M/s Mahesh Investments, Bangalore V. ACIT, Bangalore

ITA 961/BANG/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60741 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 23-05-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 05-08-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PALANI KUMAR S
• Assessee Lawyers: ASHOK A KULKARNI
• Keywords: Business income; Principle of natural justice; Reason to believe; Reassessment proceedings
• Section: 142(1); 260A; 147; 148; 28

Judgement Text

PAGE 1 OF 19 ITA NOS.960 & 961/BANG /2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SHRI GEORGE GEORGE K, J.M AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NOS.960 & 961/BANG/2010 (ASSESSMENT YEARS 2003-04 & 2005-06) M/S MAHESH INVESTMENTS, A-1, MUSEUM TERRACE, NO.29, MUSEUM ROAD, BANGALORE-1. PA NO.AACFM 5882 C VS THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-1 (1), BANGALORE. (APPELLANT) (RESPONDENT) DATE OF HEARING : 24.05.2012 DATE OF PRONOUNCEMENT : 31.05.2012 APPELLANT BY : SHRI ASHOK A KULKARNI, ADVOCAT E REVENUE BY : SHRI PALANI KUMAR S, JCIT OR DER PER GEORGE GEORGE K : THESE TWO APPEALS OF THE ASSESSEE ARE DIRECTED A GAINST THE IMPUGNED ORDER OF THE LEARNED CIT (A)-I, BANGALORE, DATED 25.5.2010. THE RELEVANT ASSESSMENT YEARS ARE 2003-04 AND 2005-06. 2. THE ASSESSEE HAD, FOR BOTH THE AYS UNDER DISPU TE, RAISED IDENTICAL ISSUES IN AN ILLUSTRATIVE AND NARRATIVE M ANNER. SUBSEQUENTLY, THE ASSESSEE HAS COME UP WITH REVISED GROUNDS VIDE ITS APPLICATION DATED 16.9.2011. YET AGAIN, VIDE ITS REPRESENTATION DATE D 17.10.2011; THE ASSESSEE HAD SUBMITTED CONCISE GROUNDS OF IDENTICAL ISSUES F OR BOTH THE AYS. ON A PAGE 2 OF 19 ITA NOS.960 & 961/BANG /2010 2 CRITICAL EXAMINATION OF THE SAME, IT HAS BEEN NOTIC ED THAT THE CORE ISSUES RAISED ARE TWO-FOLDS, NAMELY: (I) THAT THE ASSUMPTION OF JURISDICTION U/S 147 OF THE ACT WAS INVALID; & (II) IN THE ALTERNATIVE AND WITHOUT PREJUDICE, THE INCOM E DERIVED FROM LETTING OUT OF THE PROPERTY BE TREATED AS INC OME FROM BUSINESS AS AGAINST INCOME FROM HOUSE PROPERTY. AS ALREADY POINTED OUT, THE ISSUES RAISED FOR BOTH T HE AYS BEING SIMILAR, THEY WERE HEARD, CONSIDERED TOGETHER AND DISPOSED OF F, FOR THE SAKE OF CONVENIENCE IN THIS COMMON ORDER. 3. BRIEFLY STATED, THE ISSUES ARE AS UNDER: THE ASSESSEE FIRM (THE ASSESSEE IN SHORT) HAD, FOR THE AY 2003-04, FURNISHED ITS RETURN OF INCOME ON 8.8.2003 , ADMITTING A TOTAL INCOME OF RS.12 LAKHS WHICH WAS, INITIALLY, PROCESS ED U/S 143(1) OF THE ACT. SUBSEQUENTLY, NOTICES U/S 143(2) AND 142(1) OF THE A CT WERE ISSUED ON 26.5.2005. HOWEVER, THE ASSESSEE HAD OBJECTED TO T HE ASSESSMENT PROCEEDINGS ON THE GROUND THAT NO NOTICE U/S 143(2) WAS ISSUED WITHIN TWELVE MONTHS FROM THE DATE OF FILING OF THE RETURN AS REQ UIRED BY THE ACT. ACCORDINGLY, THE ASSESSMENT PROCEEDING INITIATED U/S 143(2) WAS DROPPED BY THE AO. ON SCRUTINY OF P & L ACCOUNT OF THE ASSESSE E, THE AO NOTICED THAT THE ASSESSEE HAD DERIVED ONLY RENTAL INCOME, BUT, CL AIMED VARIOUS EXPENSES BY TREATING THE RENTAL AS BUSINESS INCOME. TO VER IFY THE VERACITY OF THE CLAIM OF THE ASSESSEE, A NOTICE U/S 148 OF THE ACT WAS ISSUED. THE ASSESSEE HAD RENTAL RECEIPTS OF RS.36,27,151/- FROM A PROPER TY LOCATED AT NOS.70 & 70/1, M.G. ROAD WHICH WAS TAKEN ON LEASE BY THE ASSE SSEE, OUT OF WHICH, PAGE 3 OF 19 ITA NOS.960 & 961/BANG /2010 3 EXPENSES UNDER VARIOUS HEADS WERE CLAIMED AND ADMIT TED A NET PROFIT OF RS.11,90,960/- UNDER THE HEAD INCOME FROM BUSINESS . 3.1 BRUSHING ASIDE THE ASSESSEES CONTENTIONS AS RECORDED IN HIS IMPUGNED ORDER UNDER CHALLENGE, THE AO HAD ASSESSED THE ASSESSEES INCOME AS INCOME FROM HOUSE PROPERTY AS AGAINST BUSINESS INCOME CLAIMED BY THE ASSESSEE. FOR THE AY 2005-06 TOO, ON A SIMILAR RE ASONING, THE AO HAD REOPENED THE ASSESSMENT U/S 148 OF THE ACT AND, SUB SEQUENTLY, CONCLUDED THE ASSESSMENT, TREATING THE RENTAL INCOME AS INCO ME FROM HOUSE PROPERTY AS IN THE CASE FOR THE AY 2003-04. 4. AGGRIEVED, THE ASSESSEE HAD CHALLENGED THE TWI N ISSUES, NAMELY, (I) ASSUMPTION OF JURISDICTION U/S 147 OF THE ACT; AND (II) IN ASSESSING ITS INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY F OR BOTH THE AYS UNDER CONSIDERATION. 