MR. PUNET BHATIA, DELHI V. PR.COMM OF INCOME TAX , MUMBAI

ITA 850/MUM/2022

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 1557 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2017-2018
• Appeal Filed On: 01-05-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Deemed owner of house property; Capital Gains
• Section: 263; 143(3)

Judgement Text

Page | 1 ITA no.850/Mum/2022 Mr. Puneet Bhatia; A.Y. 17–18 IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, JM AND SHRI PRASHANT MAHARISHI, AM ITA No. 850/Mum/2022 (Assessment Year 2017–18) Mr. Puneet Bhatia C/o Sharm a Goe l A nd Co. LLP, A–47, Lo wer G roun d Floo r, Hau z Khas, Ne w D elhi, Delh i–110016 Vs. Pr. Commissioner of Income Tax, Room no. 501, 5 th Floor, Aayakar Bhavan, Maharshi Karve Road, Mumbai-400 020 (Appellant) (Respondent) PAN No. AAAPB1298H Assessee by : Mr. Ajay Wadhwa, AR Revenue by : Mr. Sanjay V. Deshmukh, CIT DR Date of hearing: 03.08.2022 Date of pronouncement : 29.08.2022 O R D E R PER PRASHANT MAHARISHI, AM: 01. This appeal is filed by the assessee against the revision order passed by The Principal Commissioner Of Income Tax – 6, Mumbai (The Learned PCIT) u/s 263 of The Income Tax Act, 1961 (The Act) on 30 March 2022 holding that assessment order passed by The Assistant Commissioner Of Income Tax, Circle 14 (3) (1) Mumbai [ the Ld AO] u/s 143 (3) of the act dated 7/11/2019 is erroneous so far as prejudicial to the interest of revenue. Page | 2 ITA no.850/Mum/2022 Mr. Puneet Bhatia; A.Y. 17–18 02. The assessee is aggrieved with that order raising following grounds of appeal. “1. That the order passed by the Hon'ble Principal Commissioner of Income Tax - 6, Mumbai (hereinafter referred to as "PCIT") under section 263 of the Income Tax Act 1961 ("the Act") dated 30.03.2022 is bad in law and on facts. 2. That the action of the Hon'ble PCIT in assuming jurisdiction under section 263 of the Act and holding that the order passed by the Assistant Commissioner of Income Tax, Circle 14(3)(1), Mumbai (hereinafter referred to as "the AO") under section 143(3) dated 07.11.2019 is erroneous in so far as prejudicial to the interest of the revenue, is illegal and without jurisdiction. 3. That on the facts and circumstances of the case, the Hon'ble PCIT has erred in assuming jurisdiction under section 263 of the Act with respect to the issue of charging notional rent on house property under section 23 of the Act without appreciating the fact that such issue was not subject matter of limited scrutiny assessment under section 143(3) of the Act. 3.1 That the Hon'ble PCIT has erred in exercising revisionary powers under section 263 of the Act in spite of the fact known to him that the case of the appellant was selected under "limited scrutiny" consequent to which the order under section 143(3) was passed and Page | 3 ITA no.850/Mum/2022 Mr. Puneet Bhatia; A.Y. 17–18 chargeability of income under the head house property was not within the scope of such limited scrutiny. 3.2 That the Hon'ble PCIT has erred in travelling beyond the jurisdiction that was vested with the A.0 while framing the assessment without appreciating the law that revisional jurisdiction cannot be exercised for broadening the scope of jurisdiction that was vested with the A.O while framing the assessment. 3.3 That the Hon'ble PCIT has erred in not appreciating the law that that the scope of limited scrutiny can only be enlarged with the prior approval of Administrative Commissioner by the AO and not challenging the powers of the AO by the appellant during the assessment proceedings does not automatically coverts limited scrutiny into complete scrutiny. 3.4 That the Hon'ble PCIT has erred in law in holding that order passed by the Ld. AO is in ignorance of the provisions of the Act. 4. That the Hon'ble PCIT has erred in law in invoking clause (a) of Explanation 2 to section 263 of the Act for passing the revisionary order. 5. That the Hon'ble PCIT has erred in holding that the provisions of section 23 are attracted in the case of the appellant without appreciating the Page | 4 ITA no.850/Mum/2022 Mr. Puneet Bhatia; A.Y. 17–18 submissions of the appellant that the said property is used by the appellant as self-occupied. 6. That the assumption of jurisdiction by the Hon'ble PCIT in the instant case being without satisfaction of pre-requisite twin conditions of the law, Le, Assessment Order being erroneous as well as prejudicial to the interest of revenue, and therefore the same is bad in law and consequently, the impugned order passed in pursuance thereto is liable to be quashed. 7. The appellant craves leave to add, amend, alter, remove, rescind, forgo or withdraw any of the above grounds of appeal which are without prejudice to one another before or at the time of hearing of the appeal in the interest of natural justice.” 03. Facts of the case shows that assessee is an individual, director in TPG Capital private limited, earning income from salary, rental income, capital gains on sale of shares and securities and other income. He filed his return of income on 30/7/2017 declaring a total income of ₹ 269,532,970/–. 04. The case of the assessee was selected for scrutiny for limited purpose Under ‘CASS for limited scrutiny “for verifying the issue pertaining to relief claimed u/s 90/91 of the act, capital gain/ loss u/s 111 A of The Act and dividend income. Page | 5 ITA no.850/Mum/2022 Mr. Puneet Bhatia; A.Y. 17–18 05. During the course of assessment proceedings notices were issued which were replied by the assessee and thereafter the assessment order was passed on 7/11/2019 at the returned income of the assessee at ₹ 269,532,966/–. 