AMAZIA DEVELOPERS P.LTD, MUMBAI V. CIT-1, MUMBAI

ITA 2499/MUM/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4113 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 07-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MK SINGH; R P MEENA
• Keywords: Business income; Revision of order; Opportunity of being heard; Set aside
• Section: 143(3); 80HHC; 27; 263; 11

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL A BENCH MUMB AI BEFORE SHRI G.S. PANNU, VICE- PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 2499/MUM/2017 (ASSESSMENT YEAR 2012-13 ) M/S AMAZIA DEVELOPERS PVT. LTD. 108, G- WING, AKRUTI COMMERCIAL COMPLEX, NEXT TO AKRUTI CENTRE POINT, CENTRAL ROAD, ANDHERI (EAST) MUMBAI- 400067. PAN: AACHCA6934H VS. DCIT- CIRCLE 1(1 )(1) ROOM NO. 533, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, CHURCHGATE, MUMBAI-400020. APPELLANT RESPONDE NT APPELLANT BY : SHRI VIJAY MEHTA WITH ANUJ KUSHANDWALA CAS (AR) RESPONDENT BY : SHRI R.P. MEENA CIT-DR & M.K. SINGH (SR DR) DATE OF HEARING : 30.04.2019 DATE OF PRONOUNCEMEN T : 08.05.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY ASSESSEE UNDER SECTION 253 OF INCOME TAX ACT IS DIRECTED AGAINST THE ORDER OF LEARNED PRINCIPAL OF COMMISSIO NER OF INCOME TAX-1, MUMBAI, PASSED UNDER SECTION 263 ON 27 TH MARCH 2017 FOR ASSESSMENT YEAR 2012-13. 2. BRIEF FACTS OF THE CASE ARE THE ASSESSEE COMPANY IS ENGAGED IN PROPERTY DEVELOPMENT, FILED ITS RETURN OF INCOME FOR RELEVAN T ASSESSMENT YEAR ON 3 0TH SEPTEMBER 2012 DECLARING TOTAL LOSS AT RS. 33,89,52 ,515/-. THE RETURN OF ITA NO. 2499/MUM/2017 AMAZIA DEVELOPERS PVT LTD 2 INCOME WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) ON 19 TH JANUARY 2015, DETERMINING TOTAL INCOME OF RS. 10,90,39,612/-. IN THE RETURN OF INCOME THE ASSESSE E CLAIMED LEASE RENTAL INCOME OF RS. 11,78,29,224/- AS BUSINESS INCOME. HOWEVER, THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER TREATED THE LEASE RENTAL INCOME OF RS.11,78,29,224/- AS INCOME FROM OTHER SOURCES. ON APPEAL BEFORE LEARNED COMMISSIONER (APPEALS), THE LEASE RENTAL INCOME WAS ALLOWED AS BUSINESS INCOME VIDE ORDER DATED 20.04.2016. NO FURTHER APP EAL BEFORE TRIBUNAL WAS FILED BY REVENUE/ ASSESSING OFFICER. 3. SUBSEQUENTLY, THE LEARNED PRINCIPAL COMMISSIONER OF INCOME TAX (LD. PR. COMMISSIONER) ISSUED A SHOW CAUSE NOTICE UNDER SECT ION 263 DATED 03 RD MARCH 2017 FOR REVISING THE ASSESSMENT ORDER DATED 19 TH JANUARY 2015. IN THE SHOW CAUSE NOTICE THE LD. PR. COMMISSIONER SHOW CAU SED AS TO WHY THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) BE NOT SET ASIDE DIRECTING THE ASSESSING OFFICER TO PASS THE ASSESSMENT ORDER AFRE SH QUA THE TREATMENT GIVEN TO LEASE RENTAL INCOME. AS PER THE LD. PR. COMMISSI ONER, THE LEASE INCOME WAS LIABLE TO BE ASSESSED UNDER THE HEAD INCOME FR OM HOUSE PROPERTY. THE ASSESSEE FILED ITS REPLY DATED 10 TH MARCH 2017. IN THE REPLY THE ASSESSEE STATED THAT AS PER THE DOCTRINE OF THE MERGER THE A SSESSMENT ORDER PASSED UNDER SECTION 143(3) DATED 19.01.2015 MERGED WITH T HE ORDER OF