5. AFTER DUE CONSIDERATION OF THE CONTENTIONS PUT FORTH BY THE ASSESSEE AND THE ISSUES RAISED BY THE ASSESSEE FOR B OTH THE AYS BEING IDENTICAL, THE LEARNED CIT (A) HAD, IN HIS CONSOLID ATED ORDER, OBSERVED THUS: (I) ASSUMPTION OF JURISDICTION U/S 147 OF THE ACT: 6. (ON PAGE 4)I FIND, NO MERIT IN THE ABOVE ARGU MENT. COPY OF THE RECORDED REASONS HAS NEVER BEEN REQUESTE D BY THE ASSESSEE DURING ASSESSMENT PROCEEDING AND, THEREFORE, HAS NOT BEEN SUPPLIED BY THE AO. PROBABL Y, THE APPELLANT HAD CONSTRUCTIVE NOTICE OF THE REASON S RECORDED AND, THEREFORE, DID NOT ASK FOR THE SAME. THEREFORE, AT THE APPELLATE STAGE THE GROUND THAT T HE ASSUMPTION OF JURISDICTION IS BAD IN LAW BECAUSE NO COPY PAGE 4 OF 19 ITA NOS.960 & 961/BANG /2010 4 OF REASON RECORDED WAS SUPPLIED CANNOT BE ADMITTED AND HAS TO BE TREATED AS NON-MAINTAINABLE ABINITIO. HO WEVER, I FIND THE REASONS FOR BELIEF OF ESCAPEMENT OF INCO ME FINDS PLACE IN THE BODY OF ASSESSMENT ORDER WHICH IS AS UNDER: IT WAS.ON 13.7.2006. 7. THE ABOVE SHOWS THE EXPENSES CLAIMED ARE NOT ALLOWABLE AND, THEREFORE, INCOME HAS ESCAPED ASSESS MENT BECAUSE THE ASSESSMENT OF INCOME HAS TO BE UNDER HO USE PROPERTY AND NOT BUSINESS. THUS, I ALSO FIND THAT W HILE COMPLETING THE ASSESSMENT THE AO HAS NOT TRAVELLED BEYOND THE REASONS RECORDED AND, THEREFORE, SEE NO MERIT IN THE ALLEGATION THAT THE ASSESSMENT IS BAD IN LAW INSOMUCH AS AO HAS TRAVELLED BEYOND THE REASONS RECORDED FOR INITIATION OF REASSESSMENT. NEVERTHEL ESS, IT MAY BE POINTED OUT THAT THE AO IS NOW EMPOWERED LEGA LLY TO GO BEYOND THE RECORDED REASONS BY VIRTUE OF INSERT ION OF EXPLANATION 3 TO SEC.147 BY THE FINANCE (NO.2) AC T 2009 W.R.E.F. 01-04-1989. 8. THE AR FURTHER POINTS OUT THAT THE CONSTITUTION OF THE FIRM AS PER THE PARTNERSHIP DEED WAS TO TAKE PROPERTIES ON LEASE AND AFTER IMPROVEMENT TO GIVE S UCH PROPERTIES ON HIRE OR LET IT OUT AND, THEREFORE, IT IS IMPROPER ON THE PART OF AO TO CONSIDER THAT THE FIR M WAS NOT IN THE BUSINESS OF LETTING OUT PROPERTIES AND I T IS EARNING INCOME FROM HOUSE PROPERTY AND, THEREFORE, EARNING ESCAPED INCOME BY CLAIMING UNCALLED FOR EXPE NSES. THIS ISSUE WILL BE DEALT IN DETAIL WHILE DISCUSSING THE GROUND NO.3 BELOW. HOWEVER, IT IS SETTLED LAW THAT ONCE IT IS FOUND THAT REASONS HAVE BEEN RECORDED, ITS SUFFICIENCY OR REASONABLENESS CANNOT BE ALLOWED TO B E QUESTIONED SO AS TO NULLIFY THE ASSESSMENT OR TREAT THE ASSUMPTION OF JURISDICTION VOID. PAGE 5 OF 19 ITA NOS.960 & 961/BANG /2010 5 9. IT IS ALSO POINTED OUT BY THE A R THAT THE OWNE R OF PROPERTY LOCATED AT 70 & 70/1, M.G. ROAD IS SRI A. K ANANTHA NARAIN AND SRI A K PREM NARRAIN. THEY LEASE D THAT PROPERTY TO SMT. ASHA NANJARAJ ON 21.3.1980 FOR FORTY YEARS FROM 01.04.1980. THEREFORE, IF AT ALL A NOTICE U/S 148 WAS REQUIRED TO BE ISSUED, IT SHOULD BE TO HER ONLY AND NOT THE APPELLANT FIRM. THUS, THE NOTI CE IS VOID ABINITIO AND, THEREFORE, THE CONSEQUENT ASSESS MENT SHOULD BE ANNULLED. I FIND FROM RECORDS THAT IT IS THE APPELLANT FIRM WHICH HAS SHOWN INCOME FROM SUCH PROPERTY AND NOT SMT. ASHA NANJARAJ WHO HAPPENS TO B E A PARTNER IN THE APPELLANT FIRM. IN THE DEED ITSEL F VIDE PARA 3 OF THE PARTNERSHIP DEED, IT HAS BEEN MENTION ED THAT THE FIRM HAS DEVELOPED THE PROPERTY LOCATED AT 70 & 70/1, M.G. ROAD AND HAS LET IT TO OFFICES AND SHOP AND RECOVERING RENTS FOR MANAGING AND MAINTAINING THE S AID PROPERTY. THUS, I FIND THE CLAIM OF APPELLANT PARAD OXICAL. IN ONE HAND IT SAYS THAT IT IS NOT THE FIRM BUT ITS PARTNER SMT ASHA NANJARAJ IS THE OWNER OF PROPERTY NO.70, 70 /1, M.G. ROAD, BANGALORE WHILE ON THE OTHER HAND, THE F IRM IS BEING TREATED AS BENEFICIAL OWNER SHOWING INCOME FR OM SUCH PROPERTY AS OWNER. HOWEVER, I FIND SMT ASHA NANJARAJ IS ONLY THE NOMINAL OWNER WHEREAS THE APPEL LANT FIRM IS IN THE REAL POSSESSION OF THE PROPERTY AND A LSO THE BENEFICIAL OWNER BY ENJOYING THE POSSESSION AS WELL A S THE RENTAL INCOME. THEREFORE, I FIND THE NOTICE U/S 14 8 OF I T ACT IN THE NAME OF FIRM WAS PERFECTLY IN ORDER AND , THEREFORE, THE ISSUE IS DECIDED IN FAVOUR OF THE RE VENUE. (II) INCOME ASSESSED UNDER THE HEAD HOUSE PROPERTY : 12.