGARD TO THE THIRD ISSUE RELATING TO INTEREST EXPE NDITURE. WITH REGARD TO THE FIRST TWO ISSUES, THE LD. CIT TOOK TH E VIEW THAT THE A.O. HAS NOT VERIFIED THE DETAILS OF HOUSE PROPERTY INCOME OFFERED BY THE ASSESSEE RESULTING IN ESCAPEMENT OF INCOME. ACCORDINGLY, HE SET ASIDE THE ASSESSMENT ORDER AND DIRECTED THE A.O. TO RE-DO THE ASSESSMENT BRINGING TO TAX THE ANNUAL VALUE OF 1MG MALL. ITA NO.1017 /BANG/2019 M/S. G. CORP PVT. LTD., BANGALORE PAGE 3 OF 13 4. THE FACTS RELATING TO THE ABOVE SAID ISSUES ARE STA TED IN BRIEF. THE ASSESSEE, ALONG WITH TWO OTHER CO-OWNERS, OWNS A SHOPPING MALL NAMED 1MG LOCATED AT M.G. ROAD, BENGALURU. THE ASSESSEE HOLD 50% OF THE SHARE IN THE ABOVE SAID MALL. UP T O DECEMBER, 2013, THE ENTIRE MALL WAS LET OUT TO A PARTY NAMED M/S. AGRE PROPERTIES & SERVICES. AFTER THE EXPIRY OF THE LIC ENSE PERIOD, THE MALL OWNERS TOOK UP THE MANAGEMENT OF THE MALL AN D ACCORDINGLY ENTERED INTO LICENSE AGREEMENT WITH ALL LICENSEES. THEY ALSO APPOINTED A MALL MANAGER NAMED M/S. LIDO MALLS MANA GEMENT PVT. LTD (HEREINAFTER CALLED AS LIDO) TO MAINTAIN AND MANAGE THE MALL. THE MALL MANAGER WAS GIVEN CHARGE OF COLLECT ING LICENSE FEES/RENT, MAINTENANCE CHARGES/ COMMON AREA MAINTEN ANCE CHARGES, MANAGING AND OPERATING THE MALL, COLLECT N ON-RENTAL RECEIVABLES INCLUDING UTILITY CHARGES, GOVERNMENTAL /STATUTORY LEVY AND TAXES. AS PER THE AGREEMENT, M/S. LIDO WOULD R ETAIN 2% OF THE LICENSE FEES/RENT AS ITS FEES FOR MANAGING/OPERATI NG AND MAINTAINING THE MALL. SIMILARLY, M/S LIDO WOULD R ETAIN 75% OF THE REVENUES GENERATED FROM OTHER INCOME INCLUDING ADVERTISEMENTS, PARKING, KIOSKS, MALL PROMOTION, ET C. 5. THE MALL OWNERS OFFERED THE INCOME THAT WAS GIVEN B Y M/S LIDO AFTER DEDUCTING ITS FEES. ACCORDINGLY, THE AS SESSEE OFFERED 50% OF THE 98% OF THE LICENSE FEES/RENT AS ITS INCO ME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. SIMILARLY THE A SSESSEE COMPANY OFFERED 50% OF 25% OF OTHER INCOME. 6. THE CASE OF THE LD. PRINCIPAL CIT IS THAT THE ENTIR E LICENSE FEE/RENT CONSTITUTES ANNUAL LETTING VALUE AS PER PROVISIONS APPLICABLE TO INCOME FROM HOUSE PROPERTY AND HENCE, THE ENTIRE AMOUNT OF LICENSE FEE/RENT, I.E 100% SHOULD HAVE BE EN TAKEN AS THE ANNUAL LETTING VALUE AND ACCORDINGLY, THE ASSES SEE SHOULD ITA NO.1017 /BANG/2019 M/S. G. CORP PVT. LTD., BANGALORE PAGE 4 OF 13 HAVE OFFERED 50% OF LICENCE FEE/RENT RECEIPTS, INST EAD OF 49%, AS ANNUAL LETTING VALUE. SIMILARLY, THE LD. PRINCIPAL CIT TOOK THE VIEW THAT REVENUE GENERATED BY WAY OF OTHER INCOME INCLU DING ADVERTISEMENTS, PARKING, KIOSK, MALL PROMOTIONS, SH OULD HAVE FORMED PART OF ANNUAL VALUE OF THE PROPERTY AND 100 % OF REVENUE SHOULD HAVE BEEN OFFERED BY THE OWNERS AS INCOME FR OM HOUSE PROPERTY. IT MAY BE RECOLLECTED THAT THE MALL OWNE RS WERE GETTING ONLY 25% OF THE OTHER INCOME WHILE 75% WAS RETAINED BY M/S. LIDO. 7. BEFORE LD. PRINCIPAL CIT, THE ASSESSEE RAISED VARIO US CONTENTIONS, BUT ALL OF THEM WERE REJECTED BY LD. P RINCIPAL