9911796707
TMI Blog2005 (6) TMI 473X X X X Extracts X X X X X X X X Extracts X X X X ..... issue of notices under section 148 : Assessment Year Date of return of income Income returned Whether Intimation or asst. Date of Intimation/ asst. Income assessed (Rs.) 1991-92 23-12-91 Nil 143(3) 22-3-94 1,93,305 1992-93 29-12-92 Nil 143(3) 29-3-95 2,33,610 1993-94 30-12-93 Nil 143(1)(a) 27-5-94 Nil 1994-95 30-9-94 (-) 10,126 143(1)(a) 28-2-95 (-) 10,126 1995-96 30-11-95 (-) 6,491 143(1)(a) 21-1-96 (-) 6,491 Subsequently during the course of assessment proceedings for assessment year 1996-97, the learned Assessing Officer learnt that the assessee had received arrears of lease rent in respect of its property situated at Aggarwal Market, Ville Parle (East), Mumbai from the tenant Indian Overseas Bank. The arrears of rent involved assessment years 1991-92 to 1995-96 also. According to the Assessing Officer the assessee was paid additional rent of Rs. 2,30,400 for each of the assessment years 1991-92, 1992-93, 1993-94 & 1994-95. For assessment year 1995-96 additional rent amounted to Rs. 5,76,000. In addition for assessment years 1994-95 and 1995-96 the assessee also received a sum of Rs. 1,14,000 each by way of service charge. According t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the assessment year for which it was paid. In fact the Hon'ble High Court observed, "Any arrears of rent for a previous year received in a later previous year shall, under those sections, have to be computed as income from house property of the former previous year. This is the clear position arising from those provisions." The learned Assessing Officer held that the facts of the case in Hope India Ltd.'s case (supra) were not exactly the same as in the case before him. In that case Central Government departments only agreed to pay substantially higher rent. In that case any upward revision of rent was not permissible except with the mutual agreement between the parties. As a matter of fact in the grounds of appeal filed by the assessee before the learned CIT (Appeals) for assessment year 1996-97, the assessee had himself stated that arrears would, if at all, be assessed under the head "Income from house property". Thus, the assessee had itself accepted and asked for treating the arrear rent as income from house property. The learned Assessing Officer, therefore, proceeded to add additional rent received by the assessee to the income originally assessed by way of enhanced income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent could not be assessed as income from house property in the year of receipt. The assessee could not, therefore, turn back and argue that they could not be assessed as income of the period for which the same were awarded. The learned CIT(Appeals), therefore, upheld the additions as made by the learned Assessing Officer. Still aggrieved the assessee is in appeal before us. 6. During the course of hearing before us the learned counsel for the assessee argued that in so far as income chargeable to tax under the head 'Income from house property' is concerned, the assessment is of a notional income. Amount of such income could not vary from time to time. During the course of assessment proceedings the assessee had duly declared rental income under the head 'income from house property'. The same was assessed under section 143(3) for first two years and processed under section 143(1)(a) for the last three years before us. The learned counsel argued that there was no possibility of there being any escapement of income under the head 'income from house property' as long as the assessee had disclosed the house property and the particulars of letting it out. In all these years the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right to receive higher rent accrued to the assessee or in relation to the year of receipt. The provisions of section 25B are titled "Special provision for arrears of rent receipt". The Legislature themselves have called section 25B a special provision signifying that earlier there was no provision at all. How could there be any failure or omission on the part of the assessee to disclose any material fact when there was no law in existence to bring such amount to charge of tax. The learned counsel for the assessee heavily relied upon in this respect on the decision of the ITAT, Delhi Bench 'D' New Delhi dated 6-10-2004 in ITA No. 731 (Delhi)/2000 and ITA Nos. 2708 to 2715 (Delhi)/2000 in the case of Parveen Chand Khanna & Sons for assessment years 1988-89 to 1995-96. The learned counsel argued that in the years under assessment the assessee had been pleading with the tenant for vacating the property. Nobody could know what the settlement would be until the settlement was made. On such facts what was the failure or omission to disclose. The learned counsel relied upon the judgment of Hon'ble Allahabad High Court in Modi Spg. & Wvg. Mills v. ITO [1975] 101 ITR 637. The learned counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty could not be assessed under section 147. 