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TMI Blog2007 (5) TMI 556X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income-tax (Appeals) and the learned Income-tax Officer, Ward 5(3), Amritsar have grossly erred in not allowing expenditure incurred by the assessee-company under various expenditure heads vide Schedule 9 of audited accounts on the ground that it was not incurred in furtherance of any business activity. 4. That the worthy Commissioner of Income-tax (Appeals), Amritsar has grossly erred in not disposing of the ground in respect of addition made on account of miscellaneous income of Rs. 28,682. 5. That worthy Commissioner of Income-tax (Appeals), Amritsar has grossly erred in confirming charging of interest under section 234B of the Income-tax Act. As regards the first grievance that the assessment order for the assessment year 2001-02 had not been passed within time allowed, the facts of the case are that although the assessment order was dated March 26, 2004, yet it was served on the assessee by affixture only on April 1, 2004. The assessee had stated before the Commissioner of Income-tax (Appeals) that no efforts were made to serve the notice on the assessee through normal means before serving the notice by affixture. In support of this contention, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the affixture order as a token of having effected service of the order by affixture through the above officials. Further, it is also noticed that the Assessing Officer has also dispatched the said order by registered post on March 31, 2004 under registration No. 14163. In the light of the above facts and circumstances, it appears that the appellant s contention that the assessment order had not been passed till 6 p.m. at March 31, 2004 is not supported by evidence on record. According to the Assessing Officer, the affixture of the assessment order made at the office premises of the appellant at R. B. K. C. Towers, Mcleod Road, Amritsar, whereas the appellant s counsel has filed an affidavit from Sh. Kashmir Singh, who is a security guard posted at 3A, The Mall, Amritsar. Hence, the affidavit of Sh. Kashmir Singh does not seem to have any evidentiary value. Further, the fact that the assessment order has been dispatched on March 31, 2004 by registered post shows that this contention of the appellant is not sustained. In view of the above, the appellant s contention regarding the assessment having been barred by limitation does not appear to be justified and therefore, the same st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not produce the assessment records. He requested for another opportunity which was allowed and the case was adjourned to May 9, 2007. On that date also, the learned Departmental representative could not produce assessment records. The learned Departmental representative, Sh. R.L. Chhanalia stated that the Departmental representative has written several letters to the Assessing Officer requesting for the assessment records. Despite this fact, the Assessing Officer has not sent the assessment records. Thus, he stated that the matter may be decided in the light of facts on records. From the facts discussed above, it is obvious that this Bench has allowed repeated opportunities to the Revenue for producing assessment record so that the fact of service of the assessment order on the assessee could be verified. However, the Department has not been able to produce these records. In fact, at the time of last hearing, the learned Departmental representative did not even request for adjournment on this ground. Thus, we have no option but to accept the contention of the assessee that the assessment order was not passed on March 26, 2004. No doubt, the provisions of section 153 require that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch income under the head Income from business . Against the said income, the assessee had claimed deduction for various expenses. After claiming deduction for expenses, the assessee declared total income at Rs. 1,92,971. The Assessing Officer asked the assessee to explain as to why the income from house property was being shown as business income. The assessee submitted a reply. However, the Assessing Officer was not impressed with the submissions of the assessee and treated the rental income as income from house property. Being aggrieved, the assessee filed an appeal before the Commissioner of Income-tax (Appeals). It was submitted before the Commissioner of Income-tax (Appeals) that the assessee company was running a business of transport right from inception. Due to adverse business situation, the assessee sold the trucks one by one and the transport business was closed down. The assessee was carrying on the business of real estate and had developed several properties at Amritsar and Jaipur. As per memorandum of association, the real estate was one of the objects of the assessee. It was submitted that the principle of res judicata was not applicable and, therefore, the fact tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on facts because the issue involved in that case was whether rental income earned could qualify for deduction under section 80HHC after insertion of clause (baa) to the Explanation to section 80HHC. Further, the learned Commissioner of Income-tax (Appeals) noted that in that case the building let out was part of the factory land and building being used is commercial asset. (vi) The learned Commissioner of Income-tax (Appeals) observed that in the present case, the assessee had not let out part of the commercial asset in the form of factory, land and building/workshop etc. earlier used for the purpose of business temporarily for earning rent. He observed in the present case, there was no evidence that the property from which the assessee earned rental income was at any point of time being used for the transport business. (vii) The learned Commissioner of Income-tax (Appeals) also observed that the judgment of the hon ble Supreme Court in the case of S. G. Mercantile Corporation P. Ltd. v. CIT [1972] 83 ITR 700 relied upon by the assessee was rather in favour of the Revenue because in that case the hon ble apex court had held that annual value of property consisting of land