CIT. SINCE THE A.O. DID NOT EXAMINE THESE ISSUES, THE PR INCIPAL CIT TOOK THE VIEW THAT THE ORDER IS ERRONEOUS AND PREJUDICIA L TO THE INTEREST OF THE REVENUE. ACCORDINGLY, HE SET ASIDE THE ASSE SSMENT ORDER AND DIRECTED THE A.O. TO RE-DO THE ASSESSMENT BY BR INGING TO TAX THE ANNUAL VALUE OF 1 MG MALL AS HOUSE PROPERTY I NCOME AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE. AGGRIEVED BY THE ORDER SO PASSED BY LD. PRINCIPAL CIT, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 8. THE LD. A.R. SUBMITTED THAT THE ASSESSEE HAS FURNIS HED ALL THE RELEVANT DETAILS RELATING TO HOUSE PROPERTY INCOME TO THE A.O. IN THIS REGARD, HE INVITED OUR ATTENTION TO THE VARIOU S DETAILS FURNISHED BEFORE THE A.O., WHICH ARE PLACED AT PAGE S 71, 310, 325 & 371 OF THE PAPER BOOK. HE FURTHER SUBMITTED THAT THE A.O. HAS COMPLETED THE ASSESSMENT BY DULY CONSIDERING THE DE TAILS SO FURNISHED BY THE ASSESSEE. THE LD. A.R. SUBMITTED THAT THE A.O. HAS EXAMINED THE DETAILS AND HAS TAKEN A PLAUSIBLE VIEW AND HENCE THE IMPUGNED REVISION ORDER IS LIABLE TO BE Q UASHED. HE ITA NO.1017 /BANG/2019 M/S. G. CORP PVT. LTD., BANGALORE PAGE 5 OF 13 SUBMITTED THAT THE LACK OF ENQUIRY OR INADEQUATE EN QUIRY ON THE PART OF THE A.O. CANNOT BE A GROUND FOR REVISING TH E ASSESSMENT ORDER. IN SUPPORT OF THIS PROPOSITION, HE PLACED H IS RELIANCE ON THE DECISION RENDERED BY HONBLE DELHI HIGH COURT IN TH E CASE OF CIT VS. SUNBEAM AUTO LIMITED 332 ITR 167. HE ALSO PLAC ED HIS RELIANCE ON THE DECISION RENDERED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. NIRAV MODI (390 ITR 292) WHE REIN IT WAS HELD THAT WHERE ASSESSING OFFICER, AFTER MAKING PROPER A ND DETAILED ENQUIRIES, TOOK A VIEW THAT AMOUNT RECEIVED BY ASSE SSEE AS GIFT FROM HIS RELATIVES WAS A GENUINE TRANSACTION, THE I MPUGNED REVISIONARY ORDER PASSED BY COMMISSIONER WAS NOT SU STAINABLE. HE SUBMITTED THAT THE DECISION RENDERED BY HONBLE BOMBAY HIGH COURT IN THE ABOVE SAID CASE HAS SINCE BEEN APPROVE D BY HONBLE SUPREME COURT IN THE CASE REPORTED IN 77 TAXMANN.CO M 78. THE LD. A.R. ALSO PLACED HIS RELIANCE ON OTHER CASE LAW S AND SUBMITTED THAT THE IMPUGNED REVISION ORDER IS NOT SUSTAINABLE SINCE THE A.O. HAS MADE DETAILED ENQUIRIES WITH REGARD TO HOUSE PR OPERTY INCOME DECLARED BY THE ASSESSEE. 9. THE LD. A.R. SUBMITTED THAT ON MERITS ALSO, THE REV ISION PROPOSED BY LD. PRINCIPAL CIT IS NOT SUSTAINABLE. HE SUBMITTED THAT AS PER THE AGREEMENT ENTERED BY THE ASSESSEE W ITH M/S. LIDO, THE OWNERS OF THE MALL SHALL BE ENTITLED TO RECEIVE ONLY 98% OF THE LICENSE FEE/RENT RECEIPTS AND REMAINING 2% SHALL BE TAKEN BY M/S. LIDO TOWARDS THEIR CHARGES. ACCORDINGLY, THE ABOVE SAID 2% IS DIVERSION OF INCOME BY OVER RIDING TITLE AND HENCE THE SAME SHALL NOT FORM PART OF ANNUAL LETTING VALUE OF PROPERTY A S OPINED BY LD. PRINCIPAL CIT. IN SUPPORT OF THIS PROPOSITION, THE LD. A.R. PLACED HIS RELIANCE ON THE DECISION RENDERED BY HONBLE SU PREME COURT IN THE CASE OF CIT VS. SITAL DAS TIRATH DAS (41 ITR 36 7). ITA NO.1017 /BANG/2019 M/S. G. CORP PVT. LTD., BANGALORE PAGE 6 OF 13 10. THE LD.A.R. FURTHER SUBMITTED THAT THE MAINTENANCE CHARGES PAID TO THE SERVICE PROVIDER FOR MAINTENANCE OF REN TED PREMISES COULD NOT BE TREATED AS RENT TAXABLE IN THE HANDS O F THE OWNERS. IN SUPPORT OF THIS PROPOSITION, HE PLACED HIS RELIANCE ON THE DECISION RENDERED BY HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. DLF OFFICE DEVELOPERS (25 TAXMANN.COM 258). ACCORDINGL Y, THE LD. A.R. SUBMITTED THAT THE VIEWS EXPRESSED BY LD. PRIN CIPAL CIT ON MERITS ARE NOT SUSTAINABLE UNDER LAW AND HENCE ON T HIS COUNT ALSO, THE IMPUGNED REVISION ORDER IS LIABLE TO BE QUASHED . 11. ON THE CONTRARY, THE LD. D.R. INVITED OUR ATTENTION TO PAGE 84 OF THE PAPER BOOK, WHEREIN THE COPY OF NOTICE ISSUE D BY A.O. U/S 142(1) OF THE ACT DURING THE COURSE OF ASSESSMENT P ROCEEDINGS IS PLACED. THE LD. D.R. SUBMITTED THAT THE A.O. HAS R AISED AS MANY AS 31 QUERIES IN THE NOTICE ISSUED U/S 142(1) OF TH E ACT. NONE OF THE QUERIES RELATES TO THE TWO ISSUES RAISED BY LD. PRINCIPAL CIT IN THE REVISION PROCEEDINGS. THE LD. A.R. SUBMITTED T HAT THE ASSESSEE HAS DECLARED RENTAL INCOME UNDER THE HEAD INCOME F ROM HOUSE PROPERTY. AS PER SECTION 23 OF THE ACT, THE ANNU AL LETTING VALUE OF THE PROPERTY IS LIABLE TO BE TAXED. FURTHER, PE RMISSIBLE DEDUCTIONS ARE GIVEN IN SECTION 24 OF THE ACT. THE ANNUAL VALUE OF THE PROPERTY IS THE ACTUAL RENT RECEIVABLE BY THE A SSESSEE AND HENCE THE MALL OWNER SHOULD HAVE OFFERED 100% OF TH E LICENSE FEES/RENT RECEIPTS AS ANNUAL VALUE INSTEAD OF 98%. SIMILARLY, OTHER INCOME RECEIVED THROUGH MALL ACTIVITIES SHALL ALSO FORM PART OF ANNUAL LETTING VALUE AND THE SAME SHOULD HAVE BEEN INCLUDED IN COMPUTATION OF ANNUAL LETTING VALUE @ 100%, AS AGAI NST 25% OFFERED BY MALL OWNERS. ITA NO.1017 /BANG/2019 M/S. G. CORP PVT. LTD., BANGALORE PAGE 7 OF 13 12. THE LD. D.R. FURTHER SUBMITTED THAT THE A.O. HAS FA ILED TO EXAMINE BOTH THESE ISSUES DURING THE COURSE OF ASSE SSMENT PROCEEDINGS. A PERUSAL OF ASSESSMENT ORDER WOULD S HOW THAT THE A.O. HAS EXAMINED THE ISSUES RELATING TO DISALLOWAN CE MADE U/S 14A OF THE ACT AND ALSO DISALLOWANCE OF CLAIM OF EX PENSES UNDER THE MATCHING PRINCIPLE, MEANING THEREBY, THE A.O. D ID NOT EXAMINE INCOME FROM HOUSE PROPERTY DECLARED BY THE ASSESSEE . ACCORDINGLY, THE LD. D.R. SUBMITTED THAT THERE IS T OTAL LACK OF APPLICATION OF MIND ON THE PART OF THE A.O. AND HEN CE LD. PRINCIPAL CIT HAS RIGHTLY INVOKED REVISION PROCEEDINGS U/S 26 3 OF THE ACT, SINCE THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDI CIAL TO THE INTEREST OF THE REVENUE. ACCORDINGLY, HE SUBMITTED THAT THE IMPUGNED REVISION ORDER PASSED BY LD. PRINCIPAL CIT SHOULD BE UPHELD. 