VEERPRABHU AUTO PVT. LTD.,KOLKATA V. A.C.I.T., CC - 2(4), KOL, KOLKATA

ITA 1218/KOL/2024

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Veerprabhu Auto Pvt. Ltd., a company primarily dealing in auto parts, faced an assessment where their rental income was classified under 'Income from House Property'. The company contested this classification, arguing that their business activities included renting out properties, which should classify the income as 'Business Income'. The Assessing Officer disallowed certain expenses related to this income, further leading to the appeal. The Tribunal also addressed a jurisdictional challenge raised by the company, which contended that the assessment was conducted by an officer without proper jurisdiction as per CBDT's internal instructions. However, the Tribunal found these instructions to be administrative conveniences and not affecting the jurisdiction in a substantive manner.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 828656 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2026
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Kolkata
• Assessment Year: misc
• Appeal Filed On: 28-05-2024
• Other Referred Cases: Sultan Brothers (P.) Ltd. v. CIT, Nisarg Properties, Chennai Properties & Investments Ltd. v. Commissioner of Income-tax, Central -III, Tamil Nadu, DCIT(Exemption) & Another vs. Kalinga Institute of Industrial Technology, Grindlays Bank Ltd. vs CIT, Subhash Chandra vs CIT, Pr. CIT vs Mega Corporation Itd, CIT Vs Shri Shyam Sunder Infrastructure Pvt. Ltd., Jaswantlal J. Shah v. ACIT, Shree Ram Vessels Scrap (P) Ltd. Vs CIT VI
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Condonation of delay; Business income; Depreciation; Search and seizure; Block assessment; Competent authority
• Section: 143(3); 132; 153A; 37

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘C’ BENCH, KOLKATA Before SHRI GEORGE MATHAN, JUDICIAL MEMBER & SHRI RAKESH MISHRA, ACCOUNTANT MEMBER ITA No.:1218/KOL/2024 Assessment Year: 2016-17 Veerprabhu Auto Pvt. Ltd. Vs. A.C.I.T., CC-2(4), Kolkata (Appellant) (Respondent) PAN: AAACL4493K Appearances: Assessee represented by : None. Department represented by : Sandip Sarkar, JCIT, Sr. DR. Date of concluding the hearing : 28-October-2025 Date of pronouncing the order : 12-January-2026 ORDER PER RAKESH MISHRA, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)-26, Kolkata [hereinafter referred to as Ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2016-17 dated 05.03.2024. 1.1. The Registry has informed that the appeal is barred by limitation by 24 days. The assessee has filed a petition for condonation of delay explaining the reasons that the appellate order was noticed by the concerned person late and since the company was busy in year-end closure, the appeal could not be filed within the time limit before the ITAT. After perusing the same, we are satisfied that the assessee had a reasonable and sufficient cause and was prevented from filing the instant appeals within the statutory time limit. We, therefore, condone the delay and admit the appeals for adjudication. Printed from counselvise.com Page | 2 ITA No.:1218/KOL/2024 Assessment Year: 2016-17 Veerprabhu Auto Pvt. Ltd. 2. The assessee is in appeal before the Tribunal raising the following grounds of appeal: “1. That on the facts and in the circumstances of the case, the Ld. CIT (A) erred in sustaining the action of the Ld. AO assessing rental income as Income from House Property instead of Income from Business amounting to Rs.786000/- 2. That on the facts and in the circumstances of the case, the Ld. CIT (A) erred in sustaining the action of the Ld. AO in disallowing the expenses such as depreciation, repairs & maintenance, Legal and professional fee etc claimed by the appellant. 3. That on the facts and in the circumstances of the case, the Ld. CIT (A) erred in not accepting the fact that the other objects of your Appellant for which the Appellant Company has been established is to give properties on rent and earn rental income from the same as per Memorandum and Article of Association. The other object read as “To manage land, building and other properties, whether belonging to the Company or not and to collect rents and income to supply tenants in occupiers and other refreshments, attendance, light, waiting room, reading room, meeting room, electric conveniences and other advantages.\" 4. The appellant craves leave to add to, alter, to delete from or substantiate the above grounds of appeal.” 