2022 (2) TMI 426 - AT - Income Tax

Validity of Reopening of assessment u/s 147 - HELD THAT - We find that the assessment was reopened by issuing notice under section 148 of the Act on 27.03.2015 and after following due process, the assessment was completed u/s 143(3) r.w.s. 147 of the Act dated 11.03.2016, which is well within four years of time limit provided in the statute. Accordingly the ground raised by the assessee is dismissed being devoid of merits. 50% disallowance of depreciation - AO was of the opinion that the assessee was using only 50% of the balance factory building and thus, the assessee is eligible for 50% of depreciation on factory building - The entire income which accrued and was assessed was from letting out of these properties and there was no other income of the assessee except the income from letting out of these two properties. Therefore in M/S CHENNAI PROPERTIES INVESTMENTS LTD 2015 (5) TMI 46 - SUPREME COURT has held that the rental income earned by the assessee cannot be treated as Income from the house property . Whereas, in this case, the assessee is engaged in manufacturing of automobile components and let out 50% of its factory building on lease and earned rental income. CIT(A) has rightly held the rental income as income under the head house property . Having the rental income held as income under the head house property , the assessee is not eligible for claim of depreciation on the let out portion. We find no infirmity in the order passed by the ld. CIT(A) and thus, the grounds raised by the assessee are dismissed.

Summary

Issues:
1. Delay in filing appeal before the ld. CIT(A) for assessment year 2012-13.
2. Reopening of assessment under section 147 of the Act for assessment year 2011-12.
3. Disallowance of 50% depreciation on factory building.

Issue 1: Delay in filing appeal before the ld. CIT(A) for assessment year 2012-13:
The appeal was dismissed due to a delay of 44 days in filing, with the authorized person for signing Form 35 being out of the country. The ld. CIT(A) did not condone the delay as basic details were not provided. The Tribunal directed the assessee to submit complete details for condonation of delay and directed the ld. CIT(A) to consider the details and decide the case on merits.

Issue 2: Reopening of assessment under section 147 of the Act for assessment year 2011-12:
The assessment was reopened within the time limit provided by the statute, and the ground raised by the assessee challenging the jurisdiction for reopening was dismissed for lack of merit. The Tribunal found the reopening process to be in compliance with the law.

Issue 3: Disallowance of 50% depreciation on factory building:
The Assessing Officer disallowed 50% of the depreciation claim as only 50% of the factory building was used by the assessee, with the rest let out to other parties. The ld. CIT(A) upheld the disallowance, stating that rental income from letting out the building should be treated as "Income from House Property" and not under other sources. The Tribunal dismissed the appeal, affirming that the rental income categorized as "Income from House Property" renders the assessee ineligible for claiming depreciation on the let-out portion of the factory building.

In conclusion, the appeal for assessment year 2012-13 was allowed for statistical purposes, with directions to submit details for condonation of delay. The appeal for assessment year 2011-12 challenging the reopening of assessment was dismissed. The disallowance of 50% depreciation on the factory building was upheld by the Tribunal, emphasizing that rental income categorized as "Income from House Property" precludes the assessee from claiming depreciation on the let-out portion.