Case Law Details
Sumrit Impex Pvt. Ltd. Vs Assessment Unit (ITAT Delhi)
In Sumrit Impex Pvt. Ltd. vs Assessment Unit, the Income Tax Appellate Tribunal, Delhi Bench, adjudicated an appeal for Assessment Year 2022–23 against an order passed by the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre under Section 143(3) of the Income-tax Act, 1961.
The assessee initially raised a legal ground contending that the case, selected for limited scrutiny, had been incorrectly treated as a complete scrutiny by the lower authorities. The Tribunal rejected this contention after considering the Revenue’s report confirming that the case was indeed subject to complete scrutiny.
The primary issue concerned the classification of rental income amounting to ₹1,11,24,910. The assessee had declared this income under the head “Income from House Property” and claimed a 30% standard deduction. However, both the Assessing Officer and the CIT(A) treated the income as “business income,” thereby denying the deduction.
The Tribunal examined past assessments and noted that in Assessment Year 2012–13, similar rental income had been accepted as income from house property without any business income addition. The Revenue relied on judicial precedents to support classification as business income, arguing that the assessee’s activity was limited to leasing.
The Tribunal, however, found these arguments unpersuasive. It observed that in the cited case law, the assessees were engaged solely in leasing activities, whereas in the present case, the assessee had multiple business objects, including trading and export of fabrics and garments. Considering these facts, the Tribunal held that the rental income could not be treated as business income.
Accordingly, the Tribunal directed the Assessing Officer to recompute the income under the appropriate head in accordance with law. The appeal was partly allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
This assessee’s appeal for assessment year 2022-23, arises against the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre [in short, the “CIT(A)/NFAC”], Delhi’s DIN and order no. ITBA/NFAC/S/250/2024-25/1074704436(1), dated 19.03.2025 involving proceedings under section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’).
Heard both the parties. Case file perused.
2. Learned counsel representing assessee first of all seeks to canvass his additional/legal ground that the impugned “limited” scrutiny has wrongly been treated as an instance of a “complete” one in both the lower authorities’ respective orders.
3. The Revenue on the other hand has filed a necessary report coming from the learned field authorities that the assessee’s case is indeed covered under the latter’s scrutiny i.e. a complete one only. We thus hold the assessee’s instant former argument/legal ground as devoid of merits which stands rejected in very terms.
4. Next comes the sole substantive issue between the parties on merits. There is hardly any dispute that the assessee had declared rental receipts of Rs.1,11,24,910/- as income from house property thereby claiming 30% standard deduction thereupon which has been held as assessable as in the nature of business income in both the learned lower authorities’ respective assessment and lower appellate findings.
5. Both the parties vehemently reiterated their respective stands against and in support of the impugned assessment of the assessee’s rental income as that derived from a house property and business; as the case may be.
6. It is in this factual backdrop that we first of all sought to ascertain the past assessment of the very nature of income in the assessee’s case. Learned counsel takes us to page 27 in the paper-book wherein it has placed on record the Assessing Officer’s section 143(3) assessment order in AY 2012-13 nowhere making any such business income addition.
7. Learned departmental representative at this stage quotes Chennai Properties 86 Investments Ltd. Vs. Commissioner of Income Tax [2015] 373 ITR 673 (SC) that both the lower authorities have rightly treated the assessee’s impugned rental income as business income. And also that it has not performed anyther business activity apart from leasing out of the property as well.
8. We find no merit in the Revenue’s foregoing vehement submissions. We first of all notice that the case law Rayala Corporation Pvt. Ltd. v. ACIT (2016) 386 ITR 500 (SC) has settled the issue after Chennai Properties 86 Investments Ltd. (supra) regarding assessment of such an income derived from leasing out property thereby concluding that the same ought to be assessed under the head ‘business income’. We are further mindful of the fact that as per para 6 in their lordship’s detailed discussion, the said assessee had stopped all other business activity whereas this is not the case herein since learned counsel has taken us to its object clauses of buying, selling, export, distributorship etc. in furnishing fabrics, fiber as well as readymade garments. We conclude in light of these peculiar facts that the assessee’s impugned rental income derived from leasing out properties could not be held as assessable as business income. We thus directed the learned Assessing Officer to finalize his consequential computation as per law in very terms.
9. No other ground or argument has been pressed.
10. This assessee’s appeal is partly allowed.
Order pronounced in the open court on 13th January, 2026
Author Bio
