2022 (8) TMI 1399 - AT - Income Tax

Filling fresh claim before the AO/ITAT without filing a revised return - Correct head of income - Revenue from Operation - taxable under the head 'House Property or 'Business' despite - principle of consistency - as in earlier years the same has been assessed as Income from Business and there was no change of facts warranting change of opinion - HELD THAT - As decided in case of Goetze India Ltd 2006 (3) TMI 75 - SUPREME COURT a fresh claim cannot be made otherwise that by the revised return of income but also held further it will not impinge upon the ITAT to admit claims otherwise of revised return. Thus, we hold that revised claim needs to be accepted and examined as per law. Also we note that CIT (A) has taken adverse inference also on the ground that written agreement has not been submitted by the assessee though mentioned that being submitted.The issue of agreement was also before the AO and AO did not offer any adverse inference that the agreement was not there. Prima facie, this does not seem to be a case of rent simplicitor. It is claimed that there is an agreement with M/s. Four Seasons Hospitality Pvt. Ltd. and according to which, revenue is shared by assessee company. However, ld. CIT (A) has found that assessee did not provide the agreement. In our considered opinion, the entire aspect needs to be examined properly in the light of the said agreement. Assessee will certainly need to provide cogent reply as to its business income why the tax audit report was not submitted and consequences will accordingly follow. Hence, we direct that the issue be remitted to the file of AO. AO is directed to consider the revised claim of the assessee as per law. Assessee appeal is allowed for statistical purposes.

Summary

Issues:
1. Interpretation of revenue from operations as taxable under 'House Property' or 'Business'
2. Acceptance of revised computation for declaring income under the head 'Business'
3. Disallowance of business expenses and depreciation
4. Allowance of setting off unabsorbed depreciation loss
5. Initiation of penalty proceedings for non-conduct of tax audit and late filing of return
6. Determination of taxable income without setting off carried forward losses
7. Examination of agreement with M/s. Four Seasons Hospitality Pvt. Ltd.

Interpretation of Revenue from Operations:
The appeal involved the interpretation of revenue from operations as taxable under 'House Property' or 'Business.' The assessee argued that the revenue should be considered as business income, citing past assessments. However, the AO assessed the revenue as income from house property, disallowing certain expenses. The CIT (A) upheld the AO's decision, emphasizing that the involvement of the assessee in the business was not supported by evidence, and the nature of the agreement with M/s. Four Seasons Hospitality Pvt. Ltd. was not adequately presented. The CIT (A) concluded that the income fell under the head 'income from house property' due to the lack of conclusive proof of business activities.

Acceptance of Revised Computation:
The assessee filed a revised computation declaring the revenue as business income during the assessment proceedings. The AO rejected this revised computation, leading to a dispute regarding the acceptance of the revised claim. The ITAT directed the AO to consider the revised claim as per law and examine the agreement claimed by the assessee, emphasizing the need for a proper assessment based on the provided agreement. The ITAT highlighted the importance of a thorough examination of the agreement in determining the nature of the income.

Disallowance of Business Expenses and Depreciation:
The AO disallowed certain business expenses and depreciation claimed by the assessee, leading to a challenge in the appeal. The ITAT did not provide a direct ruling on this issue in the summary provided, focusing more on the interpretation of revenue and acceptance of the revised computation.

Allowance of Setting Off Unabsorbed Depreciation Loss:
The assessee contended that the AO erred in not allowing the setting off of carried forward losses/depreciation while determining the taxable income. However, the CIT (A) noted that the income had been assessed under the head 'Income from house property,' and the AO was only required to check the set off of losses from one head against income from another.

Initiation of Penalty Proceedings:
Penalty proceedings were initiated against the assessee under sections 271-8 and 271-F for non-conduct of tax audit and late filing of the return. The ITAT did not provide a detailed analysis of this issue in the summary provided.

Examination of Agreement with M/s. Four Seasons Hospitality Pvt. Ltd.:
The agreement between the assessee and M/s. Four Seasons Hospitality Pvt. Ltd. was a crucial aspect of the case. The CIT (A) highlighted the absence of a submitted written agreement and took adverse inference on this ground. The ITAT directed the AO to properly examine this agreement and consider the revised claim of the assessee in light of the agreement.

This detailed analysis covers the various issues involved in the legal judgment, providing insights into the arguments presented by the parties and the decisions made by the authorities.