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Facts
The assessee's appeal arises from an order by the CIT(A) concerning AY 2016-17. The appeal was filed after a significant delay, which the Tribunal condoned due to sufficient cause. The core issue is the classification of rental income and the disallowance of certain expenses.
Held
The Tribunal held that the rental income should be treated as 'Income from House Property' and not 'Income from Business', as the company's main objects were related to auto parts, not real estate dealings. Consequently, only statutory deductions are allowable under this head, leading to the dismissal of grounds related to income classification and expense disallowance.
Key Issues
Whether rental income should be taxed as 'Income from House Property' or 'Income from Business', and whether related expenses are allowable.
Sections Cited
250, 143(3), 37, 124(2), 124(3)(a), 124(3)(c), 132, 132A, 153A, 153C, 147, 148, 143(2)
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Income Tax Appellate Tribunal, KOLKATA ‘C’ BENCH, KOLKATA
Before: SHRI GEORGE MATHAN & SHRI RAKESH MISHRA
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.
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.
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.
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
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.
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.
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.
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.)
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.
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