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Income Tax Appellate Tribunal, DELHI BENCH ‘G’, NEW DELHI
Before: Sh. Kuldip SinghDr. B. R. R. Kumar
Per Dr. B. R. R. Kumar, Accountant Member: The present appeal has been filed by the assessee against the order of ld. CIT (A)-XXI, New Delhi dated 10.03.2014.
Following the grounds have been raised by the assessee:
“1.(a) That on the facts and in the circumstances of the Petitioner Company’s case, the learned Commissioner of Income tax (Appeals) erred in law and on facts in upholding the assessment order made by the learned assessing officer, in treating the business income earned from leasing of properties as ‘Income from House Property’ instead of assessing the same to tax under the head ‘Profits & Gains of Business’, thus breaking the ‘Rule of Consistency’ as well. (b)That on the facts and in the circumstances of the Petitioner Company’s case, the learned Commissioner of Income tax (Appeals) erred in law and on facts in upholding the assessment order made by the learned assessing officer, in wrongly treating the gross business receipts of Rs.10170434 as the annual value of the property (ies) and assessing the same as Income from House Property.
ITA No. 3157/Del/2017 2 Wingflow Construction Pvt. Ltd. 2. Without prejudice to the aforesaid grounds of appeal, the learned Commissioner of Income tax (Appeals) further erred in law and on facts in upholding the assessment order of the learned assessing officer in not allowing deduction of the business expenditures aggregated to Rs.7911424 (subject to appropriate adjustment of claim of depreciation as per income tax) claimed in the Profit and Loss account for the year ended 31-03-2010, by taking a different stand in the assessment year in appeal.
That on the facts and in the circumstances of the Petitioner Company’s case, the learned assessing officer, erred in law in charging interest under section 234B of the Income tax Act, 1961.” 3. Brief history of the case is that, the assessee received income from rent and declared the same under the head profit & gains of business and profession income upto assessment year 1996-97. The assessee changed the head of income in assessment year 1997-98 and claimed rental income as house property income with the benefit of statutory deduction and also business income on the sale of property.
During the assessment year 1998-99, the assessee had claimed both the rental income under the head house property and also business income under the head business. The Assessing Officer had treated the entire income as business income. The order of the Assessing Officer was confirmed by the ld. CIT(A) and the same was also confirmed by the Tribunal vide the order dated 31.08.2004 in ITA No. 1615/Del/2002. During the assessment years 1996-97 to 2003-04, the assessee had shown the rental income as well as business income. But the Assessing Officer treated the entire income as business income from assessment years 1996-97 to 2003-04. During the assessment years 2004-05 to 2010-11, the assessee started showing the rental income as business income and also claimed all the business expenses although the income was mainly from the rent only.
During the assessment year 2008-09, the assessee had the rental income only but the same was shown as business income and all types of
ITA No. 3157/Del/2017 3 Wingflow Construction Pvt. Ltd. business expenses were claimed by the assessee. The Assessing Officer had taken up the case for scrutiny and the rental income was treated as house property income and the statutory deduction @30% was allowed and consequently all the business expenses were disallowed. The asseessee had appealed against the order of the Assessing Officer and the ld. CIT(A) had allowed the appeal of the assessee and the income of the assessee was treated as business income and consequently all the expenses were allowed.
During the assessment year 2009-10, the assessee again claimed the house property income as business income with all the claim of the business expenses on the income of the assessee which was from rentals. The return of the assessee has been accepted u/s 143(1) and no scrutiny assessment has been made by the Assessing Officer.
During the assessment year 2010-11, the assessee has the rental income only of Rs.1,01,70,436/- and the income from the other sources of Rs.72,283/- and the assessee has declared the rental income as business income and has claimed the various general expenses of Rs. 79,11,423/- and has filed the return income of Rs. 25,72,334/-. The case was taken up for scrutiny and the Assessing Officer has treated the rental income as income from house property and has allowed the statutory deduction @ 30% and consequently the claim of the expenses of Rs. 79,11,423/- has been disallowed.
The assessee appealed against the order of the Assessing Officer before the ld. CIT (A) and there, it was submitted that the assessee earlier assessed under the head business income and the same was confirmed by the ld. CIT(A) and by the Tribunal for the assessment year 1998-99. It was submitted that the assessee had claimed the rental income as business income during the assessment year 2008-09 and the Assessing
ITA No. 3157/Del/2017 4 Wingflow Construction Pvt. Ltd. Officer had assessed the rental income as house property income but the ld. CIT(A) had allowed the appeal of the assessee and the income was assessed as business income. It was submitted that there is no change in the facts of the case and the rental income should be treated as business income only and the Assessing Officer is not justified to disallow the business expenses.
The ld. CIT (A) held that so far as the principle of consistency is concerned, the same cannot be applied blindly when the facts of the case are clear and the mistake of the earlier year cannot be allowed to be perpetuated in the subsequent year in the name of consistency. Even otherwise every assessment year is an independent and separate assessment and the assessment and the appeal has to be decided on the basis of glaring facts which are available on record. The ld. CIT (A) held that in the present case, there is absolutely no dispute that the income of the assessee is only from rent and the same is required to be assessed under the head income from house property.
