M/s. Banwari Lall Pasari, Kolkata v. DCIT, C ircle- 34, Kolkata, Kolkata

ITA 523/KOL/2010 | 2006-2007
Pronouncement Date: 16-07-2010

Appeal Details

RSA Number 52323514 RSA 2010
Assessee PAN AACFB7611A
Bench Kolkata
Appeal Number ITA 523/KOL/2010
Duration Of Justice 4 month(s) 1 day(s)
Appellant M/s. Banwari Lall Pasari, Kolkata
Respondent DCIT, C ircle- 34, Kolkata, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 16-07-2010
Appeal Filed By Assessee
Bench Allotted B
Tribunal Order Date 16-07-2010
Assessment Year 2006-2007
Appeal Filed On 15-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BEN CH B KOLKATA () BEFORE . . . . . . . . SHRI B.R.MITTAL JUDICIAL MEMBER / AND ! ! ! ! . . . . ! !! ! . . . . '#$ '#$ '#$ '#$ !% SHRI K. K. GUPTA ACCOUNTANT MEMBER & & & & / ITA NO . 523/KOL/2010 '() *+/ ASSESSMENT YEAR : 2006-07 (-. / APPELLANT ) M/S. BANWARI LALL PASARI KOLKATA (PAN: AACFB 7611A) - ( - - VERSUS - . (01-./ RESPONDENT ) DCIT CIRCLE-34 KOL. -. 2 3 !/ FOR THE APPELLANT: / SHRI R. SALARPURIA 01-. 2 3 !/ FOR THE RESPONDENT : / SHRI K. HARIPRASAD !4 / ORDER ! ! ! ! . . . . ! !! ! . . . . '#$ '#$ '#$ '#$ !% PER SHRI K. K. GUPTA A.M. THE ASSESSEE IS IN APPEAL AGITATING THE ORDER OF T HE LD. CIT-XII KOLKATA UNDER SECTION 263 OF THE I.T. ACT. THE GROUNDS RAISED BY THE ASSESSEE BEFORE US READ AS UNDER: 1. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE ORDER PASSED BY THE LD. CIT U/S 263 IS WHOLLY BAD ILLEGA L AND VOID ABINITIO AND IN VIEW OF THE FACTS AND CIRCUMSTANCES SUCH ORD ER IS LIABLE TO BE QUASHED/CANCELLED. 2. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT WAS WHOLLY UNJUSTIFIED IN SETTING ASIDE THE ORD ER PASSED U/S 143(3) ON THE GROUND THAT THE ORDER SO PASSED U/S 143(3) W AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AS NEITHER A NY INCOME HAS ESCAPED ASSESSMENT NOR ANY EXCESS REFUND/CREDIT WAS GRANTED TO YOUR APPELLANT AND IN THE CIRCUMSTANCES THE ORDER PASSED U/S 263 I S LIABLE TO BE QUASHED/CANCELLED. 3. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT ERRED IN SETTING ASIDE THE CASE BACK TO THE AO AND DIRECTING HIM TO 2 RE-VERIFY THE NATURE OF RENTAL INCOME RECEIVED BY Y OUR PETITIONER WHEREAS ALL THE DETAILS OF SUCH INCOME WERE DULY PR ODUCED AT THE TIME OF ASSESSMENT PROCEEDINGS AND SUCH INCOME WERE ALL ALO NG BEEN OFFERED TO TAX AS BUSINESS INCOME ONLY AND SO ASSESSED AS THE PROPERTY FROM WHICH RENTAL INCOME IS RECEIVED IS NOT OWNED BY THE PETIT IONER AND IN VIEW OF THE FACTS AND CIRCUMSTANCES THE ACTION OF LD. CIT I N SETTING ASIDE THE CASE AND REFER IT BACK TO THE AO IS ILLEGAL AND BAD IN LAW AND IT MAY KINDLY BE HELD ACCORDINGLY. 4. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT ERRED IN SETTING ASIDE THE CASE BACK TO THE AO AND DIRECTING HIM TO RE-VERIFY THE AMOUNT OF LOAN GIVEN AND INTEREST ACC RUED THEREON WHEREAS ALL THE RELEVANT LOAN CONFIRMATIONS WERE DULY PRODU CED / SUBMITTED BEFORE THE AO AT THE TIME OF ASSESSMENT PROCEEDINGS AND IN VIEW OF THE FACTS AND CIRCUMSTANCES THE ACTION OF LD CIT IN SET TING ASIDE THE CASE AND REFER IT BACK TO THE AO IS ILLEGAL AND BAD IN L AW AND IT MAY KINDLY BE HELD ACCORDINGLY. 5. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT ERRED IN SETTING ASIDE THE CASE BACK TO THE AO AND DIRECTING HIM TO RE-VERIFY THE LIABILITY TOWARDS UNSECURED LOAN IN T HE NAME OF M/S. METALS CENTRE LTD. AS ALL THE RELEVANT DOCUMENTS INCLUDING LEDGER ACCOUNT ETC. WERE DULY PRODUCED/SUBMITTED BEFORE THE AO AND IN V IEW OF THE FACTS AND CIRCUMSTANCES THE ACTION OF LD CIT IN SETTING A SIDE THE CASE AND REFER IT BACK TO THE AO IS ILLEGAL AND BAD IN LAW A ND IT MAY KINDLY BE HELD ACCORDINGLY. 6. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT ERRED IN SETTING ASIDE THE CASE BACK TO THE AO AND DIRECTING HIM TO COMPUTE THE NOTIONAL RENTAL INCOME IN RESPECT OF TH E PROPERTY AT NEW DELHI WHEREAS THE AO WAS WHOLLY AWARE OF THE FACT T HAT SUCH PROPERTY WAS LYING VACANT THROUGH OUT THE YEAR AND WAS UTILI SED FOR BUSINESS PURPOSE ONLY AND IN VIEW OF THE FACTS AND CIRCUMSTA NCES THE ACTION OF LD CIT IN SETTING ASIDE THE CASE AND REFER IT BACK TO THE AO IS ILLEGAL AND BAD IN LAW AND IT MAY KINDLY BE HELD ACCORDINGLY. 7. FOR THAT YOUR PETITIONER CRAVES THE RIGHT TO PU T ADDITIONAL GROUNDS AND/OR TO ALTER/AMEND/MODIFY THE PRESENT GROUNDS AT THE TIME OF HEARING. 2. BRIEF FACTS AS HAVE BEEN CONSIDERED ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR AT RS.27 13 660/-. IT WAS SCRUTINISED UNDER SECTION 143(3) WHEN THE AO CONSIDERED COMPUTING TH E INCOME OF THE ASSESSEE AT 3 RS.1 61 55 531/- BY DISALLOWING CERTAIN EXPENSES CL AIMED ON BAD DEBTS LOSS IN SHARES DEALING AND ALSO EXPENSES CLAIMED UNDER THE PROVISI ONS OF SECTION 14A. 3. THE LD. CIT VIDE HIS NOTICE UNDER SECTION 263 PROCEEDED TO HOLD THAT CERTAIN ASPECTS ON THE RETURN OF INCOME HAD NOT BEEN LOOKED INTO BY THE AO WHICH INTER ALIA INCLUDED THE FACT THAT THE ASSESSEE HAD RETURNED IN COME FROM RECEIPT OF RENT AS BUSINESS INCOME VIS--VIS INCOME FROM HOUSE PROPERTY. THE AS SESSEE HAD ALSO PAID RENT TO THE RELATIVES WHICH WERE TO BE LOOKED INTO UNDER THE PR OVISIONS OF SECTION 40A(2)(B) WHICH THE AO HAD NOT LOOKED INTO. THE ASSESSEE