TMI Blog2011 (5) TMI 553X X X X Extracts X X X X X X X X Extracts X X X X ..... er Sources" - Decided against the assessee. - 1218 (MUM.) OF 2006 - - - Dated:- 27-5-2011 - D. MANMOHAN, R.K. PANDA, JJ. M. Subramaniam and M.S. Mathuria for the Appellant. Sumeet Kumar for the Respondent. ORDER D. Manmohan, Vice-President. This appeal, filed at the instance of the assessee-firm, is directed against the Order passed by the CIT(A)-32, Mumbai and it pertains to the assessment year 1999-2000. 2. As could be noticed from the grounds of appeal assessee contended before the Appellate Tribunal that (a) lower authorities have erred in treating business income of the assessee as income from other sources and (b) praying for direction to the lower authorities to treat the income of Rs. 2,22,660 as business income under section 28 of the Act. Vide order dated 29th May, 2008 the ITAT, 'J' Bench, Mumbai dismissed the appeal filed by the assessee on account of non-prosecution of the appeals. Vide application dated 18-7-2008 (MA. 468/Mum/2008) assessee requested for recall of the Order by explaining the reasons for non-appearance on the date fixed for hearing and accordingly the earlier order passed by the Tribunal was recalled and the case was re-fixe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , requested for admission of the additional ground by stating that the decision on the aforementioned issue would go to the root of the matter and hence, such issue can be considered at any stage of the proceeding. In this regard, reliance was placed upon the decision of the Hon'ble Bombay High Court in the case of Inventors Industrial Corpn. Ltd. v. CIT [1992] 194 ITR 548. Reliance was also placed upon the decision of the ITAT, Chennai, (T.M.) in the case of Hemal Knitting Industries v. Asstt. CIT [2010] 127 ITD 160 (Chennai) (T.M.) wherein the Bench observed that additional ground can be admitted at any stage even though it was not challenged in the first round of litigation. Learned Counsel has also submitted that assessment was sought to be reopened on the basis of an audit objection though rental income was originally assessed as business income. Relying upon the decision of the Hon'ble Bombay High Court in the case of CIT v. Lucas T.V.S. Ltd. [2001] 249 ITR 306/117 Taxman 366 it was contended that the opinion given by the audit party cannot be considered as a reason for reopening the assessment under section 147 of the Act. It was submitted that the return was originally file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation on facts and on application of mind Assessing Officer had reopened the assessment which is permissible in law in the light of decision of the Apex Court in the case of CIT v. P.V.S. Beedies (P.) Ltd. [1999] 237 ITR 13/103 Taxman 294. It was also submitted that the return of income having been processed under section 143(1) of the Act, there was no occasion for the Assessing Officer to apply his mind on the impugned issue and hence, reopening of assessment is valid in the light of amended provisions, as held by the Apex Court in the case of Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 291 ITR 500/161 Taxman 316. 8. Learned D.R. has also adverted our attention to page 38 of the paper book (reasons for reopening of assessment) to submit that even excess claim of deduction would be sufficient to reopen the assessment in the light of Explanation 2 to section 147 of the Act. Reliance was also placed upon the decision of the Hon'ble Gujarat High Court in the case of Praful Chunilal Patel v. M.J. Makwana, Asstt. CIT [1999] 236 ITR 832. 9. Joining the issue, learned Counsel, appearing on behalf of the assessee, submitted that Order of the Appellate Tribunal does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal was empowered to admit an additional ground. However in the instant case regular appeal was already disposed of under section 254(1) of the Act and the issue that is placed before us by the Registry is based on the limited direction given by the earlier Bench in its Order dated 17th December, 2009 and enlarging the scope of direction by admission of additional ground would amount to review of the said Order as well as the Order passed on 11th May, 2009; in our humble opinion, it is not permissible in law. 13. At any rate, as rightly observed by the learned CIT(A), notice was issued under section 148 of the Act on valid reasons which indicate that the assessee has not furnished correct information in the original return of income and thus, it cannot be said to be based on the audit objection on a question of law. The fact that the interest income was held to be 'income from other sources', by the Appellate Tribunal, as against the claim of the assessee that it is 'business income' indicate that the claim of the assessee in the original return of income is not in accordance with law. Since return was processed originally under section 143(1) of the Act without making any enqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mstances, he concluded that the income earned therefrom is assessable to tax under the head "income from house property". 16. On an appeal filed by the assessee, learned CIT(A) observed that letting out the impugned premises was nowhere connected to the main intention enshrined in the partnership deed and he has also noted the contents, various clauses in the lease deed to highlight that the lease income is assessable to tax under the head "other sources" since assessee was not the owner of the premises. Operative portion of the Order of the learned CIT(A), which is relevant in this context, is extracted for immediate reference : "Thus, it will be seen that intention of the lease agreement is merely to permit and allow the lessees to conduct, manage and carry on their lawful business from the said premises. The appellant was also prohibited from making any alterations, without the permission of the owner, to the said premises. After going through clause 3, 7, 8, 13 and 16 of the lease agreement, it is clear that the intention of the lease agreement is to allow the appellant to use the above said premises for the purpose of carrying out its business and not to treat the premises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of any fresh facts brought on record, it has to be assessed to tax under the head "Income from Business", By applying the rule of consistency. In the aforecited decision, the Hon'ble Delhi High Court observed that the assessee's purpose was to commercially exploit the building and it was running its own office. It had offered the use of its bar license for the purpose of running a restaurant in the said premises. Thus taxability of rental income as 'business income' is one of the plausible views in which event rule of consistency should certainly be applied. Learned Counsel, therefore, strongly submitted that the learned CIT(A) was not justified in directing the Assessing Officer to tax the rental income under the head "Other Sources". 18. On the other hand, learned D.R. submitted that the partnership deed was not signed, as could be noticed from page 29 of the paper book, and thus the claim that the business of the firm was to acquire land and to let out the same is not proved. Even if one has to go by the partnership deed, realising rent is only incidental to the main business of acquiring land or buildings, developing them constructing buildings etc., Whereas, in the instant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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