TaxTMI 
TaxTMI 
2015 (11) TMI 576
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..... The Revenue has mainly challenged the impugned order on merits, on the ground that the learned Commissioner of Income-tax (Appeals) has erred in law and on facts in treating the income received as licence fees and service charges from flats as business income and income from house property and not under the head income from other sources as held by the Assessing Officer. Since the issues involved in both the appeals are common arising out of similar set of facts, therefore same are being disposed off by way of this consolidated order. 2. The brief facts of the case are that the assessee-company is engaged in the business of dealing in house property for commercial exploitation. The assessee had taken over several flats at Chatrapati Shivaji Marg, Mumbai on tenancy basis and income from these flats was shown in the return of income as income received in respect of licence fee and service charges receivable from the tenants and was declared as income from business activity. This was shown up to the assessment year 2001-02 and was also accepted and assessed under the head "business income" by the Department. The return for the assessment years 2003-04 and 2004-05 was filed on Nov....
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....property may not be said as correct unless it is established that such receipts have arisen from the building owned by the company. This is clear from the language of section 22 of the Act. The relevant provisions are reproduced for sake of convenience as under : 'The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner . . . shall be chargeable to income tax under the head "Income from house property".' The factual position emerging from the records will reveal that the company took over six flats (G-43 to 47 & G-51) at Dhanraj Mahal, Chatrapati Shivaji Marg, Mumbai 400 039 on tenancy basis from Renukadevi Dhanrajgir during the period relevant to the assessment year 2001-02. In the assessment for this year the then Assessing Officer rightly considered the licence fee and service charges as business income since these flats were taken on tenancy basis. The assessment completed under section 143(3) of the Act for the assess ment year 2007-08 recently further confirms the fact regarding, assessability of licence fee and service charges from these six flats under the head business as the company is not the o....
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....ssessing Officer has held that the income from the sub-letting of the properties should be taxed as "income from other sources" and thereby denied various claims of expenses debited by the assessee. 5. The learned Commissioner of Income-tax (Appeals), so far as the validity of reopening of the assessment under section 147 of the Act, held that the same is valid because in the assessment year 2007-08, the Assessing Officer has held it to be income received from tenancy which is taxable under the head "Income from house property" and therefore, he had prima facie good reason to reopen the case for the assessment years 2003-04 and 2004-05 and to disallow the business expenses claimed by the assessee. 6. Before us learned senior counsel, Shri Firoze B. Andhyarujina submitted that, from the bare perusal of the "reasons recorded" it can be seen that the Assessing Officer did not have any material coming into record so as to entertain "reason to believe" for reopening the case under section 147 of the Act, even though the assessment stood completed under section 143(1) of the Act. The Assessing Officer is mainly trying to change the head of "Income from business income" to "Income f....
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....n 147 of the Act vis-a-vis material placed on record. It is an undisputed fact that the assessee's return of income was accepted under section 143(1) of the Act and accordingly, the returned income had attained finality. Such an assessment has been sought to be reopened on the ground that the receipts from tenancy is to be taxed under the head "Income from house property" instead of "Business income". It is a trite law that under section 147 of the Act, the reopening of the assessment can be initiated only if the Assessing Officer has "reason to believe" that income chargeable to tax has escaped assessment for any assessment year. The question whether the Assessing Officer had reason to believe or not is always a question of a jurisdiction which needs to be examined whether such a completed assessment can be reopened within the frame work of law. The hon'ble Supreme Court in the case of Ganga Saran and Sons P. Ltd. v. ITO reported in [1981] 130 ITR 1 (SC), held that the word "reason to believe" is much stronger than the words "is satisfied". The belief entertained by the Assessing Officer must not be arbitrary or irrational as it must be based on reasons which are relevant ....
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....easons recorded, the Assessing Officer has entertained reason to believe that income of the assessee should be assessed under the head "Income from house property" whereas in the impugned assessment order passed in pursuance of such reasons recorded the Assessing Officer has treated the income to be assessed under the head "Income from other sources". Thus, the very premise and the basis on which "reasons" were recorded and "reason to believe" was entertained by the Assessing Officer has itself been negated by him in the assessment order. Thus, such "reasons recorded" cannot clothe the Assessing Officer with the jurisdiction to reopen the case within the scope of section 147 of the Act, because there is no "reason to believe" based on any tangent material on record or any live link or nexus with the income chargeable to tax escaping assessment. Further the assessee in its objections has categorically brought to the notice of the Assessing Officer that the flats were acquired by the assessee in the subsequent year. During these period the flats were taken on tenancy basis, from which the assessee earned the income and it was only from the assessment year 2005-06, when the assessee h....