and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has filed the present appeal. Learned counsel for the assessee, Sh. Padam Bahl, contended that the principle of res judicata is not applicable to the income-tax proceedings. Therefore, the very fact that all throughout in the past, the rental income was being shown under the head Income from house property does not mean such income was not a Business income . He further submitted that as per memorandum of association of the company, real estate was one of the main objects of the company. Thus, he submitted that rental income which was being shown as income from house property was now shown under the head Business income . Relying on the judgment of the hon ble Supreme Court in the case of Barendra Prasad Ray v. ITO [1981] 129 ITR 295, learned counsel submitted that the expression Business does not necessarily mean trade or manufacture only. The word Business was of wide import and it means an activity carried on continuously and systematically by a person by the application of his labour and skill with a view to earn income. He only gave a list of the following judgments without explaining as to how these were applicable to the facts of the present case. In fact, most ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om house property . It is also accepted position that the assessee was carrying on transport business which has since been closed. It is no doubt true that the assessee has to incur such expenses even for earning the rental income and compliance with the various requirements under the company law. But now question that remains to be decided is whether the rental income from house property could be considered as income from business because under the provisions of the Act, the assessee is not entitled to claim deduction of the expenses incurred against the income from house property. Learned counsel for the assessee has referred to the object of the company detailed in the memorandum of association. Referring to page 13 of the paper book, learned counsel for the assessee submitted that one of the main objects of the assessee was to carry on the business of builders and contractors and to acquire by purchase, lease, exchange, hire or otherwise develop or operate land, buildings etc. Thus, he submitted that this was the main object of the company. Therefore, the rental income earned by the assessee was liable to tax under the head Income from house property . Learned counsel has hims ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts of the present case. Further, learned counsel was given time to give a summary of the judgments to explain as to how those were applicable to the facts of the present case. Apart from giving full citations of the various judgments relied upon and enclosing therewith headnotes of the judgments extracted from CTR Library of Tax Cases, learned counsel has not made any effort in explaining how those judgments were applicable to the facts of the present case. Now the question whether rental income is to be taxed under the head Income from house property or business income depends on the facts of each case. The ratio of each decision has to be considered in the light of facts of each case. Therefore, we feel that the learned authorised representative ought to have made an effort in explaining as to which judgment was applicable to the facts of the present case and why. Be that as it may, the learned Commissioner of Income-tax (Appeals) has already given detailed reasons in respect of judgments relied upon before him as to how the same were not applicable to the facts of the present case. We have referred to those judgments and the reasons given by the Commissioner of Income-tax (Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterprises v. CIT reported in [1997] 225 ITR 471 relied upon by the learned authorised representative, the facts were that the firm was constituted for carrying on business of real estate. Its business was to take property on lease, building structures thereon and leasing them out to tenants. All these activities were being carried out regularly and systematically. In fact, this was the main business of the assessee. The firm was not even owner of the property. On these facts, it was held that letting out was a part of the business of the assessee and, therefore, rental income was taxable under the head Income from business . The other judgment relied upon by the learned authorised representative is of the hon ble Madras High Court in the case of CIT v. Kongarar Spinners P. Ltd. [1994] 208 ITR 645. The facts before the hon ble Madras High Court were that the assessee earned rental income from letting out commercial assets. The assessee was running a factory. Another building and factory were also constructed and the same were let out to its subsidiaries. On these facts, the hon ble High Court held that rental income derived from letting out commercial assets was a business incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were admissible under the head Income from house property have not been allowed. Thus, we do not find any merit in this ground of appeal of the assessee. The same is dismissed. The next ground relates to an addition of Rs. 28,682 made on account of miscellaneous income. The last ground relates to interest charged under section 234B of the Act. Here also, no arguments were advanced by learned counsel for the assessee. Therefore, it appears that the assessee is not interested in prosecuting these two grounds of appeal. Accordingly, these are dismissed as such. Before parting with the appeal for the assessment year 2001-02, we wish to mention that we have already quashed the assessment order on the ground that the same was time-barred. Therefore, findings recorded by this Bench in respect of remaining grounds are only of academic interest. Even if the grounds have been decided in favour of the Revenue and against the assessee, the same would not have any effect on the outcome of the appeal because the assessment order has already been quashed. Now, we take up appeal for the assessment year 2002-03. The first grievance of the assessee in this appeal relates to treating the rent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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