HAD INTEREST INCOME BUT PAYMENT OF INTEREST AS AGAINST EARNING OF SAME WAS NOT IN ACCO RDANCE A BUSINESS ACUMEN ALONG WITH HAVING PAID INTEREST UNDER SECTION 40A(2)(B) W AS TO BE CONSIDERED BY THE AO. BAD DEBTS IN RESPECT OF A PARTICULAR LOAN DEBTOR HA D NOT BEEN CONSIDERED AND INTEREST HAD BEEN PAID BEYOND A STATUTORY LIMIT TO A LOAN CR EDITOR SHOULD HAVE BEEN DISALLOWED BY THE AO. THE UNSECURED LOANS OBTAINED INCLUDED A LOAN WHICH WAS NOT PART OF THE LOANS AS VERIFIED BY THE AO. THERE WAS AN OUTSTANDI NG BALANCE ON WHICH NO INTEREST HAD BEEN CHARGED WHICH REQUIRED THE GENUINENESS TO BE ESTABLISHED BY THE AO. THE ASSESSEE HAD A FLAT IN DELHI WHICH HAD BEEN PARTLY LET OUT AND THE INCOME OF WHICH HAD NOT BEEN SHOWN AND FINALLY TAX HAD NOT BEEN DEDUCTE D AT SOURCE FROM PAYMENT MADE TO THE CONTRACTOR IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME TAX ACT. IN VIEW THEREOF THE PROVISIONS OF SECTION 40(A)(IA) WAS TO BE LOOKED INTO. ON THESE ASPECTS THE LD. CIT SOUGHT TO INVOKE THE PROVISIONS OF SECTION 263 ON WHICH THE LD. COUNSEL FOR THE ASSESSEE BEFORE US HAS SUBMITTED WAS REPLIED TO BY WAY OF WRITTEN SUBMISSIONS AS ENCLOSED AT PAGE NOS. 1 TO 15 OF THE PAPER BOOK. 4. THE LD. COUNSEL SUBMITTED THAT ON THE BASIS OF T HE SUBMISSIONS BEFORE THE LD. CIT THE FOUR MAJOR ITEMS THAT HAVE BEEN CONSIDERED BY THE LD. CIT IN HIS ORDER UNDER SECTION 263 ARE THEREFORE ONLY THE ISSUES WHICH HAVE TO BE DEALT WITH NOW FOR CONSIDERATION ARE WHETHER APPROPRIATE FOR INVOKING THE PROVISIONS OF SECTION 263. HE POINTED OUT THAT DELETING THE REST THE FOUR HEADIN GS UNDER WHICH THE LD. CIT HAS CONSIDERED ARE (1) TREATMENT OF RENTAL INCOME AS B USINESS & PROFESSION (2) UNDERCHARGING INTEREST FROM 4 PARTIES (3) UNSECURE D LOAN FROM M/S. METAL CENTRE LTD. AND (4) HOUSE PROPERTY AT NEW DELHI. 4 4.1 INITIATING SUBMISSIONS ON THE FIRST ISSUE HE P OINTED OUT THAT THE ASSESSEE HAD BEEN OBTAINING RENTAL INCOME WHICH HAD BEEN SHOWN A S INCOME FROM BUSINESS ON ACCOUNT OF THE SOLE CRITERIA THAT THE ASSESSEE DOES NOT OWN THESE PROPERTIES WHICH IS THE BASIC CRITERIA FOR ASSESSING INCOME FROM HOUSE PROP ERTY UNDER SECTION 22 OF THE ACT AS SUGGESTED BY THE LD. CIT(A) TO THE AO FOR CONSIDERA TION AFRESH. IT WAS SUBMITTED THAT THE AO WHO MAY HAVE PROPOSED THE INITIATION FOR IN VOKING THE PROVISIONS OF SECTION 263 IN THE IMPUGNED ASSESSMENT ORDER HAD HIMSELF A CCEPTED THE CONTENTION OF THE ASSESSEE RETURNING THE INCOME ON ACCOUNT OF RECEIPT S FROM RENT AS INCOME FROM BUSINESS. IN SUPPORT OF HIS CONTENTION HE HAS FILE D THE TOTAL RECEIPTS AND THE TOTAL EXPENSES AS