(ON PAGE 9).THE CONCEPT OF OWNERSHIP IS PROGRESSIVELY LIBERALIZED BY THE COURTS TO HAVE A REL AXED MEANING EVEN TO INCLUDE A BENEFICIAL OWNER AS IN TH IS CASE, THE APPELLANT IS, I FIND THE DOMINANT INTENTION IS TO EARN RENTAL INCOME AND NOT TO DO THE BUSINESS OF LETTING OUT THE PROPERTIES. ATTENDANT FACILITIES AND SERVICES HAD BEEN PROVIDED TO THE RENTED PREMISES, I.E., IN SHOP S OR PAGE 6 OF 19 ITA NOS.960 & 961/BANG /2010 6 OFFICES, TO FETCH HIGHER AND COMPETITIVE RENT. IN THE CASE OF CIT V. BOOPALAM COMMERCIAL COMPLEX & INDUSTRIES PVT. LTD., IT HAD BEEN HELD THAT THE DOM INANT INTENTION OF THE APPELLANT SHOULD BE LOOKED INTO TO ARRIVE AT THE HEAD OF INCOME. IF IT IS FOR EARNING RENTAL INCOME, THE HEAD OF INCOME WILL BE HOUSE PROPERTY. IF THE DOMINANT INTENTION IS TO EARN PROFITS BY UNDERTAKING A RISK THE HEAD OF INCOME HAS TO BE BUSINESS. HER E, THE ACTIVITY RELATING TO PROVISION OF SERVICES THOUGH IS CONTINUOUS, IN CASE OF RENTAL PREMISES IT IS A ONE TIME IMPROVEMENT AND ALSO THE ELEMENT OF RISK IS MISSING IN BOTH, I.E., RENTING OF PREMISES AS WELL AS PROVISI ON OF ATTENDANT FACILITIES AND, THEREFORE, THE INCOME CAN NOT BE TAXED UNDER THE HEAD BUSINESS. ON THE OTHER HAND , THE DOMINANT INTENTION IS EVIDENT FROM THE FACT THAT IN STEAD OF GIVING THE NAKED PREMISES ON RENT, OTHER SERVICE S HAD ALSO BEEN PROVIDED SO THAT HIGHER RENT CAN BE EARNE D. IN VIEW OF THE ABOVE ANALYSIS OF DOMINANT INTENTION, I CONCLUDE THAT THE INCOME HAS RIGHTLY BEEN ASSESSED U NDER THE HEAD HOUSE PROPERTY, 6. AGGRIEVED, THE ASSESSEE HAS COME UP WITH THE P RESENT APPEALS. DURING THE COURSE OF HEARING, THE SUBMISSIONS MADE BY THE LEARNED A R ARE SUMMARIZED AS UNDER: (I) RELYING ON THE JUDGEMENT OF THE HONBLE DELHI HIGH C OURT IN THE CASE OF KLM ROYAL DUTCH AIRLINES V ASSISTANT DIRECTO R OF INCOME TAX (292 ITR 49) AND IN THE CASE OF CIT V VED AND C O. (302 ITR 328), THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDE D THAT WHEN THE ASSESSMENT IS NOT FINALIZED IN PURSUANCE OF A R ETURN, IT IS IMPERMISSIBLE FOR THE ASSESSING OFFICER TO INITIATE PROCEEDINGS UNDER SECTION 147 OF THE ACT. (II) THAT THE ASSESSEE INFERS THAT THE RE-ASSESSMENT PRO CEEDINGS HAVE BEEN INITIATED IN THE STATUS OF A FIRM AFTER NOTICI NG THAT THE FIRM DID NOT CARRY ON ANY BUSINESS WHICH WAS THE SUBJECT M ATTER OF APPEAL BEFORE THIS BENCH; AT THE TIME OF ISSUANCE O F NOTICE U/S 148 PAGE 7 OF 19 ITA NOS.960 & 961/BANG /2010 7 OF THE ACT, THE AO BELIEVED THAT THERE WAS NO BUSIN ESS AND, IF SO, UNDER THE PROVISIONS OF PARTNERSHIP ACT, THERE COUL D BE NO PARTNERSHIP FIRM; AND THAT HAVING KNOWN THAT THERE WAS NO PARTNERSHIP BECAUSE OF ABSENCE OF BUSINESS AT THE T IME OF ISSUANCE OF NOTICE U/S 148 OF THE ACT, THE AO COULD NOT HAVE ISSUED NOTICE U/S 148 IN THE STATUS OF A PARTNERSHIP AS HAS BEEN DONE. IN AN APPROPRIATE STATUS, HIS NOTICE OUGHT TO HAVE BEEN I SSUED WHICH CAN BE GATHERED FROM THE ORDER OF ASSESSMENT AND OUGHT TO HAVE BEEN MADE EXPLICIT IN THE RECORDED REASONS WHICH WERE DE NIED TO THE ASSESSEE; (III) THAT THE FIRM WAS CONSTITUTED TO CARRY ON THE BUSINE SS AND THE NATURE OF WHICH, AS PER PARTNERSHIP DEED, IS THAT THE NATURE OF THE BUSINESS OF THE PARTNERSHIP FIRM IS THAT OF TAKING ON LEASE/OR HIRE, TO PURCHASE OR ACQUIRE IMMOVABLE PROPERTY/PROPERTIES AND TO DEMOLISH, ALTER, IMPROVE, OR RECONSTITUTE/RECONSTRUCT THE SAID PROPERTY/PROPERTIE S AND GENERALLY TO DEVELOP SUCH PROPERTIES FOR THE PURPOSE OF LETTING, HIRING OR SELLING THEM TO THE BEST ADVANTA GE OF THE PARTNERSHIP FIRM. THE FIRM HAS ALREADY DEVELOPED TH E PROPERTY AT 70 AND 70/1, M.G.ROAD, BANGALORE AND IT HAS LET THE SAID PROPERTY TO OFFICES AND SHOPS. THE FIRM HA S TO MANAGE AND MAINTAIN THE SAID PROPERTY AND RECOVER RE NTS. THE FIRM MAY CARRY ON ANY OTHER BUSINESS/BUSINESSES A S THE PARTNERS MAY MUTUALLY DECIDE FROM TIME TO TIME. (IV) THAT THE NOTICE U/S 148 OF THE ACT WAS ISSUED IN TH E STATUS OF FIRM WHICH WAS CONSTITUTED TO CARRY ON BUSINESS, THE AO P ROCEEDED TO ASSESS THE INCOME UNDER THE HEAD HOUSE PROPERTY ON WRONG ASSUMPTION THAT THE ASSESSEE FIRM WAS NOT CARRYING O N BUSINESS AND THE INCOME GENERATED WAS NOT FROM ITS BUSINESS ACTIVITY; AND THAT SUCH AN ACT OF THE AO WIPED OFF THE EXISTENCE OF THE FIRM. IT WAS, THEREFORE, ARGUED THAT THE ASSESSMENT IN TH E STATUS OF FIRM WAS BAD IN LAW AND WAS LIABLE TO BE CANCELLED AS THE CASE OF THE REVENUE WAS THAT THE ASSESSEE WAS NOT CARRYING O N ANY BUSINESS ACTIVITY; PAGE 8 OF 19 ITA NOS.960 & 961/BANG /2010 8 (V) THAT THE INCOME DERIVED BY THE ASSESSEE WAS FROM LEA SE/RENTAL FROM