LOUDON PROPERTIES (P) LTD.,KOLKATA vs. ITO, WD-6(2), KOLKATA, KOLKATA

The assessee in the present case is a Company. During the years under consideration, it had taken house property situated at 24, Park Street, Kolkata on a long-term lease from Mrs. Mallika Jalan and the same was given on rent to Development Consultants Limited. The rent received for the said property was declared by the assessee under the head “profits and gains from business or profession” and after claiming various expenses against the same, total income of Rs.18,710/-, Rs.8,587/- and Rs.11,990/- was declared by the assessee in the returns of income filed for A.Y. 2003-04, 2004-05 and 2005-06 respectively. These returns filed by the assessee were initially accepted by the Assessing Officer under section 143(1). Subsequently the assessments, however, were reopened by him for all the three years under consideration and in the assessments completed under section 143(3) read with section 147 vide orders dated 10.09.2008 for all the three years under consideration, the rental income was assessed by him to tax in the hands of the assessee under the head “income from house property” as the assessee was found to be a deemed owner of the property within the meaning of section 27(iiib). After allowing standard deduction under section 24(a) against the rental income assessed to tax under the head “income from house property”, the total income of the assessee was determined by the Assessing Officer at Rs.1,34,690/-, Rs.1,41,430/- and Rs.1,48,500/- for A.Y. 2003-04, 2004-05 and 2005-06 respectively. On appeal, the ld. CIT(Appeals) upheld the orders passed by the Assessing Officer under section 143(3) read with section 147. On further appeal, the Tribunal vide its common order dated 10.12.2010 passed for all the three years under consideration upheld the action of the authorities below in assessing the rental income of the assessee under the head “income from house property”. The Tribunal, however, found that neither the Assessing Officer nor the ld. CIT(Appeals) had computed the taxable income of the assessee as per law as the allowability of various expenses claimed by the assessee in the Profit & Loss Account was not considered by them. The Tribunal, therefore, restored the matter to the file of the Assessing Officer for the limited purpose of considering the allowability of the various expenses debited by the assessee in the Profit & Loss Account.

As per the direction of the Tribunal, the matter was taken up by the Assessing Officer for consideration in the set aside proceedings. According to him, the assessee, however, did not comply with his requirements and requested to keep the set aside proceedings in abeyance as the Miscellaneous Application filed by the assessee in respect of the order of the Tribunal was pending. Since the matter was getting time barred, the Assessing Officer proceeded to complete the assessments under section 143(3) read with sections 147 and 254 of the Act for all the three years under consideration vide orders dated 30.12.2011, wherein he did not allow any expenditure claimed by the assessee in the Profit & Loss Account.

Against the orders passed by the Assessing Officer under section 143(3) read with sections 147 and 254 for all the three years under consideration, the asessee again filed appeals before the ld. CIT(Appeals). During the course of appellate proceedings before the ld. CIT(Appeals), reliance, inter alia, was placed by the assessee on certain judicial pronouncements in support of its claim that even if there was no income assessed under the head “profits and gains of business or profession” in the case of a Company, the expenditure incurred to maintain its establishment for complying with statutory obligation so long as it is in operation and its name is struck off the register has to be allowed. The judicial pronouncements cited by the assessee were found by the ld. CIT(Appeals) distinguishable on facts and he upheld the orders passed by the Assessing Officer under section 143(3) read with sections 147 and 254 for all the three years under consideration by observing that there was no case made by the assessee for allowing any deduction other than the deduction already allowed under section 24(a). Aggrieved by the orders of the ld. CIT(Appeals), the assessee has preferred these appeals before the Tribunal.

I have heard the arguments of both the sides and also perused the relevant material available on record. Although the ld. counsel for the assessee has relied on the decision of the Hon’ble Supreme Court in the case of Chennai Properties and Investment Limited –vs.- CIT (Civil Appeal No. 4494 of 2004 dated 09.04.2015) to contend that the rental income received by the assessee is assessable under the head “profits and gains of business or profession”, I find that the issue as regards the head of income under which the rental income received by the assessee is chargeable to tax has already become final vide Tribunal’s order dated 10.12.2010 and since the matter was restored to the file of the Assessing Officer by the said order of the Tribunal for the limited purpose of considering and allowing deduction on account of various expenses claimed by the assessee in the Profit & Loss Account, the scope of the set aside proceedings is limited to that extent only. In this regard, it is observed that even though opportunity of being heard was given by the Assessing Officer to the assessee to give effect to the order of the Tribunal dated 10.12.2010 (supra), the assessee sought time as the Miscellaneous Application filed by it against the order of the Tribunal was pending at the relevant time. The assessee thus did not get any effective opportunity to put forth its case on the issue of allowability of various expenses debited in the Profit & Loss Account before the Assessing Officer during the course of set aside proceedings. Even the ld. CIT(Appeals) while disposing of the appeals of the assessee vide his impugned orders confined himself to distinguish the case laws cited by the assessee and did not consider specifically the allowability of expenses debited by the assessee to the Profit & Loss Account as per the direction of the Tribunal. In these facts and circumstances of the case, as clearly evident from the record, the ld. counsel for the assessee has urged that one more opportunity may be given to the assessee to make out a case before the Assessing Officer and although the ld. D.R. has strongly opposed the same by submitting that the assessee has already been given sufficient opportunity to do so. I am of the view that the assessee in the facts and circumstances of the case deserves to be given one more opportunity to put forth its case before the Assessing Officer in the interest of justice. In that view of the matter, I set aside the impugned orders of the ld. CIT(Appeals) and restore the matter to the file of the Assessing Officer with a direction to consider and decide the issue relating to the allowability of various expenses debited by the assessee in the Profit & Loss Account afresh on merit in accordance with law after giving proper and sufficient opportunity of being heard to the assessee.

In the result, all the three appeals of the assessee are treated as allowed for statistical purposes.