RENT PAID WHICH BY NO STRETCH OF IMAG INATION COULD BE CONSIDERED AS INCOME FROM HOUSE PROPERTY. HE POINTED OUT THAT THE PRACTICE OF RETURNING THE SAME FOR THE PAST 20 YEARS CANNOT BE DISTURBED WHEN NO FACTU AL CONTROVERSY HAD BEEN BROUGHT ON RECORD BY THE AO. THE AO IN HIS ORDER HAD CLEA RLY ACCEPTED THE FACT THAT THE INCOME RETURNED BY THE ASSESSEE WAS TO BE ASSESSED AS INCOME FROM BUSINESS WHEN ON THE BASIS OF HIS OWN VERIFICATION HE HAS COMPUTED INCOME FROM HOUSE PROPERTY AS RETURNED AND VERIFIED BY THE ASSESSEE OWNED BY IT. THE LD.CIT IN HIS ORDER HAS NOT CONSIDERED THE ASSESSMENT RECORDS BUT HAS GONE BEYO ND THEREOF BY HOLDING THAT THE AO OUGHT TO HAVE VERIFIED WHETHER THE ASSESSEE HAD BECOME THE DEEMED OWNER OF THESE PROPERTIES WITHIN THE MEANING OF SECTION 27(I IIB) READ WITH SECTION 269UA(F) FOR THE PURPOSE OF ASSESSMENT OF RENTAL RECEIPTS. HE PO INTED OUT THAT THE PROVISIONS OF SECTION 263 DO NOT INDICATE A HYPOTHETICAL VIEW TO BE CONSIDERED BY THE AO WHEN THE VIEW HAS ALREADY BEEN TAKEN CARE OF BY THE AO AND T HE HYPOTHETICAL ASSUMPTION OF JURISDICTION WHICH THE LD. CIT HIMSELF AGREED THAT THE PROPERTIES MAY HAVE BECOME DEEMED PROPERTIES TO BE OWNED BY THE ASSESSEE. HE P OINTED OUT THAT THE LD. CIT THEREFORE COULD NOT GIVE A DIRECTION ON THE ISSUE IN VIEW OF THE FACT THAT THE DEEMED PROPOSITION CANNOT BE THRUST UPON THE AO UNDER THE REVISIONARY POWERS OF THE LD. CIT UNDER SECTION 263. IN ANY CASE RENDERING OF INCOME OF RECEIPT OF RENT AS BUSINESS INCOME IS NOT PREJUDICIAL TO THE INTEREST OF REVENU E TO THE EXTENT THAT 90% OF RENTAL INCOME HAS BEEN RENDERED TO TAX AS AGAINST THE INCO ME IF AS SUGGESTED BY THE LD. CIT TO BE TAXED AS HOUSE PROPERTY INCOME WOULD BE FURT HER REDUCED IF THE STATUTORY 5 ALLOWANCE OF EXPENSES ETC TO BE GRANTED TO THE ASS ESSEE WOULD BE TAXED ONLY AT ABOUT 65%. 4.2 THE SECOND AND THIRD ISSUES WHICH THE LD. CIT C ONSIDERED IN THE CASE OF THE ASSESSEE ARE CORRELATED TO THE FACT THAT IN HIS SHO WCAUSE NOTICE HE HAD CONSIDERED ASSUMING REVISIONARY JURISDICTION FOR INVOKING THE PROVISIONS OF SECTION 40A(2)(B) ALONG WITH THE FACT THAT THE LOAN CREDITORS ARE THE VERY AMOUNTS ADVANCED TO DEBTORS STOOD REMAINED UNVERIFIED ALTHOUGH ON HAVING POINT ED OUT IN THE SUBMISSIONS OF THE ASSESSEE BEFORE HIM ON THE BASIS OF SHOW-CAUSE NOT ICE ISSUED THE LD. CIT PICKED OUT ONLY FOUR PARTIES TO INDICATE THAT INTEREST IS BEIN G UNDER-CHARGED FROM THESE FOUR PARTIES WHICH HE HAS HIMSELF DETAILED THE INTEREST RATES CHARGED FOR THE EARLIER 8 YEARS. A MERE PERUSAL OF THE RATE OF INTEREST CHARGED WOUL D INDICATE THAT THE