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2007 (8) TMI 488 - AT - Income TaxReopening of assessment u/s 147 on the basis of change of opinion is justified or not - Income escaping assessment - Rent received - Income from other sources vs Income from house property - HELD THAT - In the present case also, the assessee has made full disclosure regarding its income. The particulars of the property have also been furnished. The Assessing Officer has not come across any new material. The assessment was completed u/s 143(1). In such circumstances, it is not possible to hold the view that the income escaping assessment is always justified in a case where the assessment was made u/s 143(1) and not u/s 143(3). As there is no fresh material with the Assessing Authority, it is to be seen that the assessment was reopened on the basis of a change of opinion of the Assessing Authority. Therefore, in the light of the decision of Madras High Court in the case of Bapalal Co. Exports 2006 (9) TMI 86 - MADRAS HIGH COURT , we find that the impugned income escaping assessment is bad in law. Therefore, it is to be set aside. The assessee is successful in its appeal for the assessment year 2000-01. Rent received form residential Apartment - Taxable under the head income from house property Or Income from business - HELD THAT - In the present case, the property of the assessee is a simple and pure residential apartment. The assessee has provided window air-conditioner. Furnitures also have been given. In other words, what is let out by the assessee is a furnished apartment. The furnishings provided by the assessee by way of window air-conditioner and furniture do not change the character of the asset from that of house property to that of business asset. The assessee is not carrying on any business by way of letting out the residential property. Moreover, it is also to be held that the property does not cease to be house property only for the reason that assessee has provided air-conditioners and furniture in the residential apartment. The reliance placed by the assessee on clause ( iii ) sub-section (2) of section 56 is also not convincing. The law provides therein that hire charges should be treated as income from other sources in such circumstances where machinery, plant or furniture belonging to an assessee with or without buildings have been let out. It is also there that the buildings are inseparable from the machinery, plant or furniture hired by the assessee. The emphasis in the said sub-section is not on the building as in the nature of a house property. The sub-section is lead by hiring machinery, plant or furniture and not by letting out of house property or building. The term buildings needs to be read in the overwhelming company of hiring of machinery, plant or furniture. Therefore, we find that the revenue is right in assessing the income as house property income. The assessee fails in its appeal for assessment year 2001-02. In result, the appeal filed by the assessee for assessment year 2000-01 is allowed the appeal for the assessment year 2001-02 is dismissed.
Issues Involved:
1. Legality of the notice issued under section 148 for reassessment of income for the assessment year 2000-01. 2. Classification of income as "income from house property" versus "income from business" or "income from other sources" for the assessment year 2001-02. Issue-wise Detailed Analysis: 1. Legality of the Notice Issued under Section 148 for Reassessment of Income for the Assessment Year 2000-01: The first ground raised by the assessee was that the CIT(A) erred in law and on facts by holding that the action of the Assessing Officer in issuing a notice under section 148 for reassessment of income was correct. The assessee argued that the notice under section 148 and the subsequent assessment order were bad in law and void ab initio. The assessee contended that all necessary materials for completing the assessment were disclosed fully and truly at the first instance, and the assessment was completed under section 143(1) by accepting the return filed by the assessee. The learned Counsel for the assessee relied on the decision of the Madras High Court in the case of Bapalal & Co. Exports v. Jt. CIT (OSD) [2007] 289 ITR 37, which held that an assessment cannot be reopened by any authority except on fresh material. The Counsel argued that in the absence of any new material, the Assessing Officer is not empowered to reopen an assessment under section 148. The learned Senior D.R., representing the revenue, relied on the decision of the Supreme Court in Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 291 ITR 500, which held that if the ingredients under section 147 are fulfilled, failure to take steps under section 143(3) will not render the Assessing Officer powerless for reassessment proceedings even when intimation under section 143(1) had been issued. Upon consideration, the Tribunal found that the decision in Rajesh Jhaveri Stock Brokers (P.) Ltd.'s case did not apply to the present case as the issue was different. The Tribunal noted that the Madras High Court in Bapalal & Co. Exports had considered a similar case where the assessment was completed under section 143(1) without any new material coming to the notice of the Assessing Authority. The Tribunal concluded that in the absence of any new material, the Assessing Officer is not empowered to reopen an assessment, whether the original assessment was completed under section 143(1) or 143(3). The Tribunal further cited several judgments, including CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1, Sheo Narain Jaiswal v. ITO [1989] 176 ITR 352, Jindal Photo Films Ltd. v. Dy. CIT [1998] 234 ITR 170, and others, which supported the principle that a mere change of opinion cannot form the basis for reopening a completed assessment. Therefore, the Tribunal found that the income escaping assessment was bad in law and set aside the reassessment order for the assessment year 2000-01. 2. Classification of Income as "Income from House Property" versus "Income from Business" or "Income from Other Sources" for the Assessment Year 2001-02: For the assessment year 2001-02, the ground of appeal was on the merits, where the CIT(A) confirmed the order of the Assessing Authority, classifying the total income of the assessee as "income from house property" instead of "income from business." The assessee owned a residential apartment and provided air-conditioning facilities and furniture, claiming that the income should be assessed as income from business or, alternatively, as "income from other sources." The learned Counsel for the assessee relied on the Full Bench decision of the ITAT Delhi Bench "B" in Shashi Kant Gupta v. ITO [1985] 14 ITD 270, where under similar circumstances, the Tribunal held that the income should be assessed as income from other sources. The Counsel also referred to section 56(2)(iii) of the Income-tax Act, which states that income from letting out buildings inseparable from machinery, plant, or furniture should be chargeable under "income from other sources." The learned Senior D.R. argued that the case of the assessee was a simple case of letting out a furnished residential apartment, which should be treated as income from house property. The Tribunal considered the matter in detail and found that the decision in Shashi Kant Gupta's case did not help the assessee. The Tribunal noted that the property in question was a simple residential apartment with air-conditioners and furniture, which did not change the character of the asset from house property to business asset. The Tribunal held that the provisions of section 56(2)(iii) did not apply as the predominant subject-matter was not the building but the machinery, plant, or furniture. Therefore, the Tribunal concluded that the revenue was right in assessing the income as house property income. Conclusion: The appeal for the assessment year 2000-01 was allowed, setting aside the reassessment order, while the appeal for the assessment year 2001-02 was dismissed, upholding the classification of income as "income from house property."
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