2012 (8) TMI 181 - AT - Income Tax

Reopening of assessment Held that - As conditions of Sec. 147 of the Act are fulfilled, AO is free to initiate proceedings u/s. 147 of Act and failure to take steps for regular assessment u/s. 143(3) will not render the AO powerless to initiate reassessment proceedings even when summary assessment with intimation u/s. 143(1)(a) of the Act had been issued - under substituted section 147 as amended by Finance Act 1999, existence of only the condition that if AO for whatever reason has reason to believe that income has escaped assessment, confers jurisdiction in reopening the assessment - action of AO to initiate reassessment proceeding is in accordance with law. Disallowance of expenses - Held that - Loss from House property is not the actual loss but it is because of claim of various charges of services claimed as rendered which in fact is not the additional charges having consequential additional rental income, but, as held above is an incidental services related with maintenance of House property for which standard deduction is duly provided under the I.T. Act - AO is right not to setting-off of brought forward non allowable loss

Issues Involved:
1. Reopening of assessment.
2. Classification of rental income under the head "Income from House Property."
3. Deduction of repair cess.
4. Deduction of expenses for services rendered to tenants.
5. Set-off of brought forward losses against current year's income.
6. Levy of interest under sections 234A and 234B of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Reopening of Assessment:
The assessee disputed the reopening of assessment by the Assessing Officer (AO) on the grounds that all claims were disclosed in the return and no new facts emerged. The AO initiated reassessment proceedings due to the deduction of service charges from rental income. The Tribunal upheld the AO's action, stating that the AO had a valid reason to believe that income had escaped assessment, as per Section 147 of the Income Tax Act. The Tribunal referenced the Supreme Court's ruling in Raymond Woolen Mills Ltd. v. ITO, which supports the AO's belief as sufficient for reopening the assessment.

2. Classification of Rental Income:
The assessee initially disclosed rental income under "Income from House Property" but later claimed it should be assessed under "Income from Business" to deduct various expenses. The AO and the CIT(A) held that since the assessee was not carrying on any business activity and only received rental income, it should be computed under "Income from House Property." The Tribunal upheld this, referencing the Supreme Court decision in Shambhu Investment v. CIT.

3. Deduction of Repair Cess:
The assessee claimed a deduction for repair cess paid to the Municipal Corporation. The AO and CIT(A) disallowed this deduction, noting discrepancies in the claimed amounts and that the bills were not in the assessee's name. The Tribunal upheld this decision, stating that the assessee failed to establish the validity of the repair cess bills and that they were not raised in the assessee's name.

4. Deduction of Expenses for Services Rendered to Tenants:
The assessee claimed expenses for services like lift maintenance, watchmen, and cleaning as deductions from rental income. The AO and CIT(A) disallowed these expenses, stating they were not allowable under Sections 23 and 24 of the Income Tax Act. The Tribunal upheld this, noting that the services provided were essential for maintaining the property and did not constitute additional services warranting separate charges. The Tribunal referenced the Delhi High Court's decision in Commissioner of Income-tax v. Gupta (H.G.) & Sons, which supports that deductions are exhaustive under Sections 23 and 24.

5. Set-off of Brought Forward Losses:
The assessee sought to set off brought forward business losses against current year's income. The AO and CIT(A) disallowed this, as the assessee did not carry out any business activity. The Tribunal upheld this decision, agreeing with the CIT(A) that the assessee's income was solely from house property and not business, thus not eligible for set-off of business losses.

6. Levy of Interest under Sections 234A and 234B:
The assessee disputed the levy of interest under Sections 234A and 234B. The Tribunal noted that no interest under Section 234A was levied by the AO, and the charging of interest under Section 234B was consequential, requiring no specific adjudication.

Conclusion:
The Tribunal dismissed all three appeals filed by the assessee for the assessment years 2002-03 to 2004-05, upholding the decisions of the AO and CIT(A) on all issues.

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