THE SUBJECT PROPERTY WHICH WAS TAKEN ON LEASE T HE PREMISES AND THE LEASE OF THE PREMISE WAS FOR ITS BUSINESS A CTIVITY TO GENERATE INCOME THERE-FROM; AND THAT THE AO NOWHER E IN HIS ORDER HAD STATED THAT ASSESSEE WAS THE OWNER OF THE PREMISE AND, THUS, HE WAS WRONG IN BRINGING TO TAX THE INCOME RE TURNED UNDER THE HEAD HOUSE PROPERTY; (VI) THAT THE ONLY ISSUE WAS WHETHER THE PROVISIONS OF S. 22 WILL OVER- RIDE THE PROVISIONS OF SECTIONS 28 TO 44B NECESSITA TING THE TAXING UNDER THE HEAD PROPERTY. THE AO HAD NOT CONSIDERE D THE NATURE OF SERVICES RENDERED BY THE ASSESSEE TO THE OCCUPANT S OF THE UNITS; THAT CLEANING SERVICES WERE UNDERTAKEN AS A PART OF THE BUSINESS OPERATIONS OF THE ASSESSEE; THAT ALL THE R EPAIR WORKS EVEN DURING THE OCCUPATION OF THE BUILDING WAS UNDER TAK EN BY THE ASSESSEE APART FROM PROVIDING ELECTRICAL AND SANITA RY FITTINGS TO THE TENANTS , THE ASSESSEE ALSO PROVIDED ELECTRICAL AND PLUMBING SERVICES AND MISCELLANEOUS SERVED TO THE VARIOUS OC CUPANTS; AND THAT FOR HAVING RENDERED ALL THE SERVICES, THE EVI DENCES FOR SUCH SERVICES WERE TO BE FOUND IN THE P & L ACCOUNT OF T HE ASSESSEE ITSELF; (VII) THAT THE SUPREME COURT IN ITS RULING (66 ITR 596) H AD LAID DOWN THE PRINCIPLE THAT IF THE PROCESS OF LETTING WHAT T HE ASSESSEE CARRIES ON WAS A VENTURE IN THE NATURE OF TRADE AND WHERE THE LETTING WAS A COMPLEX ONE IT WAS NOT INCOME FROM P ROPERTY BUT FROM BUSINESS. IT WAS, FURTHER, CLAIMED THAT THE HONBLE COURT NOTED IN THAT CASE IT IS FURTHER SAID IN THE STATEMENT OF THE CASE THAT THE ASSESSEE ALSO RENDERED OTHER SERVICE TO TH E VAULT HOLDERS (TENANTS) AND THEN TOOK NOTE OF THE VARIOUS SERVICES RENDERE D BEFORE COMING TO THE CONCLUSION THAT THE INCOME OF A PROPERTY THOUGH OWNED BY THE ASSESSEE WAS LIABLE UNDER THE HE AD BUSINESS; (VIII) TAKING SHELTER UNDER THE RULING OF THE CALCUTTA HIG H COURT (249 ITR 47), THE ASSESSEE HAD PRAYED THAT THE ASSESSMENT MADE U/S 147 BE CANCELLED AND THE INCOME RETURNED UNDER THE HEAD BUSINESS BE ACCEPTED. PAGE 9 OF 19 ITA NOS.960 & 961/BANG /2010 9 IN RESPECT OF THE ASSESSMENT YEAR 2005-06, IT WAS AR GUED THAT: (IX) THE ORIGINAL RETURN WAS FILED ON 6.1.2006 AND, THER EFORE, NOTICE U/S 143(2) COULD HAVE BEEN ISSUED AT ANY TIME BEFORE 31. 1.2007 U/S 143(3)(II); THAT THE NOTICE U/S 148 WAS ISSUED EVEN PRIOR TO THAT DATE ON 13.7.2006. IT WAS, FURTHER, ARGUED THAT WH EN A VALID RETURN FILED COULD BE PROCESSED AND SUBJECTED TO AN ASSESS MENT, IT CANNOT BE SAID THAT ANY INCOME HAS ESCAPED ASSESSMENT; THAT IT WOULD BE WHOLLY IRRATIONAL TO SAY THAT AN ASSESSING AUTHORITY CAN OVERLOOK A VALID RETURN AND INSTEAD OF MAKING ASSESSMENT U/S 1 43 (3) WHICH WAS OPEN TO BE MADE, HE COULD ASSUME JURISDICTION U /S 147 AND THAT THIS WOULD MAKE A MOCKERY OF S.147 AND THE TIME LIMI T PROVIDED U/S 153 AS A PROTECTION TO AN ASSESSEE. IT IS NOT LEFT TO THE AO TO OVERLOOK A VALID RETURN PENDING WITH HIM WHICH COUL D BE PROCESSED AND ENQUIRY COULD BE MADE AND STRAIGHT AWAY TAKE RECO URSE TO S. 147 OF THE ACT. RELIES ON THE FOLLOWING CASE LAWS: (A) KLM ROYAL DUTCH AIRLINES V. ADIT (2007) 292 ITR 49 ( DEL); (B) CIT V. AIRCRAFT RADIO CORPN. (2007) 292 ITR 64 (P & H); (C) P.G. FOILS LTD V. INCOME-TAX SETTLEMENT COMMISSION & ANR. (2008) 302 ITR 331 (MAD); & (D) CIT V. VED AND CO. (2008) 302 ITR 328 (DEL) 7. ON THE OTHER HAND, THE LEARNED D R HAD VEHEMEN TLY SUPPORTED THE STAND OF THE AUTHORITIES BELOW ON BOTH THE ISS UES. THE LEARNED D R ALSO PLACED EMPHASIS ON THE REASONING OF THE CIT (A ) IN UPHOLDING (I) THE ACTION OF THE LEARNED AO IN REOPENING THE ASSESSMEN TS FOR BOTH THE AYS UNDER CONSIDERATION; AND (II) SUSTAINING THE STAND OF THE AO IN ASSESSING THE INCOME OF THE ASSESSEE UNDER THE HEAD HOUSE PR OPERTY. IT WAS, THEREFORE, PLEADED THAT THE CONCLUSION ARRIVED AT B Y THE AUTHORITIES BELOW REQUIRES TO BE SUSTAINED IN TOTO. TO DRIVE H OME HIS POINT, THE LEARNED D R HAD PLACED STRONG RELIANCE ON THE FOLLO WING CASE LAWS: PAGE 10 OF 19 ITA NOS.960 & 961/BAN G/2010 10 GKN DRIVESHAFTS (INDIA) LTD V. ITO (2003) 259 ITR 1 9 (SC); ACIT V. MAHESH INVESTMENTS ITA NOS.905 TO 911/B/9 7 & 133/B/98 DATED 18.2.2003; & ASST. CIT V. RAJESH JHAVERI STOCK BROKERS (P) LTD. (2007) 291 ITR 500 (SC) . 