2023 (7) TMI 237 - AT - Income Tax

Revision u/s 263 - Lack of enquiry - assessment in the faceless manner - As per CIT rental income of the assessee from aforesaid concems was required to be taxed under the head Income from House Property but the AO failed to do so - HELD THAT - Law, contained in section 263, does not allow CIT to impose his view over the judicious view adopted by AO unless the view adopted by AO is established to be not at all sustainable in law. AO, in the present case, on appreciation of facts, found that assessee firm was receiving the rent from letting out the properties along with other amenities and, accordingly, using his judicial wisdom, taxed the income under the head business and profession. The view of AO was also supported by the CBDT Circular wherein also the principle laid down was that letting out buildings along with other amenities will fall in income from business. AO was duty bound to follow the directions of CBDT more so when specifically brought to his notice by the assessee during the assessment proceedings. AO, after adequate enquiry, has taken a judicious view. Revision u/s 263 is not permissible merely because PCIT may entertain a different view on the issue. Case of the assessee was selected for scrutiny for specific purpose for verification of refund claim and income from house property and, therefore, there cannot be any presumption of lack of enquiry more particularly when the detailed questionnaire was issued by the AO during the assessment proceedings and in this regard the assessee had also furnished all the details alongwith decision of Chennai Properties Investments Ltd. 2015 (5) TMI 46 - SUPREME COURT Therefore, it cannot be presumed that there was lack of enquiry on the part of the AO. Assessment in the present case of the assessee firm for the year under consideration was carried out in the faceless manner by NFAC. It is a fact that any faceless assessment is carried out through a teamwork of assessment unit, technical unit, review unit, verification unit etc. Since different units are headed by Principal Commissioner of Income Tax, therefore, in a faceless regime, normally there cannot be a case of prejudice of lack of enquiry for the reason that there is application of mind by multiple officers of Department and not by a single officer and thus at the end of our discussion, we are of the view that the assessee firm had furnished the requisite information and the NFAC has completed the assessment after considering all the facts, therefore, the order passed by the AO cannot be termed as erroneous. Assessment order passed by the AO was after full enquiry and, therefore, the case does not fall within the clause (a) and (b) of Explanation 2 to Section 263. Hence, PCIT has erred in assuming jurisdiction u/s 263 of the Act and the order passed by him stands quashed. Decided in favour of assessee.

Summary

Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act.
2. Classification of income from letting out properties and associated services.

Summary:

Jurisdiction under Section 263 of the Income Tax Act:

The assessee challenged the jurisdiction assumed by the Principal Commissioner of Income Tax (Pr. CIT) under Section 263, arguing that the Assessing Officer's (AO) order was neither erroneous nor prejudicial to the interest of the Revenue. The Pr. CIT revised the AO's order, claiming it was passed without proper application of mind and was prejudicial to the Revenue's interest. The Tribunal noted that the scope of revision under Section 263 is specific and limited, and the Pr. CIT cannot impose his view over the judicial view adopted by the AO unless the AO's view is unsustainable in law. The AO's view was supported by a CBDT Circular and a Supreme Court decision, making it a plausible view. The Tribunal concluded that the AO had conducted adequate enquiries and the assessment order was not erroneous or prejudicial to the Revenue's interest. Therefore, the Pr. CIT's assumption of jurisdiction under Section 263 was quashed.

Classification of Income from Letting Out Properties and Associated Services:

The assessee firm, engaged in the business of letting out properties and providing associated services, declared its income under "Income from Business and Profession" and not under "Income from House Property." The AO accepted this classification based on detailed enquiries and the CBDT Circular No. 16/2017, which states that income from letting out buildings with amenities is chargeable under "Income from Business." The Pr. CIT, however, argued that the CBDT Circular applied only to Software Technology Parks and revised the AO's order. The Tribunal noted that the AO's view was supported by the CBDT Circular and a Supreme Court decision in Chennai Properties & Investments Ltd. v. CIT, which held that income from letting out properties as a business activity should be classified under "Income from Business." The Tribunal concluded that the AO's classification was correct and the Pr. CIT's restrictive interpretation of the CBDT Circular was erroneous.

Conclusion:

The Tribunal allowed the appeal, quashing the Pr. CIT's order under Section 263 and upholding the AO's classification of the assessee's income under "Income from Business and Profession." The Tribunal emphasized that the AO's order was based on adequate enquiry and supported by legal precedents, making it neither erroneous nor prejudicial to the Revenue's interest.