CHARGING OF INTEREST IS SOLELY DEPENDENT ON THE BANK RATE WHICH HAS DECREASED OVER A PERIOD OF THE PAST EIGHT YEARS. THE BANK NOW CHARGES FLOATING RAT E OF INTEREST ON LOANS IN ACCORDANCE WITH THE DIRECTION OF THE RESERVE BANK OF INDIA. IT IS NOBODYS CASE THAT INTEREST IS TO BE CHARGED AT A HIGHER RATE IN VIEW OF THE FACT THA T THE ASSESSEE HAS RECEIVED A LOWER INTEREST RATE IN BUSINESS. THE RATES ARE CHARGED IN ACCORDANCE WITH THE EXISTING BUSINESS NECESSITY WHICH THE LD. CIT HAS NOT OBSERV ED IN HIS OPINION BUT INSISTED THAT CHARGING OF INTEREST IS TO HAVE A DIFFERENT RATE WH EN AMOUNTS GIVEN BY THE ASSESSEE IS AT A LOWER RATE OF INTEREST. THE LD. COUNSEL ALSO ARGU ED THAT THE AMOUNT OF LOAN CREDITOR BEING M/S. METAL CENTRE LTD. TO WHOM THE ASSESSEE O WNS 9.13 CRORES WAS NOT PROVIDED FOR INTEREST IN VIEW OF THE FACT THAT THE AMOUNT O WED BELONGED TO DIFFERENT PARTIES TRANSFERRED TO M/S. METAL CENTRE LTD. WERE ORIGINAL LY TO BE PAID BY THE ASSESSEE. M/S. METAL CENTRE LTD. WERE ASKING FOR INTEREST ON INTER EST AS PROVIDED UPTO 1 ST OF APRIL 2002. IN VIEW OF THE PRINCIPAL AMOUNT HAVING BEEN D IVERTED BY THE ACTUAL LOAN CREDITORS THE INTEREST FOR THE IMPUGNED YEAR WAS N OT PROVIDED FOR. THEREFORE THESE ISSUES CLEARLY INDICATE THAT THE AO AFTER HAVING V ERIFIED THE CONFIRMATION OF THE LOAN CREDITORS AND THE LOAN DEBTORS WAS SATISFIED ON THI S SCORE OF CHARGING OF INTEREST OR NOT THEREFROM COULD NOT NOW BE ASKED TO VERIFY AGAIN T HE BROUGHT FORWARD LOANS ONLY WHETHER THE LOAN CREDITOR WAS GENUINE AS AGAINST TH E LOAN DEBTORS WHO WERE TO BE PAID INTEREST ON THE EXISTING RATE OF INTEREST IN THE IM PUGNED ASSESSMENT YEAR AS RETURNED AS 6 INCOME BY THE ASSESSEE AND THE AO HAD VERIFIED AND THEREFORE NOW CANNOT BE SUPER- IMPOSED UNDER THE REVISIONARY POWERS OF THE LD. CIT . IT IS ONLY AN OPINION IN THE MIND OF THE LD. CIT THAT NO PRUDENT BUSINESSMAN WILL CHA RGE INTEREST ON LOAN ADVANCED LESS THAN THE INTEREST PAID ON LOANS ACCEPTED. IF THIS IS TRUE THE CONVERSE IS ALSO TRUE IN THE SENSE THAT NOBODY WILL PAY MORE INTEREST THAN WHAT IS AVAILABLE IN THE MARKET INTER ALIA SHOULD NOT BE PROVIDED FOR ALL THOSE LOAN CRE DITORS WHOSE PRINCIPAL AMOUNT IS ALSO IN DISPUTE TO THE EXTENT THAT THE CONFIRMATION OF T HE LOAN CREDITOR EXISTED EARLIER AS FAR BACK AS 01.04.02. THEREFORE ON THE SECOND AND THIR D CONTENTION OF THE LD. CIT HE POINTED OUT THAT BY NO STRETCH OF IMAGINATION WOU LD THE LD. CIT REVIEW THE CHARGING OF INTEREST AND PAYMENT OF INTEREST DIRECT THE AO TO EXAMINE THE CONFIRMATIONS WHICH ARE ON RECORD OF THE AO. 4.3 ON THE LAST ISSUE