FIRST ITA NO. 2499/MUM/2017 AMAZIA DEVELOPERS PVT LTD 3 APPELLATE AUTHORITY. THE ASSESSEE ALSO STATED THAT THE LEASE RENTAL INCOME ARISING FROM THE UNITS IN THE PARK CONSTITUTES BUSI NESS INCOME WHICH IS CONSISTENTLY BEING CLAIMED BAS BUSINESS INCOME AND THE SAME NEEDS TO BE ACCEPTED FOR THE CURRENT YEAR. THE ASSESSEE ALSO TH E ASSESSEE ALSO STATED THAT ASSESSMENT ORDER SOUGHT TO BE REVISED IS NOT PREJUD ICIAL TO THE INTEREST OF REVENUE, SINCE, IF THE LEASE INCOME IS ASSESSED AS INCOME FROM HOUSE PROPERTY IT WOULD BE BENEFICIAL TO THE ASSESSEE. T HE REPLY OF ASSESSEE WAS NOT ACCEPTED BY THE LEARNED PR. COMMISSIONER AND HE NCE, HE SET ASIDE THE ASSESSMENT ORDER DIRECTING THE ASSESSING ORDER TO P ASS THE ORDER AFRESH. THE LEARNED PR. COMMISSIONER WHILE SETTING ASIDE THE AS SESSMENT ORDER CONCLUDED, SINCE THE LEARNED COMMISSIONER (APPEALS) HAS UPHELD THE STAND OF ASSESSEE ON THE ISSUE OF THE INCOME FROM LEASE R ENTAL, THE SAME CANNOT BE SUBJECTED TO REVISION IS NOT ACCEPTABLE BECAUSE THE ISSUE OF TAXABILITY OF LEASE RENTAL AS INCOME FROM HOUSE PROPERTY HAS NEVER B EEN SUBJECT MATTER BEFORE LEARNED COMMISSIONER (APPEALS). THE COMMISSIONER (A PPEALS) HAS DECIDED THE ISSUE OF LEASE RENTAL BEING TAXED BY ASSESSING OFFICER UNDER THE HEAD INCOME FROM OTHER SOURCES AS AGAINST BUSINESS IN COME DECLARED BY THE ASSESSEE. THE ARGUMENT OF ASSESSEE COMPANY ON THE I SSUE OF LEASE RENTAL TO BE TAXED AS BUSINESS INCOME IS NOT ACCEPTABLE AS TH E ASSESSEE OWNS THE UNITS IN INDUSTRIAL PARK, AND THE LEASE INCOME FROM SUCH PROPERTY, BEING BUILDING ITA NO. 2499/MUM/2017 AMAZIA DEVELOPERS PVT LTD 4 AND THE LAND APPURTENANT THERETO IS CHARGEABLE TO T AX UNDER SECTION 22 UNDER THE HEAD INCOME FROM HOUSE PROPERTY. AGGRIEVED BY THE ORDER OF LEARNED PR. COMMISSIONER THE ASSESSEE HAS FILED PRESENT APP EAL BEFORE THIS TRIBUNAL BY RAISING THE VARIOUS GROUND OF APPEAL AS REFERRED BELOW. (1) THE ORDER PASSED BY LEARNED COMMISSIONER OF INCOME TAX UNDER SECTION 263 OF INCOME TAX ACT IS ILLEGAL AND BAD IN LAW. (2) THE LEARNED COMMISSIONER OF INCOME TAX ERRED IN LAW AND ON FACTS AND THAT THE ORDER DATED 19 TH JANUARY 2015, PASSED BY THE ASSESSING OFFICER UNDE R SECTION 143 (3) OF THE ACT WAS ERRONEOUS AND PREJUD ICIAL TO THE INTEREST OF REVENUE (3) THE LEARNED COMMISSIONER OF INCOME TAX HAS ERRED I N LAW AND ON FACT IN SETTING ASIDE THE ORDER DATED 19 TH JANUARY 2015 PASSED BY THE ASSESSING OFFICER UNDER SECTION 143( 3) OF THE ACT AND IN DIRECTING T O REFRAME THE ASSESSMENT IN TERMS OF THE DISCUSSIONS MADE IN THE IMPUGNED ORDER AS REGARD THE HEAD OF INCOME UNDER THE LEASE RENTAL INCOME ARE TO BE ASS ESSED. 