Case Law Details
The assessment for AY 90-91 was reopened on the ground to verify whether the income from warehousing charges should be treated as income from business or income from house property. Ultimately after investigating the case in detail, the Assessing Officer himself arrived at a conclusion that charges on account of warehousing are business receipts and the reassessment was completed accordingly. Now, for these years under consideration the department had taken a different view, which in our considered opinion, is not correct and not acceptable either in the eyes of law or otherwise. There is no change in facts or circumstances. The assessee is doing the same business of warehousing. Similar receipts were received in past. The warehouses were given to different parties. Warehouses were constructed for the purpose of running of business of warehousing. Therefore, in view of these facts and circumstances and in view of the past history of the assessee company, we have no hesitation in holding that the ld CIT (A) was justified in allowing the legal ground of the assessee that the reopening of the assessments were bad in law. The orders of the Assessing Officer were void ab-initio.(Para 5.1)
the claim of the assessee was accepted in past, therefore, in view of the rule of consistency, the claim of the assessee has to be accepted for the year under consideration as there is no change in facts or circumstances of the case. It is well settled position of law that the rule of consistency has to be followed. There is no doubt that res-judicata does not apply in income tax proceedings but if there is any change of circumstances, then principle of res-judicata is applicable.(Para 9)
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH ‘F’ MUMBAI
BEFORE SHRI R.K.GUPTA, JM & SHRI R.K.PANDA, AM
ITA Nos.7263 to 7267 / Mum / 03
(Asstt.Years 1996-96 to 2000-01)
&
(Asstt.Year 2001-02)
| The Income Tax Officer |
Ward 6(2)(3), Mumbai
(Appellant)
Vs
M/s Ellora Silk Mills Pvt.Ltd
902 Vaitarna Worli Sagar Hsg, Society Pochkhanwala Road, Mumbai 25
PAN No. AAACE8430H
(Respondent)
Date of Order: 10th January 2008
Appellant by: Shri M Goyal
Respondent by: Shri Salil Kapoor
O R D E R
PER R.K.GUPTA, JM:
These are six appeals by the department against the order of the CIT (A) relating to assessment years 1996-97 to 2001-02.
2. In appeal for AY 1996-97 to 2000-01, the department is objecting in quashing the notice u/s 148 for initiating proceedings u/s 147 holding the reassessment proceedings u/s 147 and the notice u/s 148 issued by the Assessing Officer for all these assessment years as invalid and void ab-inito ignoring and without appreciating the evidences on record, the opportunity of being heard given to the assessee and the correct factual and legal position of the case.
2.1 In appeal for AY 2001-02, the department is objecting in directing the Assessing Officer to assess the income from warehousing activity and handling charges as income from business without appreciating the fact that the assessee is in respect of fixed sum on monthly / annual basis from the parties for the use of go-down and further, the TDS certificates furnished by the assessee also show the receipts as rental income from warehousing activity as property income instead of business income claimed by the assessee.
3. First, we will take up the appeals on legal ground.
3.1 The assessments for five years i.e. AYs 1996-97 to 2000-01 were completed u/s 143 (3) r.w.s 147 determining total income of Rs.29,46,609/-, Rs.38,65,214/-, Rs.35,07,868/-, Rs.27,01,339/- and Rs.20,66,869/- respectively.
3.2 On perusal of assessment records, the Assessing Officer noticed that the assessee company has shown income arising out of warehousing charges and handling charges. These receipts have been shown as business income. The TDS has been deducted by the tenants at the rate applicable for rental income. The nature of payments in the TDS certificate has been shown as ‘rent’. In facts, these receipts should have been taxed under the head ‘income from house property’ instead of ‘business income’. Hence, there was reason to believe that income has escaped assessment in this case. Therefore, the case was reopened for assessment u/s 147 of the Act.
