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TMI Blog2022 (11) TMI 467X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 154 of the Act lacks jurisdiction as ld. AO did not demonstrate as to what is the mistake apparent on record and the debatable or change of opinion is not subject matter of the provision of section 154 of the Act, as the law allows the mistake apparent on record be rectified which is expressly not demonstrated before us and see that there exist no mistake which is apparent on record. The law duly empowers the revenue to invoke other provision to consider the audit objection but the same is not permitted under the provision of section 154 of the Act as it done by the AO. In view of the above, we do not find any infirmity in the order of the ld. CIT(A)/NFAC and accordingly decline to interfere. Hence the ground of the appeal of the revenue is dismissed. - ITA No. 255/JP/2021 - - - Dated:- 18-10-2022 - Dr. S. Seethalakshmi, JM And Shri Rathod Kamlesh Jayantbhai, AM For the Revenue : Ms. Monisha Choudhary -JCIT For the Assessee : Shri Nikhelesh KatariA-C.A. ORDER PER: DR. S. SEETHALAKSHMI, J.M. This appeal is filed by the Revenue aggrieved from the order of the National Faceless Appeal Centre, Delhi, [herein after referred to as NFAC/ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he CIT(A) on both counts i.e. first that exemption so disallowed is not amenable within the provision of rectification proceedings as provided in section 154 of the Act and second that no proper opportunity of being heard was given to the assessee which is also the pre-condition to pass an order u/s. 154 of the Act. The ld. CIT(A) allowed the appeal of the assessee holding that the act of the assessing officer in not issuing any notice or giving an opportunity to the appellant before rectifying the assessment is bad in law and against the principle of natural justice and the same is violative of provision of section 154(3) of the Act. Aggrieved, from the said order of the ld. CIT(A)/NFAC the revenue has filed this appeal challenging that the action of the ld. CIT(A)/NFAC deleing the addition which was made after giving opportunity of being heard to the assessee vide notice dated 18.06.2018 and thus the finding was not correct and the order was passed after giving proper opportunity of being heard. 5. Before we proceed to deal with the merits of the case of the revenue, we would like to examine the findings of the ld. CIT(A) in an appeal of the assessee. The relevant findings are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tention so to do and has allowed the assessee or the deductor [or the collector] a reasonable opportunity of being heard . Thus, the act of the Assessing Officer in not issuing any notice or giving an opportunity to the appellant before rectifying the assessment is bad in law and against the principle of natural justice. The rectification order u/s. 154 of the Act in this case, is therefore not sustainable, being in violation of section 154(3). It is therefore quashed and the addition made consequently stands deleted. All the grounds of appeal are deemed to be allowed. 6. The ld. AR of the assessee based on the above findings of the ld. CIT(A) / NFAC submitted that the issue of merits as well as on technical both grounds deliberated by the ld. CIT(A) and the appeal of the assessee was allowed on both the grounds. The revenue did not challenge the findings on the merits of the appeal but have filed an appeal only on technical ground which is not sustainable and deserves to be dismissed. Alternatively, the ld. AR of the assessee submitted that if the appeal of the revenue is considered on technical ground even though they have not challenged the finding of the ld. CIT(A) on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to note that the valuation report of the architect was duly brought on record by the assessee before the ld. AO by the submission of the assessee (PB 3) and a copy of the valuation report is placed at PB 14-22. Interestingly, the same valuation report is made basis for present rectification proceedings. 1.2.2.3 Copy of sale deed on which deduction is claimed duly submitted in assessment proceedings u/s 143(3):We may also submit that the sale deed which is forming basis of deduction claimed by the assessee u/s 54 of the Act was duly submitted before the ld. AO. The extract from the submission dt.7-3-2016 is as under (PB 7): Thus, the sale deed was also before the ld. AO through above submission. 1.2.2.4 Sale deed itself mention that some shops were part of the property: It is also relevant to note that apart from the report of the valuer even the sale deed mention the existence of shops in the house property in question. The relevant extracts of the sale deed are as follows: (PB 44 last para) (PB 46 first para) Therefore, even the sale deed clearly mentions that the property was residential cum commercial property. 