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2020 (2) TMI 458 - AT - Income TaxRevision u/s 263 - whether rental income of House property is assessable under the head Income from House Property or under the head Income from business or profession ? - Stand of the ld PCIT is that rental income should be assessable under the head Income from business or profession whereas the stand of the assessee is that it should be assessable under the head Income from House Property - HELD THAT - We note that the object clause, as contained in the Memorandum and Articles of association of company, would not be the conclusive factor. Matter has to be examined on the facts of each case as held by the Hon ble Supreme Court in the case of Raj Dadarkar Associates vs. ACIT 2017 (5) TMI 586 - SUPREME COURT Assessing Officer has taken one of the possible views that the income should be assessable under the head income from house property , hence the order passed by the Assessing Officer u/s 143(3) dated 07.12.2016 is neither erroneous nor prejudicial to the interest of revenue. Since the order of the Assessing Officer cannot be held to be erroneous as well as prejudicial to the interest of the revenue, in the facts and circumstances narrated above, the usurpation of jurisdiction exercising revisional jurisdiction by the Principal CIT is null in the eyes of law and, therefore, we are inclined to quash the very assumption of jurisdiction to invoke revisional jurisdiction u/s 263 by the Principal CIT. Therefore, we quash the order of the Principal CIT dated 25.03.2019 being ab initio void. - Decided in favour of assessee
Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act, 1961. 2. Classification of rental income under "Income from House Property" versus "Income from Business or Profession." 3. Consistency in tax treatment across different assessment years. Detailed Analysis: 1. Jurisdiction under Section 263 of the Income Tax Act, 1961: The Principal Commissioner of Income Tax (Pr. CIT) exercised jurisdiction under Section 263 of the Act, challenging the assessment order passed by the Assessing Officer (AO) under Section 143(3) for the Assessment Year 2014-15. The Pr. CIT argued that the assessment order was erroneous and prejudicial to the interest of the revenue because the rental income was incorrectly classified under "Income from House Property" instead of "Income from Business or Profession." The Tribunal examined whether the conditions for invoking Section 263 were met, referencing the Supreme Court's decision in Malabar Industries Ltd. vs. CIT, which requires the order to be both erroneous and prejudicial to the revenue. 2. Classification of Rental Income: The core issue was whether the rental income should be classified under "Income from House Property" or "Income from Business or Profession." The Pr. CIT contended that since the primary income of the assessee was from letting out properties, it should be considered business income. The assessee argued that the rental income had consistently been assessed under "Income from House Property" in previous years, and there was no change in the facts or circumstances to warrant a different classification. The Tribunal noted that the AO had accepted the rental income under "Income from House Property" in the past assessment years, and there was no new material change to justify a reclassification. 3. Consistency in Tax Treatment: The Tribunal emphasized the principle of consistency, citing the Supreme Court's decision in Radhasoami Satsang vs. CIT, which held that if a particular view has been accepted in earlier years, it should not be changed in subsequent years unless there is a significant change in facts. The Tribunal found that the AO had consistently assessed the rental income under "Income from House Property" for the assessment years 2011-12 to 2013-14, and there was no justification for the Pr. CIT to assume jurisdiction under Section 263 for the assessment year 2014-15. Conclusion: The Tribunal concluded that the AO's order was neither erroneous nor prejudicial to the interest of the revenue, as it was consistent with the treatment of rental income in previous years. The Pr. CIT's assumption of jurisdiction under Section 263 was deemed "null" and "ab initio void." Consequently, the Tribunal quashed the Pr. CIT's order dated 25.03.2019 and allowed the appeal of the assessee. Order Pronounced: The appeal of the assessee was allowed, and the order was pronounced in the open court on 07/02/2020.
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