TMI Blog2011 (3) TMI 1035X X X X Extracts X X X X X X X X Extracts X X X X ..... a) then the ALV of the property would be actual rent. Since, in the case in hand, AO has not at all shown any exercise for computation of the ALV of the property by adopting the method as provided under section 23(1). The exercise of determination of the ALV as per the section 23(1) includes two steps, first determination of fair rent under section 23(1)(a) and second actual rent received or receivable by the owner. For computation of the sum for which the property might reasonably be expected to let, the AO has to take into account various factors. As it is settled by the various decisions by the Hon'ble Supreme Courts and High Courts that fair rent under section 23(1)(a) may be determined by considering the Municipal Value or standard rent of the property as the case may be. Therefore, on merits requires to be verified and examined properly by taking into account various factors requires for determination of the ALV as prescribed under section 23(1) of the Act. The CIT while passing the revision order u/s 263 has not taken into account all the aspects for computation of the ALV as prescribed under section 23(1). Since the Municipal value/standard rent of the property in quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n'ble High Courts. As regards the validity of the jurisdiction under section 263, the ld. AR of the assessee has submitted that while completing the assessment, the Assessing Officer has duly examined the issue of computation of annual letting value, therefore, once the Assessing Officer has taken a view the CIT cannot be permitted to take a different view on the same issue. He has submitted that the assessee has furnished all the details in respect of the issue of Annual letting value of the property in question. He has referred the letter dated 8-9-2003 issued by the Assessing Officer, wherein the Assessing Officer has raised the various quarries about the interest free deposits received by the assessee. In the said letter the Assessing Officer asked the assessee to furnish the copy of the conveyance deed and other record of flat in question. The Assessing Officer also asked the assessee to explain about the fixed deposits with documentary evidence as well as to furnish the correspondence with the bank. He has referred to reply of the assessee to the queries of the Assessing Officer and submitted that the assessee has explained that the security deposit of Rs. 1,90,00,000 was rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 125 ITD 1 (TM). 5. In rebuttal, the learned AR has submitted that the Assessing Officer raised the queries regarding the fair rent; under section 23(1) of the Act, therefore, the Assessing Officer has taken a view while completing the assessment under section 143(3) and the CIT cannot substitute the view of the Assessing Officer for computation of the fair market rent under section 23(1)(a). 6. We have considered the rival contentions and relevant record. After careful perusal of the queries raised by the Assessing Officer, we find that the queries were raised by the Assessing Officer in respect of fixed deposits shown by the assessee as liability in the balance sheet for examining and ascertaining the sources of parties regarding securities deposits. The Assessing Officer has not discussed anything about the issue of notional interest for determining the Fair Market Rent under section 23(1)(a). Thus, the Assessing Officer has not applied his mind or taken any view on the issue of notional interest. When the Assessing Officer has not taken any view in respect of the issue which is a subject mater of the revision order under section 263 then it cannot be said that the CIT has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It has however been defined at page 562 in Black's Law Dictionary (Seventh Edition) thus: "erroneous, adj. Involving error; deviating from the law." The word "error" has been defined at the same page in the same Dictionary thus: error. N. 1. A psychological state that does not conform to objective reality; a belief that what is false is true or that what is true is false. 11. At page 649/650 in P. Ramanatha Aiyer's Law Lexicon (Reprint 2002), the term "error" has been defined to mean thus: Error. A mistake in judgment or deviation from the truth in matters of fact, and from the law in matters of judgment;...'Error', is a fault in judgment, or in the process or proceeding to judgment or in the execution upon the same, in a Court of Record; which in the Civil Law is called a Nullitie. (Termes de la Ley) Something incorrectly done through ignorance or inadvertence (Section 99, C.P.C. and section 215, Cr.P.C.). Error, Fault. Error respects the act; fault respects the agent, an error may lay in the judgment, or in the conduct; but a fault lies in the will or intention. 12. At page 650 of the aforesaid Law Lexicon, the scope of "Error, mistake, blunder, and hallucination" h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld have made further inquiries before accepting the claim made by the assessee in his return. The reason is obvious. Unlike the Civil Court which is neutral in giving a decision on the basis of evidence produced before it, the role of an Assessing Officer under the Income-tax Act is not only that of an adjudicator but also of an investigator. He cannot remain passive in the face of a return, which is apparently in order but calls for further enquiry. He must discharge both the roles effectively. In other words, he must carry out investigation where the facts of the case so require and also decide the matter judiciously on the basis of materials collected by him as also those produced by the assessee before him. The scheme of assessment has undergone radical changes in recent years. It deserves to be noted that the present assessment was made under section 143(3) of the Income-tax Act. In other words, the Assessing Officer was statutorily required to make the assessment under section 143(3) after scrutiny and not in a summary manner as contemplated by sub-section (1) of section 143. Bulk of the returns filed by the assessees across the country is accepted by the Department under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. 15. In our humble view, arbitrariness in decision-making would always need correction regardless of whether it causes prejudice to an assessee or to the State Exchequer. The Legislature has taken ample care to provide for the mechanism to have such prejudice removed. While an assessee can have it corrected through revisional jurisdiction of the Commissioner under section 264 or through appeals and other means of judicial review, the prejudice caused to the State Exchequer can also be corrected by invoking revisional jurisdiction of the Commissioner under section 263. Arbitrariness in decision-making causing prejudice to either party cannot therefore be allowed to stand and stare at the legal system. It is difficult to countenance such arbitrariness in the actions of the Assessing Officer. It is the duty of the Assessing Officer to adequately protect the interest of both the parties, namely, the assessee as well as the State. If he fails to discharge his duties fairly, his arbitrary actions culminat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greater in a case where the order is passed at the original stage. The appellate or revisional authority, if it affirms such an order, need not give separate reasons if the appellate or revisional authority agrees with the reasons contained in the order under challenge. Similar view was earlier taken by the Hon'ble Supreme Court in Siemens Engg. Mfg. Co. Ltd. v. Union of India AIR 1976 SC 1785. It is settled law that while making assessment on assessee, the ITO acts in a quasi-judicial capacity. An assessment order is amenable to appeal by the assessee and to revision by the Commissioner under sections 263 and 264. Therefore, a reasoned order on a substantial issue is legally necessary. The judgment of the Hon'ble Madras High Court on which reliance was placed by the learned Counsel for the assessee also points to the same direction. We have reproduced above the relevant portion of the observations made by the learned Judges. They have held that orders, which are subversive of the administration of revenue, must be regarded as erroneous and prejudicial to the interests of the revenue. If the Assessing Officers are allowed to make assessments in an arbitrary manner, as has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer has to first take into account the actual rent received or reasonably by the owner of the property. Thus, as per the provisions of section 23(1), the Assessing Officer has to first determine the fair rent under section 23(1)(a) and then take into account the actual rent received or receivable by the assessee under section 23(1)(b) only thereafter the Assessing Officer has to compare the fair rent under section 23(1)(a) with the actual rent received or receivable as per the section 23(1)(b). If the Assessing Officer found that the actual rent is excess of the sum as determined under section 23(1)(a) then the ALV of the property would be actual rent. Since, in the case in hand, the Assessing Officer has not at all shown any exercise for computation of the ALV of the property by adopting the method as provided under section 23(1). The exercise of determination of the ALV as per the section 23(1) includes two steps, first determination of fair rent under section 23(1)(a) and second actual rent received or receivable by the owner. For computation of the sum for which the property might reasonably be expected to let, the Assessing Officer has to take into account various ..... X X X X Extracts X X X X X X X X Extracts X X X X
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