1.2.3 The ld. AO must have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lacks proper reasoning: As also mentioned by the ld. CIT(A) that the order passed u/s 154 of the Act, we may submit that the rectification order passed by the ld. AO lacks proper reasoning as it is not explained that how there is any mistake apparent on record which is amenable to jurisdiction u/s 154 of the Act. This is also clear from the following submissions that the ld. AO has taken a easiest route just to make addition instead following the process of law. 1.5.1 Deduction can be granted as a whole either in section 54 or section 54F ld. AO already determined the house property to be residential : We may submit that in the scheme of deduction u/s 54 or 54F of the Act, there is no concept of proportionate deduction. While section 54 is applicable in cases where the assessee transfers a residential property, deduction u/s 54F can be claimed where the assessee transfers other than residential property. The provisions of the Act nowhere envisage a third situation which the ld. AO tried to work out. In the present case, once the erstwhile AO has found the house property to be residential and accordingly allowed deduction u/s 54 of the Act, subsequently the ld. AO ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant for the year 2014 i.e. year of sale: It is to be noted that the valuation report of the architect is of the valuation as of 1-4-1981 while the property was sold on dt.11-2-2014 i.e. a gap of more than 33 years. So logically the valuation is not relevant as there might have been disproportionate change in the residential and commercial rates. Therefore, even if some proportionate valuation was to be done, it should have been on the basis of sale consideration and not the cost as has been considered by the ld. AO. 1.7 No reasonable opportunity of being heard granted 1.7.1 The provisions itself speaks of reasonable opportunity of being heard and not a or one opportunity of being heard: It is submitted that as per provisions of section 154(3) of the Act, a reasonable opportunity of being heard must be granted to the assessee before passing of rectification having effect of enhancing of assessment. The legislature in their wisdom used the word reasonable and not a or one . Therefore, the clear intention is that the assessee must be given time to put his defence and not just cursory opportunity which is also clear from the fact that a substantial time limit o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings u/s 263: We may also submit that as per provisions of section 263, the time limit for passing of the revision order is two years from the end of the financial year in which the order sought to be revised has been passed. In the present case, the assessment order was passed on dt.28-6-2016 and therefore, the time limit for passing of the revision order was available till 31-3-2019. Thus even there was enough time available for making a revision order. Considering the above facts and circumstances of the case neither there was any mistake apparent on record nor there was any reasonable opportunity of being heard and therefore, the ld. CIT(A) rightly quashed the rectification assessment u/s 154 of the Act and the same is prayed to be sustained. Based on the above written submission the ld. AR of the assessee submitted that even on merits there exist no mistake apparent on record and therefore, the action of the ld. AO is not permissible under the pretext of mistake it is not a mistake but the ld. AO is trying review his own records on the very same issue which is already considered and decided under section 143(3) of the Act. 7. The ld. AR of the assessee in addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to the provisions of section 154. (CIT(A) para 1 page 3) In last para of the order, the ld. CIT(A) held as under: Thus, the act of the assessing officer in not issuing any notice or giving any opportunity to the appellant before rectifying the assessment is bad in law and against the principle of natural justice. The rectification order u/s 154 of the Act in this case, is therefore not sustainable, being in violation of section 154(3). It is therefore quashed and the addition made consequently stands deleted. All the grounds of appeal are deemed to be allowed (CIT(A) last para page 3) Therefore, it is very much clear that the appeal of the assessee was in totality including the ground relating to rectification not being amenable to sec.154. Now the department has filed this appeal challenging the quashing of proceedings u/s 154 of the Act but only on the ground relating to the providing of reasonable opportunity of being heard. Now without prejudice to the submission that CIT(A) has duly accepted the ground of appeal of the assessee and there is no appeal by the department on that part Additional Ground of Appeal: Now under above background the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal before the ld. CIT(A) with regard to the validity of the rectification proceedings on the ground that such a rectification is out of the scope of the provisions of sec.154 as this is not a mistake apparent on the record. Now though the ld. CIT(A) has clearly held that disallowance is not amenable to rectification proceedings but the same was not mentioned while finally disposing off the appeal in favor of the assessee. Therefore, the first condition that the ground of appeal is not adjudicated or should have been decided against the assessee is clearly met 1.1.2 Adjudication has direct bearing on the subject matter of the appeal: As can be seen above that the assessee has challenged the validity of the rectification proceedings on two counts, firstly that the rectification is out of the purview of the provisions of section 154 and secondly that no proper opportunity of being heard have been granted by the ld. CIT(A). As already submitted above, the ld. CIT(A) did not accept the ground raised questioning whether the such rectification is within the scope of section 154 or not. However, the ld. CIT(A) has allowed the appeal of the assessee on the ground that no proper o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y or the Court, and therefore, has not filed an appeal against the same, is entitled to defend such an order before the Appellate forum on all grounds, including the ground which has been held against him by the Lower Authority, though the final order is in its favour. In the instant case, the Assessee was not an aggrieved party, as he had succeeded before the CIT (A) in the ultimate analysis. Not having filed a cross