TMI Blog2015 (7) TMI 1020X X X X Extracts X X X X X X X X Extracts X X X X ..... business operations temporarily when the assessee company could not earn income from its main object in spite of their best efforts. At this juncture, the ratio of the decision of Hon ble Special Bench, ITAT, Delhi in the case of Atma Ram Properties (P) Ltd. [2006 (4) TMI 196 - ITAT DELHI-C] also supports the case of the revenue wherein it was held that rental income derived by assessee company of letting out property simplicitor was chargeable to tax under the head income from house property and not as business income irrespective of the fact that the assessee company was doing business of acquiring, developing and selling properties because the rental income accrued to the assessee company only because of ownership of the property and not by exploitation of rented property by way of complex commercial activity. we are inclined to hold that the view taken by the AO and upheld by the CIT(A) is quite justified and reasonable. - Decided against assessee. Admission of additional evidence objected - Held that:- In the present case, the assessee has not placed any sufficient reason which prevented it in filing documents/evidence during assessment proceedings which was filed subsequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were disallowed by the AO and upheld by the CIT(A), is restored to the file of AO for proper examination and verification after affording due opportunity of hearing for the assessee and without being prejudiced or influenced with the earlier assessment and impugned order on this issue - Decided in favour of assessee for statistical purposes. Disallowance of set off of brought forward assessed business losses - Held that:- Since by the earlier part of this order on ground no. 1, we have held that the rental income of the assessee company deserves to be treated as income from house property instead of business income as claimed by the assessee, therefore, business loss cannot be set off against the income from house property and conclusion of the CIT(A) was correct on this issue. However, we further make it clear that the AO is empowered to provide proper treatment to the brought forward losses as per relevant provisions of the Act in the present AY 2006-07 and also in the subsequent assessment years. Accordingly, ground no. 3 of the assessee is dismissed with the aforesaid directions of the AO to provide proper, reasonable and justified treatment to the same in accordance with l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ii) Bank Charges 1468.08 iii) General expenses 25,680.00 IV) Telephone Expenses 3,600.00 v) Preoperative expenses written off 2,400.00 vi) Staff welfare 8,695.00 vii) Lease rent expenses 66448.00 Viii) Maintenance Charges 85,208.00 ix) Printing Stationery 6,090.00 x) Remuneration to Director 2,88,000.00 xi) Salary 1,80,000.00 xii) Depreciation 2,50,781.00 without assigning any reasons, especially when aforesaid expenses were incurred wholly and exclusively for the purpose of business of the company and in order to maintain its status. 3. That the Ld. CIT(A) erred on both facts and in law in confirming the action of the Ld. AO, in not allowing the set off of brought forward assessed business losse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re this Tribunal in this second appeal with the ground as reproduced hereinabove. Ground No.4 4. Next issue for our consideration is rejection of application of the assessee filed under Rule 46A of the Income Tax Rules 1962. From careful consideration of impugned order, we note that the CIT(A) rejected said application of the assessee with following observations and conclusion:- 3. During appeal proceedings, the appellant has filed an application under Rule 46A and has requested for admission of additional evidence which is copy of all the returns already on record, certificate of incorporation, objects of the company. The reason for submitting the application under rule 46A has been stated to be The AO has not allowed any opportunity of hearing to produce the evidence which was though referred by Mr. Mirola i.e. assessment records of earlier years. The AO had also not asked to produce the same. In view of this it was found necessary to file all the returns already on record, certificate of incorporation, objects of the company, board s resolution in order to appreciate the facts and circumstances of the case. Though these documents are part of earlier assessment r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence during assessment proceedings which was filed subsequently before CIT(A) as additional evidence under Rule 46A. The assessee was given due opportunity of hearing before the AO, hence the AO rightly objected to the admission of additional evidence and the CIT(A) was quite justified in rejecting the same. Hence, ground no. 4 of the assessee is dismissed. Ground No. 5 8. We have heard arguments of both the sides and carefully perused the relevant material placed on record. At the very outset, ld. counsel of the assessee vehemently contended that Shri Sanjeev Bhardwaj was never authorised by the assessee company to file any letter either on 22.8.2008 or any other date considering that the receipts from rent from the property located in Sector 18, Noida may be treated as income from house property. Ld. counsel has drawn our attention towards affidavit dated 14.1.2013 of Director of the assessee company Smt. Sonali Ahuja and submitted that while the income of the assessee company was regularly treated as business income during all preceding assessment years viz. from 2001-02 to 2005-06, then