UPAL DEVELOPERS P. LTD., MUMBAI V. PR CIT-8, MUMBAI

ITA 871/MUM/2021

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 5124 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2015-2016
• Appeal Filed On: 20-05-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Difference of opinion; Change of opinion; Set aside
• Section: 148; 263; 143(3); 142(1); 43; 2(A); 119

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “F” MUMBAI BEFORE SHRI VIKAS AWASTHY (JUDICIAL MEMBER) AND SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) ITA No. 871/MUM/2021 Assessment Year: 2015-16 Upal Developers Private Limited, Market City Resources Pvt. Ltd., Second Floor, R.R. Hosiery Bldg. Shree Laxmi Woolen Mills Estate, Mumbai-400011. Vs. Principal Commissioner of Income Tax-8, Mumbai. PAN No. AAACU 7953 K Appellant Respondent Assessee by : Mr. Vijay Mehta, AR Revenue by : Mr. Achal Sharma, CIT-DR Date of Hearing : 12/04/2022 Date of pronouncement : 21/06/2022 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against revision order dated 17/03/2021 passed by the Ld. Principal Commissioner of Income-tax-8, Mumbai [in short ‘the ld. PCIT’] for assessment year 2015-16. The grounds raised by the assessee are reproduced as under: 1. On the facts and in the circumstances of the case and in law, the Hon'ble Principal Commissio invoking the provisions of Section 263 of the Act thereby assuming jurisdiction under the said provisions. The Hon'ble PCIT further erred in holding that the assessment completed in the case of appellant had been made without c necessary enquires into the specified issue and hence, the assessment order so passed by the learned A.0 u/s. 143(3) of the Act dated 28.12.2017 is erroneous and prejudicial to the interest of the revenue. The appellant prays that the order of the Principal CIT us. 263 may kindly be quashed and the assessment order of the Ld. A.O dated 28.12.2017 may be restored. 2. On the facts and in the circumstances of the case and in law, the Hon'ble Principal Commissioner of Income Tax holding that the assessment order passed by the Ld. AO u/s. 143(3) of the Act dated 28.12.2017 is erroneous and prejudicial to the i case back to the Ld. A.O. for making a fresh assessment. The appellant prays that the said action of Hon'ble Principal CIT may kindly be quashed. 3. On the facts and in the circumstances of the case and in law, the Hon'ble Principal Commissioner of Income Tax 8 erred in holding that the Ld. A.O. has failed to make any inquiry into the taxability of revenue from operations of Rs. 29.58 crores 16. The grounds raised by the assessee are reproduced as On the facts and in the circumstances of the case and in law, the Hon'ble Principal Commissioner of Income Tax 8 erred in invoking the provisions of Section 263 of the Act thereby assuming jurisdiction under the said provisions. The Hon'ble PCIT further erred in holding that the assessment completed in the case of appellant had been made without c necessary enquires into the specified issue and hence, the assessment order so passed by the learned A.0 u/s. 143(3) of the Act dated 28.12.2017 is erroneous and prejudicial to the interest of the revenue. The appellant prays that the order of the Principal CIT us. 263 may kindly be quashed and the assessment order of the Ld. A.O dated 28.12.2017 may be restored. On the facts and in the circumstances of the case and in law, the Hon'ble Principal Commissioner of Income Tax holding that the assessment order passed by the Ld. AO u/s. 143(3) of the Act dated 28.12.2017 is erroneous and prejudicial to the interest of the revenue, and hence set aside the appellant case back to the Ld. A.O. for making a fresh assessment. The appellant prays that the said action of Hon'ble Principal CIT may kindly be quashed. On the facts and in the circumstances of the case and in law, the Hon'ble Principal Commissioner of Income Tax 8 erred in holding that the Ld. A.O. has failed to make any inquiry into the taxability of revenue from operations of Rs. 29.58 crores Upal Developers Pvt. Ltd. ITA No. 871/M/2021 2 16. The grounds raised by the assessee are reproduced as On the facts and in the circumstances of the case and in law, the ner of Income Tax 8 erred in invoking the provisions of Section 263 of the Act thereby assuming jurisdiction under the said provisions. The Hon'ble PCIT further erred in holding that the assessment completed in the case of appellant had been made without carrying out necessary enquires into the specified issue and hence, the assessment order so passed by the learned A.0 u/s. 143(3) of the Act dated 28.12.2017 is erroneous and prejudicial to the interest of the revenue. The appellant prays that the order of the Principal CIT us. 263 may kindly be quashed and the assessment order of the Ld. A.O dated 28.12.2017 may be On the facts and in the circumstances of the case and in law, the Hon'ble Principal Commissioner of Income Tax - 8 erred in holding that the assessment order passed by the Ld. AO u/s. 143(3) of the Act dated 28.12.2017 is erroneous and prejudicial nterest of the revenue, and hence set aside the appellant case back to the Ld. A.O. for making a fresh assessment. The appellant prays that the said action of Hon'ble Principal CIT On the facts and in the circumstances of the case and in law, the Hon'ble Principal Commissioner of Income Tax 8 erred in holding that the Ld. A.O. has failed to make any inquiry into the taxability of revenue from operations of Rs. 29.58 crores disregardi setting aside the appellant's case back to the Ld. A.0. for making a fresh assessment. The appellant prays that the said action of Hon'ble Principal CIT may kindly be quashed. 4. On the facts and in the circ Hon'ble Principal Commissioner of Income Tax 8 erred in stating that the entire revenue from operations of Rs. 29.58 crores was claimed by the appellant as business income and accepted by the Ld. A.O. and setting aside back to the Ld. A.O. for making a fresh assessment. The appellant prays that the said action of Hon'ble Principal CIT may kindly be quashed. 