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS, ATTENTIVELY PERUSED THE RELEVANT CASE RECORDS AND ALSO THE CASE LAWS ON WHICH BOTH THE PARTIES HAVE PLACED THEIR STRONG RELIANCE. ALSO DU LY PERUSED THE PAPER BOOKS FURNISHED BY THE LEARNED AR DURING THE COURSE OF HEA RINGS WHICH CONTAINED, AMONG OTHERS, COPIES OF (I) LEASE DEED; (II) ORDER OF THE HONBLE JURISDICTIONAL HIGH COURT DATED 14.11.2007; (III) P ARTNERSHIP DEED ETC., 8.1 THE ESSENCE OF THE LENGTHY CONTENTIONS OF THE ASSESSEE BEING THAT THE RULING OF THE HONBLE APEX COURT IN THE CA SE OF GKN DRIVESHAFTS (INDIA) LTD V. ITO REPORTED IN (2003) 259 ITR 19 (S C) WAS DIRECTLY APPLICABLE UNLESS THOSE PRE-CONDITIONS PRESCRIBED W ERE FULFILLED, THE REASSESSMENT PROCEEDING RESORTED TO BY THE AO FOR IS SUANCE OF NOTICE U/S 148 OF THE ACT WAS BAD IN LAW. 8.2 WITH HIGHEST REGARDS, WE HAVE CAREFULLY PERUSE D THE RULING OF THE HONBLE COURT WHEREIN IT HAD CATEGORICALLY CLA RIFIED THAT WHEN A NOTICE UNDER SECTION 148 IS ISSUED, THE PROPER COURSE OF A CTION FOR THE NOTICEE IS TO FILE RETURN AND IF HE SO DESIRES , TO SEEK REASONS FOR ISSUING NOTICE. THE ASSESSING OFFICER IS BOUND TO FURNISH REASONS WITHI N A REASONABLE TIME. ON RECEIPT OF REASONS, THE NOTICEE IS ENTITLED TO FILE OBJECTIONS TO ISSUANCE OF NOTICE AND THE ASSESSING OFFICER IS BOUND TO DISPOS E OF THE SAME BY PASSING A SPEAKING ORDER. HOWEVER, IN THE PRESENT CASE, IRONICALLY, A REQUEST FOR FURNISHING OF THE REASONS RECORDED FOR REOPENING TH E ASSESSMENTS FOR THE PAGE 11 OF 19 ITA NOS.960 & 961/BAN G/2010 11 AYS 2003-04 AND 2005-06 WAS MADE ONLY ON 1.9.2010 ( COURTESY: PAGE 25 OF PB AR) WHEREAS THE REASSESSMENT PROCEEDINGS WERE CONCLUDED WAY BACK ON 30.7.2007 ITSELF. WE ARE, THEREFORE, OF THE CON SIDERED VIEW THAT THE ASSESSEE CANNOT TAKE SHELTER UNDER THE RULING OF TH E APEX COURT (SUPRA) WHICH HAS NO APPLICATION TO THE ASSESSEES CASE AT ALL. AS A MATTER OF FACT, THE RETURN OF INCOME OF THE ASSESSEE WAS, INITIALLY, PROCESSED U/S 143(1) OF THE ACT AND, SUBSEQUENTLY, TO VERIFY THE VERACITY OF T HE ASSESSEES CERTAIN CLAIMS, THE AO HAD PERHAPS ISSUED NOTICES U/S 143(2 ) AND 142(1) WHICH WAS OBJECTED TO BY THE ASSESSEE ON THE SURMISE THAT A NO TICE U/S 143(2) AS REQUIRED BY THE ACT WAS NOT ISSUED WITHIN TWELVE MON THS FROM THE DATE OF FILING OF THE RETURN. IN CONSONANCE WITH THE PROVI SIONS OF S. 143(2) OF THE ACT, THE ASSESSMENT PROCEEDINGS INITIATED ON THE BA SIS OF ISSUANCE OF NOTICE U/S 143(2) OF THE ACT ON 26.5.2005 WERE DROPPED BY T HE AO. HOWEVER, ON SUBSEQUENT VERIFICATION OF THE P & L ACCOUNT FURNI SHED BY THE ASSESSEE ALONG WITH ITS RETURN OF INCOME, IT WAS NOTICED BY T HE AO THAT THE ASSESSEE HAD DERIVED ONLY RENTAL INCOME, BUT, CLAIMED VARIOUS EXPENSES, TREATING THE RENTAL INCOME AS BUSINESS INCOME. AS THE EXPENSE S CLAIMED BEING NOT ALLOWABLE AND THE AO HAD REASONS TO BELIEVE THAT TH E INCOME ESCAPED ASSESSMENT BECAUSE THE ASSESSMENT OF SUCH INCOME HA D TO BE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. ACCORDINGLY, AS R IGHTLY POINTED OUT BY THE LEARNED CIT (A), WHILE CONCLUDING THE ASSESSMEN T, THE AO HAD NOT TRAVELLED BEYOND THE REASONS RECORDED AND, THEREFORE , THERE WAS NO MERIT IN THE ALLEGATION OF THE ASSESSEE THAT THE ASSESSMENT WAS BAD IN LAW. PAGE 12 OF 19 ITA NOS.960 & 961/BAN G/2010 12 8.3 AT THIS JUNCTURE, WE WOULD LIKE TO RECALL THE RULING OF THE HONBLE HIGHEST JUDICIARY OF THE LAND IN THE CASE OF ACIT V. RAJESH JHAVARI STOCK BROKERS (P) LTD CITED SUPRA WHEREIN THE HONB LE COURT HAD, AFTER DULY ANALYZING VARIOUS ASPECTS, RULED THUS: 16. SECTION 147 AUTHORISES AND PERMITS THE ASSESSI NG OFFICER TO ASSESS OR REASSESS INCOME CHARGEABLE TO TAX, IF HE HAS REASON TO BELIEVE THAT INCOME FOR ANY ASSESSM ENT YEAR HAS ESCAPED ASSESSMENT. THE WORD REASON IN T HE PHRASE REASON TO BELIEVE WOULD MEAN CAUSE OR JUSTIFICATION. IF THE ASSESSING OFFICER HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCOME HAD ES CAPED ASSESSMENT, IT CAN BE SAID TO HAVE REASON TO BELIEV E THAT AN INCOME HAD ESCAPED ASSESSMENT. THE EXPRESSION CANNOT BE READ TO MEAN THAT THE ASSESSING OFFICER S HOULD HAVE FINALLY ASCERTAINED THE FACT BY LEGAL EVIDENCE O R CONCLUSION. THE FUNCTION OF THE ASSESSING OFFICER IS TO ADMINISTER THE STATUTE WITH SOLICITUDE FOR THE PUBL IC EXCHEQUER WITH AN INBUILT IDEA OF FAIRNESS TO TAXPA YERS. AS OBSERVED BY THE SUPREME COURT