there was no question of making such request on 22.8.2008 which was picked up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company as income from house property instead of business income, as claimed by the assessee only on the basis of impugned letter dated 22.8.2008 which was not filed on the instructions of the assessee company in view of our foregoing discussion. Accordingly, ground no. 5 of the assessee is allowed. Ground No.1 10. Apropos ground no.1, the ld. counsel of the asessee submitted that the AO treated rental receipts of the company as income from house property only on the sole basis of a letter dated 22.8.2008 which was not filed on the instructions of the assessee and the AO did not consider the treatment given by the assessee and accepted by the revenue in earlier assessment yeas and other relevant facts. Ld. counsel vehemently contended that the CIT(A) rejected additional evidence of the assessee and upheld the conclusion of the AO only on the basis of wrong observations of the AO which were not sustainable in law and on the facts of the case. 11. Ld. DR replied that the AO had no option but to accept the admission letter of the assessee which was filed on 22.8.2008 and the CIT(A) had no alternative except to go with the conclusion of the AO which was supported by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustainable. At the same time, when we consider the conclusion of the authorities below we find it appropriate to consider facts of present case under which the assessee earned impugned rental income. Then it would suffice to consider the applicability of the ratio of the judgments and order as relied by both the parties. 14. As per para 2 page 2 of written submissions/synopsis filed by the assessee before us narrated facts leading to impugned rental income which reads as under:- 2. In terms of the aforesaid objects, the assessee purchased shop in sector 18, Noida in the period relevant to the AY 2001-02 and used it for the purpose of business. The appellant has earned commission income in the first year itself amounting to ₹ 66,710/- and claimed depreciation on its shop opened at Sector -18, Noida. The assessee filed return for the AY 2001-02 declaring loss of 63,180/- after claiming depreciation, inter alia, on amount invested in shop. For the AY 2002-03, the assessee filed return declaring loss of ₹ 2,05,553/- and for the AY 2003- 04, the assessee filed return declaring loss of ₹ 1,03,106/- . On 14-01-2003 the board of directors in the meeting held at it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee company was formed with the main object of earning commission income from property transactions and it has earned commission income of ₹ 66,710 in AY 2001-02, the first year of business. Subsequently, in AY 2002-03, there was neither any business income nor any rental income for the assessee company. Subsequently, in AY 2003-04 and 2004-05, the gross rental income was ₹ 90,000 and ₹ 9,50,600 respectively and there was no business income from commission. In the AY 2005-06, there was rental income of ₹ 17,88,000 and there was no commission income during this period. In the year under consideration i.e. AY 2006-07, the assessee earned gross rental income of ₹ 19,75,500 and there was no business income during this period. 17. Under above noted facts and circumstances and as per year wise detail of gross rental income and gross business income submitted by the assessee, we clearly observe that the assessee company earned commission income from property transaction of ₹ 66,710 only in AY 2001-02 and in the subsequent AY from 2002-03 to 2006-07, there was no business income either from commission of property transaction or from any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt held that the realisation of rental income by the assessee was in the course of its business in prosecution of one of its objects in its memorandum and was liable to be included in its business profits and was assessable to tax as business profit. In this case, the bank owned a six-storeyed building where its office was located at ground floor and part of sixth floor and rest of the building was let out to tenants on rent. In this situation, the rental receipts were treated as business income. In the extant case, the assessee only earned rental income which was not primary activity, hence, facts of the present case are distinguishable from that case. In our humble understanding, benefit of the ratio of this decision is not available for the assessee as the facts of the present case are distinguishable from that case. 20. In the judgement of Universal Plast Ltd. vs CIT (supra), it was decided that where the assessee is engaged in the business of giving cotton stopped its business and let out godowns and also separated machinery and let out pressing factory to a metal pressing factory, rental income derived therefrom could not be assessed as business income. In view of above, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be assessable under the head Income from house property and not Profits and gains of business or profession . What is let out should be predominantly the said property inasmuch as the rental income should be from the bare letting of the tenements or from letting accompanied by incidental services or facilities. The subject hired out should not be a complex one and the income obtained should not be so much because of the facilities and services rendered than because of their letting of the tenements. If such a situation is found to be obtained, the other aspects such as nature of the property being commercial/business asset, etc. in the hands of the assessee as well as nature of the business of the assessee do not change the character of the income and the rental income does not become income from trade or business. 