2025 (2) TMI 1394 - AT - Income Tax

Rental income from state warehousing classified as business income disputed; remand ordered for fresh adjudication.

Rental receipts from a state warehousing entity were disputed as to classification as business income versus standalone rental. The taxpayer relied on ... Rental income from Andhra Pradesh State Warehousing Corporation - Classification of receipts as business income - non-participation in the proceedings by the Representative of the assessee, the learned CIT (A) has dismissed the appeals ex-parte Assessee has pleaded before us that the assessee has been regularly filing their return of income for the earlier as well as subsequent years wherein the rent received from Andhra Pradesh State Warehousing Corporation has been declared as business turnover u/s 44AD and offered to tax @ 8% which were accepted by the Department as business income. Therefore, assessing the rental income received from Andhra Pradesh State Warehousing Corporation on gross basis by the Assessing Officer without considering the income offered by the assessee in the earlier years as well as in the subsequent years as business income @ 8% needs reconsideration. HELD THAT:- Hence, in the facts and circumstances of the case and in the interest of justice, when both the Assessing Officer as well as the learned CIT (A) have passed ex-parte orders, the matter is remanded to the record of the Assessing Officer for fresh adjudication. Appeals filed by the assessee are allowed for statistical purposes. Issues: (i) Whether the delays of 61 days, 274 days and 366 days in filing the three appeals should be condoned. (ii) Whether the ex-parte orders confirming assessment of rental receipts should be set aside and the matters remanded to the Assessing Officer for fresh adjudication.Issue (i): Whether the delays in filing the appeals are liable to be condoned.Analysis: The assessees filed affidavits explaining non-filing and non-participation in assessment and appellate proceedings due to reliance on an ageing Income Tax Practitioner who, because of ill health and old age, did not pursue proceedings and failed to inform the assessees about ex-parte orders. Identical affidavits from the practitioner corroborated the cause. The Revenue opposed condonation. The Tribunal considered the explanations, supporting affidavits and circumstances and evaluated whether sufficient cause existed for the delays.Conclusion: The delays of 61 days, 274 days and 366 days are condoned subject to payment of costs of Rs. 2,500 for each appeal to the Prime Minister's National Relief Fund.Issue (ii): Whether the ex-parte orders confirming the assessment of rental receipts as income on gross basis should be set aside and remanded for fresh adjudication.Analysis: The Assessing Officer assessed the entire rental receipts after non-response to notices and the CIT(A) dismissed appeals ex-parte. The assessees showed consistent filing in earlier and subsequent years treating such receipts as business turnover under section 44AD and offering tax at 8% and pointed to TDS credit reflected in Form 26AS. Given the ex-parte nature of both assessment and appellate orders and the representation that merits exist (consistent prior/subsequent treatment and TDS credit), the Tribunal found that reconsideration on merits with an opportunity of hearing is necessary in the interest of justice.Conclusion: The ex-parte orders are set aside and the matters are remanded to the file of the Assessing Officer for fresh adjudication with direction to afford the assessee proper opportunity of hearing. The appeals are allowed for statistical purposes.Final Conclusion: The Tribunal condoned the delays and, on merits, set aside the ex-parte orders and remanded the matters for fresh adjudication, thereby granting relief to the assessees while imposing a cost; the appeals are allowed for statistical purposes.Ratio Decidendi: Where ex-parte assessment and appellate orders are impugned and the assessee demonstrates sufficient cause for delay together with prima facie material warranting reconsideration (including consistent prior/subsequent treatment and TDS credit), the Tribunal may condone delay and remand the matter to the Assessing Officer for fresh adjudication after providing opportunity of hearing.