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TMI Blog2016 (8) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Raghvendra Kishore Singh and Mr. Anup Kumar, Advocates. O R D E R Dr. S. Muralidhar, J.: 1. These four appeals by the Assessee are directed against a common order in ITA Nos. 1867 to 1870/Del/99 for the Assessment Years ( AYs ) 1990-91 to 1993-94. By the order dated 30th October 2006, the Court framed the following questions of law for consideration: 1. Whether the Income Tax Appellate Tribunal was correct in law and on facts in holding that the reopening of the assessment under Section 147 of the Income Tax Act, 1961, was valid and in accordance with law? 2. Whether the Income Tax Appellate Tribunal was correct in law and on facts in holding that the income derived by the appellant from licencing part of the premises is to be assessed under the head Income from house property under Section 22 of the Income Tax Act, 1961 and not under the head Income from business under Section 28 of the Income Tax Act, 1961 despite the fact the aforesaid income had regularly been assessed under the head income from business? 3. Whether in the circumstances of the case, and on the proper interpretation of the licence deeds, the Tribunal was correct in law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereof be allowed to be used by any other person/firm/company etc. 5. That the licensee shall not be entitled to put up a sign-board outside the Licensed premises as per D.D.A. rules. shed in question is being give to the Licensee in original condition i.e. AS IT IS terms and the Licensee will undertake any repairs or so if the same are required. He will also be responsible to keep the premises in a sanitary clean condition and shall pay the cost of making good any damage thereto or to the adjacent premises caused by the negligence or mis-use of the premises by the Licensee or his agents, employees servants, workers etc and shall indemnify the Licensor against any loss and damage to the premises caused by fire or otherwise. 6. That the Licensee shall not be entitled to make any encroachment and shall confine himself his running of the industry strictly within the confines of the Licenced space/portion of the premises. ...... 8. That the Licencee shall not be entitled to make any additions/alterations without obtaining prior approval of the Licensor in writing. ... 10. That the Licensee can terminate this Licence by giving three months notice i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2830 Business Income 1985-86 1,73,085 2657 Business Income 1986-87 2,29,722 24303 24300 Business Income 143(1)(a) 1987-88 2,38,150 23,256 23,256 Business Income 143(1)(a) 1988-89 2,45,675 28,187 28,187 Business Income 143(1)(a) 1989-90 3,28,356 48,511 48,511 Business Income 143(1)(a) 6. For AY 1990-91, the Assessee filed a return on 30th October 1990 declaring an income ₹ 59,124. The return was filed along with copies of the statement of income, trading account, profit and loss account and balance sheet. The income was processed under Section 143(1)(a) of the Act by an intimation dated 30th March 1991. Reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a it was submitted that there was nothing on record to show that the Assessee had earned income more than what was disclosed by him and there was no material available to the AO to come to the conclusion that there was any escapement of income. According to the Assessee, the reopening of the assessment was based merely on a change of opinion. 10. By the time the order dated 12th January 1999 was passed, the assessments for three other AYs i.e. 1991-92 to 1993-94, were reopened by the AO by issuing notices under Section 148 of the Act and appeals for those AYs were also filed by the Assessee before the CIT (A). In the common order dated 12th January 1991 for the four AYs 1990-91 to 1993-94, the CIT (A) negatived the plea raised by the Assessee to the reopening of the assessment under Section 148 of the Act on the ground that proper reasons had been recorded by the AO in each of the years. However, the CIT (A) accepted the plea of the Assessee that the licence fee received by him ought to be taxed as income from business and not as income from house property. The CIT (A) analysed the licence deed and came to the conclusion that the Assessee was exploiting the commercial assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessments under Section 148 of the Act was not valid as there was no material available with the AO to come to the conclusion that the Assessee had camouflaged rental income as business income . Reliance was also placed on the decisions in Commissioner of Income Tax v. Orient Craft Limited (2013) 354 ITR 536 (Del), Swati Saurin Shah v. Income-tax Officer [2016] 70 taxmann.com 72 (Guj) and Priya Desh Gupta v. Commissioner of Income Tax (2016) 385 ITR 452 (Del). He also relied on the Commentary on the Transfer of Property Act, 1882 by Nandi, 3rd Edition, 2010 to draw a distinction between a 'licence' and a 'lease'. 15. Countering the above submissions, it was submitted by Mr. Rahul Chaudhary, learned Senior Standing Counsel for the Revenue that after the decision dated 18th May 2016 by this Court in W.P. (C) No. 1393 of 2002 (Indu Lata Rangwala v. Deputy Commissioner of Income Tax) there was no need for the AO to base his reasons to believe that the income had escaped assessment on fresh tangible material since the initial returns for the AY in question were processed under Section 143(1) of the Act. While the AO was required to record reasons, they did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tial return is processed under Section 143 (1) of the Act, the AO can form reasons to believe that income has escaped assessment by examining the very return and/or the documents accompanying the return. It is not necessary in such a case for the AO to come across some fresh tangible material to form 'reasons to believe' that income has escaped assessment. 35.8 In the assessment proceedings pursuant to such reopening, it will be open to the Assessee to contest the reopening on the ground that there was either no reason to believe or that the alleged reason to believe is not relevant for the formation of the belief that income chargeable to tax has escaped assessment. 17. In the present case, however, the Assessee did contest the reopening on the ground that there was no reason to believe that income had escaped assessment and that in any event the reason to believe as recorded was not relevant for the formation of belief that income chargeable to tax had escaped assessment. It is in the above background that the Court is called upon to examine whether the reasons recorded by the AO for reopening the assessments for the aforementioned AYs satisfied the requireme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) and (iii) 21. Questions (ii) and (iii) are next taken together for consideration. The factors that ought to have been taken note of by the ITAT were that the Assessee had consistently shown the licence fee as business income from AY 1982-83 onwards. The return for AY 1982-83 was picked up for scrutiny and an assessment order passed under Section 143(3) of the Act accepting the stand of the Assessee that the licence fee was in the nature of business income. This stand was continued by the Assessee for all the AYs that followed, including the AYs in question. As already noticed, the CIT(A) elaborately discussed the clauses of the licence deed to come to the conclusion that what was being collected by the Assessee was in fact a licence fee and not rent. The second factor was that the Assessee virtually had no business since 1982-83 and his only source of income by way of business was the licence fee that was collected. The ITAT has in the impugned order not given any reason for disagreeing with the CIT (A) and has simply confirmed the order of the AO that the licence fee constituted income from house property and not business income. 22. Learned counsel for the Assessee r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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