M/s Kisan Gramin Bhandaran, V. ITO,

ITA 604/DEL/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7236 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 18-04-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 05-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Difference of opinion; Change of opinion
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G NEW DELHI) BEFORE SHRI I.C. SUDHIR AND SHRI O. P , KANT ITA NO. 604 /DEL/201 6 ASSESSMENT YEAR: 200 7 - 0 8 KISAN GRAMIN BHANDARAN, VS. ITO, ASALATPUR JARAI, CHANDAUSI, CH ANDAUSI (UP) (UP) (PAN: AA IFK1137C ) (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI PIYUSH KAUSHIK , A DV. DEPARTM ENT BY: S MT. RISHPAL BEDI, SR. DR DATE OF HEARING : 18 . 0 4 .201 6 DATE OF PRONOUNCEMENT: 27 : 06 .201 6 ORDER PER I.C. SUDHIR : JUDICIAL MEMBER THE ASSESSEE HAS QUESTIONED FIRST APPELLATE ORDER ON THE GROUND THAT THE LEARNED CIT(APPEALS) WAS JUSTIFIED IN UPHOLDING RE NTAL INCOME RECEIVED ON LETTING OUT WAREHOUSES UNDER THE HEAD INCOME FROM HOUSE PROPERTY AGAINST THE BUSINESS INCOME SHOWN BY THE ASSESSEE. 2. HEARD AND CONSIDERED THE ARGUMENTS ADVANCED BY THE PARTIES IN VIEW OF ORDERS OF THE AUTHORITIES BELOW, MATERIA L AVAILABLE ON RECORD AND THE DECISIONS RELIED UPON. 3 . THE FACTS IN BRIEF ARE THAT THE ASSESSEE, A PARTNERSHIP FIRM HAD DISCLOSED RENTAL INCOME OF RS.8,11,046 AS BUSINESS INCOME IN ITS PROFIT AND LOSS ACCOUNT AND NET INCOME OF RS.2,325 WAS SHOWN AS BUSIN ESS INCOME AFTER 2 CLAIMING DEPRECIATION ON GO DOWN BUILDING AND OTHER CONSEQUENTIAL EXPENSES. THE ASSESSING OFFICER DID NOT AGREE AND HELD THE RECEIPT AS INCOME FROM HOUSE PROPERTY. THE SAME HAS BEEN UPHELD BY THE LEARNED CIT(APPEALS) WHICH HAS BEEN QUEST IONED BEFORE THE ITAT. 4. IN SUPPORT OF THE GROUND, THE LEARNED AR SUBMITTED THAT ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF WAREHOUSING AS PER THE PARTNERSHIP DEED AND REFERRED THE COPY OF PARTNERSHIP DEED MADE AVAILABLE AT PAGE NOS. 1 TO 4 OF THE PAPER BOOK UNDER THE CERTIFICATE THAT IT WAS MADE AVAILABLE BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE THE LEARNED CIT(APPEALS). HE SUBMITTED THAT THE ASSESSEE HAD TAKEN A LOAN FROM PUNJAB NATIONAL BANK FOR CONSTRUCTION OF GO DOWN AND CAPITAL IZED THE SAME IN ITS BOOKS AT RS.54,37,000 AS NOTED BY THE ASSESSING OFFICER HIMSELF VIDE ORIGINAL ORDER PASSED UNDER SEC. 143(3) OF THE ACT. THE ASSESSEE HAS CONSIDERED THE SAID GO DOWN AS ITS BUSINESS ASSETS I.E. FIXED ASSETS AS PER AUDITED ACCOUNTS MADE AVAILABLE ON RECORD WITH THE CERTIFICATE THAT IT WAS FURNISHED BEFORE THE ASSESSING OFFICER AND LEARNED CIT(APPEALS) AND CLAIMED DEPRECIATION ON THE SAME. THE ASSESSMENT ORIGINALLY FRAMED WAS REOPENED ONLY ON THE PREMISES THAT THE INCOME FROM LETTING OF G O DOWN SHOULD HAVE BEEN ASSESSED UNDER THE HEAD HOUSE PROPERTY INSTEAD OF 3 BUSINESS INCOME. THE LEARNED AR SUBMITTED THAT IN THE ORIGINAL ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAD CONSCIOUSLY ACCEPTED THE SAID INCOME AS BUSINESS INCOME . THE RECO RDED REASONS TO BELIEVE NOWHERE REFLECT THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE IN FULLY AND TRULY DISCLOSING ALL MATERIAL FACTS. THUS, THE REOPENING WAS NOT VALID AS IT WAS BASED ON CHANGE OF OPINION ONLY. IN THIS REGARD, HE PLACED RELIANCE ON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. (2002) 256 ITR 1 UPHELD BY THE HON'BLE SUPREME COURT REPORTED IN (2010) 320 ITR 561 (SC) HOLDING THAT REOPENING IS NOT PERMISSIBLE ON THE BASIS OF CHANGE OF OPINIO N AND IF NOTICE UNDER SEC. 148 IS ISSUED WITHOUT THE JURISDICTIONAL FOUNDATION AVAILABLE UNDER SEC. 147 OF THE ACT, THE NOTICE AND SUBSEQUENT PROCEEDINGS WILL BE INVALID. 5. ON MERIT, THE LEARNED AR SUBMITTED THAT THE ISSUE RAISED IS FULLY COVERED IN F AVOUR OF THE ASSESSEE BY THE RECENT DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CHENNAI PROPERTIES & INVESTMENT LTD. VS. CIT (2015) 373 ITR 673 (SC) REVERSING THE DECISION OF HON'BLE MADRAS HIGH COURT REPORTED IN 266 ITR 685 (MAD.) FOLLOWED BY T HE LEARNED CIT(APPEALS) FOR HOLDING THE RENTAL INCOME AS INCOME FROM THE HOUSE PROPERTIES. THE LEARNED AR POINTED OUT THAT THROUGHOUT IT HAS BEEN 4 REMAINED THE CASE OF THE ASSESSEE THAT IT WAS HAVING NO OTHER BUSINESS THAN LETTING OUT THE WAREHOUSE. HE SUBM ITTED FURTHER THAT THE CASE OF ASSESSEE IS ALSO FULLY SUPPORTED BY THE DECISION OF HON'BLE JURISDICTIONAL ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. GOEL BUILDERS 331 ITR 344 (ALL). HE ALSO PLACED RELIANCE ON THE FOLLOWING DECISIONS: I) CIT VS. SHAAN FINANCE PVT. LTD. 231 ITR 308 (SC); II) VORA WAREHOUSING (P) LTD. VS. ACIT 70 ITD 518; III) SHREEJI EXHIBITORS VS. ACIT ITA NO. 640/M/2014 DATED 14.8.2015; IV) M/S. BHUVAN LEASING & INFRA - STRUCTURE VS. ITO ITA NO. 4977/MUMBAI/2006 D ATED 10.6.2015. 6. THE LEARNED SENIOR DR ON THE OTHER HAND PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. HE SUBMITTED THAT THE LEARNED CIT(APPEALS) HAS DISCUSSED THE ISSUE IN DETAIL AND THEREAFTER ONLY HE HAS COME TO THE CONCLUSION THAT THE RENT AL INCOME EARNED ON LETTING OUT OF THE WAREHOUSE WAS NOTHING BUT INCOME FROM THE HOUSE PROPERTY. 7. HAVING GONE THROUGH THE ABOVE DECISIONS AND SUBMISSIONS OF THE PARTIES, WE FIND THAT THE CONTENTION OF THE ASSESSEE THAT IT NO OTHER BUSINESS THAN LETTING OUT THE WAREHOUSE HAS NOT BEEN REBUTTED BY THE REVENUE AND UNDER ALMOST SIMILAR FACTS THE HON'BLE JURISDICTIONAL ALLAHABAD HIGH COURT 5 IN THE CASE OF CIT VS. GOEL BUILDERS (SUPRA) HAS BEEN PLEASED TO DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. IN THAT CASE ALSO, THE ASSESSEE HAD EARNED INCOME FROM LETTING OF A COMMERCIAL ASSETS AND THE HON'BLE HIGH COURT HELD THAT THE INCOME DERIVED FROM LETTING OF COMMERCIAL ASSETS WILL CONSTITUTE BUSINESS INCOME AND NOT INCOME FROM HOUSE PROPERTY. THE LEARNED CIT(APPEALS) IN THE PRESENT CASE BEFORE US HAS FOLLOWED THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. CHENNAI PROPERTIES & INVESTMENTS LTD. 266 ITR 685 (MAD.) TO COME TO THE CONCLUSION THAT THE RENTAL INCOME FROM LETTING OUT WAREHOUSE IN THE PRESE NT CASE WAS NOT BUSINESS INCOME AS CLAIMED BY THE ASSESSEE BUT IT WAS INCOME FROM HOUSE PROPERTY. THE SAID DECISION HAS BEEN REVERSED BY THE HON'BLE SUPREME COURT REPORTED IN (2015) 373 ITR 673 (SC) HOLDING THAT INCOME DERIVED FROM LETTING OF A BUSINESS AS SETS WILL CONSTITUTE BUSINESS INCOME. IN THAT CASE ALSO, THE ASSETS LET OUT WAS A BUSINESS ASSET AND THE ASSESSEE HAD EARNED ITS ENTIRE INCOME FROM SAID LETTING OUT AND THERE WAS NO OTHER INCOME AS IN THE PRESENT CASE BEFORE US. WE ARE THUS OF THE VIEW THA T THE AUTHORITIES BELOW IN THE PRESENT CASE WERE NOT JUSTIFIED IN HOLDING THE RENTAL INCOME RECEIVED FROM THE BUSINESS ASSETS AS INCOME FROM HOUSE PROPERTY. RESPECTFULLY FOLLOWING THE RATIOS LAID DOWN IN THE ABOVE CITED DECISIONS BY THE LEARNED AR DIRECT T HE ASSESSING OFFICER TO ACCEPT THE CLAIMED RENTAL INCOME FROM WAREHOUSE AS 6 BUSINESS INCOME. THE GROUNDS QUESTIONING THE VALIDITY OF THE ORDERS OF THE AUTHORITIES BELOW IN TREATING THE CLAIMED BUSINESS INCOME AS INCOME FROM HOUSE PROPERTY ARE THUS ALLOWED. IN VIEW OF THIS FINDING ON THE MERITS OF THE CASE, THE VALIDITY OF INITIATION OF REOPENING PROCEEDINGS QUESTIONED BY THE ASSESSING OFFICER DURING THE HEARING OF THE PRESENT APPEAL DOES NOT REQUIRE ADJUDICATION AS HAVING BECOME ACADEMIC ONLY. 8 . IN RESULT, APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 . 06 . 201 6 SD/ - SD/ - ( O.P . K A NT ) ( I.C. S UDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 27 / 06 /201 6 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR 7 DATE DRAFT DICTATED DIRECTLY ON COMPUTER 26 . 0 6 .201 6 DRAFT PLACED BEFORE AUTHOR 26 . 0 6 .2016 DRAFT PROPOSED & PL ACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 26 .06 .2016 APPROVED DRAFT COMES TO THE SR.PS/PS 28 . 0 6 .2016 KEPT FOR PRONOUNCEMENT ON 27 .0 6 .2016 FILE SENT TO THE BENCH CLERK 28 . 0 6 .2016 DATE ON WHICH FI LE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.