M/s Batreja Udyog, Indore V. The ITO 4 (1), Indore

ITA 636/IND/2005

• Counselvise Citation: [2005] 113 COUNSELVISE.COM (IT) 4368 (ITAT-INDORE)
• Duration Of Justice: 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2005
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 08-11-2005
• Assessment Year: 1996-1997
• Appeal Filed On: 08-08-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K CHAUDHARY
• Assessee Lawyers: YOGESH A THAR; AMRITLAL JAIN CAS
• Keywords: Reopening of assessment; Recovery proceedings; Business income; Revision of order; Depreciation; Business expenditure; Initiation of penalty proceedings; Difference of opinion; Reason to believe; Change of opinion
• Section: 271(1)(c); 143(3); 244A; 142(1); 143(1); 143(2); 264; 147; 246; 148; 56; 2; 15; 139

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C.SHARMA, ACCOUNTANT MEMBER PAN NO. : AACCS4152N I.T.A.NO.635, 636, 634/IND/2006 & 613/IND/2005 A.Y. : 2001-02, 2003-04, 1999-2000 & 2000-01 SAMRUDDHI SWASTIK TRADING AND INVESTMENTS LIMITED, ACIT, CIRCLE 2(1), UJJAN BIRLAGRAM, VS NAGDA. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI YOGESH A. THAR AND SHRI AMRITLAL JAIN, CAS RESPONDENT BY : SHRI R.K. CHAUDHARY, CIT DR O R D E R PER R. C. SHARMA, A.M. THESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A) FOR THE ASSESSMENT YEARS 1999-2000, 2000-01, 2001-02 AND 2003-04 IN THE MATTER OF ORDER PASSED U/S 143(3)/148 OF THE INCOME-TAX ACT, 1961. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT THE ASSESSEE COMPANY BELONGS TO THE BIRLA GROUP OF COMPANIES. IT IS MAINLY DERIVING INCOME FROM PROPERTIES LET OUT. INV ESTMENTS ARE ALSO MADE IN CERTAIN SHARES. THE INCOME FROM THE PROPERTIES L ET OUT WAS DISCLOSED BY THE ASSESSEE UNDER THE HEAD BUSINESS INCOME SO AS TO CLAIM DEPRECIATION AND OTHER EXPENDITURE. THE RETURN WAS SIMPLY ACCEPT ED BY PROCESSING THE - 2 - SAME U/S 143(1) OF IT ACT. SUBSEQUENTLY THE CASES W ERE RE-OPENED BY THE A.O IN VIEW OF THE VARIOUS SUPREME COURT JUDGMENTS WHEREIN IT WAS HELD THAT WHEN NO SERVICES ARE RENDERED, INCOME FROM PRO PERTY SHOULD BE DISCLOSED AS INCOME FROM HOUSE PROPERTY AND NOT AS BUSINESS INCOME. ACCORDINGLY, INCOME WAS ASSESSED BY THE ASSESSING O FFICER U/S 143(3)/147 AS INCOME FROM HOUSE PROPERTY AND ASSESSEES CLAIM OF DEPRECIATION AS BUSINESS EXPENDITURE WAS DECLINED. BY THE IMPUGNED ORDER THE LD. CIT(A) CONFIRMED THE ACTION OF AO AGAINST WHICH ASSESSEE I S IN FURTHER APPEAL BEFORE US. FOLLOWING COMMON GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE IN ALL THE YEARS UNDER CONSIDERATION. GROUND NO.1 ISSUANCE ON NOTICE U/S 148 IS INVALID THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN THE LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE REOPENING OF ASSES SMENT U/S 147 BY ISSUANCE OF NOTICE U/S 148 WAS VALID. GROUND NO.2 ORDER PASSED U/S 143(3)/148 IS BARRED BY LIMITATIO N: THAT THE LD. CIT(A) FURTHER ERRED IN HOLDING THAT T HE ORDER PASSED U/S 143(3)/148 WAS VALID AND WAS NOT BARRED BY LIMITATI ON IN VIEW OF SECTION 153(2) AND IN VIEW OF JUDGMENT OF HONBLE M.P.HIGH COURT IN THE CASE OF JIJEEBAI SHINDE VS. CGT 46 CTR 122, IGNORING THAT : (A) THE ORDER SHOULD HAVE BEEN PASSED UP TO 31.03.2006 AND THE PASSING THEREOF SHOULD BE EVIDENCED BY ITS DISPATCH UP TO 3 1.03.2006, ONLY PUTTING THE DATE ON THE ORDER 31.03.2006 IS NOT S UFFICIENT. (B) THE ORDER WAS DELIVERED TO THE GOVERNMENT SPEED POS T CENTRE, UJJAIN ONLY ON 03.04.2006 ( AS PER CERTIFICATE OF POSTAL D EPARTMENT). THE - 3 - PLEAS TAKEN BY THE A.O THAT THE ORDER WAS HANDED OV ER TO THE DISPATCH SECTION WORKING UNDER THE INSTRUCTION AND DIRECTIO N OF THE ASSESSING OFFICER IS NOT SUFFICIENT. GROUND NO.3.ASSESSMENT OF LEAVE AND LICENSE INCOME AS INCOME FROM HOUSE PROPERTY INSTEAD OF BUSINESS INCOME IS INVALI D. THAT THE LD. CIT(A) FURTHER ERRED IN HOLDING THAT T HE :LEAVE AND LICENSE INCOME IS CHARGEABLE UNDER THE HEAD INCO ME FROM HOUSE PROPERTY INSTEAD OF THE HEAD BUSINESS INCOME. GROUND NO.4.DISALLOWANCE OF DEPRECIATION ON PROPERT Y USED FOR BUSINESS OF THE ASSESSEE: THAT THE LD. CIT(A) ALSO ERRED IN CONFIRMING THE DI SALLOWANCE OF DEPRECIATION OF CLAIMED ON THE PROPERTY USED FOR TH E PURPOSE OF THE BUSINESS OF THE APPELLANT. GROUND NO.5 WRONG WITHDRAWAL OF INTEREST U/S 244A OF THE ACT THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN CONFIRMING THE WITHDRAWAL OF INTERE ST GRANTED U/S 244A. GROUND NO.6 WRONG CHARGING OF INTREST U/S 234-D THAT THE LD. CIT(A) ALSO ERRED IN HOLDING THAT THE INTEREST CHARGED U/S 234-D WAS VALID. GROUND