3.3 Before the CIT (A), it was submitted that these warehousing structures are in possession of the assessee since about 1966. They are used for warehousing activities for customers. The goods of customers are stored in theses warehouse premises, and for their use, ‘warehousing’ charges are recovered. This income is being shown as income from business and till AY 1995-96, the income from warehousing activities has been shown and treated as income from business. Earlier in AYs 1991-92 & 92-93 the assessment was done under scrutiny on this matter where the income from warehousing activities was assessed as ‘income from business activity’. It was further submitted that thereafter, assessment for AY 90-91 was reopened u/s 148 to treat this income as income from house property. In reassessment also, after considering the fact of this case, it was held that it was the income from business. Reassessment order was passed on 30.09.94. The Assessing Officer has held in this assessment order that the income from warehousing business is charged to tax under the head ‘business’ and not under the head ‘income from house property’. In AY 94-95 & 95-96 the returns were accepted by the department in which the income from warehousing activities shown income from business and no change has been made by the department till AY 95-96. It was further submitted that since there is no change in the source of this income has not been changed, therefore, the Assessing Officer was not justified in deviating from the stand already taken in earlier years in the case of the assessee on the same issue without bringing on record any new fact which can be enable the Assessing Officer to deviate from its earlier decisions. The warehousing properties are the same and the charges, which are being received by the assessee company, are the same expect in variation of the amount, but not in character and they are being shown under the head ‘income from business. It was therefore, argued that the principal of res-judicata is applicable in the case of the assessee company in view of the fact that no new fact has been brought on record by the Assessing Officer in support of any material change in the facts which were in existence in earlier years where the income was shown as income from business and accordingly, it was accepted by the department. Accordingly, it was submitted that the Assessing Officer was not justified in reopening of the assessment for taking difference view. Reliance was placed on the decision reported in 64 ITR 388, 22 ITR 208, 30 ITR 618, 178 ITR 311 and 77 IR 410. Detailed written submissions were also filed before the CIT (A). To verify the facts of the case, the case records were asked to be produced by the CIT (A) from the department. The Assessing Officer having jurisdiction over the case of the assessee had produced the case records. The copy of the reasons recorded was also produced.
3.4 After considering the case records and the submissions of the assessee, the CIT (A) found that the Assessing Officer was not justified in reopening of the assessment for all these years. The CIT (A) recorded his findings that on same set of facts the Assessing Officer has allowed claim of the assessee for the last so many years. The case laws on which reliance placed were found in support of the case of the assessee. Accordingly, the CIT (A) has held that the assessments completed u/s 143(3) r.w.s.147 are void ab-inito and accordingly, they were cancelled. Now, the department is in appeal here before the Tribunal.
4. The Ld DR placed reliance on the order of the Assessing Officer. It was further submitted that some new information have gathered by the Assessing Officer before issuing notice u/s 148 for AY 96-97 to 2000-01.It was further submitted that res-judicata does not apply in Income Tax proceedings. Reliance was placed in support of this contention on the decision reported in 203 ITR 456 and 263 ITR 34.
4.1 The ld counsel on the other hand firstly placed reliance on the order of the CIT(A). It was further submitted that rule of consistency has to be followed. It was further submitted that there is no charge of facts or material for the year under consideration and the year for which the claim of the assessee has been accepted in past. Therefore, on the same set of facts, the department now cannot take a different view. Reliance was placed on the decisions reported in 245 ITR 492(Del), 77 ITR 410(P&H), 215 ITR 323(Guj) and 109 ITR 229 (Cal). The contentions raised before the CIT(A) were reiterated. Further reliance was placed on the decision of the Tribunal in the case of Aipita Marketing Pvt.Ltd. decided in ITA No.672 & 673/ Mum/2004 vide order dated 24.08.2007 in which on similar facts, reopening of the assessment was quashed. It was submitted that in the case also the assessment was completed u/s 143 (1) and thereafter assessment was reopened. However, the Tribunal found that on similar set of facts the claim of the assessment was held as bad in law.