10. The learned counsel for the assessee argued that had the Assessing Officer gone through the files for earlier assessment years carefully, he would have known that in so far as the tenancy agreement period was concerned, the same had expired long back. It could not, therefore, be said that the material facts were not on the file of the Assessing Officer. The assessee had entered into a lease period of 10 years only. It was true that during the financial years in question no rent had been received by the assessee from the tenant. However, the assessee had to file the return of income based on the rent that was previously being received because the assessee was obliged under law to file the returns of income on the basis of rent receivable. There was, thus, no failure on the part of the assessee not to have disclosed fully and truly all material facts necessary for assessment. As to the service charges of Rs. 1,14,000 no service was rendered by the assessee. It was simply that certain amounts were being paid to the assessee not by way of rent but under different descriptions. If the assessee had provided strong room, the income did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any income under the head 'Income from house property'. The assessee simply offered certain amounts calculated on the basis of past rent by way of 'other income'. Therefore non-disclosure of material facts necessary for assessment was patent on the face of the records. The assessee declared the income as business income in the garb of other income. There was no disclosure of full facts. Along with the return of income no basis was furnished as to why such treatment was given. The fact that no rent was received and the matter was subjudice was not disclosed. Even the fact that the tenant had continued in possession was not disclosed. The learned D.R. argued that the assessee's case was also covered by Explanation 1 to section 147. Relying upon the judgment of Hon'ble Supreme Court in Sri Krishna (P.) Ltd. v. ITO [1996] 221 ITR 538 1 (SC), the learned D.R. argued that the requirement of law was that there should be full disclosure and not partial disclosure. He also placed reliance on Indo-Aden Salt Mfg. & Trading Co. (P.) Ltd. [1986] 159 ITR 6242 (SC) and Esskay Engg. (P.) Ltd. v. CIT [2001] 247 ITR 818 3 (SC). 15. The learned counsel for the assessee in his reply argued that the j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aised the legal ground that there cannot be reopening of assessment under section 147 in relation to income from house property. To say the least, this contention of the assessee is not free from debate. For the purpose of a valid reopening of assessment under the provisions of section 147 it is not necessary that the view entertained by the learned Assessing Officer at that point of time should be fool proof and hundred per cent accurate. Reference in this respect may be made to the judgment of Hon'ble Supreme Court in the case of Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC) and the judgment of the Hon'ble Kerala High Court in G. Sukesh v. Dy. CIT [2001] 252 ITR 230 (Ker.). 17. During the course of hearing before us the learned counsel raised another argument also that after the expiry of a period of four years the assessment could not be reopened under section 147 unless the income chargeable to tax had escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. It is admitted fact that for all these years in the returns of income filed by the assessee di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere the property is let and the annual rent received or receivable by the owner is in excess of the former sum, the amount so received or receivable Hon'ble Supreme Court held in the case of Smt. Sheila Kaushish (supra) that the sum for which the property might reasonably be expected to let from year to year could not be in excess of lawful rent as provided by any Rent Control Act. The controversy in the present case has arisen on account of the charge of tax under section 22 being on the annual value of property and not on any income as such from the property. 20. The question as to whether arrears of rent relating to earlier years can be brought to tax in the subsequent year of receipt has been considered by Hon'ble Calcutta High Court in the case of Hamilton & Co. (P.) Ltd. (supra). The Hon'ble Calcutta High Court held that income from property is to be computed only on the annual value of that year and that cannot include income for more than 12 months. In that judgment Hon'ble Calcutta High Court further held that where the income is derived from house property, the same cannot be taxed under the head "Income from other sources". The same view was later on held by Authority f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ench of Hon'ble Calcutta High Court. 24. We may also mention here that in the case of Hamilton & Co. (P.) Ltd. (supra) there appears in relation to Explanation-I to section 23 following observations from the court at page 398 : "The Explanation defines 'annual rent' of a year as the actual rent received or receivable by the owner, 'in respect of such year'. The arrears of rent are rent received or receivable in respect of the past year to which the arrears relate." Hon'ble Delhi High Court have also considered the related issue in the case of Ms. Sadhna Chadha ( supra). In that case the issue was whether the arrears of rent received in a subsequent year can be brought to tax in the year of receipt of the arrears. Hon'ble High Court after having referred to the judgment of Hon'ble Calcutta High Court in Hamilton's case, found themselves in agreement with that judgment. 25. As the matter stands now there is only one judgment, i.e., Calcutta High Court in the case of Hope (India) Ltd. where the reverse situation as to whether arrears of rent can be assessed retrospectively in the earlier years has been considered. That judgment is in favour of the assessee and against the revenue. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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