13. WE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECO RD. THE PRINCIPLES RELATING TO INITIATION OF REVISION PROCE EDINGS HAS BEEN EXPLAINED BY HONBLE SUPREME COURT IN THE CASE OF M ALABAR INDUSTRIES COMPANY LTD. VS. CIT (243 ITR 83) AND TH E SAME HAS BEEN REITERATED BY HONBLE SUPREME COURT IN THE CAS E OF CIT VS. MAX INDIA LTD. (295 ITR 282). FOR THE SAKE OF CONV ENIENCE, WE EXTRACT BELOW THE OPERATIVE PORTION OF THE ORDER PA SSED BY HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL COM PANY LTD. SECTION 263 OF THE INCOME-TAX ACT, 1961 EMPOWERS T HE COMMISSIONER TO CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDINGS UNDER THE ACT AND, IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN, BY THE ASS ESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT ERESTS OF THE REVENUE, TO PASS AN ORDER UPON HEARING THE ASSESSEE AND AFTER AN ENQ UIRY AS IS NECESSARY, ENHANCING OR MODIFYING THE ASSESSMENT OR CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. THE KEY WORDS THAT AR E USED BY SECTION 263 ARE THAT THE ORDER MUST BE CONSIDERED BY THE COMMISSION ER TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THIS PROVISION HAS BEEN INTERPRETED BY THE SUPREME COURT IN SEVERAL JU DGMENTS TO WHICH IT IS ITA NO.1017 /BANG/2019 M/S. G. CORP PVT. LTD., BANGALORE PAGE 8 OF 13 NOW NECESSARY TO TURN. IN MALABAR INDUSTRIAL CO. LT D. V. CIT [2000] 243 ITR 83, THE SUPREME COURT HELD THAT THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COM MITTED BY THE ASSESSING OFFICER AND IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. THE SUPREME COURT HELD THAT AN INCORREC T ASSUMPTION OF FACT OR AN INCORRECT APPLICATION OF LAW, WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. AN ORDER PASSED IN VIOLATION OF THE PRINCIPLES OF N ATURAL JUSTICE OR WITHOUT APPLICATION OF MIND, WOULD BE AN ORDER FALLING IN THAT CATEGORY. THE EXPRESSION PREJUDICIAL TO THE INTERESTS OF TH E REVENUE, THE SUPREME COURT HELD, IT IS OF WIDE IMPORT AND IS NOT CONFINED TO A LOSS OF TAX. WHAT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE IS EXPLAINED IN THE JUDGMENT OF THE THE SUPREME COURT (HEADNOTE) : THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE RE VENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE A SSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER, CANNOT BE TREATED AS PREJUDICIAL TO THE IN TERESTS OF THE REVENUE, FOR EXAMPLE, WHEN AN INCOME-TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME-TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF T HE REVENUE UNLESS THE VIEW TAKEN BY THE INCOME-TAX OFFICER IS UNSUSTAINABLE IN LAW. 14. THE HONBLE SUPREME COURT HAS MADE IT CLEAR IN THE ABOVE SAID CASE THAT THE ASSESSMENT ORDERS PASSED WITHOUT APPLICATION OF MIND SHALL FALL UNDER THE CATEGORY OF ERRONEOUS ORD ER AND IF SUCH ERRONEOUS ORDER CAUSES PREJUDICE TO THE REVENUE, TH EN THE LD. PRINCIPAL CIT IS ENTITLED TO INVOKE HIS POWER GIVEN U/S 263 OF THE ACT FOR REVISING THE ASSESSMENT ORDER. THE APPLICA TION OF MIND CONTEMPLATES THAT THE A.O. SHOULD HAVE EXAMINED THE ISSUE AND SHOULD HAVE TAKEN A PLAUSIBLE VIEW AFTER DUE APPLIC ATION OF MIND. 15. THE LAW IS WELL SETTLED THAT IF THERE IS A FAILURE ON THE PART OF AO TO