2020 (8) TMI 63 - AT - Income Tax

Correct head of income - assessability of lease rent received under the head income from house property or business income - compensation received on account of damages for deprivation and use of occupation - HELD THAT - Conduct of the assessee clearly shows that in three subsequent assessment years the assessee have accepted the rental income as income from house property. That being the case, the rule of consistency would clearly apply insofar as treatment of compensation received in the impugned assessment year as well. Therefore, in our opinion, the compensation received by the assessee has been correctly assessed under the head income from house property. Decisions relied upon by AR would not be applicable to the facts of the present case as in the instant case, the assessee itself in the subsequent assessment years has offered the compensation as income from house property. The assessee cannot be permitted to change the head of income according to his own sweet will and convenience. The contention of the learned Counsel for the assessee to explain the reasons for offering of compensation under the head house property income in subsequent years, in our view, stands on thin ice, hence not acceptable. Validity of Reopening of assessment u/s 147 - HELD THAT - Admittedly, the return of income filed by the assessee was initially processed under section 143(1) and was not subject to scrutiny. Therefore, the Assessing Officer never had occasion to verify various claims made by the assessee in the return of income. When in the course of assessment proceedings for the assessment year 2012 13, the Assessing Officer was informed about the receipt of compensation from NTCL, he verified all the relevant fact and thereafter concluded that the compensation received by the assessee is assessable under the head income from house property. On the basis of such information received in assessment year 2012 13, the Assessing Officer has re opened the assessment under section 147 of the Act in the impugned assessment year. We do not find any legal infirmity in the action of the Assessing Officer in re opening the assessment under section 147 of the Act. - Decided against assessee. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT - Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited 2020 (5) TMI 359 - ITAT MUMBAI

Issues Involved:
1. Assessability of lease rent received under the head "income from house property."
2. Validity of re-opening of assessment under section 147 of the Income Tax Act, 1961.
3. General nature of ground no.3.
4. Levy of interest under sections 234A, 234B, 234C, and 234D, and initiation of penalty proceedings under section 271(1)(c) of the Act.

Issue-Wise Detailed Analysis:

1. Assessability of Lease Rent:
The assessee challenged the assessability of lease rent received under the head "income from house property." The assessee, engaged in construction, filed its return declaring a loss. The Assessing Officer (AO) found that the assessee received compensation from NTCL as per a court decree but did not offer this compensation as income under the head "house property." The AO re-opened the assessment, arguing the compensation should be taxed under "house property," citing the assessee's acceptance of this classification in subsequent years (2012-13, 2013-14, 2014-15). The assessee argued that the compensation was incidental to its business and should be set off against work-in-progress. The Tribunal upheld the AO's decision, applying the rule of consistency, as the assessee had accepted the compensation as "house property" income in subsequent years.

2. Validity of Re-opening of Assessment under Section 147:
The assessee contested the validity of re-opening the assessment under section 147, claiming it was based on "borrowed satisfaction" from the 2012-13 assessment. The Tribunal noted that the original return was processed under section 143(1) without scrutiny. The AO, upon discovering the compensation during the 2012-13 assessment, had valid grounds to re-open the assessment for the impugned year. The Tribunal found no legal infirmity in the AO's action, as the AO acted within his powers upon identifying the escaped income.

3. General Nature of Ground No. 3:
The assessee alleged that the Commissioner (Appeals) rejected all submissions and did not decide the issue on merits. The Tribunal dismissed this ground as vague, general, and without substance.

4. Levy of Interest and Initiation of Penalty Proceedings:
The assessee challenged the levy of interest under sections 234A, 234B, 234C, and 234D, and the initiation of penalty proceedings under section 271(1)(c). The Tribunal noted these issues were either consequential or premature and dismissed this ground without adjudication.

Procedural Issue:
The Tribunal addressed the delay in pronouncing the order due to the COVID-19 lockdown, referencing the decision in DCIT V/s JSW Limited. The Tribunal excluded the lockdown period from the 90-day pronouncement requirement, acknowledging the extraordinary circumstances.

Conclusion:
The appeal was dismissed, upholding the AO's assessment of compensation as "house property" income and validating the re-opening of the assessment under section 147. The Tribunal dismissed the other grounds as either vague or premature.

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