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TMI Blog2024 (8) TMI 1079X X X X Extracts X X X X X X X X Extracts X X X X ..... aring total income of Rs. 6,93,13,140/-. The case of the assessee was selected for scrutiny assessment and a notice under section 143(2) was issued on 04.09.2015. The ld. Assessing Officer has passed a scrutiny assessment under section 143(3) on 28.12.2016. He accepted the stand of the assessee that rental income is to be assessed as a house property income. The copy of this assessment order is available on pages no. 1 to 14 of the paper book. On page 14, ld. Assessing Officer has made the computation of taxable income. He determined income from house property as per the return at Rs. 7,32,44,667/-. The business income declared by the assessee was at a loss of Rs. 39,31,532/-. This has been reduced by the ld. Assessing Officer to Rs. 16,59,079/-. In other words, the ld. Assessing Officer did not disturb the claim of house property income made by the assessee in the return. 4. The ld. CIT perused the assessment record and formed an opinion that alleged house property income ought to have been assessed as a business income and he took action under section 263 of the Income Tax Act. After hearing the assessee, he passed an order under section 263 on 15.03.2019, copy of this order is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any are: "To carry on the business of all kinds of engineering products including financing, manufacturing, selling or in any other form. To undertake estimation, survey, design, manufacture, construct, supply of material for dams, generating stations, transmission lines, sub-stations and plants of all description and their ancillaries. To carry on the business of electric light and power company in all its branches and, in particular, to generate, accumulate, transmit, distribute and supply electricity for all purpose for which electric energy can be employed and to manufacture and deal in all apparatus and things required for or capable of being used in connection with the generation, distribution, supply, accumulation and utilization of electricity. " (ii) Though during the AY 2014-15, total gross receipt of the company was Rs. 10,81,48,305/-, out of which rental income was to the tune of Rs. 10.56.30.000/-, which is about 98% of the total gross receipt and the rental income was offered under the head "Income from House Property." Moreover, during the year the assessee had no income from the sale of engineering products which was its primary business. (iii) In the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... house property income. The appeal to the ld. CIT(Appeals) brought relief to the assessee and income was assessed as a business income. 9. The Revenue took the issue before the Tribunal, who concurred with the ld. CIT(Appeals) and dismissed the appeal. The Hon'ble Madras High Court had reversed the orders of ITAT as well as ld. CIT(Appeals) and held that income of the assessee is to be assessed as a house property income and not a business income. 10. The assessee, in this background took the matter before the Hon'ble Supreme Court, who set aside the judgment of the Hon'ble Madras High Court. The Hon'ble Supreme Court has propounded that the main business of the assessee was letting out of the property, which was conducted in an organized manner. The case of the assessee from the beginning was that it is in the business of letting out of the property and earning rental income as a business activity. This explanation of the assessee was accepted by the Hon'ble Court and held that rental property in that case deserves to be assessed as a business income. 11. The ld. Counsel for the assessee submitted that ld. CIT took this judgment as if in every case, wherever rental income earned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed as a house property income and not a business income. The copy of this assessment order has been placed at page no. 183 of the paper book. In A.Y. 2014-15, originally ld. Assessing Officer has accepted the stand of the assessee and that assessment order has been set aside by the ld. Commissioner. In A.Y. 2015-16, again assessee has declared house property income which has been accepted, though there was no scrutiny assessment but under section 143(1), the stand of the assessee has been accepted. Thus on the strength of Hon'ble Supreme Court's decision in the case of Radhasoami Satsang Saomi Bagh, Agra -vs.- CIT reported in 193 ITR 321 (SC), he submitted that principle of consistency ought to have been followed. He also relied upon the judgment of the Hon'ble Supreme Court in the case of CIT -vs.- M/s. PFH Mall & Retail Management Private Limited (SLP No. 19720 of 2011] vide order dated 04.09.2012, wherein Hon'ble Supreme Court has again affirmed the Rule of Consistency. 14. The ld. D.R., on the other hand, relied upon the orders of revenue authorities and submitted that the assessee has not challenged the order of ld. CIT passed under section 263. Therefore, in pursuance of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portion of the said property is used by the assessee himself for his own business purpose. The rest of the said property has been let out to the various occupiers as stated hereinbefore. It further appears that the assessee had already recovered a sum of Rs. 4,25,000 as and by way of security free advance from three occupants. Hence, the entire cost of the property let out to those occupiers has already been recovered as and by way of interest-free advance by the assessee. Hence, it cannot be said that the assessee is exploiting the property for its commercial business activities and such business activities are prime motive and letting out the property is a secondary one. 13. Let us approach the problem from another angle by applying the lest suggested by the five judges' Bench in the case of Sultan Brothers Pvt. Ltd. The three questions framed by the apex court are applied in the instant case as follows (page 363) : (A) Was it the intention in making the lease-and it matters not whether there is one lease or two, i.e., separate leases in respect of the furniture and the building-that the two should be enjoyed together? In the instant case there is no separate agreement f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... larly, we have noticed the facts in the judgment of Chennai Properties & Investment Ltd., which has been heavily relied upon by the ld. Commissioner. It is pertinent to note that in that case, the main objective of the assessee in the Memorandum of Association was to enter into a business for earning rental income. This activity was taken as a venture in the business. Those are not the facts in the present case in hand. The ld. Commissioner in the proceeding under section 263 construed the modus operandi of the assessee as if it is in the business of earning rental income. It is a change made by the ld. Commissioner in his observation, which has been adopted by the ld. Assessing Officer. It is pertinent to observe that judgments are to be construed for the proposition laid down in them and not to infuse the facts in the case, which is before the authority. In the efforts at the end of the ld. Commissioner, which has been further adopted by the ld. Assessing Officer is to draw inference of facts, as if those facts are the facts of the assessee's case. On the strength of the percentage of income declared by the assessee, he changed the characteristic of the business activities of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... city, water etc. This in our opinion was inseparable from basic charges of rent. The assessee has made bifurcation of the receipt from the, occupiers of the shops/stalls as rent and service charges. As rightly held by the Assessing Officer, decision of Hon'ble Supreme Court in the case of Shambu Investment Pvt. Ltd., 263 ITR 143 will apply. The assessee has not established that he was engaged in any systematic or organized activity of providing service to the occupiers of the shops/stalls so as to constitute the receipts from them as business income. In our opinion, the assessee received income by letting out shops/stalls; and therefore, the same has to be held as income from house property." 18) The ITAT being the last forum insofar as factual determination is concerned, these findings have attained finality. In any case, as mentioned above, the learned counsel for the appellant did not argue on this aspect and did not make any efforts to show as to how the aforesaid findings were perverse. It was for the appellant to produce sufficient material on record to show that its entire income or substantial income was from letting out of the property which was the principal business ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d because it was received by the company formed with the object of developing and setting up properties." 20) In Rayala Corporation (P) Ltd., fact situation was identical to the case of Chennai Properties & Investments Ltd. and for this reason, Rayala Corporation (P) Ltd. followed Chennai Properties & Investments Ltd., which is held to be inapplicable in the instant case". 18. Both these judgments of the Hon'ble Supreme Court are authored by Hon'ble Justice A.K. Sikri and the Hon'ble Supreme Court has pointed out a distinction as to how the adjudicating authority ought to have adopted a particular approach for deciding the issue. This aspect has subsequently been considered by the ITAT, Chennai in the case of ACIT -vs.- S.N. Damani Infra (P) Limited reported in [2022] 96 ITR (T) 707, wherein ITAT has observed that whether an assessee carried out systematic and organized activities by providing service to occupiers of premises or a mere let out of property on rent has to be decided on facts of a particular case. 19. If we examine the facts of the present case, then, it would reveal that ld. Assessing Officer has not highlighted any aspect, which goad him to say that rental incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at for the earlier assessment year 2001-2002, the Income Tax Appellate Tribunal (for short, 'ITAT'] has taken the view that income in question is business income. This view has been upheld by the High Court in these cases. In Civil Appeal arising out of S.L.P. (C) No. 6756 of 2009, no ground has been taken to challenge the decision of the High Court on its finding concerning assessment year 2001-2002. Applying the rule of consistency, these civil appeals filed by the department are dismissed with no order as to costs". 21. The observation of the Hon'ble Supreme Court in the case of Radhasoami Satsang Saomi Bagh (supra) was also worth to note, which reads as under:- "13. We are aware of the fact that strictly speaking res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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