06. On examination of the record by the learned PCIT, he found that that the AO asked the assessee to furnish details of all movable and immovable properties owned by him along with description and address. In response to that assessee has furnished requisite details. Based on those details total seven immovable properties, which included 2 agricultural lands were shown . Based on these details the AO noted that assessee has not offered rental income in respect of three properties. The AO issued show cause notice why these three properties should not be treated as deemed let out properties and income should not be taxed under the head income from house property. The assessee submitted that two properties are under construction and therefore no rent was received. However, there is one more property located at Goa and assessee submitted that it is taken as a holiday home which was used by him and his family members during vacation. The ld AO while finalizing the assessment order did not make any addition with respect to that. Therefore, notice u/s 263 of the act was issued on 3/3/22 to show cause that why the assessment order passed by the learned assessing officer should not be held to be erroneous as it did not add rental income in respect of the holiday home at Goa. Page | 6 ITA no.850/Mum/2022 Mr. Puneet Bhatia; A.Y. 17–18 07. Assessee made detail submission on 8/3/22 stating that his case was selected for limited scrutiny for verifying limited aspect of his return of income. The chargeability of income from house property was not the subject matter of scope of the scrutiny; therefore, the provisions of Section 263 of the income tax act cannot be invoked on that ground. The learned PCIT rejected this argument of the assessee stating that as during the course of assessment proceedings assessee has furnished all the details which are verified by the assessing officer, Assessee did not challenge the power of the AO calling for details on the issues other than the limited issue mentioned in the notice u/s 143 (2) of the act, now assessee cannot object. Therefore this contention of the assessee is not acceptable. He invoked the provisions of explanation 2 of Section 263 of the act and held that the explanation of the assessee that there is no deemed rental income chargeable to tax with respect to the holiday home at Goa was not examined properly by the assessing officer as no addition is made on that count. Therefore after referring several judicial precedents and justifying the taxability of the income Under the income from house property with respect to holiday home at Goa, he set-aside the order passed by the learned assessing officer holding it to be erroneous and prejudicial to the interest of the revenue per order dated 30/3/2022. 08. Assessee is aggrieved with that and has preferred this appeal. The learned authorised representative submitted a factual paper book containing 49 pages as well as Page | 7 ITA no.850/Mum/2022 Mr. Puneet Bhatia; A.Y. 17–18 submitted a case law compilation containing 76 pages and CBDT circular dated 28/11/2018 showing that what is the scope of enquiry in limited scrutiny cases selected Under CASS method. The argument of the learned authorised representative is that order of the learned assessing officer cannot be held to be erroneous so far as prejudicial to the interest of the revenue stating that the enquiries have not been made or addition has not been made by the learned assessing officer on the issues which are not part of the reasons for selection of case of the assessee Under the limited scrutiny mechanism. He submitted that instructions of CBDT also says that the assessing officer is duty-bound to look into only that information and nothing more. He submitted that the case of the assessee was never selected for complete scrutiny and that is not the case of the learned PCIT also. He submitted that in several judicial precedents of the coordinate benches it has been held that the order passed by the assessing officer cannot be said to be erroneous so far as prejudicial to the interest of the revenue in case of limited scrutiny assessment cases, where AO has not made any enquiry on other aspects other than the issues involved in limited scrutiny notice. He referred to case law paper book and referred to 9 such decisions. He therefore submitted that the order passed by the learned PCIT u/s 263 of the income tax act is without jurisdiction. 09. The learned departmental representative vehemently supported revisionary order of the learned PCIT. Page | 8 ITA no.850/Mum/2022 Mr. Puneet Bhatia; A.Y. 17–18 010. We have carefully considered the rival contention and perused the orders of the lower authorities. In this case the return of the assessee was picked up for scrutiny Under the limited scrutiny criterion for verification of issues pertaining to relief claimed u/s 90/91 of the act, capital gain/loss u/s 111 A and dividend income. Therefore, there is no scope of enquiry or power to make an addition to the learned assessing officer with respect to the income chargeable to tax under the head income from house property. It is apparent that the learned assessing officer has exceeded his jurisdiction by asking several details, which were not part of the issues of limited scrutiny assessment. That is altogether a different issue that the AO collected information beyond his powers, but based on such information, which has been collected by the learned assessing officer, the learned PCIT could not have stated that addition with respect to the income from house property has not been charged by the learned AO, though it was not part of the limited scrutiny issue, therefore, the order of the assessment is erroneous in so far as prejudicial to the interest of revenue. several judicial precedents cited before us also supports the case of the assessee. The reason given for rejection of this argument by the learned PCIT is also not palatable. It is held by him that as assessee has succumbed to the jurisdiction of the assessing officer and supplied certain information, the assessee loses his right to challenge the same later on. Based on the information mentioned in the revisionary order, the learned PCIT should have Page | 9 ITA no.850/Mum/2022 Mr. Puneet Bhatia; A.Y. 17–18 reprimanded the assessing officer by asking assessee to furnish the information, which were not within the scope of limited scrutiny. Instead of that, the learned PCIT has invoked the provisions of Section 263 of the act on such information. The action of the learned PCIT also is not in consonance with the direction/ instructions of the central board of direct taxes on limited scrutiny. Therefore, we have no hesitation that the order passed by the learned that PCIT is without jurisdiction therefore we quash it. 011. In the result order passed u/s 263 of the act by the learned principal Commissioner of income tax, dated 30/3/2022 for assessment year 2017 – 18 is quashed. Appeal of the assessee is allowed. Order pronounced in the open court on 29.08.2022. Sd/- Sd/- (AMIT SHUKLA) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 29.08.2022 Sudip Sarkar, Sr.PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, True Copy// Page | 10 ITA no.850/Mum/2022 Mr. Puneet Bhatia; A.Y. 17–18 Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai