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TMI Blog2011 (9) TMI 731X X X X Extracts X X X X X X X X Extracts X X X X ..... rns had only been processed under Section 143(1)(a) and the restrictions of reopening of assessments applicable to assessments u/s.143(3) were not applicable to intimations u/s.143(1)(a) ? 2. Without prejudice to the first question, whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in cancelling the reopening of the assessment for the assessment year under consideration on the ground that it was based on audit objection, without following the decision of the Supreme Court 237 ITR 13 relied on by the Revenue ? 3. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the income was not assessable under the head 'income from property' but was assessable under the head 'business' merely on the ground that the land on which the super-structure was built had been taken on lease overlooking the fact that the provisions for computation of in come under the head 'income from property' envisaged such a situation and provided for allowing the rent paid for the grounds as a deduction while computing income from house property owned by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 96 as well as on the decision in the case of Commissioner of Income Tax Vs. LKS Jewellers reported in 109 Taxman 114, the assessee contended that the opinion of the audit party as regards the application or interpretation of law could not be the basis for reopening the assessment. The assessee further contended that having regard to the business of the assessee to develop properties, the commercial complex constructed over the leasehold land was a commercial asset utilised for the purpose of the business, consequently, the income derived therefrom on letting out of the property had to be assessed only as "business income". 5. A reading of the order of assessment shows that the Assessing Officer rejected the assessee's contention and held that the decision of this Court reported in 215 ITR 424 (Commissioner of Income Tax Vs. Indian Metal and Metallurgical Corporation), which was rendered under similar circumstances would apply to the facts herein. The Assessing Authority held that the transaction being one of exploitation of the property as an owner and not by way of exploitation of business assets, the assessment of the rental receipts as "business income" would not ari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ituted with effect from April 1, 1989, enabled the Officer to reopen the assessment. So long as the ingredients of Section 147 of the Income Tax Act, 1961 are fulfilled, the Assessing Officer is free to initiate proceeding under Section 147 of the Income Tax Act, 1961 to reopen the assessment. Considering the provisions of Section 143(1)(a) of the Act, as it stood during the relevant assessment years under consideration, the moment the Officer found that the assessment had been wrongly made and that the facts were not under any controversy, rightly, the Officer concerned applied the law of this Court following the Apex Court decision under similar circumstances to the case of the assessee to assess the rental receipts as "income from house property". 9. Learned Standing counsel for the Revenue further placed reliance on the decision of the Apex Court in the case of East India Housing and Land Development Trust Ltd Vs. CIT reported in 42 ITR 49 (SC), in the case of CIT Vs. Indian Metal and Metallurgical Corporation reported in 215 ITR 424 (Mad), in the case of (1)Universal Plast Ltd (2) Guntur Merchants Cottpn Press Co. Ltd. , Vs. CIT reported in 237 ITR 454 (SC), which were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed only as "business income". Even in the case of CIT Vs. Chennai Properties and Investments Ltd reported in 266 ITR 685 (Mad), this Court had pointed out to various decisions and laid down propositions, which have to be satisfied before assessing the income as "business income" or "income from house property". In the light of the above said facts and the decisions relied on, rightly, the Tribunal came to the conclusion that there was only change of opinion and that cannot be the basis for initiating proceedings under Section 147 of the Income Tax Act, 1961. Having regard to the nature of business carried on by the assessee, as a fact finding authority, the Tribunal held that business is assessable only as "business income". 11. Referring to the contention of learned Standing counsel, placing reliance on the decision of the Supreme Court in the case of ACIT Vs. Rajesh Jhaveri Stock Brokers P.Ltd., reported in 291 ITR 500 (SC), learned counsel for the assessee pointed out that the Tribunal had not considered this aspect on the jurisdiction issue but held that the Audit Party Objection was the only reason on which the Assessing Officer resorted to reopen the assessment. Nei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder 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). With effect from April 1, 1989, the provisions underwent substantial and material changes. A new scheme was introduced and in the new substituted section 143(1) prior to the subsequent substitution with effect from June 1, 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, without prejudice to the provisions of section 143(2) an intimation was to be sent to the assessee specifying the sum so payable and such intimation was deemed to be a notice of demand issued under Section 156 for the apparent purpose of making machinery provisions relating to recovery of tax applicable. The first proviso to section 143(1)(a) allowed the Department to make certain adjustme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 18. In view of the above findings, the only question that is left behind is whether income from letting out of the property is to be assessable as "business income" or "income from house property". 