26. In the present case, the subject property let out by the assessee-company was undisputedly owned by it and it was a case of bare letting of tenement and the subject hired out was not a complex one. It was thus a case of letting out of a property owned by the assessee simplicitor and not a case of exploitation of the property by way of complex commercial ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same was filed on the instructions of the assessee, therefore, the income derived from rent should be treated as business income. 26. On careful consideration of above submissions, at the very outset, we are of the view that the principle of consistency cannot be applied to the assessment order which was passed u/s 143(1) of the Act because under this provision, the assessment is framed in a mechanical manner by accepting the return of income filed by the assessee without taking any view on a particular issue or treatment of income under a specific head. Hence, application of principle of consistency cannot be pressed in the present case. 27. At the cost of repetition, we may point out that the revenue authorities have not disputed this fact that the assessee company was incorporated on 12.12.2000 with a number of objects including as follows:- to build, construct, establish, own, purchase, sell, take on lease or exchange or otherwise acquire, hold, maintain and manage industrial, commercial or residential buildings, apartment houses, hotels, motels, hostels, restaurants and to let, sublet, give on lease or otherwise permit to use and occupation for rent or hire char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rden of expenditure and losses. In this situation and totality of the facts and circumstances, we have no hesitation to hold that the assessee company was formed with the main object of property business and earning income from property transactions in the form of commission and profits etc. but when the company could not perform well in its main objects, then at the end of third FY 2002-03, it was decided by the Board of Directors of the company that the said shop purchased in the first year of business operations 2001-02 relevant to AY 2001-02 should be let out temporarily till company gets sufficient profits from its main business activities. 30. With this background and aforenoted facts and circumstances, we respectfully take cognizance of recent decision of Hon ble Supreme Court in the case of Chennai Properties and Investments Ltd. vs CIT (2015) 373 ITR 673 (SC) wherein after considering all previous judgments of Hon ble Supreme Court including dicta of the judgments of Hon ble Apex Court in the case of East India Housing and Land Development Trust Ltd. vs CIT (1961) 42 ITR 49(SC), decision of Hon ble constitutional bench to Supreme Court in the case of Sultan Brothers (P) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s decision in the context of the main objective of the company and took note of the fact that letting out of the property was not the object of the company at all. The court was therefore, of the opinion that the character of that income which was from the house property had not altered because it was received by the company formed with the object of developing and setting up properties. Before we refer to the Constitution Bench judgment in the case of Sultan Brothers (P) Ltd., we would be well advised to discuss the law laid down authoritatively and succinctly by this Court in 'Karanpura Development Co. Ltd. v. Commissioner of Income Tax, West Bengal' [44 ITR 362 (SC)]. That was also a case where the company, which was the assessee, was formed with the object, inter alia, of acquiring and disposing of the underground coal mining rights in certain coal fields and it had restricted its activities to acquiring coal mining leases over large areas, developing them as coal fields and then sub-leasing them to collieries and other companies. Thus, in the said case, the leasing out of the coal fields to the collieries and other companies was the business of the assessee. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onclusion whether the income is to be treated as income from business and such a question would depend upon the circumstances of each case, viz., whether a particular business is letting or not. This is so stated in the following words: - We think each case has to be looked at from a businessman's point of view to find out whether the letting was the doing of a business or the exploitation of his property by an owner. We do not further think that a thing can by its very nature be a commercial asset. A commercial asset is only an asset used in a business and nothing else, and business may be carried on with practically all things. Therefore, it is not possible to say that a particular activity is business because it is concerned with an asset with which trade is commonly carried on. We find nothing in the cases referred, to support the proposition that certain assets are commercial assets in their very nature. We are conscious of the aforesaid dicta laid down in the Constitution Bench judgment. It is for this reason, we have, at the beginning of this judgment, stated the circumstances of the present case from which we arrive at irresistible conclusion that in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rresistible conclusion that in view of main object of the assessee company, the rental income from letting of property is the business income of the assessee. 33. As we have already noted that in the judgment of Sultan Brothers (supra), the Hon ble apex court categorically held that merely an entry in the object clause showing a particular object would not be the determinative factor to arrive at a conclusion whether the income is to be treated as income from business and such a question would depend upon the circumstances of each case. In the light of above ratio if we analyse the totality of the facts and circumstances of the present case, we have no hesitation to hold that the main object of the present assesssee company was not to earn rental income from letting of property which was purchased in FY 2001-02 and let out in FY 2002- 03 temporarily till the company gets sufficient profits from its main business activity with cautious decision of Board of Directors of the company dated 14.1.2003 with the intention to reduce burden of expenditure and losses suffered by the assessee company right from its incorporation during preceding three years. The present case clearly falls o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Properties Ltd. [1992] 62 Taxman 285 (Cal) 6. CIT vs New Savan Sugar Gur Refining Co. Ltd. (1991) 55 Taxman 189 (Cal) 7. CIT vs Rampur Timber Turnery Co. Ltd [1981] 6 Taxman 241 (ALL.). 8. Income Tax Officer vs Mokul Finance (P)Ltd. [2007]110 TTJ Delhi 9. M/s Vatsalya Enterprises Pvt. Ltd vs Asstt Commissioner of Income Tax {ITA no 6552/2011 decided on 28.01.2013 by ITAT Mumbai 'F' Bench} 36. Replying to the above, ld. DR supported the action of the AO and the CIT(A) and contended that the only income of the assessee company was computed and assessed under the head of income from house property and there was no other business activity during the financial year under consideration, therefore, the expenses claimed by the assessee in the profit and loss account were rightly disallowed by the AO. Ld. DR also submitted that the AO took a reasonable approach in allowing claim of audit fee and filing fee to the assessee. Supporting the impugned order, ld. DR submitted that the first appellate authority was right and correct in upholding the disallowance made by the AO. 37. On careful consideration of above submissions, at the very outset, we respectfully tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly and exclusively for the purpose of making or earning income. It is the purpose of the expenditure that is relevant in determining the applicability of s. 57(iii) and that purpose must be making or earning of income. Sec. 57(iii) does not require that this purpose must be fulfilled in order to qualify the expenditure for deduction. It does not say that the expenditure shall be deductible only if any income is made or earned. There is n fact nothing in the language of s. 57(iii) to suggest that the purpose for which the expenditure is made should fructify into any benefit by way of return in the shape of income. The plain natural construction of the language of s. 57(iii) irresistibly leads to the conclusion that to bring a case within the section, it is not necessary that any income should in fact have been earned as a result of' the expenditure. It may be pointed out that an identical views was taken by this Court in Eastern Investments Ltd. vs. CIT (1951) 20 ITR 1 (SC) : TC41R.491, where interpreting the corresponding provision in s. 12(2) of the Indian IT Act, 1922, which was ipsissima verba in the same terms as s. 57(iii), Bosc J., speaking on behalf of the Court, observe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any difference in the true interpretation of s. 57(iii). The language of s. 57(iii) is clear and unambiguous and it has to be construed according to its plain natural meaning and merely because a slightly wider phraseology is employed in another section which may take in something more, it does not mean that s. 57(iii) should be given a narrow and constricted meaning not warranted by the language of the section and, in fact, contrary to such language. This view which we are taking is clearly supported by the observations of Lord Thankerton in Huges vs. Bank of New Zealand (1938) 6 ITR 636 (HL) TC16R.381, where the learned Law Lord said.' Expenditure in course of the trade which is unremunerative is none the less a proper deduction, if wholly and exclusively made for the purposes of the trade. It does not require the presence of a receipt on the credit side to justify the deduction of an expense. 10. Further, the Calcutta High Court in Ganga Properties Ltd. (supra), relying upon the judgment of Allahabad High Court in CIT vs Rampur Timber, [1981] 129 ITR 58 (All.), observed and held as under:- In our view, a limited company, even if it does not carry on bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upra), we hold that it is not necessary that any income should, in fact, have been earned as a result of expenditure and expenses incurred by the assessee to maintain its corporate and legal existence cannot be disallowed merely because no income has been earned as a result of activities conducted and expenditure incurred by the assessee company during the relevant period. With the above proposition, the issue of allowability of expenditure claimed by the assessee in the Profit and loss account, which were disallowed by the AO and upheld by the CIT(A), is restored to the file of AO for proper examination and verification after affording due opportunity of hearing for the assessee and without being prejudiced or influenced with the earlier assessment and impugned order on this issue. Accordingly, ground no. 2 of the assessee is deemed to be allowed for statistical purposes. Ground No.3 39. Apropos ground no.3, ld counsel of the assessee submitted that the CIT(A) erred on both facts and in law in confirming the action of the Ld. AO, in not allowing the set off of brought forward assessed business losses of earlier years without appreciating that the said disallowance is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icated above. ITA No.1134/Del/2013 for AY 2005-06 45. This appeal by the assessee has been directed against the order of the CIT(A)-VIII, New Delhi dated 19.12.2012 in Appeal No.231/2011-12 for AY 2005-06. Application of assessee for admission of additional grounds of appeal 45.1 We have heard arguments of both the sides and carefully perused the relevant material placed on record. Ld. counsel of the assessee placing reliance on several judgements of Hon ble Supreme Court and Hon ble High Court including judgment in the case of NTPC vs CIT (1998) 229 ITR 383 (SC) submitted that the additional grounds raised by the assessee are purely legal grounds which could not be taken before CIT(A) for want of proper legal advice, therefore, the same may kindly be admitted for adjudication. Ld. DR submitted that when the assessee did not raise these legal objections/grounds before the CIT(A), then the same cannot be raised during second appellate proceedings before the Tribunal. 45.2 On careful consideration of above submissions and perusal of additional ground raised by the assessee, we observe that in these grounds, the assessee is placing its objection regarding avai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or reopening have not been supplied to the appellant before the expiry of six years from the end of the relevant Assessment Year, which is beyond the period prescribed under Section 149( 1) (b) of the Income Tax Act, 1961. 45.3 Along with original appeal, the assessee raised six grounds which read as under:- 1. On the facts and in the circumstances of the case and in law, the ld. CIT (A) erred in not appreciating that the order passed by the Assessing Officer u/s 143(3) of the Income tax Act, 1961 is without jurisdiction and bad in law as the jurisdiction u/s 147 is vitiated. 2. On the facts and in the circumstances of the case and in law, the ld. CIT (A) erred in not appreciating that the order passed by the Assessing Officer u/s 143(3) of the Income tax Act, 1961 is without jurisdiction and bad in law as the AO did not communicate reasons for issuance of notice u/s 148 of the Act. 3. On the facts and in the circumstances of the case and in law, the ld. CIT (A) erred in holding that income earned from exploitation of commercial space has to be assessed under the head 'Income from House Property' instead of under the head 'Profits and Gains of Bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel pointed out that in the first para of impugned assessment order, the AO only records that subsequently, proceedings u/s 147/148 of the Act were initiated and notice u/s 148 dated 20.9.2008 was issued for the following reasons. Ld. counsel further submitted that the AO in response to notice u/s 148 of the Act did not supply a copy of the reasons recorded before issuing notice u/s 148 of the Act even till today viz. upto hearing before us despite oral request and written letter dated 30.1.2013 and 22.2.2013. Ld. counsel further pointed out that in terms of judgment of Hon ble Supreme Court in the case of GKN Driveshafts (India) Ltd. vs ITO Others (2003) 259 ITR 19 (SC), the AO is bound to furnish reasons recorded before the issuance of notice. Therefore, in these circumstances, completion of assessment u/s 143(3) of the Act is not in accordance with law and, therefore, notice u/s 148 of the Act and all reassessment proceedings need to be quashed. Ld. counsel also took us through decision of Hon ble Calcutta High Court in the case of Berger Paints India Ltd. vs ACIT Ors. (2004) 266 ITR 462 (Cal.) and submitted that the assessee is entitled to be supplied with the reasons in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory provision for providing reasons recorded for reopening of assessment u/s 147/148 of the Act to the assessee. However, as per ratio of the decision of Hon ble apex court in the case of Shri G.N.Mohan Raju vs ITO (supra) which was also referred by Hon ble Calcutta High Court in the case of Berger Paints India Ltd. vs ACIT Ors. (supra), it has been held that when a notice u/s 148 of the Act is issued, a proper course of action for the notice (assessee) is to file the return and if he so desires to seek reasons for issuing the notice u/s 148 of the Act. When the assessee expresses his willingness or desire to seek reasons before the AO, then the AO is bound to furnish reasons within a reasonable time. The relevant operative part of the order of the Hon ble Supreme Court in the case of GKN Driveshafts (India) Ltd. vs ITO Others (supra) which was followed by Hon ble Calcutta High Court in the case of Berger Paints India Ltd. vs ACIT Ors. (supra), at page 20 is being respectfully reproduced below:- We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under Section 148 of the Income tax Act is issued, the proper co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period prescribed u/s 149(1)(b) of the Act. Ld. counsel of the assessee submitted that in case reasons for reopening of the assessment have not been supplied to the assessee before expiry of six years from the end of relevant assessment year which is beyond the period prescribed u/s 149(1)(b) of the Act, then reassessment proceedings are vitiated and deserve to be quashed. Ld. DR submitted that as per provisions of section 149(1)(b) of the Act, no notice u/s 148 shall be issued for the relevant assessment year if four years but not more than six years have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to rupees one lakh or more for that period. Ld. DR pointed out that the present case is related to AY 2005-06 and notice u/s 148 of the Act was issued to the assessee on 25.09.2008 which is very well within the prescribed time limit u/s 149(1)(b) of the Act and the said provision prescribes time limit for issuance of notice u/s 148 of the Act wherein supply of reasons recorded is not a criteria or precondition. 