2021 (7) TMI 1185 - AT - Income Tax

Revision u/s 263 - as per CIT AO erred in allowing deduction claimed for maintenance/compensation related to rental income when only standard deduction of 30% is allowable which amounts to double deduction, on the issue of notional rental income from undivided share of an unrented ancestral building and on the issue of interest u/s.234B - HELD THAT - Taking note of the decision of the Apex court in the case of Malabar Industrial Co. Ltd. Vs. CIT 2000 (2) TMI 10 - SUPREME COURT held that if the A.O. has taken a possible view, it cannot be said that the view taken by him is erroneous nor the order of the AO in that case can be set aside in revision. It is a case of no-enquiry at all on these issues and it is not the case of the assessee that A.O. was made aware that issues have been settled by the Tribunal and accepted by the department. In the light of the above facts since the A.O. has not made any enquiry into the faults pointed out by the CIT, the order passed by the A.O. has to be treated as erroneous as well as prejudicial to the interest of the revenue. CIT gets jurisdiction to invoke revisional jurisdiction u/s.263 of the Act and thus the legal issue raised by the assessee is dismissed. The other issues raised in the other grounds need factual enquiry and verification, so we are not examining the merits of those grounds. So, those grounds of the assessee preferred against the merits of all the issues raised by the Ld. PCIT stand dismissed. Therefore, we do not find any infirmity in the order passed by the Ld. Pr. CIT and the impugned order of the Ld. Pr. CIT is upheld - before parting we direct the A.O. that while he gives effect to the Ld. PCIT's order, he has to take into consideration the rule of consistency raised by the assessee and decide the issue in accordance to law - contentions of the assessee on each issues should be considered by the A.O. while deciding all issues and the issues settled by this Tribunal cannot be disturbed without there being any change in fact or law and in accordance to principles of consistency and in accordance to law. - Decided against assessee.

Summary

Issues Involved:
1. Jurisdiction of the Principal Commissioner of Income Tax (Pr. CIT) to invoke Section 263 of the Income-tax Act, 1961.
2. Direction for de novo assessment regarding deduction claimed for maintenance compensation from rental income.
3. Direction for de novo assessment on the issue of notional rental income from an undivided share of an unrented ancestral building.
4. Direction for de novo assessment on the issue of interest under Section 234B.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Pr. CIT to Invoke Section 263:
The primary issue is whether the Pr. CIT had the jurisdiction to invoke Section 263 of the Act without satisfying the condition precedent that the Assessing Officer's (A.O.) order was erroneous and prejudicial to the interests of the revenue. The Tribunal examined the show cause notice (SCN) issued by the Pr. CIT, which highlighted that the A.O. allowed a deduction for maintenance compensation resulting in double deduction, failed to charge statutory interest under Section 234B, and did not include notional income from other properties. The Tribunal noted that the A.O. did not conduct necessary inquiries into these issues, which is a prerequisite for invoking Section 263. The Tribunal referred to judicial precedents, including the Hon'ble Supreme Court's decision in Malabar Industries Ltd. vs. CIT, which mandates that an order must be erroneous and prejudicial to the revenue for Section 263 to be invoked. The Tribunal concluded that the A.O.'s failure to investigate these issues rendered the order erroneous and prejudicial to the revenue, thus justifying the Pr. CIT's invocation of Section 263.

2. Direction for De Novo Assessment Regarding Deduction for Maintenance Compensation:
The Pr. CIT directed a de novo assessment on the issue of deduction claimed for maintenance compensation amounting to ?4,07,404 from rental income. The Tribunal noted that the A.O. did not make any specific inquiry into this deduction, which resulted in a double deduction along with the standard deduction under Section 24. The Tribunal found that merely filing the computation of income does not suffice as an inquiry by the A.O. The Tribunal upheld the Pr. CIT's direction for a de novo assessment on this issue, emphasizing the need for proper investigation and verification.

3. Direction for De Novo Assessment on Notional Rental Income:
The Pr. CIT also directed a de novo assessment on the issue of notional rental income from an undivided share of an unrented ancestral building. The Tribunal observed that the A.O. did not make any inquiry into this issue. The assessee argued that the property was ancestral, undivided, and not rented out, and no notional income was taxed in earlier years. However, the Tribunal held that the A.O.'s failure to investigate this issue warranted the Pr. CIT's direction for a de novo assessment.

4. Direction for De Novo Assessment on Interest Under Section 234B:
The Pr. CIT directed a de novo assessment on the issue of levying interest under Section 234B, despite the appellant being a senior citizen with no income from business or profession. The Tribunal noted that the A.O. did not levy interest under Section 234B, which was not erroneous given the appellant's exemption under Section 207(2). However, the Tribunal upheld the Pr. CIT's direction for a de novo assessment to ensure proper verification and application of the law.

Conclusion:
The Tribunal dismissed the appeal of the assessee, upholding the Pr. CIT's invocation of Section 263 and the directions for de novo assessments on all three issues. The Tribunal emphasized the need for proper inquiry and verification by the A.O. and directed the A.O. to consider the rule of consistency and decide the issues in accordance with the law while giving effect to the Pr. CIT's order. The appeal was dismissed, and the A.O. was instructed to pass a speaking order after considering the assessee's submissions and documents.