5. On the facts and in the circumstances of the case and in law, the Hon'ble Principal Commissio directing the Ld. A.O. to treat the income from services provided by the appellant as Income from House Property without making any inquiry into said issue and setting aside the appellant's case back to the Ld. A.O. for making assessment. The appellant prays that the said action of Hon'ble Principal CIT may kindly be quashed. 6. On the facts and in the circumstances of the case and in law, the Hon'ble Principal Commissioner of Income Tax 8 erred in issuing directions to the fresh assessment based on erroneous facts, incorrect understanding of the case and without giving sufficient opportunity to the appellant to be heard. The appellant prays that the said action of Hon'ble Principal CI quashed. disregarding the enquiries made by the Ld. A.O. in fact and setting aside the appellant's case back to the Ld. A.0. for making a fresh assessment. The appellant prays that the said action of Hon'ble Principal CIT may kindly be quashed. On the facts and in the circumstances of the case and in law, the Hon'ble Principal Commissioner of Income Tax 8 erred in stating that the entire revenue from operations of Rs. 29.58 crores was claimed by the appellant as business income and accepted by the Ld. A.O. and setting aside the appellant's case back to the Ld. A.O. for making a fresh assessment. The appellant prays that the said action of Hon'ble Principal CIT may kindly be quashed. On the facts and in the circumstances of the case and in law, the Hon'ble Principal Commissioner of Income Tax 8 erred in directing the Ld. A.O. to treat the income from services provided by the appellant as Income from House Property without making any inquiry into said issue and setting aside the appellant's case back to the Ld. A.O. for making assessment. The appellant prays that the said action of Hon'ble Principal CIT may kindly be quashed. On the facts and in the circumstances of the case and in law, the Hon'ble Principal Commissioner of Income Tax 8 erred in issuing directions to the Ld. A0 u/s. 263 of the Act for making a fresh assessment based on erroneous facts, incorrect understanding of the case and without giving sufficient opportunity to the appellant to be heard. The appellant prays that the said action of Hon'ble Principal CIT may kindly be quashed. Upal Developers Pvt. Ltd. ITA No. 871/M/2021 3 ng the enquiries made by the Ld. A.O. in fact and setting aside the appellant's case back to the Ld. A.0. for making a fresh assessment. The appellant prays that the said action of Hon'ble Principal CIT may kindly be quashed. umstances of the case and in law, the Hon'ble Principal Commissioner of Income Tax 8 erred in stating that the entire revenue from operations of Rs. 29.58 crores was claimed by the appellant as business income and the appellant's case back to the Ld. A.O. for making a fresh assessment. The appellant prays that the said action of Hon'ble Principal CIT On the facts and in the circumstances of the case and in law, the ner of Income Tax 8 erred in directing the Ld. A.O. to treat the income from services provided by the appellant as Income from House Property without making any inquiry into said issue and setting aside the appellant's case back to the Ld. A.O. for making a fresh assessment. The appellant prays that the said action of Hon'ble On the facts and in the circumstances of the case and in law, the Hon'ble Principal Commissioner of Income Tax 8 erred in Ld. A0 u/s. 263 of the Act for making a fresh assessment based on erroneous facts, incorrect understanding of the case and without giving sufficient opportunity to the appellant to be heard. The appellant prays T may kindly be 7. The Appellant craves leave to add, alter, amend or withdraw any of the Grounds of Appeal herein above and to submit further arguments, statements, documents and papers as may be considered necessary either at or before the hearing appeal. 2. At the outset, we may like to mention that Registry has pointed out delay of 5 days in filing the present appeal. The Ld. counsel submitted that delay is covered by the order of the Hon’ble Supreme Court in suo moto motion and hence appeal might be admitted. We find that appeal has been filed on 02.05.2021, with delay of 5 days, which is duly covered by the order of Hon’ble Supreme Court in Civil Appeal (supra). The delay in filing appeal is according directed to argue the appeal on 3. Briefly stated fact income filed by the assessee on 27/09/2015 declaring total loss of (-)₹2,25,17,751/-, the under section 143(3) The Appellant craves leave to add, alter, amend or withdraw any of the Grounds of Appeal herein above and to submit further arguments, statements, documents and papers as may be considered necessary either at or before the hearing appeal. At the outset, we may like to mention that Registry has pointed out delay of 5 days in filing the present appeal. The Ld. counsel submitted that delay is covered by the order of the Hon’ble Supreme motion Miscellaneous Application No. 665/2021 and hence appeal might be admitted. We find that appeal has been filed on 02.05.2021, with delay of 5 days, which is duly covered by the order of Hon’ble Supreme Court in Civil Appeal (supra). The delay in filing appeal is accordingly condoned and parties were the appeal on merit. acts of the case are that against the return of income filed by the assessee on 27/09/2015 declaring total loss of , the Assessing Officer completed assessment under section 143(3) of the Income-tax Act, 1961 (in short the Upal Developers Pvt. Ltd. ITA No. 871/M/2021 4 The Appellant craves leave to add, alter, amend or withdraw any of the Grounds of Appeal herein above and to submit further arguments, statements, documents and papers as may be considered necessary either at or before the hearing of the At the outset, we may like to mention that Registry has pointed out delay of 5 days in filing the present appeal. The Ld. counsel submitted that delay is covered by the order of the Hon’ble Supreme pplication No. 665/2021 and hence appeal might be admitted. We find that