MAKE AN ENQUIRY ON THE ISSUE WHICH CALLS FOR AN ENQUIRY, THAT BY ITSELF WILL RENDER THE ORDER OF ASSESSMENT ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. WE DE RIVE SUPPORT FOR THIS VIEW FROM THE DECISION RENDERED BY THE HONBLE DELHI HIGH ITA NO.1017 /BANG/2019 M/S. G. CORP PVT. LTD., BANGALORE PAGE 9 OF 13 COURT IN THE CASE OF GEE VEE ENTERPRISES VS. DCIT 9 9 ITR 375 & 386(DELHI). THE FOLLOWING PASSAGE FROM THE SAID DE CISION WOULD EXPLAIN CLEARLY THE LEGAL POSITION IN THIS REGARD: (13) SHRI G.C. SHARMA ARGUED THAT THE ORDERS PASSE D BY INCOME-TAX AUTHORITIES UNDER SECTIONS 34 AND 33B OF THE OLD ACT CORRESPONDING TO SECTIONS 147 , AND 263 OF THE NEW ACT STOOD ON THE SAME FOOTING WHEN THEY WERE CHALLENGED AS BEING WITHOUT JURISDICTION BY WAY OF A WRIT PETITIO NS WE DO NOT, HOWEVER, THINK THAT HE CAN DERIVE ANY ASSISTANCE FROM THE DECISION IN CALCUTTA DISCOUNT COMPANY'S CASE. AS POINTED OUT BY THE SUPREME COURT IN MYSORE STATE ROAD TRANSPORT CORPORATION V. THE MYSORE ROAD APPELLATE TRIBUNAL, (CIVIL APPEAL NO . 1801 OF 1970 DECIDED ON AUGUST 8, 1974) (II) REFERR ING TO AN ESSAY ON 'DETERMINING THE RATIO DECIDENDI OF A CASE' BY DR. A. L. GOODHART, 'THE PRINCIPLE OF A' CASE IS DETERMINED BY TAKING INTO ACCOUNT THE FACTS TREATED BY THE JUDGE DECIDING A CASE AS MATERIAL AND HIS DECISION AS BAS ED THEREON.' THE RATIO OF THE DECISION IN CALCUTTA DISCOUNT COMPANY'S (10) CASE C ANNOT APPLY TO THE FACTS OF THE PRESENT CASE FOR THE FOLLOWING REASONS :- (I) UNDER SECTION 34 , THE DUTY OF THE ASSESSED IS ONLY TO STATE THE MAT ERIAL FACTS NECESSARY FOR THE PURPOSE OF .ASSESSMENT. ONCE THES E FACTS ARE ACCEPTED AND AN ASSESSMENT IS MADE, THE INCOME TAX OFFICER CANNOT R EOPEN THE ASSESSMENT UNLESS HE HAD REASON TO BELIEVE THAT THE MATERIAL FACTS WE RE NOT TRULY DISCLOSED.. THE REASON WHY THE REOPENING OF THE ASSESSMENT IS THUS MADE SOMEWHAT DIFFICULT IS TO PRESERVE THE FINALITY OF THE PREVIOUS DECISION WHIC H SHOULD NOT BE DESTROYED EXCEPT FOR A GOOD REASON. ONCE IT IS FOUND THAT THE DISCLO SURE OF FACTS WAS COMPLETE, NO JURISDICTION COULD ARISE FOR THE REOPENING OF THE A SSESSMENT. (II) ON THE OTHER HAND, THE CONDITION FOR THE ASSUMPTION OF JURISDICTION UNDER OLD SECTION 33B AND THE NEW SECTION 263 IS EASIER TO FULFILL. THE REASON IS THAT IT IS NOT THE INCOME TAX OFFICER BUT A SUPERIOR OFFICE R LIKE THE COMMISSIONER WHO IS EXERCISING A REVISIONAL JURISDICTION SUO MOTU TH ERE UNDER. THE SUPERIOR OFFICER COULD BE TRUSTED WITH A LARGER POWER. THE ONLY REQU IREMENT FOR THE EXERCISE OF THIS POWER IS THAT THE COMMISSIONER SHOULD CONSIDER THAT THE ORDER PASSED BY THE. INCOME TAX OFFICER IS 'ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE.' WHAT IS THE MEANING OF 'ERRONEOUS' IN THIS CONTEXT? IT WAS ARGUED FOR THE ASSESSEDS BY SHRI G. C. SHARMA T HAT THE WORD 'ERRONEOUS' MEANS THAT THE ORDER MUST APPEAR TO BE WRONG ON THE FACE OF IT. IN OTHER WORDS, HE EQUATED THE 'ERROR' WITH 'ERROR OF LAW APPARENT ON THE FACE OF