2009 (3) TMI 647 - AT - Income Tax

Summary

Issues Involved:

1. Deletion of addition on account of estimated rental income.
2. Treatment of lease rent income as business income or income from house property.
3. Consideration of notional benefits from interest-free deposits in determining annual letting value.
4. Validity of reopening assessments beyond four years.
5. Consistency in judicial decisions and principle of res judicata.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Estimated Rental Income:

The revenue contested the deletion of Rs. 1,00,00,000 made on account of estimated rental income. The CIT(A) directed the Assessing Officer to delete this addition, holding that the lease rent income was consistently treated as business income till assessment year 2001-02. The ITAT upheld CIT(A)'s decision, emphasizing that the department had accepted the lease rent income as business income in previous years, and there was no compelling reason to deviate from this position.

2. Treatment of Lease Rent Income:

The core issue was whether the lease rent income should be treated as business income or income from house property. The ITAT had previously ruled in assessment year 1997-98 that the income should be assessed under the head "Income from house property." The Assessing Officer, however, attempted to assess the income under the head "Income from business and profession" for subsequent years. The ITAT reaffirmed that the lease rent income should be treated as income from house property, consistent with its earlier decision.

3. Consideration of Notional Benefits from Interest-Free Deposits:

The Assessing Officer included notional benefits from interest-free deposits while computing the annual letting value under section 23(1)(a) of the Income-tax Act. The CIT(A) and ITAT rejected this approach, stating that the actual rent received should be the basis for determining the annual value. The ITAT cited the jurisdictional High Court's decision in CIT v. J.K. Investors (Bombay) Ltd., which held that notional interest on deposits could not be considered for determining annual value.

4. Validity of Reopening Assessments Beyond Four Years:

The assessee challenged the reopening of assessments for assessment years 1998-99 to 2000-01, arguing that it was beyond the permissible four-year period. The ITAT agreed, citing the jurisdictional High Court's ruling in Sesa Goa Ltd. v. Jt. CIT, which emphasized that reopening beyond four years requires evidence of the assessee's failure to disclose material facts. The ITAT found no such failure and quashed the reopened assessments for these years.

5. Consistency in Judicial Decisions and Principle of Res Judicata:

The ITAT stressed the importance of consistency in judicial decisions, referencing several judicial pronouncements. It noted that once an issue is settled by a superior court, it should be considered final unless reversed. The ITAT criticized the department's approach of revisiting settled issues, highlighting the principle of judicial propriety and the need to avoid multiple litigations. The ITAT also emphasized the doctrine of merger, stating that the Assessing Officer had no jurisdiction to challenge the ITAT's earlier decision.

Conclusion:

The ITAT dismissed the revenue's appeals and upheld the CIT(A)'s decisions, confirming that the lease rent income should be treated as income from house property, and the notional benefits from interest-free deposits should not be included in the annual letting value. The ITAT also quashed the reopened assessments for being beyond the permissible period and emphasized the need for consistency in judicial decisions.