Falcon Vincon Private limited , Bengaluru V. Pr.CIT-3, Kolkata

ITA 1159/KOL/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6566 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 15-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHARI
• Assessee Lawyers: A K TIBREWAL
• Keywords: Business income; Principle of natural justice; Rule of consistency; Assessment record; Capital Gains
• Section: 143(3); 44AB; 13; 22; 27; 263; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C, BENCH KOLKATA BEFORE SHRI A. T. VARKEY, JM & DR. A.L. SAINI, AM ITA NO.1159/KOL/2019 (ASSESSMENT YEAR: 2014-15) FALCON VINCON PRIVATE LIMITED 102, TOWER NO.12, SHRIRAM SAMEEKSHA, NEW GANGAMMA GUDI POLICE STATION ROAD, NAIDU LAYOUT, BENGALURU VS. PR. CIT-3, KOLKATA ./ ./PAN/GIR NO. : AABCF3203C ( /APPELLANT ) .. ( / RESPONDENT ) APPELLANT BY : SHRI A. K. TIBREWAL, FCA REVENUE BY : DR. P. K. SRIHARI, CIT(DR) / DATE OF HEARING : 20/11/2019 /DATE OF PRONOUNCEMENT : 07/02/2020 / O R D E R PER DR. A. L. SAINI, AM: THE CAPTIONED APPEAL FILED BY THE ASSESSEE, PERTAINING TO ASSESSMENT YEAR 2014-15, IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. PRINCIPAL COMMISSIONER OF INCOME TAX-3, KOLKATA, DATED 25.03.2019, U/S 263(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS UNDER: 1. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. PR. COMMISSIONER OF INCOME TAX-3, KOLKATA ERRED IN ASSUMING JURISDICTION UNDER SECTION 263 OF THE INCOME TAX ACT, 1961, WHEN THE ASSESSMENT ORDER DATED 25 TH SEPTEMBER 2014 PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE SAID ACT WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE WITHIN THE MEANING OF SECTION 263 OF THE ACT. 2. THAT THE LD. PR. COMMISSIONER OF INCOME TAX-3, KOLKATA ERRED IN ASSUMING JURISDICTION UNDER SECTION 263 OF THE ACT TO HOLD THAT THE RENTAL INCOME FROM IMMOVEABLE PROPERTY OWNED BY THE APPELLANT COMPANY WAS ASSESSABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' AS AGAINST THE RENTAL INCOME ASSESSED UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. ITA NO.1159/KOL/2019 FALCON VINCON PRIVATE LIMITED 2 3. THAT WITHOUT PREJUDICE TO THE AFORESAID GROUNDS OF APPEAL, LD. COMMISSIONER OF INCOME TAX ERRED IN ASSUMING JURISDICTION UNDER SECTION 263 OF THE ACT ON A DEBATABLE ISSUE AS WAS HELD BY HON'BLE DELHI HIGH COURT IN THE JUDGEMENT DATED 20TH MARCH, 2019 IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SUNIL LAMBA IN ITA NO. 465/2003. 4. THE APPELLANT PRAYS LEAVE OF THE HON'BLE TRIBUNAL TO ADD, AMEND, ALTER ALL OR ANY GROUNDS OF APPEAL AS THE CIRCUMSTANCES MAY WARRANT. 3. THE FACTS OF THE CASE WHICH CAN BE STATED QUITE SHORTLY ARE AS FOLLOWS: THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME ON 25/09/2014 AT A TOTAL INCOME OF RS.23,89,020/- THE RETURN WAS SELECTED FOR SCRUTINY THROUGH CASS. THE ASSESSMENT U/S. 143(3) OF THE INCOME TAX ACT, 1961 (TO BE REFERRED TO AS ACT HEREINAFTER) WAS COMPLETED ON 07/12/2016 AT AN ASSESSED INCOME OF RS. 23,89,020/-. LATER ON, LD. PRINCIPAL COMMISSIONER OF INCOME TAX HAS EXERCISED HIS JURISDICTION U/S 263 OF THE ACT. THEREFORE, THE ASSESSMENT RECORDS OF THE ASSESSEE COMPANY WERE CALLED FOR AND ON THE BASIS OF THE VERIFICATION OF THE MATERIAL AVAILABLE ON RECORD, IT WAS NOTICED BY THE LD PCIT THAT THE ORDER OF ASSESSMENT U/S. 143(3) OF THE ACT DATED 07.12.2016 FOR THE A.Y. 2014-15 WAS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE ON THE FOLLOWING GROUND:- 'THAT THE ASSESSEE HAS ERRONEOUSLY CHARGED THE INCOME FROM 'RENTING OF IMMOVABLE PROPERTY UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' WHEREAS THE SAME SHOULD HAVE BEEN CHARGED UNDER THE HEAD 'INCOME FROM BUSINESS & PROFESSION AS ITS ONLY INCOME IS INCOME FROM LETTING OUT OF IMMOVABLE PROPERTY. SO, THERE HAS BEEN AN UNDERCHARGE OF INCOME OF RS.38,10,582/-. 