- Bookmark
- Share
- CaseIQ
Mukti Properties P. Ltd. v. Commissioner Of Income-Tax
Structured Summary of the Opinion (Kalyan Jyoti Sengupta, J.; I.P. Mukerji, J. concurring)
Factual and Procedural Background
The assessee is a company engaged in real estate activities including construction, letting out and maintenance. For assessment year 2003-04 the company filed its return (with audited accounts, tax audit report under section 44AB, computation and related documents) on 29 November 2004, declaring a gross total income of Rs. 26,889 after setting off business loss against house property income. That return was processed by issuance of an intimation under section 143(1).
The Assessing Officer issued a notice under section 148 dated 2 July 2005 initiating proceedings under section 147. The assessee protested the notice, questioned validity and jurisdiction and requested reasons; while reserving its rights it treated the earlier return as a return in response to the notice. The Assessing Officer disallowed deductions claimed as brokerage and commission of Rs. 3,50,000.
The assessee raised the matter before the Commissioner of Income-tax (Appeals) who allowed relief by treating 50% of certain administrative expenses as relatable to real estate business (following an earlier assessment-year decision). The Revenue appealed to the Income-tax Appellate Tribunal (the Tribunal) which allowed the Revenue's appeal and restored the Assessing Officer's order insofar as the Rs. 3,50,000 brokerage and commission was concerned.
The assessee (appellant) then approached this court by way of appeal challenging the Tribunal's order; the appeal raised three substantial questions of law regarding (1) whether the Tribunal erred in not deciding the legality of proceedings under section 147/148 before deciding on merits, (2) whether reassessment under section 147 could be initiated on a mere change of opinion where the return had been filed and processed under section 143(1), and (3) whether the Tribunal committed jurisdictional error in restoring the Assessing Officer's reassessment of the entire income when the recorded reasons under section 148(2) were limited to alleged escapement of Rs. 3,50,000.
Legal Issues Presented
- Whether the Tribunal was justified in law in not considering and deciding whether the proceeding under section 147 read with section 148 of the Act are legally sustainable before deciding the case on the merits of the contention of the assessee?
- Whether, on the facts and in the circumstances of the case, when the assessee had disclosed its return and its claim for allowable expenses for a sum of Rs. 3,50,000 at the time of assessment, the proceeding can be reopened under section 147 on a mere change of opinion?
- Whether, on the facts and in the circumstances of the case, the learned Appellate Tribunal committed a jurisdictional error in reversing the order of the Commissioner of Income-tax (Appeals) and restoring the order of the Assessing Officer who reassessed the entire income, even though the recorded reasons under section 148(2) were limited to alleged escapement of income of Rs. 3,50,000 on account of commission and brokerage?
Arguments of the Parties
Appellant's Arguments (as recorded)
- Relying on the Supreme Court decision in Asst. CIT v. Rajesh Jhaveri Stock Brokers P. Ltd. ([2007] 291 ITR 500 (SC)), the appellant argued that an intimation under section 143(1) is not an assessment under section 143(3); therefore no escapement of income could be said to have occurred and proceedings under sections 147/148 were illegal and without jurisdiction.
- The appellant argued that questions of jurisdiction and pure questions of law can be raised at the appellate stage under section 100 read with Order 41, rule 33 CPC and under section 260A of the Income-tax Act, relying on Santosh Hazari v. Purushottam Tiwari and Tarini Kamal Pandit and other authorities permitting late raising of pure legal questions.
- Counsel submitted that because the issue of jurisdiction goes to the root, the Assessing Officer's order and the Tribunal's order were not tenable.
Respondent's (Revenue) Arguments (as recorded)
- The Revenue contended that the first two questions were not raised before the authorities below (Assessing Officer, CIT(A), or Tribunal) and therefore this court should not entertain or decide them; reliance was placed on decisions including Prabhat Zarda Factory, Commissioner of Income Tax v. Tata Chemicals Ltd., and M. Janardhana Rao.