appeal has been filed on 02.05.2021, with delay of 5 days, which is duly covered by the order of Hon’ble Supreme Court in Civil Appeal (supra). The and parties were that against the return of income filed by the assessee on 27/09/2015 declaring total loss of completed assessment , 1961 (in short the Act) on 28/12/2017 determining total loss at Thereafter, the Ld. PCIT called for the record and after perusal of the same, he was of the view that the a 28/12/2017 passed by the as prejudicial to the interest of the notice under section 263 of the carried out by the Assessing Offi service charges of maintenance of mall as to whether the same should be taxed under the head “ profession” as declared by the assessee or should be taxed under the head “income from house p PCIT, the Assessing Officer Association (MOA) of the assessee company before completing the assessment for ascertaining true nature of the business of the assessee. In his view, any o should have been treated as income from house property by the on 28/12/2017 determining total loss at (-) PCIT called for the record and after perusal of the same, he was of the view that the assessment order dated 28/12/2017 passed by the Assessing Officer was erroneous insofar as prejudicial to the interest of the Revenue, accordingly, he issued notice under section 263 of the Act proposing that no enquiry was Assessing Officer on the issue of income from service charges of maintenance of mall as to whether the same hould be taxed under the head “profit and gains of the business or profession” as declared by the assessee or should be taxed under the head “income from house property” as per law. According to Assessing Officer has not verified the Memorandum of the assessee company before completing the assessment for ascertaining true nature of the business of the assessee. In his view, any other income associated with leasing should have been treated as income from house property by the Upal Developers Pvt. Ltd. ITA No. 871/M/2021 5 )₹1,95,74,520/-. PCIT called for the record and after perusal of the ssessment order dated was erroneous insofar , accordingly, he issued proposing that no enquiry was on the issue of income from service charges of maintenance of mall as to whether the same profit and gains of the business or profession” as declared by the assessee or should be taxed under the According to Ld. Memorandum of of the assessee company before completing the assessment for ascertaining true nature of the business of the ther income associated with leasing should have been treated as income from house property by the assessee. The Ld. PCIT in the impugned order held that the assessment order passed by the 28/12/2017 is without making any enquiry and in absence of specific enquiry made by the for accepting assessee evidence, it cannot be said that the documents submitted by th assessee were duly verified by the referred various decisions and thereafter in concluding para 6 of the impugned order held as under: “6. In conclusion, the assessing officer has failed to make necessary enquiry and bring character and nature of the income. Omission to do so has resulted in an order which is erroneous and prejudicial to the interest of revenue. In view of this I am of the view that the assessment order erroneous and prejudicial to the interest of revenue as per provisions of Explanation 2(a) to section 263(1) of the Income Tax Act.1961 and requires to be revised and set aside. Accordingly, the assessment is revised and set aside to the Officer is directed to frame the order de novo, as per observation made in thus order above PCIT in the impugned order held that the assessment order passed by the Assessing Officer 28/12/2017 is without making any enquiry and in absence of specific enquiry made by the Assessing Officer or recording reasons for accepting assessee’s submission without any appropriate evidence, it cannot be said that the documents submitted by th assessee were duly verified by the Assessing Officer referred various decisions and thereafter in concluding para 6 of the impugned order held as under: In conclusion, the assessing officer has failed to make necessary enquiry and bring on record all facts necessary for determining the true character and nature of the income. Omission to do so has resulted in an order which is erroneous and prejudicial to the interest of revenue. In view of this I am of the view that the assessment order d. 28/12/2017 is erroneous and prejudicial to the interest of revenue as per provisions of Explanation 2(a) to section 263(1) of the Income Tax Act.1961 and requires to be revised and set aside. Accordingly, the assessment is revised and set aside to the file of the Assessing Officer. The Assessing Officer is directed to frame the order de novo, as per observation made in thus order above”. Upal Developers Pvt. Ltd. ITA No. 871/M/2021 6 PCIT in the impugned order held that the Assessing Officer dated 28/12/2017 is without making any enquiry and in absence of or recording reasons submission without any appropriate evidence, it cannot be said that the documents submitted by the Assessing Officer. The Ld. PCIT referred various decisions and thereafter in concluding para 6 of the In conclusion, the assessing officer has failed to make necessary on record all facts necessary for determining the true character and nature of the income. Omission to do so has resulted in an order which is erroneous and prejudicial to the interest of revenue. In d. 28/12/2017 is erroneous and prejudicial to the interest of revenue as per provisions of Explanation 2(a) to section 263(1) of the Income Tax Act.1961 and requires to be revised and set aside. Accordingly, the assessment is file of the Assessing Officer. The Assessing Officer is directed to frame the order de novo, as per observation made 4. Before us, the Assessing Officer has made complete enquiry on the issu thereafter only accepted the claim of the assessee. The referred to notice dated 06/11/2017 issued in terms of section 142(1) of the Act, wherein the assessee to justify as to why the