M/s. TOKHEM ENTERPRISES, MUMBAI V. ITO Wd. 20(3)(1), MUMBAI

ITA 1218/MUM/2006

• Counselvise Citation: 121819914 RSA 2006
• Duration Of Justice: 5 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 15-03-2011
• Assessment Year: 1999-2000
• Appeal Filed On: 20-02-2006
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUM EET KUMAR
• Assessee Lawyers: M SUBRAMANIAM; MATHURIA
• Keywords: Reopening of assessment; Business income; Audit objection; Rule of consistency; Question of law
• Section: 143(1); 147; 148; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J : MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI R.K.PANDA, ACCOUNTANT MEMBER ITA. NO. 1218/MUM/2006 ASSESSMENT YEAR 1999-2000 M/S. TOKHEM ENTERPRISES MUMBAI 400 026 PAN AACFT7670F VS. THE ITO, WARD 20(3)(1) MUMBAI (APPELLANT) (RESPONDENT) FOR APPELLANT : S/SHRI M.SUBRAMANIAM & M.S.MATHUR IA FOR RESPONDENT : SHRI SUMEET KUMAR, SR. D.R. ORDER PER D. MANMOHAN, V.P. 1. THIS APPEAL, FILED AT THE INSTANCE OF THE ASSES SEE-FIRM, IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A)-32, MUMBAI AND IT PERTAINS TO THE ASSESSMENT YEAR 1999-2000. 2. AS COULD BE NOTICED FROM THE GROUNDS OF APPEAL ASSESSEE CONTENDED BEFORE THE APPELLATE TRIBUNAL THAT (A) LO WER AUTHORITIES HAVE ERRED IN TREATING BUSINESS INCOME OF THE ASSESSEE A S INCOME FROM OTHER SOURCES AND (B) PRAYING FOR DIRECTION TO THE LOWER AUTHORITIES TO TREAT THE INCOME OF RS.2,22,660/- AS BUSINESS INCOM E UNDER SECTION 28 OF THE ACT. VIDE ORDER DATED 29 TH MAY, 2008 THE ITAT, J BENCH, MUMBAI DISMISSED THE APPEAL FILED BY THE ASSESSEE O N ACCOUNT OF NON- PROSECUTION OF THE APPEALS. VIDE APPLICATION DATED 18-7-2008 (MA. 468/MUM/2008) ASSESSEE REQUESTED FOR RECALL OF THE ORDER BY EXPLAINING THE REASONS FOR NON-APPEARANCE ON THE DA TE FIXED FOR HEARING AND ACCORDINGLY THE EARLIER ORDER PASSED BY THE TRIBUNAL WAS RECALLED AND THE CASE WAS RE-FIXED FOR HEARING. MR. M.S. MATHURIA APPEARED ON BEHALF OF THE ASSESSEE ON 31-3-2009 AND ARGUED THE APPEAL. ACCORDINGLY, VIDE ORDER DATED 11 TH MAY, 2009 THE ITAT, J BENCH, MUMBAI DISPOSED OF THE APPEAL ON MERITS WHER EIN THE BENCH ITA. NO. 1218/MUM/2006 M/S. TOKHEM ENTERPRISES 2 OBSERVED THAT NO BUSINESS ACTIVITY HAVING BEEN CARR IED ON BY THE ASSESSEE. INTEREST RECEIVED ON BANK FDRS WAS CORREC TLY ASSESSED TO TAX AS INCOME FROM OTHER SOURCES. ACCORDINGLY, AP PEAL WAS DISMISSED. 3. IT MAY BE NOTICED THAT APPEAL WAS FILED ON 20-2 -2006 BUT TILL THE DATE OF DISPOSAL OF THE APPEAL ASSESSEE DI D NOT CHOOSE TO FILE ANY ADDITIONAL GROUND BEFORE THE APPELLATE TRIBUNAL . ASSESSING OFFICER HAS TREATED INTEREST AS WELL AS THE RENT RECEIPTS A S INCOME FROM OTHER SOURCES AS AGAINST THE CLAIM OF THE ASSESSEE THAT T HEY WERE ASSESSABLE TO TAX AS INCOME FROM BUSINESS WHEREAS THE APPELL ATE TRIBUNAL HAS DISPOSED-OF THE ISSUE CONCERNING THE INTEREST INCOM E ONLY AND OMITTED TO CONSIDER THE ISSUE PERTAINING TO THE HEAD UNDER WHICH RENT RECEIPTS ARE ASSESSABLE TO TAX. ACCORDINGLY, M.A. WAS MOVED ON 20-7-2009 (M.A.502/MUM/2009) SEEKING RECALL OF THE ORDER OF T HE TRIBUNAL FOR ADJUDICATION OF GROUND OF APPEAL NO.1 ON MERITS. VI DE ORDER DATED 17 TH DECEMBER, 2009 THE ITAT, J BENCH, MUMBAI ADMITTED THAT AN INADVERTENT MISTAKE CREPT IN THE ORDER DATED 11-5-2 009 FOR NOT CONSIDERING GROUND NO.1 AND ACCORDINGLY RECALLED TH E ORDER OF THE TRIBUNAL DATED 11-5-2009 ONLY AS FAR AS GROUND NO. 1 IS CONCERNED. THE BENCH STATED THAT NO OTHER GROUND CAN BE CONSID ERED AT THE STAGE OF HEARING GROUND NO.1 AND IN THIS REGARD OBSERVED AS UNDER : THE REGISTRY IS DIRECTED TO FIX THE APPEAL FOR HEARING IN DUE COURSE ONLY AS FAR AS GROUND OF APPEAL NO.1 IS CONCERNED. 4. THUS, REGISTRY FIXED THE APPEAL FOR HEARING ON GROUND NO.1. THE CASE WAS ADJOURNED FROM TIME TO TIME AND THEREAFTER THE ASSESSEE MOVED AN APPLICATION DATED 12 TH MAY, 2010 IN ITA. NO. 1218/MUM/2006 SEEKING ADMISSION OF THE FOLLOWING AD DITIONAL GROUNDS OF APPEAL. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE RE-OPENING PROCEEDINGS INITIATED ITA. NO. 1218/MUM/2006 M/S. TOKHEM ENTERPRISES 3 U/S. 147 OF THE INCOME TAX ACT, 1961 IS INVALID AND BAD IN LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSMENT ORDER PASSED U/S. 143 (3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 IS INVAL ID AND BAD IN LAW. 5. AT THE TIME OF HEARING LEARNED COUNSEL, APPEARI NG ON BEHALF OF THE ASSESSEE, REQUESTED FOR ADMISSION OF THE ADDITIONAL GROUND BY STATING THAT THE DECISION ON THE AFOREMEN TIONED ISSUE WOULD GO TO THE ROOT OF THE MATTER AND HENCE, SUCH ISSUE CAN BE CONSIDERED AT ANY STAGE OF THE PROCEEDING. IN THIS REGARD, RELIANCE WAS PLACED UPON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF INVENTORS INDUSTRIAL CORPORATION LTD. VS. C IT (1992) 194 ITR 548. RELIANCE WAS ALSO PLACED UPON THE DECISION OF THE ITAT, CHENNAI, (T.M.) IN THE CASE OF HEMAL KNITTING INDUSTRIES VS. ACIT REPORTED IN (2010) 127 ITD 160 (CHENNAI) (T.M.) WHEREIN THE BEN CH OBSERVED THAT ADDITIONAL GROUND CAN BE ADMITTED AT ANY STAGE EVEN THOUGH IT WAS NOT CHALLENGED IN THE FIRST ROUND OF LITIGATION. LE ARNED COUNSEL HAS ALSO SUBMITTED THAT ASSESSMENT WAS SOUGHT TO BE REO PENED ON THE BASIS OF AN AUDIT OBJECTION THOUGH RENTAL INCOME WA S ORIGINALLY ASSESSED AS BUSINESS INCOME. RELYING UPON THE DECIS ION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. LUCAS TVS LTD. (2001) 249 ITR 306 IT WAS CONTENDED THAT THE OPINION GIVEN BY THE AUDIT PARTY CANNOT BE CONSIDERED AS A REASON FOR REOPENING THE ASSESSMENT UNDER SECTION 147 OF THE ACT. IT WAS SUBMITTED THAT THE R ETURN WAS ORIGINALLY FILED ON 25-9-1999 WHICH WAS PROCESSED UNDER SECTIO N 143 (1) OF THE ACT ON 31-3-2000 WHEREAS, NOTICE WAS ISSUED UNDER S ECTION 148 OF THE ACT ON 12-9-2002 ON THE BASIS OF THE AUDIT OBJECTIO N. REASONS SET OUT IN THE NOTICE DO NOT SPELL OUT AS TO HOW THERE WAS ESCAPEMENT OF INCOME AND EVEN THOUGH RETURN WAS PROCESSED UNDER S ECTION 143 (1) OF THE ACT IT CANNOT BE REOPENED WITHOUT JUSTIFIABL E REASONS AND IN THIS REGARD RELIANCE WAS PLACED UPON THE DECISION OF HON BLE MADRAS HIGH ITA. NO. 1218/MUM/2006 M/S. TOKHEM ENTERPRISES 4 COURT IN THE CASE OF BAPALAL & CO. EXPORTS VS. JCIT (OSD) (2007) 289 ITR 37. 6. STRONGLY OBJECTING TO THE ADDITIONAL GROUND RAI SED BY THE ASSESSEE, LEARNED D.R. SUBMITTED THAT THE APPEAL FI LED BEFORE THE APPELLATE TRIBUNAL WAS DISPOSED OF UNDER SECTION 25 4 OF THE ACT ON 11 TH MAY, 2009 AND TILL THE DATE OF DISPOSAL OF THE APP EAL, ASSESSEE DID NOT CHOOSE TO FILE ADDITIONAL GROUND. THE BENCH, HA VING HAS DISPOSED OF THE APPEAL, CAN NO LONGER EXERCISE THE JURISDICT ION, IN THE PROCESS OF HEARING THE MATTER UPON RECALL OF THE ORDER FOR THE LIMITED PURPOSE OF DISPOSING OF GROUND NO.1 TO ADMIT ANY ADDITIONAL GR OUND. IN THE INSTANT CASE, THE BENCH HAS RECALLED THE APPEAL FOR THE LIMITED PURPOSE OF DISPOSING OF GROUND NO.1 AND THAT SCOPE CANNOT BE ENLARGED SINCE THE MEMBERS BECOME FUNCTOUS OFFICIO UPON DISPOSAL OF THE APPEAL AT THE FIRST STAGE. CASE LAW RELIED UPON BY THE ASSESSEE ARE DISTINGUISHABLE ON FACTS INASMUCH AS THOSE CASES DE AL WITH THE SITUATION WHERE IN ADDITIONAL GROUND WAS RAISED IN A REGULAR APPEAL PROCEEDINGS, WHEREAS IN THE INSTANT CASE APPEAL WAS ALREADY DISPOSED OF AND THE RECALL WAS FOR THE LIMITED PURPOSE OF DI SPOSING OF THE GROUND NO.1. THUS THIS BENCH CANNOT TRAVERSE ITS JU RISDICTION TO TAKE INTO CONSIDERATION ANY NEW GROUND NOT SET FORTH EIT HER IN THE MEMORANDUM OF APPEAL FORMING PART OF FORM-36 OR ADD ITIONAL GROUNDS, IF ANY, FILED DURING THE COURSE OF HEARING OF THE APPEAL. IF THE PLEA OF THE ASSESSEE HAD TO BE ACCEPTED, IT WILL AM OUNT TO UPSETTING THE EARLIER ORDER PASSED BY THE TRIBUNAL ON MERITS. BEARING IN MIND THE FACT THAT THE APPELLATE TRIBUNAL IS NOT ENTITLE D TO REVIEW ITS EARLIER ORDERS, ADDITIONAL GROUND CANNOT BE CONSIDERED AT T HIS STAGE. 7. WITHOUT PREJUDICE TO THE ABOVE ARGUMENTS, LEARN ED D.R. SUBMITTED THAT REOPENING OF ASSESSMENT IS VALID IN THE INSTANT CASE SINCE, IT WAS NOT MERELY BASED UPON AUDIT OBJECTION BUT IT WAS TAKEN AS AN INFORMATION ON FACTS AND ON APPLICATION OF MI ND ASSESSING OFFICER HAD REOPENED THE ASSESSMENT WHICH IS PERMIS SIBLE IN LAW IN THE LIGHT OF DECISION OF THE APEX COURT IN THE CASE OF CIT VS. PVS ITA. NO. 1218/MUM/2006 M/S. TOKHEM ENTERPRISES 5 BEEDIS PVT. LTD. (1999) 237 ITR 13. IT WAS ALSO SUB MITTED THAT THE RETURN OF INCOME HAVING BEEN PROCESSED UNDER SECTIO N 143 (1) OF THE ACT, THERE WAS NO OCCASION FOR THE ASSESSING OFFICE R TO APPLY HIS MIND ON THE IMPUGNED ISSUE AND HENCE, REOPENING OF ASSES SMENT IS VALID IN THE LIGHT OF AMENDED PROVISIONS, AS HELD BY THE APE X COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS PVT. LTD. 291 ITR 500. 8. LEARNED D.R. HAS ALSO ADVERTED OUR ATTENTION TO PAGE 38 OF THE PAPER BOOK (REASONS FOR REOPENING OF ASSESSM ENT) TO SUBMIT THAT EVEN EXCESS CLAIM OF DEDUCTION WOULD BE SUFFICIENT TO REOPEN THE ASSESSMENT IN THE LIGHT OF EXPLANATION 2 TO SECTION 147 OF THE ACT. RELIANCE WAS ALSO PLACED UPON THE DECISION OF THE H ONBLE GUJARAT HIGH COURT IN THE CASE OF PRAFUL CHUNILAL PATEL AND ANOTHER VS. ACIT (1999) 236 ITR 832. 9. JOINING THE ISSUE, LEARNED COUNSEL, APPEARING O N BEHALF OF THE ASSESSEE, SUBMITTED THAT ORDER OF THE APPELLATE TRIBUNAL DOES NOT GET EFFECTED MERELY BECAUSE ADDITIONAL GROUND WAS R AISED CHALLENGING THE JURISDICTION OF THE ASSESSING OFFICER IN REOPEN ING THE ASSESSMENT AND THUS, DISPOSAL OF SUCH GROUND WOULD NOT AMOUNT TO REVIEWING THE EARLIER ORDER OF TRIBUNAL. 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS AND PERUSED THE RECORD. 11. FACTS NECESSARY FOR THE DISPOSAL OF THIS ISSUE ARE BROUGHT OUT IN SUFFICIENT DETAIL. IT MAY BE NOTICED THAT TH E APPEAL WAS ORIGINALLY DISPOSED OF BY THE BENCH ON 11 TH MAY, 2009 AND TILL THE DATE OF DISPOSAL OF THE APPEAL ASSESSEE DID NOT CHOOSE T O FILE ANY ADDITIONAL GROUND. ACCORDINGLY, AN ORDER WAS PASSED UNDER SECT ION 254 OF THE ACT. SINCE APPEAL WAS NO LONGER SUBSISTING, IF THE ASSESSEE INTENDS TO CHALLENGE THE JURISDICTION OF THE ASSESSING OFFICER IN REOPENING THE ASSESSMENT, ATLEAST AN APPLICATION OUGHT TO HAVE BE EN MOVED BEFORE THE CONCERNED BENCH SEEKING RECALL OF THE ORDER TO ENABLE THE ITA. NO. 1218/MUM/2006 M/S. TOKHEM ENTERPRISES 6 ASSESSEE TO RAISE A FRESH GROUND BUT THE ASSESSEE D ID NOT CHOOSE TO MAKE ANY APPLICATION IN THAT REGARD. BASED ON THE S PECIFIC REQUEST MADE BY THE ASSESSEE, IN ITS M.A. THE BENCH, VIDE I TS ORDER DATED 17 TH MAY, 2009, RECALLED THE EARLIER ORDER OF THE TRIBUN AL FOR THE LIMITED PURPOSE OF DISPOSING OF GROUND NO.1. ONCE THE APPEA L IS DISPOSED OF UNDER SECTION 254 (1) OF THE I.T. ACT, 1961, THE BE NCH BECOMES FUNCTOUS OFFICIO UNLESS OTHERWISE EMPOWERED AS PER THE PROCEDURE PRESCRIBED UNDER LAW. STATUTE PERMITS THE BENCH, WH ICH ORIGINALLY HEARD THE MATTER, TO RECALL ITS ORDER IN ITS ENTIRE TY OR TO RECALL IN A LIMITED WAY OR MAY PASS A CORRIGENDUM OR CORRECT CE RTAIN MISTAKES APPARENT FROM RECORD. IN THE INSTANT CASE, IN EXERC ISE OF THE POWERS VESTED IN THE BENCH UNDER SECTION 254 (2) OF THE AC T, THE BENCH RECALLED THE APPEAL FOR THE LIMITED PURPOSE OF DISP OSING OF GROUND NO.1. UNDER THESE CIRCUMSTANCES, THIS BENCH HAS NO JURISDICTION TO GO INTO THE OTHER ISSUES OTHER THAN THE ONE WHICH WAS RECALLED. ON A CONSPECTUS OF THE MATTER, WE ARE OF THE OPINION THA T AT THIS STAGE THE ASSESSEE IS NOT ENTITLED TO RAISE ANY ADDITIONAL GR OUND TO CHALLENGE THE VALIDITY OF THE RE-ASSESSMENT PROCEEDINGS. 12. CASE LAW RELIED UPON BY THE ASSESSEE ARE DISTI NGUISHABLE ON FACTS. IT MAY BE NOTICED THAT DURING THE SUBSIST ENCE OF THE REGULAR APPEAL PROCEEDINGS AN ADDITIONAL GROUND WAS RAISED AND HAVING REGARD TO THE FACT THAT IT GOES TO THE ROOT OF THE MATTER IT WAS HELD THAT THE TRIBUNAL WAS EMPOWERED TO ADMIT AN ADDITIONAL G ROUND. HOWEVER IN THE INSTANT CASE REGULAR APPEAL WAS ALREADY DISP OSED OF UNDER SECTION 254 (1) OF THE ACT AND THE ISSUE THAT IS PL ACED BEFORE US BY THE REGISTRY IS BASED ON THE LIMITED DIRECTION GIVEN BY THE EARLIER BENCH IN ITS ORDER DATED 17 TH DECEMBER, 2009 AND ENLARGING THE SCOPE OF DIRECTION BY ADMISSION OF ADDITIONAL GROUND WOULD A MOUNT TO REVIEW OF THE SAID ORDER AS WELL AS THE ORDER PASSED ON 11 TH MAY, 2009 ; IN OUR HUMBLE OPINION, IT IS NOT PERMISSIBLE IN LAW. 13. AT ANY RATE, AS RIGHTLY OBSERVED BY THE LEARNE D CIT(A), NOTICE WAS ISSUED UNDER SECTION 148 OF THE ACT ON V ALID REASONS WHICH ITA. NO. 1218/MUM/2006 M/S. TOKHEM ENTERPRISES 7 INDICATE THAT THE ASSESSEE HAS NOT FURNISHED CORREC T INFORMATION IN THE ORIGINAL RETURN OF INCOME AND THUS, IT CANNOT BE SA ID TO BE BASED ON THE AUDIT OBJECTION ON A QUESTION OF LAW. THE FACT THAT THE INTEREST INCOME WAS HELD TO BE INCOME FROM OTHER SOURCES, BY THE APPELLATE TRIBUNAL, AS AGAINST THE CLAIM OF THE ASSESSEE THAT IT IS BUSINESS INCOME INDICATE THAT THE CLAIM OF THE ASSESSEE IN THE ORIGINAL RETURN OF INCOME IS NOT IN ACCORDANCE WITH LAW. SINCE RETU RN WAS PROCESSED ORIGINALLY UNDER SECTION 143(1) OF THE ACT WITHOUT MAKING ANY ENQUIRY OR SCRUTINY, ISSUANCE OF NOTICE UNDER SECTION 148 O F THE ACT, IN THE CIRCUMSTANCES OF THE CASE, IS JUSTIFIED. 14. COMING TO THE MAIN ISSUE URGED IN GROUND NO.1, THE CASE OF THE ASSESSEE IS THAT IT HAD EARNED RENTAL INCOME FROM HOUSE PROPERTY IN ITS ORDINARY COURSE OF CARRYING ON BUSI NESS AND HENCE RECEIPTS ARE ASSESSABLE TO TAX UNDER THE HEAD PROF ITS AND GAINS OF BUSINESS AND PROFESSION. ASSESSING OFFICER HELD TH AT IT HAS TO BE TREATED AS INCOME FROM HOUSE PROPERTY WHEREAS THE L EARNED CIT(A) DIRECTED THE ASSESSING OFFICER TO TAX THE RECEIPTS OF RS.2,53,120/- UNDER THE HEAD OTHER SOURCES. UNDISPUTED FACTS AR E THAT THE ASSESSEE-FIRM HAD TAKEN ON LEASE AN IMMOVABLE PROPE RTY I.E., PREMISES NO.72, BLOCK-D, CHANAKYA PURI, NEW DELHI FROM MISS. JYOTI D/O. LATE MR. TARACHAND. THE SAME WAS LET OUT TO MR. GABORE S ANDI VIDE LEASE AGREEMENT DATED 20H JULY, 1998. THE PERIOD OF LEASE IS 24 MONTHS AND LEASE RENT IS FIXED AT RS.60,000/- PER MONTH. T HE TWO-STOREYED PREMISES APPEARS TO BE MEANT FOR RESIDENTIAL USE AN D IT WAS LET OUT TO AN EMPLOYEE OF INTERNATIONAL LABOUR ORGANISATION. A SSESSEE OFFERED THE RENTAL INCOME UNDER THE HEAD BUSINESS INCOME AND THE PROFIT THEREOF WAS FULLY SET OFF AGAINST THE CARRIED FORWA RD LOSSES FOR THE ASSESSMENT YEARS 1994-95 AND 1995-96. IT IS NOT IN DISPUTE THAT THE ASSESSMENT FOR THE ASSESSMENT YEAR 1996-97 ONWARDS WERE COMPLETED UNDER SECTION 143 (1) OF THE ACT. HOWEVER, IN THE Y EAR UNDER CONSIDERATION, THE ASSESSING OFFICER INITIATED RE-A SSESSMENT PROCEEDINGS AND CALLED FOR THE OBJECTIONS OF THE AS SESSEE AS TO WHY THE ITA. NO. 1218/MUM/2006 M/S. TOKHEM ENTERPRISES 8 INCOME EARNED FROM LETTING OUT OF THE PROPERTY SHOU LD NOT BE ASSESSED TO TAX AS INCOME FROM HOUSE PROPERTY. IN RESPONSE THERETO, ASSESSEE SUBMITTED THAT THE BUSINESS OF PARTNERSHIP WAS OF A CQUIRING LAND OR BUILDING, DEVELOPING THEM, MANAGING THEM, REALISING RENT/PROFIT THEREFROM, CONSTRUCTING BUILDINGS, SELLING/BUYING F LATS/ROOMS, GIVING THEM ON LEASE TO BUILDERS/CONSTRUCTORS ETC., AND TH US LETTING OUT OF THE PROPERTY WAS PART OF THE MAIN ACTIVITY OF THE B USINESS. 15. ASSESSING OFFICER OBSERVED THAT THE ASSESSEE H AD NO OTHER ACTIVITY SUCH AS ACQUIRING NEW PREMISES OR LETTING IT OUT ETC.,; FIRM HAD TAKEN ON LEASE THE PREMISES AT CHANAKYA PURI, NEW D ELHI AND LET OUT THE SAME ON A MONTHLY RENT. THE LEASE AGREEMENT IND ICATES THAT THE RENT IS RECEIVED FOR LETTING OUT THE PREMISES FOR R ESIDENTIAL PURPOSE. UNDER THE CIRCUMSTANCES, HE CONCLUDED THAT THE INCO ME EARNED THEREFROM IS ASSESSABLE TO TAX UNDER THE HEAD INCO ME FROM HOUSE PROPERTY. 16. ON AN APPEAL FILED BY THE ASSESSEE, LEARNED CI T(A) OBSERVED THAT LETTING OUT THE IMPUGNED PREMISES WAS NOWHERE CONNECTED TO THE MAIN INTENTION ENSHRINED IN THE PA RTNERSHIP DEED AND HE HAS ALSO NOTED THE CONTENTS, VARIOUS CLAUSES IN THE LEASE DEED TO HIGHLIGHT THAT THE LEASE INCOME IS ASSESSABLE TO TAX UNDER THE HEAD OTHER SOURCES SINCE ASSESSEE WAS NOT THE OWNER OF THE PREMISES. OPERATIVE PORTION OF THE ORDER OF THE LEARNED CIT(A ), WHICH IS RELEVANT IN THIS CONTEXT, IS EXTRACTED FOR IMMEDIATE REFEREN CE : THUS, IT WILL BE SEEN THAT INTENTION OF THE LEASE AGREEMENT IS MERELY TO PERMIT AND ALLOW THE LESSEES TO CONDUC T, MANAGE AND CARRY ON THEIR LAWFUL BUSINESS FROM THE SAID PREMISES. THE APPELLANT WAS ALSO PROHIBITED FROM MA KING ANY ALTERATIONS, WITHOUT THE PERMISSION OF THE OWNE R, TO THE SAID PREMISES. AFTER GOING THROUGH CLAUSE 3, 7, 8, 13 AND 16 OF THE LEASE AGREEMENT, IT IS CLEAR THAT THE INT ENTION OF THE LEASE AGREEMENT IS TO ALLOW THE APPELLANT TO US E THE ITA. NO. 1218/MUM/2006 M/S. TOKHEM ENTERPRISES 9 ABOVE SAID PREMISES FOR THE PURPOSE OF CARRYING OUT ITS BUSINESS AND NOT TO TREAT THE PREMISES AS ITS BUSIN ESS ASSET. IN FACT THE APPELLANT WAS SPECIFICALLY PROHI BITED FROM CREATING ANY SUB-TENANCY OR ANY OTHER RIGHT OF SIMI LAR NATURE AS PER PARA 13 OF THE LEASE AGREEMENT. SINCE THE APPELLANT WAS ONLY AUTHORISED TO CARRY OUT ITS BUSI NESS FROM THE SAID PREMISES AND NOT TO USE THE SAID PREM ISES FOR THE PURPOSE OF ITS BUSINESS, RECEIPTS, IF ANY, FROM THE SAID PREMISES, CANNOT BE TREATED AS BUSINESS RECEIPTS. THEREFORE, THE SAME IS REQUIRED TO BE TAXED AS INC OME FROM OTHER SOURCES. THE INCOME FROM OTHER SOURCES OF TH E APPELLANT IS REQUIRED TO BE TAKEN AT RS.2,53,120/- I.E., THE INCOME OF THE APPELLANT WITHOUT ALLOWING FOR ANY DE DUCTION ON ACCOUNT OF INTEREST AND SALARY TO THE PARTNER. N O DEDUCTION ON ACCOUNT OF THESE EXPENSES CAN BE ALLOW ED TO THE APPELLANT WHILE COMPUTING INCOME FROM OTHER SOU RCES. THE INCOME FROM HOUSE PROPERTY, AS COMPUTED BY THE A.O., IS RS.4,05,400/- IS DELETED AND INCOME FROM OTHER S OURCES IS TAKEN AT RS.2,53,120/-. 17. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US. LE ARNED COUNSEL, APPEARING ON BEHALF OF THE ASSESSEE, SUBMI TTED THAT THE ASSESSING OFFICER HAS TREATED THE RENTAL INCOME AS INCOME FROM HOUSE PROPERTY OVERLOOKING THE FACT THAT THE ASSESSEE IS NOT OWNER OF THE PROPERTY. HE FURTHER SUBMITTED THAT THE ASSESSEE HA D TAKEN THE PREMISES ON RENT AND SUB-LET THE PREMISES INFURTHER ANCE OF THE INTENTIONS STATED IN THE PARTNERSHIP DEED AND THUS, INCOME EARNED ON THE SAID PREMISES IS ASSESSABLE TO TAX UNDER THE HE AD BUSINESS INCOME. HE ADVERTED OUR ATTENTION TO PAGE 23 OF T HE PAPER BOOK (PARTNERSHIP DEED) WHEREIN IT WAS STATED THAT THE F IRM IS ENTITLED TO CARRY ON THE BUSINESS OF ACQUIRING THE LAND, DEVELO PING THEM, REALISING RENT AND MAKING PROFIT THEREON. REFERRING TO THE DE CISION OF THE APEX COURT IN THE CASE OF S.G. MERCANTILE 83 ITR 700 IT WAS CONTENDED THAT ITA. NO. 1218/MUM/2006 M/S. TOKHEM ENTERPRISES 10 THE ACTIVITY OF LETTING OUT THE PROPERTY WOULD CONS TITUTE A BUSINESS ACTIVITY. IN THE AFORECITED DECISION IT WAS HELD TH AT RESIDUARY HEAD OF INCOME CAN BE RESORTED ONLY IF INCOME IS NOT ASSESS ABLE TO TAX UNDER ANY SPECIFIC HEAD. LEARNED COUNSEL HAS ALSO PLACED RELIANCE UPON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF CIT VS. D.S. PROMOTERS AND DEVELOPERS (P) LTD. (2009) 25 DTR (DE L) 8 TO SUBMIT THAT RENTAL INCOME HAVING BEEN ACCEPTED BY THE ASSE SSING OFFICER AS BUSINESS INCOME FOR SEVERAL ASSESSMENT YEARS, IN TH E ABSENCE OF ANY FRESH FACTS BROUGHT ON RECORD, IT HAS TO BE ASSESSE D TO TAX UNDER THE HEAD INCOME FROM BUSINESS, BY APPLYING THE RULE O F CONSISTENCY. IN THE AFORECITED DECISION, THE HONBLE DELHI HIGH COU RT OBSERVED THAT THE ASSESSEES PURPOSE WAS TO COMMERCIALLY EXPLOIT THE BUILDING AND IT WAS RUNNING ITS OWN OFFICE. IT HAD OFFERED THE USE OF ITS BAR LICENSE FOR THE PURPOSE OF RUNNING A RESTAURANT IN THE SAID PRE MISES. THUS TAXABILITY OF RENTAL INCOME AS BUSINESS INCOME IS ONE OF THE PLAUSIBLE VIEWS IN WHICH EVENT RULE OF CONSISTENCY SHOULD CERTAINLY BE APPLIED. LEARNED COUNSEL, THEREFORE, STRONGLY SUBMI TTED THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN DIRECTING THE A SSESSING OFFICER TO TAX THE RENTAL INCOME UNDER THE HEAD OTHER SOURCES . 18. ON THE OTHER HAND, LEARNED D.R. SUBMITTED THAT THE PARTNERSHIP DEED WAS NOT SIGNED, AS COULD BE NOTICE D FROM PAGE 29 OF THE PAPER BOOK, AND THUS THE CLAIM THAT THE BUSINES S OF THE FIRM WAS TO ACQUIRE LAND AND TO LET OUT THE SAME IS NOT PROV ED. EVEN IF ONE HAS TO GO BY THE PARTNERSHIP DEED, REALISING RENT IS ON LY INCIDENTAL TO THE MAIN BUSINESS OF ACQUIRING LAND OR BUILDINGS, DEVEL OPING THEM CONSTRUCTING BUILDINGS ETC., WHEREAS, IN THE INSTAN T CASE, EXCEPT THE SOLITARY CASE OF TAKING ON LEASE THE IMPUGNED PREMI SES AND LETTING OUT, THE ASSESSEE HAS NOT CARRIED ON ANY OTHER ACTIVITY WHICH IN ITSELF PROVES THAT THE ASSESSEE WAS NOT ENGAGED IN THE BUS INESS OF LETTING OUT THE PROPERTY. HE RELIED UPON THE ORDER OF THE L EARNED CIT(A) TO SUBMIT THAT THE CLAUSE IN THE LEASE DEED INDICATE T HAT THE ASSESSEE IS NOT ENTITLED TO LET OUT THE PREMISES AND WAS MERELY PERMITTED TO USE ITA. NO. 1218/MUM/2006 M/S. TOKHEM ENTERPRISES 11 THE ABOVE SAID PREMISES FOR THE PURPOSE OF CARRYING ON ITS BUSINESS AND NOT TO TREAT THE PREMISES AS ITS BUSINESS ASSET . UNDER THE CIRCUMSTANCES, LEASE RENT RECEIVED BY THE ASSESSEE CANNOT BE TREATED AS BUSINESS RECEIPTS. ASSESSEE WAS NOT OWNING THE P ROPERTY AND HENCE IT CANNOT BE ASSESSED TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. SINCE IT DOES NOT FALL UNDER ANY OF THE SPECIFIC HEADS, LEARNED CIT(A) WAS JUSTIFIED IN BRINGING TO TAX THE IMPUGNED INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. RELIANC E WAS PLACED UPON THE FOLLOWING DECISIONS : (I) BAIJNATH BRIJMOHAN & SONS P. LTD. VS. CIT (1986) 16 1 ITR 234 (BOM.) (II) UNIVERSAL PLAST LTD. VS. CIT (1999) 237 ITR 454 (S. C.) 19. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS AND PERUSED THE RECORD. IT IS NOT IN DISPUTE THAT ASSES SEE HAS NOT CARRIED ON ANY OTHER ACTIVITY EITHER IN THIS YEAR OR IN THE SUBSEQUENT YEARS TO INDICATE THAT IT WAS ENGAGED IN THE BUSINESS OF ACQ UIRING PROPERTIES AND LETTING OUT THE SAME. EVEN GOING BY THE UNSIGNE D PARTNERSHIP DEED THE MAIN INTENTION APPEARS TO BE TO ACQUIRE LA ND/BUILDING AND TO DEVELOP THE PROPERTY WHEREAS, ASSESSEE HAS NOT CARR IED ON ANY SUCH ACTIVITY IN ANY OF THE EARLIER YEARS. IN OTHERWORDS , ASSESSEE HAD NOT INTENDED TO CARRY ON ITS MAIN ACTIVITY IN THE YEAR UNDER CONSIDERATION. THE FIRM HAS MERELY TAKEN ON LEASE THE PROPERTY AT CHANKYA PURI AND THE TERMS OF AGREEMENT CLEARLY DEPICT THAT THE ASSE SSEE IS NOT ENTITLED TO SUB-LET THE PROPERTY. THEREFORE, INCOME FOR SUCH SUB-LETTING CANNOT BE TREATED AS BUSINESS INCOME. SINCE ASSESSEE IS N OT THE OWNER OF THE PROPERTY IT CANNOT BE ASSESSED TO TAX EVEN UNDER TH E HEAD PROPERTY INCOME. UNDER THE CIRCUMSTANCES, WE ARE OF THE OPI NION THAT THE LEARNED CIT(A) WAS JUSTIFIED IN HOLDING THAT THE IM PUGNED INCOME IS ASSESSABLE TO TAX UNDER THE HEAD OTHER SOURCES. W E, THEREFORE, AFFIRM THE ORDER OF THE LEARNED CIT(A) AND DISMISS THE APPEAL FILED BY THE ASSESSEE. 20. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISMISSED. ITA. NO. 1218/MUM/2006 M/S. TOKHEM ENTERPRISES 12 ORDER PRONOUNCED IN THE OPEN COURT, ON THIS THE 2 7 TH DAY OF MAY, 2011. SD/- SD/- (R.K.PANDA) (D.MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATE 27 TH MAY, 2011 VBP/- COPY TO 1. M/S. TOKHEM ENTERPRISES, 39, SHANKAR SAGAR, SOPH IA COLLEGE LANE, OFF : WARDEN ROAD, MUMBAI 400 026 PAN AACFT76 70F 2. THE I.T.O., WARD 20 (3) (1), 605, PIRAMAL CHAMBE RS, PAREL, MUMBAI 400 012. 3. CIT(A)-XXXII, MUMBAI 4. CIT-20, MUMBAI. 5. DR J BENCH 6. GUARD FILE (TRUE COPY) BY ORDER ASST. REGISTRAR, ITAT, MUMBAI BENCHES MUMBAI.