NO.7 INITIATING PENALTY PROCEEDINGS U/S 271 (1)(C): THAT THE LD. CIT (A) ALSO ERRED IN NOT HOLDING THAT THE INITIATION OF PENALTY PROCEEDINGS U/S 271 (1) (C) WAS NOT CORRECT . - 4 - 3. SHRI YOGESH JAIN, CA APPEARED ON BEHALF OF T HE ASSESSEE. VARIOUS GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE WITH REGARD TO LEGALITY OF REOPENING AND CONSEQUENT ASSESSMENT MADE THEREON, HOWEVER, DU RING THE COURSE OF HEARING LD.AUTHORIZED REPRESENTATIVE PRESSED LEGALI TY OF REOPENING OF ASSESSMENT IN THE ABSENCE OF ANY NEW MATERIAL FOUND BY THE ASSESSING OFFICER. IT WAS CONTENDED BY THE LD.AUTHORIZED REPR ESENTATIVE THAT THE ASSESSEE HAS FURNISHED ALL INFORMATION WITH RESPECT OF HIS SOURCE OF INCOME AND ASSESSMENT WAS FRAMED U/S 143(1), THEREAFTER, T HERE WAS NO ANY ADDITIONAL INFORMATION OR NEW MATERIAL BEFORE THE A O TO JUSTIFY THE AOS ACTION FOR A REASON TO BELIEVE THAT THERE WAS ESCAP EMENT OF INCOME. ON THE OTHER HAND, THE LD. CIT DR SUPPORTED THE REOPENING OF ASSESSMENT ON THE BASIS OF DETAILED FINDING RECORDED BY THE ASSESSING OFFICER AND JUSTIFICATION GIVEN BY THE CIT(A) BOTH ON FACTS AND LAW, UPHOLDIN G THE VALIDITY OF REOPENING. FROM THE RECORD WE FOUND THAT THE ASSESS EE IS AN INVESTMENT COMPANY OF GRASIM GROUP OF INDUSTRIES. RETURN WAS F ILED AT A LOSS, WHICH WAS PROCESSED U/S 143(1) FOR THE RELEVANT ASSESSMEN T YEAR UNDER CONSIDERATION AND THE RETURNED INCOME WAS ACCEPTED. THEREAFTER, THE AO RECORDED DETAILED AND SPECIFIC REASONS FOR ISSUE OF NOTICE U/S 148 TO THE EFFECT THAT RENTAL INCOME DECLARED BY THE ASSESSEE WAS TO BE CHARGED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND THE DEPRECIATION C LAIMED ON SUCH PROPERTY WAS NOT ALLOWABLE AS BUSINESS EXPENDITURE AND SUCH EXCESS CLAIM HAS RESULTED IN TO UNDER ASSESSMENT OF INCOME. CONT ENTION OF LD.AUTHORIZED REPRESENTATIVE WAS THAT OFFICE PREMISES WERE BEING USED FOR THE PURPOSE OF ASSESSEES BUSINESS, HENCE, THE QUESTION OF TAKING RENTALS IN RESPECT THEREOF AS INCOME FROM HOUSE PROPERTY DOES NOT ARISE. HE FU RTHER CONTENDED THAT THE ASSESSEE IS THE EXCLUSIVE OWNER OF THESE OFFICE PRE MISES AND THE SAME HAVE BEEN GIVEN ON LEASE AND LICENCE BASIS IN THE NORMAL COURSE OF BUSINESS OF THE - 5 - ASSESSEE. THE LD.AUTHORIZED REPRESENTATIVE DRAWN OU R ATTENTION TO THE TERMS OF LEASE AND LICECING AGREEMENT AND SUBMITTED THAT LETTING OUT OF PROPERTY WAS NOT MERELY A TRANSACTION OF LETTING OUT, BUT TH E SAME IS A COMMERCIAL EXPLOITATION OF ITS PROPERTY. AS PER LD.AUTHORIZED REPRESENTATIVE, WHEN THE LETTING OUT OF PROPERTY IS FOR COMMERCIAL EXPLOITAT ION OF THE PROPERTY, THE INCOME THEREOF IS TO BE TAXED UNDER THE HEAD INCOM E FROM BUSINESS AND NOT AS INCOME FROM HOUSE PROPERTY. ACCORDINGLY, T HERE WAS CORRECT CLAIM OF DEPRECIATION ON SUCH BUILDING, AS BUSINESS EXPEN DITURE. WITH REGARD TO THE VALIDITY OF REOPENING, LD.AUTHORIZED REPRESENTATIVE PLACED RELIANCE ON THE DECISION OF I.T.A.T., MUMBAI BENCH IN AIPITA MARKET ING (P) LIMITED VS. ITO, 21 SOT 302, IN SUPPORT OF PROPOSITION THAT IN ABSENCE OF ANY NEW MATERIAL, THE AO IS NOT EMPOWERED TO REOPEN THE ASS ESSMENT WHETHER ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(1)/143(3) . LD.AUTHORIZED REPRESENTATIVE FURTHER CONTENDED THAT WHILE HOLDING WHETHER IN A CASE WHERE ASSESSMENT IS MADE U/S 143(1) AND NOT U/S 143 (3) IT IS NOT POSSIBLE TO HOLD VIEW THAT INCOME ESCAPING ASSESSMENT IS ALWAYS JUSTIFIED. AS PER LD.AUTHORIZED REPRESENTATIVE, THE TRIBUNAL HAS ELAB ORATELY DISCUSSED THE PROPOSITION OF LAW LAID DOWN BY HON'BLE SUPREME CO URT IN THE CASE OF RAJESH JHAVERI, 291 ITR 500 AND HAVE DISTINGUISHED IT WHILE COMING TO THE CONCLUSION THAT THERE WAS NO VALID REOPENING EVEN I F THE ASSESSMENT WAS MADE U/S 143(1). THE LD.AUTHORIZED REPRESENTATIVE A LSO RELIED ON THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE O F BAPALAL & COMPANY EXPORT, 289 ITR 37, IN SUPPORT OF THE PROPOSITION T HAT IN THE ABSENCE OF NEW MATERIAL, THE AO IS NOT EMPOWERED TO REOPEN AN ASSE SSMENT IRRESPECTIVE OF WHETHER IT IS MADE U/S 143(1) OR 143(3). RELIANCE W AS ALSO PLACED ON THE DECISION OF BOMBAY I.T.A.T., IN THE CASE OF S. VINO D KUMAR & COMPANY IN I.T.A.NO. 3300/MUM/2004, ORDER DATED 3RD JULY, 2008 , AND DECISION IN CASE - 6 - OF DRIZZLE MARKETING PRIVATE LIMITED IN I.T.A.NO. 3 737/MUM/2005 ORDER DATED 22 ND JANUARY, 2008, WHEREIN IT WAS HELD THAT IN THE ABS ENCE OF FRESH MATERIAL HAD COME TO THE NOTICE OF AO, NOTICE U/S 1 48 COULD NOT BE ISSUED EVEN WHERE ASSESSMENT WAS ORIGINALLY COMPLETED U/S 143(1) OF THE ACT. 4. ON THE OTHER HAND, THE