CONSIDERED BY THE LD. CIT RE GARDING THE RENTAL INCOME FROM HOUSE PROPERTY AT NEW DELHI HE POINTED OUT THAT TH E AO IN ASSESSMENT YEAR 2003-04 HAD ALSO CONSIDERED THIS ASPECT ON ASSESSING INCOME FROM HOUSE PROPERTY AT RS.90 000/- WHEN HE THOUGHT IT FIT THAT IT WAS NOT SELF-OCCUPIED. WHEN IT WAS APPEALED AGAINST THE LD. CIT(A) ON THE ISSUE HELD THAT THIS PROPERTY IS OWNED BY THE ASSESSEE WAS ITS BUSINESS ASSET AND VACANT. THEREFORE IT SH OULD NOT BE SUBJECTED TO NOTIONAL RENT AS ASSESSED AND DELETED THE ADDITION. THE AO HAD NO T BROUGHT OUT ANY MATERIAL TO ESTIMATE OR CONSIDER INCOME THEREFROM AS INCOME FRO M HOUSE PROPERTY. THE LD. CIT HOWEVER SOUGHT TO RELY ON A HOUSE TAX RECEIPT PAID BY THE ASSESSEE WHICH SUGGESTED THAT IT WAS PARTLY LET OUT. HE POINTED OUT THAT THE LD. CIT DID NOT VERIFY THAT THE ASSESSEE HAD GIVEN A PART OF IT TO A TENANT ON RENT BECAUSE THERE WAS NONE. THE HOUSE TAX RECEIPT THEREFORE WAS ONLY A VOUCHER OF THE T AX PAID AS REQUIRED BY THE MUNICIPAL CORPORATION AND CANNOT BE CONSIDERED AS THE AO HAVI NG IGNORED THIS IMPORTANT ASPECT ON VERIFICATION TO ASSUME JURISDICTION UNDER SECTIO N 263. IT IS A PROPOSITION OF THE LD. CIT TO EXAMINE THE ASSESSEE TO MAINTAIN THAT IT IS SELF-OCCUPIED PROPERTY TO BE ESTABLISHED BY OTHER THAN THE MUNICIPAL CORPORATION RECEIPT. IT IS A PROPOSITION NOT INVOLVING ANY ERROR OR PREJUDICE TO THE REVENUE. 7 4.4 CONCLUDING HIS ARGUMENTS HE SUBMITTED THAT ALL THESE ISSUES HAVING BEEN CONSIDERED AS INTEGRAL BUSINESS OF THE ASSESSEE TH E VERY FACT THAT IN THE IMMEDIATELY SUCCEEDING ASSESSMENT YEAR THE AO HAD VERIFIED ALL THESE ASPECTS. THE AO PROPOSING INVOKING THE PROVISIONS OF SECTION 263 ON THE MATERIALS WHICH WERE AVAILABLE ON RECORD AND PLACED IN THE PAPER BOOK T HEREFORE CONFIRMS THAT A VIEW ALONE IS TO BE THRUST UPON THE AO. HE POINTED OUT THAT AL L THESE CONTROVERSIES WERE CONSIDERED IN DETAIL IN THE ASSESSMENT ORDER FOR TH E ASSESSMENT YEAR 2005-06 UNDER SECTION 143(3) WHEN THE ASSESSEE DECLARING ITS INCO ME AT RS.4 47 759/- WAS ASSESSED AT RS.2.04 CRORES AND HAD BEEN CONSIDERED BY THE MULTI PLE APPELLATE AUTHORITIES WHICH ORDERS INDICATE THAT THE VIEW HELD BY THE LD. CIT F OR THE IMPUGNED ASSESSMENT ORDER HAD BEEN CONSIDERED AT LENGTH BY THE AO. THEREFORE THE ORDER UNDER SECTION 263 AS PROPOSED BY THE LD. CIT OF GIVING DIRECTION TO THE AO IN RE-EXAMINING AND NOT POINTING ANY ERROR OR PREJUDICE TO THE REVENUE THE REFORE CANNOT BE SUSTAINED. 