1990 (10) TMI 139 - AT - Income Tax

Assessed Income, Assessing Officer, Financial Year, Income From House Property, Income From Other Sources, Orders Prejudicial To Interests, Original Assessment, Original Order, Previous Year

Summary

Issues Involved:
1. Assessment of income from flats as "income from house property" vs. "income from other sources".
2. Adoption of the previous year for assessing income from flats.
3. Validity and implications of the CIT's order under section 263.

Issue-wise Detailed Analysis:

1. Assessment of Income from Flats:
The primary issue was whether the income from flats should be assessed under the head "Income from house property" or "Income from other sources." The CIT initiated proceedings under section 263, asserting that the income should be assessed under "income from other sources" because the flats had not been transferred to the assessee by a registered conveyance deed nor mutated in her name in municipal records. The CIT's direction to reassess the income under "income from other sources" was accepted by the assessee, and this point was not disputed further.

2. Adoption of the Previous Year:
The dispute centered on whether the assessing officer was justified in changing the previous year for assessing the income from flats. Initially, the income was assessed from February 15, 1979, to April 30, 1979, for the assessment year 1980-81 under "income from house property." The assessee contended that once the assessing officer had accepted the previous year ending on April 30, it should not be changed without the assessee's consent, as per section 3(4) of the Income-tax Act, 1961. The assessee argued that the original adoption of the previous year should remain unchanged.

The assessing officer, however, reassessed the income by adopting the financial year as the previous year, excluding the income from February 15, 1979, to March 31, 1979, from the assessment. The CIT(A) upheld this approach, and the Tribunal agreed, stating that since the assessee had not maintained books of account, the financial year preceding the assessment year was the appropriate previous year as per section 3 of the Act. The Tribunal held that the action of the revenue in adopting a different previous year was correct and in accordance with the law.

3. Validity and Implications of the CIT's Order under Section 263:
The CIT's order under section 263 set aside the original assessments and directed fresh assessments to be made in accordance with the law. The Tribunal noted that once an assessment is cancelled under section 263, the assessing officer is entitled to proceed afresh as if no assessment had been made, provided the directions of the CIT are followed. The Tribunal emphasized that the assessing officer has the same powers as in framing the original assessment, subject to the directions of the CIT.

The Tribunal concluded that the assessing officer acted within his jurisdiction by adopting the financial year as the previous year while framing the fresh assessments. The CIT's failure to detect the mistake in the original adoption of the previous year did not preclude the assessing officer from correcting it in the fresh assessment. The Tribunal found no merit in the assessee's appeals and dismissed them.

Conclusion:
The Tribunal upheld the CIT's direction to assess the income from flats under "income from other sources" and validated the assessing officer's adoption of the financial year as the previous year for the fresh assessments. The appeals filed by the assessee were dismissed.