TMI Blog2012 (8) TMI 181X X X X Extracts X X X X X X X X Extracts X X X X ..... setting-off of brought forward non allowable loss - ITA Nos.5290, 5291 & 5292/Mum/2009 - - - Dated:- 28-3-2012 - B R Mittal, T R Sood, JJ. For Appellant: Shri Sanjay R Parikh For Respondent: Shri K V Ravi Namboodiri ORDER Per: B R Mittal: These three appeals are filed by assessee for assessment years 2002- 03, 2003-04 and 2004-05 against separate orders of Ld. CIT(A) all dt. 10.7.2009. 2. At the time of hearing, Ld. AR submitted that relevant facts and substantive grounds are identical in all these appeals. Therefore, we heard these appeals together and dispose off the same by this common order for the sake of convenience and brevity. 3. Firstly we take up appeal for assessment year 2002-03 being ITA No. 5290/M/09. 4. The relevant facts are that assessee is a Private Ltd. Company and derives income from 4 house properties viz. , 1) Badrika Ashram Building, 1st Lind Khetwadi, 1st Parsiwala, Mumbai-400 004 2) Vithal Sadan Bldg., 342, Kalbadevi Road, Mumbai-400 002 3) Shiv Prasad Bldg., 73/IInd Cavel Cross Lane, Mumbai-400002 4) Bhagatwadi Bldg., 132 Bhuleshwar Road, Kabutar Khana, Mumbai-400 002. ii) These 4 buildings are having 546 tenements, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w facts came to the notice of AO. Hence, initiation of reassessment proceeding is not valid in law. Ld. AR submitted that AO has initiated reassessment proceedings on account of claiming deductions of service charges of Rs. 5,52,151/- from rental income. He relied on the decision of Delhi High Court in the case of CIT Vs R.J Wood Pvt. Ltd. 334 ITR 358 and submitted that it was held that maintenance and other charges which were paid by assessee are deductible from rental income and therefore there was no escapement of income which was chargeable to tax. Hence initiation of reassessment proceeding is not in accordance with law. 9. On the other hand Ld. Departmental Representative supported action of AO to initiate reassessment proceedings. He submitted that assessee derived rental income from the properties let out to various persons. He submitted that so called maintenance charges are not allowable from the rental income which is assessed under the head Income from House Property . He further submitted that return filed by assessee was processed u/s. 143(1) of the Act and there was no assessment made by AO. He submitted that as per explanation 2 of Sec. 147 of the Act where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be deductable from the rent while computing the Annual Letting Value. In view of above facts, we are of the considered view that the said case is not relevant to the facts of the case before us. On the other hand, we are of the considered view that the only criteria of reopening of assessment is that the AO should have reason to believe that income chargeable to tax has escaped assessment notwithstanding that full disclosure of material is on record. It is observed that return filed by assessee was processed u/s. 143(1) of the Act and if AO is of the view that income chargeable to tax has escaped assessment, his action u/s. 143(1) is valid as the escaped assessment includes both non assessment as well as under assessment. The sufficiency or correctness of material is not a thing to be considered at the stage of reopening of assessment as held by Hon ble Apex Court in the case of Raymond Woolen Mills Ltd. Vs ITO 236 ITR 34 (SC) . Further reopening of assessment can also be initiated when there is an apparent error on the face of record or available in the records which leads to under assessment or excessive claim of loss. The Hon ble Apex Court has also held in the case of ACIT V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) has confirmed the action of AO to assess the rental income under the head Income from House Property . 15. During the course of hearing of appeal, Ld. AR conceded that rental income derived by assessee from letting out of 4 buildings, details mentioned herein above at para-4 is to be assessed under the head Income from house property and referred the decision of Hon ble Apex Court in the case of Shambhu Investment Vs CIT 263 ITR 143 . In view of above submission of Ld. AR, grounds Nos. 3 to 5 of appeal are rejected. 16. In grounds Nos. 6 to 8 of appeal assessee has disputed the order of Ld. CIT(A) in not allowing deduction on account of repairs cess amounting to Rs. 4,72,834/-. 17. The AO has stated that assessee claimed deduction of repairs cess u/s. 24(1)(vii) on the ground that said expenses was incurred being repaircess levied by Municipal Corporation, Mumbai. However, AO did not accept the claim of assessee. Being aggrieved, assessee filed appeal before First Appellate Authority. 18. On behalf of assessee, it was contended that the cess was paid as tax levied by the local authority and as such it is allowable as per proviso to Sec. 23(1). It was also conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder issue disallowance of repair-cess made by AO is confirmed. Hence, assessee is in further appeal before Tribunal. 