IN CENTRAL PROVINCE S MANGANESE ORE CO. LTD V. ITO (1991) 191 ITR 662, FO R INITIATION OF ACTION UNDER SECTION 147(A) (AS THE P ROVISION STOOD AT THE RELEVANT TIME) FULFILLMENT OF THE TWO REQUISITE CONDITIONS IN THAT REGARD IS ESSENTIAL. AT THAT STAGE, THE FINAL OUTCOME OF THE PROCEEDING IS NOT RELEVANT. IN OTHER WORDS, AT THE INITIATION STAGE, WHAT IS REQUIRED IS REASON TO BELIEVE, BUT NOT THE ESTABL ISHED FACT OF ESCAPEMENT OF INCOME. AT THE STAGE OF ISSU E OF NOTICE, THE ONLY QUESTION IS WHETHER THERE WAS RELEV ANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FO RMED A REQUISITE BELIEF. WHETHER THE MATERIALS WOULD CONCLUSIVELY PROVE THE ESCAPEMENT IS NOT THE CONCERN AT THAT STAGE. THIS IS SO BECAUSE THE FORMATION OF BE LIEF BY THE ASSESSING OFFICER IS WITHIN THE REALM OF SUBJEC TIVE SATISFACTION ITO V. SELECTED DALURBAND COAL CO. ( P) LTD PAGE 13 OF 19 ITA NOS.960 & 961/BAN G/2010 13 (1996) 217 ITR 597 (SC); RAYMOND WOOLLEN MILLS LTD V . ITO (1999) 236 ITR 34 (SC). 17. THE SCOPE AND EFFECT OF SECTION 147 AS SUBSTITU TED WITH EFFECT FROM 1.4.1989, AS ALSO SECTIONS 148 TO 152 ARE SUBSTANTIALLY DIFFERENT FROM THE PROVISIONS AS T HEY STOOD PRIOR TO SUCH SUBSTITUTION. UNDER THE OLD PROVISIONS OF SECTION 147, SEPARATE CLAUSES (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 UND ER SECTION 147(A) TWO CONDITIONS WERE REQUIRED TO BE SATISFIED FIRSTLY THE ASSESSING OFFICER MUST HAVE RE ASON TO BELIEVE THAT INCOME PROFITS OR GAINS CHARGEABLE TO INCOME-TAX HAVE ESCAPED ASSESSMENT, AND SECONDLY HE MUST ALSO HAVE REASON TO BELIEVE THAT SUCH ESCAPEME NT HAS OCCURRED BY REASON OF EITHER (I) OMISSION OR FAI LURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY OR TRULY A LL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT OF THAT YEAR. BOTH THESE CONDITIONS WERE CONDITIONS PRECEDENT TO BE SATISFIED BEFORE THE ASSESSING OFFICER COULD HAVE JURISDICTION TO ISSUE NOTICE UNDER SECTION 148 READ WITH SECTION 47(A). BUT UNDER THE SUBSTITUTED SECTION 1 47 EXISTENCE OF ONLY THE FIRST CONDITION SUFFICES. IN OTHER WORDS, IF THE ASSESSING OFFICER FOR WHATEVER REASON HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMEN T IT CONFERS JURISDICTION TO REOPEN THE ASSESSMENT. 8.4 WITH DUE CARE, WE HAVE PERUSED THE CASE LAWS ON WHICH THE ASSESSEE HAD PLACED ITS RELIANCE AND OF THE FIRM VI EW THAT THEY WERE NOT DIRECTLY APPLICABLE TO THE FACTS OF THE ISSUE ON HAN D. IN THE CASE OF KLM ROYAL DUTCH AIRLINES V ASSISTANT DIRECTOR OF INCOME TAX (292 ITR 49) AND IN THE CASE OF CIT V VED AND CO. (302 ITR 328), THE HONBLE DELHI HIGH COURT HELD THAT WHEN ASSESSMENT PROCEEDINGS ARE NOT TERMINATED, THE ASSESSING OFFICER IS NOT JUSTIFIED IN ISSUING NOTIC E UNDER SECTION 148 OF THE PAGE 14 OF 19 ITA NOS.960 & 961/BAN G/2010 14 ACT. IN THE INSTANT CASE, AS STATED EARLIER, NOTIC E ISSUED UNDER SECTION 143(2) WAS DROPPED ON OBJECTION OF THE ASSESSEE, SI NCE THE SAME WAS NOT ISSUED AS STIPULATED UNDER THE ACT. WHEN NO SCRUTI NY ASSESSMENT COULD HAVE BEEN COMPLETED IN THIS CASE, AND WHEN THE ASSESSING OFFICER REALIZES THAT THE INCOME HAS ESCAPED ASSESSMENT, HE IS PERFECTLY J USTIFIED TO INVOKE REASSESSMENT PROCEEDING BY ISSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT. IN AN OVERALL CONSIDERATION OF THE FACTS AND CIRCUM STANCES OF THE ISSUE AS DELIBERATED UPON IN THE FORE-GOING PARAGRAPHS AND A LSO IN CONFORMITY WITH THE RULING OF THE HONBLE SUPREME COURT (SUPRA), WE ARE OF THE FIRM VIEW THAT THE AO WAS WITHIN HIS REALM TO REOPEN THE ASSE SSMENT FOR THE AY 2003-04 WHICH HAS BEEN DULY SUSTAINED BY THE LEARNED CIT (A) WITH HIS WELL DESERVED REASONING. IN VIEW OF THE ABOVE, WE FIND THAT THERE IS ANY INFIRMITY IN THE FINDING OF THE CIT (A) WHICH REQUIRES OUR IN TERVENTION. IN ESSENCE, THE ASSESSMENT IN QUESTION WAS VALIDLY RE-OPENED BY T HE ASSESSING OFFICER. IT IS ORDERED ACCORDINGLY. 8.5 ANOTHER ISSUE IS AS TO WHETHER THE RENTAL INC OME FROM THE SUBJECT PROPERTY WAS ASSESSABLE UNDER THE HEAD HOUSE PROPERTY OR BUSINESS INCOME. AT THE OUT-SET, WE WOULD LIKE TO REITERATE THAT THE EARLIER BENCH, IN THE ASSESSEES OWN CASE IN ITA NO S. 905 TO 911/B/97 & 133/B/98 FOR THE AYS 1984-85 TO 91-92 DATED 18.2.2 003 WHILE ADDRESSING TO THE REVENUES GRIEVANCE WITH THE REGARD TO THE D IRECTIONS OF THE CIT (A) TO ASSESS THE PROPERTY INCOME IN THE STATUS OF RF, A FTER DULY ANALYZING THE RELEVANT PROVISIONS OF THE ACT, S.4 OF THE INDIAN P ARTNERSHIP ACT, 1932 AND ALSO THE VIEWS OF VARIOUS JUDICIARY ON A SIMILAR ISS UE, HAD COME TO A CONCLUSION THAT: PAGE 15 OF 19 ITA NOS.960 & 961/BAN G/2010 15 11. IN THE PRESENT CASE, THE FIRM AS PER ITS OBJE CTS SET OUT IN PARTNERSHIP DEED ACQUIRED THE PROPERTY ON LEA SE, DEMOLISHED THE STRUCTURE, CONSTRUCTED NEW BUILDING LEASED IT TO VARIOUS LESSEES MAINTAINS IT, COLLECTS RENTS, OTHER ADMINISTRATIVE FUNCTIONING ARE ALSO CARRIED O N . THIS IS BUSINESS OF FIRM, THOUGH INCOME FROM WHICH MAY BE TAXABLE AS INCOME FROM HOUSE PROPERTY. SIMILAR VIEW HAS BEEN TAKEN BY ITAT IN ASSESSEES OWN CASE FOR EARLIE R YEARS RELIED BY COUNSEL FOR ASSESSEE. NO FURTHER MATERIAL IS BROUGHT TO OUR NOTICE TO TAKE A DIFFERE NT VIEW. 8.6 IN THE MEANWHILE, WE ALSO RECALL THE RULING O F THE HONBLE JURISDICTIONAL HIGH COURT IN THE ASSESSEES OWN CAS E [CIT V. MAHESH INVESTMENTS) IN ITA NO.387/2002 DATED 14.11.2007 FO R THE AY 1992-93. THE ISSUE, IN BRIEF, WAS THAT THE ASSESSEE FILED IT S RETURN OF INCOME IN THE STATUS OF REGISTERED FIRM. THE AO, HOWEVER, HAVING HELD THAT THE ASSESSEE WAS NOT CARRYING ON ANY BUSINESS ACTIVITIES, TREATED IT AS AN AOP. ON AN APPEAL BY THE ASSESSEE, THE LEARNED CIT (A) ALLOWED THE APPEAL IN FAVOUR OF THE ASSESSEE, TREATING IT AS REGISTERED FIRM WHICH WAS, SUBSEQUENTLY, UPHELD BY THE TRIBUNAL. 8.7 ON A REFERENCE BY THE REVENUE, THE HONBLE COU RT HAD, AFTER DUE CONSIDERATION OF RIVAL SUBMISSIONS, HELD AS UND ER: 6. HAVING HEARD THE COUNSEL FOR THE PARTIES AND O N PERUSAL OF THE ORDER PASSED BY THE ASSESSING OFFICER AS ALSO THE COMMISSIONER FOR APPEALS AND THE INCOME-TA X APPELLATE TRIBUNAL, WE ARE OF THE OPINION THAT ALL THE AUTHORITIES WITHOUT LOOKING INTO THE PARTNERSHIP DE ED OF THE RESPONDENT-ASSESSEE, HAVE GIVEN THEIR FINDINGS. IN VIEW OF THE JUDGMENT OF THE SUPREME COURT IN R.C. M ITTER AND SONS CASE (SUPRA)[36 ITR 194 (SC)], WE ARE OF T HE PAGE 16 OF 19 ITA NOS.960 & 961/BAN G/2010 16 OPINION THAT THE ASSESSING OFFICER WAS REQUIRED TO EXAMINE THE NATURE OF BUSINESS ACTIVITIES CARRIED O N BY THE RESPONDENT ASSESSEE IN ORDER TO HOLD WHETHER IT IS AN ASSOCIATION OF PERSON OR A REGISTERED PARTNERSHI P FIRM. WITHOUT EXAMINING THE ACTIVITIES OF THE RESP ONDENT ASSESSEE, IT WAS NOT FAIR EITHER FOR THE ASSESSIN G OFFICER OR THE COMMISSIONER FOR APPEAL OR THE TRIBU NAL TO GIVE THEIR FINDINGS. 7. IN THE CIRCUMSTANCES, WITHOUT ANSWERING THE QUE STION OF LAW FRAMED IN THIS APPEAL, WE ARE REQUIRED TO SE T ASIDE ALL THE ORDERS AND REMAND THE MATTER TO THE ASSESSI NG OFFICER FOR FRESH CONSIDERATION. ACCORDINGLY, THIS APPEAL IS ALLOWED AND THE MATTER IS REMANDED TO THE ASSESS ING OFFICER. IT IS OPEN FOR THE RESPONDENT ASSESSEE T O PRODUCE NECESSARY DOCUMENTS TO PROVE ITS CASE AND THEREAFTER THE ASSESSING OFFICER SHALL PASS APPROPR IATE ORDER. 8.8 CONSEQUENTLY, THE AO, VIDE HIS ORDER U/S 143(3 ) R.W.S. 260A OF THE ACT DATED 25.11.2010 [FOR THE AY 1992-93] FOR T HE DETAILED REASONS RECORDED THEREIN, HAD CONCLUDED THAT: (ON PAGE 2) THUS, AS SEEN FROM THE ABOVE, THE PARTNERSHIP IS MAINLY FOR THE PURPOSE OF DEVELOPING OF PROPERTY AT 70 & 70/1 ON M.G.ROAD, BANGALORE. AS TH E FACTS ON RECORD STAND, TILL DATE THIS IS THE ONLY PR OPERTY DEVELOPED/CONSTRUCTED BY THE ASSESSEE. THE BUSINESS OF THE ASSESSEE IS ONLY LETTING, HIRING OR SELLING. THERE IS NO OTHER ACTIVITY OF PROVIDING ANY SERVICES TO THE TENAN TS AS CLAIMED DURING THE PRESENT PROCEEDINGS. THEREFORE, THE DIFFERENTIATION THE AR/ASSESSEE TRIED TO MAKE THEIR LETTING AS COMPLEX EVEN IF IT TO BE TREATED ON TH AT GROUND, WITHOUT GOING ON MERITS, IS NON-EXISTENT. AS SEEN FROM THE FACTS THERE IS NO SUCH DIFFERENCE OF LETTI NG COMPARE TO NORMAL LETTING WHERE INCOME IS TREATED A S INCOME FROM HOUSE PROPERTY. THE SO CALLED SERVICES ARE PAGE 17 OF 19 ITA NOS.960 & 961/BAN G/2010 17 PART OF THE OWNERS OBLIGATION TOWARDS TENANTS AS P ER THEIR AGREEMENT. THE IT ACT HAS RECOGNIZED INCOME FROM SUCH PROPERTIES UNDER INCOME FROM HOUSE PROPER TY. FURTHER, THE LEGISLATURE HAS ALSO ENVISAGED CERTAIN EXPENDITURE FOR THE INCOME AND GIVEN STATUTORY DEDUCTION. THEREFORE, NO DIFFERENTIABLE ACTIVITY BY THE ASSESSEE HAS BEEN NOTICED APART FROM NORMAL LETTING