2016 (7) TMI 669 - AT - Income Tax

Reopening of assessment - Eligibility of exemption from income tax U/s 10(20) - Held that - Assessing Officer was duty bound to furnish the reasons within the reasonable time on receipt of the request from the assessee, since the ld Assessing Officer has failed to provide the reasons for issuing the notice within reasonable time, therefore, we are left with no other option but to set aside the proceedings to the file of the Assessing Officer with direction to provide reasons for issuing notice U/s 148 to the assessee within four weeks from the date of receipt of the order in respect of A.Y. 2005-06 to 2009-10. Thereafter the assessee shall find the objections to the assessing officer and the assessing officer shall pass a speaking order in accordance with law in that the reasonable period deciding the objections of the assessee which may be filed against notice under section 148. Therefore we hereby set aside the orders passed by the authorities below and allow the appeals of the assessee for statistical purposes only.

Summary

Issues Involved:
1. Validity of reassessment proceedings under Section 147/148 of the Income Tax Act, 1961.
2. Validity of ex-parte assessment orders under Section 144 read with Section 147.
3. Denial of exemption under Section 10(20) of the Income Tax Act, 1961.
4. Disallowance of various expenditures incurred by the Trust.
5. Denial of carry forward and set off of losses.
6. Charging of interest under Sections 234A and 234B.
7. Classification of rental income.
8. Treatment of certain expenses as revenue expenditure.
9. Deduction of ground rent, conversion charges, transfer fee, etc.

Detailed Analysis:

1. Validity of Reassessment Proceedings:
The assessee challenged the reassessment proceedings initiated under Section 147/148, arguing that the reassessment was invalid as the reasons for issuing the notice were not provided. The Tribunal noted that the Hon'ble High Court had directed the Revenue to supply reasons for issuing the notice for the assessment year 2010-11. However, similar directions were not issued for the years 2005-06 to 2009-10. The Tribunal emphasized the necessity of providing reasons for issuing notices under Section 148, as mandated by the Supreme Court in the case of GKN Driveshafts (India) Ltd. vs. Income-Tax Officer and Others [2003] 259 ITR 19 (SC). Consequently, the Tribunal set aside the reassessment proceedings and directed the Assessing Officer to provide reasons for issuing the notices and to pass a speaking order after considering the objections raised by the assessee.

2. Validity of Ex-parte Assessment Orders:
The Tribunal found that the ex-parte assessment orders under Section 144 read with Section 147 were passed without providing the reasons for initiating reassessment proceedings. As such, these orders were also set aside with directions to the Assessing Officer to follow the proper procedure as outlined in the judgment of GKN Driveshafts (India) Ltd.

3. Denial of Exemption under Section 10(20):
The Tribunal referred to its earlier order, which held that the assessee was not exempt from income tax under Section 10(20) of the Income Tax Act, 1961. Therefore, the income of the assessee was taxable. However, since the reassessment proceedings were set aside, this issue was also remanded back to the Assessing Officer for reconsideration.

4. Disallowance of Various Expenditures:
The Tribunal did not specifically address the disallowance of various expenditures incurred by the Trust in its detailed analysis. However, since the reassessment proceedings were set aside, this issue was also remanded back to the Assessing Officer for fresh consideration.

5. Denial of Carry Forward and Set Off of Losses:
Similar to the issue of disallowance of expenditures, the Tribunal did not specifically address the denial of carry forward and set off of losses. This issue was also remanded back to the Assessing Officer for fresh consideration following the proper reassessment procedure.

6. Charging of Interest under Sections 234A and 234B:
The Tribunal did not specifically address the issue of charging interest under Sections 234A and 234B. However, since the reassessment proceedings were set aside, this issue was also remanded back to the Assessing Officer for fresh consideration.

7. Classification of Rental Income:
The Revenue challenged the CIT(A)'s decision to treat rental income as 'Income from business' instead of 'Income from house property'. The Tribunal noted that this issue was part of the reassessment proceedings, which were set aside. Therefore, this issue was also remanded back to the Assessing Officer for fresh consideration.

8. Treatment of Certain Expenses as Revenue Expenditure:
The Revenue also challenged the CIT(A)'s decision to allow certain expenses as revenue expenditure. As the reassessment proceedings were set aside, this issue was remanded back to the Assessing Officer for fresh consideration.

9. Deduction of Ground Rent, Conversion Charges, Transfer Fee, etc.:
The Revenue contested the CIT(A)'s decision to allow deductions for ground rent, conversion charges, transfer fee, etc., on the grounds that these constituted the shares of the State Government and Municipal Bodies and were not part of the assessee's income. Since the reassessment proceedings were set aside, this issue was also remanded back to the Assessing Officer for fresh consideration.

Conclusion:
The Tribunal set aside the reassessment proceedings for the assessment years 2005-06 to 2009-10 due to the failure of the Assessing Officer to provide reasons for issuing notices under Section 148. The Assessing Officer was directed to provide reasons within four weeks and to pass a speaking order after considering the objections raised by the assessee. Consequently, all issues raised in the appeals by both the assessee and the Revenue were remanded back to the Assessing Officer for fresh consideration following the proper reassessment procedure. All appeals were allowed for statistical purposes only.