TaxTMI 
TaxTMI 
2005 (12) TMI 214
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....e cleaning, tubewell, pump maintenance, etc., have been incurred through self-made vouchers which are not properly verifiable, therefore, he disallowed Rs. 10,000 out of such expenses claimed and added the same in the income of the assessee and, therefore, completed the assessment at an income of Rs. 35,89,430 vide order dated 25-11-2003 passed under section 143(3) of the Income-tax Act. 2.1 On examination of the assessment record, it was noticed by the Ld. CIT that the assessee-company has claimed various expenses to the tune of Rs. 17,54,266 for extending service facilities to its tenants. It was further found by the Ld. CIT that statutory deduction on account of repairs and collection has already been claimed and allowed while computing the rental income, therefore, the excess expenses of Rs. 17,54,264 on account of repairs and maintenance in addition to statutory deduction resulting loss to the revenue, and accordingly, the Ld. CIT was of the view that the assessment order passed under section 143(3) dated 25-11-2003 is bad in law and is erroneous insofar as it is prejudicial to the interest of the revenue and, accordingly, issued a show-cause notice under section 263 as to ....
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....s or profession". He further submits that from the last 5 decades it is being shown and accepted as such by the revenue except in the assessment year 1970-71 in which the claim of the assessee has been accepted by the then AAC of Income-tax vide order dated 15-11-1972 for assessment year 1970-71. He further submits that the assessee's accounts arc audited and in the annual report of the audited accounts the assessee has shown 'rental income' and 'service charges' separately and has claimed expenses as per Profit and Loss Account allowable under the Act. He further submits that the Assessing Officer after examining the books of account and the details has accepted the 'rental income' under the head "Income from house property" and 'service charges' under the head "Profits and gains of business" which is as per law laid down by the Hon'ble Supreme Court in the case of Karnani Properties Ltd. v. CIT [1971] 82 ITR 547 and also by the CBDT Circular No. 33 of 1941, dated 23-5-1941 appearing at page 1 of the assessee's Paper book. The reliance was also placed on the decision of Tribunal 'E' Bench, Kolkata in the case of Joint CIT v. Shree Govind Property & Investment (P.) Ltd. [IT Appeal ....
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....t the said decision is squarely applicable to the facts of the present case. As the assessee is receiving composite monthly rent including service charges as per tenancy agreements filed by the assessee in his paper book, therefore, there is no error in the order of the Ld. CIT in setting aside the issue to the file of the Assessing Officer. He further submits that since the Assessing Officer has failed to make proper enquiry, therefore, under the provisions of section 263, Commissioner has the power to set aside the assessment. The reliance was also placed on the decisions in the cases of Gee Vee Enterprises v. Addl. CIT [1975] 99 ITR 375 (Delhi), CIT v. South India Shipping Corpn. Ltd. [1998] 233 ITR 546 (Mad), CIT v. M.M. Khambhatwala [1992] 198 ITR 144 (Guj.) and CIT v. Bhagwan Das [2005] 272 ITR 367 (All.). He, therefore, submits that the order passed by the Ld. CIT under section 263 be upheld. 6. In the rejoinder, the Ld. Counsel for the assessee submits that as per tenancy agreements monthly rent and service charges are separately described and mentioned, therefore, there is no composite rent. He further submits that in the bills also the assessee has shown monthly rent a....
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....p; 1,440.00 Monthly Rental 16A, Chowringhee Mansions 182.50 Municipal Tax 30, Jawaharlal Nehru Road 720.00 Service Charges Kolkata-700 016 Neon Sign Board Space Other Charges, if any....
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....--------------------------- We further find that in the return of income for the assessment year under consideration 2001-02, the assessee has shown rental income under the head "Income from house property" and service charges under the head "Profit and gains of business or profession" as under: Income from house property as per separate statement appearing at Rs. 37,08,146.99 page 19 of the paper book -------------------------------------------------------------- Busi ness oss: Ser vice char ges Rs. 7,67,932.26 Add inter est income Rs. 8,13,833.00 -------------------- Rs. 15,81,765.26 (-) (-)Inte -------------------- ....
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....nbsp; Rs. 35,23,565.01 Add Back: Gratuity liability Rs. 47,954.00 Charity (100%) Rs. 7,912.00 ---------------- Taxable income Rs. 35,79,436.00 &....
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....e is inclusive of all charges to the assessee, therefore, it has been held that by the said agreement the parties have intended that such letting out would be an inseparable one. It has been further held that the prime object of the assessee under the said agreement was to let out the portion of the said property to various occupants by giving them additional right of using the furniture and fixtures and other common facilities for which rent was being paid month by month in addition to the security free advance covering the entire cost of the said immovable property and finally it has been held that the income derived from the said property is an income from property and should be assessed as such. 8.2 The above decision of the Hon'ble Calcutta High Court has been affirmed by the Hon'ble Supreme Court in Shambhu Investment (P.) Ltd.'s case. 9. In Gee Vee Enterprises' case, relied on by the Ld. Departmental Representative, it has been held at page 376 (short notes) as under: "It is not necessary for the Commissioner to make further inquiries before cancelling the assessment order of the Income-tax Officer. The Commissioner can regard the order as erroneous on the ground th....
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....eous and prejudicial to the interests of the revenue. The CIT can exercise his power under section 263 of the Income-tax Act, even in a case where the issue is debatable. Revisional powers under section 263 are not comparable with powers of rectification of mistake under section 154 of the Income-tax Act. 12. In Shri Bhagwan Das' case, relied on by the Ld. Departmental Representative, it has been held that an order which has been passed without application of mind, will also fall under the expression 'erroneous and prejudicial to the interest of the revenue'. In the assessment order, there was no discussion regarding the question as to whether the amount of income shown by the assessee which was being claimed to be exempt had actually been earned by him or not and further, whether the c entire amount of income from agriculture and poultry farming was exempt from tax. The CIT had rightly initiated proceeding under section 263 of the Income-tax Act, 1961 as exemption had been granted without application of mind. 13. In Karnani Properties Ltd.'s case, relied on by the Ld. counsel for the assessee, the assessee-company owned the Karnani Mansion consisting of numerous residential ....
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....r cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of Revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income-tax Officer is unsustainable in law." 15. Further the Hon'ble Apex Court in Radhasoami Satsang v. CIT [1992] 193 ITR 321 at page 329 observed that: "We are aware of the fact that, strictly speaking, res judicata does not apply to income-tax 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." 15.1 And the Hon'ble jurisdictional High Court in CIT v. Hindustan Motors Ltd. [1991]....