RECORD' WHICH IS A WELL-KNOWN GROUND FOR THE REVIEW OF A QUASIJUDICIAL ORDER BY THIS COURT UNDER ARTICLE 226. WE ARE UNABLE TO AGREE WITH THIS INTERPRETATION. THE INTENTION OF THE LEGISLATURE WAS TO GIVE A WIDE POWER TO THE COMMISSIONER. HE MAY CONSIDER THE ORDER OF THE INCOME TAX OFFICER AS ERR ONEOUS NOT ONLY BECAUSE IT CONTAINS SOME APPARENT ERROR OF REASONING OR OF LAW OR OF FACT ON THE FACE OF IT BUT ALSO BECAUSE IT IS A STEREO-TYPED ORDER WHICH S IMPLY ACCEPTS WHAT THE ASSESSED HAS STATED IN HIS RETURN AND FAILS TO MAKE INQUIRIES WHICH ARE CALLED FOR IN THE CIRCUMSTANCES OF THE CASE. SHRI SHARMA'S CONTENTION THAT THIS WOULD GIVE ITA NO.1017 /BANG/2019 M/S. G. CORP PVT. LTD., BANGALORE PAGE 10 OF 13 THE COMMISSIONER THE POWER TO REVISE THE ORDER OF T HE INCOME TAX OFFICER MERELY ON THE GROUND OF SUSPICION IS UNTENABLE IN VIEW OF THE FOLLOWING TWO SUPREME COURT DECISIONS WHICH HAVE ALREADY CONSTRUED THE OL D SECTION 33B CONTRARY TO SHRI SHARMA'S CONTENTION. IN RAMPYARI DEVI SARAOGI V. COMMISSIONER OF INCOME TAX , (1968)67 I.T.R. 84, THE INCOME TAX OFFICER ACCEPTED THE RETURN OF THE ASSESSED IN RESPECT OF THE INITIAL CAPITAL, THE GIFT RECEIVED A ND THE SALE OF JEWELLERY, THE INCOME FROM BUSINESS, ETC., WITHOUT ANY INQUIRY OR EVIDENC E WHATSOEVER. FOR THIS REASON THE COMMISSIONER HELD THE ORDER TO BE ERRONEOUS. IN REVISION, HE CANCELLED THE ORDER AND ORDERED THE INCOME TAX OFFICER TO MAKE A FRESH ASSESSMENT. IN HIS ORDER THE COMMISSIONER HAD USED CERTAIN NEW GROUNDS WHICH HAD NOT BEEN DISCLOSED TO THE ASSESSED IN THE NOTICE GIVEN TO HI M TO SHOW CAUSE WHY THE ORDER OF THE INCOME TAX OFFICER SHOULD NOT BE REVISED. BUT A PART FROM THESE NEW GROUNDS, THE SUPREME COURT OBSERVED AT PAGE 88 OF THE REPORT THAT- 'THERE WAS AMPLE MATERIAL TO SHOW THAT THE INCOME T AX OFFICER MADE THE ASSESSMENTS IN UNDUE HURRY........,...THE ASSES SED MADE A DECLARATION GIVING THE FACTS REGARDING INITIAL CAPITAL, THE ORN AMENTS AND PRESENTS RECEIVED AT THE TIME OF MARRIAGE, OTHER GIFTS RECEI VED FROM HER FATHER-IN LAW, ETC., WHICH SHOULD HAVE PUT ANY INCOME TAX OFF ICER ON HIS GUARD. BUT THE INCOME TAX OFFICER WITHOUT MAKING ANY INQUIRIES TO SATISFY HIMSELF PASSED THE ASSESSMENT ORDER ....... A SHORT-TYPED A SSESSMENT ORDER WAS MADE FOR EACH ASSESSMENT YEAR......NO EVIDENCE WHAT SOEVER WAS PRODUCED IN RESPECT OF THE MONEY-LENDING BUSINESS DONE. .... ........NO NAMES WERE GIVEN AS TO THE PARTICS TO WHOM THE LOANS WERE ADVA NCED.' IN TARA DEVI AGGARWAI V. COMMISSIONER OF INCOME TAX , (1973) 88 I.T.R. 323, ALSO THE INCOME TAX OFFICER, HOWRAH, WHILE REMARKING THA T THE SOURCE OF INCOME OF THE ASSESSED WAS INCOME FROM SPECULATION AND INTEREST O N INVESTMENTS STATED THAT NEITHER THE ASSESSED , ABLE TO PRODUCE THE DETAILS AND VOUCHERS OF THE SPECULATIVE TRANSACTIONS MADE DURING THE ACCOUNTING YEAR NOR WA S THERE ANY EVIDENCE REGARDING THE INTEREST RECEIVED BY THE ASSESSED FRO M DIFFERENT PARTIES ON HER INVESTMENTS. NOTWITHSTANDING THESE