- It was argued that the Assessing Officer had made a legal mistake in allowing deduction at the rate of 30% under section 24(1) and in accepting the return under section 143(1)(a); given that mistake of law, reassessment could be opened within four years and the reopening was not merely a change of opinion issue because only adjustments under section 143(1)(a) had been made.
- The Revenue relied on Ranchi Club Ltd. v. CIT and on Explanation 2(b) to section 147 to submit that where no assessment has been made and an intimation only has been sent, it is open to the Assessing Officer to issue notice under section 148 if he has reason to believe that income has escaped assessment.
- On the merits (third question), Revenue submitted that even if recorded reasons related only to Rs. 3,50,000, it was open to the CIT(A) to restore the Assessing Officer's reassessment of the entire income.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court (from text) |
|---|---|---|
| Asst. CIT v. Rajesh Jhaveri Stock Brokers P. Ltd., [2007] 291 ITR 500 (SC) | Intimation under section 143(1) is not an assessment; scope of section 147 as substituted (only need "reason to believe"); formation of subjective belief by Assessing Officer at notice stage requires relevant material but not conclusive proof of escapement. | The court relied on this decision to explain the scope and effect of section 147 (post-1989 substitution) and the test at the notice stage, but also observed that the question whether to answer Q1 & Q2 would be governed by procedural considerations about points raised below. |
| Santosh Hazari v. Purushottam Tiwari (Deceased) By Lrs., [2001] 251 ITR 84 (SC) | Scope and power of appellate court under section 260A; allowing substantial question of law to be raised at a late stage. | Invoked by appellant to support raising jurisdictional questions at appellate stage; the court acknowledged the principle but noted factual distinctions and procedural posture affecting its application. |
| Tarini Kamal Pandit v. Prafulla Kumar Chatterjee, (1979) 3 SCC 280 | Pure question of law not involving question of fact can be raised for the first time before the Supreme Court. | Citied by the appellant; the court noted the authority but distinguished its applicability because the point was not agitated below and in view of the assessee's conduct (inviting adjudication on merits). |
| B.K. Gooyee v. Commissioner of Income-Tax, [1966] 62 ITR 109 (Cal) | Illegality/invalidity of a notice under provisions corresponding to section 147 could be raised in High Court even if not raised below (in earlier context). | The court examined this decision but held that the factual matrix in that case was different and that the principle should not be applied wherever an illegality is alleged; it emphasized weighing whether the question goes to the root. |
| CIT v. Madan Lal Mehra, [1992] 198 ITR 287 (Delhi) | Authority relied upon by appellant in relation to raising points of law (referenced among other decisions). | Cited in the list of authorities relied on by the appellant; the court referenced it as part of the jurisprudence on when late points of law may be entertained. |
| CIT v. Prabhat Zarda Factory, [2001] 248 ITR 447 (Patna) | Authority relied upon by the Revenue for the proposition that questions not raised below should not be entertained by a higher court. | Relied on by the court (through citation of later Bombay High Court authority) to justify refraining from answering questions that were not raised before the authorities below. |
| Commissioner of Income Tax v. Tata Chemicals Ltd., [2002] 256 ITR 395 (Bom) | When a question was not determined by the Appellate Tribunal nor the Commissioner of Income-tax (Appeals), the High Court should refrain from answering it. | The court expressly relied on this statement of law (cited by Mr. Agarwal) to refrain from answering the first two questions since they were not determined below. |
| M. Janardhana Rao v. Joint Commissioner Of Income Tax, [2005] 273 ITR 50 (SC) | Authority invoked by Revenue concerning the limitation on raising new issues at appellate stage. | Relied on by the Revenue; the court referenced these authorities when considering whether to decide questions not previously raised below. |
| Ranchi Club Ltd. v. CIT, [1995] 214 ITR 643 (Patna) | Interpreted Explanation 2(b) to section 147 to the effect that where no assessment has been made but an intimation under section 143(1) has been sent, a case of escapement can be deemed to exist permitting issue of notice under section 148. | Relied upon by Revenue; the court recorded this argument as part of the Revenue's case that reopening after an intimation is permissible, but the court ultimately decided the matter on the basis of waiver and merits rather than fully adopting or rejecting this authority. |
Court's Reasoning and Analysis
The court proceeded in two broad stages: (A) whether it should answer the first two jurisdictional questions (questions 1 and 2) which relate to the validity of reopening under sections 147/148; and (B) the merits question (question 3) concerning whether the Tribunal erred in restoring the Assessing Officer's reassessment of the entire income when reasons referred only to Rs. 3,50,000.