objection, even when the appeal was preferred by the Revenue, it does not mean that an inference can be drawn that the Respondent assessee had accepted the findings in part of the final order, that was decided against him. Therefore, when the Revenue filed an appeal before the ITAT, the Appellant herein (Respondent before the Tribunal) was entitled under law to defend the same and support the order in appeal on any of the grounds decided against it. The Respondent assessee had taken the ground of maintainability before Commissioner (Appeals) and, therefore, in the appeal filed by the Revenue, it could rely upon Rule 27 and advance his arguments, even though it had not filed cross objections against the findings which were against him. The ITAT, therefore, committed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not decided by the Ld. CIT (A) as the point of contention of the assessee relates to the same issue raised by the Revenue. In this regard, we find support and guidance from the judgment of Hon ble Gujarat High Court in the case of PCIT vs. Sun Pharmaceuticals Industries Ltd in tax appeal no. 654 655 of 2017, wherein it was held as under: 11. To put the controversy beyond doubt, Rule 27 of the Rules makes it clear that the respondent in appeal before the Tribunal even without filing an appeal can support the order appealed against on any of the grounds decided against him. It can be easily appreciated that all prayers in the appeal may be allowed by the Commissioner (Appeals), however, some of the contentions of the appellant may not have appealed to the Commissioner. When such an order of the Commissioner is at large before the Tribunal, the respondent before the Tribunal would be entitled to defend the order of the Commissioner on all grounds including on grounds held against him by the Commissioner without filing an independent appeal or cross objection. 12. Rule 27 of the Rules is akin to Rule 22 Order XLI of the Civil Procedure Code. Sub-rule (1) provides that an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave therefore no hesitation in accepting the submission of the learned counsel for the appellant that the High Court was in error in proceeding on the basis that the appellant not having filed a memorandum of cross-objections, was not entitled to canvass the correctness of the finding on the bar of Order II Rule 2 rendered by the trial court. 14. Similar issue came-up before Division Bench of this Court in case of DahodSahakariKharidVechan Sangh Ltd. vs. Commissioner of Income Tax reported in282 ITR 321 in which the Court observed as under: 17. Taking up the second issue first, the Tribunal has committed an error in law in holding that the assessee having not filed cross objection against findings adverse to the assessee in the order of Commissioner (Appeals), the said findings had become final and remained unchallenged. The Tribunal apparently lost sight of the fact that the assessee had succeeded before the Commissioner (Appeals). The appeal had been allowed and the penalty levied by the assessing officer deleted in entirety. In fact, there was no occasion for the assessee to feel aggrieved and hence, it was not necessary for the access to prefer an appeal. The positi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal was, therefore, in error in holding that the finding recorded by the Commissioner (Appeals) remained unchallenged since the assessee had not filed cross objections. 15. The first question is, therefore, answered against the Revenue and in favour of the assessee. 22. The ratio laid down in the judgment above is squarely applicable to the facts of the case. The judgments referred by the Ld. DR in the course of hearing are distinguishable from the present facts of the case. Therefore we find that the said judgements are not relevant for the purpose of adjudication of issue before us. 23. In view of the above, we concur the argument of the ld. AR for the assessee. Considering the above facts and circumstances of the case, application made under Rule 27 is prayed to be admitted and also prayed to consider the ratio decided in the following decisions:- Sanjay Sawhney vs. Pr. CIT in ITA No. 834/2019 dated 18.05.2020 (Del. H.C.) Addl. CIT vs. Ranbaxy Laboratories Ltd. In ITA 3799/Del/2009 dated 29.07.2019 ( Del. Trib.) 8. In addition to the above two written submission the ld. AR of the assessee read provision of Rule 27, related relied upon judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue audit team. There are no arguments of the ld. DR on merits of the case so as to controvert the findings of the ld. CIT(A).Since, the appeal of the assessee was allowed by the ld. CIT(A) on both technical as well as consideration of the merits of the case and the revenue has challenged this appeal only on the opportunity ground (technical ground) and did not challenge the ground on the fact that considering the fact of the case that the mistake is apparent on record or not. Whereas on the other hand looking to the petition of the ld. AR of the assessee under rule 27 raising the legal ground at this stage which is based on the ratio decided in favour of the assessee considering the facts of the case on hand respectfully following the ratio of decision relied upon by the assessee we consider it to allow the additional ground on merits raised by the ld. AR of the assessee as the related ground was also raised before the ld. CIT(A). We have gone through the submission of the assessee and orders of the lower authorities it is not disputed that the assessee has earned the capital gain and the claimed the deduction under section 54 of the Act. As the ld. AR of the assessee has alr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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