income from o taken under the head Counsel drawn our attention to paper reply dated 13/11/2017 filed before the response to notice under section 142(1) dated 06/11/2017. In the said reply the assessee explained that all the direct and ancillary cost related to construction of mall at Luck under the head building and no portion of the said cost as depreciation. Accordingly and collecting rent was declared under the head house property”. Apart from rental income the assessee company Before us, the Ld. Counsel of the assessee submitted that has made complete enquiry on the issu thereafter only accepted the claim of the assessee. The referred to notice dated 06/11/2017 issued in terms of section wherein the Assessing Officer specifically asked the assessee to justify as to why the income from other services was taken under the head “profit and gains of the business drawn our attention to paper book page 26 to 27 reply dated 13/11/2017 filed before the Assessing Officer response to notice under section 142(1) dated 06/11/2017. In the said reply the assessee explained that all the direct and ancillary ed to construction of mall at Lucknow was capitaliz under the head building and no portion of the said cost . Accordingly, income from leasing out of premises and collecting rent was declared under the head . Apart from rental income the assessee company Upal Developers Pvt. Ltd. ITA No. 871/M/2021 7 of the assessee submitted that has made complete enquiry on the issue and thereafter only accepted the claim of the assessee. The Ld. Counsel referred to notice dated 06/11/2017 issued in terms of section specifically asked ther services was profit and gains of the business”. The Ld. book page 26 to 27 containing Assessing Officer in response to notice under section 142(1) dated 06/11/2017. In the said reply the assessee explained that all the direct and ancillary now was capitalized under the head building and no portion of the said cost was claimed income from leasing out of premises and collecting rent was declared under the head “income from . Apart from rental income the assessee company also earned revenue by way of providing services various commercial act form of common area maintenance were charged separately from the lessee and offered under the head “profit and gains of business and profession the decision of the Hon’ble Sarabhai Private Limited 129 Taxmann 43 income from service services rendered to the tenant treated as profit and gains of the busines assessee-company has followed this method of computation of income in earlier years and the accepted the same in assessment under section 143(3) of the 4.1 The Ld. Counsel income from services rendered by the assessee in mall premises should be taxed under the head profit and gains of the business arose in assessment years prior and subsequent to assessment year also earned revenue by way of providing services activities in the mall, which were charged in the form of common area maintenance (CAM) charges. The said receipt were charged separately from the lessee and offered under the head profit and gains of business and profession”. The assessee relied on decision of the Hon’ble Gujarat High Court in the case of Sarabhai Private Limited 129 Taxmann 43 to support that income from service services rendered to the tenant treated as profit and gains of the business. It was also submitted that company has followed this method of computation of income in earlier years and the Income-tax Department accepted the same in assessment under section 143(3) of the Counsel further submitted that issue whether the income from services rendered by the assessee in mall premises under the head profit and gains of the business arose in assessment years prior and subsequent to assessment year Upal Developers Pvt. Ltd. ITA No. 871/M/2021 8 also earned revenue by way of providing services for undertaking in the mall, which were charged in the . The said receipt were charged separately from the lessee and offered under the head . The assessee relied on High Court in the case of CIT Vs to support that income from service services rendered to the tenants should be as also submitted that company has followed this method of computation of Department duly accepted the same in assessment under section 143(3) of the Act. that issue whether the income from services rendered by the assessee in mall premises under the head profit and gains of the business arose in assessment years prior and subsequent to assessment year under consideration i.e assessment was reopened subsequent to the assessment order in the year under consideration, however such reopening was quashed by the Hon’ble Bombay High Court holding that reasons recorded were based on mere change of opinion. Sim 2013-14 also reopening was Counsel referred to the order of the Hon’ble High Court available on page 119 to 121 of the paper Court has held that the opinion section 143(3) of the Ld. Counsel accordingly submitted that wherever two views are possible the Ld. PCIT is not justified in substituting his view in place of the view of the Assessing Officer 4.2 In assessment year 2017 has accepted the claim of the assessee of income from service under the head “profit and gains of the business under consideration i.e. AY 2015-16. In assessment year 2012 assessment was reopened subsequent to the assessment order in the year under consideration, however such reopening was quashed by the Hon’ble Bombay High Court holding that reasons recorded were based on mere change of opinion. Similarly, in assessment year 14 also reopening was quashed on similar grounds. referred to the order of the Hon’ble High Court available on page 119 to 121 of the paper book and submitted that Hon’ble High Court has held that the opinion formed in assessment order under section 143(3) of the Act is one of opinion sustainable in law. The accordingly submitted that wherever two views are PCIT is not justified in substituting his view in place Assessing Officer. In assessment year 2017-18 and 2018-19 the Assessing Officer has accepted the claim of the assessee