A. On whether to decide the jurisdictional questions (Questions 1 & 2)
- The court acknowledged established principles that pure questions of law which go to the root of jurisdiction may sometimes be raised for the first time at an appellate stage (citing Tarini Kamal Pandit, Santosh Hazari and related authorities).
- However, the court emphasized that those authorities arose in different factual settings (mainly civil matters) and should not be treated as a blanket permission to raise any illegality at any time. The court stressed that the applicability of that principle depends on whether the question touches the root of the matter and whether non-consideration would result in a grave miscarriage of justice.
- Factually, the court found that the assessee, on receipt of the section 148 notice, asked for reasons, received them, and then in its reply of 8 September 2005 protested but also invited the Assessing Officer to treat the earlier return as a return in response to the notice and to decide the matter on merits. The court construed this conduct as a waiver of the jurisdictional objection.
- Furthermore, the court noted that the contention as to jurisdiction/invalidity of the section 148 notice was not taken either in the memorandum of appeal before the Commissioner of Income-tax (Appeals) or before the Tribunal. The Revenue relied on authorities (including the statement in Tata Chemicals) that a High Court should refrain from deciding points not determined below.
- Balancing the precedents and the factual conduct of the assessee, the court concluded it would refrain from answering the first two questions: it held that the appellant had waived the objection and that those questions need not be decided by this court in the present procedural posture.
B. On the merits (Question 3)
- The court analyzed the assessment orders and the orders of the two appellate fora. It observed that both the Assessing Officer and the Tribunal treated the assessee's income as income from house property and therefore believed deductions were governed solely by section 24 (which provides a 30% deduction under the head "Income from house property").
- The court noted, however, that the assessee carried on a real estate business (construction, letting out, maintenance), producing mixed income comprising profits and gains from business as well as income from house property. The court referred to the articles of association and the audit report as sources evidencing the nature of the business.
- Legal principle applied: section 24 applies to income chargeable under the head "Income from house property" (i.e., when income is exclusively derived from house property). Where there is mixed income, deductions appropriate to each relevant head should be considered.
- The Commissioner of Income-tax (Appeals) had examined the profit and loss account and concluded that brokerage, commission and administrative expenses were partially attributable to the real estate business and allowed relief (50% of administrative expenses as relatable to real estate, consistent with an earlier assessment-year decision of 1998-99). The court accepted that approach.
- The court emphasized a principle of "quasi-judicial discipline": while res judicata does not strictly apply in tax assessments, where an identical factual and legal situation was earlier decided (and there was no change in law or facts), it would be inappropriate to reach a different conclusion in a subsequent year for the same assessee. The court treated the earlier favorable appraisal by the Commissioner of Income-tax (Appeals) in 1998-99 as persuasive and consistent with the present case.
- Accordingly, the court found the Tribunal's approach to be patently erroneous and restored the Commissioner of Income-tax (Appeals) order on file, answering the third question in the affirmative (i.e., the Tribunal committed error in restoring the Assessing Officer's disallowance in the manner it did).
Holding and Implications
Holding: The appeal is disposed of in favour of the assessee by restoring the order of the Commissioner of Income-tax (Appeals) on the relevant point. The court answered the third substantial question in the affirmative (finding the Tribunal's decision on the merit to be unsustainable) and directed the Assessing Officer to take action in accordance with the judgment. The court refrained from answering the first two jurisdictional questions.