Before us, during the arguments the order of the Tribunal for the assessment year 2008-09 in ITA No. 3474/Del/2011 has been produced before us. The relevant portion of the said order is as under: “7. We have gone through the facts and circumstances of the case and also rival submissions of the parties. If we consider the factual position as well as controversy of the instant case with M/s. Rayala Corporation Pvt. Ltd. vs. ACIT in Civil Appeal No.6437 of 2016 judgment dated 11.08.2016 passed by the Hon’ble Apex Court while referring to Chennai Properties and Investments Ltd. vs. CIT – (2015) 373 ITR 673 (SC), the same is identical and similar to the case decided by the Apex Court. The relevant crux is reproduced herein below:-
“11. The judgment relied upon by the learned counsel appearing for the assessee squarely covers the facts of the case involved in the appeals. The business of the company is to lease its property and to earn rent and therefore, the income so earned should be treated as its business income.
ITA No. 3157/Del/2017 5 Wingflow Construction Pvt. Ltd.
In view of the law laid down by this Court in the case of Chennai Properties (supra) and looking at the facts of these appeals, in our opinion, the High court was not correct while deciding that the income of the assessee should be treated as Income from House Property.”
Even otherwise, in our considered view, the ld. CIT (A) has rightly upheld the assessee’s income as business income and for the sake of brevity, clarity and to come to the right conclusion, the relevant part of the order of the ld. CIT (A) is reproduced below:-
“3.1 During the course of appellant proceedings the ld. AR of the assessee attended and submitted a detailed submission with a chart showing the treatment of the income for various assessment years as under:
S. Asstt. Income Income shown as Income assessed Remarks No. Year as 1. 1989-90 102,850.00 Business income Business income Copy of return & order u/s 143(1) 2. 1990-91 3500.80 -DO- -DO- -do- 3. 1991-92 2440.00 -DO- -DO- Copy of return enclosed 4. 1992-93 22072.48 -DO- -DO- -do- 5. 1993-94 5226.34 -DO- -DO- After adjusting loss of (2441.98 + 22072.48) 6. 1994-95 14,147.71 -DO- -DO- Copy of return enclosed 7. 1995-96 29,781.00 -DO- -DO- Order u/s 143(3) of the Act 8. 1996-97 2915009.00 -DO- -DO- Order u/s 143(3) 9. 1997-98 402,530.00 House Property -DO- Order u/s 143(3) 1998-99 178,353.00 -DO- -DO- Order u/s 143(3) 10. 11. 1990-2000 452,160.00 -DO- -DO- Order u/s 143(3) 12. 2000-01 874,570.00 -DO- -DO- Order u/s 143(3) 13. 2001-02 52,690.00 -DO- -DO- Order u/s 143(3) 14. 2002-03 63,883.00 -DO- -DO- Order u/s 143(3) 15. 2003-04 125,620.00 -DO- -DO- Order u/s 143(3) 16. 2004-05 74,980.00 Business income -DO- - 17. 2005-06 151,660.00 -DO- -DO- Order u/s 143(l)(a) 18. 2006-07 720,415.00 -DO- -DO- Intimation u/s 143(1)(a) 19. 2007-08 --- -DO- -DO- ---
ITA No. 3157/Del/2017 6 Wingflow Construction Pvt. Ltd. 20. 2008-09 568,494.00 -DO- House Property Order u/s 143(3) 21. 2009-10 3552767.00 -DO- -DO- -- 22. 2010-11 2572234.00 -DO- -DO- —
From the chart it is absolutely clear that from assessment year 1995-96 assessee was showing the above income as 'business income' and same was assessed also as 'business income'. From assessment years 1996-97 to assessment year 2003-04, the assessee was showing it as 'income from house property' but it was assessed at 'business income'. From assessment years 2004-05 to assessment year 2010-11, the assessee has shown it as 'business income', which was assessed as 'business income' by the Department till assessment year 2007-08, However, in assessment year 2008-09, the assessee has shown it as 'business income' but Department has assessed it as 'income from house property', the year in which appeal is for adjudication. In this regard it is found that from assessment year 1989-90 to assessment year 2007-08, the Department has consistently assessing the above said income as 'business income'. However, for assessment year 2008-09, it has been assessed as 'income from house property', In the body of assessment order Assessing Officer also has not given the finding as to why he has arrived at the conclusion that above said income should not be treated as 'business income' and arrived at his finding in a very arbitrary manner, without any cogent reason, In this regard principle of consistency has to be followed and from the chart as discussed above, it is absolutely clear that since beginning Department has accepted the above said income as 'business income', So, for this assessment year why treatment of the head of the income is different, requires to be supported by reasoned order, which has not been done, Furthermore, ITAT has also held for assessment year 1998-99 relying on the rule of consistency and has also upheld the action of Assessing Officer and ld. CIT(A) and treated the rental income of the assessee under the head ‘income from business or profession’. So, relying on the above decision of the ITAT for the above mentioned assessment year, it is held that assessee’s income from rental income should be accepted as business income and ground no.1 and 2 are decided in favour of the assessee.”
In view of the above, we are of the opinion that the rule of consistency should be followed and the ld. CIT (A) is justified in
ITA No. 3157/Del/2017 7 Wingflow Construction Pvt. Ltd. treating the assessee’s income as business income. Accordingly, we uphold the order of the ld. CIT (A) and dismiss the grounds of appeal.”
Since, the income has been assessed for 22 years under the head income from business and profession in the absence of any material changes in the instant year, we hereby direct that the income may be assessed under the head ‘Profits and gains of business or profession’.
In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 24/02/2020.
Sd/- Sd/- (Kuldip Singh) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 24/02/2020 *Subodh* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR