TaxTMI 
TaxTMI 
2008 (6) TMI 267
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....rchased on 4th March, 2005. The AO, thereafter, picked up the case for scrutiny and issued notices under s. 143(2)/142(1). During the course of assessment proceedings, the AO scrutinized the sheet of computation of income annexed with the return and noticed that assessee has shown car hire charges amounting to Rs. 1,86,000. Assessee has claimed thereon, depreciation, car insurance, interest paid to bank and driver's salary amounting to Rs. 1,39,464, Rs. 20,953, Rs. 69,763 and Rs. 42,000 respectively. This resulted in a loss from car hire charges. The AO asked the assessee to substantiate the claim of loss from car hiring charges and its setting off against salary income in the same financial year. It was explained that the claim has been made under s. 57(ii) of the Act. The AO, however, took a different view. He noted that loss from hiring of the car has been claimed to set it off against salary income. He, however, assessed it under the head 'Income from business or profession' and accordingly, set off of the loss was not allowed against salary income, by virtue of s. 71(2A) which was introduced in the IT Act, 1961 w.e.f. 1st April, 2005. 3. The learned CIT(A) confirmed the ord....
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.... 267 : (l992) 193 ITR 321 (SC), for the proposition that even though principle of res judicata is not applicable but where facts are the same and there is absence of any material change justifying Department to take a different view from that taken in earlier proceedings, then they should not have changed their view. 5. Against this, the learned Departmental Representative submitted that the AO had not carried out any enquiry in earlier years and had not applied his mind in earlier years, therefore, it would not be correct to say that an error which crept in earlier years should have been allowed to continue in subsequent years. The assessee has been doing the business of car hiring and therefore, its income should have been assessed under the head 'Income from business or profession'. He referred to the concept of 'business' as per s. 2(13) which, according to him is very wide and would include even a single transaction. He referred to the decision in the case of Mahammad Faruq, In re (1938) 6 ITR 1 (All) rendered by Hon'ble Allahabad High Court wherein the Hon'ble Court elaborated the concept of word 'business'. It was held that business must be some activity which has for its....
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....e Orissa High Court in the case of Industrial Development Corporation of Orissa Ltd. vs. CIT (2004) 189 CTR (Ori) 417 : (2004) 268 ITR 130 (Ori). 10. We have considered the rival submissions and perused the material on record. Undisputed facts are that assessee has only one car which was given on hire to M/s Jai Prakash Associates. She was assessed to tax under s. 143(3) wherein she had declared the income from car hire charges under the head 'Income from other sources'. In some years there was loss which was set off against salary income and was accepted by the AO. For the sake of convenience, we give below the figures of income/loss assessed under s. 143(3) in earlier years: ------------------------------------------------------------- Asst. Assessment framed Description year under s. 143(3) vide order dated ------------------------------------------------------------- 2000-01 1.3.2003 Loss of Rs. 45,036 from car hiring  ....
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....profession' when it is already accepted and assessed by the Department as income from other sources and set off of resulting loss is allowed against other income. In our considered view, the Department should have followed the principle of consistency and in this year also it should have assessed the car hiring charges under the head 'Income from other sources'. Reasons are that there is no change of facts as compared to earlier years. Even though principles of res judicata are not applicable to IT proceedings but Courts have held that AO should have followed their decisions of earlier years unless there are changes in facts and circumstances in the current year as compared to earlier years. 12. The Hon'ble Delhi High Court in the case of CIT vs. Lagan Kala Upvan (2003) 179 CTR (Del) 243 : (2003) 259 ITR 489 (Del), held that in absence of any change in the objectives and activities of the assessee, the AO was not justified in taking a different view only in respect of present assessment year when from the asst. yr. 1970-71, exemption under the said provisions of the Act was being allowed to the assessee consistently. Therefore, there is no question of denying exemption under s. ....
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....ty or conduct with a set purpose and a motive of profit which in fact may not arise or be earned. Business cannot include activities which are gratis to one party i.e. to the buyer. An activity to be treated as business should have a semblance of trade, an attribute of commercial activity and an expectation to earn income over a reasonable period. 18. The Hon'ble Allahabad High Court in the case of CIT vs. Jai Bharat Theatre (2001) 167 CTR (All) 274 : (2001) 247 ITR 295 (All), defined the word 'business' to include every trade, occupation and profession. The question whether a particular letting amount to business has to be decided in the circumstances of each case and each case has to be looked at from a businessman's point of view to find out whether the letting was doing of business or the exploitation of his property by an owner. It is an actual activity carried on by the assessee that has to be seen and not the object for which a company or a firm is established. 19. The Hon'ble Madras High Court in the case of CWT vs. K. Vijayakumar (2001) 166 CTR (Mad) 246 : (2000) 243 ITR 271 (Mad), held that to regard an activity as business, there must be a course of dealings either....
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....ry income. As facts, as compared to earlier years have not changed, the authorities should have taken a consistent view. 22. In this regard, we refer to the observation of Hon'ble Supreme Court in the case of Radhasoami Satsang vs. CIT wherein it was observed as under: "We are aware of the fact that. strictly speaking, res judicata does not apply to IT proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year." 23. Now we consider whether mere claim of the assessee of various expenses such as depreciation, car insurance, interest and driver's salary could bring the income from car hire charges under the head 'Income from business or profession'. In this regard, we notice that depreciation is also allowable to an assessee under s. 57(ii) in addition to s. 32(2) as s. 32(2) has been made applicable for computation of....