2007 (12) TMI 214 - SC - Income Tax

Hire Charges Assessee claims as Business Income AO held as Income from House Property Commissioner (Appeals) confirmed the order of AO on the basis of Commissioner (Appeals) notices u/s 148 issued for earlier years Tribunal and confirmed the stand of Assessee as Business Income HC confirmed the order of Tribunal Revenue filed appeal before SC SC observed that that in this case there were two separate proceedings involved viz. order of Commissioner of Income-tax (Appeals) plus proceedings under section 148. Unfortunately all proceedings are clubbed in the writ petitions. We do not know the exact status of those proceedings Assessee directed to file an appeal before tribunal u/s 253(1)

Summary

Issues:
1. Classification of income as business income or income from house property for Assessment Year 1997-98.
2. Validity of the High Court's direction regarding the treatment of income for subsequent assessment years.
3. Maintainability of writ petitions in light of the Tribunal's decision.
4. Requirement of filing appeals under Section 253(1) of the Income Tax Act.

Analysis:
1. The primary issue in this case revolved around the classification of income for Assessment Year 1997-98 as either business income or income from house property. The respondent, a private limited company engaged in hire-purchase business, received hiring and maintenance charges from lessees after constructing a multi-storeyed building on a leased land. Initially, the Assessment Officer treated the income as from house property, but the Tribunal later ruled in favor of the respondent, considering it as business income.

2. The High Court's decision came under scrutiny regarding its direction to treat the income as business income for all subsequent assessment years based on the Tribunal's ruling for a specific year. The Supreme Court found fault with this approach, emphasizing that each assessment year is a separate unit under the Income Tax Act, and the High Court's omnibus order was deemed improper. The Court highlighted that the unit of assessment is a "year," not a block assessment, and parties should have appealed to the Tribunal individually for each year.

3. The Court addressed the issue of the maintainability of writ petitions filed by the assessee against the reopening of assessments. It was deemed that the writ petitions were misconceived and not maintainable in law. The proper course of action for the assessee should have been to appeal under Section 253(1) of the Income Tax Act instead of resorting to writ petitions. The Court stressed that the High Court should not have entertained the writ petitions in this scenario.

4. Lastly, the Court clarified the procedural requirements for challenging the decisions of the Commissioner of Income-tax (Appeals) and the reopening of assessments. It was noted that there were two separate proceedings involved, and all proceedings were clubbed in the writ petitions erroneously. The Court directed the assessee to file appeals under Section 253(1) within four weeks if challenging the decisions, ensuring that the appeals would not be dismissed on the ground of delay. The Civil Appeal was disposed of with no order as to costs, subject to the specified directions.