4. WE HAVE HEARD THE SUBMISSION OF LEARNED AUTHORIZE R EPRESENTATIVE (AR) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVES ( DR) FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE A LSO DELIBERATED ON VARIOUS CASE LAWS RELIED BY LEARNED REPRESENTATIVE OF THE PARTIES. THE LEARNED AR OF THE ASSESSEE SUBMITS THAT AS PER THE THEORY D OCTRINE OF MERGER, THE ASSESSMENT ORDER PASSED BY ASSESSING OFFICER UNDER SECTION 143(3) DATED 19 TH JANUARY 2015 HAS SINCE MERGED WITH THE ORDER OF LEA RNED COMMISSIONER (APPEALS) QUA THE ISSUE SOUGHT TO BE REVISED BY THE PR. COMMISSIONER U/S 263 OF THE ACT. THE LEARNED PR. COMMISSIONER HAS NO POWER TO REVISE THE ITA NO. 2499/MUM/2017 AMAZIA DEVELOPERS PVT LTD 5 ASSESSMENT ORDER PASSED BY ASSESSING OFFICER ON THE ISSUE WHICH HAS BEEN SINCE EXAMINED BY COMMISSIONER (APPEAL). IN THE RE TURN OF INCOME THE ASSESSEE OFFERED THE LEASE RENTAL INCOME AS BUSINE SS INCOME, THE SAME WAS NOT ACCEPTED BY THE ASSESSING OFFICER, THE ASSESSIN G OFFICER TREATED THE SAME AS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SO URCES. THE ASSESSEE FILED APPEAL BEFORE LD. COMMISSIONER (APPEALS). IN APPEAL THE ASSESSEE FILED DETAILED SUBMISSIONS EXPLAINING THE CORRECT HEAD UNDER WHICH SUCH RECEIPT SHOULD BE ASSESSED. THE LD. COMMISSIONER (APPEALS) ALLOWED THE APPEAL OF THE ASSESSEE BY ACCEPTING THE LEASE RENTAL INCOME A S BUSINESS INCOME. THE LEARNED AR FOR THE ASSESSEE FURTHER SUBMITS THAT TH E ORDER OF ASSESSING OFFICER ON POINT OF TAXABILITY OF LEASE RENTAL INCO ME HAS ALREADY MERGED WITH THE ORDER OF LD. COMMISSIONER (APPEALS). IT WAS SU BMITTED THAT IN ORDER OF LD. PR. COMMISSIONER IS LIABLE TO QUASHED AND SET A SIDE ONLY ON THE DOCTRINE OF MERGER ALONE. THE LEARNED AR FOR THE ASSESSEE I N SUPPORT OF HIS OF THE SUBMISSION RELIED UPON THE FOLLOWING DECISION: (I) CIT VS K.S SERA PRODUCTIONS LTD. ( 374 ITR 503 BOM) (II) CIT VS NIRMA CHEMICALS WORKS P LTD [309 ITR 67 (GUJ )] (III) SONAL GARMENTS VS JCIT ( 95 ITD 363 MUM) (IV) MARICO INDUSTRIES VS ACIT (313 ITR(AT) 259 (MUM) 5. IN SECOND ALTERNATIVE SUBMISSION THE LEARNED AR OF THE ASSESSEE SUBMITS THE LEASE RENTAL INCOME EARNED BY THE ASSESSEE HAS BEEN ASSESSED AS INCOME FROM OTHER SOURCES BY THE ASSESSING OFFICER. THE V IEW TAKEN BY ASSESSING ITA NO. 2499/MUM/2017 AMAZIA DEVELOPERS PVT LTD 6 OFFICER IS ONE OF THE POSSIBLE VIEWS. IT WAS SUBMIT TED THAT THE PROCEEDING UNDER SECTION 263 INITIATED CANNOT BE INITIATED BY THE LEARNED PR. COMMISSIONER IF THE ASSESSING OFFICER HAS TAKEN A P OSSIBLE VIEW. IN SUPPORT OF HIS SUBMISSION THE LEARNED AR OF THE ASSESSEE RE LIED UPON THE FOLLOWING DECISION (I) MALABAR INDUSTRIAL COMPANY LTD VERSUS CIT ( 243 ITR 82 SC) (II) CIT VERSUS MAX INDIA ( 295ITR 282 SC) (III) CIT VS ARVIND JEWELLERS (290 ITR 689 GUJ) (IV) CIT VS GABRIAL INDIA LTD (203 ITR108 (BOM), (V) CIT VS DEVELOPMENT CREDIT BANK (323 ITR 206 BOM), (VI) CIT VS VIKAS POLYMERS (194 TAXMAN 57 DELHI), (VII) CIT VS ANIL KUMAR SHARMA (194 TAXMAN 504 DELHI) 6. THE LD. AR FOR THE ASSESSEE FURTHER SUBMITS THAT CB DT HAS ISSUED A CIRCULAR NO. 16/2017, DATED 25.04.2017, WHEREIN IT IS EXPRES SLY STATED THAT THE RENT RECEIVED FROM LETTING OF THE PROPERTY IN THE INDUST RIAL PARK IS TO BE TREATED AS BUSINESS INCOME. THE ASSESSEE HAS RECEIVED THE LEAS E RENTAL FROM THE LETTING OF THE PROPERTIES IN THE INDUSTRIAL PARK HENCE; THE RENT RECEIVED FROM THE RENTAL INCOME IS TO BE TREATED AS BUSINESS INCOME. IT WAS FURTHER CANVASSED BY LD AR FOR THE