TMI Blog2010 (10) TMI 814X X X X Extracts X X X X X X X X Extracts X X X X ..... ave and licence income - chargeable under the head "Income from house property " OR "Business income" - Held that:- Following the latest decision of Commissioner Of Income-Tax Versus Shambhu Investment Pvt. Ltd. [2001 (3) TMI 77 - CALCUTTA High Court] proposition of law laid down therein are applicable to the facts of instant case, confirming the action of the CIT(A) for taxing the rental income as "income from house property". Regarding interest u/s 234D - Held that:- No interest is chargeable u/s 234D prior to the assessment year 2004-05 Regarding Penalty - AO has initiated penalty proceedings for the income escaped assessment due to taxing of rental income as income from house property - since no penalty has been levied and it was just initiation, no interference is required by the Tribunal at this juncture - Appeals are allowed - ITA NOS. 613/IND/2005 AND 634 TO 636/IND/2006 - - - Dated:- 29-10-2010 - ORDER Per R.C. Sharma, Accountant Member These are the appeals filed by the assessee against the order of ld. CIT(A) for the assessment years 1999-2000, 2000-01, 2001-02 and 2003-04 in the matter of order passed u/s 143(3)/148 of the Income-tax Act, 1961. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve and License Income" is chargeable under the head "Income from House Property" instead of the head "Business Income". Ground No. 4 Disallowance of depreciation on property used for business of the assessee : That the Ld. CIT(A) also erred in confirming the disallowance of depreciation of claimed on the property used for the purpose of the business of the Appellant. Ground No. 5 Wrong withdrawal of interest u/s 244A of the Act That on the facts and in the circumstances of the case and in law, the CIT(A) erred in confirming the withdrawal of interest granted u/s 244A. Ground No. 6 Wrong charging of intrest u/s 234-D That the Ld. CIT(A) also erred in holding that the interest charged u/s 234-D was valid. Ground No. 7 Initiating penalty proceedings u/s 271 (l)(c): That the Ld. CIT (A) also erred in not holding that the initiation of penalty proceedings U/s 271(1)(c) was not correct." 3. Shri Yogesh Jain, CA appeared on behalf of the assessee. Various grounds have been taken by the assessee with regard to legality of reopening and consequent assessment made thereon, however, during the course of hearing ld. Authorized Representative pressed legality of reopen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench in Aipita Marketing (P.) Ltd. v. ITO 21 SOT 302, in support of proposition that in absence of any new material, the AO is not empowered to reopen the assessment whether original assessment was completed u/s 143(1)/143(3). Ld. Authorized Representative further contended that while holding whether in a case where assessment is made u/s 143(1) and not u/s 143(3) it is not possible to hold view that income escaping assessment is always justified. As per ld. Authorized Representative, the Tribunal has elaborately discussed the proposition of law laid down by Hon'ble Supreme Court in the case of Rajesh Jhaveri, 291 ITR 500 and have distinguished it while coming to the conclusion that there was no valid reopening even if the assessment was made u/s 143(1). The ld. Authorized Representative also relied on the decision of Hon'ble Madras High Court in the case of Bapalal Company Export 289 ITR 37, in support of the proposition that in the absence of new material, the AO is not empowered to reopen an assessment irrespective of whether it is made u/s 143(1) or 143(3). Reliance was also placed on the decision of Bombay I.T.A.T., in the case of S. Vinod Kumar Company in I.T.A. No. 330 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction by him of any evidence in support of the return. Where the assessee objected to such assessment or where the officer was of the opinion that the assessment was incorrect or incomplete or the officer did not complete the assessment under section 143(1), but wanted to make an inquiry, a notice under section 143(2) was required to be issued to the assessee requiring him to produce evidence in support of his return. After considering the material and evidence produced and after making necessary inquiries, the officer had power to make assessment under section 143(3). 6. With effect from 1st April 1989, the provisions underwent substantial and material changes. A new scheme was introduced and the new substituted section 143(1) prior to subsequent substitution with effect from 1st June 1999 in clause(a), a provision was made that where a return was filed under section 139 or in response to a notice under section 142(1) and any tax or refund was found due on the basis of such return after adjustment of tax deducted at source, any advance tax or any amount paid otherwise by way of tax or interest, an intimation was to be sent u/s 143(1)(a), without prejudice to the provisions of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after making such adjustments. With effect from 1st April 1998, second proviso to section 143(1)(a) was substituted by the Finance Act, 1997, which was operative till 1st June 1999. The requirement was that intimation was to be sent to the assessee whether or not any adjustments had been made under the first proviso to section 143(1) and notwithstanding that no tax or interest was found due from the assessee concerned. Between 1st April, 1998 to 31st March 1999, sending of an intimation under section 143(1)(a) was mandatory. This position continued till all the assessment years under consideration before us. 9. Thus, legislative intent is very clear from the use of the word 'intimation' as substituted for 'assessment', the Assessing Officer is free to make any addition after grant of opportunity to the assessee. By making adjustments under the first proviso to section 143(1)(a), no addition which is impermissible by the information in the return could be made by the Assessing Officer. Reason is that under section 143(1)(a) no opportunity is granted to the assessee and the Assessing Officer proceeds on his opinion on the basis of the return filed by the assessee. The very fact tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent as understood in the common parlance or even during taxing statutes. Further, the intimation under section 143(1)(a) was deemed to be a notice of demand under section 156 for the purpose of making machinery provisions relating to recovery of tax applicable. By such application only tax amount indicated to be payable by the intimation became permissible and nothing more can be inferred from the deeming section. 