Case Law Details
Barons Inn Vs ITO (ITAT Bangalore)
The appeal before the ITAT Bangalore arose from an order of the National Faceless Appeal Centre (NFAC) for Assessment Year 2020-21. The reassessment order had been passed under Sections 147 read with 144 of the Income-tax Act, 1961, determining the assessee’s total income at Rs. 62,96,782 as against the returned income of Rs. 6,71,632. An addition of Rs. 56,06,865 was made on the ground that rent receipts amounting to Rs. 80,09,807 received from Speciality Restaurants Limited and another party had not been disclosed under the head “Income from House Property” after allowing the standard deduction of 30%. The NFAC confirmed the addition and dismissed the assessee’s appeal.
According to the facts recorded by the Tribunal, information received from the Insight Portal and Form 26AS showed that the assessee had received rental income of Rs. 80,09,798. Since the assessee had disclosed only Rs. 6,71,630 in its return of income filed on 9 January 2021, the assessment was reopened. Several opportunities and show-cause notices were issued to the assessee, which were only partly responded to, resulting in the reassessment order dated 17 March 2025 making the addition of Rs. 56,06,865.
The assessee contended that it was engaged in the business of running and maintaining commercial establishments and providing associated services such as furniture maintenance, canteen facilities, housekeeping, and security services. It argued that the receipts were business income and not income from house property. The assessee relied on judicial precedents and CBDT Circular No. 16/2017 dated 25 April 2017 in support of its claim. It was submitted that the amounts received from Speciality Restaurants Limited and another tenant were taxable as business income and did not become income from house property merely because tax had been deducted at source under Section 194-I. The assessee also argued that non-response by tenants to notices issued under Section 133(6) could not justify the addition when details of properties, agreements, annual accounts, and services had already been furnished.
The assessee challenged the reassessment before the CIT(A). However, although six opportunities were granted, no responses were filed before the appellate authority. Consequently, the CIT(A) upheld the assessment order, observing that the assessee had failed to submit any response or supporting evidence.
Before the Tribunal, the assessee reiterated its challenge to the addition and also raised additional grounds questioning the validity of the notice issued under Section 148 and the approval granted under Section 151, alleging that the approval was unsigned. The assessee further contended that these issues had been raised before the CIT(A) in the statement of facts but had not been considered or adjudicated. It was also submitted that the disputed receipts had already been offered to tax in the profit and loss account as business income.
The Tribunal observed that merely because tax was deducted under Section 194-I, the income could not automatically be treated as income from house property in the hands of the recipient. It noted that the assessee’s challenges regarding the reopening under Section 148 and the alleged unsigned approval under Section 151 had not been adjudicated by the CIT(A). The Tribunal also took note of the assessee’s contention that the income had already been offered as business income.
Considering these circumstances, the Tribunal held that the appeal had been decided by the CIT(A) without examining all the relevant facts and issues. It therefore restored the entire matter to the file of the CIT(A) for fresh adjudication. The CIT(A) was directed to examine the validity of the reopening, the issue of the unsigned approval, and the applicability of Section 282A, including Section 282A(2) relating to deemed authentication. Thereafter, the CIT(A) was directed to decide the matter on merits. The Tribunal also observed that if the income had already been assessed as business income, an addition under the head “Income from House Property” could not be made without reducing the same amount from business income.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
1. ITA No. 2791/Bengaluru/2025 is filed by M/s. Barons Inn (the Assessee/ Appellant) against the Appellate Order passed by the National Faceless Appeal Centre, Delhi (the Ld. CIT(A)) for Assessment Year 2020-21 dated 10.09.2025 wherein the Appeal filed by the Assessee against the Reassessment Order dated 17.03.2025 passed u/s. 147 r.w.s. 144 of the Income Tax Act 1961 (the Act) passed by the Assessment Unit, Income Tax Department determining the total income of the Assessee at Rs. 62,96,782/-against the returned income of the Assessee of Rs. 6,71,632/-, making an addition of Rs. 56,06,865/- on account of the rent receipt of Rs. 80,09,807/-received from Speciality Restaurants Limited and other party was not disclosed after the standard deduction of 30% was confirmed and the Appeal of the Assessee was dismissed.
2. The Assessee is aggrieved with the same and has filed this Appeal.
3. We have heard Ms. Sahana, Advocate on behalf of the Assessee and Shri Balusamy N, JCIT — Senior DR on behalf of the Ld. Assessing Officer.
4. The brief facts of the case shows that Assessee is a partnership firm wherein the information is received from the insight portal and as per information available in form no. 26AS that Assessee has received a rent of Rs. 80,09,798/- which is liable to tax. In the return of income filed by the Assessee on 09.01.2021, the Assessee disclosed the income of only Rs. 6,71,630/-. Therefore, the case of the Assessee was reopened. The Assessee was given several opportunities including show cause notice which was replied in part and therefore, the reassessment order was passed on 17.03.2025 wherein the addition of Rs. 56,06,865/- was made.
5. This was made rejecting the explanation of the Assessee that Assessee is engaged in the business of running and maintaining commercial establishment including maintenance such as furniture etc., including canteen, housekeeping, security services and thus Assessee is not renting out the properties and income is chargeable to tax not under the head income from house property but business income. The Assessee relied upon several judicial precedents including circular no. 16/2017 dated 25.04.2017 which supports the case of the Assessee. The Assessee also submitted that the rental income received of Rs. 52,19,798/- from Speciality Restaurants Limited and Rs. 27,90,000/- from Vinith John Raj are chargeable to tax as business income. It cannot take the shape of income from house property merely for the reason that the TDS is deducted u/s. 1941 of the Act. The issuance of notice u/s. 133(6) of the Act was not replied by the tenant could not be the reason for making the addition where the Assessee has submitted the details of properties, copies of agreement, annual accounts of the Assessee, details of services.
6. Aggrieved with the Assessment Order, the Assessee preferred an Appeal before the Ld. CIT(A) wherein the Assessee was granted 6 opportunities but none of them were replied and therefore the Ld. CIT(A) confirmed the Assessment Order stating that Appellant failed to submit any response or evidences.
7. The Assessee is in Appeal before us. On careful perusal of the various grounds of Appeal and the argument of the Ld. Authorized Representative, we are of the view that merely because the income is classified u/s. 1941 of the Act and tax is deducted under that section it does not become income chargeable to tax in the hands of the recipient as income from house property only. However, before us the Assessee has raised an additional ground challenging notice u/s. 148 of the Act as well as unsigned approval issued u/s. 151 of the Act. The Ld. Authorized Representative has also challenged that all these facts are mentioned in the statement of facts before the Ld. CIT(A) but same were not considered and not adjudicated. It is also the case that the income is already offered in the profit and loss account under the head business income. However, as the case of the Assessee is decided by the Ld. CIT(A) without looking into all these facts, as well as the challenge to the 148 which was also raised before the Ld. CIT(A) being not adjudicated, we restore the whole Appeal back to the file of the Ld. CIT(A) to decide and reopening of the Assessment, and the issue of unsigned approval after discussing the provisions of section 282A of the Act and specific reference to provisions of section 282A(2) which provides about deemed authentication. Thereafter, Id CIT (A) may decide the issue on the merits of the issue and if the income of the Assessee is already assessed to tax as business income, the addition on account of income from house property without reducing it from the business income could not have been made. The Ld. CIT(A) is directed to decided the issue in accordance with the law.
8. In the result, Appeal filed by the Assessee is allowed for statistical purposes.
Order pronounced in the open court on 18th May, 2026.
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