2.1 The assessee has also raised an additional ground of appeal which is as under: “That, on the fact and circumstance of the case, the order dated 22.03.2022 passed by the Ld. Assessing Officer is wholly without jurisdiction, bad in law and liable to be quashed in view of the Instruction No. 1/2011 dated 31st January, 2011 issued by CBDT.” 3. Brief facts of the case are that the assessee is a private limited company belonging to LMJ Group of companies. A search & seizure operation was conducted at the business premises of the assessee. Though the name of the assessee company was appearing in the warrant u/s 132 of the Act, however it was not appearing in the copy of Panchnama. The return of income for the AY 2016-17 was filed on 17.10.2016 disclosing loss of ₹1,46,903/-. During the Previous year Printed from counselvise.com Page | 3 ITA No.:1218/KOL/2024 Assessment Year: 2016-17 Veerprabhu Auto Pvt. Ltd. corresponding to the AY 2016-17, the Assessing Officer (hereinafter referred to as Ld. 'AO') noted that the assessee had derived income from rent amounting to ₹9,48,000/-, therefore, the rental income ought to have been considered under \"Income from House property\". Further the Ld. AO disallowed the expenses such as depreciation, repairs & maintenance and computed the income from house property as per the provision of the Act and assessed the total income at ₹6,43,000/- u/s 143(3) of the Act. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) who dismissed the appeal of the assessee by holding as under: “The main object of the appellant is with respect to auto parts and has no relation to dealings in real estate. In the case of Sultan Brothers (P.) Ltd. v. CIT (1964) 51 ITR 353 (SC), the Hon'ble Supreme Court has clarified that merely an entry in the object clause showing a particular object would not be the determinative factor to arrive at an conclusion whether the income is to be treated as income from business and such a question would depend upon the circumstances of each case, viz., whether a particular business is letting or not. This is so stated in the following words: - \"We think each case has to be looked at from a businessman's point of view to find out whether the letting was the doing of a business or the exploitation of his property by an owner. We do not further think that a thing can by its very nature be a commercial asset. A commercial asset is only an asset used in a business and nothing else, and business may be carried on with practically all things. Therefore, it is not possible to say that a particular activity is business because it is concerned with an asset with which trade is commonly carried on. We find nothing in the cases referred, to support the proposition that certain assets are commercial assets in their very nature.\" It is for this reason, at the beginning it is stated the as per the memorandum of association, letting of the properties is not the business of the assessee. In Nisarg Properties (supra), it was held where according to Memorandum of Association, main object of assessee-company was to acquire properties such as land and building, leasehold or freehold, and also to earn rental Printed from counselvise.com Page | 4 ITA No.:1218/KOL/2024 Assessment Year: 2016-17 Veerprabhu Auto Pvt. Ltd. income from these properties, income derived by assessee from leave and license agreement was to be chargeable to tax as business income and not as income from house property In fact, the Honourable Supreme Court in the case of Chennai Properties & Investments Ltd. v. Commissioner of Income-tax, Central -III, Tamil Nadu in [2015] 56 taxmann.com 456 (SC) has held that where in terms of memorandum of association, main object of assessee-company was to acquire properties and earn income by letting out same, said income was to be brought to tax as business income and not as income from house property In this case, the main object of the company is with relation to auto parts and therefore applying the ratio of the decision in the case of Chennai Properties (supra) it is held that the income from the letting out of property would be considered under the head \"Income from house Property and therefore the order of the AO is upheld. Ground No.3: That on the facts and circumstances of the case and in law, the Ld. AO has grossly erred in disallowing Rs 31000/- incurred on account of legal & professional charges. The Appellant submits that being in the business of renting out of properties, it sometimes happens that after renting out its property to tenants, the landlord i.e. the Appellant needs the property for its personal use or has to evict the tenant for different reasons, many of which might be due to the fault of the tenant himself; however, despite several requests from the Appellant, the tenants