2005 (6) TMI 473 - AT - Income Tax

Summary

Issues Involved:
1. Reopening of assessments under section 147.
2. Assessment of enhanced rent received subsequent to the financial years under assessment under the head "Income from house property".
3. Levy of interest under sections 234B and 234C of the Act.

Issue-wise Detailed Analysis:

1. Reopening of Assessments under Section 147:
The assessee contended that the reopening of assessments under section 147 was invalid, arguing that there was no non-disclosure of material facts on their part. The assessee had disclosed rental income under the head "income from house property" during the original assessments, and no additional rent or service charges were received during the financial years under consideration. The right to receive higher rent accrued only on 6-11-1995, and the provisions of section 25B, which were introduced later, were not applicable retrospectively. The Tribunal held that the reopening of assessments was valid since the substantial fact of receiving additional rent came to the notice of the Assessing Officer only during the assessment proceedings for 1996-97. The Tribunal cited the judgments in Raymond Woollen Mills Ltd. v. ITO and G. Sukesh v. Dy. CIT to support the reopening of assessments under section 147.

2. Assessment of Enhanced Rent under "Income from House Property":
The assessee argued that the enhanced rent could not be taxed in the assessment years under consideration as the right to receive the higher rent accrued only in the financial year 1995-96. They relied on the judgment in Hope (India) Ltd. v. CIT, which held that enhanced rent agreed upon after the close of the previous year could not be assessed as income from house property for that year. The Tribunal referred to the judgments in Hamilton & Co. (P.) Ltd. v. CIT and Hope (India) Ltd. v. CIT, concluding that arrears of rent received in a subsequent year could not be taxed in the year of receipt or retrospectively in earlier years. The Tribunal noted that section 25B, introduced by the Finance Act, 2000, applied prospectively from assessment year 2001-02 and did not affect the assessment years in question. Consequently, the Tribunal deleted the additions made by the Assessing Officer for the arrears of rent received by the assessee after the expiry of the relevant financial years.

3. Levy of Interest under Sections 234B and 234C:
The assessee challenged the levy of interest under sections 234B and 234C, arguing that the Assessing Officer had merely stated, "Interest is charged under sections 234B and 234C as per rules," without proper justification. The Tribunal found no substance in these grounds of appeal, noting that the Assessing Officer had specifically ordered for charging of interest under sections 234B and 234C. However, the Tribunal directed the Assessing Officer to re-compute the amount of interest under sections 234B and 234C, if any, after giving effect to the order.

Conclusion:
The Tribunal partly allowed the appeals, upholding the reopening of assessments under section 147 but deleting the additions made for arrears of rent received after the relevant financial years. The levy of interest under sections 234B and 234C was upheld, with directions for re-computation if necessary.