Punjab-Haryana High Court
Aditya And Company vs Commissioner Of Income Tax And Anr. on 1 October, 2004
Equivalent citations: (2005)195CTR(P&H)258, [2005]279ITR47(P&H), (2005)139PLR583
Author: Ajay Kumar Mittal
Bench: Ajay Kumar Mittal
JUDGMENT Ajay Kumar Mittal, J.
1. This order shall dispose of C.W.P. Nos. 15512 of 2004 and 15516 of 2004, as they involve similar facts relating to assessment years 2002-2003 and 2003-2004.
2. For the sake of reference, the facts have been taken out from C.W.P. No. 15512 of 2004.
3. In this petition under Article 226/227 of the Constitution of India, the petitioner has sought to challenge the proceedings initiated under Section 148 of the Income-tax Act, 1961 (for short, 'the Act') and has sought quashing of Annexure P2 and the order passed on objections (Annexure P1).
4. The petitioner had filed the return for the assessment year 2003-2004 in the status of a firm and an intimation under Section 143(1) of the Act for giving refund of Rs. 2,00,450/- was issued. The petitioner had shown the rental income from warehouse business in pursuance of the partnership deed and had claimed deduction of salary and interest paid to the partners. The Assessing Officer had issued a notice under Section 148 of the Act (Annexure P2) on the premise that the said income does not fall within the ambit of 'Business Income' and shall be income from other sources and, therefore, income chargeable to tax has escaped assessment. Accordingly, the petitioner was issued a notice by the Assessing Officer, to which objections were filed by the assessee. The Assessing Officer vide order dated 10.9.2004 (Annexure P1) had rejected the said objections on the ground that letting out of plinth to government agencies could not be termed as business income and the rental income would be assessable as income from other sources.
5. Learned counsel for the petitioner on the strength of precedent reported in Narsingha Kar & Co. v. Commissioner of Income-Tax, Orissa, (1978)113 I.T.R. 712 and Commissioner of Income-tax, West Bengal v. Cossipore Properties, (1997)107 I.T.R. 965 submitted that letting out of plinth would constitute business income and not income from other sources. Shri Jain, learned counsel for the petitioner next submitted that in the present case, the assessing officer has initiated reassessment proceedings on mere change of opinion and the same is bad in law as held in Wyeth (India) Pvt. Ltd. v. N.D.Bhatt, Inspecting Assistant Commissioner of Income-tax and Anr., (1982)127 I.T.R. 20. The last submission of the learned counsel for the petitioner was that in view of Commissioner of Income-tax v. D.C.Basappa and Ors. (2001)251 I.T.R. 673, the assessing officer cannot take recourse to the proceedings under Section 148 of the Act, for changing the status of an assessee.
6. We have considered the submissions of the learned counsel, but have not felt impressed. The Assessing Officer in the reasons recorded and also while rejecting the objections of the petitioner, noticed as under: "It was clearly mentioned that Section 4 of the Indian Partnership Act, 1932 defined partnership as relationship between the persons who have agreed to share the profits of business carried on by all or any of them acting for all meaning thereby that a firm could be formed if it derived income from Business or profession only and if the income derived is not from business, no partnership existed and consequently the said concern was not entitled to the status of firm. By simply mentioning the words 'business' in the partnership deed executed on 1.4.2001 does not mean that it is mandatory for the department to assess the income under the head "income from Business or profession". Accordingly, your objections in this regard cannot be accepted."
7. In Narasingha Kar & Co. case (supra), a Division Bench of Orissa High Court after considering the facts and circumstances of the case and on a proper construction of the agreement came to the conclusion that the income earned by the assessee from the shops was assessable under Section 28 of the Act and not under Section 56 thereof. Again in Cossipore Properties's case (supra), it was on the facts of that particular case that it was observed as under:- "In our opinion, there was sufficient material before the Tribunal to conclude that the activities carried on by the assessee were business activities."
8. From what has been noticed above, it would thus be abundantly clear that it is on the basis of facts of each case that it has to be decided whether a particular income falls under the heads "business income" or the "income from other sources". In the present case, we do not find any error in the approach of the assessing officer in initiating proceedings under Section 148 of the Act against the petitioner and accordingly issuing notice Annexure P2 and passing order Annexure P1 on the objections filed by the petitioner and the same cannot be said to be without jurisdiction.
9. Now adverting to the next limb of the arguments of the learned counsel for the petitioner, in Wyeth (India) Pvt. Ltd. 's case (supra), the income received by the assessee0 towards the rent or the compensation was treated as an income from "other sources" by the assessing officer. The assessee had produced the entire relevant material to the assessing officer and the assessment was completed after perusing the material. It was on that premises the re-opening was held to be bad as the assessing officer on mere change of opinion had sought to initiate re-assessment proceedings. In the present case, the assessee was only sent an intimation under Section 143(1)(a) of the Act and the question of examination of the material by the assessing officer did not arise at that stage. Thus, there is no question of change of opinion in the present case. Similarly, D.C.Basappa and others was a case where an order under Section 171 of the Act had been made and the Revenue in the proceedings under Section 147 of the Act purporting to re-open the assessment on the ground of loss of revenue wanted to get over an order already in existence under Section 171 and it was in those facts, it was held that the assessing officer cannot convert the proceedings under Section 147 to pass a different order under Section 171 of the Act. That is not the situation in the present case. Thus, these cases cited by the counsel for the petitioner are not applicable to the facts and circumstances of the present case.
10. Accordingly, we find no merit in both the petitions and the same are hereby dismissed.