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Facts
Hind Ceramics Pvt. Ltd. received license fees from commercial property leases, which it declared as 'income from house property' and claimed a 30% standard deduction under Section 24(1). The Assessing Officer and CIT(A) reclassified this as 'business income', disallowing the deduction. For AY 2017-18, the assessee filed an additional ground challenging the validity of the Section 143(2) notice, arguing it did not specify the type of scrutiny as mandated by CBDT instructions.
Held
For AY 2012-13, the Tribunal directed the Ld. AO to assess the license fees as 'income from house property' based on consistent treatment in previous assessment years, allowing the 30% standard deduction. For AY 2017-18, the Tribunal held that the Section 143(2) notice was invalid for failing to specify the type of scrutiny as per CBDT instructions, rendering the subsequent assessment order void ab initio and quashing it.
Key Issues
Whether income from license fees for commercial property should be treated as 'income from house property' or 'business income', and the validity of a Section 143(2) notice when it fails to specify the type of scrutiny as per CBDT instructions.
Sections Cited
24(1), 234B, 143(2), 119
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH, KOLKATA
Before: SHRI RAJESH KUMAR, AM & SHRI PRADIP KUMAR CHOUBEY, JM
These are appeals preferred by the assessee against the orders of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated even dated 30.01.2024 for the AYs 2012-13 & 2017-18.
ITA No.608/KOL/2024 for A.Y. 2012-13
The issue raised in ground no.1 is general in nature and needs no specific adjudication.
The issue raised in ground nos.2,3,4, is against the order of ld. CIT (A) confirming the disallowance as made by the ld. AO by rejecting the
The ld. CIT (A) in the appellate proceedings, affirmed the order of the ld. Assessing Officer
After hearing the rival contentions and perusing the materials available on record, we find that assessee has been receiving the license fees from various shop owners to whom the premises were leased out in commercial spaces in its mall/ warehouse from which the assessee has received license fees of ₹2,37,32,969/-. The assessee in return of income has shown the said income under the head of house property and accordingly claimed standard deduction at the rate of 30% amounting to ₹70,08,412/- u/s 24(1) of the Act. We note that the said
The issue raised in ground no.6, is against the charging of interest u/s 234B of the Act which are consequential and are not required to be adjudicated at this stage.
The counsel of the assessee pointed out that the assessee has filed additional grounds of appeal vide letter dated 9.04.2025 which are extracted below:
“1. For that on the facts of the case, the Assessing Officer issuing the notice u/s 143(2) of the IT Act, 1961 on 09.08.2018 did not have jurisdiction over the case of the assessee, as there was no mention of the type of scrutiny under which the case of the
The ld. DR on the other hand submitted that the issue was not raised before any of the authorities below and therefore, may kindly be restored to the file of any of the authorities below for adjudication.
After hearing the rival contentions and perusing the material on record, we find that the assessee has raised an additional grounds of appeal
The ld. DR on the other hand submitted that this is a computer- generated notice and the non-mentioning of the fact of either limited or complete scrutiny or compulsory manual scrutiny would not render the issuance of notice u/s 143(2) of the Act as invalid. Therefore, additional ground raised by the assessee may kindly be dismissed.
“6. After hearing the rival contentions and perusing the materials available on record, we find that particularly the notice was issued u/s 143(2) of the Act, a copy of which is available at page no. 25 of the Paper Book. We note that the said notice has not been issued in consonance with the CBDT Instruction F No. 225/157/2017/ITA-II Dated 23.06.2017. The said notice is extracted below for the sake of ready reference:- “आमकर अधिनियम 1961 की िारा 143(2) के अिीि िोटिस Notice under section 143(2) of the Income-tax Act, 1961 संवीक्षा (कंप्यूिर आिाररत संवीक्षा चयि Scrutiny (Computer Alded Scrutiny Selection) महोदय/महोदया/ भेससस, Sir/Madam/ M/s, आपको सूधचत ककया जाता है कक नििासरण वर्स 2017-18 के पावती संख्या 269322761301017 के अिुसार आपके द्वारा टदिांक 30/10/2017 को दाखिल की गई आयकर वववरणी को संवीक्षा के ललए चुिा गया है। This is for your kind information that the return of income filed by you for assessment year 2017-18 vide ack, no. 269322761301017 on 30/10/2017 has been selected for Scrutiny.
Since, we have allowed the appeal of the assessee on legal issue, the other grounds raised on merit are not being adjudicated at this stage and are being left open to be decided at the later stage if need arises for the same.
In the result, both the appeals of the assessee are allowed.
Order pronounced in the open court on 06.05.2025.