ASHOK M JAIN, NAVI MUMBAI V. PRINCIPAL COMMISSIONER OF INCOME TAX - 28, MUMBAI

ITA 6764/MUM/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7100 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 28-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R P MEENA
• Assessee Lawyers: V D PARMAR
• Keywords: Opportunity of being heard; Principle of natural justice; Maximum Marginal Rate; Earning of tax free income; Wrong claim
• Section: 143(3); 142(1); 263

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL A BENCH, MUM BAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.6764/MUM/2017 (ASSESSMENT YEAR 201 3-14 ) MR. ASHOK M. JAIN, B-2501, EMERALD BAY CHS, PLOT NO. R3/B, OFF. PALM BEACH ROAD, NR. B.P. PETROL PUMP, SECTOR-14, NERUL, NAVI MUMBAI-400706. PAN: AAIPJ9350L VS. PR. CIT-28, ROOM NO. 301, 3 RD FLOOR, TOWER NO.6, VASHI RAILWAY STATION COMPLEX, VASHI, NAVI MUMBAI-400703. APPELLANT RESPONDENT APPELLANT BY : SHRI V.D. PARMAR (AR) RESPONDENT BY : SHRI R.P. MEENA (CIT-DR) DATE OF HEARING : 01.05.2018 DATE OF PRONOUNCEMEN T : 31.05.2018 ORDER UNDER SECTION 254(1) OF INCOME -TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER ; 1. THE INSTANT APPEAL BY ASSESSEE UNDER SECTION 253 OF THE INCOME-TAX ACT (THE ACT) IS DIRECTED AGAINST THE ORDER UNDER SECTION 26 3 OF INCOME TAX ACT DATED 31.10.2017 PASSED BY LD. PRINCIPAL COMMISSIONER OF INCOME-TAX-28 [LD. PCIT], MUMBAI FOR ASSESSMENT YEAR 2013-14. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2013-14 ON 28.09.2013 DECLARING TOT AL INCOME AT RS.32,53,380/-. THE ASSESSMENT WAS COMPLETED ON 30. 03.2016 UNDER SECTION 143(3) OF THE ACT. THE ASSESSMENT ORDER WAS REVISED BY LD. PCIT VIDE ITS ORDER DATED 31.03.2017. THE LD. PCIT ISSUED NOTICE UNDER SECTION 263 DATED 23.03.2017. IN THE SHOW-CAUSE NOTICE, THE LD. PCIT RAISED THE ISSUE THAT THE ASSESSING OFFICER WHILE PASSING ASSESSMENT ORDER HA S NOT EXAMINED THE ITA NO.6764/M/17- MR. ASHOK M. JAIN 2 RECEIPT OF AMOUNT OF RS. 15.64 LAKHS IN THE CAPITAL ACCOUNT BY WAY OF INTEREST FROM M/S MILESTONE DOMESTIC SCHEME III. THEREFORE, THE ORDER PASSED BY ASSESSING OFFICER IS ERRONEOUS SO FAR AS PREJUDICIA L TO THE INTEREST OF REVENUE. IN RESPONSE TO THE SHOW-CAUSE NOTICE UNDER SECTION 263, THE ASSESSEE FILED HIS REPLY ON 30.03.2017. IN THE REPLY, THE ASSESSEE CONTENDED THAT THE ASSESSEE FURNISHED FULL DETAILS AT THE TIME OF ASSE SSMENT PROCEEDINGS RELATED TO THE INTEREST RECEIVED FOR RS. 15,64,000/-. THE A SSESSMENT OFFICER AFTER GOING THROUGH THE SAID DETAILS AND SATISFYING HIMSE LF PASSED THE ASSESSING ORDER. THE ASSESSING OFFICER WAS SATISFIED THAT SUC H INTEREST IS RECEIVED FROM SAID TRUST IS NOT TAXABLE. THE ASSESSEE FURTHER CON TENDED THAT HE HAS RECEIVED A PAY OUT FROM M/S MILESTONE DOMESTIC SCHEME III, M /S MILESTONE REAL ESTATE FUND (TRUST), WHICH IS DISCRETIONARY TRUST A ND IS BEING TAXED AT MAXIMUM MARGINAL RATE UNDER SECTION 164, SO ANY AMO UNT RECEIVED FROM SUCH TRUST ON DISTRIBUTION OF INCOME IN THE HAND OF BENEFICIARY IS NOT TAXABLE. THEREFORE, THE ASSESSING OFFICER HAS NOT A DDED THE SAME AS TAXABLE INCOME. THE CONTENTION OF THE ASSESSEE WAS NOT ACCE PTED BY LD. PCIT HOLDING THAT SECTION 164 RELIED BY ASSESSEE