TMI Blog2010 (11) TMI 567X X X X Extracts X X X X X X X X Extracts X X X X ..... der is erroneous and the error has resulted in prejudice to the interests of the Revenue - Ino such step has been taken by the ld. CIT - Therefore, the Assessing Officer was not justified in departing from the stand taken in the earlier years particularly when there was no material change in the facts and circumstances of the present case as compared to earlier years - Hence, the ld. CIT(A) was justified in directing the Assessing Officer to tax warehousing charges under the head 'Income from house property' and allow deduction as per section 24 after verification - Decided in favour of assessee. - 546 (LUCK.) OF 2010 - - - Dated:- 12-11-2010 - H.L. KARWA, N.K SAINI, JJ. Anadi Verma for the Appellant. J.J. Mehrotra for the Respondent. ORDER H.L. Karwa, Vice President. The appeal by the revenue and the Cross Objection by the assessee are directed against the order of the ld. CIT(A)-III, Lucknow dated 12-3-2010 relating to assessment year 2006-07. 2. In ITA No. 546 (Luck.)/2010, the revenue has taken the following grounds : "1. The ld. CIT(A) has erred and on facts in holding that warehousing charges received by the assessee is to be taxed as income fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... using charges. The assessee's claim of warehousing charges received is his "income from house property is not acceptable, due to following facts as emerge from examination of the facts of the case : 1. The Audit Report of the assessee filed along with the ITR of the assessee clearly mentions at point 8(a) of Form 3CD that the Nature of Business of the assessee to be "warehousing". It is also noteworthy that the Audit Report is the most authentic financial statement of any assessee and the Auditor "Sanjeev Shriram Verma Co., C.A." who have prepared this Audit report are the regular auditors of the assessee since many previous years. 2. The assessee has shown this income from Warehousing Charges in his Profit Loss account. It is also seen that this "Warehousing Charges" in fact forms the major income credited in the Profit Loss account, which later has been deducted from business income in the final computation and shown as house property income. Rest of the income is from Transportation charges and interest income. The assessee has actually claimed business expenses as elaborated in his Profit Loss account against this income from warehousing. 3. During the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de water facility by giving separate tap connection in the said premises wherever necessary as per the requirement of the lessee. The expenses and charges towards this will be borne by the Lessor". The para 8 states "A dedicated telephone line will be provided in the said premises by the lessor for exclusive use by the lessee." The Para 12 states "since the lessee requires the said premises for manufacturing activity, the lessor will provide separate power connection and lighting in the production area premises with minimum 450 LUX brightness and normal lighting in the storing and other areas" The Para 13 states "The lessor shall provide a hoist for smooth and proper handling of the material till the first floor of the warehouse, from and, to the incoming truck of the assessee" (III) The copy of lease deed between Electrolux Kelvinator Ltd., Harbilas Cold Storage and Food Products clearly show that that the premises were being taken on lease for business purpose. Para 2(iii) clearly states "The lessor allows to lessee to give license to any other persons to the use of the demised premises as carrying and forwarding agents exclusively for business relating to the license ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eipts for rent payments amount to 16,78,646, the total rental income shown by the assessee is Rs. 29,50,840. Therefore, it is also apparent that the assessee had entered into business contract with these parties and leasing of the building was inclusive of other business facilities for its use as warehouse and accordingly the parties have made payments to the assessee on these contracts. It is thus clear that the assessee is into the business of running warehouse and the warehouse space is leased out to different parties under contract along with warehousing facilities as per the requirements of these parties. Considering all the facts of the case, as discussed above, it is apparent that the assessee is not justified. In showing this income under the head "Income from House property". Therefore, considering all the above-mentioned facts, I hereby consider the income of the assessee to be considered under "Income from Business and Profession" and accordingly the income of the assessee