5. We heard rival submissions and considered them carefully. After considering the submissions and pursuing the relevant material on record, we do not find any infirmity in the findings of the ld CIT (A). The findings of the ld CIT (A) are given in para 2.5 & 3 of his order which are as under:
“2.5 I have considered the above facts and decisions as stated by the Assessing Officer and also as submitted by the appellant before me at the time of hearing of this appeal along with the decisions. On consideration of the same, it is held that in view of the facts of this case, the decisions as relied upon by the appellant are squarely applicable and the decisions cited by the Assessing Officer in the assessment order are not having any application of the facts of this case in view of the fact that there is no material evidence or new/fresh facts available in these assessment years under reference so as to enable the Assessing Officer to take different view as it was taken in earlier assessment years treating the income from warehousing charges as income from business and income from house property. The then Assessing Officer in AY 90-91 reopened the case only on this ground to verify whether the income from warehousing charges should be treated as income from business or income from house property. Ultimately, the ld Assessing Officer has concluded that the income from warehouse charges is nothing, but income from business in the hands of the appellant. Similarly, in scrutiny assessments also, it was decided in favour of the appellant. Therefore, the applicability of TDS provisions on rent does not make any difference as regards the character of income and source of income from warehouse charges as income from business and not from house property. Therefore, there should not be any deviation from the earlier decision taken by the Assessing Officer holding the income from warehouse charges as income from business and not income from house property. The earlier decision was not proved to be arbitrary or perverse or without making any enquiries. After carrying out detailed enquiries, findings were given by the Assessing Officer in those assessment years and thereafter, he held that it was the income from business and not the income from house property. Therefore, in my opinion, I do not find any merit in the action of the Assessing Officer which has been taken u/s 147 having issued notice u/s 148 of the Act. Therefore, these proceedings are not desirable in this case. Therefore, theses proceedings are held invalid and the notice u/s 148 issued by the Assessing Officer for all these assessment years is held to be invalid and it is held as void ab initio. Therefore, the notice u/s 148 for initiating the proceedings u/s 147 are quashed.
3. Since the reassessment proceedings and the notices u/s 148 have been annulled and therefore, merits are not required to be judged upon in view of the following decisions:-
i) This view has been taken by Hon’ble Calcutta High Court in the case of Rawatmal Hirkchand Vs CIT 129 ITR 346 holding that the deletion of one of the items had been on the sole ground that the initiation of reassessment proceedings was invalid. In that view of the matter, it was open to the assessee to contend within the framework of the question referred that the addition of Rs.45,711/- retrained by the Tribunal was incorrect. This was not a new question. The assessee had preferred the appeals before the Tribunal and there was no question of any waiver of the invalidity of intimation of proceedings. As the initiation of proceedings was invalid, the addition of Rs.45,711/- could not be sustained.
ii) The Hon’ble Rajasthan High Court in the case of Deep Chand Kothari vs CIT 171 ITR 381 has held that an order passed by an authority without jurisdiction is a nullity and its invalidity can be challenged whenever and wherever it is sought to be enforced or relied upon. Held that the objection regarding jurisdiction had to be decided first. The Tribunal committed an error in not allowing the assessee to raise objections to the jurisdiction of the Income Tax Officer to initiate proceedings and to the validity of the proceedings taken in pursuance thereof. Question of jurisdiction can be raised at any point.
iii) The Hon’ble Madhya Pradesh High Court in the case of CIT vs. Agha Jabbar Khan 187 ITR 587 has held that in the appeal preferred by the assessee before the Appellate Assistant Commissioner, the only question that required the decision wax whether, in the facts and circumstances of the case, the ITO had jurisdiction to reopen the assessment u/s 147 (a) of the Act and whether the order of reassessment was liable to be quashed. Once the Appellate Assistant Commissioner came to the conclusion that the Income Tax Officer had no jurisdiction to reopen the case u/s 147 (a) and that the assessment order should be quashed, he had no jurisdiction to make any further direction for re-computing the amount of capital gains. In view of these decisions, the merits relating to the additions made by the Assessing Officer in the Appellant’s case are not required to be judged upon as because, the assessment order u/s 143 (3) of the Act. Therefore, the ground no.1 of his appeal is allowed in favour of the appellant and therefore, other grounds of this appeal are not decided upon.”
5.1 After going through the findings of the ld CIT (A) and the case laws on which reliance has been placed by the ld CIT (A) and other case law, we find that the CIT (A) was justified in allowing the legal ground of the assessee for all these years. There is no dispute that in past the claim of the assessee that warehousing receipts are business receipts was accepted while completing the assessment for AY 84-85 was completed u/s 143(3) where the issue was discussed in detail. Thereafter, for AY 92-93 and 93-94 the assessments were completed u/s 143(3) and the issue was examined. Thereafter, the assessment for AY 90-91 was reopened on the ground to verify whether the income from warehousing charges should be treated as income from business or income from house property. Ultimately after investigating the case in detail, the Assessing Officer himself arrived at a conclusion that charges on account of warehousing are business receipts and the reassessment was completed accordingly. Now, for these years under consideration the department had taken a different view, which in our considered opinion, is not correct and not acceptable either in the eyes of law or otherwise. There is no change in facts or circumstances. The assessee is doing the same business of warehousing. Similar receipts were received in past. The warehouses were given to different parties. Warehouses were constructed for the purpose of running of business of warehousing. Therefore, in view of these facts and circumstances and in view of the past history of the assessee company, we have no hesitation in holding that the ld CIT (A) was justified in allowing the legal ground of the assessee that the reopening of the assessments were bad in law. The orders of the Assessing Officer were void ab-initio. Accordingly, we confirm the order of the ld CIT (A) on this issue for all these years.