ASSESSEE THAT IF LEASE RENTAL INCO ME IS TREATED AS INCOME FROM THE HOUSE PROPERTY THEN THE ADDITION WOULD B E RS. 8,24,80,457/- (BEING 30% DEDUCTION OF RS 11,78,29,224/- WOULD BE RS. 3,53,48,676/-). THE LD. PR. COMMISSIONER CAN REVISE THE ASSESSMENT ORDE R IF THERE IS LOSS TO THE ITA NO. 2499/MUM/2017 AMAZIA DEVELOPERS PVT LTD 7 REVENUE BY THE ORDER OF THE ASSESSING OFFICER. IN T HE PRESENT CASE THERE IS NO LOSS TO THE REVENUE RATHER THERE WOULD BE LOWER ADD ITIONS IF THE ORDER PASSED BY LD. PR COMMISSIONER IS UPHELD. 7. ON THE OTHER HAND THE LD. CIT-DR FOR THE REVENUE SU PPORTED THE ORDER OF THE LD. PR COMMISSIONER PASSED UNDER SECTION 263 OF THE ACT. THE LD. DR FURTHER SUBMITS THAT THE TAXABILITY OF LEASE RENTAL INCOME AS INCOME FROM HOUSE PROPERTY WAS NEVER BEFORE THE LD. COMMISSIONER (APP EALS), THEREFORE THE THEORY OF MERGER IS NOT APPLICABLE IN THE PRESENT C ASE. THE CBDT CIRCULAR CITED BY THE LD. AR FOR THE ASSESSEE IS NOT APPLICA BLE ON THE FACTS OF THE ASSESSEE AS THE ASSESSEE IS NOT THE DEVELOPER OF TH E INDUSTRIAL PARK. THE LD. DR PRAYED FOR DISMISSAL OF THE APPEAL FILED BY THE ASSESSEE. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PAR TIES AND HAVE GONE THROUGH THE ASSESSMENT ORDER PASSED UNDER SECTION 1 43(3) DATED 19.01.2015, ORDER OF LD COMMISSIONER (APPEALS) DATED 20.04.2016 AND THE ORDER OF LD PR COMMISSIONER DATED 27.03.2017(WHICH IS IMPUGNED BE FORE US). PERUSAL OF THE ASSESSMENT ORDER MADE IT CLEAR THAT THE ASSESSI NG OFFICER TREATED THE LEASE RENTAL INCOME AS INCOME FROM OTHER SOURCES. HOWEVER , ON APPEAL BEFORE LD. COMMISSIONER (APPEALS) THE APPEAL OF THE ASSESSEE W AS ALLOWED AND THE SAID INCOME WAS ALLOWED AS BUSINESS INCOME. THE LD. COMM ISSIONER (APPEALS) BEFORE TREATING THE SAID INCOME AS BUSINESS INCOME OBSERVED THAT THE ITA NO. 2499/MUM/2017 AMAZIA DEVELOPERS PVT LTD 8 ASSESSEE IS CONSISTENTLY CLAIMING THE LEASE RENTAL INCOME AS BUSINESS INCOME AND THE SAME HAS BEEN ACCEPTED BY DEPARTMENT IN ASS ESSMENT YEAR 2010-11 AND 2011-12 IN ASSESSMENT ORDER PASSED UNDER SECTIO N 143(3). IT WAS ALSO NOTED BY THE LD. COMMISSIONER (APPEALS) THAT THE AS SESSEE HAS NO OTHER INCOME EXCEPT THE RENTAL INCOME FROM THE UNITS HELD BY THE ASSESSEE IN THE INDUSTRIAL PARK. NO FURTHER APPEAL WAS FILED BY THE REVENUE/ ASSESSING OFFICER. IN OUR VIEW THE LD. COMMISSIONER (APPEALS) EXAMINED THE TAXABILITY OF THE RENTAL INCOME AFTER DEEP ANALYSIS OF THE FACTS. FAC TUALLY, THE APPRAISAL SHOWS THAT THE ISSUE REGARDING THE NATURE OF LEASE INCOME WAS THE SUBJECT MATTER OF ASSESSMENT BY THE ASSESSING OFFICER AND ALSO THE AD JUDICATION BY THE LD. CIT(A) THEREAFTER. THE LD. PR COMMISSIONER ISSUED S HOW CAUSE NOTICE UNDER SECTION 263 DATED 03.03.2015 FOR PROPOSED REVISION OF THE ASSESSMENT ORDER ON THE GROUND THAT THE LEASE INCOME BE ASSESSED AS INCOME UNDER THE HEAD AS HOUSE PROPERTY. IN REPLY TO THE SHOW CAUSE NOTICE THE ASSESSEE SPECIFICALLY STATED THAT THE SUBJECT MATTER OF PROPOSED REVISION WAS CONSIDERED IN THE APPEAL BY LD. COMMISSIONER (APPEALS) WHILE DECIDING THE APPEAL