47.1 On careful consideration of above submissions, we are of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent under section 143(3). On the other hand, if the AO chose to accept assessee s request, he can indeed make an assessment under section 143(3). In the case before us, assessments were completed under section 143(3) read with section 147. Or in other words AO accepted the request of the assessee. This in turn makes it obligatory to issue notice u/s 143(2) after the request by the assessee to treat his earlier return as filed in pursuance to notices u/s 148 of the IT Act was received. This request, in the given case, has been made only on 05-10-2010. Any issue of notice prior to that date cannot be treated as a notice on a return filed by the assessee pursuant to a notice u/s 148 of the Act. Or in other words, there was no valid issue of notice u/s 143(2) of the IT Act, and the assessments were done without following the mandatory requirement u/s 143(2) of the IT Act. This in our opinion, render the subsequent proceedings all invalid. Learned CIT(A) had only adjudicated on a position where there was no service of notices u/s 143(2) of the IT Act. He had not dealt with the scenario, where notice was issued prior to the filing of return by the assessee. We therefore, quash the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee as facts and circumstances of the case are dissimilar as the assessee had neither filed any return nor requested the AO to treat the earlier return as has been filed in pursuance to notice u/s 148 of the Act. 47.5 Ld. counsel of the assessee has also alleged that proceedings u/s 147 of the Act cannot be based on conjectures and the reopening has to be based on some tangible material, something that can be recorded as having a live link/close nexus with the circumstances relied upon for formation of belief before the AO. Ld counsel of the assessee submitted that when the same income was treated as business income in the earlier assessment years right from 2001- 02 to 2005-06, then on similar set of facts and circumstances without any deviation or change, the reopening u/s 147/148 of the Act would be change of opinion on the same material and, therefore, issuance of notice u/s 147 of the Act was not valid and without jurisdiction and bad in law as the jurisdiction u/s 147 of the Act is vitiated. 47.6 Ld. counsel of the assessee placed reliance on various decisions including decision of Jurisdictional High Court of Delhi in the case of CIT vs Orient Craft Ltd. in ITA No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction for issuance of notice and reopening of assessment that cannot be alleged as change of opinion because the department had no opportunity to form any opinion during earlier assessment year proceedings which were completed u/s 143(1) of the Act and hence on the issue of rental income, the AO had reason to believe that the assessee had wrongly placed gross rental receipt as business income instead of income from house property which has escaped assessment. 47.9 On careful consideration of above submissions of both the sides and careful perusal of the relevant material placed on record, inter alia reasons for reopening assessment order and ratio of the orders and judgements relied by both the sides, at the very outset, we note that undisputedly and admittedly, the assessment was completed u/s 143(1) of the Act in the case of assessee from commencement of its business i.e. AY 2001-02 to 2005-06 and the AO had no opportunity to form any opinion about the taxable head of rental receipts of the assessee company in those assessment years. The issue cropped up when the AO took up the case of the assessee for AY 2006-07 for scrutiny and reached to a conclusion that the gross rental r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 248]. It may be noted above that under the first proviso to the newly substituted section 143(1), with effect from June 1, 1999, except as provided in the provision itself, the acknowledgment of the return shall be deemed to be an intimation under section 143(1) where (a) either no sum is payable by the assessee, or (b) no refund is due to him. It is significant that the acknowledgment is not done by any Assessing Officer, but mostly by ministerial staff. Can it be said that any assessment is done by them? The reply is an emphatic no . The intimation under section 143(1)(a) was deemed to be a notice of demand under section 156, for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery indicated to be payable in the intimation became permissible. And nothing more can be inferred from the deeming provision. Therefore, there being no assessment under section 143(1)(a), the question of change of opinion, as contended, does not arise. 48.1 Hence, as per ratio laid down by the Hon ble apex court after considering its earlier judgments in the case of CIT vs Rajesh Jhaveri Stock Broker (P) Ltd., (supra), DCI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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