DEFECTS THE INCO ME TAX OFFICER DID NOT INVESTIGATE INTO THE VARIOUS SOURCES BUT ASSESSED T HE ASSESSED ON A TOTAL INCOME OF RS. 9037.00 . THE INQUIRIES MADE BY THE COMMISSIONE R REVEALED THAT THE ASSESSED DID NOT RESIDE OR CARRY ON BUSINESS AT THE ADDRESS GIVEN IN THE RETURN. THE COMMISSIONER WAS ALSO OF THE VIEW THAT THE INCOME T AX OFFICER WAS NOT JUSTIFIED IN ACCORDING THE INITIAL CAPITAL, THE SALE OF ORNAM ENTS, THE INCOME FROM BUSINESS, THE INVESTMENTS, ETC.. WITHOUT ANY INQUIRY OR EVIDE NCE WHATSOEVER AND THAT THE ORDER OF ASSESSMENT WAS ERRONEOUS AND PREJUDICIAL T O THE INTERESTS OF THE REVENUE. THE HIGH COURT HELD THAT THERE WERE MATERIALS TO JU STIFY THE COMMISSIONER'S FINDING THAT THE ORDER OF ASSESSMENT WAS ERRONEOUS INSOFAR AS IT WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. SHRI SHARMA TRIED TO DISTINGUISH THIS DECISION ON THE GROUND THAT THE ADDRESS OF THE ASSESSED IN THAT CAS E WAS GIVEN INCORRECTLY. THE DECISION OF THE HIGH COURT AND THAT OF THE SUPREME COURT WERE NOT, HOWEVER, BASED ON THAT GROUND AT ALL. ON THE CONTRARY, THE S UPREME COURT FOLLOWED THEIR PREVIOUS DECISION IN RAMPYARI DEVI'S (12) CASE AND UPHELD THE DECISION OF THE HIGH COURT PRECISELY ON THE SAME GROUNDS. THESE TWO DECISIONS SHOW THAT IT IS NOT NECESSARY FOR THE COMMISSIONER TO MAKE FURTHER INQU IRIES BEFORE CANCELLING THE ASSESSMENT ORDER OF THE INCOME TAX OFFICER. THE COM MISSIONER CAN REGARD THE ORDER AS ERRONEOUS ON THE GROUND THAT IN THE CIRCUM STANCES OF THE CASE THE INCOME ITA NO.1017 /BANG/2019 M/S. G. CORP PVT. LTD., BANGALORE PAGE 11 OF 13 TAX OFFICER SHOULD HAVE MADE FURTHER INQUIRIES BEFO RE ACCEPTING THE STATEMENTS MADE BY THE ASSESSED IN HIS RETURN. (14) THE REASON IS OBVIOUS. THE POSITION AND FUNCTION OF THE INCOME TAX OFFICER IS VERY DIFFERENT FROM THAT OF A CIVIL COURT. THE S TATEMENTS MADE IN A PLEADING PROVED BY THE MINIMUM AMOUNT OF EVIDENCE MAY HE ACC EPTED BY A CIVIL COURT IN THE ABSENCE OF ANY REBUTTAL. THE CIVIL COURT IS NEU TRAL. IT SIMPLY GIVES DECISION ON THE BASIS OF THE PLEADING AND EVIDENCE WHICH COMES BEFORE IT. THE INCOME TAX OFFICER IS NOT ONLY AN ADJUDICATOR BUT ALSO AN INVE STIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF A RETURN WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER INQUIRY. IT IS HIS DUTY TO ASCERTAIN THE TRUTH OF T HE FACTS STATED IN THE RETURN WHEN THE CIRCUMSTANCES OF THE CASE ARE SUCH AS TO PROVOK E AN INQUIRY. THE MEANING TO BE GIVEN TO THE WORD 'ERRONEOUS' IN SECTION 263 EMERGES OUT OF THIS CONTRACT. IT IS BECAUSE IT IS INCUMBENT ON THE INCOME TAX OFFICE R TO FURTHER INVESTIGATE THE FACTS STATED IN THE RETURN WHEN CIRCUMSTANCES WOULD MAKE SUCH AN INQUIRY PRUDENT THAT THE WORD 'ERRONEOUS' IN SECTION 263 INCLUDES THE FAILURE TO MAKE SUCH AN INQUIRY. THE ORDER BECOMES ERRONEOUS BECAUS E SUCH AN INQUIRY HAS NOT BEEN MADE AND NOT BECAUSE THERE IS ANY THING WRONG WITH THE ORDER IF ALL THE FACTS STATED THEREIN ARE ASSUMED TO BE CORRECT. 