OF THE ASSESSEE, THEREFORE, AS PER DOCTRINE OF MERGER THE ASSESSMENT IS MERGED WITH THE ORDER OF LD. COMMISSIONER (APPEALS). THE TAXABI LITY OF THE LEASE RENTAL INCOME WAS EXAMINED AND CONSIDERED BY LD. COMMISSIO NER (APPEALS) AND THEREBY CONSIDERING THE DOCTRINE OF MERGER, ONCE TH E ISSUE HAS BEEN ITA NO. 2499/MUM/2017 AMAZIA DEVELOPERS PVT LTD 9 EXAMINED AND DECIDED BY LD. COMMISSIONER (APPEALS), THE REVISION ORDER UNDER SECTION 263 CANNOT BE MADE. APART FROM THE LE GAL OBJECTION THE ASSESSEE STATED THAT SIMILAR INCOME HAS BEEN ACCEPT ED BY REVENUE AS BUSINESS INCOME IN ASSESSMENT YEARS 2009-10, 2010-11 AND 201 1-12. THE REPLY OF THE ASSESSEE WAS NOT ACCEPTED BY LD. PR COMMISSIONER BY TAKING HIS VIEW THAT THE TAXABILITY OF RENTAL INCOME AS INCOME FROM HOUS E PROPERTY WAS NOT THE SUBJECT MATTER BEFORE LD. COMMISSIONER (APPEALS). 9. SECTION 263 OF THE ACT AND EXPLANATION (C) THERE UNDER WHICH ARE MATERIAL FOR CONSIDERATION ON THE ISSUE IN THIS APPEAL AND READ AS UNDER : '263. REVISION OF ORDERS PREJUDICIAL TO REVENUE . (1) THE 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 INSOF AR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, HE MAY, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MA KING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SU CH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT, OR CANCELLING THE ASSE SSMENT AND DIRECTING A FRESH ASSESSMENT. EXPLANATION. FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED T HAT, FOR THE PURPOSES OF THIS SUB-SECTION, ****** ( C ) WHERE ANY ORDER REFERRED TO IN THIS SUB-SECTION A ND PASSED BY THE ASSESSING OFFICER HAD BEEN THE SUBJECT-MATTER OF AN Y APPEAL, THE POWERS OF THE COMMISSIONER UNDER THIS SUB-SECTION S HALL EXTEND TO SUCH MATTERS AS HAD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEAL.' 10. A CAREFUL READING OF THE PROVISIONS OF SECTION 263 MAKES IT CLEAR THAT THE COMMISSIONER OF INCOME-TAX IS ENTITLED TO REVISE AN ASSESSMENT ORDER INSOFAR ITA NO. 2499/MUM/2017 AMAZIA DEVELOPERS PVT LTD 10 AS THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE IN TEREST OF THE REVENUE, HOWEVER, EXPLANATION (C) PLACES AN EMBARGO ON THE COMMISSIONER OF INCOME-TAX IN CASE OF SUBJECT-MATTER OF ANY APPEAL WHICH HAS BEEN CONSIDERED AND DECIDED IN SUCH APPEAL. IN OTHER WOR DS, BEFORE THE COMMISSIONER OF INCOME-TAX EXERCISES THE JURISDICTI ON UNDER SECTION 263 OF THE ACT, THE COMMISSIONER OF INCOME-TAX IS REQUIRED TO ASCERTAIN WHETHER THE ORDER REFERRED TO IN SUB-SECTION (1) OF SECTION 263 OF THE ACT HAD BEEN THE SUBJECT-MATTER OF ANY APPEAL, AND IF YES, THE REVIS IONAL POWERS SHALL BE AVAILABLE ONLY IF SUCH SUBJECT-MATTER HAD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEAL 11. THE HONBLE BOMBAY HIGH COURT IN CIT VS K SERA SERA PRODUCTIONS LTD (SUPRA) HELD WHERE ISSUES OF INCOME OF ASSESSEE FRO M PRODUCTION OF FILM AND DEDUCTION OF COST OF PRODUCTION THERE AGAINST HAD B EEN CONSIDERED AND DECIDED IN APPEAL BY FIRST APPELLATE AUTHORITY, SAI D ISSUES COULD NOT BE MADE SUBJECT MATTER OF REVISION