4. THEREFORE, THE LD PR. CIT ISSUED A SHOW-CAUSE NOTICE DATED 25.02.2019 REQUIRING CLARIFICATION AND EXPLANATION FROM THE ASSESSEE, ABOUT THE ABOVE-NOTED ISSUE. IN RESPONSE, THE ASSESSEE SUBMITTED THE WRITTEN SUBMISSIONS BEFORE THE LD PR. CIT WHICH IS REPRODUCED BELOW: (I) THE ASSESSEE COMPANY IS THE LEGAL OWNER OF THE SAID PROPERTY SITUATED AT PATTANDU AGRAHARA VILLAGE, KRISHNARAJAPURAM HOBLI, SOUTH TALUK, BANGALORE AND HAS BEEN LET OUT TO HEWLETT PACKARD INDIA SOFTWARE OPERATION PVT. LTD AND ITA NO.1159/KOL/2019 FALCON VINCON PRIVATE LIMITED 3 GLOBAL E-BUSINESS OPERATIONS PVT. LTD SINCE LAST SEVERAL YEARS. THE RENTAL INCOME FROM THE SAID PROPERTY HAS ALL ALONG BEEN OFFERED TO TAX UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' AND ASSESSED AS SUCH UNDER SCRUTINY ASSESSMENT (II) IT IS SUBMITTED THAT THE PRIMARY OBJECT CLAUSE OF THE MEMORANDUM OF ASSOCIATION DOES NOT STATE THAT THE BUSINESS OF THE ASSESSEE IS OF RENTING OF PROPERTY. THE ASSESSEE COMPANY HAS PURCHASED THE PROPERTY WITH THE INTENTION OF LETTING IT OUT AND TO EARN RENTAL INCOME FROM THE SAME. (III) WE REFER TO THE JUDGMENT OF HON'BLE CALCUTTA HIGH COURT IN THE CASE OF SHAMBHU LNVESTMENT (P) LTD. [2001] 249 ITR 47 (CAL) WHEREIN THE HONBLE HIGH COURT HELD THAT WHERE THE PRIME OBJECT OF THE ASSESSEE WAS TO LET OUT PORTION OF PROPERTY TO VARIOUS OCCUPANTS BY GIVING THEM ADDITIONAL RIGHT OF USING FURNITURE AND FIXTURES AND OTHER COMMON FACILITIES FOR WHICH RENT WAS BEING PAID MONTH BY MONTH IN ADDITION TO THE SECURITY FREE ADVANCE COVERING THE ENTIRE COST OF THE SAID IMMOVABLE PROPERTY, THE INCOME DERIVED FROM THE SAID PROPERTY WAS AN INCOME FROM PROPERTY AND SHOULD BE ASSESSED AS SUCH. THE APPEAL FILED BY REVENUE WAS UPHELD BY HON 'BLE SUPREME COURT IN (2003) 263 ITR 143(SC). 5. HOWEVER THE LD. PR. CIT REJECTED THE CONTENTION OF THE ASSESSEE AND HELD AS FOLLOWS: 4. I HAVE CAREFULLY CONSIDERED THE SUBMISSION MADE ON BEHALF OF THE ASSESSEE AND PERUSED THE MATERIALS AVAILABLE ON RECORDS. IT APPEARS FROM THE RECORDS AND DOCUMENTS FURNISHED ON BEHALF OF THE ASSESSEE COMPANY THAT DURING F.Y 2012- 13, TOTAL CREDIT TO THE PROFIT &LOSS A/C OF THE ASSESSEE COMPANY WHICH IS OF RS.2,06,94,348/- WAS ITS RENTAL INCOME. SIMILARLY, IN F.Y 2013-14, OUT OF TOTAL CREDIT TO PROFIT & LOSS A/C OF THE ASSESSEE, ONLY RS.6,77,000/- WAS PROFIT ON SALE OF PROPERTY, AND REST OF RS.2,06,94,338/- WAS ITS RENTAL INCOME WHICH IS ABOUT 97% OF TOTAL CREDIT TO THE PROFIT & LOSS A/C. IT IS CLEAR FROM THE ABOVE THAT LETTING OUT OF THE PROPERTIES WAS THE BUSINESS OF THE ASSESSEE. IN THIS CONTEXT, REFERENCE MAY BE MADE TO A LATER DECISION RENDERED BY THE HON'BLE SUPREME COURT IN THE CASE OF M/S CHENNAI PROPERTIES & INVESTMENTS LTD. VS. CIT (2015) 373 ITR 673 (SC). IN THIS CASE, HON'BLE SUPREME COURT HAD HELD THE MAIN OBJECT OF THE COMPANY WAS TO LET OUT PROPERTIES AS WELL AS MAKE ADVANCES UPON THE SECURITY OF LANDS AND BUILDINGS OR OTHER PROPERTIES OR ANY INTEREST THEREIN. IN OTHER WORDS, IT WAS HELD BY HON'BLE SUPREME COURT THAT LETTING OUT THE PROPERTIES WAS THE BUSINESS OF THE ASSESSEE AND THE ASSESSEE RIGHTLY DISCLOSED THE INCOME AS BUSINESS INCOME. IN THE INSTANT CASE, DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE ISSUE RELATING TO MAIN OBJECT' AND 'NATURE OF BUSINESS' OF THE ASSESSEE COMPANY WAS NOT EXAMINED AND VERIFIED IN THE LIGHT OF THE DECISION RENDERED BY THE HON'BLE SUPREME COURT IN THE CASE OF M/S CHENNAI PROPERTIES & INVESTMENT LTD. VS.CIT (SUPRA).THIS HAS CERTAINLY MADE THE ASSESSMENT ORDER AS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE AND THUS, AMENABLE TO INTERFERENCE BY PR.CIT BY INVOCATION OF REVISIONARY POWER OF THE ACT. IN VIEW OF THE FACTS STATED ABOVE, THE ASSESSMENT ITA NO.1159/KOL/2019 FALCON VINCON PRIVATE LIMITED 4 ORDER PASSED BY THE A.O. HAS BECOME ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE WHICH WILL CALLED FOR INTERVENTION OF THE SECTION 263 OF THE ACT. THEREFORE, LD PCIT HAS DIRECTED THE AO TO INITIATE FRESH ASSESSMENT PROCEEDINGS AND CARRY OUT NECESSARY VERIFICATION ABOUT THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE. 6. AGGRIEVED BY THE ORDER OF THE LD. PCIT U/S 263 OF THE ACT THE ASSESSEE IS IN APPEAL BEFORE US. 7. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT HOUSE PROPERTY WAS RENTED OUT BY THE ASSESSEE COMPANY AND EARLIER THE SAID HOUSE PROPERTY WAS USED TO BE TAXABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY BY THE DEPARTMENT. THE LD. COUNSEL SUBMITTED THAT FOR ASSESSMENT YEARS 2011-12 TO 2013-14, THE ASSESSING OFFICER FRAMED THE ASSESSMENT U/S 143(3) OF THE ACT AND ACCEPTED THAT RENTAL INCOME UNDER THE HEAD HOUSE PROPERTY. THE LD. COUNSEL SUBMITTED THAT THE LD. PCIT WAS OF THE VIEW THAT HOUSE PROPERTY INCOME SHOULD BE ASSESSED UNDER THE HEAD BUSINESS INCOME INSTEAD OF UNDER THE HEAD HOUSE PROPERTY. THE COUNSEL POINTED OUT THAT IF TWO VIEWS ARE POSSIBLE AND ASSESSING OFFICER HAS TAKEN ONE POSSIBLE VIEW THEN ASSESSMENT ORDER CANNOT BE TERMED AS ERRONEOUS. THE ASSESSEE HAS RIGHTLY SHOWN RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND A.O ALSO ACCEPTED UNDER THE HEAD HOUSE PROPERTY IN ASSESSMENT YEARS 2011-12 TO 2013-14. HENCE THE ORDER PASSED BY THE ASSESSING OFFICER IS NOT ERRONEOUS. 8. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE REITERATED THE STAND TAKEN BY THE LD. PR. CIT WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 9. WE HAVE HEARD BOTH THE PARTIES AND PERSUED THE MATERIALS AVAILABLE ON RECORD. THE SOLITARY DISPUTE IN THE ASSESSEE`S CASE UNDER CONSIDERATION IS THAT WHETHER RENTAL INCOME OF HOUSE PROPERTY IS ASSESSABLE UNDER THE HEAD INCOME ITA NO.1159/KOL/2019 FALCON VINCON PRIVATE LIMITED 5 FROM HOUSE PROPERTY OR UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION? THE STAND OF THE LD PCIT IS THAT RENTAL INCOME SHOULD BE ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION WHEREAS THE STAND OF THE ASSESSEE IS THAT IT SHOULD BE ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. FIRST OF ALL, WE HAVE TO SEE WHETHER THE REQUISITE JURISDICTION NECESSARY TO ASSUME REVISIONAL JURISDICTION IS THERE EXISTING BEFORE THE PR. CIT TO EXERCISE HIS POWER. FOR THAT, WE HAVE TO EXAMINE AS TO WHETHER IN THE FIRST PLACE THE ORDER OF THE ASSESSING OFFICER FOUND FAULT BY THE PRINCIPAL CIT IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. FOR THAT, LET US TAKE THE GUIDANCE OF JUDICIAL PRECEDENCE LAID DOWN BY THE HONBLE APEX COURT IN MALABAR INDUSTRIES LTD. VS. CIT [2000] 243 ITR 83(SC) WHEREIN THEIR LORDSHIP HAVE HELD THAT TWIN CONDITIONS NEEDS TO BE SATISFIED BEFORE EXERCISING REVISIONAL JURISDICTION U/S 263 OF THE ACT BY THE CIT. THE TWIN CONDITIONS ARE THAT THE ORDER OF THE ASSESSING OFFICER MUST BE ERRONEOUS AND SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN THE FOLLOWING CIRCUMSTANCES, THE ORDER OF THE AO CAN BE HELD TO BE ERRONEOUS ORDER, THAT IS (I) IF THE ASSESSING OFFICERS ORDER WAS PASSED ON INCORRECT ASSUMPTION OF FACT; OR (II) INCORRECT APPLICATION OF LAW; OR (III)ASSESSING OFFICERS ORDER IS IN VIOLATION OF THE PRINCIPLE OF NATURAL JUSTICE; OR (IV) IF THE ORDER IS PASSED BY THE ASSESSING OFFICER WITHOUT APPLICATION OF MIND; (V) IF THE AO HAS NOT INVESTIGATED THE ISSUE BEFORE HIM; THEN THE ORDER PASSED BY THE ASSESSING OFFICER CAN BE TERMED AS ERRONEOUS ORDER. COMING NEXT TO THE SECOND LIMB, WHICH IS REQUIRED TO BE EXAMINED AS TO WHETHER THE ACTIONS OF THE AO CAN BE TERMED AS PREJUDICIAL TO THE INTEREST OF REVENUE. WHEN THIS ASPECT IS EXAMINED ONE HAS TO UNDERSTAND WHAT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIES (SUPRA) HELD THAT THIS PHRASE I.E. PREJUDICIAL TO THE INTEREST OF THE REVENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. THEIR LORDSHIP HELD THAT IT HAS TO BE REMEMBERED THAT EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. WHEN THE ASSESSING OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT ITA NO.1159/KOL/2019 FALCON VINCON PRIVATE LIMITED 6 HAS RESULTED IN LOSS TO THE REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF THE REVENUE UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. 10. TAKING NOTE OF THE AFORESAID DICTUM OF LAW LAID DOWN BY THE HONBLE APEX COURT, LET US EXAMINE WHETHER ORDER PASSED BY THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. WE NOTE THAT THE ASSESSING OFFICER HIMSELF WAS ACCEPTING THE RENTAL INCOME UNDER THE HEAD HOUSE PROPERTY IN THE PAST ASSESSMENT YEARS, 2011-12, 2012-13 AND 2013-14. THE ASSESSMENTS WERE FRAMED BY AO U/S 143(3) OF THE ACT FOR THE ASSESSMENT YEARS, 2011-12, 2012-13 AND 2013-14 AND THE ASSESSING OFFICER HAD ACCEPTED THAT THE RENTAL INCOME SHOULD BE ASSESSABLE UNDER THE HEAD HOUSE PROPERTY. WE NOTE THAT THERE IS NO ANY CHANGE IN FACTS SO FAR ASSESSMENT YEAR 2014-15. THE LD PCIT TOOK STAND FOR THE FIRST TIME IN THE ASSESSMENT YEAR 2014-15 (UNDER CONSIDERATION), THAT RENTAL INCOME OF THE ASSESSEE SHOULD BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION, WHICH IS NOT ACCEPTABLE FOR THE SIMPLE REASON THAT THERE IS NO ANY CHANGE IN FACTS AND CIRCUMSTANCES OF THE ASSESSEE COMPANY. THE DEPARTMENT HAS BEEN ACCEPTING THE STAND OF THE ASSESSEE SINCE LAST THREE YEARS AND LD PCIT ALSO HAD NOT EXERCISED HIS JURISDICTION U/S 263 OF THE ACT IN THESE PAST THREE ASSESSMENT YEARS, 2011-12, 2012-13 AND 2013-14. IT IS A WELL SETTLED LEGAL POSITION THAT FACTUAL MATTERS WHICH PERMEATE THROUGH MORE THAN ONE ASSESSMENT YEAR, IF THE REVENUE HAS ACCEPTED A PARTICULAR'S VIEW OR PROPOSITION IN THE PAST, IT IS NOT OPEN FOR THE REVENUE TO TAKE ENTIRELY CONTRARY OR DIFFERENT STAND IN A LATER YEAR ON THE SAME ISSUE, INVOLVING IDENTICAL FACTS UNLESS AND UNTIL A COGENT CASE IS MADE OUT BY THE ASSESSING OFFICER ON THE BASIS OF CHANGE IN FACTS. FOR THAT WE RELY ON THE ORDER OF THE HONBLE SUPREME COURT IN RADHASOAMISATSANG VS. CIT 193 ITR 321 (SC), WHEREIN IT WAS HELD AS FOLLOWS: ITA NO.1159/KOL/2019 FALCON VINCON PRIVATE LIMITED 7 'WE ARE AWARE OF THE FACT THAT, STRICTLY SPEAKING, RES JUDICATA DOES NOT APPLY TO INCOME TAX PROCEEDINGS. AGAIN, EACH ASSESSMENT YEAR BEING A UNIT, WHAT IS DECIDED IN ONE YEAR MAY NOT APPLY IN THE FOLLOWING YEAR BUT WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WOULD NOT BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. ON THESE REASONING, IN THE ABSENCE OF ANY MATERIAL CHANGE JUSTIFYING THE REVENUE TO TAKE A DIFFERENT VIEW OF THE MATTER - AND, IF THERE WAS NO CHANGE, IT WAS IN SUPPORT OF THE ASSESSEE WE DO NOT THINK THE QUESTION SHOULD HAVE BEEN REOPENED AND CONTRARY TO WHAT HAD BEEN DECIDED BY THE COMMISSIONER OF LNCOME-TAX IN THE EARLIER PROCEEDINGS, A DIFFERENT AND CONTRADICTORY STAND SHOULD HAVE BEEN TAKEN.' WE ARE OF THE VIEW THAT THE ABOVE CITED PRECEDENTS ON PRINCIPLE OF CONSISTENCY ARE SQUARELY APPLICABLE TO THE ASSESSEE UNDER CONSIDERATION, THEREFORE ORDER PASSED BY AO IS NOT ERRONEOUS. 11. WE NOTE THAT THE OBJECT CLAUSE, AS CONTAINED IN THE MEMORANDUM AND ARTICLES OF ASSOCIATION OF COMPANY, WOULD NOT BE THE CONCLUSIVE FACTOR. MATTER HAS TO BE EXAMINED ON THE FACTS OF EACH CASE AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF RAJ DADARKAR & ASSOCIATES VS. ACIT [2017] 81 TAXMANN.COM 193(SC) WHEREIN THE HON`BLE SUPREME COURT HELD AS UNDER: 13 . BEFORE DEALING WITH THE RESPECTIVE CONTENTIONS, WE MAY STATE, IN A SUMMARY FORM, SCHEME OF THE ACT ABOUT THE COMPUTATION OF THE TOTAL INCOME. SECTION 4 OF THE ACT IS THE CHARGING SECTION AS PER WHICH THE TOTAL INCOME OF AN ASSESSEE, SUBJECT TO STATUTORY EXEMPTIONS, IS CHARGEABLE TO TAX. SECTION 14 OF THE ACT ENUMERATES FIVE HEADS OF INCOME FOR THE PURPOSE OF CHARGE OF INCOME TAX AND COMPUTATION OF TOTAL INCOME. THESE ARE: SALARIES, INCOME FROM HOUSE PROPERTY, PROFITS AND GAINS OF BUSINESS OR PROFESSION, CAPITAL GAINS AND INCOME FROM OTHER SOURCES. A PARTICULAR INCOME, THEREFORE, HAS TO BE CLASSIFIED IN ONE OF THE AFORESAID HEADS. IT IS ON THAT BASIS RULES FOR COMPUTING INCOME AND PERMISSIBLE DEDUCTIONS WHICH ARE CONTAINED IN DIFFERENT PROVISIONS OF THE ACT FOR EACH OF THE AFORESAID HEADS, ARE TO BE APPLIED. FOR EXAMPLE, PROVISIONS FOR COMPUTING THE INCOME FROM HOUSE PROPERTY ARE CONTAINED IN SECTIONS 22 TO 27 OF THE ACT AND PROFITS AND GAINS OF BUSINESS OR PROFESSION ARE TO BE COMPUTED AS PER THE PROVISIONS CONTAINED IN SECTIONS 28 TO 44AB OF THE ACT. IT IS ALSO TO BE BORNE IN MIND THAT INCOME TAX IS ONLY ONE TAX WHICH IS LEVIED ON THE SUM TOTAL OF THE INCOME CLASSIFIED AND CHARGEABLE UNDER THE VARIOUS HEADS. IT IS NOT A COLLECTION OF DISTINCT TAXES LEVIED SEPARATELY ON EACH HEAD OF THE INCOME. ITA NO.1159/KOL/2019 FALCON VINCON PRIVATE LIMITED 8 14 . THERE MAY BE INSTANCES WHERE A PARTICULAR INCOME MAY APPEAR TO FALL IN MORE THAN ONE HEAD. THESE KIND OF CASES OF OVERLAPPING HAVE FREQUENTLY ARISEN UNDER THE TWO HEADS WITH WHICH WE ARE CONCERNED IN THE INSTANT CASE AS WELL, NAMELY, INCOME FROM THE HOUSE PROPERTY ON THE ONE HAND AND PROFITS AND GAINS FROM BUSINESS ON THE OTHER HAND. ON THE FACTS OF A PARTICULAR CASE, INCOME HAS TO BE EITHER TREATED AS INCOME FROM THE HOUSE PROPERTY OR AS THE BUSINESS INCOME. TESTS WHICH ARE TO BE APPLIED FOR DETERMINING THE REAL NATURE OF INCOME ARE LAID DOWN IN JUDICIAL DECISIONS, ON THE INTERPRETATION OF THE PROVISIONS OF THESE TWO HEADS. WHEREVER THERE IS AN INCOME FROM LEASING OUT OF PREMISES AND COLLECTING RENT, NORMALLY SUCH AN INCOME IS TO BE TREATED AS INCOME FROM HOUSE PROPERTY, IN CASE PROVISIONS OF SECTION 22 OF THE ACT ARE SATISFIED WITH PRIMARY INGREDIENT THAT THE ASSESSEE IS THE OWNER OF THE SAID BUILDING OR LANDS APPURTENANT THERETO. SECTION 22 OF THE ACT MAKES 'ANNUAL VALUE' OF SUCH A PROPERTY AS INCOME CHARGEABLE TO TAX UNDER THIS HEAD. HOW ANNUAL VALUE IS TO BE DETERMINED IS PROVIDED IN SECTION 23 OF THE ACT. 'OWNER OF THE HOUSE PROPERTY' IS DEFINED IN SECTION 27 OF THE ACT WHICH INCLUDES CERTAIN SITUATIONS WHERE A PERSON NOT ACTUALLY THE OWNER SHALL BE TREATED AS DEEMED OWNER OF A BUILDING OR PART THEREOF. IN THE PRESENT CASE, THE APPELLANT IS HELD TO BE 'DEEMED OWNER' OF THE PROPERTY IN QUESTION BY VIRTUE OF SECTION 27(IIIB) OF THE ACT. ON THE OTHER HAND, UNDER CERTAIN CIRCUMSTANCES, WHERE THE INCOME MAY HAVE BEEN DERIVED FROM LETTING OUT OF THE PREMISES, IT CAN STILL BE TREATED AS BUSINESS INCOME IF LETTING OUT OF THE PREMISES ITSELF IS THE BUSINESS OF THE ASSESSEE. 15 . WHAT IS THE TEST WHICH HAS TO BE APPLIED TO DETERMINE WHETHER THE INCOME WOULD BE CHARGEABLE UNDER THE HEAD 'INCOME FROM THE HOUSE PROPERTY' OR IT WOULD BE CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS FROM BUSINESS OR PROFESSION', IS THE QUESTION. IT MAY BE MENTIONED, IN THE FIRST INSTANCE, THAT MERELY BECAUSE THERE IS AN ENTRY IN THE OBJECT CLAUSE OF THE BUSINESS SHOWING A PARTICULAR OBJECT, WOULD NOT BE THE DETERMINATIVE FACTOR TO ARRIVE AT A CONCLUSION THAT THE INCOME IS TO BE TREATED AS INCOME FROM BUSINESS. SUCH A QUESTION WOULD DEPEND UPON THE CIRCUMSTANCES OF EACH CASE. IT IS SO HELD BY THE CONSTITUTION BENCH OF THIS COURT IN SULTAN BROS. (P) LTD. V. CIT [1964] 51 ITR 353 (SC) AND WE REPRODUCE THE RELEVANT PORTION THEREOF: '7. WE THINK EACH CASE HAS TO BE LOOKED AT FROM A BUSINESSMAN'S POINT OF VIEW TO FIND OUT WHETHER THE LETTING WAS THE DOING OF A BUSINESS OR THE EXPLOITATION OF HIS PROPERTY BY AN OWNER. WE DO NOT FURTHER THINK THAT A THING CAN BY ITS VERY NATURE BE A COMMERCIAL ASSET. A COMMERCIAL ASSET IS ONLY AN ASSET USED IN A BUSINESS AND NOTHING ELSE, AND BUSINESS MAY BE CARRIED ON WITH PRACTICALLY ALL THINGS. THEREFORE, IT IS NOT POSSIBLE TO SAY THAT A PARTICULAR ACTIVITY IS BUSINESS BECAUSE IT IS CONCERNED WITH AN ASSET WITH WHICH TRADE IS COMMONLY CARRIED ON. WE FIND NOTHING IN THE CASES REFERRED, TO SUPPORT THE PROPOSITION THAT CERTAIN ASSETS ARE COMMERCIAL ASSETS IN THEIR VERY NATURE.' 16 . IN VIEW THEREOF, THE OBJECT CLAUSE, AS CONTAINED IN THE PARTNERSHIP DEED, WOULD NOT BE THE CONCLUSIVE FACTOR. MATTER HAS TO BE EXAMINED ON THE FACTS OF EACH CASE AS HELD IN SULTAN BROS. (P) LTD. CASE (SUPRA) EVEN OTHERWISE, THE OBJECT CLAUSE WHICH IS CONTAINED IN THE PARTNERSHIP FIRM IS TO TAKE THE PREMISES ON RENT ITA NO.1159/KOL/2019 FALCON VINCON PRIVATE LIMITED 9 AND TO SUB-LET. IN THE PRESENT CASE, READING OF THE OBJECT CLAUSE WOULD BRING OUT TWO DISCERNIBLE FACTS, WHICH ARE AS FOLLOWS: (A) THE APPELLANT WHICH IS A PARTNERSHIP FIRM IS T O TAKE THE PREMISES ON RENT AND TO SUB- LET THOSE PREMISES. THUS, THE BUSINESS ACTIVITY IS OF TAKING THE PREMISES ON RENT AND SUB- LETTING THEM. IN THE INSTANT CASE, BY LEGAL FICTION CONTAINED IN SECTION 27(IIIB) OF THE ACT, THE APPELLANT IS TREATED AS ' DEEMED OWNER'. (B) THE AFORESAID CLAUSE ALSO MENTIONS THAT PARTNERSHIP FIRM MAY TAKE ANY OTHER BUSINESS AS MAY BE MUTUALLY AGREED UPON BY THE PARTNERS. 17 . IN THE INSTANT CASE, THEREFORE, IT IS TO BE SEEN AS TO WHETHER THE ACTIVITY IN QUESTION WAS IN THE NATURE OF BUSINESS BY WHICH IT COULD BE SAID THAT INCOME RECEIVED BY THE APPELLANT WAS TO BE TREATED AS INCOME FROM THE BUSINESS. BEFORE US, APART FROM RELYING UPON THE AFORESAID CLAUSE IN THE PARTNERSHIP DEED TO SHOW ITS OBJECTIVE, THE LEARNED COUNSEL FOR THE APPELLANT HAS NOT PRODUCED OR REFERRED TO ANY MATERIAL. ON THE OTHER HAND, WE FIND THAT ITAT HAD SPECIFICALLY ADVERTED TO THIS ISSUE AND RECORDED THE FINDINGS ON THIS ASPECT IN THE FOLLOWING MANNER: '26. ON THIS ISSUE FACTS AVAILABLE ON RECORD ARE THAT THE ASSESSEE LET OUT SHOPS/STALLS TO VARIOUS OCCUPANTS ON A MONTHLY RENT. THE ASSESSEE COLLECTED CHARGES FOR MINOR REPAIRS, MAINTENANCE, WATER AND ELECTRICITY. AS PER THE TERMS OF ALLOTMENT BY THE BMC, THE ASSESSEE WAS BOUND TO INCUR ALL THESE EXPENSES. THE ASSESSEE, IN TURN, COLLECTED EXTRA MONEY FROM THE ALLOTTEES. THE ASSESSEE COLLECTED 20% OF MONTHLY RENT AS SERVICE CHARGES. SUCH SERVICE CHARGES WERE ALSO USED FOR PROVIDING SERVICES LIKE WATCH AND WARD, ELECTRICITY, WATER ETC. THIS IN OUR OPINION WAS INSEPARABLE FROM BASIC CHARGES OF RENT. THE ASSESSEE HAS MADE BIFURCATION OF THE RECEIPT FROM THE, OCCUPIERS OF THE SHOPS/STALLS AS RENT AND SERVICE CHARGES. AS RIGHTLY HELD BY THE ASSESSING OFFICER, DECISION OF HON'BLE SUPREME COURT IN THE CASE OF SHAMBU INVESTMENT PVT. LTD., 263 ITR 143 WILL APPLY. THE ASSESSEE HAS NOT ESTABLISHED THAT HE WAS ENGAGED IN ANY SYSTEMATIC OR ORGANIZED ACTIVITY OF PROVIDING SERVICE TO THE OCCUPIERS OF THE SHOPS/STALLS SO AS TO CONSTITUTE THE RECEIPTS FROM THEM AS BUSINESS INCOME. IN OUR OPINION, THE ASSESSEE RECEIVED INCOME BY LETTING OUT SHOPS/STALLS; AND THEREFORE, THE SAME HAS TO BE HELD AS INCOME FROM HOUSE PROPERTY.' 18 . THE ITAT BEING THE LAST FORUM INSOFAR AS FACTUAL DETERMINATION IS CONCERNED, THESE FINDINGS HAVE ATTAINED FINALITY. IN ANY CASE, AS MENTIONED ABOVE, THE LEARNED COUNSEL FOR THE APPELLANT DID NOT ARGUE ON THIS ASPECT AND DID NOT MAKE ANY EFFORTS TO SHOW AS TO HOW THE AFORESAID FINDINGS WERE PERVERSE. IT WAS FOR THE APPELLANT TO PRODUCE SUFFICIENT MATERIAL ON RECORD TO SHOW THAT ITS ENTIRE INCOME OR SUBSTANTIAL INCOME WAS FROM LETTING OUT OF THE PROPERTY WHICH WAS THE PRINCIPAL BUSINESS ACTIVITY OF THE APPELLANT. NO SUCH EFFORT WAS MADE. ITA NO.1159/KOL/2019 FALCON VINCON PRIVATE LIMITED 10 19 . RELIANCE PLACED BY THE APPELLANT ON THE JUDGMENTS OF THIS COURT IN CHENNAI PROPERTIES & INVESTMENTS LTD. (SUPRA) AND RAYALA CORPORATION (P) LTD. (SUPRA) WOULD BE OF NO AVAIL. IN CHENNAI PROPERTIES & INVESTMENTS LTD. (SUPRA) WHERE ONE OF US (SIKRI, J.) WAS A PART OF THE BENCH FOUND THAT THE ENTIRE INCOME OF THE APPELLANT WAS THROUGH LETTING OUT OF THE TWO PROPERTIES IT OWNED AND THERE WAS NO OTHER INCOME OF THE ASSESSEE EXCEPT THE INCOME FROM LETTING OUT OF THE SAID PROPERTIES, WHICH WAS THE BUSINESS OF THE ASSESSEE. ON THOSE FACTS, THIS COURT CAME TO THE CONCLUSION THAT JUDGMENT OF THIS COURT IN KARANPURA DEVELOPMENT CO. LTD. V. CIT [1962] 44 ITR 362 (SC) WAS APPLICABLE AND THE JUDGMENT OF THIS COURT IN EAST INDIA HOUSING & LAND DEVELOPMENT TRUST LTD. V. CIT [1961] 42 ITR 49 (SC) WAS HELD TO BE DISTINGUISHABLE. IN THE PRESENT CASE, WE FIND THAT SITUATION IS JUST THE