5. THE LD. D.R. HAS SUPPORTED THE ORDER OF THE LD. CIT BY INDICATING THAT THE MAGNITUDE OF DISALLOWANCE AND ADDITION CLEARLY REQU IRE THE AO TO RE-EXAMINE FURTHER AS SUGGESTED BY THE LD. CIT IN HIS ORDER. HE POINTE D OUT THAT THE LD.CIT HAVING CONSIDERED 10 ISSUES AS NOTED BY IN HIS SHOW-CAUSE NOTICE DIRECTED RE-EXAMINING ONLY FOUR OF THEM THEREFORE IS MATERIAL FOR CONSIDERAT ION BY THE AO IS PREJUDICIAL TO THE REVENUE AND THE ORDER BE UPHE LD. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE LD. COUNSEL FOR THE ASSESSEE HAS ARGUED AS BEFORE THE LD. CIT AND HAS EVEN PURSUED THE 6 MONTHS PERIOD AS WAS BETWEEN THE PROPOSAL FOR INVOKING THE PROVISIONS OF SECTION 263 BY THE AO WHEN HE COMPLET ED THE ASSESSMENT FOR THE SUBSEQUENT ASSESSMENT YEAR WITHOUT MAKING ANY FURTH ER ADDITION EXCEPT DISALLOWING EXPENSES UNDER SECTION 14A. THE LD. AO WAS AWARE OF THE ISSUES IN THE SHOW-CAUSE NOTICE VIS--VIS ASSESSMENT SUBSEQUENTLY. THE LD. C OUNSEL HAS BEEN ABLE TO FURNISH DETAILS OF PAST ASSESSMENT AND THE ORDERS OF THE AO APPEALED AGAINST BEFORE THE FIRST APPELLATE AUTHORITY WHICH ORDERS INDICATE THE HIGH -PITCHED ASSESSMENTS AND THEIR DELETION BY THE LD. CIT(A). THESE ORDERS FINALLY SE TTLED DO NOT REQUIRE ANY FURTHER VERIFICATION. IN OTHER WORDS WE ARE OF THE CONSIDE RED VIEW THAT THE LD. CIT IN HIS 8 ORDER HAS MAINLY OPINED HIS VIEWS WHICH ARE NOT A CCORDING TO THE BUSINESS PRACTICE OR ACCORDING TO THE ASSESSEES MODE OF PAYMENT OF TAX ON CERTAIN MATERIAL INCOME IS TO BE DISTURBED. WE ARE OF THE CONSIDERED VIEW THAT CONDU CT OF A BUSINESS IS LEFT BEST TO A BUSINESSMAN ESPECIALLY FOR THE DEPARTMENT THAT HA D BEEN ACCEPTING THE TRANSACTIONS AND FINDING NO INFIRMITY THEREIN FOR THE PAST SEVER AL YEARS OF CHARGING OF INTEREST AND EARNING INCOME THEREFROM IS ALSO BEST LEFT TO A BAN KING BUSINESS AS LONG AS THE LOAN CREDITORS AND THE LOAN DEBTORS HAVE CONFIRMED WHICH CONFIRMATIONS HAVE BEEN PLACED ON RECORD. IT IS NOBODYS CASE THAT NOTIONAL INTERE ST SHOULD BE CHARGED ON AMOUNTS SIMPLY BECAUSE LESS INTEREST IS BEING PAID OR RENT IS BEING PAID FOR EARNING RENTS IN SO FAR AS IT IS ONLY AN OPINION AND A VIEW WHICH IS A HYPOTHETICAL VIEW IS UNTENABLE IN LAW. THIS WAS CONSIDERED BY THE HONBLE APEX COURT IN THE DECISION RENDERED IN THE CASE OF MALABAR INDUSTRIAL CO. REPORTED IN 243 ITR 83. SIMILARLY THE LD. COUNSEL HAS BEEN ABLE TO SUCCESSFULLY EXPLAIN THAT RENDERING OF INCOME FROM RECEIPT OF RENT ON PROPERTY NOT OWNED BY THE ASSESSEE IS A BUSINESS TR ANSACTION DULY VERIFIED AND ACCEPTED BY THE AO FOR THE PAST SEVERAL YEARS CANN OT BE THRUST UPON THE AO TO HOLD THE SAME AS A TENANT DEEMED TO BE OWNER OF A PROPER TY. THIS VIEW IS ALSO BEYOND THE SCOPE OF ASSUMING THE JURISDICTION UNDER