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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 ..... either offered for 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st. yr. 2002-03. 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with certain specific direction to determine the fair rent for the purposes of computing perquisite. The Tribunal did not ask the AO to apply r. 3 in computing such perquisite. That r. 3 of IT Rules merely prescribes the method for determining the value of the rent-free accommodation provided by the employer and does not, in any way, determine the 'fair rent' of any property, for which there are other methods like considering the rental value, municipal valuation etc. (c) That in a set aside assessment, 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 (De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited the same with Government account with due date, annual return in Form No. 24 was also filed and salary certificate in Form No. 16 issued by 30th April, 2001 and the assessee filed his return of income by 31st July, 2001. Therefore, when computation has been made, tax has been deducted and deposited and certificate issued within the stipulated time as per existing rule, the amended r. 3 of IT Rules shall not be applicable to the case of the assessee. 5. The learned Departmental Representative, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the perquisite value of the assessee's rent-free furnished accommodation at Rs. 5,63,725 as against shown by the assessee in return of income of Rs. 1,20,000. The assessee was unsuccessful before learned CIT(A). On second appeal, the Tribunal vide order dt. 21st Sept., 2005 set aside the issue to the file of AO for the limited purpose of redetermining the fair rent of the property after examination of the documents and details that may be furnished by the assessee during set aside proceeding. 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 prejud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e aforesaid proviso under cl. (9) of the said substituted r. 3 of IT Rules promulgated on 25th Sept., 2001, it is amply clear that option was open to the employee concerned to compute the value of all perquisites made available to him beginning from 1st day of April, 2001 and ending with 30th day of Sept., 2001 in accordance with the rules as they stood prior to this amendment. Therefore, from the language of the said cl. (9) it is clear to allow discretion to the employee concerned to 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee, then the same should not be applied. That is to say, s. 295(4) puts restriction on the retrospective application of a notification if it adversely affects the interests of the assessee. In this case, as stated above, the assessee did all the formalities in computing income, deducting tax thereon, filing of return etc. within the stipulated time before promulgation of this amended rule, which were also in terms of option provided in cl. (9) of the said amended rule. 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 scie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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