UNDER SECTION 263. THE RELEVANT PART OF THE ORDER IS EXTRACTED BELOW: 10. WE FIND THAT DESPITE THIS POSITION EMERGING FROM T HE RECORD AND BEING UNDISPUTED, THE ORDER UNDER SECTION 263 OF THE INCO ME TAX ACT MAKES DETAILED REFERENCE TO THE SHOW CAUSE NOTICE. THE SHOW CAUSE NOTICE AS ALSO THIS ORDER PASSED UNDER SECTION 263 MAKE DETAILED REFERENCE TO THE CLAIMS OF THE ASSESSEE AND WHICH WERE PART OF THE APPEAL BEFORE THE COMMIS SIONER AND DEALT WITH BY HIM IN HIS ORDER DATED 12TH OCTOBER, 2011. THE ORDE R OF THE COMMISSIONER UNDER ITA NO. 2499/MUM/2017 AMAZIA DEVELOPERS PVT LTD 11 SECTION 263 DATED 29TH MARCH, 2012, FROM PARAS 8 ON WARDS, MAKES EXTENSIVE REFERENCE TO THESE ASPECTS. IN THE CIRCUMSTANCES, W HAT FURTHER EMERGES IS THAT NOT ONLY DID THE REVISIONAL AUTHORITY PURPORT TO REVISE THE ASSESSING OFFICER'S ORDER, BUT HE PURPORTED TO DEAL WITH THE SAME DIRECTION WH ICH WAS ISSUED IN THE ORDER OF THE FIRST APPELLATE AUTHORITY AND WHICH WAS GIVEN E FFECT TO BY THE ASSESSING OFFICER. MEANING THEREBY, THE CONTENTS OF THE REMAN D REPORT, GIVING EFFECT TO THE ORDER OF THE FIRST APPELLATE AUTHORITY, AS SUBMITTE D BY THE ASSESSING OFFICER, CAME TO BE RECONSIDERED AND REVISITED. IN ADDITION THERE TO, ONE MORE ASPECT OF SALE OF THEATRICAL RIGHTS OF ' DARNA ZAROORI HAI ' TO M/S. RGV ENTERPRISES WAS CONSIDERED. NATURALLY, THEREFORE, THE DOCTRINE OF M ERGER WAS INVOKED BY THE ASSESSEE AND IT WAS APPLIED BY THE TRIBUNAL TO UPHO LD THE OBJECTION RAISED BY THE ASSESSEE. 11. IN THE ABOVE FACTUAL CIRCUMSTANCES, WE DO NOT FIND THAT THE TRIBUNAL ERRED IN HOLDING THAT CLAUSE (C) OF THE EXPLANATION TO SUB SECTION (1) OF SECTION 263 OF THE INCOME TAX ACT, 1961 CANNOT BE APPLIED. IN THE PRES ENT CASE, THAT HAS NO APPLICATION BECAUSE THE MATTERS WHICH HAVE BEEN CON SIDERED AND DECIDED IN THE APPEAL BY THE FIRST APPELLATE AUTHORITY ARE BEING M ADE SUBJECT MATTER OF THE REVISIONAL AUTHORITY'S ORDER. IN OTHER WORDS, THE P OWER TO REVISE, AS CONFERRED BY SECTION 263, IS SOUGHT TO BE EXERCISED SO AS TO DEA L WITH THE SAME MATTERS WHICH HAVE BEEN CONSIDERED AND DECIDED IN THE APPEAL. WE DO NOT FIND ANY MERIT IN MR. MOHANTY'S SUBMISSION BECAUSE DETAILED REFERENCE S HAVE BEEN MADE IN THE FOREGOING PARAGRAPHS TO THE CASE OF THE ASSESSEE BE FORE THE ASSESSING OFFICER, HIS INITIAL ORDER, THE ORDER OF THE FIRST APPELLATE AUTHORITY, THE DIRECTION ISSUED BY THE FIRST APPELLATE AUTHORITY AND WHICH WAS GIVEN E FFECT TO BY THE ASSESSING OFFICER. ALL THESE WOULD DENOTE THAT SOMETHING WHIC H WAS VERY MUCH PART AND PARCEL OF THE APPELLATE AUTHORITY'S ORDER AND DEALT WITH EXTENSIVELY THEREIN IS NOW SOUGHT TO BE REVISED AND REVISITED. FIRSTLY, IF THE INCOME OF THE ASSESSEE FROM THE FILM IS RS.11,25,00,000/-, THEN, WHETHER THE EXPLAN ATION OF THE ASSESSEE THAT IT IS NOT SO DESERVES TO BE CONSIDERED OR NOT BY THE ASSE SSING OFFICER IS GRIEVANCE NO. 1/GROUND NO. 1 BEFORE THE FIRST APPELLATE AUTHORITY . SECONDLY, IF THAT IS TAKEN TO BE THE INCOME OF THE ASSESSEE AND WITHOUT ADMITTING IT TO BE SO THE COST OF ITA NO. 2499/MUM/2017 