SECTION 26 3 IN SO FAR AS THE REVENUE HAS GAINED BY ACCEPTING THE INCOME FROM RENT RECEIVED A S BUSINESS INCOME RATHER THAN FROM HOUSE PROPERTY WHEN THE STATUTORY DEDUCTION UN DER SECTION 24 WOULD HAVE TO BE GRANTED TO THE ASSESSEE WHICH THE ASSESSEE BEFORE US HAS NOT CLAIMED AT MORE THAN 5%. ON THE ISSUE OF INCOME FROM HOUSE PROPERTY AT D ELHI WE ARE INCLINED TO HOLD THAT THE AO WAS APPRISED OF IT A BUSINESS ASSET FOR THE SAME INCOME ON VERIFYING THE PAST RECORDS CANNOT BE HELD AS PART TENANTED AS THE LD . CIT HAS NOT BEEN ABLE TO ESTABLISH HIS ASSUMPTION ON THE BASIS OF ANY RECORD AVAILABLE WITH THE AO. WE FIND THE CONTENTION OF THE LD. COUNSEL APPROPRIATE THAT IN V IEW OF THE PAYMENT OF HOUSE PROPERTY TAX ON A PORTION IF IT WAS TENANTED THEN TAX PAID IS HIGHER NOT IN THE INTEREST OF THE ASSESSEE DEFINITELY WAS NOT DISALLOWED BY TH E AO. THEREFORE ON CONSIDERING THE TOTALITY OF ALL THE FACTS WE ARE OF THE CONSIDERED VIEW THAT THE ASSUMING OF JURISDICTION UNDER SECTION 263 BY THE LD. CIT AS PER SHOW CAUSE NOTICE DATED 05.10.09 STOOD FULLY EXPLAINED BY THE ASSESSEE AND THEREFORE AS NO ERRO R OR PREJUDICE TO REVENUE HAS BEEN CAUSED TO THE INTEREST OF THE REVENUE ON HAVING EXA MINED THE RECORDS EARLIER BY THE 9 AO THEREFORE COULD NOT FURTHER CAUSE TO RE-ENQUIR E WHICH IN OUR VIEW WAS NOT NECESSARY. AS PER HIS ORDER THE DIRECTION TO THE A O BY HIM THEREFORE DID NOT JUSTIFY AS THE ACT WOULD NEITHER ENHANCE NOR MODIFY THE ADD ITION OR CANCEL THE ASSESSMENT OF NOT HAVING EXAMINED AND NOT GIVING A DIRECTION OF F RAMING OF FRESH ASSESSMENT AS PER HIS DIRECTION. THIS INDICATES THAT THE ISSUES HAD A LREADY BEEN CONSIDERED BY THE AO IN THE PROCEEDING UNDER SECTION 143(3) THEREFORE COU LD NOT BE SUBJECTED TO FURTHER ROVING ENQUIRIES AS PER HIS OWN OPINION AND VIEWS. THE ORDER SHOULD BE BOTH ERRONEOUS AND PREJUDICIAL WHICH THE LD. CIT HAS NOT DEALT WITH. AS A RESULT THE ORDER OF THE LD. CIT UNDER SECTION 263 IS DIRECTED TO BE QUASHED. 7. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 5 !4 6 #( ' 57 THIS ORDER IS PRONOUNCED IN COURT ON 16.07.2010 . SD/- SD/- . . . . . . . . SHRI B.R.MITTAL JUDICIAL MEMBER ! ! ! ! . . . . ! !! ! . . . . '#$ '#$ '#$ '#$ !% SHRI K. K. GUPTA ACCOUNTANT MEMBER ( (( (8% 8% 8% 8%) )) ) DATE: 16.0 7 .2010 !4 2 0'': ;!:*<- COPY OF THE ORDER FORWARDED TO: 1. M/S. BANWARI LALL PASARI C/O- SALARPURIA JAJODIA & CO. 7 C.R. AVENUE KOLKATA- 700 072 2 D.C.I.T. CIRCLE-34 KOLKATA 3. THE CIT 4. THE CIT(A) 5. DR KOLKATA BENCHES KOLKATA 1: 0'/ TRUE COPY !4(#/ BY ORDER DEPUTY /ASST. REGISTRAR ITAT KOLKATA BENCHES MST(SR.P.S.) 10