2023 (2) TMI 334 - AT - Income Tax

Revision u/s 263 - assessee had received an amount from the investment in property and the same is required to be taxed in the year of receipt i.e. A.Y. 2014-15 - Whether amount should be taxable in assessment year 2013-14 or in assessment year 2014-15 and tax rate in both the assessment years are same whether there is loss to the Revenue? - HELD THAT - In order to invoke the jurisdiction under section 263 of the Act two conditions should be satisfied viz (1) order passed by the Assessing Officer should be erroneous and (2) prejudicial to the interest of Revenue. We note that Assessing Officer taxed the disputed amount of Rs.9, 00, 000/- in assessment year 2013-14 instead of assessment year 2014-15 therefore order passed by the Assessing Officer is erroneous - since in both the assessment years 2013-14 and 2014-15 tax rate was same therefore order passed by the AO should not be prejudicial to the interest of Revenue (as there is no loss to the Revenue). Hence one of the conditions (prejudicial to the interest of Revenue) is not getting satisfied in the assessee s case under consideration. Therefore we note that the issue raised by Ld.PCIT is revenue neutral as it does give loss to the Revenue. Since one of conditions is that order should be prejudicial to the interest of revenue which is absent in assessee s case under consideration. We note that although the order passed by the Assessing Officer is erroneous because the right income should be taxable in right assessment year however since the tax rates are same in assessment year 2013-14 and 2014-15 therefore we note that there is no loss to the Revenue. Considering the smallness of amount and considering the fact that tax rate in both the assessment years are same hence there is no loss to the Revenue (one of the conditions is not satisfied to invoke jurisdiction u/s 263) therefore we do not instruct the Assessing Officer to tax the impugned amount of Rs.9, 00, 000/- in assessment year 2014-15 as no any useful purpose would be served and it would be unnecessary burden on the Assessing Officer to make the compliance to tax the disputed amount Rs.9, 00, 000/- in assessment year 2014-15. Decided in favour of assessee.

Issues Involved:
1. Whether the assessment order dated 29-12-2016 passed under section 143(3) of the Income Tax Act, 1961, is erroneous and prejudicial to the interest of revenue.
2. Whether the addition of Rs.9,00,000/- received from investment in property situated in Mumbai should be made in the assessment year 2014-15.
3. Whether the total amount received from the investment has already been accounted for in previous years, leading to no loss of revenue.
4. Whether the assessment order should be set aside under section 263 of the Income Tax Act.

Detailed Analysis:

1. Erroneous and Prejudicial Assessment Order:
The assessee challenged the correctness of the order passed by the Principal Commissioner of Income Tax (PCIT) under section 263 of the Income Tax Act, 1961, which deemed the assessment order dated 29-12-2016 as erroneous and prejudicial to the interest of revenue. The PCIT argued that the assessment order failed to include an amount of Rs.9,00,000/- received from property investments in Mumbai during the assessment year 2014-15.

2. Addition of Rs.9,00,000/-:
The PCIT directed the Assessing Officer to add Rs.9,00,000/- to the assessee's income for the assessment year 2014-15. The PCIT noted that the assessee admitted to receiving Rs.1,27,00,000/- from property sales, divided among himself and his brothers, with Rs.9,00,000/- received by the assessee during the financial year 2013-14. This amount was not included in the assessee's total income for the assessment year 2014-15.

3. Accounting for Total Amount Received:
The assessee contended that the entire amount received from the property investments had already been accounted for in previous years, with no loss of revenue. The assessee argued that the amount of Rs.9,00,000/- was part of the total amount received and taxed in earlier assessment years, specifically 2010-11 and 2013-14. The assessee claimed that taxing the same amount again in 2014-15 would result in double taxation.

4. Setting Aside the Assessment Order:
The PCIT rejected the assessee's contention, stating that the amount of Rs.9,00,000/- received during the assessment year 2014-15 had not been taxed and should be included in the total income for that year. The PCIT emphasized that each assessment year is a distinct unit for tax purposes, and the right income should be taxed in the correct assessment year. The PCIT concluded that the assessment order was erroneous and prejudicial to the interest of revenue, setting it aside and directing the Assessing Officer to add Rs.9,00,000/- to the assessee's income for the assessment year 2014-15.

Tribunal's Judgment:
The Tribunal noted that the assessee's share of Rs.28,00,000/- had been taxed in two assessment years (2010-11 and 2013-14), and the disputed amount of Rs.9,00,000/- was included in the total taxable amount. The Tribunal observed that the tax rate for both assessment years 2013-14 and 2014-15 was the same, making the issue revenue neutral with no loss to the revenue. The Tribunal concluded that while the assessment order was erroneous, it was not prejudicial to the interest of revenue due to the revenue-neutral nature of the issue. Consequently, the Tribunal quashed the order passed by the PCIT, allowing the appeal of the assessee. The Tribunal also clarified that this decision should not be treated as a precedent for other assessment years.

Conclusion:
The appeal was allowed, and the order of the PCIT was quashed, with the Tribunal emphasizing the revenue-neutral nature of the issue and the absence of any loss to the revenue.

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