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2020 (12) TMI 337 - AT - Income TaxRevision u/s 263 - A.O. has not verified the details of house property income offered by the assessee resulting in escapement of income - CIT set aside the assessment order and directed the A.O. to re-do the assessment bringing to tax the annual value of 1MG Mall - assessee, along with two other co-owners, owns a shopping Mall named 1MG located at M.G. Road, Bengaluru - HELD THAT - Agreement entered by the assessee with M/s. Lido states that M/s. Lido would retain 2% of license fees/rent receipts and 75% of the other income, we notice that the A.O. has not examined the tax implication of the agreement in the context of section 23 24 of the Income tax Act, as the Mall income has been offered by the assessee under the head Income from house property . As rightly pointed out by Ld. D.R. the tax on income from house property is charged on the annual letting value and term Annual letting value has been defined u/s 23 of the Act. Further, the assessee is entitled to claim only those expense which are listed out in section 24 of the Act from the annual letting value determined u/s 23 of the Act. Admittedly, the A.O. did not examine any of the issues pointed out by the Ld. Principal CIT. A.R took support of the decision rendered in the case of Sunbeam Auto Ltd 2009 (9) TMI 633 - DELHI HIGH COURT - We notice that the said decision was rendered prior to the insertion of Explanation 2 in sec. 263(1) by Finance Act, 2015 w.e.f. 1.6.2015. As per clause (a) of Explanation 2, the order passed without making inquiries or verification which should have been made shall be deemed to be erroneous and prejudicial to the interests of the revenue. Since the A.O. failed to examine these issues, in our view, the Ld. Principal CIT was justified in observing that there is lack of application of mind and hence the order is erroneous and prejudicial to the interest of the revenue, in the facts and circumstances of the case. A.R arguments on the concept of diversion of overriding title are not relevant while examining the validity of revision proceedings and the assessee may take these arguments before the AO, if so advised. Since the A.O. has not examined these issues on merits, we are of the view that the same need not be considered by the Tribunal while examining the validity of revision proceedings, unless it is shown that the view taken by Ld. Principal CIT is not totally sustainable in law. Accordingly, we decline to address the arguments advanced on merits. Principal CIT was justified in passing the impugned revision order. - Decided against assessee.
Issues Involved:
1. Examination of the annual letting value of the property. 2. Inclusion of maintenance charges in the annual letting value. 3. Examination of interest expenditure claimed under Section 24. Detailed Analysis: Issue 1: Examination of the Annual Letting Value of the Property The Principal CIT observed that the assessee reflected only 98% of the rental receipts for computing house property income, whereas the entire 100% of its share should have been considered. The assessee, along with co-owners, owns a shopping mall and appointed Lido Malls Management Pvt. Ltd. (Lido) to manage it. Lido retained 2% of the license fees/rent as its management fee, and the assessee offered 50% of the remaining 98% as its income. The Principal CIT contended that the entire license fee/rent constitutes the "annual letting value" as per the Act's provisions and should have been offered at 100%. The Tribunal upheld the Principal CIT's view, noting that the AO did not examine the tax implications of the agreement with Lido under Sections 23 and 24 of the Act. Issue 2: Inclusion of Maintenance Charges in the Annual Letting Value The Principal CIT noted that the maintenance charges paid by tenants directly to Lido were not reflected as part of the annual value of the property. Citing the Punjab and Haryana High Court's decision in Sunil Kumar Gupta vs. ACIT, it was argued that maintenance charges should form part of the annual letting value. The Tribunal agreed, emphasizing that the AO failed to examine this issue during the assessment proceedings, thus rendering the assessment order erroneous and prejudicial to the revenue's interest. Issue 3: Examination of Interest Expenditure Claimed Under Section 24 The Principal CIT initially questioned whether the interest expenditure claimed by the assessee included principal repayment. However, during the revision proceedings, the explanations provided by the assessee were accepted by the Principal CIT, and this issue was dropped. The Tribunal did not further address this issue as it was resolved during the revision proceedings. Conclusion: The Tribunal upheld the Principal CIT's revision order, agreeing that the AO failed to examine critical issues regarding the annual letting value and maintenance charges, making the assessment order erroneous and prejudicial to the revenue's interest. The appeal filed by the assessee was dismissed, and the revision order was upheld.
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