Case Law Details
M/s. Great Heights Infratech Pvt. Vs Pr. CIT (ITAT Delhi)
Where assessee-company claimed that it was engaged in real estate business, whether rental income was to be taxed under the Head “Business Income” or “Income from House Property” was to be decided as per objects of the assessee-company. The assessee-company filed copy of the Memorandum of Association and Learned Counsel for the Assessee referred to main objects to be pursued by the assessee-company on its incorporation which provides that assessee-company would be carrying on business for construction of any type of property and to let-out or sell the same to the public, therefore, renting-out the properties is also one of the main objects of the assessee-company. Therefore, letting-out/renting-out the property was in fact business of the assessee-company. Therefore, same was correctly claimed by assessee-company as income from business and profession.
The Hon’ble Gauhati High Court in the case of Leela Choudhary vs. CIT 289 ITR 226 held that Order passed under section 263 of the I.T. Act without considering the reply of the assessee would not be valid.
In the instant case, the assessee-company produced sufficient evidence and material before the Ld. CIT in support of the contention that rental income is in fact “Business Income” of the assessee-company which have been correctly accepted by the A.O. Therefore, before taking any adverse view against the assessee-company, the Ld. CIT should have examined the explanation of assessee-company and should have considered the reply of the assessee-company. However, nothing has been done and without any justification, the original assessment orders have been set aside. It may also be noted here that the A.O. in A.Y. 2013-2014 has specifically mentioned that necessary details, information and documents have been called for from the assessee-company time to time which have been furnished. The A.O. accepted the returned income of the assessee-company and made addition on account of unexplained investment on protective basis. In A.Y. 2014-2015, the A.O. specifically mentioned in the assessment order that assessee-company has shown income from profits and gains from business or profession. The A.O. examined the source of such income on test check basis and reply/explanation of assessee-company has been duly considered.
The A.O. accepted the returned income of the assessee-company which would show that A.O. was conscious of the fact that assessee-company has only declared income from business on account of rent received in both the assessment years. There is no other income declared by assessee-company in its accounts or in the return of income. Therefore, it appears to us that A.O. has accepted the rental income as business income of the assessee-company in the impugned assessment years after satisfying himself on such claim made by assessee-company by producing the necessary details on record. The view of the A.O. is supported by the Judgments of the Hon’ble Supreme Court in the case of Chennai Properties and Investments Ltd. vs. CIT (supra) and in the case of Rayala Corporation (P.) Ltd. Vs. ACIT (supra).
Please become a Premium member. If you are already a Premium member, login here to access the full content.