19. Learned Standing Counsel appearing for the Revenue in this regard placed heavy reliance on the decision of the Supreme Court in the case of East India Housing and Land Development Trust Ltd Vs. CIT reported in 42 ITR 49 (SC), in the case of CIT Vs. Indian Metal and Metallurgical Corporation reported in 215 ITR 424 (Mad) as well as in the case of CIT Vs. Chennai Properties and Investment Ltd, reported in 266 ITR 345 (Mad). 20. As far as the first cited decision reported in 42 ITR 49(SC) (East India Housing and Land Development Trust Ltd Vs. CIT) is concerned, the assessee therein is a company formed with the object of promoting real estate business and developing markets. It claimed that the income derived from shops let out was to be assessed under Section 10 of the 1922 Act as "profits or gains" of business. In considering the question, the Supreme Court pointed out that the mere fact that the assessee had to obtain licence from the Corporation of Calcutta and to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be assessed as "income from other sources". In so holding, this Court pointed out to the decision of the Apex Court in Sultan Brothers' case reported in (1964) 51 ITR 353 and distinguished the same and held that when the assessee had let out the building along with amenities, the assessee derived income from letting out of the property owned by it, in the circumstances, the question of the income derived by the assessee from letting out of the property viz., first, second and fourth floors could not be assessed as income from "other sources", but to be assessed as "income from house property". 22. In the decision reported in 266 ITR 685 (Mad) (Commissioner of Income Tax Vs. Chennai Properties and Investments Ltd), this Court elaborately considered the decisions of the Apex Court as well as this Court and pointed out that the question as to whether letting out of the property results in "business income" or "income from property" is to be decided based on the facts of each case. Pointing out to the decision in the case of East India Housing (1961) 42 ITR 49 (SC) as well as in the case of Karanpura Development Co.Ltd Vs. CIT reported in (1962) 44 ITR 362(SC), in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r nomenclature, lease, amount, rents, licence fee) received by an assessee from leasing or letting out of assets would fall under the head "Profits and gains of business or profession"; (2) it is a mixed question of law and fact and has to be determined from the point of view of a businessman in that business on the facts and in the circumstances of each case, including true interpretation of the agreement under which the assets are let out ; (3) where all the assets of the business are let out, the period for which the assets are let out is a relevant factor to find out whether the intention of the assessee is to go out of business altogether or to come back and restart the same ; (4) if only a few of the business assets are let out temporarily, while the assessee is carrying out his other business activities, then it is a case of exploiting the business assets otherwise than employing them for his own use for making profit for that business ; but if the business never started or has started but ceased with no intention to be resumed, the assets also will cease to be business assets and the transaction will only be exploitation of property by an owner there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... materials placed before us by the assessee to contradict the above said facts. 27. It was highlighted by learned counsel for the assessee that the assessee herein is not the owner of the land but only owner of the superstructure and submitted for application of the above said decision to the cases on hand for a remand. We do not think the facts of the present cases warrant such remand. 28. We have already referred to the decision of the Apex Court in East India Housing and Land Development Trust Ltd Vs. Commissioner of Income Tax reported in (1961) 42 ITR 49 (SC), which was also considered in the case of (1)Universal Plast Ltd., (2) Guntur Merchants Cottpn Press Co.Ltd Vs. CIT reported in 237 ITR 454. The question involved therein was as to whether income from letting of the property was to be treated as "business income" or not. As has been pointed out in the decision in the case of (1)Universal Plast Ltd., (2) Guntur Merchants Cottpn Press Co.Ltd Vs. CIT reported in 237 ITR 454, when the facts noted in the case before us clearly point out that the transaction was only by way of exploitation of the property by the assessee and not by way of exploitation of busines ..... X X X X Extracts X X X X X X X X Extracts X X X X
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