LD. CIT DR, SHRI R.K. CH AUDHARY, APPEARED ON BEHALF OF THE REVENUE AND STRONGLY SUPPORTED THE OR DERS OF THE LOWER AUTHORITIES WITH REGARD TO THE VALIDITY OF THE REOP ENING. RELIANCE WAS PLACED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CAS E OF RAJESH JHAVERI STOCK BROKERS PRIVATE LIMITED (SUPRA), WHEREIN IT W AS HELD THAT IN CASE OF INTIMATION U/S 143(1), THE AO CAN REOPEN THE ASSESS MENT IF THERE ARE REASONS TO BELIEVE THAT INCOME OF ASSESSEE HAS ESCAPED ASSE SSMENT. AS PER THE LD. CIT DR, THE ASSESSEE HAS WRONGLY CLAIMED INCOME FRO M HOUSE PROPERTY AS INCOME FROM BUSINESS IN RESPECT OF THE OFFICE PREMI SES GIVEN ON LEASE AND LICENCE AGREEMENT, ACCORDINGLY, CLAIM OF DEPRECIATI ON UNDER THE BUSINESS HEAD WAS WRONG, WHICH NECESSITATED REOPENING OF ASS ESSMENT U/S 147. RELIANCE WAS ALSO PLACED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF RAYMOND WOLLENS MILLS LIMITED, 236 ITR 34, WHREIN REOPENING OF ASSESSMENT WAS HELD TO BE JUSTIFIED U/S 147(A). 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREFU LLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND ALSO DELIBERATE D ON THE CASE LAWS CITED BY THE LD.AUTHORIZED REPRESENTATIVE, DEALT WITH BY LOW ER AUTHORITIES IN THEIR RESPECTIVE ORDERS AND ALSO CASE LAWS CITED BY LD. C IT DR IN THE CONTEXT OF FACTUAL MATRIX OF THE CASE. FROM THE RECORD, WE FOU ND THAT THE ASSESSEE WAS EARNING RENTAL INCOME IN RESPECT OF BUILDING GIVEN ON LEASE AND LICENCE. THE ASSESSEE WAS CLAIMING SUCH INCOME AS INCOME FROM BU SINESS AND THEREBY CLAIMED THE DEPRECIATION ON SUCH PROPERTY AS BUSINE SS EXPENDITURE. THE RETURN SO FILED WAS PROCESSED BY THE ASSESSING OFFI CER U/S 143(1), THEREAFTER - 7 - WITHIN THE SPECIFIED LIMIT PRESCRIBED UNDER THE STA TUTE, THE AO INITIATED PROCEEDINGS U/S 147 BY ISSUE OF NOTICE U/S 148. REA SONS FOR REOPENING WAS ALSO RECORDED. THE CRUX OF THE PROVISIONS OF SEC.14 3(1) UP TO 31 ST MARCH, 1989, WAS THAT AFTER A RETURN OF INCOME WAS FILED T HE ASSESSING OFFICER COULD MAKE AN ASSESSMENT UNDER SECTION 143(1) WITHOUT REQ UIRING PRESENCE OF THE ASSESSEE OR PRODUCTION BY HIM OF ANY EVIDENCE IN SU PPORT OF THE RETURN. WHERE THE ASSESSEE OBJECTED TO SUCH ASSESSMENT OR W HERE THE OFFICER WAS OF THE OPINION THAT THE ASSESSMENT WAS INCORRECT OR IN COMPLETE OR THE OFFICER DID NOT COMPLETE THE ASSESSMENT UNDER SECTION 143(1), B UT WANTED TO MAKE AN INQUIRY, A NOTICE UNDER SECTION 143(2) WAS REQUIRED TO BE ISSUED TO THE ASSESSEE REQUIRING HIM TO PRODUCE EVIDENCE IN SUPPO RT OF HIS RETURN. AFTER CONSIDERING THE MATERIAL AND EVIDENCE PRODUCED AND AFTER MAKING NECESSARY INQUIRIES, THE OFFICER HAD POWER TO MAKE ASSESSMENT UNDER SECTION 143(3). 6. WITH EFFECT FROM 1 ST APRIL 1989, THE PROVISIONS UNDERWENT SUBSTANTIAL AND MATERIAL CHANGES. A NEW SCHEME WAS INTRODUCED A ND THE NEW SUBSTITUTED SECTION 143(1) PRIOR TO SUBSEQUENT SUBSTITUTION WIT H EFFECT FROM 1 ST JUNE 1999 IN CLAUSE(A), A PROVISION WAS MADE THAT WHERE A RET URN WAS FILED UNDER SECTION 139 OR IN RESPONSE TO A NOTICE UNDER SECTIO N 142(1) AND ANY TAX OR REFUND WAS FOUND DUE ON THE BASIS OF SUCH RETURN AF TER ADJUSTMENT OF TAX DEDUCTED AT SOURCE, ANY ADVANCE TAX OR ANY AMOUNT P AID OTHERWISE BY WAY OF TAX OR INTEREST, AN INTIMATION WAS TO BE SENT U/S 143(1)(A), WITHOUT PREJUDICE TO THE PROVISIONS OF SECTION 143(2) TO THE ASSESSEE SPECIFYING THE SUM SO PAYABLE AND SUCH INTIMATION WAS DEEMED TO BE A NOTI CE OF DEMAND ISSUED UNDER SECTION 156. THE FIRST PROVISO TO SECTION 14 3(1)(A) ALLOWED THE DEPARTMENT TO MAKE CERTAIN ADJUSTMENTS IN THE INCOM E OR LOSS DECLARED IN THE RETURN. THEY WERE AS FOLLOWS: - 8 - A) AN ARITHMETICAL ERROR IN THE RETURN, ACCOUNTS AND D OCUMENTS ACCOMPANYING IT WERE TO BE RECTIFIED. B) ANY LOSS CARRIED FORWARD, DEDUCTIONS, ALLOWANCE OR RELIEF WHICH ON THE BASIS OF THE INFORMATION AVAILABLE IN SUCH R ETURN, ACCOUNTS OR DOCUMENTS, WAS PRIMA FACIE ADMISSIBLE, BUT WHICH WAS NOT CLAIMED IN THE RETURN WAS TO BE ALLOWED; AND C) ANY LOSS CARRIED FORWARD, RELIEF CLAIMED IN THE RET URN WHICH ON THE BASIS OF THE INFORMATION AS AVAILABLE IN SUCH RETUR N, ACCOUNTS OR DOCUMENTS WERE PRIMA FACIE INADMISSIBLE WAS TO BE D ISALLOWED. 7. WHAT WERE PERMISSIBLE UNDER THE FIRST PROVISO TO SE CTION 143(1)(A) TO BE ADJUSTED WERE (I) ONLY APPARENT ARI THMETICAL ERRORS IN THE RETURN, ACCOUNTS OR DOCUMENTS ACCOMPANYING THE RETU RN, (II) LOSS CARRIED FORWARD, DEDUCTION, ALLOWANCE OR RELIEF, WHICH WAS PRIMA FACIE ADMISSIBLE ON THE BASIS OF INFORMATION AVAILABLE IN THE RETURN BUT NOT CLAIMED IN THE RETURN, AND SIMILARLY, (III) THOSE CLAIMS WHICH WER E ON THE BASIS OF THE INFORMATION AVAILABLE IN THE RETURN, PRIMA FACIE IN ADMISSIBLE, WERE TO BE RECTIFIED/ALLOWED/DISALLOWED. WHAT WAS PERMISSIBLE FOR CORRECTION OF ERRORS APPARENT ON THE BASIS OF THE DOCUMENTS ACCOMPANYING THE RETURN? THE ASSESSING OFFICER HAD NO AUTHORITY TO MAKE ADJUSTME NTS OR ADJUDICATE UPON ANY DEBATABLE ISSUE. IN OTHER WORDS, THE ASSESSING OFFICER HAD NO POWER TO GO BEHIND THE RETURN, ACCOUNTS OR DOCUMENTS EITHER IN ALLOWING OR IN DISALLOWING DEDUCTION, ALLOWANCE OR RELIEF. - 9 - 8. THE PROVISIONS OF SECTION 143(1)(A) ARE WITHOUT PR EJUDICE TO THE PROVISIONS OF SECTION 143(2). THOUGH, TECHNICALLY THE INTIMATION ISSUED WAS DEEMED TO BE A DEMAND NOTICE ISSUED UNDER SECTION 1 56 THAT DID NOT PER SE PRECLUDE THE RIGHT OF THE ASSESSING OFFICER TO PROC EED UNDER SECTION 143(2). THAT RIGHT IS RESERVED AND NOT TAKEN AWAY. BETWEEN THE PERIOD FROM 1 ST APRIL, 1989 TO 31 ST MARCH 1998, THE SECOND PROVISO TO SECTION 143(1)(A ), REQUIRED THAT WHERE ADJUSTMENTS WERE MADE UNDER FIR ST PROVISO TO SECTION 143(1)(A) , AN INTIMATION HAD TO BE SENT TO THE ASS ESSEE NOTWITHSTANDING THAT NO TAX OR REFUND WAS DUE FROM HIM AFTER MAKING SUCH ADJUSTMENTS. WITH EFFECT FROM 1 ST APRIL 1998, SECOND PROVISO TO SECTION 143(1)(A) W AS SUBSTITUTED BY THE FINANCE ACT, 1997, WHICH WAS OPE RATIVE TILL 1 ST JUNE 1999. THE REQUIREMENT WAS THAT INTIMATION WAS TO BE SENT TO THE ASSESSEE WHETHER OR NOT ANY ADJUSTMENTS HAD BEEN MADE UNDER THE FIRS T PROVISO TO SECTION 143(1) AND NOTWITHSTANDING THAT NO TAX OR INTEREST WAS FOUND DUE FROM THE ASSESSEE CONCERNED. BETWEEN 1 ST APRIL, 1998 TO 31 ST MARCH 1999, SENDING OF AN INTIMATION UNDER SECTION 143(1)(A) WAS MANDATOR Y. THIS POSITION CONTINUED TILL ALL THE ASSESSMENT YEARS UNDER CONSI DERATION BEFORE US. 9. THUS, LEGISLATIVE INTENT IS VERY CLEAR FROM THE US E OF THE WORD INTIMATION AS SUBSTITUTED FOR ASSESSMENT, THE ASSESSING OFFICER IS FREE TO MAKE ANY ADDITION AFTER GRANT OF OPPORTUNITY TO THE ASSESSEE. BY MAKING ADJUSTMENTS UNDER THE FIRST PROVISO TO SECTION 143( 1)(A), NO ADDITION WHICH IS IMPERMISSIBLE BY THE INFORMATION IN THE RETURN COUL D BE MADE BY THE ASSESSING OFFICER. REASON IS THAT UNDER SECTION 14 3(1)(A) NO OPPORTUNITY IS GRANTED TO THE ASSESSEE AND THE ASSESSING OFFICER P ROCEEDS ON HIS OPINION ON THE BASIS OF THE RETURN FILED BY THE ASSESSEE. THE VERY FACT THAT NO OPPORTUNITY OF HEARING BEING GIVEN UNDER SECTION 14 3(1)(A) INDICATES THAT THE - 10 - ASSESSING OFFICER HAS TO PROCEED ACCEPTING THE RETU RN AND MAKING THE PERMISSIBLE ADJUSTMENTS ONLY. 10. AS A RESULT OF INSERTION OF EXPLANATION TO SECTION 143 BY THE FINANCE ACT (NO.2) OF 1991 WITH EFFECT FROM 1-10-19 91 AND SUBSEQUENTLY WITH EFFECT FROM 1-6-1994 BY FINANCE ACT 1994 AND ULTIMATELY OMITTED WITH EFFECT FROM 1-6-1999 BY EXPLANATION AS INTRODUCED B Y THE FINANCE ACT (NO.2) OF 1999, AN INTIMATION SENT TO THE ASSESSEE UNDER SECTION 143(1)(A) WAS DEEMED TO BE AN ORDER FOR PURPOSES OF SECTION 2 46 BETWEEN 1-6-94 TO 31-3-95 AND UNDER SECTION 264 BETWEEN 1-10-1991 AN D 31-5-1999. THE EXPRESSIONS INTIMATION AND ASSESSMENT ORDER HAV E BEEN USED AT DIFFERENT PLACES. CONTEXTUAL DIFFERENCE BETWEEN THE TWO EXPR ESSIONS HAS TO BE UNDERSTOOD IN THE CONTEXT OF THE EXPRESSIONS USED. ASSESSMENT IS USED AS MEANING SOME TIMES THE COMPUTATION OF INCOME SOME TIMES THE DETERMINATION OF THE AMOUNT OF TAX PAYABLE AND SOM E TIMES THE WHOLE PROCEDURE LAID DOWN IN THE ACT FOR IMPOSING LIABILI TY UPON THE TAX PAYER. IN THE SCHEME OF THINGS THE INTIMATION UNDER SECTION 1 43(1)(A) CANNOT BE TREATED TO BE AN ORDER OF ASSESSMENT. THE DISTINCTION IS A LSO WELL BROUGHT OUT BY THE STATUTORY PROVISIONS AS THEY STOOD AT DIFFERENT POI NTS OF TIME. UNDER SECTION 143(1)(A) AS STOOD PRIOR TO 1 ST APRIL 1989, THE ASSESSING OFFICER HAD TO PASS AN ORDER IF HE DECIDED TO ACCEPT THE RETURN, BUT UN DER THE AMENDED PROVISIONS, THE REQUIREMENT OF PASSING OF AN ASSESS MENT ORDER HAS BEEN DISPENSED WITH AND INSTEAD AN INTIMATION IS REQUIRE D TO BE SENT. 11. THE CENTRAL BOARD OF DIRECT TAXES (CBDT) HAD ISSUE D VARIOUS CIRCULARS IN THIS REGARD EXPLAINING THE PURPOSE BEH IND THE PROVISIONS OF SECTION 143(1)(A), NAMELY, TO MINIMIZE THE DEPARTM ENTAL WORK IN SCRUTINIZING EACH AND EVERY RETURN, AND TO CONCENTR ATE ON SELECTIVE SCRUTINY OF RETURNS. - 11 - 12. UNDER THE FIRST PROVISO TO SECTION 143(1) WITH EFF ECT FROM 1 ST JUNE,1999, EXCEPT AS PROVIDED IN THE PROVISION ITSE LF, THE ACKNOWLEDGMENT OF THE RETURN SHALL BE DEEMED TO BE INTIMATION UNDER S ECTION 