would be recomputed as hereunder : Net business income shown in computation Rs. (2,74,154) Add: Income from warehousing Rs. 29,50,480 Building repair disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C F remuneration received during the year is also shown under the head 'Miscellaneous income'. It is on these items that tax deducted at source by the payers is at the rate applicable to contractor. As far as the rent income is concerned, tax has been deducted at source at the rates as applicable for rental income and a chart showing the reconciliation of the rent receipts along with TDS is reproduced as under : Name of Party Rent TDS Other Income TDS Haier Appliances 201000 10128 1007906 2661 TVS Suzuki 969144 209598 12000 0 TATA Jhonsons 210000 48144 681261.19 9571 Electrolux 782652 181116 152821.80 0 Kitchen Appliances 349684.41 71688 58429.31 0 Motor General 240000 50400 Motor Fab Sales P. Ltd. 198000 Total 2950480.41 471074 1912418.30 36192 Warehousing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court in the case of CIT v. Realest Builders Services Ltd. [2008] 170 Taxman 218 (SC) wherein the Hon'ble Supreme Court held Head Notes as under : "Held : Under section 145, it is always open to the Department to insist on the change in the method of accounting followed by the assessee over the years (which is the case herein) if the impugned method of accounting results in under-estimation of profits/net income. In this case, no allegation of that nature was ever made by the Department. In fact, the assessment order also does not indicate whether the impugned method of accounting followed by the assessee results in underestimation of the profits/net income. Though reasoning of the High Court was not valid, since the Department has not gone into the above vital aspect regarding method of accounting under section 145, there is no reason to interfere with the impugned judgment. The High Court has proceeded on the basis of 'rule of consistency'. The view taken by the High Court on that count is not acceptable. In cases where the Department wants to tax an assessee on the ground of the liability arising in a particular year, it should always ascertain the method of accounting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in subsequent years. A decision taken by the authorities in the previous year would not estop or operate as res judicata for subsequent year. In view of the above decisions, Shri Anadi Verma, ld. D.R. submitted that the Assessing Officer has correctly treated the warehousing charges as 'Income from business' as against 'Income from house property'. Accordingly, Shri Anadi Verma, ld. D.R. submitted that the order of the ld. CIT(A) may be reversed and that of the Assessing Officer may be restored. 8. Shri J.J. Mehrotra, C.A., ld. Counsel for the assessee reiterated the submissions made before the lower authorities. He has also narrated certain relevant facts of the case stating that initially the assessee firm was carrying on the business of running of a cold storage up to the year 1989. In the year 1990, the business of running of cold storage was discontinued and portion of building was given to different parties on rent for their use as warehouse as well as their offices. The income received by the assessee since 1990 onwards was on account of letting out of warehouse/office which has been offered to tax as income under the head 'House property' as the same was directly rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ta does not apply to income-tax proceedings, but at the same time, the Hon'ble Supreme Court in the case of Radhasoami Satsang v. CIT [1991] 100 CTR (SC) 267/[1992] 193 ITR 321 (SC) has also enunciated the principles of consistency while administering the justice." Shri J.J. Mehrotra, ld. Counsel for the assessee pointed out that the decision of CIT v. Goel Builders [2010] 192 Taxman 28 (All.) has been affirmed by the Hon'ble Allahabad High Court Lucknow Bench, Lucknow in IT Appeal No. 127 of 2005 along with IT Appeal Nos. 128, 129, 130 and 131 all of the year 2005 vide their judgment dated 24-5-2010 (2010) 45 DTR (All.) 318. 8.1 Shri J.J. Mehrotra, ld. Counsel for the assessee also relied on the following decisions : 1. CIT v. Lagan Kala Upvan [2003] 259 ITR 489/126 Taxman 205 (Delhi) 2. DIT v. Lovely Bal Shiksha Parishad [2004] 266 ITR 349/135 Taxman 34 (Delhi) 3. CIT v. Satinder Pal Singh [IT Appeal Nos. 646 647 of 2009, dated 7-1-2010] (Punj. Har.) 4. Goel Builders (supra) 5. Dr. Narendra Prasad v. CIT [2010] 322 ITR 171 (Pat.) 6. Dy. CIT v. Goel Erectors Pipe Manufacturers (P.) Ltd. [2010] 45 DTR (Lucknow)(Trib.) 473 In view of the abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 24 after verification. In our considered view, the principle of res judicata does not apply to income-tax proceedings, but at the same time principles of consistency have to be followed while administering justice. 