may often refuse to leave the property. For the year under consideration a similar issue arose for which the Appellant had to engage legal counsel for the purpose of drafting and filing of the necessary suits in accordance with law, and thereafter appear in the matters from time to time. For this purpose, the Appellant incurred legal and professional charges. It is a settled position in law that legal and professional charges incurred towards the business of the assessee, would be treated as revenue expenses expenditure and the same shall be allowed. As such the expense incurred by the Appellant towards legal and professional charges should be allowed u/s 37 of the Act. The appellant submits that the appellant is in the business of letting out of properties and therefore the expenditure should be allowed u/s 37 of the Act. The action of the AO in considering the Income from letting out of property under the head 'Income from House property' has been upheld. All the expenses allowable has already been considered by the AO by allowing deductions u/s 24(a) and administrative expenses and financial charges Printed from counselvise.com Page | 5 ITA No.:1218/KOL/2024 Assessment Year: 2016-17 Veerprabhu Auto Pvt. Ltd. and therefore, no other expense is allowable. Therefore, the appeal on this ground is dismissed. In the result, the appeal is dismissed.” 4. Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before the Tribunal. 5. None appeared on behalf of the assessee and the case was heard with the assistance of the Ld. DR. 6. The assessee has raised the additional ground of appeal vide application dated 15.12.2017. The written submission dated 22.04.2025 filed by the Ld. DR in this regard is as under: “Date: 22.04.2025 To The Hon'ble Members C Bench ITAT Kolkata 225 AJC Bose Road, Kolkata Respected Sirs, Sub: ITA 1218/Kol/2024-Veerprabhu Auto Pvt Ltd. AY 2016-17; Challenge of Jurisdiction by assessee The assessee's contention is that the assessment order was passed by the AO without jurisdiction by the ACIT and not by the ITO and that the department did not follow the internal administrative Instruction No.1/2011 dt. 31.01.2011 issued by the CBDT. 2. It is seen that this is a case where the assessee has raised the issue of jurisdiction for the first time only after the completion of assessment before the Hon'ble ITAT. Hence, provisions of sections 124 (4) and 124 (2) have been rendered redundant in this case and the present case is squarely hit by provisions of section 124(3)(a) and 124(3)(c) as well, whereby the assessee has forgone its entitlement to question the jurisdiction of its AO as per law. 124 (2) Where a question arises under this section as to whether an Assessing Officer has jurisdiction to assess any person, the question shall be determined by the Principal Director General or Director General or the Principal Chief Commissioner or Chief Commissioner or the Printed from counselvise.com Page | 6 ITA No.:1218/KOL/2024 Assessment Year: 2016-17 Veerprabhu Auto Pvt. Ltd. Principal Commissioner or Commissioner, or where the question is one relating to areas within the jurisdiction of different Principal Directors General or Directors General or Principal Chief Commissioners or Chief Commissioners or Principal Commissioners or Commissioners, by the Principal Directors General or Directors General or Principal Chief Commissioners or Chief Commissioners or Principal Commissioners or Commissioners concerned or, if they are not in agreement, by the Board or by such Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner as the Board may, by notification in the Official Gazette, specify 124 (4) Subject to the provisions of sub-section (3), where an assessee calls in question the jurisdiction of an Assessing Officer, then the Assessing Officer shall, if not satisfied with the correctness of the claim, refer the matter for determination under sub-section (2) before the assessment is made 124 (3) No person shall be entitled to call in question the jurisdiction of an Assessing Officer- (a) where he has made a return under sub-section (1) of section 115WD or under sub-section (1) of section 139, after the expiry of one month from the date on which he was served with a notice under sub-section (1) of section 142 or sub-section (2) of section 115WE or sub-section (2) of section 143 or after the completion of the assessment, whichever is earlier; (c) where an action has been taken under section 132 or section 1324, after the expiry of one month from the date on which he was served with a notice under sub-section (1) of section 153A or sub-section (2) of section 153C or after the completion of the assessment, whichever is earlier. 