2003 (7) TMI 265 - AT - Income Tax

Summary

Issues Involved:
1. Reopening of assessments under section 147.
2. Classification of income from sub-letting as 'income from house property' or 'income from other sources'.
3. Validity of notices issued under section 148.
4. Permissible deductions under the head 'income from house property'.

Detailed Analysis:

1. Reopening of Assessments under Section 147:
The assessee appealed against the reopening of assessments for the years 1991-92 to 1997-98, arguing that the proceedings under section 147 were without jurisdiction. The Tribunal noted that the law under section 147 had changed significantly after 1989, permitting the Assessing Officer (AO) to reopen assessments if there was reason to believe that income had escaped assessment. The Tribunal held that the AO was justified in reopening the assessments for the years 1995-96 to 1997-98 as the assessee had failed to disclose income under the head 'house property' following the amendments to sections 27(iiib) and 269UA(f).

2. Classification of Income from Sub-letting:
The assessee disclosed income from sub-letting under 'income from other sources' based on historical treatment. However, the Tribunal noted that due to amendments in section 27(iiib) by the Finance Act, 1987, and the inclusion of section 269UA(f), the income should be assessed under 'income from house property'. The Tribunal emphasized that the lessee is deemed the owner if the lease exceeds 12 years, thus requiring income to be disclosed under 'house property'.

3. Validity of Notices Issued under Section 148:
For the assessment years 1991-92 to 1994-95, the Tribunal found that the notices under section 148 were issued beyond the four-year limitation period stipulated in section 149. Consequently, the reassessments for these years were quashed as invalid. However, for the years 1995-96 to 1997-98, the notices were issued within the permissible period, validating the proceedings.

4. Permissible Deductions under the Head 'Income from House Property':
The Tribunal acknowledged that the assessee consistently claimed income under 'other sources' and did not get an opportunity to claim deductions permissible under 'house property'. Therefore, the Tribunal restored the issue to the AO for the years 1995-96 to 1997-98, directing the AO to allow the assessee to claim permissible deductions under 'income from house property' after proper hearing.

Conclusion:
The Tribunal allowed the appeals for the years 1991-92 to 1994-95 due to invalid notices under section 148. For the years 1995-96 to 1997-98, the appeals were partly allowed, upholding the reopening of assessments but remanding the case to the AO to allow the assessee to claim appropriate deductions under 'income from house property'.