13. On a comparison of the provisions as it stood before the Direct Tax Laws (Amendment) Act, 1987 and the provisions as substituted by the Direct Tax Laws (Amendment) Act, 1987, it would be clear that: - the scope and effect of section 147 as substituted with effect from 1st April 1989, as also sections 148 to 152 are substantially different from the provisions as stood prior to such substitution. 14. Under old provisions of section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under section 147(a) two conditions were required to be satisfied: firstly, the Assessing Officer must have reason to believe that income, pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way of scrutiny assessment order u/s 143(3). It was observed that there is a contextual difference between the two expressions in the context the expressions are used. The word "assessment" is used as meaning something "the computation of income", sometimes "determination of amount of tax payable" and sometimes the whole procedure laid down in the Act for imposing liability upon the tax payers. It was further observed that in the scheme of things, the intimation u/s 143(1)(a) cannot be treated to be an order of assessment. This distinction is also well brought out by the statutory provisions as they stood at different points of time, prior to 1st April, 1989, u/s 143(1)(a), the AO had to pass an assessment order if he decided to accept the return, but under the amended provisions, the requirement of passing of an assessment order has to be dispensed with and instead of it an intimation is required to be sent. It was further elaborated that under the first proviso to the newly substituted section 143(1) w.e.f. 1st June, 1999, except as provided in the provision itself, acknowledgement of the return shall be deemed to be intimation u/s 143(1), where no sum is payable by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st also have a reason to believe that such escapement has occurred by reason of either omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Both these conditions were required to be satisfied before the AO could have justification to issue notice u/s 148 read with section 147(a), but under the substituted section 147, existence of only first condition suffices, meaning thereby if the AO has reason to believe that income has escaped assessment, it confers the valid jurisdiction to reopen the assessment. It is pertinent to mention here that both the conditions must be fulfilled if the case is within the ambit of proviso to section 147. Thus, if more than four years have been passed after completion of assessment u/s 143(3), no reopening can be made unless there is a failure on the part of the assessee to disclose fully and truly all material facts in the return of income. It was concluded by the Hon'ble Supreme Court that so long as ingredients of section 147 are fulfilled, the AO is free to initiate proceedings u/s 147 and failure to take steps u/s 143(3) will not render the AO powerless to initiate reassessment pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In support of its contention that rental income is to be assessed as income from business, the ld. Authorized Representative highly relied on the decision of Hon'ble Supreme Court in the case of Karnani Properties Ltd. 82 ITR 547. In this case, on the basis of finding recorded by the Tribunal to the effect that income was derived by the assessee, the owner of flats and shops, from the services rendered in an organized and systematic manner with the help of large staff for the same, income was assessable as business income. When the decision of Tribunal was reversed by the Hon'ble High Court, in an appeal filed by the assessee before the Hon'ble Supreme Court, it was held that when the question referred to the High Court speaks of "On the facts and circumstances of the case", it means the facts and circumstances found by the Tribunal and not the facts and circumstances that may be found by the High Court. It was observed that neither the High Court nor the Hon'ble Supreme Court has jurisdiction to go behind or to question the statement of facts made by the Tribunal and that statement of case is binding on the parties. Under these facts and circumstances, the Hon'ble Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly, we follow the proposition of law laid down by the Hon'ble Supreme Court in the case of Shambhu Investment and confirmed the action of lower authorities for taxing the same as income from house property. 25. In view of above discussion respectfully following the latest decision of Hon'ble Supreme Court reported at 249 ITR 47, proposition of law laid down therein are applicable to the facts of instant case, we confirm the action of the ld. CIT(A) for taxing the rental income as "income from house property". 26. The assessee has also taken ground with regard to charging of interest u/s 234D on excess refund determined by reassessment order u/s 147 of the Act. For this purpose, the ld. Authorized Representative placed reliance on the decision of the I.T.A.T., Special Bench in the case of Ekta Promoters 305 ITR 1, which was subsequently affirmed by Hon'ble Delhi High Court while deciding the appeal in the case of M/s. Mitsubishi Corporation, order dated August 30, 2010, wherein it was held that interest u/s 234-D, is not chargeable for the period prior to assessment year 2004-05. Both the orders were also placed on record. 27. We have carefully considered the rival contention ..... X X X X Extracts X X X X X X X X Extracts X X X X
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