3. From the above, it is clear that the assessee had no locus standi to question the jurisdiction of the ACIT since the assessee should have questioned the issuance of notice by the ACIT within one month of its issuance and therefore, the assessee cannot be allowed to raise this issue at this stage. 4. The Hon'ble Apex Court in the case of DCIT(Exemption) & Another vs. Kalinga Institute of Industrial Technology; Special Leave to Appeal (C) No(s). 29304/2019 and WP(C) No. 898/2017 held that if the assessee feels that Notice u/s 143(2) of the Act was issued by wrong AO, then the assessee is at Printed from counselvise.com Page | 7 ITA No.:1218/KOL/2024 Assessment Year: 2016-17 Veerprabhu Auto Pvt. Ltd. liberty to take objection to raise the issue within one month of the issuance of the notice in the assessment proceedings. 5. Further, on the issue of internal administrative Instruction No. 1/2011 dt.31.01.2011 issued by the CBDT, the Hon'ble Calcutta High Court in Grindlays Bank Ltd. vs CIT in 193 ITR 457 has held that, \"these provisions are really provisions of administrative convenience and it is not a case of inherent lack of jurisdiction and that in any event it is not one for adjudication by the court\". Several other judgments w.r.t section 124 are also in favour of revenue; Elite Pharmaceuticals in WP No.1172/2015 dt. 23.02.2016 (Cal). Subhash Chandra vs CIT in 218 CTR 191 (P & H). Pr. CIT vs Mega Corporation Itd ITA 128/2016 23.02.2017 (Delhi). CIT Vs Shri Shyam Sunder Infrastructure Pvt. Ltd. (Delhi) 337 ITR 64. 6. In Pr. CIT vs Mega Corporation Itd ITA 128/2016 dt. 23.02.2017 (Delhi), the assessee challenged the jurisdiction of the Assessing Officer on the basis that the incumbent officer who passed the assessment order had no jurisdiction to do so, as he was not conferred with necessary powers to do so. The assessee pleaded that the AO, i.e. Addl CIT, was not an AO in terms of section 120(4)(b), assuming he was, then for him to take charge as AO, there is necessary of an order u/s 127 for transfer of jurisdiction from DCIT to Addl CIT. The High Court heard the matter and allowed the appeal of the Revenue and sent the matter back to file of the Tribunal for adjudication of merits. 7. In Jaswantlal J. Shah v. ACIT [2021] 128 taxmann.com 378 (Mumbai - Trib.), the appeal was filed by the assessee challenging jurisdiction of Assessing Officer of the ACIT Central Circle to pass the assessment order. Assessee contended that order passed under section 127 transferring assessee's case must be communicated under the signature of the competent authority to clearly indicate that there had been an agreement between the CIT having jurisdiction over the case and the CIT having jurisdiction over the transferee AO. The Tribunal held that sub-section (3) to section 127 provides an exception to the above statutory provision i.e. where the jurisdiction of Assessing Officer is transferred from one Assessing Officer to another Assessing Officer within the same city, locality, or place, there is no mandatory requirement to provide opportunity of hearing to the assessee. Hence, there was no statutory requirement for notice or prior intimation for change in jurisdiction to the assessee. Printed from counselvise.com Page | 8 ITA No.:1218/KOL/2024 Assessment Year: 2016-17 Veerprabhu Auto Pvt. Ltd. 8. In Shree Ram Vessels Scrap (P) Ltd. Vs CIT VI Special Civil Applications Nos. 16883, 16886, 16888 & 16896 of 2012 dt. 23.01.2013, it was held that; \"In the present case, we notice that that petitioners belonged to the same family or group. They were subjected to common search operation. Their assessments were therefore, under proposal for transfer. A show cause notice was issued to all of them in which the Commissioner called upon them to explain why the cases should not be centralised at Ahmedabad for effective and coordinated investigation. After considering their objections and permitting the oral submissions by the authorised representative, the Commissioner passed the order transferring the cases on the ground that cases were required to be centralised. The reason that being search cases they had to be placed before a centralised circle office also cannot be stated to be irrelevant. The department for internal convenience and efficient functioning, if has created a special branch for dealing with search cases and has decided to conduct assessments of such cases under such wing, surely assessee cannot have any objection to the same. Assessee has no right in law to insist that his case be kept out of consideration of such branch.\" Yours respectfully Sallong Yaden Sr.DR, ITAT, Kolkatal” 6.1 The Ld. DR also stated that since it was a search and seizure action and after the search the cases are centralized with an officer, therefore, in view of the centralized cases, normal proceedings do not survive and the order u/s 127 of the Act takes precedence over the normal jurisdiction. We agree with the submission of the Ld. DR and, therefore, the additional ground of appeal is rejected. 7. As regards the merits of the case, since the notice u/s 143(2) of the Act for AY 2016-17 could have been issued up to 30th September, 2017, therefore, this was an abated assessment on the date of search being 09.09.2015. Hence, the decision in the case of Principal Commissioner of Income-tax, Central-3 v. Abhisar Buildwell (P.) Printed from counselvise.com Page | 9 ITA No.:1218/KOL/2024 Assessment Year: 2016-17 Veerprabhu Auto Pvt. Ltd. Ltd. [2023] 149 taxmann.com 399 (SC) does not apply to the facts of the case as the same relates to unabated/completed assessments; the relevant extract is as under: “In view of the above and for the reasons stated above, it is concluded as under: (i) in case of search under section 132 or requisition under section 132A, the Assessing Officer assumes the jurisdiction for block assessment under section 153A; (ii) all pending assessments/reassessments shall stand abated; (iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the Assessing Officer would assume the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the Assessing Officer including the income declared in the returns; and (iv) in case no incriminating material is unearthed during the search, the Assessing Officer cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the Assessing Officer in absence of any incriminating material found during the course of search under section 132 or requisition under section 132A. However, the completed/unabated assessments can be reopened by the Assessing Officer in exercise of powers under section 147/148, subject to fulfilment of the conditions as envisaged/mentioned under section 147/148 and those powers are saved.” 8. The Ld. CIT(A) has confirmed the disallowance of ₹31,000/- made by the Ld. AO and the finding of the Ld. CIT(A) is extracted in the preceding para 3. We find no justification for interfering the finding of the Ld. CIT(A) who has treated the income from house property instead of under the head income from business on the basis of his finding Printed from counselvise.com Page | 10 ITA No.:1218/KOL/2024 Assessment Year: 2016-17 Veerprabhu Auto Pvt. Ltd. extracted in the preceding paragraph after examining the memorandum of association of the assessee which is extracted as under: “Memorandum of Association L.M.J. AUTO PRIVATE LIMITED 1. The name of company L.M.J Auto Private Ltd. 2. The Registered Office of the Company will be situated in the state of West Bengal 3. The objects for which the company is established are:- 1. MAIN OBJECTS TO BE PURSUED ON INCORPORATION:- 1. To carry on business as exporters, importers trades, representatives, dealers, distributers, stockists, buyers, sellers, agents or merchants in all kinds and forms of transport vehicles, passengers car, scooter, auto taxi, auto van its spare parts consumable stores and accessories 2. To carry on business as manufactures in all kind of transport vehicles, passenger car, light and heavy Motor vehicle, earth vehicle and all other Automobile goods, spare parts, accessories and consumable stores” 9. Since the income is treated as income from house property and as the reasons are mentioned for the conclusion drawn, therefore, there is no reason to interfere with the finding of the Ld. CIT(A) made in respect of ground no. 3 of the appeal as other than statutory deductions, no other deduction is allowable when the income is computed under the head ‘Income from House Property’. Hence, the order of the Ld. CIT(A) is hereby confirmed and Ground Nos. 1, 2 and 3 are dismissed. 10. In the result, the appeal filed by the assessee is dismissed. Order pronounced in the open Court on 12th January, 2026. Sd/- Sd/- [George Mathan] [Rakesh Mishra] Judicial Member Accountant Member Dated: 12.01.2026 Bidhan (Sr. P.S.) Printed from counselvise.com Page | 11 ITA No.:1218/KOL/2024 Assessment Year: 2016-17 Veerprabhu Auto Pvt. Ltd. Copy of the order forwarded to: 1. Veerprabhu Auto Pvt. Ltd., 30, Jawaharlal Nehru Road, 2nd Floor, Block C, Room 15A, Kolkata, West Bengal, 700016. 2. A.C.I.T., CC-2(4), Kolkata. 3. CIT(A)-26, Kolkata. 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. 6. Guard File. //True copy // By order Assistant Registrar ITAT, Kolkata Benches Kolkata Printed from counselvise.com "