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TMI Blog2011 (9) TMI 731X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee having business in letting out the property as stated in its memorandum, by itself, will not conclusively point out that the income is nothing but business income. Inference to be drawn from facts of each case. Court held it as rental income. - Tax Case (Appeal) Nos.443 to 448 of 2005 - - - Dated:- 20-9-2011 - Mrs.Justice CHITRA VENKATARAMAN, Mr.Justice M.JAICHANDREN, JJ. For Appellant : Mr.K.Subramaniam Standing Counsel for Income Tax For respondent : Mr.P.J.Rishikesh J U D G M E N T CHITRA VENKATARAMAN, J. The Tax Case Appeal is filed by the Revenue against the common order of the Income Tax Appellate Tribunal, Chennai 'D' Bench dated 03.08.2004 in ITA.No.1236 to 1241/(Mds)/2003 relating to the assessment years 1992-93 to 1997-98 raising the following substantial questions of law:- 1. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the CIT (Appeals) was correct in cancelling the reopening of the assessment for the assessment years in question on the ground that there was no fresh information and there was failure on the part of the assessee to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... veloping landed properties, promoting and setting up of a market thereon. The assessee claimed that the income derived from letting out of the properties was business income and was not to be taxed as income from house property . While passing the assessment order under Section 143(1)(a) of the Income Tax Act, 1961, originally, the Assessing Officer accepted the claim of the assessee that the income thereon from letting out the property was business income . However, proceedings under Section 147 of the Income Tax Act, 1961 was invoked on the basis of the decision of this Court in the case of Commissioner of Income Tax Vs. Indian Metal and Metallurgical Corporation reported in 215 ITR 424, wherein, this Court held that income received from letting out of property is to be assessed only as income from house property . 4. The assessee filed its objection stating that the interpretation of law based on the decision of this Court reported in 215 ITR 424 ( Commissioner of Income Tax Vs. Indian Metal and Metallurgical Corporation) had no relevance to the facts of the case. Placing reliance on the decision of the Hon'ble Supreme Court in Indian and Eastern Newspaper Society ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 40 (Guj), in the case of Balaji Enterprises reported in (97) 225 ITR 471 (Kar), in the case of Shah Brothers reported in (99) 110 Taxmann 40 (Karnataka), the Commissioner of Income Tax (Appeals) agreed with the view of the assessee that the income was to be assessed under the head business income and not under income from house property . Aggrieved by the same, the Revenue went on appeal before the Income Tax Appellate Tribunal, wherein, the Department placed reliance on the decision of the Apex Court in the case of the CIT Vs. P.V.S.Beedies Pvt Ltd., reported in 237 ITR 13 on the aspect of the reopening of the assessment. 7. The Tribunal accepted the contention of the assessee that the reopening of the assessment was made based on the change of opinion and there were no fresh information available. Thus holding , it rejected the Revenue's appeal. 8. Learned Standing counsel appearing for the Revenue brought before us the decision of the Apex Court in the case of A.C.I.T Vs. Rajesh Jhaveri Stock Brokers P.Ltd reported in 291 ITR 500 (SC), wherein, the Apex Court pointed out to the scope of Section 143(1) as well as Sections 147 and 148 of the Income Tax Act, 1961 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income Tax Vs. Lucas T.V.S.Ltd., reported in (1998) 234 ITR 296 (Mad), the decision of the Bombay High Court in the case of Sesa Goa Ltd., Vs. Joint Commissioner of Income Tax and Others reported in (2007) 294 ITR 101 (Bom) as well as in the case of Transworld International Inc. Vs. Jt. Commissioner of Income Tax reported in (2005) 273 ITR 242 (Delhi) on the question as to whether Audit Objection could be the basis for reopening the assessment and submitted that the assessment could not be reopened based on subsequent decision, To do so in the absence of any fresh material would amount to change of opinion. Placing reliance on the decision in the case of Commissioner of Income Tax, Spl.Range II Vs. Sanmar Holding Ltd., reported in (2005) 272 ITR 345(Mad) as well as order passed in T.C.A.707 to 709 of 2005 (Commissioner of Income Tax, Spl.Range II Vs. Sanmar Holdings Ltd) , in the case of Commissioner of Income Tax Vs. D.S.Promoters and Developers Pvt Ltd., reported in (2009) 183 TAXMAN 153 (Delhi), he pointed out to the memorandum of the Company that when the business of the Company is essentially one of construction and letting out properties, income from letting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sdiction to initiate proceedings under Section 147 of the Act, in cases, where he has reason to believe that income has escaped assessment. The Apex Court pointed out to the provisions as it stood prior to the amendment in 1989 that under the original provision, two conditions were required to be satisfied viz., the Officer must have reason to believe that income, profits or gains chargeable to income tax have escaped assessment and secondly, he must also have reason to believe that such escapement is either on account of omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. 