OUT OF PROPE RTIES WHICH INCOME IS RECOGNIZED/ASSESSED UNDER INCOME FR OM HOUSE PROPERTY. FURTHER, THE PROPERTY (LAND) IN QUES TION HAS BEEN TAKEN POSSESSION BY THE ASSESSEE ON A LONG LEASE OF 40 YEARS THROUGH A LEASE DEED DATED 21.3.80 AND, HENCE, FALLS WITHIN THE AMBIT OF OWNER FOR THE PURP OSE OF INCOME FROM HOUSE PROPERTY. IN VIEW OF THE ABOVE , THE INCOME DERIVED BY THE ASSESSEE FROM LETTING OUT PROPERTIES IS ASSESSED UNDER INCOME FROM HOUSE PROPERTY. SINCE THERE IS NO BUSINESS ACTIVITY AS CLAIMED BY THE ASSESSEE, THE STATUS OF THE ASSESSEE IS TREAT ED AS AOP. 8.9 INCIDENTALLY, ON THE ORDERS OF THE HONBLE JUR ISDICTIONAL HIGH COURT IN ITA NOS.286 OF 2003 AND 290 OF 2003 DATED 15.11.2007 FOR THE AYS 1985-86, 86-87 AND 89-90 IN THE ASSESSEES OWN CASE, THE AO, VIDE HIS ORDERS U/S 143 (3) R.W.S. 260A OF THE ACT DATED 25. 11.2010 HAD HELD THE STATUS OF THE ASSESSEE AS AOP AND ALSO THE INCOME D ERIVED BY THE ASSESSEE FROM THE SUBJECT PROPERTY WAS ASSESSED UNDER THE HEA D INCOME FROM HOUSE PROPERTY. SIGNIFICANTLY, THE ASSESSEE HAS NOT COME UP WITH ANY DOCUMENTARY EVIDENCE TO REBUT THE REVENUES STAND CO NVINCINGLY. TAKING INTO ACCOUNT THE ABOVE FACTS INTO CONSIDERATION AND ALSO IN CONSONANCE WITH THE FINDINGS OF THE EARLIER BENCH REFERRED ABOVE, WE AR E OF THE FIRM VIEW THAT THE LEARNED AO WAS JUSTIFIED IN TREATING THE RENTAL INCOME OF THE ASSESSEE FROM THE SUBJECT PROPERTY AS INCOME FROM HOUSE PROP ERTY. THE STAND OF PAGE 18 OF 19 ITA NOS.960 & 961/BAN G/2010 18 THE AO HAS ALSO BEEN DULY VINDICATED BY THE LEARNED C IT (A) FOR THE REASONS RECORDED IN HIS IMPUGNED ORDER. THE STAND OF THE A UTHORITIES BELOW REQUIRES NO INTERFERENCE OF THIS BENCH. IT IS ORDERED ACCOR DINGLY. A.Y 2005-06: 8.10 IT WAS THE CONTENTION OF THE ASSESSEE THAT T HE ORIGINAL RETURN WAS FILED ON 6.1.2006 AND, THEREFORE, A NOTICE U/S 143(2) COULD HAVE BEEN ISSUED AT ANY TIME BEFORE 31.1.2007 U/S 143(3)(II) O F THE ACT WHEREAS THE AO HAD ISSUED A NOTICE U/S 148 OF THE ACT ON 13.7.2 006. IT WAS, THEREFORE, ARGUED THAT WHEN A VALID RETURN FILED COULD BE PROC ESSED, IT CANNOT BE SAID THAT INCOME HAS ESCAPED ASSESSMENT. THE ASSESSING AUTHORITY, IT WAS ARGUED, CANNOT OVERLOOK A VALID RETURN FOR MAKING AN ASSESSMENT U/S 143 (3) OF THE ACT. IN STEAD, ASSUMING JURISDICTION U/S 14 7 OF THE ACT TO INITIATE REASSESSMENT PROCEEDINGS BY THE AO WAS, THEREFORE, I NVALID WHICH REQUIRES TO BE HELD AS ILLEGAL. TO DRIVE HOME ITS POINT, T HE ASSESSEE HAD RELIED ON THE FOLLOWING CASE LAWS: KLM ROYAL DUTCH AIRLINES V. ADIT (2007) 292 ITR 49 (DEL); CIT V. AIRCRAFT RADIO CORPN. (2007) 292 ITR 64 (P & H); P.G. FOILS LTD V. INCOME-TAX SETTLEMENT COMMISSION & ANR. (2008) 302 ITR 331 (MAD); & CIT V. VED AND CO. (2008) 302 ITR 328 (DEL) AS COULD BE SEEN FROM THE ABOVE, IT HAS BEEN NOTICE D THAT THE SAID ARGUMENTS HAVE NOT BEEN PUT FORTH EITHER BEFORE THE ASSESSING AUTHORITY OR BEFORE THE FIRST APPELLATE AUTHORITIES FOR THEIR CO NSIDERATION. IN VIEW OF THE ABOVE AND ALSO IN THE PRINCIPLES OF INTERESTS O F NATURAL JUSTICE AND FAIR PLAY, WE ARE OF THE CONSIDERED VIEW THAT THIS ISSUE REQUIRES FRESH CONSIDERATION BY THE AO IN VIEW OF THE RULINGS OF VA RIOUS JUDICIARY (SUPRA) ON PAGE 19 OF 19 ITA NOS.960 & 961/BAN G/2010 19 A SIMILAR ISSUE. ACCORDINGLY, THIS ISSUE IS REMITTE D BACK TO THE FILE OF THE AO WITH A SPECIFIC DIRECTION TO CONSIDER THE SAME A FRESH AND TO TAKE APPROPRIATE ACTION IN ACCORDANCE WITH THE PROVISION S OF THE ACT, AFTER AFFORDING A REASONABLE OPPORTUNITY TO THE ASSESSEE O F BEING HEARD. WHILE DOING SO, THE AO SHALL, KEEP IN VIEW THE RULINGS OF VARIOUS COURTS CITED SUPRA. IT IS ORDERED ACCORDINGLY. 8.11 WITH REGARD TO THE ASSESSING OF THE RENTAL I NCOME FROM THE SUBJECT PROPERTY, THE FINDINGS RECORDED FOR THE AY 2 003-04 ON A SIMILAR ISSUE BY THIS BENCH IN THE ASSESSEES OWN CASE (SUPR A) HOLDS GOOD FOR THIS ASSESSMENT YEAR TOO. IT IS ORDERED ACCORDINGLY. IN THE RESULT , (I) THE ASSESSEES APPEAL FOR THE AY 2003-04 IS DISMISSED; & (II) THE ASSESSEES APPEAL FO R THE AY 2005-06 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST DAY OF MAY, 2012 SD/- SD/- (JASON P BOAZ) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONCERNE D. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/ BY ORDER SENIOR PRIVATE SECRETARY, ITAT, BANGAL ORE.