AMAZIA DEVELOPERS PVT LTD 12 PRODUCTION OF THE FILM NEEDS TO BE DEDUCTED BY APPL YING RULE 9A OF THE INCOME TAX RULES. THUS, THAT IS GROUND NO. 2 IN THE MEMO O F APPEAL BEFORE THE FIRST APPELLATE AUTHORITY AND IN HIS ORDER DATED 12TH OCT OBER, 2011. BOTH THESE MATTERS ARE VERY MUCH PART OF THE REVISIONAL AUTHORITY'S OR DER DATED 29TH MARCH, 2012. THE ATTEMPT TO REOPEN THEM CANNOT BE SAVED AS CLAUS E (C) OF EXPLANATION BELOW SUB-SECTION (1) OF SECTION 263 OF THE INCOME TAX AC T, 1961 HAD NO APPLICATION. 12. THE HONBLE GUJARAT HIGH COURT IN CIT VS NIRMA CHEM ICALS WORKS P. LTD (SUPRA) HELD THAT THE COMMISSIONER IS ENTITLED TO R EVISE AN ASSESSMENT ORDER INSOFAR AS THE ORDER IS ERRONEOUS AND PREJUDICIAL T O THE INTEREST OF THE REVENUE, BUT THE EXPLANATION (C) TO SECTION 263 PLA CES AN EMBARGO ON THE COMMISSIONER IN CASE OF SUBJECT-MATTER OF ANY APPEA L WHICH HAD BEEN CONSIDERED AND DECIDED IN SUCH APPEAL. IN OTHER WOR DS, BEFORE THE COMMISSIONER EXERCISES THE JURISDICTION UNDER SECTI ON 263, HE IS REQUIRED TO ASCERTAIN WHETHER THE ORDER REFERRED TO IN SUB-SECT ION (1) OF SECTION 263 HAD BEEN THE SUBJECT-MATTER OF ANY APPEAL, AND IF YES, THE REVISIONAL POWERS SHOULD BE AVAILABLE ONLY IF SUCH SUBJECT-MATTER HAD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEAL. 13. FURTHER HONBLE BOMBAY HIGH COURT IN SONAL GARMENTS VS JCIT (SUPRA) HELD THAT FROM THE CHRONOLOGY OF EVENTS IT APPEARS THAT COMPUTATION OF DEDUCTION UNDER SECTION 80HHC WAS A SUBJECT-MATTER OF APPEAL BEFORE THE COMMISSIONER (APPEALS). THE COMMISSIONER (APPEALS) HAD GIVEN SOME FINDINGS ON THE COMPUTATION OF DEDUCTION UNDER SECT ION 80HHC. THEREFORE, ITA NO. 2499/MUM/2017 AMAZIA DEVELOPERS PVT LTD 13 THE ASSESSMENT ORDER HAD MERGED WITH THE ORDER OF T HE COMMISSIONER (APPEALS). THUS, UNDER EXPLANATION (C) TO SECTION 2 63(1), SUCH ACTION OF THE COMMISSIONER WAS NOT PERMISSIBLE. THE WORD MATTER IS CERTAINLY A WORD OF WIDE IMPORT AND REPRESENTS A SUBJECT OR SITUATION T HAT ONE NEEDS TO THINK ABOUT, DISCUSS OR DEAL WITH. THE HONBLE HIGH COURT ALSO AFTER CONSIDERING THE SIMILAR OBJECTION OF THE DEPARTMENT HELD THAT I T WAS DIFFICULT TO ACCEPT THE SUBMISSION OF THE DEPARTMENT THAT THE ISSUE OF DEPR ECIATION BEING OPTIONAL OR THE ISSUE WHETHER THE ASSESSEE WAS AT ALL ENTITLED TO DEDUCTION UNDER SECTION 80HHC OR NOT, WAS NOT A SUBJECT-MATTER OF APPEAL FI LED BY THE ASSESSEE BEFORE THE COMMISSIONER (APPEALS). A MATTER MIGHT H AVE MANY ASPECTS AND THE ABOVE-MENTIONED TWO FACTORS MIGHT BE THE ASPECT S OF THE MATTER BUT NOT THE ENTIRE MATTER ITSELF. THE MATTER, IN THE IN STANT CASE, WAS DEDUCTION UNDER SECTION 80HHC. THEREFORE, THE ASSESSMENT ORDE R, SO FAR AS IT RELATED TO DEDUCTION UNDER SECTION 80HHC, HAD MERGED WITH THE ORDER OF THE COMMISSIONER (APPEALS) AND, THEREFORE, EXERCISE OF POWER BY THE COMMISSIONER UNDER SECTION 263 WAS EVEN NOT AVAILAB LE UNDER EXPLANATION (C) TO SECTION 263(1). THEREFORE, ORDER UNDER SECTI ON 263 WAS NOT A VALID ORDER IN THE EYES OF LAW. 14. NOW AGAIN TURNING TO THE EVENTS OF THE CASE IN HAND , IN THE RETURN OF INCOME THE ASSESSEE OFFERED THE LEASE RENTAL INCOME AS BUS INESS INCOME, THE ITA NO. 2499/MUM/2017 AMAZIA DEVELOPERS PVT LTD 14 TREATMENT OF THE INCOME OFFERED BY ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER, THE ASSESSING OFFICER TREATED TH E SAME AS INCOME FROM OTHER SOURCES. THE ASSESSEE FILED APPEAL BEFORE LD. COMMISSIONER (APPEALS). THE LD. COMMISSIONER (APPEALS) ALLOWED T HE APPEAL OF THE ASSESSEE BY ACCEPTING THE LEASE RENTAL INCOME AS B USINESS INCOME. THEREFORE, BEFORE THE LD COMMISSIONER (APPEALS) THE RE WAS ISSUE OF TAXABILITY OF RENTAL INCOME, WHICH WAS DULY CONSIDE RED AND DECIDED BY HIM. THE LD COMMISSIONER (APPEALS) DECIDED THE ISSUE AFT ER EXAMINING THE MEMORANDUM OF ASSOCIATION OF THE ASSESSEE, NATURE O F THE INCOME AND FACTS THAT SIMILAR INCOME WAS ACCEPTED AS A BUSINESS INCO ME. IN OUR VIEW THE ORDER OF ASSESSING OFFICER ON POINT OF TAXABILITY O F LEASE RENTAL INCOME IS MERGED WITH THE ORDER OF LD. COMMISSIONER (APPEALS) . THE REVENUE/ ASSESSING OFFICER ACCEPTED THE FINDING OF LD. COMMI SSIONER (APPEALS) AS NO FURTHER APPEAL WAS FILED BEFORE TRIBUNAL. THIS FACT WAS BROUGHT IN THE NOTICE OF LD. PR COMMISSIONER IN THE REPLY FURNISHED BY TH E ASSESSEE. THE LD. PR COMMISSIONER TOOK THE VIEW THAT THE TAXABILITY OF R ENTAL INCOME AS HOUSE PROPERTY INCOME WAS NOT THE SUBJECT MATTER BEFORE LD. COMMISSIONER (APPEALS). IN OUR VIEW THE LD. PR COMMISSIONER IS W RONG IN HIS APPROACH AND THE TAXABILITY OF LEASE INCOME AS WAS VERY MUCH BEF ORE LD. COMMISSIONER (APPEALS). IN VIEW OF THE ABOVE FACTUAL AND LEGAL D ISCUSSIONS THE ITA NO. 2499/MUM/2017 AMAZIA DEVELOPERS PVT LTD 15 EXPLANATION (C) TO SECTION 263 PLACES AN EMBARGO ON THE COMMISSIONER IN CASE OF SUBJECT-MATTER OF ANY APPEAL WHICH HAD BEEN CONSIDERED AND DECIDED IN SUCH APPEAL. BEFORE THE LD. COMMISSIONER EXERCIS ES HIS JURISDICTION UNDER SECTION 263, HE IS REQUIRED TO ASCERTAIN WHETHER TH E ORDER REFERRED TO IN SUB- SECTION (1) OF SECTION 263 HAD BEEN THE SUBJECT-MAT TER OF ANY APPEAL, AND IF YES, THE REVISIONAL POWERS SHOULD BE AVAILABLE ONLY WITH RESPECT TO SUBJECT- MATTER THAT HAD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEAL. THUS, IN THE PRESENT CASE, THE LD. PR COMMISSIONER WAS WRONG IN REVISING THE ASSESSMENT ORDER ON THE TAXABILITY OF RENTAL INCOME AS INCOME FROM HOUSE PROPERTY. THEREFORE, THE ORDER PASSED BY HIM IS NOT VALID. WE HOLD SO. 15. AS WE HAVE HELD THE REVISION ORDER DATED 27.03.201 7 PASSED BY LD PR COMMISSIONER UNDER SECTION 263 IS INVALID, THEREFOR E ADJUDICATION OF OTHER ALTERNATIVE SUBMISSIONS OF THE LD AR FOR THE ASSESS EE AND DISCUSSION ON THE MERIT OF THE ISSUE HAS BECOME ACADEMIC. 16. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08/05/2019. SD/- SD/- G.S. PANNU PAWAN SINGH VICE-PRESIDENT JUDICIAL MEMBER MUMBAI, DATE: 08.05.2019 COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT ITA NO. 2499/MUM/2017 AMAZIA DEVELOPERS PVT LTD 16 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR A BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI