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TMI Blog2009 (11) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... or taxation by the assessee in his return or by his employer in TDS Form No. 16. Consequently in response to notice under s. 148 the assessee offered Rs. 1,20,000 as perquisite for rent-free furnished accommodation. In absence of full details, the AO estimated the value of perquisite at Rs. 5,63,725, which was @ 10 per cent of his salary and added the same to his total income and the assessment under s. 143(3)/147 was completed on a total income of Rs. 86,55,450. Before the learned CIT(A) the assessee's case was that as per r. 3(a)(ii) of IT Rules where 10 per cent of salary exceeds the fair rental value of the property, the valuation of the same shall be limited to the fair value of the accommodation. However, the AO wanted the assessee to produce documents to substantiate the fair rent claimed by the assessee and estimated the value of accommodation at 10 per cent of salary. The learned CIT(A) rejected the assessee's plea and upheld the computation made by the AO. The assessee carried the matter before the Tribunal. The Tribunal vide order dt. 21st Sept., 2005 in ITA No. 1123/Kol/2005 set aside the issue to the file of AO for fresh determination of fair rent of rent-free accommod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2-03. It was further contended that as per proviso to cl. (9) of r. 3 above, option is open to the employee concerned to compute the value of all perquisites for the period beginning from 1st April, 2001 and ending on 30th Sept., 2001 in accordance with rules as they stood prior to this amendment. Therefore, when proviso to amended rule speaks of computing perquisite as per pre-substituted r. 3 for financial year 2001-02, in that case the assessee's computation of, perquisite under the amended rule for financial year 2000-01 relevant to asst. yr. 2001-02 shall not be as per law. Learned CIT was not convinced with the explanation of the assessee. He referred to decision of Hon'ble Supreme Court in the case of BHEL Workers Union Anr. vs. Union of India (2008) 217 CTR (SC) 19 : (2008) 7 DTR (SC) 122 and held that the order passed by the AO is not just erroneous but prejudicial to the interest of Revenue. The relevant portion of his observation in this regard is as under: "Once it is established beyond doubt that r. 3 would be applicable from the asst. yr. 2001-02 and not from asst. yr. 2002-03 as has been contended by the assessee, the income of the assessee has to be computed as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO derives jurisdiction from the order of Tribunal and, thus the AO cannot introduce a new source of income, nor can he deal with any point which was not the subject-matter of appeal before the Tribunal in such set aside assessment proceeding. Therefore, when the powers of the Tribunal are limited to the subject-matter of appeal, the powers of the AO in reassessment cannot extend beyond the same. In this connection, learned Authorised Representative relied on the following decisions: (i) Bhopal Sugar Industries Ltd. vs. ITO (1960) 40 ITR 618 (SC); (ii) Puranmal Radhakishan Co. vs. CIT (1957) 31 ITR 294 (Bom); (iii) Asstt. CIT vs. Anima Investment Ltd. (2000) 68 TTJ (Del)(TM) 1 : (2001) 247 ITR 22 (Del)(TM)(AT); (iv) CIT vs. Lal Chand Agarwal (2002) 178 CTR (Raj) 56 : (2003) 259 ITR 497 at 510 (Raj) (v) CIT vs. Mahindra Co. (1995) 125 CTR (Raj) 81 : (1995) 215 ITR 922 at 928 (Raj) (d) That when the AO has followed the direction given by the Tribunal to determine the fair rent of the property, the assessment order passed in pursuance of such direction was in order and valid. Learned CIT has tried to apply amended r. 3(1) of IT Rules, which was not subject be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive, on the other hand, relied on the order of learned CIT. He submitted that the AO has not computed the perquisite value of the accommodation provided to the assessee by his employer as per (twenty-second) amendment of r. 3 of IT Rules w.e.f. 1st April, 2001 and simply has gone by the documents and explanations given by the assessee during set aside proceedings. Therefore, his action in not acting in terms of the said amended rule caused the assessment erroneous and thus prejudicial to the interests of Revenue. Relying on the decisions of Hon'ble Supreme Court in the case of BHEL Workers Union and CIT vs. Isthmian Steamship Lines (1951) 20 ITR 572 (SC), he submitted that in the case of the assessee, amended r. 3 is applicable from the asst. yr. 2001-02 and not from asst. yr. 2002-03, as claimed by the assessee. The learned Departmental Representative, therefore, submitted that the order of learned CIT passed under s. 263 should be upheld. 6. We have considered the rival contentions of the parties and gone through the materials placed on record. The reason as pointed out by learned CIT to justify his invoking jurisdiction under s. 263 of the Act was that according to r. 3(1), a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The relevant direction of the Tribunal is already quoted in para 2 above of this order. The AO after examining/considering such details as required by him recomputed the perquisite value at Rs. 1,49,000 vide impugned assessment order dt. 15th June, 2006. The AO after verifying the documents gathered from the assessee in set aside proceeding and as per direction of Tribunal and after considering the explanation offered by the assessee exercised his judicial discretion in the matter while completing the reassessment. We are of the considered view that when AO has taken a possible view on the basis of details before him, in such circumstances, the view taken by the AO cannot be said to be prejudicial to the Revenue nor can it be said to be erroneous. In the case of Malabar Industrial Co. Ltd. vs. CIT, the Hon'ble Supreme Court held as under: "The phrase 'prejudicial to the interests of the Revenue' has to be read in conjunction with an erroneous order passed by the AO. Every loss of revenue as a consequence of an order of the AO, cannot be treated as prejudicial to the interests of the Revenue, for example, when an ITO adopted one of the courses permissible in law and it has resul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compute the perquisite under pre-amended r. 3 of the IT Rules. As stated by the learned counsel and not disputed by the Department that the assessee before the notification made on 25th Sept., 2001 had already deducted tax under s. 192 and deposited with Government account within the due date, i.e., by 7th April, 2001, annual return for salary in Form No. 24 also filed by 31st May, 2001 and salary certificate in Form No. 16 issued by 30th April, 2001. Even the assessee also filed his return of income by 31st July, 2001. Therefore, all these formalities had been completed by the assessee before the amendment was promulgated on 25th Sept., 2001. Therefore, these activities in terms of old rule were not in violation of the intention of the legislature as provided in cl. (9) of the amended rule reproduced above. We further find that even the learned CIT has himself stated in last but one para of his order as under: "The AO is also directed to examine the claim of the assessee if the assessee exercise the option and claiming the rule as it stood prior to the amendment till September as per the Notifications No. S.O. 940(E) dt. 25th Sept., 2001." From the above direction of learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le. Now if the amended rule is applied, though not applicable in the case of the assessee for the reasons stated above, it would be detrimental to the interest of the assessee, which is against the spirit of provisions of s. 295 of the Act. Hon'ble Bombay High Court in the case of Seksaria Biswan Sugar Factory Ltd. Anr. vs. IAC (1990) 86 CTR (Bom) 35 : (1990) 184 ITR 123 (Bom), had the occasion to deal with retrospective application of amendment made in the statute. Relevant portion of the observation is reproduced below: "The assessment for the asst. yr. 1982-83 was originally completed allowing the petitioners' claim for deduction under s. 35(1)(ii) of the IT Act, 1961, in respect of donation to a scientific research centre, then approved under that section by the prescribed authority. The approval was withdrawn by the prescribed authority by a notification dt. 2nd Jan., 1986, with retrospective effect. The ITO, thereupon, issued a notice under s. 147(b) seeking to withdraw the deduction for the asst. yr. 1982-83. On a writ petition to quash the notice: Held , that s. 295(4) empowers the CBDT to make rules with retrospective effect. Even there, the rules can be amended r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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