Direct consequences for the parties:
- The Tribunal's judgment (which had restored the Assessing Officer's reassessment in respect of Rs. 3,50,000) is set aside insofar as it reversed the CIT(A)'s allowance; the CIT(A)'s order allowing part of the administrative expenses/brokerage as attributable to business is restored.
- The Assessing Officer is directed to do the needful in accordance with the court's direction and the law as stated in the judgment.
- The appeal is disposed of without any order as to costs.
Broader implications: The court applied and discussed existing authorities on when jurisdictional/lawful-reopening questions can be raised at appellate stages, but the decision primarily resolves the dispute on its facts and procedural posture; the court did not purport to lay down a new general precedent beyond applying established principles to the facts (the court explicitly refrained from deciding Q1 & Q2).
Kalyan Jyoti Sengupta, J.:— This appeal is at the instance of the assessee above named against the judgment and order of the learned Income-tax Appellate Tribunal (hereinafter referred to as “the said Tribunal”), Kolkata, on the following substantial questions of law:
“Whether the Tribunal was justified in law in not considering and deciding whether the proceeding under section 147 read with section 148 of the Act are legally sustainable in law before deciding the case on the merits of the contention of the assessee?”
“Whether, on the facts and in the circumstances of the case, when the assessee had disclosed its return and its claim for allowable expenses for a sum of Rs. 3,50,000 at the time of assessment of proceeding can be reopened under section 147 on a mere change of opinion?”
“Whether, on the facts and in the circumstances of the case, the learned Appellate Tribunal committed a jurisdictional error in reversing the order, of the Commissioner, of Income-tax (Appeals) and restoring the order of the Assessing Officer who reassessed the entire income, even though the recorded reasons under section 148(2) were limited to alleged escapement of income of Rs. 3,50,000 on account of commission and brokerage?”
2. The facts of the case as it appears from the records and also submitted in the written notes of argument is as follows. The assessee appellant is a company carrying on real estate business including construction of the, building, letting out. the same as well as providing maintenance and other services. The appellant duly filed a return of income for the assessment year 2003-04 with audited accounts, tax audit report under section 44AB, computation sheet, and other documents were filed on November 29, 2004, declaring gross total income at Rs. 26,889 after setting off business loss of Rs. 10,13,614 against income under the head “House property” of Rs. 10,40,503. The return was duly processed under section 143(1). Thereafter, the Assessing Officer initiated proceeding under section 147 of the Act and issued notice under section 148 dated July 2, 2005. On receipt of the said notice the appellant through his learned lawyer duly protested questioning the validity and jurisdiction, and also asked for reason. The appellant without prejudice and with protest called upon to treat earlier return filed under section 139 as returns in response to the said notice, if reassessment is required to be done at all. The Assessing Officer disallowed the deduction claimed on account of brokerage and commission of a sum of Rs. 3,50,000. The assessee though had challenged notices under section 148 of the said Act before the Assessing Officer, however, he did not deal with the said contention. The matter was taken to the Commissioner of Income-tax (Appeals) pointing out that even in the assessment year 1998-99, 50 per cent, of the additional expenses which had been incurred in carrying on its real estate business had been allowed but the balance 50 per cent, was disallowed as it related to house property. The said decision made in the assessment year 1998-99 had been followed in the subsequent year also. Following the said decision the Commissioner of Income-tax (Appeals) in this assessment year has allowed 50 per cent, of the administrative expenses relatable to real estate business but the balance amount had been disallowed as it related to house property income.