9.1 In the case of Goel Builders (supra), certain vacant space in Goel Complex, Lucknow was let out in assessment year 1986-87. The rental income was offered for taxation under the head "Profits and gains of business or profession". Right from assessment years 1986-87 to 1992-93, the Department accepted the claim of the assessee to the effect that the income was taxable under the head "Profits and gains of business or profession". While the assessment order for assessment year 1990-91 was framed under section 143(3), the orders for the other years were passed under section 143(1)(a) of the Act. In the assessment years 1993-94 and 1994-95, the Assessing Officer taxed the income under the head "Income from house property". On appeal, the ld. CIT(A) accepted the claim of the assessee and directed the Assessing Officer to assess the income as "Business income". The order of the ld. CIT(A) was challenged by the revenue before the Tribunal. The Tribunal following the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the present case. The Hon'ble High Court held that the principle of consistency is a rule in general, but for cogent, reason or on justifiable ground the Revenue has got right to depart from its earlier practice and take a different view, which shall be determined upon the facts and circumstances of each case. In the instant case, the Assessing Officer has not brought any material on record while taking a different view in the year under consideration. In the case of Goel Builders (supra), the Hon'ble jurisdictional High Court has further categorically held that it would not be appropriate to change the view in subsequent years except on justifiable ground like, change of circumstances or non-consideration of relevant material or statutory provisions or failure on the part of assessing or appellate authority to exercise jurisdiction for extraneous reason or small amount of revenue involved or other justifiable ground depending on facts of each case. In the instant case, the Assessing Officer has not brought any new material on record to show as to why he has taken a different view in the year under consideration and therefore, the ld. CIT(A) was justified in accepting the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Act of 1961." 9.4 In the case of Lovely Bal Shiksha Parishad (supra), the Hon'ble Delhi High Court held that if there is no change in facts or law - exemption granted cannot be withdrawn. The relevant observations of the Hon'ble High Court mentioned in the Head Notes read as under : "Though strictly speaking res judicata does not apply to income-tax proceedings, where a fundamental aspect continuing through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. Held, that in view of the fact that no change in the nature of activities had been pointed out and the assessee had been granted exemption under section 10(22) of the Income-tax Act, 1961, not only in respect of the earlier years but subsequent years as well, the assessee was entitled to the exemption in the assessment year 1991-92." 9.5 In the case of Lagan Kala Upvan (supra), the observations made by the Hon'ble Delhi High Court and the Head Note read as under : "The language of section 10(22) of the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use property' or under the head "Income from business or profession". In the case of Realest Builders Services Ltd. (supra), the Hon'ble Supreme Court has observed that in cases where the Department wants to tax an assessee on the ground of the liability arising in a particular year, it should always ascertain the method of accounting followed by the assessee in the past and whether change in method of accounting was warranted on the ground that profit is being underestimated under the impugned method of accounting. We, therefore, are of the opinion that the decision relied upon by the ld. D.R. in the case of Realest Builders Services Ltd. (supra) is not applicable to the facts of the present case. 10.1 The decision of the Hon'ble Supreme Court in the case of Municipal Corpn. of City of Thane (supra) is also not relevant as far as the present controversy is concerned. There is no quarrel that in taxation matters, the strict rule of res judicata as envisaged by section 11, CPC, 1908 has no application. However, the Hon'ble Supreme Court in the case of Radhasoami Satsang (supra) held as under : "Strictly speaking, res judicata does not apply to income-tax proceedings. Though, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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