19. During the course of hearing, Ld. AR submitted that copies of bills of payment of repair cess paid to Municipal Corpn. of Greater Mumbai are placed at pages 45 to 53 of Paper Book. He submitted that said payment was paid to Board who was assigned the activity to collect repairs under Mumbai Housing Area Development Board Act, 1976. He submitted that it is a statutory duty and the same should be allowed as deduction as per proviso to Sec. 23(1) of the Act. However, Ld. DR supported the order of Ld. CIT(A). 20. We have carefully considered orders of authorities below and submissions of Ld. Representatives of parties. We have also perused pages 45 to 53 of paper book to which our attention was drawn at the time of hearing that assessee paid repair cess to Municipal Corporation which is allowable as per proviso to Sec. 23 of the Act. However, Ld. AR could not establish the fact as recorded by Ld. CIT(A) in the impugned order that all the repair cess bills contains name of other parties and not of the assessee. Therefore, considering the full facts as obser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reads as under:- I have considered this issue carefully and perused the written submission. In this case it is found beyond doubt that appellant has owned four buildings and has given to 546 tenants, which income is Income from House Property as there is no series of activities like business activities. As appears from the records that appellant company has acquired land and built house and let it out to the tenants, hence appellant derives income from House property vide Commercial properties Ltd. AIR 1928 (Cal) 456, Balliganga Bank Ltd. Vs CIT (1946) 14 ITR 409 (Cal) and Indian Citi Property Ltd. Vs CIT (1965) 55 ITR 262 (Cal.). Similarly, in such set of facts case of East India Housing Land Development Trust Ltd. Vs CIT (1961) 42 ITR 49 (SC) is also relevant. Appellant has not explained as to how rental income is a composite rent comprising of charges for various services, which is not incidental to letting out the House Property. In fact, no such independent and additional services are provided which has got additional element of charges or income, on the contrary it is a very obvious fact that appellant receives rents from the tenants which does not reveal any evidence o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices provided and decision in the case of Universal Textile Water Proof Co.(India) Vs ACIT 20 SOT 275 . However, Ld. DR in his submission supported the order of Ld. CIT(A). He submitted that no independent and additional services have been provided by assessee and whatever the services are provided are the necessary services provided and for which 30% deduction has already been given as per Sec. 24 of I.T. Act. He further submitted that the decision of Mumbai Bench ITAT in the case of Universal Textile Water Proof Co.(India) Vs ACIT (supra) relied upon by assessee is not applicable as in that case there were business service centre in premises and assessee provided infrastructure facilities. He further submitted that in the said case, rental income was segregated into rent and service charges as assessee provided infrastructure facilities as business was conducted by the tenants in the premises let out by assessee unlike in the case of assessee herein. 26. We have carefully considered the orders of authorities below and submissions of Ld. Representatives of both parties. We have also gone through cases cited by Ld. AR (supra). We observe that assessee has provided facilities of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t derives only rental income from tenants. In view of above facts, we uphold the order of Ld. CIT(A) and reject ground Nos. 9 to 11 of appeal of assessee. 28. In ground Nos. 12 and 13, assessee has disputed the order of Ld. CIT(A) in upholding the action of AO not to allow set off of brought forward losses against current year s income. 29. We have heard the Ld. Representatives of assessee and have considered orders of authorities below. We observe that AO has stated that assessee company did not carry out any business activity. Hence, loss computed by assessee under the head business or profession is not accepted. 30. In the first appeal, Ld. CIT(A) has stated that assessee has shown income from house property only and does not have any business activity. We consider it prudent to refer para-18 of the impugned order of Ld. CIT(A) which is as under: I have considered the rival submission carefully, and found that AO has rightly assessed the income from House property, therefore, there is no point for setting-off of business losses of A.Y. 1991-92 of Rs. 27,136/-, 1995-96 Rs. 1,02,419/-, 2000-01 Rs. 58,283/-, A.Y. 2001-02 Rs. 99,257/- and loss from House property income Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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