REVERSE. THE JUDGMENT IN EAST INDIA HOUSING AND LAND DEVELOPMENT TRUST LTD. (SUPRA) WHICH WOULD BE APPLICABLE WHICH IS DISCUSSED IN PARA 8 OF CHENNAI PROPERTIES & INVESTMENTS LTD. CASE (SUPRA) AND THE REPRODUCTION THEREOF WOULD BRING HOME THE POINT WE ARE CANVASSING: '8. WITH THIS BACKGROUND, WE FIRST REFER TO THE JUDGMENT OF THIS COURT IN EAST INDIA HOUSING AND LAND DEVELOPMENT TRUST LTD. CASE [EAST INDIA HOUSING AND LAND DEVELOPMENT TRUST LTD. V. CIT, [1961] 42 ITR 49 (SC) ] WHICH HAS BEEN RELIED UPON BY THE HIGH COURT. THAT WAS A CASE WHERE THE COMPANY WAS INCORPORATED WITH THE OBJECT OF BUYING AND DEVELOPING LANDED PROPERTIES AND PROMOTING AND DEVELOPING MARKETS. THUS, THE MAIN OBJECTIVE OF THE COMPANY WAS TO DEVELOP THE LANDED PROPERTIES INTO MARKETS. IT SO HAPPENED THAT SOME SHOPS AND STALLS, WHICH WERE DEVELOPED BY IT, HAD BEEN RENTED OUT AND INCOME WAS DERIVED FROM THE RENTING OF THE SAID SHOPS AND STALLS. IN THOSE FACTS, THE QUESTION WHICH AROSE FOR CONSIDERATION WAS: WHETHER THE RENTAL INCOME THAT IS RECEIVED WAS TO BE TREATED AS INCOME FROM THE HOUSE PROPERTY OR THE INCOME FROM THE BUSINESS? THIS COURT WHILE HOLDING THAT THE INCOME SHALL BE TREATED AS INCOME FROM THE HOUSE PROPERTY, RESTED ITS DECISION IN THE CONTEXT OF THE MAIN OBJECTIVE OF THE COMPANY AND TOOK NOTE OF THE FACT THAT LETTING OUT OF THE PROPERTY WAS NOT THE OBJECT OF THE COMPANY AT ALL. THE COURT WAS THEREFORE, OF THE OPINION THAT THE CHARACTER OF THAT INCOME WHICH WAS FROM THE HOUSE PROPERTY HAD NOT ALTERED BECAUSE IT WAS RECEIVED BY THE COMPANY FORMED WITH THE OBJECT OF DEVELOPING AND SETTING UP PROPERTIES.' 20 . IN RAYALA CORPORATION (P) LTD. (SUPRA) FACT SITUATION WAS IDENTICAL TO THE CASE OF CHENNAI PROPERTIES & INVESTMENTS LTD. (SUPRA) AND FOR THIS REASON, RAYALA CORPORATION (P) LTD. (SUPRA) FOLLOWED CHENNAI PROPERTIES & INVESTMENTS LTD. (SUPRA) WHICH IS HELD TO BE INAPPLICABLE IN THE INSTANT CASE. 21 . FOR THE AFORESAID REASONS, WE ARE OF THE OPINION THAT THESE APPEALS LACK MERIT AND ARE, ACCORDINGLY, DISMISSED WITH COST. THEREFORE, WE NOTE THAT ASSESSING OFFICER HAS TAKEN ONE OF THE POSSIBLE VIEWS THAT THE INCOME SHOULD BE ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY, HENCE THE ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) DATED 07.12.2016 IS ITA NO.1159/KOL/2019 FALCON VINCON PRIVATE LIMITED 11 NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE. SINCE THE ORDER OF THE ASSESSING OFFICER CANNOT BE HELD TO BE ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE, IN THE FACTS AND CIRCUMSTANCES NARRATED ABOVE, THE USURPATION OF JURISDICTION EXERCISING REVISIONAL JURISDICTION BY THE PRINCIPAL CIT IS NULL IN THE EYES OF LAW AND, THEREFORE, WE ARE INCLINED TO QUASH THE VERY ASSUMPTION OF JURISDICTION TO INVOKE REVISIONAL JURISDICTION U/S 263 BY THE PRINCIPAL CIT. THEREFORE, WE QUASH THE ORDER OF THE PRINCIPAL CIT DATED 25.03.2019 BEING AB INITIO VOID. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 07/02/2020. SD/- (A. T. VARKEY) SD/- (A. L. SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA; DATED: 07/02/2020 RS, SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT- FALCON VINCON PRIVATE LIMITED 2. / THE RESPONDENT.- PR. CIT-3, KOLKATA 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, ITAT, KOLKATA 6. [ / GUARD FILE. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR, I.T.A.T, KOLKATA BENCHES, KOLKATA .