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TMI Blog2024 (7) TMI 1419X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Shambhu Investment (P) Ltd. [ 2001 (3) TMI 77 - CALCUTTA HIGH COURT ] is concerned, in this judgment, Hon ble Courts are unanimous to propound that whether rental income is to be treated as a business income or house property income, it would depend upon the nature of agreement and user of the premises. In that case, the assessee had let out portion of the said property to various occupants by giving them additional right of using furniture and fixtures and other common facilities. The rental income was assessed as a business income. How this exercise has not been done by the AO in the present case in A.Y. 2015-16. It is also pertinent to note that prior to A.Y. 2015-16, the assessee himself was showing rental income under the head business income . In this year, there is a change in the methodology, therefore, before accepting that change, AO ought to have enquired as to how the same agreement can give rise to income as a house property income. Therefore, ld. Commissioner has not committed any error while exercising the powers u/s 263. Decided against assessee. - Shri Rajpal Yadav, Vice-President (KZ) And Dr. Manish Borad, Accountant Member For the Assessee : Shri Abhi Sark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . No. Pr. CIT-2/Pat/Tech./u/s 263/2018-19/6886 dated 14th March, 2020 as under:- 1. The return of income for A. Y. 2015-16 was filed on 13.11.2015 declaring total income of Rs. 2,76,02,310/-. An order of assessment under section 143(3) of the Income Tax Act, 1961 was passed on 22.12.2017 on total income of Rs. 2,92,86,079/-. The case was selected for Limited Scrutiny through CASS to verify (a) Contract receipts/Fees mismatch, (b) Sales turnover mismatch (c) Sundry Creditors (d) Change in annual lettable Value of house property (e) Tax credit mismatch. 2. From perusal of the case records for A. Y. 2015-16, it is found that during A. Y. 2015-16 your have shown rental income of Rs. 2,51,92,196/- and claimed a deduction u/s 24 @30% of Rs. 75,57,015/-. On perusal of lease/rent agreement dated 28.04.2012 submitted by you it clear that you have derived such income in F.Yr. 2012-13 and F.Yr. 201314 relevant to A. Y. 2013-14 and 2014-15 and the same was shown under the head Business and Profession . However, in A.Yr. 2015-16 the same income received on said agreement has been shown as rental income and claimed the deduction u/s 24 for repair and maintenance. Thus, certainly, this is a case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04.2012. The assessing officer failed to examine this aspect. It is apparent that the facts and substance of the case was not thoroughly examined/verified in light of the questionnaire mentioned in the aforesaid notice. The lacunae renders the assessment order erroneous in so far as it is prejudicial to the revenue. VI. In view of the above, the order under reference is held to be erroneous and prejudicial to the interest of revenue and accordingly set aside on the limited specific points as outlined above. The Assessing Officer is directed to adjudicate afresh on the issues mentioned above after giving opportunity of being heard to the assessee in the interest of justice and fairness . 4. A perusal of the above would indicate that the assessee had entered into a rent agreement with Bharti Airtel Limited on 09.05.2011, which was again revised on 18.05.2012. According to the ld. Pr. CIT, the assessee has been showing this rental income as a business income upto A.Y. 2014-15, but for the accounting year relevant to A.Y. 2015-16, the character of this income has been changed from business income to house property income. The assessee has claimed deduction under section 24 of the Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deemed always to have extended to such matters as had not been considered and decided in such appeal. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Explanation.- In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded. 6. A bare perusal of the sub section-1 would reveal that powers of revision granted by section 263 to the learned Commissioner have four compartments. In the first place, the learned Commissioner may call for and examine the records of any proceedings under this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itative pronouncements including the decision of Hon ble Supreme Court in the case of Malabar Industries 243 ITR 83 and has propounded the following broader principle to judge the action of CIT taken under section 263. (i) The CIT must record satisfaction that the order of the AO is erroneous and prejudicial to the interest of the Revenue. Both the conditions must be fulfilled. (ii) Sec. 263 cannot be invoked to correct each and every type of mistake or error committed by the AO and it was only when an order is erroneous that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the AO has adopted one of the courses permissible under law or where two views are possible and the AO has taken one view with which the CIT does not agree. If cannot be treated as an erroneous order, unless the view taken by the AO is unsustainable under law. (vi) If while making the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... committed by the ld. Assessing Officer, which has caused a prejudice to the interest of revenue. 11. As far as the judgment of the Hon ble Calcutta High Court, which has been upheld by the Hon ble Supreme Court in the case of Shambhu Investment (P) Ltd. (supra) is concerned, in this judgment, Hon ble Courts are unanimous to propound that whether rental income is to be treated as a business income or house property income, it would depend upon the nature of agreement and user of the premises. In that case, the assessee had let out portion of the said property to various occupants by giving them additional right of using furniture and fixtures and other common facilities. In this way, the rental income was assessed as a business income. How this exercise has not been done by the ld. Assessing Officer in the present case in A.Y. 2015-16. It is also pertinent to note that prior to A.Y. 2015-16, the assessee himself was showing rental income under the head business income . In this year, there is a change in the methodology, therefore, before accepting that change, the ld. Assessing Officer ought to have enquired as to how the same agreement can give rise to income as a house property i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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