143(1) WHERE (A) EITHER NO SUM IS PAYABLE BY THE ASSESSEE, OR (B) NO REFUND IS DUE TO HIM. IT IS SIGNIFICANT THAT THE ACKNOWLEDGEMENT IS MOSTLY DONE BY THE MINISTERIAL STAFF AND NOT BY THE ASSESSING OFFICER. THUS THE INTIMAT ION DOES NOT HAVE ALL THE CHARACTERISTICS OF AN ASSESSMENT AS UNDERSTOOD IN T HE COMMON PARLANCE OR EVEN DURING TAXING STATUTES. FURTHER, THE INTIMATI ON UNDER SECTION 143(1)(A) WAS DEEMED TO BE A NOTICE OF DEMAND UNDER SECTION 1 56 FOR THE PURPOSE OF MAKING MACHINERY PROVISIONS RELATING TO RECOVERY OF TAX APPLICABLE. BY SUCH APPLICATION ONLY TAX AMOUNT INDICATED TO BE PA YABLE BY THE INTIMATION BECAME PERMISSIBLE AND NOTHING MORE CAN BE INFERRED FROM THE DEEMING SECTION. 13. ON A COMPARISON OF THE PROVISIONS AS IT STOOD BEF ORE THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987 AND THE PROVISIONS A S SUBSTITUTED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, IT WOULD BE CLEAR THAT: - THE SCOPE AND EFFECT OF SECTION 147 AS SUBSTITUTED WITH EFFECT FROM 1 ST APRIL 1989, AS ALSO SECTIONS 148 TO 152 ARE SUBSTAN TIALLY DIFFERENT FROM THE PROVISIONS AS STOOD PRIOR TO SUCH SUBSTITUTION. 14. UNDER OLD PROVISIONS OF SECTION 147, SEPARATE CLAU SES (A) AND (B) LAID DOWN THE CIRCUMSTANCES UNDER WHICH INCOME ESCAPING ASSESSMENT FOR THE PAST ASSESSMENT YEARS COULD BE ASSESSED OR REASSESSED. TO CONFER JURISDICTION UNDER SECTION 147(A) TWO CONDITIONS WE RE REQUIRED TO BE SATISFIED: FIRSTLY, THE ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THAT INCOME, PROFITS OR GAINS CHARGEABLE TO INCOME-TAXAB LE HAVE ESCAPED ASSESSMENT, AND SECONDLY, HE MUST ALSO HAVE REASON TO BELIEVE THAT SUCH - 12 - ESCAPEMENT HAS OCCURRED BY REASON OF EITHER OMISSIO N OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY OR TRULY ALL MATE RIAL FACTS NECESSARY FOR HIS ASSESSMENT OF THAT YEAR. BOTH THESE CONDITIONS ARE CONDITIONS PRECEDENT TO BE SATISFIED BEFORE THE ASSESSING OFFICER COULD HAV E JURISDICTION TO ISSUE NOTICE UNDER SECTION 148 READ WITH SECTION 147(A). BUT UNDER THE SUBSTITUTED NEW SECTION 147, THE EXISTENCE OF ONLY THE FIRST CO NDITION WOULD SUFFICE. IN OTHER WORDS, IF THE ASSESSING OFFICER FOR WHATEVER REASON HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, IT CONF ERS JURISDICTION TO REOPEN THE ASSESSMENT. IT IS, HOWEVER, TO BE NOTED THAT B OTH THE CONDITIONS MUST BE FULFILLED, IF THE CASE FALLS WITHIN THE AMBIT OF PR OVISO TO SECTION 147 AS STOOD AFTER AMENDMENT. 15. THUS AS PER THE AMENDED PROVISIONS OF SEC.147, FOR RE-OPENING OF AN ASSESSMENT THERE SHOULD BE A REASON TO BELIEV E THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT FOR ANY ASSESSMENT YE AR. SUCH REASON TO BELIEVE CAN BE RAISED IN ANY MANNER AND IS NOT QUAL IFIED BY A PRE-CONDITION OF FAITH AND TRUE DISCLOSURE OF MATERIAL FACTS BY A N ASSESSEE AS CONTEMPLATED IN PRE-AMENDED SECTION 147(A) AND THE ASSESSING OFF ICER CAN, UNDER THE AMENDED PROVISIONS, LEGITIMATELY RE-OPEN THE ASSESS MENT IN RESPECT OF INCOME WHICH HAD ESCAPED ASSESSMENT. VIEWED IN THA T ANGLE, POWER TO RE- ASSESSMENT IS MUCH WIDER UNDER THE AMENDED PROVISIO NS AND CAN BE EXERCISED EVEN AFTER ASSESSEE HAS DISCLOSED FULLY A ND TRULY ALL MATERIAL FACTS. REASONS WHICH MAY WEIGH WITH THE ASSESSING OFFICER MAY BE THE RESULT OF HIS OWN INVESTIGATION AND MAY ALSO COME FROM ANY SO URCE THAT HE CONSIDERS RELIABLE. FORMING OF THIS BELIEF IS AN ADMINISTRAT IVE DECISION TO BE ARRIVED AT IN JUDICIAL MANNER. THE ASSESSING OFFICER IS REQUI RED TO ACT FAIRLY AND JUDICIOUSLY. HIS BELIEF MUST HAVE SUBSTANCE AND MU ST NOT BE A SHADOW. THERE IS NO DISPUTE TO THE WELL SETTLED LEGAL PROPO SITION THAT SUCH BELIEF - 13 - SHOULD BE BONA FIDE AND SHOULD NOT BE BASED ON VAGU E, ARBITRARY AND NON- SPECIFIC INFORMATION. 16. IN THE CASE OF RAJESH JHAVERI (SUPRA), HON'BLE SUP REME COURT CATEGORICALLY DEALT WITH REOPENING OF ASSESSMENT WI TH REGARD TO MODE UNDER WHICH ASSESSMENT HAS BEEN DONE, EITHER BY WAY OF TH E INTIMATION U/S 143(1) OR BY WAY OF SCRUTINY ASSESSMENT ORDER U/S 143(3). IT WAS OBSERVED THAT THERE IS A CONTEXTUAL DIFFERENCE BETWEEN THE TWO EXPRESSI ONS IN THE CONTEXT THE EXPRESSIONS ARE USED. THE WORD ASSESSMENT IS USED AS MEANING SOMETHING THE COMPUTATION OF INCOME, SOMETIMES DETERMINATI ON OF AMOUNT OF TAX PAYABLE AND SOMETIMES THE WHOLE PROCEDURE LAID DOW N IN THE ACT FOR IMPOSING LIABILITY UPON THE TAX PAYERS. IT WAS FURT HER OBSERVED THAT IN THE SCHEME OF THINGS, THE INTIMATION U/S 143(1)(A) CANN OT BE TREATED TO BE AN ORDER OF ASSESSMENT. THIS DISTINCTION IS ALSO WELL BROUGHT OUT BY THE