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Income Tax Appellate Tribunal, DELHI BENCH “G” NEW DELHI
Before: SHRI I.C. SUDHIR & SHRI O. P, KANT
ORDER
PER I.C. SUDHIR: JUDICIAL MEMBER The assessee has questioned first appellate order on the ground that the Learned CIT(Appeals) was justified in upholding rental income received on letting out warehouses under the head “income from house property” against the business income shown by the assessee.
Heard and considered the arguments advanced by the parties in view of orders of the authorities below, material available on record and the decisions relied upon.
The facts in brief are that the assessee, a partnership firm had disclosed rental income of Rs.8,11,046 as business income in its profit and loss account and net income of Rs.2,325 was shown as business income after 2 claiming depreciation on go down building and other consequential expenses. The Assessing Officer did not agree and held the receipt as “income from house property”. The same has been upheld by the Learned CIT(Appeals) which has been questioned before the ITAT.
In support of the ground, the Learned AR submitted that assessee is a partnership firm engaged in the business of warehousing as per the partnership deed and referred the copy of partnership deed made available at page Nos. 1 to 4 of the paper book under the certificate that it was made available before the Assessing Officer as well as before the Learned CIT(Appeals). He submitted that the assessee had taken a loan from Punjab National Bank for construction of go down and capitalized the same in its books at Rs.54,37,000 as noted by the Assessing Officer himself vide original order passed under sec. 143(3) of the Act. The assessee has considered the said go down as its business assets i.e. fixed assets as per audited accounts made available on record with the certificate that it was furnished before the Assessing Officer and Learned CIT(Appeals) and claimed depreciation on the same. The assessment originally framed was reopened only on the premises that the income from letting of go down should have been assessed under the head “house property” instead of 3 “business income”. The Learned AR submitted that in the original assessment proceedings, the Assessing Officer had consciously accepted the said income as business income. The recorded reasons to believe nowhere reflect that there was failure on the part of the assessee in fully and truly disclosing all material facts. Thus, the reopening was not valid as it was based on change of opinion only. In this regard, he placed reliance on the decision of Hon'ble Delhi High Court in the case of CIT vs. Kelvinator of India Ltd. (2002) – 256 ITR 1 upheld by the Hon'ble Supreme Court reported in (2010) – 320 ITR 561 (SC) holding that reopening is not permissible on the basis of change of opinion and if notice under sec. 148 is issued without the jurisdictional foundation available under sec. 147 of the Act, the notice and subsequent proceedings will be invalid.
On merit, the Learned AR submitted that the issue raised is fully covered in favour of the assessee by the recent decision of the Hon'ble Supreme Court in the case of Chennai Properties & Investment Ltd. vs. CIT (2015) – 373 ITR 673 (SC) reversing the decision of Hon'ble Madras High Court reported in 266 ITR 685 (Mad.) followed by the Learned CIT(Appeals) for holding the rental income as income from the house properties. The Learned AR pointed out that throughout it has been 4 remained the case of the assessee that it was having no other business than letting out the warehouse. He submitted further that the case of assessee is also fully supported by the decision of Hon'ble jurisdictional Allahabad High Court in the case of CIT vs. Goel Builders – 331 ITR 344 (All). He also placed reliance on the following decisions: i) CIT vs. Shaan Finance Pvt. Ltd. – 231 ITR 308 (SC); ii) Vora Warehousing (P) Ltd. Vs. ACIT – 70 ITD 518; iii) Shreeji Exhibitors Vs. ACIT – dated 14.8.2015; iv) M/s. Bhuvan Leasing & Infra-structure Vs. ITO – ITA No. 4977/Mumbai/2006 dated 10.6.2015.
The Learned Senior DR on the other hand placed reliance on the orders of the authorities below. He submitted that the Learned CIT(Appeals) has discussed the issue in detail and thereafter only he has come to the conclusion that the rental income earned on letting out of the warehouse was nothing but income from the house property.