of income from service under profit and gains of the business”. The Ld. Counsel Upal Developers Pvt. Ltd. ITA No. 871/M/2021 9 assessment year 2012-13, assessment was reopened subsequent to the assessment order in the year under consideration, however such reopening was quashed by the Hon’ble Bombay High Court holding that reasons recorded in assessment year on similar grounds. The Ld. referred to the order of the Hon’ble High Court available on book and submitted that Hon’ble High formed in assessment order under is one of opinion sustainable in law. The accordingly submitted that wherever two views are PCIT is not justified in substituting his view in place Assessing Officer has accepted the claim of the assessee of income from service under Counsel referred to assessment order for placed on paper book page Ld. Counsel submitted assessment of income under the head business and profession setting aside the assessment is not justified. 5. The Ld. DR on the other hand relied on the order of the PCIT and submitted that inquire the MOA of the assessee company for true nature of the ‘head of income’ under which service charges would be assessable. 6. We have heard rival submission of parties and perused the relevant material on record. 6.1 For an assessm section 263 of the Act, the twin conditions erroneous and secondly, order to assessment order for assessment year 2017-18 and 2018 book pages 174 -176 and 177-179 respectively. submitted that the revenue itself has assessment of income under the head “profit and gains of the business and profession” and therefore action of the setting aside the assessment is not justified. DR on the other hand relied on the order of the PCIT and submitted that the Assessing Officer was required to inquire the MOA of the assessee company for true nature of the ‘head of income’ under which service charges would be assessable. We have heard rival submission of parties and perused the relevant material on record. For an assessment order to be held liable to revision under section 263 of the Act, the twin conditions, firstly, secondly, order prejudicial to the interest of the Upal Developers Pvt. Ltd. ITA No. 871/M/2021 10 18 and 2018-19 179 respectively. The considered the profit and gains of the ion of the Ld. PCIT in DR on the other hand relied on the order of the Ld. was required to inquire the MOA of the assessee company for true nature of the ‘head of income’ under which service charges would be assessable. We have heard rival submission of parties and perused the ent order to be held liable to revision under , firstly, order to be a prejudicial to the interest of the Revenue, should be satisfied simultaneously. The Hon’ble Delhi High Court in the case of GEE VEE Enterprises Private Limited versus CIT [1975] 99 ITR 375 (Delhi order of the Income Tax Officer as erroneous 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 accepts what the assessed has stated inquiries which are called for in the circumstances of the case. Hon’ble Delhi High Court referred to the two decision of the Hon’ble Supreme Court in the case of Commissioner of Income Tax Devi Aggarwai v. Commissioner of Income Tax 323 (13) and observed that to make further inquiries before cancelling the assessment order of the Income Tax Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the should be satisfied simultaneously. The Hon’ble Delhi High GEE VEE Enterprises Private Limited versus [1975] 99 ITR 375 (Delhi) held that the CIT may consider the order of the Income Tax Officer as erroneous 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 simply accepts what the assessed has stated in his return and fails to make inquiries which are called for in the circumstances of the case. Hon’ble Delhi High Court referred to the two decision of the Hon’ble Supreme Court in the case of Rampyari Devi Saraogi v. Commissioner of Income Tax, (1968)67 I.T.R. 84 (12), Devi Aggarwai v. Commissioner of Income Tax, (1973) 88 IT and observed that it is not necessary for the Commissioner to make further inquiries before cancelling the assessment order of the Income Tax Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Upal Developers Pvt. Ltd. ITA No. 871/M/2021 11 should be satisfied simultaneously. The Hon’ble Delhi High GEE VEE Enterprises Private Limited versus may consider the order of the Income Tax Officer as erroneous not only because it contains some apparent error of reasoning or of law or of fact on the typed order which simply in his return and fails to make inquiries which are called for in the circumstances of the case. The Hon’ble Delhi High Court referred to the two decision of the Hon’ble pyari Devi Saraogi v. , (1968)67 I.T.R. 84 (12), and Tara , (1973) 88 ITR it is not necessary for the Commissioner to make further inquiries before cancelling the assessment order of the Income Tax Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income Tax Officer should have made further inquiries before accepting the statements made by the assessed in his return. 6.2 The Hon’ble Delhi High Court inquiries by the Assessing Officer observing as under: “(14) The reason is obvious. The is very different from that of a civil court. The statements A made in a pleading proved by the mininum amount of evidence may he accepted by a civil court in the absence of any rebuttal. The civil court is the basis of the pleading and evidence which comes before it. The Income Tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but inquiry. It is his duty to assertain the truth of the faets stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word "erroneous" in contract. It is because it is incumbent on the Income Tax Officer to further investigate the facts stated in the return when cireuinstances would make such an inquiry prudent that the word "erroneous" in failure to make such an inquiry. The order becomes erroneous because such an inquiry has not been made and not because there is any thing wrong with the order if all the facts stated Nor can ii be said that it was necessary for the Commissioner to himself make such inquiry before cancelling the order of assessment. er should have made further inquiries before accepting the statements made by the assessed in his return. The Hon’ble Delhi High Court (supra) justified making of inquiries by the Assessing Officer observing as under: (14) The reason is obvious. The position and function of the Income Tax Officer is very different from that of a civil court. The statements A made in a pleading proved by the mininum amount of evidence may he accepted by a civil court in the absence of any rebuttal. The civil court is nuctral. 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 investigator. He cannot remain passive in the face of a return which is apparently in order but calis for further inquiry. It is his duty to assertain the truth of the faets stated in the return when the circumstances of the case are such as to provoke 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 Officer to further investigate the facts stated in the return when cireuinstances would make such an inquiry prudent that the word "erroneous" in section 263 failure to make such an inquiry. The order becomes erroneous because 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. Nor can ii be said that it was necessary for the Commissioner to himself make such inquiry before cancelling the order of assessment.” Upal Developers Pvt. Ltd. ITA No. 871/M/2021 12 er should have made further inquiries before accepting the statements made by the assessed in his return. justified making of inquiries by the Assessing Officer observing as under: position and function of the Income Tax Officer is very different from that of a civil court. The statements A made in a pleading proved by the mininum amount of evidence may he accepted by a civil court in nuctral. 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 investigator. He cannot remain calis for further inquiry. It is his duty to assertain the truth of the faets stated in the return when the circumstances of the case are such as to provoke an inquiry. The emerges out of this contract. It is because it is incumbent on the Income Tax Officer to further investigate the facts stated in the return when cireuinstances would make such section 263 includes the failure to make such an inquiry. The order becomes erroneous because such an inquiry has not been made and not because there is any thing wrong with the Nor can ii be said that it was necessary for the Commissioner to himself make 6.3 Similarly, Hon’ble Calcutta High Court in the case of Central-1 Vs Maithan I 2012 has observed as under : “It is not the law that the Assessing Officer occupying the position of an investigator and adjudicator can discharge his functions by perfunctory or inadequate investigation. Such a prejudicial orders. Where the relevant enquiry was not undertaken, as in this case, the order is erroneous and prejudicial too and therefore revisable. Investigation should always be faithful and fruitful. Unless enquiry are pursued the enquiry cannot be said to have been faithfully conducted.” 6.4 The Hon’ble Delhi High Court has again emphasized in the case of ITO versus DG Housing Projects Ltd. ITA 179/2011 there is complete lack The assessment order is erroneous Hon’ble High Court are as under “A distinction must be drawn in the cases where the Assessing Officer does not conduct an enquiry; as lack prejudicial to the interests of the Revenue and cases where the Assessing Officer conducts an enquiry but the finding recorded is erroneous and which is also prejudicial to the interests of the Revenue. , Hon’ble Calcutta High Court in the case of 1 Vs Maithan International (Cal) IT Appeal No. 53 of has observed as under : “It is not the law that the Assessing Officer occupying the position of an investigator and adjudicator can discharge his functions by perfunctory or inadequate investigation. Such a course is bound to result in erroneous and prejudicial orders. Where the relevant enquiry was not undertaken, as in this case, the order is erroneous and prejudicial too and therefore revisable. Investigation should always be faithful and fruitful. Unless all truthful areas of enquiry are pursued the enquiry cannot be said to have been faithfully The Hon’ble Delhi High Court has again emphasized in the case ITO versus DG Housing Projects Ltd. ITA 179/2011 there is complete lack of enquiry on the part of the Assessing Officer. The assessment order is erroneous the relevant observation of the Hon’ble High Court are as under : “A distinction must be drawn in the cases where the Assessing Officer does not conduct an enquiry; as lack of enquiry by itself renders the order erroneous and prejudicial to the interests of the Revenue and cases where the Assessing Officer conducts an enquiry but the finding recorded is erroneous and which is also prejudicial to the interests of the Revenue. In the latter cases, the Commissioner Upal Developers Pvt. Ltd. ITA No. 871/M/2021 13 , Hon’ble Calcutta High Court in the case of CIT IT Appeal No. 53 of “It is not the law that the Assessing Officer occupying the position of an investigator and adjudicator can discharge his functions by perfunctory or course is bound to result in erroneous and prejudicial orders. Where the relevant enquiry was not undertaken, as in this case, the order is erroneous and prejudicial too and therefore revisable. all truthful areas of enquiry are pursued the enquiry cannot be said to have been faithfully The Hon’ble Delhi High Court has again emphasized in the case ITO versus DG Housing Projects Ltd. ITA 179/2011 that where of enquiry on the part of the Assessing Officer. he relevant observation of the “A distinction must be drawn in the cases where the Assessing Officer does not of enquiry by itself renders the order erroneous and prejudicial to the interests of the Revenue and cases where the Assessing Officer conducts an enquiry but the finding recorded is erroneous and which is also In the latter cases, the Commissioner has to examine the order or the decision taken by the Assessing Officer on the merits and then form an opinion on the merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interests the second set of cases, the Commissioner cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not.” 6.5 Further, we also find that i section 263 of the Act, which has been made eff assessment year 2015 deemed to be erroneous insofar as prejudicial to the interest of the Revenue, if the Assessing Officer which ought to have been carried out in the facts and circumstances of the case. The Ld. PCIT has also relied on the various decision to hold that in case of lack of enquiry by the assessment order is rendered erroneous i interest of the revenue. 