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TMI Blog2017 (12) TMI 569X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee owned more than one house. Since the assessee was in accommodation of more than one house, so far as the provision of section 23(2) is applicable to him and therefore, considering the factual position as explained above, we do not find any infirmity in the order passed by the Assessing Officer. In these circumstances, it cannot be said that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Therefore, we quash the order u/s.263 of the Act. - Decided in favour of assessee. - ITA No.857/Kol/2017 - - - Dated:- 18-10-2017 - SHRI N.V. VASUDEVAN, JM AND DR. A.L.SAINI, AM For The Appellant : Shri A. K. Tibrewal, FCA For The Respondent : Md. Usman, CIT, DR ORDER Per Dr. Arjun Lal Saini, AM: The captioned appeal filed by the assessee, pertaining to Assessment Year 2012-13, is directed against an order passed by the ld. Commissioner of Income Tax-21, Kolkata, under section 263 of the Income Tax Act, 1961, ( hereinafter referred to as the Act ), dated 03.03.2017. 2. The assessee has raised the following grounds of appeal: 1. That the order passed by Ld. Principal Commissioner of lncome ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(3) made on 27.03.2015, no verification about the genuineness of Gross Rent received @ ₹ 12,000/- per month was made by the A.O. The assessee had claimed total deduction u/s 24(b) of the Act to the extent of ₹ 2,41,347/- (Rs.1,35,428/- paid to SBI Rs.1,05,919/- paid to ICICI Bank), on Housing Loan taken from the Bank. Though the assessee had claimed Negative Income from Housing Property at ₹ 1,40,547/-, the A.O. has not applied the provisions of section 23(4)(b), since he owns two House properties in Kolkata, out of which one was Let-out and the other is Self-occupied. The Annual Value of the Self-occupied Property has not been treated notionally u/ s 23(1), as if such house has been Let-out as required u/ s 23(4)(b) of the Act. The provisions of section 23(4)(b) of the Act have not been applied and the genuineness of Gross Rent received have not been examined; and (ii) Income from other sources has been declared on account of interest income at ₹ 6,00,784/- on loans for ₹ 40,00,000/- advanced by the assessee to M/s Rajasthan Lace Pvt. Ltd. However, no income from interest Interest on Loans totalling to ₹ 8,55,544/- advanced to the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iries were made by the Assessing Officer during the course of the assessment proceedings for the said year. The issue, relating to assessment of rent of ₹ 12,000 p.m. received by assessee, was examined by the Assessing Officer with reference to the lease agreement entered into by assessee with the tenant. The payments of interest on loans borrowed by assessee and the amounts of interest received by assessee on loans advanced were examined by the Assessing Officer with reference to and the issue relating to interest free loans given to assessee s HUF etc. The Assessing Officer having been satisfied on the evidences, documents and facts of the case did not made any disallowance or addition and passed the order dated 28th March, 2016, under section143(3) of the Act. 7.During the revision proceedings under section 263 of the Act, the assessee submitted before the CIT that he had received rent of ₹ 12,000 per month only from the flat let out by him and the same only could be treated as rent taxable under section 23(1) of the Act. Further the Annual Letting Value of the other house has to be taken to be nil since the assessee had such option under sections 23(2)/ and 23(4) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nning Manufacturing Mills Co. Ltd. [1980] 125 ITR 361 (All.) for the proposition that when the property is subject to statutory control regulations, the actual rent being fetched by the property should prevail as a measure of annual value of the property for the purpose of assessment of income from the property. In Kolkata all assessees are governed by West Bengal Premises Act. Therefore, the actual amount of rent being ₹ 12,000 per month received by assessee in pursuance to the agreement dated 1st April, 2011 had rightly been assessed as income chargeable to tax under the head House Property' subject to statutory deductions permitted under the Act. Therefore, the assessee submitted that under these the facts and circumstances of the case and the law relating to assessment of income under the head House Property, there was no error in the assessment order passed under section 143(3) of the Act. 8. Regarding the second issue relating to claim of interest, raised by CIT U/s 263, the assessee submitted that the allegation made in the show cause notice that assessee claimed deduction of Interest of ₹ 2,41,347 while computing the income from House Property was whol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the revenue. 10. However, the Commissioner of Income Tax ignored the submissions of the assessee and observed that in the assessee s case, the assessment order was passed without considering the aspects as enumerated in the show-cause notice to the assessee while doing an assessment u/s 143(3), the A.O. is not expected to be passive in the face of the return but to actively examine the case from all perspective and conduct further enquiry. The power of revision by the CIT u/s 263 of the Act is very wide and it is in the nature of supervisory jurisdiction. The power u/s 263 can be exercised even in cases where the issue is debatable and such power is not comparable with the power of rectification of mistake u/s 154 of Act. It is well settled that incorrect assumption of facts or application of law satisfies the requirement of law i.e. order being erroneous prejudicial to the interest of revenue. The order passed by the A.O. without application of mind or order showing apparent error of reasoning or the order where the A.O. simply accepts where the assessee stated in his return of income and fails to make the enquiries which are called for in the facts and circumstances of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only from the flat let out by him and the same only could be treated as rent taxable under section 23(1) of the Act. Further the Annual Letting Value of the other house has to be taken to be nil since the assessee had such option under section 23(2)/23(4) of the Act where the assessee owns more than one house. Admittedly, assessee was in occupation of more than one house and therefore the provisions of sec.23(2) are applicable in this case and the ALV of other house is to be taken to be Nil as provided in section 23 (4)(a) read with section 23(2) of the Act.With regard to the ALV of the property let out by assessee, it was submitted that the amount of actual rent received by assessee could only be taken to be ALV for the purposes of assessment of income under the head House Property . The assessee relied on the decision of Hon'ble Calcutta High Court in the case of CIT vs. Kishanlal Sons (Udyog) Pvt. Ltd. [2003] 260 ITR 481 (Cal.), wherein it was, inter alia, held that the rent being fetched by the property at the beginning of the relevant previous year should be considered to represent the annual value of the property. The Counsel also relied on the decision of Hon'ble D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration to the rival submissions. The law with regard to exercise of jurisdiction u/s.263 of the Act on the ground that the AO failed to make enquiries which he ought to have made in the given circumstances of a case is well settled. 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 assessee in his return. 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 calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word erroneous in section 263 includes the failure to make such an enquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein ..... X X X X Extracts X X X X X X X X Extracts X X X X
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