TaxTMI 
TaxTMI 
2026 (8) TMI 1551
X X X X Extracts X X X X
X X X X Extracts X X X X
....e firm. It is stated that the partner was continuously travelling during February and March 2026 and, therefore, could not provide the necessary papers to the consultant for preparation of the appeal. It is further stated that, upon resuming office in the second week of March 2026, he appointed a Chartered Accountant and took immediate steps for preparing and filing the present appeal. The assessee has submitted that the delay was neither intentional nor deliberate but occurred due to circumstances beyond its control. 3. We have considered the petition and the supporting affidavit. The delay is of 37 days and the explanation furnished by the assessee is supported by the sworn affidavit of its partner. There is nothing on record to indicate that the delay was deliberate or that the assessee stood to derive any advantage by filing the appeal belatedly. In our considered view, the assessee has shown sufficient cause for not presenting the appeal within the prescribed period. The Departmental Representative (DR)raised no objection in condoing the delay. Accordingly, in exercise of the power conferred under section 253(5) of the Act, the delay of 37 days is condoned and the appeal is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the learned CIT(A) erred in affirming action of the learned AO in assuming rent income at 20% of market value (as per stamp duty records) of tenancy property (under pagdi system) inasmuch as entire addition made is purely fictitious basis surmises and conjectures and thus, addition made under the head 'Income from House Property' is liable to be deleted; 3.3 The learned CIT(A) failed to appreciate and ought to have held that appellant had already offered actual rent income received from the immovable property (whose tenancy right was transferred during the year) thereby resulting in double taxation on same income liable to be deleted; Ground No. 4 - Incorrect taxation of rent income earned in the course of business under the head 'Income from House Property' instead of 'Income from Business' as already offered to tax in return of income 4.1 On the facts and in circumstances of the case and in law, the learned CIT(A) erred in affirming action of the learned AO in taxing the rental income earned embedded in development of immovable property as 'Income from House Property' inasmuch as earning rental income and developing properties being main object of appel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ply dated 18.04.2022 explaining that the transaction was not a sale of immovable property by the assessee. The assessee explained that the property was governed by the tenancy law and that it was merely the landlord of the said property. The original tenant, Shri Pradeep Jethalal Shah, had expired and his tenancy rights had devolved upon his legal heirs, namely, Smt. Kusum Pradeep Shah, Shri Tarak Pradeep Shah and Smt. Nisha Nimesh Shah. These legal heirs transferred their tenancy rights to Shri Jayantilal Chunnilal Prajapati under the agreement dated 14.11.2017. The assessee stated that it had joined the agreement merely as a confirming party in its capacity as landlord and that it had neither transferred the tenancy rights nor received any consideration under the agreement. 7. The assessment order records that an order under section 148A(d) was passed on 28.04.2022 and a notice under section 148 was issued on the same date. The assessee filed its return in response to the notice under section 148 on 22.11.2023 declaring income of Rs. 29,490/-. Thereafter, statutory notices were issued and the reassessment proceedings were completed. 8. The Assessing Officer did not make any....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s nor received any consideration. 12. The learned AR further submitted that the rental income had already been accounted for and offered to tax. He referred to the computation of income and the Profit and Loss Account placed in the paper book. The Profit and Loss Account reflected gross rental receipts of Rs. 11,15,200/- and net profit of Rs. 23,587/-. After making an addition of Rs. 5,900/- in the computation, the assessee had offered business income of Rs. 29,487/-, rounded off to Rs. 29,490/-. 13. The learned AR submitted that the notice under section 148A(b) was issued only on the allegation of escapement of capital gain arising from the purported sale of immovable property. No addition was ultimately made under the head "Capital Gains". The Assessing Officer instead estimated notional rent with reference to the stamp duty value and made additions under the head "Income from House Property". It was contended that the income forming the sole basis of the notice under section 148A(b) was not assessed and that the additions ultimately made related to altogether different issues. 14. In support of this contention, the learned AR relied upon the following decisions: ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the agreement and had received no consideration. The assessment order itself proceeds on the basis that the transaction was an agreement for transfer of tenancy rights and not a sale of the property by the assessee. Significantly, the Assessing Officer made no addition under the head "Capital Gains" in respect of the transaction referred to in the notice under section 148A(b). 20. The Assessing Officer instead estimated notional rent by applying 20 per cent to the stamp duty value and made an addition of Rs. 4,64,800/- under the head "Income from House Property". He also made a separate addition of Rs. 7,51,153/- by assessing the disclosed rental receipts under the head "Income from House Property" instead of the head "Profits and Gains of Business or Profession". These additions concern the determination and classification of rental income. They are distinct from the alleged capital gain arising from the purported sale of the property, which alone formed the basis of the notice under section 148A(b). 21. The contention raised by the learned AR is a pure question of law arising from the notice under section 148A(b), the assessee's reply and the reassessment order, all of whi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 6.1 of the impugned order, at the highest, can only be termed as 'a suspicion subject to a case of fishing enquiry'. ... 11... In any case, the Division Bench of this Court in CIT v. Jet Airways (I) Ltd. [2010] 195 Taxman 117/[2011] 331 ITR 236 (Bombay)/2010 SCC Online Bom. 2065, held that the effect of Section 147 is that the AO has to assess or reassess such income that has escaped assessment and which was the basis of the formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which comes to his notice during the course of the proceedings. However, if after issuing a notice under Section 148 of the Act, the AO accepts the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assess some other income. ... In this case, the AO has accepted the contention of the assessee and held that the information report by the Insight portal is accounted for by the assessee in his books and income arising out of those transactions is duly....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (supra) similarly held that "the Assessing Officer did not have jurisdiction to make some other addition/disallowance in the hands of the Assessee." In Subhash Runwal (supra), it was held that where the very basis recorded for reopening did not result in an addition, "such reassessment cannot be treated as a valid order in the eyes of law." In Narendra Vinayak Palmure (supra), which involved reopening on the ground of a difference between the stamp duty valuation and the disclosed consideration, the Co-ordinate Bench held that "no other addition can be sustained in the reassessment order" when no addition was made on the issue for which the assessment was reopened. 28. Thus, the consistent judicial position is that the Assessing Officer cannot abandon the income specified in the notice under section 148A(b) and sustain the reassessment only on the basis of another and distinct item of income. The Explanation to section 147 does not dispense with the statutory requirement that the reassessment must remain founded upon an income which had escaped assessment. Nor can an issue not disclosed to the assessee in the notice under section 148A(b) be used as a substitute for the original....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ription may not by itself determine the issue, it reflects the absence of a proper examination of the statutory computation. 33. As regards the addition of Rs. 7,51,153/-, the Profit and Loss Account records gross rental receipts of Rs. 11,15,200/-. Thus, there is no finding that the rental receipts were suppressed or omitted from the books of account. The dispute is essentially confined to the head under which those receipts were assessable. Even if the Assessing Officer considered the receipts taxable under the head "Income from House Property", the income already included in the business computation was required to be excluded and the computation recast transparently under the appropriate head so that the same receipts were not retained under both heads. The final computation continues to reflect business income of Rs. 29,487/- while separately assessing the house-property income. The assessment order does not contain a clear reconciliation demonstrating that the same income has been eliminated from the business computation. 34. We also find that the learned CIT(A) dismissed the appeal without examining the aforesaid factual and computational aspects. Nevertheless, since t....