6.6 In view of the above judicial precedents and the amendment introduced by the P has to examine the order or the decision taken by the Assessing Officer on the merits and then form an opinion on the merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interests of the Revenue. In the second set of cases, the Commissioner cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is Further, we also find that in terms of Explanation section 263 of the Act, which has been made eff assessment year 2015-16 w.e.f. 01.06.2015, an assessment order is deemed to be erroneous insofar as prejudicial to the interest of the Revenue, if the Assessing Officer fails to carry out the which ought to have been carried out in the facts and circumstances PCIT has also relied on the various decision to hold that in case of lack of enquiry by the Assessing Officer assessment order is rendered erroneous insofar as prejudicial to the interest of the revenue. In view of the above judicial precedents and the amendment introduced by the Parliament by way of Explanation Upal Developers Pvt. Ltd. ITA No. 871/M/2021 14 has to examine the order or the decision taken by the Assessing Officer on the merits and then form an opinion on the merits that the order passed by the of the Revenue. In the second set of cases, the Commissioner cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is n terms of Explanation-2 below section 263 of the Act, which has been made effective from an assessment order is deemed to be erroneous insofar as prejudicial to the interest of the to carry out the inquiries, which ought to have been carried out in the facts and circumstances PCIT has also relied on the various decision to Assessing Officer, the nsofar as prejudicial to the In view of the above judicial precedents and the amendment arliament by way of Explanation-2, if the Assessing Officer fails in carrying out the enquiry which ought to have been carried in the f assessment order is obviously erroneous insofar as prejudicial to the interest of Revenue. 6.7 In the instant case, the Ld asking assessee to explain the reason for considering charges received from various services under the head and the assessee also replied and explained treating such service c assessee is considering the said service charges under the business income for last many years and that the Revenue. According to the assessee, the warrant requirement of verifying MOA of the assessee c the Ld. PCIT is of the view that before accepting the claim of service charges to be taxed under the head “profit an business/profession, the fails in carrying out the enquiry which ought to arried in the fact and circumstances of the case, then assessment order is obviously erroneous insofar as prejudicial to the interest of Revenue. In the instant case, the Ld. AO issued query letter specifically assessee to explain the reason for considering charges received from various services under the head “business income and the assessee also replied and explained in detail re treating such service charges under the head “business income essee is considering the said service charges under the business income for last many years and that treatment had been accepted by According to the assessee, the Assessing Officer warrant requirement of verifying MOA of the assessee c PCIT is of the view that before accepting the claim of service charges to be taxed under the head “profit an , the Assessing Officer was required to verify Upal Developers Pvt. Ltd. ITA No. 871/M/2021 15 fails in carrying out the enquiry which ought to and circumstances of the case, then assessment order is obviously erroneous insofar as prejudicial to letter specifically assessee to explain the reason for considering charges business income” in detail reasons for business income”. The essee is considering the said service charges under the business had been accepted by Assessing Officer did not warrant requirement of verifying MOA of the assessee company, but PCIT is of the view that before accepting the claim of service charges to be taxed under the head “profit and gain of was required to verify the MOA of the company objects in which the assessee could have carried out the business. view of this facts and when the Assessing Officer issue was examined in earlier in scrutiny proceeding and accepted by the Department and no change in facts or new information etc could trigger or warrant him to ask for the MOA of the therefore the instant or complete lack of inquiry case. 6.8 The another argument has been taken by the considering income from mall services under the head profit and gains of the business is one of the view submitted that the assessee before the of its claim has relied on the decision of the Hon’ble Court in the case of CIT Vs Sarabhai P the MOA of the company so as to ascertain the differ objects in which the assessee could have carried out the business. s and circumstances, we are of the opinion that Assessing Officer was made aware of the f issue was examined in earlier in scrutiny proceeding and accepted and in the year under consideration s or new information etc. came before him, which could trigger or warrant him to ask for the MOA of the case does fall in the category of no enquiry case or complete lack of inquiry case. The another argument has been taken by the Ld. counsel considering income from mall services under the head profit and gains of the business is one of the view sustainable in law