2018 (5) TMI 139 - AT - Income Tax

Income from Warehousing Classified as Business Income, Invalid Proceedings Under Sections 147/148, Assessee Appeals Allowed

The Tribunal determined that income from warehousing should be classified as 'business income' rather than 'house property' income. The proceedings ... Treating the income from warehouse as income from ‘house property’ instead of ‘business income’ - Held that:- Tribunal in assessee’s own case wherein income from warehousing was accepted by the Tribunal in the A.Y.2008-09 and 2013-14 [2018 (3) TMI 1509 - ITAT MUMBAI] as income from business. Tribunal after considering various judicial pronouncements correclty reached to the conclusion that income from warehousing was liable to be assessed under the head ‘business income’ rather than income from ‘house property’. As the facts and circumstances during the years under consideration are same, respectfully following the order of the Tribunal in assessee’s own case, we do not find any justification for treating the warehousing income as income from ‘house property’. - Decided in favour of assessee Issues Involved:1. Classification of income from warehouse as 'house property' income versus 'business income'.2. Validity of the proceedings initiated under Section 147/148 of the IT Act based on a change of opinion.Detailed Analysis:1. Classification of Income from Warehouse:The primary issue revolves around whether the income derived from the warehouse should be classified as 'house property' income or 'business income'. The assessee contended that the income should be treated as 'business income', referencing a previous Tribunal order dated 01/02/2018 for the assessment years 2008-09 and 2013-14 where similar income was classified as 'business income'.The Tribunal analyzed the nature of the income, emphasizing that the assessee was engaged in the business of shipping agency and warehousing. The warehouse in question was used to provide storage services to importers, which included auxiliary services like pest control and security. The Tribunal cited the Supreme Court judgment in M/s. Rayala Corporation Pvt. Ltd. vs ACIT and the Madras High Court judgment in CIT vs NDR Warehousing (P.) Ltd., which supported the classification of such income as 'business income' due to the commercial nature of the activities involved.The Tribunal also noted the principle of consistency, highlighting that for the assessment years 2006-07 and 2007-08, the income from the warehouse was assessed as 'business income' under Section 143(3) of the Act. The Tribunal found no change in facts or law that would justify a departure from this classification. Therefore, the Tribunal concluded that the income should be assessed as 'business income', setting aside the order of the CIT(A).2. Validity of Proceedings under Section 147/148:For the assessment year 2008-09, the proceedings were reopened under Sections 147/148 of the Act. The original assessment had classified the income as 'business income'. The assessee challenged the reopening, arguing it was based on a mere change of opinion without any new material facts.The Tribunal examined the reasons recorded for reopening, which cited the Supreme Court judgment in Shambhu Investment (P) Ltd. However, this judgment was available at the time of the original assessment. The Tribunal emphasized that the Assessing Officer did not provide any new tangible material to justify the change in classification. The Tribunal concluded that the reopening was flawed and based on a mere change of opinion, thus favoring the assessee.Conclusion:The Tribunal, after considering various judicial pronouncements and the facts of the case, held that the income from warehousing should be classified as 'business income' rather than 'house property' income. Additionally, the proceedings initiated under Sections 147/148 were deemed invalid as they were based on a change of opinion without new material facts. Consequently, both appeals of the assessee were allowed.Order Pronouncement:The order was pronounced in the open court on 25/04/2018, allowing the appeals of the assessee.