15. Noting the substantial change made to Section 143 of the Act with effect from 01.06.1999, the Supreme Court pointed out that up to March 31st, 1989, after a return was filed, the Officer could make an assessment under Section 143(1) of the Act, without requiring the presence of the assessee or the production by him of any evidence in support of the return. Where the assessee objected to such an assessment or where the officer was of the opinion that the assessment was incorrect or incomplete or the officer did not comple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey stood therein. Thus, with the amendment brought to Section 147 of the Act, on and from 01.04.1989 and the elucidation on the scope of the authority and jurisdiction of the Officer under Section 147 of the Act as given in the above referred decision of the Apex Court, we have no hesitation in holding that the Tribunal committed serious error in holding that there was no material to justify the resort to Section 147 proceedings. Consequently, substantial question No.1 is answered in favour of the Revenue. In so holding, we have no hesitation in rejecting the assessee's prayer to remit the matter to the Assessing Officer. We do not think that any worthwhile exercise could be carried on by the Assessing Officer to consider the question as to whether assessment could be reopened, on the basis of the objection of the Audit party, which contention has no relevance for the purpose of considering the assessment under Section 147 of the Act, having regard to the order under Section 143(1)(a) of the Act. 17. In the light of the above, we reject the prayer of the assessee for remand. Consequently, we also hold that substantial question No.2 merits to be answered in favour of the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ately held as follows:- The income received by the appellant from shops is indisputable income from property ; so is the income from stall from occupants. The character of the income is not altered merely because some stalls remain occupied by the same occupants and the remaining source of income from the stalls is occupation of the stalls, and it is a matter of little moment that the occupation which is the source of the income is temporary. The IT authorities were, in our judgment, right in holding that the income received by the appellant was assessable under S.9 of the IT Act. 21. In the decision reported in 215 ITR 424 (Mad) (CIT Vs. Indian Metal and Metallurgical Corporation), which was referred to by the Assessing Officer, this Court considered the case of the assessee, who was the owner of multi-storeyed building, in which, a part of the building in the first, second and fourth floors were let out with amenities. The Tribunal held that the income derived by the assessee should be treated as income from other sources . On a reference before this Court, reversing the order of the Tribunal, this Court held that the income derived by the assessee could not be asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut of the property was to be assessed as income from house property . The only exception are cases, where the letting of the building was inseparable from the letting of the machinery, plant and furniture. In such cases, it was held that the rental income would not have been realised, but for the letting out of the machinery, plant or furniture along with such building and therefore, the rental received for the building had to be assessed under the head Income from other sources . It was reiterated that where the owner of the property exploited the property by leasing out the same and realised income by way of rent, the same was to be assessed under the head Income from house property and not as business income . The said decision was applied in the decision of this Court in the case of Keyaram Hotels (P) Ltd Vs. Assistant Commissioner of Income Tax reported in (2008) 300 ITR 118 (Mad). 24. The Supreme Court in the decision of (1) Universal Plast Ltd., (2) Guntur Merchants Cotton Press Co. Ltd Vs. Commissioner of Income Tax laid down the following ratio :- (1) no precise test can be laid down to ascertain whether income (referred to by whatever nomenclature, lease, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 22 of the Act, for the purpose of assessing the rental income as an income from the house property , the revenue authorities must go into the question whether there was any exploitation of the property by their owner by giving it away for rent, before assessing such rental income as an income from house property. Going through the records, this Court held that in the absence of any finding on this aspect, the proper course would be to remand the matter back to the Assessing Officer for de novo consideration. In the light of the above said decision, this Court remitted the matter to the Assessing Officer. 26. It is seen from the order of assessment that the assessee took on lease the land and building owned by Mr.Sethu-Director of the Company. The assessee constructed the commercial complex and received rental income therefrom. The Assessing Officer pointed out that it was the only activity carried out during the year 1991-92 ; there were no other activity thereafter carried on ever since 1991-92. Under such circumstances, the Assessing Officer concluded that there was no such thing as exploitation of business assets. There are no materials placed before us by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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