DOES NO T EXEMPT THE SHARES OF BENEFICIARY OF TRUST. THE ASSESSEE HAS INVESTED IN THE FUND. THE ASSESSEE IS NOT BENEFICIARY FOR WHOSE BENEFIT, THE TRUST IS CRE ATED. THE SHARE OF MEMBER OF ASSOCIATION OF PERSON (AOP) IS ASSESSED AS PER SECTION 67A OF THE ACT, THEREFORE, THE ASSESSEE MADE A FALSE CLAIM OF INTER EST BEING EXEMPT. THE LD. PCIT DECLARED THE ASSESSMENT ORDER DATED 30.03.2016 AS ERRONEOUS AND IN SO ITA NO.6764/M/17- MR. ASHOK M. JAIN 3 FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. THE LD. PCIT FURTHER CONCLUDED THAT ASSESSING OFFICER FAILED TO CONDUCT PROPER ENQ UIRIES, INVESTIGATION AND EXAMINATION OF FACTS. THE ASSESSING OFFICER WAS DIR ECTED TO PASS THE FRESH ASSESSMENT ORDER IN ACCORDANCE WITH LAW AFTER AFFOR DING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THEREFORE, AGGRIEVED B Y THE ORDER OF LD. PCIT, THE ASSESSEE HAS FILED PRESENT APPEAL BEFORE US RAI SING THE FOLLOWING GROUNDS OF APPEAL: (1) ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW LD. PR. CIT ERRED IN SETTING ASIDE THE ORDER OF AO PASSED U/S 143(3) DATED 30-03 -2016 AND DIRECTING THE AO TO PASS FRESH ASSESSMENT ORDER IN ACCORDANCE WITH T HE LAW. (2) ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW LD. PR. CIT ERRED IN GIVING FINDING THAT APPELLANT HAS MADE FALSE CLAIM RELATIN G TO INTEREST OF RS 15.64 LACS RECEIVED FROM MILE STONE REAL ESTATE FUND (TRUST) A S EXEMPT INCOME. (3) ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW LD. PR. CIT ERRED IN HOLDING THAT ORDER OF AO U/S 143(3) IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE WITHOUT APPRECIATING THE FA CT THAT ISSUE OF TAXABILITY OF INTEREST OF RS 15.64 LACS WAS EXAMINED BY AO AT THE TIME OF ASSESSMENT PROCEEDINGS AND ONLY AFTER EXAMINING SUCH ISSUE AO SATISFIED HIMSELF THAT SAME IS EXEMPT AND ACCORDINGLY PASSED ORDER U/S 143(3). 3. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE (AR ) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENU E AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. AR OF THE ASS ESSEE SUBMITS THAT DURING THE ASSESSMENT PROCEEDING, THE ASSESSING OFFICER RA ISED PROPER QUERIES RELATED WITH M/S MILESTONE REAL ESTATE FUND (TRUST). THE ASSESSE E FURNISHED ALL DETAILS INCLUDING INTEREST FROM M/S MILESTONE R EAL ESTATE FUND OF RS. 15.04 LAKHS. THE ASSESSING OFFICER AFTER PROPER VER IFICATION OF THE FACT AND CONSIDERING THE SUBMISSION OF THE ASSESSEE PASSED T HE ASSESSMENT ORDER. THE ITA NO.6764/M/17- MR. ASHOK M. JAIN 4 LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT THE COP Y OF NOTICE ISSUED BY ASSESSING OFFICER UNDER SECTION 142(1) DATED 30.11. 2015 IS PLACED ON RECORD. THE ASSESSING OFFICER VIDE QUESTION NO. 17 RAISED A QUERY RELATED WITH CAPITAL ACCOUNT AND FOR SEEKING THE DETAILS INCLUDI NG THE INTEREST FROM M/S MILESTONE REAL ESTATE FUND OF RS.15,164/-. THE ASSE SSEE IN HIS REPLY DATED 15.05.2015 FURNISHED THE STATEMENT OF INTEREST FROM M/S MILESTONE AND THE CONFIRMATION FROM M/S MILESTONE. COPY OF WHICH IS P LACED ON RECORD (PAGE NO. 13 & 14 OF THE PAPER BOOK). THE LD AR FOR THE A SSESSEE SUBMITS THAT ASSESSMENT THE ORDER PASSED BY ASSESSING OFFICER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE. THE ASSESSM ENT WAS PASSED AFTER VERIFICATION OF FACTS. IN SUPPORT OF HIS SUBMISSION , THE LD. AR OF THE ASSESSEE RELIED UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. GABRIEL INDIA 71 TAXMAN 585 (BOM) AND CBDT CIRCULAR NO. 13 OF 2014 DATED 28.07.2014. 4. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF LD. PCIT. THE LD. DR FOR THE REVENUE FURTHER SUBMITS TH AT ASSESSING OFFICER HAS NOT MADE PROPER ENQUIRY DURING THE ASSESSMENT PROCE EDING. MOREOVER, THE ASSESSING OFFICER SHALL FIND OUT IN THE FRESH ASSES SMENT PROCEEDINGS, IF THE CONDITION PRESCRIBED UNDER SECTION 164 IS COMPLIED WITH OR NOT. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE NO TED THAT DURING THE ASSESSMENT PROCEEDING, THE ASSESSING OFFICER RAISED QUERY RELATED WITH ITA NO.6764/M/17- MR. ASHOK M. JAIN 5 THE INTEREST RECEIVED FROM M/S MILESTONE REAL ESTAT E FUND (TRUST) OF RS. 15.64 LAKHS. THE ASSESSEE VIDE ITS REPLY DATED 15.1 2.2015 FURNISHED THE NECESSARY REPLY AND THE DETAILS. AFTER CONSIDERING THE EXPLANATION, THE ASSESSING OFFICER GRANTED EXEMPTION TO THE ASSESSEE . 6. THE HONBLE DELHI HIGH COURT IN DIT VS JYOTI FOUNDA TION [2013]357 ITR 388(DELHI) WHILE DISTINGUISHING THE ORDER PASSE D AFTER PROPER INQUIRY AND WITHOUT INQUIRY HELD THAT THE ORDERS WH ICH ARE PASSED WITHOUT INQUIRY OR INVESTIGATION ARE TREATED AS ERR ONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, BUT ORDERS WHICH ARE PA SSED AFTER INQUIRY OR INVESTIGATION ON THE ISSUES ARE NOT PER SE OR NORMA LLY TREATED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. BECAUSE THE REVISIONARY AUTHORITY FEELS AND OPINES THAT FURTHER INQUIRY OR INVESTIGATION WAS REQUIRED OR DEEPER OR FURTHER SCR UTINY SHOULD BE UNDERTAKEN, THE COMMISSIONER MUST RECORD A FINDING THAT THE ORDER MADE IS ERRONEOUS. HONBLE SUPREME COURT IN MALABAR INDUSTRIAL CO LTD VS CIT [2000] 243 ITR 83 (SC) HAS WHILE EXAMINING T HE SCOPE OF REVISIONARY POWER OF COMMISSIONER HELD THAT A BARE READING OF SECTION 263 OF THE ACT 1961, MAKES IT CLEAR THAT THE PREREQ UISITE FOR THE EXERCISE OF JURISDICTION BY THE COMMISSIONER OF INCOME TAX SUO MOTO UNDER IT, IS THAT THE ORDER OF ITO IS ERRONEOUS, SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. THE CIT HAS TO BE SATISFIED TW IN CONDITIONS, NAMELY (1), THE ORDER OF AO SOUGHT TO BE REVISED IS ERRONE OUS AND (2) IT IS ITA NO.6764/M/17- MR. ASHOK M. JAIN 6 PREJUDICIAL TO THE INTEREST OF REVENUE. IF ONE OF T HEM IS ABSENT- IF THE ORDER OF ITO IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUDICIAL TO THE REVENUE, RE COURSE CANNOT BE HAD TO SECTION 263 (1) OF THE ACT. THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COM MITTED BY THE AO, IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACT OR AN INCORRECT APPLIC ATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOU S. IN THE SAME CATEGORY FALLS ORDERS PASSED WITHOUT APPLYING THE P RINCIPLE OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND. THE PHRASE PREJUDICIAL TO THE INTEREST OF REVENUE IS NOT AN EXPRESSION OF ART AN D IS NOT DEFINED IN THE ACT. UNDERSTOOD IT IS ORDINARY MEANING IT IS OF WID E IMPORT AND IS NOT CONFINED TO LOSS OF TAX. THE SCHEME OF THE ACT IS T O LEVY AND COLLECT TAX IN ACCORDANCE WITH THE PROVISION OF THE ACT AND THI S TASK IS ENTRUSTED TO THE REVENUE. IF DUE TO AN ERRONEOUS ORDER OF THE IT O, THE REVENUE IS LOSING TAX LAWFULLY PAYABLE BY A PERSON, IT WILL CE RTAINLY BE PREJUDICIAL TO THE INTEREST OF REVENUE. THE PHRASE PREJUDICIAL TO THE INTEREST OF REVENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRON EOUS ORDER PASSED BY THE AO. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF A N ORDER OF AO, CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF REVENUE, FOR EXAMPLE, WHEN AN ITO, ADOPTED ONE OF THE COURSE PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE ITA NO.6764/M/17- MR. ASHOK M. JAIN 7 ITO HAS TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE IN TEREST OF REVENUE. UNLESS THE VIEW TAKEN BY ITO IS UNSUSTAINABLE IN LA W. 7. THE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS GAB RIEL INDIA (1993) 203 ITR 108 (BOM) HELD THAT IF THE ASSESSING OFFICER ACTING IN ACCORDANCE WITH LAW MAKES A CERTAIN ASSESSMENT, THE SAME CANNOT BE BRANDED AS ERRONEOUS BY THE COMMISSIONER SIMPLY BECAUSE, ACCORDING TO HIM, THE ORDER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY. THIS SECTION DOES NO T VISUALIZE A CASE OF SUBSTITUTION OF THE JUDGMENT OF THE COMMISSIONER OF INCOME TAX FOR THAT OF THE ITO, WHO PASSED THE ORDER, UNLESS THE DECISION IS HELD TO BE ERRONEOUS. CASES MAY BE VISUALIZED WHERE THE ITO WHILE MAKING AN ASSESSMENT EXAMINES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINES THE INCOME EITHER BY ACCEPTING THE ACCOUNTS OR BY MAKING SOME ESTIMATE HIMSELF. THE CO MMISSIONER, ON PERUSAL OF THE RECORDS, MAY BE OF THE OPINION THAT THE ESTI MATE MADE BY THE OFFICER CONCERNED WAS ON THE LOWER SIDE AND LEFT TO THE COM MISSIONER HE WOULD HAVE ESTIMATED THE INCOME AT A FIGURE HIGHER THAN THE ON E DETERMINED BY THE ITO. THAT WOULD NOT VEST THE COMMISSIONER WITH POWER TO RE-EXAMINE THE ACCOUNTS AND DETERMINE THE INCOME HIMSELF AT A HIGH ER FIGURE . THE ASSESSING OFFICER HAS TAKEN A REASONABLE AND POSSIBLE VIEW. 8. IN VIEW OF THE ABOVE FACTUAL AND LEGAL DISCUSSION, WE FIND THAT THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER HAS TAKE N ONE OF THE POSSIBLE VIEWS WHILE GRANTING THE EXEMPTION OF INTEREST INCO ME OF RS. 15.64 LAKHS. ITA NO.6764/M/17- MR. ASHOK M. JAIN 8 THUS, THE ORDER PASSED BY ASSESSING OFFICER IS NOT ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE. EVEN ON MERIT WE HAVE S EEN THAT THE ASSESSEE HAS RECEIVED INTEREST FROM MILESTONE DOMESTIC SCHEME II I, THE SCHEME OF MILESTONE REAL ESTATE FUND (TRUST) WHICH IS DISCRET IONARY TRUST AND IS BEING TAXED AT MARGINAL TAX RATE UNDER SECTION 164 SO ANY AMOUNT RECEIVED FROM SUCH TRUST ON DISTRIBUTION OF INCOME IN THE HANDS O F BENEFICIARY IS NOT TAXABLE. THEREFORE, THE ASSESSEE ALSO SUCCEEDED ON MERIT. THUS, THE VIEW TAKEN BY LD. PCIT IS NOT SUSTAINABLE. IN THE RESULT , GROUND OF APPEAL RAISED BY ASSESSEE IS ALLOWED. 9. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.05.2018. SD/- SD/- G.S. PANNU PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 31.05.2018 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 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