2013 (9) TMI 238 - AT - Income Tax

Income Tribunal's Classification Upheld: Lease & Maintenance Charges Not Business Income

M/s. Meeraj Estate & Developers Versus DCIT. - 4(1), Aaykar Bhawan, Agra

The tribunal upheld the authorities' classification of income from lease, furnishing, and maintenance charges under 'House Property' and 'Other Sources,' ... Nature of Lease Rent Received - Income from business or house property or other sources - Lease agreements - furnishing of floors of the building given on rent - agreement to provide maintenance and up- keeping of building, floor, furniture & fixtures and other equipments installed in the said premises - Principle of res judicata - Held that:- it is well settled that the principle of resjudicata or estoppel, which applies to decision of civil courts, has no application to decisions of income-tax authorities so as to preclude the determination of a question in a previous assessment order from being reopened in proceedings relating to a subsequent assessment. - for A.Y. 2005-2006 A.O. has accepted claim of the assessee without examining the relevant records and without recording facts of the issue. The order of the A.O. for A.Y. 2005-2006 is not in accordance with law. Merely accepting assessee's clam without examining records and material, it cannot be said that the order of the A.O. to be followed in subsequent year. The principle of consistency suggests that if any authority after examining records and material and after recording facts come to conclusion or taken a particular view on the issue by a speaking order in accordance with law only such view is to be followed on account of principle of consistency. A blind order, not taking any view, not examining records and material, such order is not required to be followed on principle of consistency. If anything was going wrong in the past that wrong thing need not to be followed in subsequent year. The wrong thing has to be corrected on notice of the same - partner of the assessee firm clearly admitted that the property taken on lease for the purpose of giving rent to GAIL - Revenue authorities are correct in not following the order of the A.O. for A.Y. 2005-2006. Nature of income - intention of the assessee was to let out the property to earn the rent. The assessee has claimed that income is assessable under the head 'income from business' but the assessee has failed to discharge the onus by furnishing evidence and material that the assessee was doing business. No systematic set up has been established for doing business activities. The assessee has failed to point out the volume, frequency, continuity and regularity of the transactions of purchase and sale in clause of goods - CIT(A) has rightly confirmed the action of the A.O in treating rental income assessable as income from house property and services receipts as income from other sources. Order of CIT (A) is confirmed on the issue. The AO is directed to give consequential effects and calculate total taxable income in accordance with law - Following decision of CIT vs. National Storage Pr. Ltd. [1967 (4) TMI 16 - SUPREME Court] - Decided against Assessee. Issues Involved:1. Classification of income from lease, furnishing, and maintenance charges.2. Consistency in assessment across different assessment years.3. Applicability of interest under Section 234B of the Income Tax Act.Issue-wise Detailed Analysis:1. Classification of Income from Lease, Furnishing, and Maintenance Charges:The primary issue was whether the income from lease charges, furnishing charges, and maintenance charges should be classified under 'House Property,' 'Other Sources,' or 'Business Income.' The assessee claimed these as 'Business Income,' while the authorities classified them differently.Lease Charges: The assessee had entered into a lease agreement with GAIL, letting out a vacant floor. The authorities determined that this income should be classified under 'House Property,' as it involved merely letting out property without any significant business activity.Furnishing Charges: The second agreement involved furnishing the leased floor with amenities like air conditioning. The authorities found that this was a consequence of the lease agreement and did not involve recurring business activities. Hence, it was also classified under 'House Property.'Maintenance Charges: The third agreement was for maintaining the leased premises. The authorities noted that only one person was employed for maintenance, indicating no significant business activity. Thus, this income was classified under 'Other Sources.'2. Consistency in Assessment Across Different Assessment Years:The assessee argued that in the previous assessment year (2005-06), the income was accepted as 'Business Income' and should be consistently treated the same way. However, the authorities and the tribunal noted that the principle of res judicata does not apply to income tax proceedings. Each assessment year is independent, and errors in one year do not bind future assessments.3. Applicability of Interest Under Section 234B of the Income Tax Act:The assessee contested the levy of interest under Section 234B. The authorities upheld the levy, stating that it is mandatory and consequential.Conclusion:The tribunal upheld the authorities' classification of the income under 'House Property' and 'Other Sources,' rejecting the claim of 'Business Income.' It also affirmed the applicability of interest under Section 234B. The appeals for both assessment years (2006-07 and 2008-09) were dismissed.