2015 (6) TMI 252 - AT - Income Tax

Revision u/s 263 - CIT was of the view that Assessing Officer admitted the income declared by the assessee under the head business without examining the nature of the lease agreement and thus the nature of the lease charges earned remained to be examined - Held that - We do not find any support for the stand of the Commissioner that the income from the impugned lease rentals was liable to be assessed as income from house property. Be that as it may, it is quite clear that a possible view on the issue has been taken by the Assessing Officer in the assessment order dated 11.10.2010 (supra) and therefore even on this count there does not appear to be sufficient ground for the Commissioner to assume jurisdiction u/s 263 of the Act merely because he held a different view. In this context, we may refer to the judgement of the Hon ble Delhi High Court in the case o1f8 CIT vs. DLF Power Ltd., (2009 (10) TMI 63 - DELHI HIGH COURT) and CIT vs. Mepco Industries Ltd., (2006 (11) TMI 164 - MADRAS High Court). - Decided in favour of assessee.

Issues Involved:

1. Invocation of Section 263 by the Commissioner.
2. Classification of lease charges as 'business income' or 'income from house property'.
3. Adequacy of Assessing Officer's enquiry and application of mind.

Detailed Analysis:

1. Invocation of Section 263 by the Commissioner:

The primary contention raised by the assessee was that the Commissioner erred in invoking Section 263 of the Income Tax Act, 1961, and holding that the assessment order passed by the Assessing Officer was erroneous and prejudicial to the interests of the Revenue. The Commissioner examined the records and found that the Assessing Officer admitted the income declared by the assessee under the head 'business' without examining the nature of the lease agreement. The Commissioner believed that the lease charges should have been assessed under 'income from house property' and that the brought forward loss and unabsorbed depreciation could not be set-off against the current year's income. The Commissioner issued a show-cause notice to the assessee, questioning why the assessment order should not be considered erroneous and prejudicial to the interests of the Revenue.

2. Classification of Lease Charges:

The assessee contended that the lease charges were rightly assessed as 'business income' because the company was providing various services along with leasing space, making it a composite charge for space and services. The Commissioner, however, did not accept this plea and remitted the matter back to the Assessing Officer for a fresh decision after considering all relevant facts and evidence. The Commissioner did not conclusively decide whether the income should be classified as 'income from house property' but emphasized the need for detailed enquiry into the services provided by the assessee.

3. Adequacy of Assessing Officer's Enquiry and Application of Mind:

The assessee argued that the Assessing Officer had duly examined the nature of rental incomes by making enquiries and reviewing the lease agreements. The assessee provided copies of the order-sheet entries and lease agreements to demonstrate that the Assessing Officer had applied his mind. The Commissioner, however, asserted that the Assessing Officer did not raise a specific query regarding the head of income under which the rental incomes should be assessed, leading to a conclusion of non-application of mind.

The Tribunal examined whether the assessment order was passed without application of mind. It was noted that the entire assessment record should be examined to determine if the Assessing Officer had applied his mind. The Tribunal found that the Assessing Officer had called for and examined relevant material, including lease agreements and details of business activities, indicating that the Assessing Officer did apply his mind. The Tribunal also referred to case law, including the judgments of the Hon'ble Bombay High Court and the Hon'ble Punjab & Haryana High Court, to support the view that the absence of detailed discussion in the assessment order does not necessarily indicate non-application of mind if the record shows that relevant enquiries were made.

Conclusion:

The Tribunal concluded that the conditions precedent for invoking jurisdiction under Section 263 did not exist in this case. The assessment order was not erroneous or prejudicial to the interests of the Revenue as the Assessing Officer had taken a possible view after examining relevant material. The Tribunal set aside the order of the Commissioner and restored the assessment order dated 11.10.2010, thereby allowing the appeal of the assessee.

Order Pronounced:

The appeal of the assessee was allowed, and the order was pronounced in the open Court on 28th August, 2014.

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