submitted that the assessee before the Assessing Officer of its claim has relied on the decision of the Hon’ble CIT Vs Sarabhai P. Ltd. (supra) Upal Developers Pvt. Ltd. ITA No. 871/M/2021 16 so as to ascertain the different area of objects in which the assessee could have carried out the business. In , we are of the opinion that aware of the fact that this issue was examined in earlier in scrutiny proceeding and accepted in the year under consideration, there was came before him, which could trigger or warrant him to ask for the MOA of the company, case does fall in the category of no enquiry case Ld. counsel that considering income from mall services under the head profit and sustainable in law. He Assessing Officer in support of its claim has relied on the decision of the Hon’ble Gujarat High supra). He submitted that Hon’ble Jurisdictional quashing notice under section 148 of the year has held that opinion formed by th original assessment year was not reopening of the assessment on the same material was based on change of opinion. In Malabar Industrial Co. principle that where the courses permissible in law or where two views are possible and the Assessing Officer has taken one view with which the Commissioner does not agree, it cannot prejudicial to the interests of the Revenue unless the view taken by the Assessing Officer Income Tax vs. Gabriel India Ltd., 203 ITR 108 of Hon’ble Bombay High C Jurisdictional High Court in the case of assessee quashing notice under section 148 of the Act in earlier assessment has held that opinion formed by the Assessing Officer original assessment year was not unsustainable in law and therefore reopening of the assessment on the same material was based on In view of the judgment of the Supreme Court in Co. (2000) 243 ITR 83 (SC) it is now a settled principle that where the Assessing Officer has adopted one of the courses permissible in law or where two views are possible and the 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 Assessing Officer is unsustainable in law. In Commissioner of Income Tax vs. Gabriel India Ltd., 203 ITR 108 a Division Bench Hon’ble Bombay High Court observed that Section 263 does not Upal Developers Pvt. Ltd. ITA No. 871/M/2021 17 in the case of assessee while in earlier assessment Assessing Officer in sustainable in law and therefore reopening of the assessment on the same material was based on of the Supreme Court in it is now a settled has adopted one of the courses permissible in law or where two views are possible and the has taken one view with which the Commissioner be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by Commissioner of a Division Bench observed that Section 263 does not empower the Comm the Assessing Officer, unless the decision is held to be erroneous. 6.9 We find that Ld. view of the Assessing Officer rendered to mall tenant under the head profit and gains of the business/profession is an unsustainable view in law. The Ld. CIT also could not explain as how income received from rendering services to mall tenant for common area maintenance should not be treated under the head profit and gains of the business. Hon’ble Gujarat High Court in the case of Limited (supra) has held that income received by an assessee to different services rendered to the tenants should be treated as profit and gains of the business or profession, therefore clearly this is one of the possible view therefore Ld. PCIT is not justified in revising the empower the Commissioner to substitute his judgment for that of , unless the decision is held to be erroneous. Ld. PCIT has not brought on record as how the Assessing Officer to treat the income from services rendered to mall tenant under the head profit and gains of the business/profession is an unsustainable view in law. The Ld. CIT also could not explain as how income received from rendering mall tenant for common area maintenance should not be treated under the head profit and gains of the business. Hon’ble Gujarat High Court in the case of CIT vs. Sarabhai Private has held that income received by an assessee to ifferent services rendered to the tenants should be treated as profit and gains of the business or profession, therefore clearly this is one of the possible view which the Assessing Officer PCIT is not justified in revising the Upal Developers Pvt. Ltd. ITA No. 871/M/2021 18 ment for that of , unless the decision is held to be erroneous. PCIT has not brought on record as how the to treat the income from services rendered to mall tenant under the head profit and gains of the business/profession is an unsustainable view in law. The Ld. CIT-DR also could not explain as how income received from rendering mall tenant for common area maintenance should not be treated under the head profit and gains of the business. We find that Sarabhai Private has held that income received by an assessee to ifferent services rendered to the tenants should be treated as profit and gains of the business or profession, therefore clearly this is one has taken and PCIT is not justified in revising the order of the Assessing Officer holding it to be the interest of the revenue. 6.10 In view of the above discussion, the grounds raised by the assessee in its appeal are allowed. 7. In the result, the appeal of the asses Order pronounced in the Court. Sd/- (VIKAS AWASTHY JUDICIAL MEMBER Mumbai; Dated: 21/06/2022 Rahul Sharma, Sr. P.S. 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. //True Copy// holding it to be erroneous insofar as prejudicial to the interest of the revenue. In view of the above discussion, the grounds raised by the assessee in its appeal are allowed. In the result, the appeal of the assessee is allowed. ounced in the Court. Sd/- VIKAS AWASTHY) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT Copy of the Order forwarded to : BY ORDER, (Sr. Private Secretary ITAT, Mumbai Upal Developers Pvt. Ltd. ITA No. 871/M/2021 19 insofar as prejudicial to In view of the above discussion, the grounds raised by the see is allowed. - OM PRAKASH KANT) MEMBER Sr. Private Secretary) ITAT, Mumbai