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TMI Blog2012 (8) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... om the subject property was assessed under the head ‘income from house property.’ - the assessee has not come up with any documentary evidence to rebut the Revenue’s stand convincingly. - Decided against the assessee. - ITA Nos.960 & 961/Bang/2010 - - - Dated:- 31-5-2012 - SHRI GEORGE GEORGE K, SHRI JASON P BOAZ, JJ. Appellant by : Shri Ashok A Kulkarni, Advocate Revenue by : Shri Palani Kumar S, JCIT ORDER PER GEORGE GEORGE K : These two appeals of the assessee are directed against the impugned order of the learned CIT (A)-I, Bangalore, dated 25.5.2010. The relevant assessment years are 2003-04 and 2005-06. 2. The assessee had, for both the AYs under dispute, raised identical issues in an illustrative and narrative manner. Subsequently, the assessee has come up with revised grounds vide its application dated 16.9.2011. Yet again, vide its representation dated 17.10.2011; the assessee had submitted concise grounds of identical issues for both the AYs. On a critical examination of the same, it has been noticed that the core issues raised are two-folds, namely: (i) that the assumption of jurisdiction u/s 147 of the Act was invalid; ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T (A) had, in his consolidated order, observed thus: (i) Assumption of jurisdiction u/s 147 of the Act: 6. (On page 4) I find, no merit in the above argument. Copy of the recorded reasons has never been requested by the assessee during assessment proceeding and, therefore, has not been supplied by the AO. Probably, the appellant had constructive notice of the reasons recorded and, therefore, did not ask for the same. Therefore, at the appellate stage the ground that the assumption of jurisdiction is bad in law because no copy of reason recorded was supplied cannot be admitted and has to be treated as non-maintainable abinitio. However, I find the reasons for belief of escapement of income finds place in the body of assessment order which is as under: It was .on 13.7.2006. 7. The above shows the expenses claimed are not allowable and, therefore, income has escaped assessment because the assessment of income has to be under House Property and not Business. Thus, I also find that while completing the assessment the AO has not travelled beyond the reasons recorded and, therefore, see no merit in the allegation that the assessment is bad in law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e possession as well as the rental income. Therefore, I find the notice u/s 148 of I T Act in the name of firm was perfectly in order and, therefore, the issue is decided in favour of the revenue. (ii) Income assessed under the head house property : 12.(on Page 9) .The concept of ownership is progressively liberalized by the Courts to have a relaxed meaning even to include a beneficial owner as in this case, the appellant is, I find the dominant intention is to earn rental income and not to do the business of letting out the properties. Attendant facilities and services had been provided to the rented premises, i.e., in shops or offices, to fetch higher and competitive rent. In the case of CIT v. Boopalam Commercial Complex Industries Pvt. Ltd., it had been held that the dominant intention of the appellant should be looked into to arrive at the head of income. If it is for earning rental income, the head of income will be house property . If the dominant intention is to earn profits by undertaking a risk the head of income has to be business. Here, the activity relating to provision of services though is continuous, in case of rental premises it is a one time i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng, hiring or selling them to the best advantage of the partnership firm. The firm has already developed the property at 70 and 70/1, M.G.Road, Bangalore and it has let the said property to offices and shops. The firm has to manage and maintain the said property and recover rents. The firm may carry on any other business/businesses as the partners may mutually decide from time to time. (iv) That the notice u/s 148 of the Act was issued in the status of firm which was constituted to carry on business, the AO proceeded to assess the income under the head house property on wrong assumption that the assessee firm was not carrying on business and the income generated was not from its business activity; and that such an act of the AO wiped off the existence of the firm. It was, therefore, argued that the assessment in the status of firm was bad in law and was liable to be cancelled as the case of the Revenue was that the assessee was not carrying on any business activity; (v) That the income derived by the assessee was from lease/rental from the subject property which was taken on lease the premises and the lease of the premise was for its business activity to generate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority can overlook a valid return and instead of making assessment u/s 143 (3) which was open to be made, he could assume jurisdiction u/s 147 and that this would make a mockery of s.147 and the time limit provided u/s 153 as a protection to an assessee. It is not left to the AO to overlook a valid return pending with him which could be processed and enquiry could be made and straight away take recourse to s. 147 of the Act. Relies on the following case laws: (a) KLM Royal Dutch Airlines v. ADIT (2007) 292 ITR 49 (Del); (b) CIT v. Aircraft Radio Corpn. (2007) 292 ITR 64 (P H); (c) P.G. Foils Ltd v. Income-tax Settlement Commission Anr. (2008) 302 ITR 331 (Mad); (d) CIT v. Ved And Co. (2008) 302 ITR 328 (Del) 7. On the other hand, the learned D R had vehemently supported the stand of the authorities below on both the issues. The learned D R also placed emphasis on the reasoning of the CIT (A) in upholding (i) the action of the learned AO in reopening the assessments for both the AYs under consideration; and (ii) sustaining the stand of the AO in assessing the income of the assessee under the head house property . It was, therefore, pleaded that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e veracity of the assessee s certain claims, the AO had perhaps issued notices u/s 143(2) and 142(1) which was objected to by the assessee on the surmise that a notice u/s 143(2) as required by the Act was not issued within twelve months from the date of filing of the return. In consonance with the provisions of s. 143(2) of the Act, the assessment proceedings initiated on the basis of issuance of notice u/s 143(2) of the Act on 26.5.2005 were dropped by the AO. However, on subsequent verification of the P L account furnished by the assessee along with its return of income, it was noticed by the AO that the assessee had derived only rental income, but, claimed various expenses, treating the rental income as business income . As the expenses claimed being not allowable and the AO had reasons to believe that the income escaped assessment because the assessment of such income had to be under the head income from house property . Accordingly, as rightly pointed out by the learned CIT (A), while concluding the assessment, the AO had not travelled beyond the reasons recorded and, therefore, there was no merit in the allegation of the assessee that the assessment was bad in law. 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer jurisdiction under section 147(a) two conditions were required to be satisfied firstly the assessing 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 has occurred by reason of either (i) omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the assessing officer could have jurisdiction to issue notice under section 148 read with section 47(a). But under the substituted section 147 existence of only the first condition suffices. In other words, if the assessing officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment . 8.4 With due care, we have perused the case laws on which the assessee had placed its reliance and of the firm view that they were not directly applicable to the facts of the issue on hand. In the case of KLM Royal Dutch Airlines v Assistant Director of Income Tax (292 ITR 49) and in the case of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l for assessee. No further material is brought to our notice to take a different view. 8.6 In the meanwhile, we also recall the ruling of the Hon ble jurisdictional High Court in the assessee s own case [CIT v. Mahesh Investments) in ITA No.387/2002 dated 14.11.2007 for the AY 1992-93. The issue, in brief, was that the assessee filed its return of income in the status of Registered Firm. The AO, however, having held that the assessee was not carrying on any business activities, treated it as an AOP. On an appeal by the assessee, the learned CIT (A) allowed the appeal in favour of the assessee, treating it as Registered Firm which was, subsequently, upheld by the Tribunal. 8.7 On a reference by the Revenue, the Hon ble Court had, after due consideration of rival submissions, held as under: 6. Having heard the counsel for the parties and on perusal of the order passed by the assessing officer as also the Commissioner for Appeals and the Income-tax Appellate Tribunal, we are of the opinion that all the authorities without looking into the Partnership Deed of the respondent-assessee, have given their findings. In view of the judgment of the Supreme Court in R.C. Mitter and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion has been taken possession by the assessee on a long lease of 40 years through a lease deed dated 21.3.80 and, hence, falls within the ambit of owner for the purpose of income from house property. In view of the above, the income derived by the assessee from letting out properties is assessed under income from house property . Since there is no business activity as claimed by the assessee, the status of the assessee is treated as AOP . 8.9 Incidentally, on the orders of the Hon ble jurisdictional High Court in ITA Nos.286 of 2003 and 290 of 2003 dated 15.11.2007 for the AYs 1985-86, 86-87 and 89-90 in the assessee s own case, the AO, vide his orders u/s 143 (3) r.w.s. 260A of the Act dated 25.11.2010 had held the status of the assessee as AOP and also the income derived by the assessee from the subject property was assessed under the head income from house property. Significantly, the assessee has not come up with any documentary evidence to rebut the Revenue s stand convincingly. Taking into account the above facts into consideration and also in consonance with the findings of the earlier Bench referred above, we are of the firm view that the learned AO was justified in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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