16. THE LD. A.R. TOOK US THROUGH VARIOUS DOCUMENT S, INFORMATION AND EXPLANATIONS FURNISHED BY THE ASSESSEE BEFORE T HE A.O. THOUGH THE AGREEMENT ENTERED BY THE ASSESSEE WITH M /S. LIDO STATES THAT M/S. LIDO WOULD RETAIN 2% OF LICENSE FE ES/RENT RECEIPTS AND 75% OF THE OTHER INCOME, WE NOTICE THAT THE A.O . HAS NOT EXAMINED THE TAX IMPLICATION OF THE AGREEMENT IN TH E CONTEXT OF SECTION 23 & 24 OF THE INCOME TAX ACT, AS THE MALL INCOME HAS BEEN OFFERED BY THE ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. AS RIGHTLY POINTED OUT BY LD. D.R. THE TAX ON INCOME FROM HOUSE PROPERTY IS CHARGED ON THE ANNUAL LETTIN G VALUE AND TERM ANNUAL LETTING VALUE HAS BEEN DEFINED U/S 23 OF THE ACT. FURTHER, THE ASSESSEE IS ENTITLED TO CLAIM ONLY THO SE EXPENSE WHICH ARE LISTED OUT IN SECTION 24 OF THE ACT FROM THE AN NUAL LETTING VALUE DETERMINED U/S 23 OF THE ACT. ADMITTEDLY, THE A.O. DID NOT EXAMINE ANY OF THE ISSUES POINTED OUT BY THE LD. PR INCIPAL CIT. 17. THE LD A.R TOOK SUPPORT OF THE DECISION REN DERED BY HONBLE DELHI HIGH COURT IN THE CASE OF SUNBEAM AUTO LTD (S UPRA). WE ITA NO.1017 /BANG/2019 M/S. G. CORP PVT. LTD., BANGALORE PAGE 12 OF 13 NOTICE THAT THE SAID DECISION WAS RENDERED PRIOR TO THE INSERTION OF EXPLANATION 2 IN SEC. 263(1) BY FINANCE ACT, 2015 W .E.F. 1.6.2015. AS PER CLAUSE (A) OF EXPLANATION 2, THE ORDER PASSE D WITHOUT MAKING INQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE SHALL BE DEEMED TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. SINCE THE A.O. FAILED TO EXAMINE THESE ISSUES, IN OUR VIEW, THE LD. PRINCIPAL CIT WAS JUSTIFIED IN OBSERV ING THAT THERE IS LACK OF APPLICATION OF MIND AND HENCE THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 18. THE LD A.R ALSO ADVANCED HIS ARGUMENTS ON T HE CONCEPT OF DIVERSION OF OVERRIDING TITLE. IN OUR VIEW, THESE ARGUMENTS ARE NOT RELEVANT WHILE EXAMINING THE VALIDITY OF REVISION P ROCEEDINGS AND THE ASSESSEE MAY TAKE THESE ARGUMENTS BEFORE THE AO , IF SO ADVISED. 19. THE LD. A.R. ADVANCED HIS ARGUMENTS ON MERIT S ON BOTH THE ISSUES REVISED BY LD. PRINCIPAL CIT. SINCE THE A.O . HAS NOT EXAMINED THESE ISSUES ON MERITS, WE ARE OF THE VIEW THAT THE SAME NEED NOT BE CONSIDERED BY THE TRIBUNAL WHILE EXAMIN ING THE VALIDITY OF REVISION PROCEEDINGS, UNLESS IT IS SHOW N THAT THE VIEW TAKEN BY LD. PRINCIPAL CIT IS NOT TOTALLY SUSTAINAB LE IN LAW. ACCORDINGLY, WE DECLINE TO ADDRESS THE ARGUMENTS AD VANCED ON MERITS. 20. IN VIEW OF THE FOREGOING DISCUSSIONS, WE ARE OF THE VIEW THAT THE LD. PRINCIPAL CIT WAS JUSTIFIED IN PASSING THE IMPUGNED REVISION ORDER. ACCORDINGLY, WE UPHOLD THE SAME. ITA NO.1017 /BANG/2019 M/S. G. CORP PVT. LTD., BANGALORE PAGE 13 OF 13 21. IN THE RESULT, THE APPEAL FILED BY THE ASSES SEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH SEPT, 2020 SD/- (BEENA PILLAI) JUDICIAL MEMBER SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 18 TH SEPT, 2020. VG/SPS COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.