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2020 (1) TMI 723 - AT - Income TaxAssessment u/s 153A - assessment passed either under s.143(1) or under s.143(3) and not pending at the time of search in the absence of any incriminating material unearthed as a result of search or not ? - HELD THAT:- In the absence of any connection with the incriminating material unearthed in search proceedings of the assessee, additions/disallowances/realignment of income already declared in the regular course in respect of concluded statements i.e. AYs. 2010-11 & 2011-12 in the instant appeals, are not permissible in law. In the present appeals, the AO has merely attempted to realign the taxability of income from one head to another i.e. from business income to income from house property. Apparently, the AO has merely sought to revisit the chargeability of income already declared prior to search without any discovery of incriminating material while making assessment post search under s.143(3) r.w.s. 153A of the Act. This course adopted by the AO does not resonate with the judicial interpretations available in this regard. Hence, the action of the AO for realignment of income for AYs. 2010-11 & 2011-12 is bad in law and cannot be countenanced The Revenue is thus ousted from making such adjustments under s.153A of the Act in respect of concluded assessments. - Decided in favour of assessee. Nature of income - rental income from letting out of some adjoining shops by the assessee company to one person - chargeable to tax u/s 22 under the head ‘income from house property’ or business income chargeable u/s 28 - HELD THAT:- The assessee in the instant case has merely let out three adjacent and adjoining shops to a cooperative bank and derived a pre-determined rental income therefrom in a passive manner without anything more. The lease agreement entered into with bank has not been placed on record despite specific query in this regard. In the instant case, the assessee himself has declared the rental income to be merely on ‘other income’ source. As a corollary, the rental income was not regarded as part of the trading operations of the assessee. Thus, merely because one of the main object of the assessee is to let out property and derive rent thereon by itself cannot be viewed as a sole criteria for treatment of income derived under the head ‘business income’. The attendant circumstances and express statutory scheme of Act cannot be ignored while evaluating the nature of income. Significantly, a perusal of the Memorandum of Association placed on record shows that one of the clauses of the memorandum under category, ‘other objects’ of the assessee is to let out immovable properties. We have also perused the main object for which the assessee company has been incorporated. A close reading of the main object shows that the company was incorporated to essentially carry on business as developers of land, building, immovable properties etc. by constructing and maintaining such buildings/shops etc. The leasing of shops and other property constructed in the course of such business as developer could however be also leased out as main object. It has not been shown that a single plunge to let out adjoining shops/galas to the bank resulted in the course of carrying on business as developer etc. An independent let out of property thus could be possibly regarded as ‘business income’ only where some elements/characters of business is present. Dominant intention to let out property as ‘business activity’ is also not shown to exist. - Decided against assessee.
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