STATUTORY PROVISIONS AS THEY STOOD AT DIFFERENT POINTS OF TIM E, PRIOR TO 1 ST APRIL, 1989, U/S 143(1)(A), THE AO HAD TO PASS AN ASSESSMENT ORD ER IF HE DECIDED TO ACCEPT THE RETURN, BUT UNDER THE AMENDED PROVISIONS, THE R EQUIREMENT OF PASSING OF AN ASSESSMENT ORDER HAS TO BE DISPENSED WITH AND IN STEAD OF IT AN INTIMATION IS REQUIRED TO BE SENT. IT WAS FURTHER ELABORATED T HAT UNDER THE FIRST PROVISO TO THE NEWLY SUBSTITUTED SECTION 143(1) W.E.F. 1 ST JUNE, 1999, EXCEPT AS PROVIDED IN THE PROVISION ITSELF, ACKNOWLEDGEMENT O F THE RETURN SHALL BE DEEMED TO BE INTIMATION U/S 143(1), WHERE NO SUM IS PAYABLE BY THE ASSESSEE OR WHERE NO REFUND IS DUE TO HIM. IT WAS CATEGORICA LLY OBSERVED THAT ACKNOWLEDGEMENT IS NOT DONE BY THE ASSESSING OFFICE R, BUT BY THE MINISTERIAL STAFF. UNDER THESE CIRCUMSTANCES, IT CA NNOT BE SAID THAT THE ASSESSMENT HAS BEEN MADE BY THE MINISTERIAL STAFF. THE INTIMATION U/S 143(1)(A) IS DEEMED TO BE A NOTICE OF DEMAND U/S 15 6. FOR THE APPARENT PURPOSE OF MAKING MACHINERY PROVISION RELATING TO R ECOVERY OF TAX - 14 - APPLICABLE. BY SUCH APPLICATION ONLY RECOVERY INDIC ATED TO BE PAYABLE IN THE INTIMATION BECOMES PERMISSIBLE AND NOTHING MORE CAN BE INFERRED FROM THE DEEMING PROVISION. THUS, THERE IS NO ASSESSMENT U/S 143(1)(A) OF THE ACT. 17. IT IS CRYSTAL CLEAR FROM THE ABOVE DECISION OF THE HON'BLE SUPREME COURT WHICH IS HAVING BINDING EFFECT ON US UNDER CONSTITUTION OF INDIA THAT THE PROCESSING OF RETURN U/S 143(1) DOES NOT AMOUNT TO ASSESSMENT ORDER. THEREFORE, NEITHER ANY OPINION IS FORMED NOR THERE IS A QUESTION OF CHANGE OF OPINION. SINCE INTIMATION U/S 143(1) IS N OT AN ASSESSMENT, THERE IS NO QUESTION OF ANY NEW MATERIAL TO EMPOWER THE AO T O REOPEN THE ASSESSMENT U/S 147, WHEN THERE IS A REASON TO BELIE VE THAT THERE IS ESCAPEMENT OF INCOME. IN THE INSTANT CASE BEFORE US , THE RETURN WAS PROCESSED U/S 143(1) AND NO ASSESSMENT WAS FRAMED B Y ISSUE OF NOTICE U/S 143(2). UNDER THESE FACTS AND CIRCUMSTANCES, THE PR OPOSITION OF LAW LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF RA JESH JHAVERI IS CLEARLY APPLICABLE. IT IS PERTINENT TO MENTION HERE THAT SE CTION 147 AUTHORIZES THE AO TO ASSESS OR REASSESS INCOME CHARGEABLE TO TAX, WHE N, HE HAS REASON TO BELIEVE THAT INCOME FOR ANY ASSESSMENT YEAR HAS ESC APED ASSESSMENT. IN THE INSTANT CASE, THE OBSERVATION OF THE AO TO THE EFFE CT THAT BY CLAIMING THE RETURNED INCOME UNDER WRONG HEAD, THE ASSESSEE HAS CLAIMED EXCESS DEPRECIATION, WHICH IS NOT PERMISSIBLE IN CASE OF I NCOME IS ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THIS IS A SU FFICIENT REASON TO BELIEVE THAT INCOME OF THE ASSESSEE HAS ESCAPED ASS ESSMENT, WHICH IS SUFFICIENT TO EMPOWER THE AO TO REOPEN THE ASSESSME NT BY ISSUE OF NOTICE U/S 148. HON'BLE SUPREME COURT IN THE CASE OF RAJESH JH AVERI HAS FURTHER OBSERVED THAT UNDER THE EARLIER PROVISIONS OF SECTI ON 147(A), TWO CONDITIONS WERE REQUIRED TO BE SATISFIED, FIRSTLY, THE AO MUST HAVE REASON TO BELIEVE THAT INCOME, PROFITS OR GAINS CHARGEABLE TO TAX HAVE ESC APED ASSESSMENT AND , - 15 - SECONDLY, HE MUST ALSO HAVE A REASON TO BELIEVE THA T SUCH ESCAPEMENT HAS OCCURRED BY REASON OF EITHER OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR ASSESSMENT. BOTH THESE CONDITIONS WERE REQUIRED TO BE SATISFIED BEFO RE THE AO COULD HAVE JUSTIFICATION TO ISSUE NOTICE U/S 148 READ WITH SEC TION 147(A), BUT UNDER THE SUBSTITUTED SECTION 147, EXISTENCE OF ONLY FIRST CO NDITION SUFFICES, MEANING THEREBY IF THE AO HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, IT CONFERS THE VALID JURISDICTION TO REOPEN THE ASS ESSMENT. IT IS PERTINENT TO MENTION HERE THAT BOTH THE CONDITIONS MUST BE FULFI LLED IF THE CASE IS WITHIN THE AMBIT OF PROVISO TO SECTION 147. THUS, IF MORE THAN FOUR YEARS HAVE BEEN PASSED AFTER COMPLETION OF ASSESSMENT U/S 143(3), N O REOPENING CAN BE MADE UNLESS THERE IS A FAILURE ON THE PART OF THE ASSESS EE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS IN THE RETURN OF INCOME. IT WAS CONCLUDED BY THE HON'BLE SUPREME COURT THAT SO LONG AS INGREDIENTS OF SECTIO N 147 ARE FULFILLED, THE AO IS FREE TO INITIATE PROCEEDINGS U/S 147 AND FAIL URE TO TAKE STEPS U/S 143(3) WILL NOT RENDER THE AO POWERLESS TO INITIATE REASSE SSMENT PROCEEDINGS EVEN WHEN INTIMATION U/S 143(1) HAD BEEN ISSUED. 18. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND AN Y INFIRMITY IN THE ORDER OF THE CIT(A) FOR CONFIRMING THE ACTIO N OF THE AO FOR REOPENING THE ASSESSMENT WHEN THE SAME WAS MADE WITH REFERENC E TO INTIMATION PASSED U/S 143(1). 