6. Now, we will take up the appeal for AY 2001-02.
7. The Assessing Officer while treating the income accruing to the assessee on account of warehousing charges and handling charges as income from house property instead of business income shown by the assessee has observed that the assessee has received income under the head ‘warehousing charges’ and ‘compensation against premises’. The same has been shown as income from business. The Assessing Officer has considered the above to be in the nature of income from house property. While holding so, reliance has been placed on the decision of the Karnataka High Court in the case reported in 162 ITR 468 and the decision of the Supreme Court in 42 IR 49. It was contended before the CIT (A) that the company was incorporated on 29.01.1965 and carried on there business of manufacture of textile fabrics. The company also undertook job work from outside parties for dyeing, processing and finishing of synthetic fabrics. In the year 1976, the textile policy was changed and accordingly, the above manufacturing activity carried on by the assessee company, became un-remunerative. The banks and unsecured creditors started filing legal cases and accordingly, the company submitted a scheme of compromise or arrangement before the Bombay High Court u/s 391 (1) and (2) of the Companies Act, 1956. The Hon’ble Bombay High Court accepted the scheme of the company and in order to rehabilitate the company, the High Court allowed the company to sell their surplus machinery to pay off the creditors and allowed the company to carry on warehousing business to carry on warehousing business in their premises to tide over the losses and to carry out systematic and organized activity by exploiting the commercial assets. It was further contended that accordingly, the business of warehousing continued in accordance with the approval of the High Court and the company is continuously showing income in the above nature as income from business. It was also explained that in the AY 1990-91 the assessment was reopened and the Assessing Officer after examining the issue in detail has held that the warehousing receipts are business receipts.
8. After considering the submissions and relevant material on record, the CIT (A) found that the department itself has accepted the claim of the assessee that the receipts from the warehousing are business receipts. Therefore, the department was not correct in not accepting the claim of the assessee the year under consideration. The CIT (A) has also examined the order of the Hon’ble Bombay High Court and found that the Hon’ble High Court has held that the assessee carried out its business of warehousing in their premises. The CIT (A) further noted that there are different customers in different years and different receipts have been received by the assessee from different customers. The details of the customers and details of receipts have also taken into consideration by the CIT (A) and the same are recorded in Para 6&7 of his order. Accordingly, it was found by the CIT (A) that the receipts from warehousing are business receipts. Accordingly, the ground of the assessee was allowed.
8.1 The ld DR placed reliance on the order of the Assessing Officer. Further reliance was placed on the decision reported in 150 ITR 310 (Bom). On the other hand, the ld counsel of the assessee stated that the decision of the Hon’ble Bombay High Court on which reliance placed by the ld DR is not applicable on the facts of the present case. It was further submitted that on permission granted by the Hon’ble Bombay High Court, the assessee has started its business of warehousing. Rule of consistency has to be followed as in past the claim of the assessee has been accepted. Therefore, there is no infirmity in the findings of the ld CIT (A) who allowed the claim of the assessee for the year under consideration.
9. After considering the rival submissions and perusing the relevant material on record, we do not find any infirmity in the findings of the ld CIT (A). We have already discussed the facts while disposing the appeal of the department for AY 1996-97 to 2000-01. We have observed that the claim of the assessee was accepted in past, therefore, in view of the rule of consistency, the claim of the assessee has to be accepted for the year under consideration as there is no change in facts or circumstances of the case. It is well settled position of law that the rule of consistency has to be followed. There is no doubt that res-judicata does not apply in income tax proceedings but if there is any change of circumstances, then principle of res-judicata is applicable. Therefore, in view of the above facts and circumstances and in view of the detailed reasoning, given by the ld CIT (A), we confirm him order for the year under consideration also.
10. In the result, the appeals filed by the department are dismissed.
Order pronounced on 10th Jan 2008
