TaxTMI 
TaxTMI 
2009 (8) TMI 49
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....ion no. 31 of 2005 has been filed interalia for the following relief:- "(i) That a suitable writ, order or direction be issued quashing the notices dated 8.1.2004, for reassessment under Section 147 of Income Tax Act, 1961 for the assessment years 2001-02 and 2002-03, both under Section 148 of Income Tax Act, 1961; (ii) That a suitable writ, order or direction in the nature of mandamus or prohibition be issued restraining or prohibiting the Income Tax Officer, Ghaziabad, respondent from passing any reassessment order in pursuance of the notices dated 8.1.2004 both under the Income Tax Act, 1961;" 3. In these writ petitions similar questions of fact and law are involved and with the consent of the parties they are taken up together and are being disposed of by a common judgment and order. 4. These writ petitions relate to the assessment year 2001-02 and 2002-03. 5. All the facts of the aforesaid writ petitions are more or less the same, therefore, facts of the leading writ petition no.32 of 2005 are briefly stated as under:- 6. The petitioner is a partnership firm engaged in the business of manufacture and sale of RCC Pipes. The return of income declaring total rec....
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....to reduce the taxable property income. Thus the assessee is entitled to get the benefit of deduction as allowable under the head income from house property and not as business expenditure as claimed by the assessee in the P & L A/c . The same view has been held by the Ld. C.I.T. (Appeal) Ghaziabad vide her order at 29.07.2003 in the case of assessee in assessment year 2000-01. This view also finds support from the decision of Hon'ble Apex Court in the case of East India Housing and Land Development Trust Ltd. Vs. C.I.T., West Bengal reported in 42 ITR 49 as cited by the Ld. C.I.T. (Appeals) Ghaziabad in her above mentioned order. It appears that the interest paid to partners is not entirely on account of business activity but a major part of the capital has been invested towards the purchase of the property. Thus it is the investment made by these persons the so called partners and no interest can be allowed on their investments as there is no borrowing of capital. Therefore, I have reasons to believe that excessive relief from the income from house property has been allowed U/s 147 explanation C (iii) of the I.T. Act, 1961. I have reasons to believe that assessee has escaped incom....
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....refer to aforesaid circular No. 549 dated 31st October, 1989. The relevant ex293tract of the said circular is reproduced below:- "Income escaping assessment 7.1 Simplification of the provisions relating to assessment or reassessment of income escaping assessment (section 147).- Under the old provisions of section 147 of the Income tax Act, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed, as follows:-293 (i) Clause (a) empowered the Income-tax Officer to assess or reassess the income escaping assessment, if he had reason to believe that income had escaped assessment on account of omission or failure on the part of the assessee to file a return of income for an assessment year or to disclose fully and truly all material facts necessary for assessment for that year. (ii) Clause (b) empowered the Income Tax Officer to reopen an assessment, notwithstanding the fact that there had been no omission or failure, as mentioned in clause (a), on the part of the assessee if the Income-tax Officer, on the basis of information in his possession, had reason to believe that income had escaped....
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....siness activity but the major part of the capital was invested towards the purchase of the property thus the investment made by those persons, the so called partners and no interest can be allowed on their investment as there was no borrowing of capital. 20. During the assessment years 2001 to 2003, the assessee was in possession of the land and building which was partly being used for the purpose of its business as Godown, factory shed etc. whereas the remaining part was given on rent to third party. The rental income received from third party was shown by the petitioner firm under the head income from business. The return filed by the petitioner disclosing the entire income from business and not under the head property was accepted under Section 143 (1) without any application of mind thereafter the notice under Section 148 was issued and the Assessing Officer was of the opinion that the said income was chargeable under the "head property income" and was also of the opinion that the interest paid to partners was not entirely on account of business activity but a major part of the capital was invested towards the purchase of the property thus it was the investment made by the p....
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....ssed the appeal of the petitioner and held that the petitioner was not entitled for set off the business expenditure claimed to the extent of Rs. 4,72,256/- against the income from property and taxed the income under the head "income from property" instead of "income from business". 24. The notices under Section 148 for the assessment year 2001 to 2003 were issued on 15.12.2003 much prior to the subsequent order dated 30.1.2004 passed by the CIT(A) Ghaziabad recalling its order dated 22.7.2003 for Assessment Year 2000-01 and allowing the appeal of the petitioner. It is a settled law that res-judi-cata does not apply to income tax proceedings and each assessment year being a separate unit and is new and is based on different facts and circumstances. It is also relevant to note that when the objections raised by the petitioner against the issuance of notice under Section 148 for the assessment years 2001 to 2003, even at that time the case of Chaman Udhyog for the assessment year 2000-01 was sub-judice. Moreover the assessment order for the assessment year 2000-01 was passed under section 143 (3) read with section 147 of the Act, however, for the assessment years in question (asse....
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....mpugned notices were quashed. 29. The aforesaid facts and circumstances of the case of J.P. Bajpai (HUF) clearly suggest that the present case is clearly distinguishable and has no bearing on the case in hand. 30. The petitioner has further placed reliance on the case of Commissioner of Income Tax V. Pateshwari Electrical and Associated Industries (P) Ltd. 2006 282 ITR 61. This case has absolutely no application to the facts of the present case. The said case was not directed against the issuance of notice issued under Section 148 of the Act. In the present matter, the matter is still to be decided finally by the Assessing Authority, whether the income should be treated under the head "business income" or "property income". The petitioner will get ample of opportunity to show sufficient cause to the Assessing Authority during the course of assessment. 31. The petitioner has placed further reliance on the decision of the Universal Plast Ltd. V. Commissioner of Income Tax 237 ITR 454 (S.C.). In this case also, the validity of notice issued under Section 148 of the Act was not under consideration, therefore, it has no application to the facts and circumstances of the present ....
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....r has, for any reason escaped assessment to tax for some year. If such a basis exists, the assessing authority can proceed in the manner laid down in the section. To put it differently, if there are, in fact, some reasonable grounds for the assessing authority to believe that the whole or any part of the turnover of a dealer has escaped assessment, it can take action under the section. Reasonable grounds necessarily postulate that they must be germane to the formation of the belief regarding escaped assessment. If the grounds are of an extraneous character, the same would not warrant initiation of proceedings under the above section. If,however the grounds are relevant and have a nexus with the formation of belief regarding escaped assessment, the assessing authority would be clothed with jurisdiction to take action under the section. Whether the grounds are adequate or not is not a matter which would be gone into by the High Court or this Court for the sufficiency of the grounds which induced the assessing authority to act is not a justiciable issue. What can be challenged the existence of the belief but not the sufficiency of reasons for the belief. At the same time, it is necess....