19. NEXT GROUND TAKEN BY THE ASSESSEE RELATES TO CIT( A)S ACTION FOR HOLDING THE LEAVE AND LICENCE INCOME AS CHARGEA BLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY INSTEAD OF THE HEAD B USINESS INCOME. 20. WITH REGARD TO CHARGING OF LEAVE AND LICENCE AS IN COME FROM HOUSE PROPERTY, WE FOUND THAT THE OFFICE PREMISES O F THE ASSESSEE WAS GIVEN ON RENT AND THE RENTAL INCOME WAS OFFERED AS INCOME FROM BUSINESS AGAINST - 16 - WHICH VARIOUS EXPENDITURE INCLUDING EXPENDITURE UND ER THE HEAD DEPRECIATION ON BUILDING WAS CLAIMED. THE ISSUE A S REGARD TAXING OF INCOME RELATABLE TO A PROPERTY HAS BEEN ELABORATELY DISCUSSED BY HON'BLE CALCUTTA HIGH COURT IN THE CASE OF SHAMBHU INVESTME NT PRIVATE LIMITED, 249 ITR 47, WHICH HAS BEEN SUBSEQUENTLY AFFIRMED BY THE HON'BLE SUPREME COURT AND REPORTED AT 263 ITR 143. IT WAS HELD BY H ON'BLE COURT THAT WHILE TAXING THE INCOME IN RESPECT OF IMMOVABLE PROPERTY WHAT IS TO BE SEEN IS WHAT WAS THE PRIMARY OBJECT OF THE ASSESSEE WHILE E XPLOITING THE PROPERTY. IF IT IS FOUND BY APPLYING SUCH TEST THAT MAIN INTENTI ON IS LETTING OUT THE PROPERTY OR ANY PORTION THEREOF, THE SAME MUST BE C ONSIDERED AS RENTAL INCOME OR INCOME FROM HOUSE PROPERTY. HOWEVER, IF I T IS FOUND THAT MAIN INTENTION IS TO EXPLOIT THE PROPERTY BY WAY OF COMP LEX COMMERCIAL ACTIVITY, IN THAT EVENT, IT MUST BE HELD THAT IT IS ASSESSABL E AS BUSINESS INCOME. IN THE INSTANT CASE BEFORE US, AFTER GOING THROUGH THE TERMS AND CONDITIONS OF LEAVE AND LICENCE AGREEMENT, WE FOUND THAT INTENTIO N OF THE PARTIES TO THE SAID AGREEMENT ARE CLEAR AND UNAMBIGUOUS BY WHICH T HE ASSESSEE HAS ALLOWED SECOND PARTY TO ENJOY THE SAID PROPERTY UPO N PAYMENT OF COMPREHENSIVE MONTHLY RENT. BY THE SAID AGREEMENT, THE PRIME OBJECT OF THE ASSESSEE WAS TO LET OUT THE SAID PROPERTY WITH VARI OUS RIGHTS TO USE THE FACILITY ATTACHED TO THE SAID PROPERTY. COMPOSITE RENTAL INC OME WAS CHARGED COVERING ALL THE FACILITIES. THUS, THE MAIN INTENTION WAS TO LET OUT THE PROPERTY ON RENT RATHER THAN EXPLOITATION OF PROPERTY BY WAY OF COMP LEX COMMERCIAL ACTIVITY. THE RENTAL INCOME WAS, THEREFORE, ASSESSABLE AS INC OME FROM HOUSE PROPERTY. 21. IN SUPPORT OF ITS CONTENTION THAT RENTAL INCOME I S TO BE ASSESSED AS INCOME FROM BUSINESS, THE LD.AUTHORIZED REPRESEN TATIVE HIGHLY RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE O F KARNANI PROPERTIES LIMITED, 82 ITR 547. IN THIS CASE, ON THE BASIS OF FINDING RECORDED BY THE - 17 - TRIBUNAL TO THE EFFECT THAT INCOME WAS DERIVED BY T HE ASSESSEE, THE OWNER OF FLATS AND SHOPS, FROM THE SERVICES RENDERED IN AN O RGANIZED AND SYSTEMATIC MANNER WITH THE HELP OF LARGE STAFF FOR THE SAME, I NCOME WAS ASSESSABLE AS BUSINESS INCOME. WHEN THE DECISION OF TRIBUNAL WAS REVERSED BY THE HON'BLE HIGH COURT, IN AN APPEAL FILED BY THE ASSESSEE BEFO RE THE HON'BLE SUPREME COURT, IT WAS HELD THAT WHEN THE QUESTION REFERRED TO THE HIGH COURT SPEAKS OF ON THE FACTS AND CIRCUMSTANCES OF THE CASE, I T MEANS THE FACTS AND CIRCUMSTANCES FOUND BY THE TRIBUNAL AND NOT THE FAC TS AND CIRCUMSTANCES THAT MAY BE FOUND BY THE HIGH COURT. IT WAS OBSERVED THA T NEITHER THE HIGH COURT NOR THE HON'BLE SUPREME COURT HAS JURISDICTION TO G O BEHIND OR TO QUESTION THE STATEMENT OF FACTS MADE BY THE TRIBUNAL AND THA T STATEMENT OF CASE IS BINDING ON THE PARTIES. UNDER THESE FACTS AND CIRCU MSTANCES, THE HON'BLE SUPREME COURT AFFIRMED THE FINDING OF THE TRIBUNAL TO THE EFFECT THAT SINCE ACTIVITY WAS CARRIED ON SYSTEMATICALLY AND IN AN OR GANIZED MANNER, THE INCOME WAS ASSESSABLE AS INCOME FROM BUSINESS. 22. IN THE INSTANT CASE, THE FACTS ARE QUITE DISTINGUI SHABLE, WHEREIN THE TERMS AND CONDITIONS OF LEASE AND LICENCE AGREE MENT CLEARLY INDICATE THAT INCOME WAS ATTACHED TO THE IMMOVABLE PROPERTY, WHIC H WAS CLEARLY ASSESSABLE UNDER THE HEAD INCOME FORM HOUSE PROPER TY. 23. THE LD.AUTHORIZED REPRESENTATIVE RELIED ON THE DEC ISION OF THE I.T.A.T. CALCUTTA BENCH IN THE CASE OF PFH MALL & R ETAIL MANAGEMENT LIMITED, 110 ITD 337, WHEREIN IT WAS HELD THAT INCO ME DERIVED BY SHOPPING MALLS, DEPARTMENTAL STORES AND BUSINESS CENTRES OF PROPERTIES OWNED BY IT AND LET OUT TO VARIOUS USERS WHICH WERE PROVIDING H OST OF SERVICE/FACILITIES/AMENITIES IN THE SAID MALL/BUSIN ESS CENTRES, THE INCOME THEREFROM WAS ASSESSABLE AS BUSINESS INCOME. WE H AD CAREFULLY GONE THROUGH THIS DECISION OF THE TRIBUNAL WHEREIN THE F ACTS WERE VERY PECULIAR - 18 - AND THE ASSESSEE COMPANY HAD DEVELOPED A SHOPPING M ALL/BUSINESS CENTRES ON THE PROPERTIES OWNED BY IT, THE SAME WERE LET OU T TO VARIOUS USERS, ALONGWITH LETTING OUT THE ASSESSEE HAS ALSO PROVIDE D HOST OF SERVICES/FACILITIES/AMENITIES IN THE SAID MALLS/BUS INESS CENTRES. BY GOING THROUGH PECULIAR TERMS AND CONDITIONS OF THE AGREEM ENT SO ENTERED WITH THE USE OF SHOPS, MALLS ETC., THE TRIBUNAL FOUND THAT T HE BASIC INTENTION OF ASSESSEE WAS COMMERCIAL EXPLOITATION OF ITS PROPERT IES BY DEVELOPING THEM AS SHOPPING MALL/THE BUSINESS CENTRES AND, THEREFOR E, INCOME DERIVED THEREFROM WAS ASSESSABLE AS BUSINESS INCOME. ACCORD INGLY, THE ACTION OF CIT U/S 263 WAS SET-ASIDE, WHO HAS HELD THAT ORDER OF THE AO WAS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTERESTS OF REVENU E FOR TAXING SUCH RENTAL INCOME AS INCOME FROM BUSINESS. 24. HOWEVER, THE FACTS IN THE INSTANT CASE, ARE DISTING UISHABLE AND THE ASSESSEE HAS NOT UNDERTAKEN ANY DEVELOPMENT OF SHOP, MALLS/ BUSINESS CENTRES AND ALSO NOT PROVIDED HOST OF SERVICE AND A MENITIES AS WERE PROVIDED IN THE CASE DISCUSSED BY THE HON'BLE CALCUTTA BENCH (SUPRA). IT IS PERTINENT TO MENTION HERE THAT THE CASE LAWS RELIED ON BY LD. AR IN CASE OF AIPTA MARKETING (SUPRA) TO SUPPORT HIS LEGAL PLEA OF REOP ENING U/S 147 WITHOUT FRESH MATERIAL BEFORE THE AO, SUPPORTS THE VIEW OF AO FOR TAXING THE PROPERTY INCOME AS INCOME FROM HOUSE PROPERTY. ACCO RDINGLY, WE FOLLOW THE PROPOSITION OF LAW LAID DOWN BY THE HON'BLE SUP REME COURT IN THE CASE OF SHAMBHU INVESTMENT AND CONFIRMED THE ACTION OF L OWER AUTHORITIES FOR TAXING THE SAME AS INCOME FROM HOUSE PROPERTY. 25. IN VIEW OF ABOVE DISCUSSION RESPECTFULLY FOLLOWING THE LATEST DECISION OF HON'BLE SUPREME COURT REPORTED AT 249 I TR 47, PROPOSITION OF LAW LAID DOWN THEREIN ARE APPLICABLE TO THE FACTS O F INSTANT CASE, WE CONFIRM - 19 - THE ACTION OF THE LD. CIT(A) FOR TAXING THE RENTAL INCOME AS INCOME FROM HOUSE PROPERTY. 26. THE ASSESSEE HAS ALSO TAKEN GROUND WITH REGARD TO CHARGING OF INTEREST U/S 234D ON EXCESS REFUND DETERMINED BY RE ASSESSMENT ORDER U/S 147 OF THE ACT. FOR THIS PURPOSE, THE LD.AUTHORIZED REP RESENTATIVE PLACED RELIANCE ON THE DECISION OF THE I.T.A.T., SPECIAL B ENCH IN THE CASE OF EKTA PROMOTERS, 305 ITR 1, WHICH WAS SUBSEQUENTLY AFFIR MED BY HON'BLE DELHI HIGH COURT WHILE DECIDING THE APPEAL IN THE CASE OF M/S. MITSUBISHI CORPORATION, ORDER DATED AUGUST 30,2010, WHEREIN IT WAS HELD THAT INTEREST U/S 234-D, IS NOT CHARGEABLE FOR THE PERIOD PRIOR T O ASSESSMENT YEAR 2004-05. BOTH THE ORDERS WERE ALSO PLACED ON RECORD. 27. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. T HE AO HAS CHARGED INTEREST U/S 234D WHICH HAS BEEN CHALLENGED BY THE ASSESSEE BEFORE THE LD. CIT(A) WHO HAS CONFIRMED THE SAME. THE ISSUE WITH R EGARD TO CHARGING OF INTEREST U/S 234D, FOR THE PERIOD FALLING PRIOR TO ASSESSMENT YEAR 2004-05 IS NO MORE RES INTEGRA IN VIEW OF THE DECISION OF THE I.T.A.T. SPECIAL BENCH IN THE CASE OF EKTA PROMOTERS, (SUPRA), WHICH WAS SUBS EQUENTLY AFFIRMED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF MITSUBISHI CORPORATION VIDE ORDER DATED AUGUST 30, 2010. NO CONTRARY DECISION WAS BRO UGHT TO OUR NOTICE BY THE DEPARTMENT. ACCORDINGLY, RESPECTIVELY FOLLOWING THE DECISION OF I.T.A.T. SPECIAL BENCH WE HOLD THAT NO INTEREST IS CHARGEABL E U/S 234D PRIOR TO THE ASSESSMENT YEAR 2004-05. AS ALL THE ASSESSMENT YEAR S UNDER CONSIDERATION ARE PRIOR TO ASSESSMENT YEAR 2004-05, NO INTEREST I S CHARGEABLE U/S 234D. ACCORDINGLY, THIS GROUND OF APPEAL IS ALLOWED IN AL L THE YEARS UNDER CONSIDERATION. - 20 - 28. GROUND WITH REGARD TO SETTING OFF BUSINESS LOSS HOL DING IT TO BE CAPITAL LOSS, WAS NOT PRESSED BY THE LD.AUTHORIZED REPRESENTATIVE. THE SAME IS, THEREFORE, DISMISSED IN LIMINE IN THE RELEVANT YEARS UNDER CONSIDERATION. 29. THE GROUND TAKEN WITH REGARD TO ALLOWING INTEREST U/S 244A IS CONSEQUENTIAL IN NATURE. 30. GROUND WAS ALSO TAKEN BY THE ASSESSEE WITH REGARD TO INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT WIT H REGARD TO INCOME ESCAPING ASSESSMENT ON ACCOUNT OF TAXING THE SAME U NDER HEAD INCOME FROM HOUSE PROPERTY. THE AO HAS INITIATED PENALTY PROCE EDINGS FOR THE INCOME ESCAPED ASSESSMENT DUE TO TAXING OF RENTAL INCOME A S INCOME FROM HOUSE PROPERTY. HOWEVER, SINCE NO PENALTY HAS BEEN LEVIED AND IT WAS JUST INITIATION, NO INTERFERENCE IS REQUIRED BY THE TRIB UNAL AT THIS JUNCTURE. 31. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE ALLOWED IN PART IN TERMS INDICATED HEREINABOVE. T HIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 29 TH OCTOBER, 2010. (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 29.10.2010. CPU*