3. Thus, the appeal was allowed.
4. The Revenue went on appeal against the order of the Commissioner of Income-tax (Appeals) Since the assessee did not prefer any appeal against the order of the Commissioner of Income-tax (Appeals) as the relief on which was granted, the question relating to the jurisdiction of the Assessing Officer to issue notice under section 148 could not be raised by the assessee before the learned Tribunal. The learned Tribunal allowed the appeal preferred by the Revenue restored the order of the Assessing Officer so far as the amount of Rs. 3,50,000 as brokerage and commission expenses is concerned:
5. Dr. Debi Prasad Pal, learned senior counsel appearing for the appellant assessee submits ‘that’ intimation under section-143(1) is not an assessment as decided by the Supreme Court in the case-reported in Asst. CIT v. Rajesh Jhaveri Stock Brokers P. Ltd., [2007] 291 ITR 500(SC). Actually the return filed by the appellant was not assessed under section 143(3) of the Act but only an intimation was made under section 143(1) of the Act on the basis of which total tax liability had been paid by the assessee. Therefore, there cannot be any sort of escapement of any income. In view of the Supreme Court decision as above he contends that the proceeding under section 147 read with section 148 is patently illegal, invalid and without jurisdiction. It is settled law unless the income escaped assessment reassessment by notice under section 148 of the Act is clearly invalid, illegal and without jurisdiction. He submits before the learned Tribunal the question of jurisdiction could not be raised since no appeal could be preferred because the appellant succeeded before the Commissioner of Income-tax (Appeals) on the merits. However, before this court in view of the provision of section 100 read with Order 41, rule 33 of the Code of Civil Procedure the question of law can be raised even at the appellate stage also. The scope and power of the appeal court under section 260A of the Act has been explained by the Supreme Court in the case reported in Santosh Hazari v. Purushottam Tiwari (Deceased) By Lrs., [2001] 251 ITR 84 (SC). Moreover, the provision of the Code of Civil Procedure relatable to appeal to the High Court has been incorporated in sub-section (7) of section 260A of the Act. Besides the point of law can be raised at any stage in view of the law settled by a catena of judicial pronouncements which are as follows:
Tarini Kamal Pandit v. Prafulla Kumar Chatterjee (Deed.), (1979) 3 SCC 280;
B.K Gooyee v. Commissioner Of Income-Tax, [1966] 62 ITR 109 (Cal); [2009] 314 ITR (St.) 206.
CIT v. Madan Lal Mehra, [1992] 198 ITR 287 (Delhi).
6. Since the question of jurisdiction goes to the very root of the matter the order of the Assessing Officer so also the Tribunal is not tenable.
7. Mr. Agarwal, learned counsel appearing for the Revenue, contends that questions Nos. 1 and 2 formulated by this court need not be answered those questions were never raised before any of the three fora below. Unless those questions are raised at all levels this court cannot decide the same. In support of his contention he has. relied on the following decisions:
CIT v. Prabhat Zarda Factory, [2001] 248 ITR 447 (Patna), Commissioner Of Income Tax… v. Tata Chemicals Ltd.…., [2002] 256 ITR 395 (Bom) and M. Janardhana Rao v. Joint Commissioner Of Income Tax, [2005] 273 ITR 50 (SC),
8. He submits, that in this case the Assessing, Officer committed a legal mistake allowing the deduction at the rate of-30 per cent, of the rent under section ‘24(1) of the Act as well as, the brokerage and commission No further claim for expenses incurred for earning the rental income towards brokerage and commission was permissible under section 24(1) of the Act against the income from house property over and above 30 per cent, deduction. Accordingly, as there was a mistake of law in accepting the return under section 143(1)(a) of the Act, the assessment could be reopened within four years even if there was a change of opinion on the part of the Assessing Officer. He further submits that it is not the correct contention of the appellant that the assessment had been made by the Assessing Officer under section 143(3) of the Act and, hence, he was not entitled to change his opinion and the proceedings under section 147 was invalid. Only adjustments were made under section 143(1)(a) of the Income-tax Act which did not require formation of opinion and the question of change of opinion did not arise.
9. He citing decision of the Patna High Court in the case of Ranchi Club Ltd. v. CIT reported in [1995] 214 ITR 643 (Patna), submits that in view of the provisions contained in Explanation 2(b) to section 147 of the Act to the effect that, where no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated his income or has claimed excessive deduction, it would be deemed to be a case where income chargeable to tax has escaped assessment. In a case where only an intimation has been sent, notice can be issued under section 148 of the Act. He referring to the Supreme Court decision in the case of Asst. CIT v. Rajesh Jhaveri Stock Brokers P. Ltd. reported in [2007] 291 ITR 500 (SC) contends that intimation under section 143(1)(a) cannot be treated as an order of assessment; when there being no assessment under section 143(1)(a), the question of change of opinion did not arise. The scope and effect of section 147, as substituted with effect from April 1, 1989, as also sections 148 to 152 are substantially different from the provisions as they stood prior to such substitution. If the Assessing Officer whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. The Assessing Officer is not powerless to initiate reassessment proceedings even when intimation under section 143(1) had been issued. He contends further that the income in respect of any issue, which has escaped assessment notwithstanding that the reasons for such issue have not been included in the reasons recorded under section 148(2) of the Act.
10. On the merits with regard to the third question he submits if reasons for ‘reopening of the assessment were limited to income of Rs. 3,50,000, it was open to the Commissioner of Income-tax (Appeals) to restore the order of the Assessing Officer who reassessed the entire income.
11. After having considered the submission of the learned counsel for the parties and going through the records it appears to us in this appeal the first two questions relating to reopening of assessment under sections 147 and 148 of the said Act need to be dealt with or answered though the same were not taken at the hearing of the Assessing Officer, nor whispered before the Commissioner of Income-tax (Appeals) and the Tribunal. The law is settled that pure question of law which goes to the very root of the jurisdiction and further initiation of proceedings can be raised at any stage even at the stage of the Supreme Court. In the case reported in Tarini Kamal Pandit v. Prafulla Kumar Chatterjee (Deed.), (1979) 3 SCC 280, the Supreme Court allowed pure question of law not involving any question of fact could be raised for the first time before the Supreme Court. In this case, it was found the question of law was not taken by the learned lawyers on given fact, as such point of law was allowed to be raised, as public policy always demands that the law is to be applied appropriately on given facts and circumstances. Similarly, in the case of Santosh Hazari v. Purushottam Tiwari (Deceased) By Lrs. reported in [2001] 251 ITR 84 (SC), the Supreme Court allowed to raise substantial question of law at a late stage though such plea was not taken before the learned court of appeal.
12. It appears that those decisions were rendered in civil matters and the principle thereof cannot be applied in this case by reason of the fact in this case point was not agitated at the time of hearing before any authority below. Moreover, the appellant-assessee itself invited the Assessing Officer, Commissioner of Income-tax (Appeals) to decide the matter on the merits waiving their right to question the validity and legality of the notice and action of reassessment. In real sense there was no order of assessment earlier. There is yet another decision of this court reported in the case of B.K Gooyee v. Commissioner Of Income-Tax reported in [1966] 62 ITR 109 (Cal) wherein illegality and invalidity of a notice under section 34 of the earlier Act which is corresponding provisions of section 147 of the present Act was not raised before all the fora below and the same was allowed to be raised in the High Court for the first time. We have examined, carefully and read those decisions and we find that the factual aspect of the matter in those cases went to the root of the matter. Unless it was allowed to be raised there would have been wrong application of law which could result in injustice. The aforesaid principle, in our view, cannot be allowed to be made applicable wherever and whenever any illegality is to be noted. On considering the case if it is found; that the question is weighable in nature and it does not touch the root of the matter so as to render the entire proceeding invalid, the aforesaid pronouncement of the, high authorities are not. appropriate.
13. Turning to the present case we notice that section 143(1) notice was issued first followed by notice under section 148. On receipt of the notice the assessee-appellant asked for reasons from the Assessing Officer for reopening the assessment and the same were supplied. On receipt of those reasons the reply dated September 8, 2005, was given and it was stated that the assessee was protesting against the issue of notice under section 148 calling upon to file fresh returns and it was also was called upon under protest to treat the earlier returns filed under section 136 as returns in response to the notice. Hence, with mild reservation the assessee invited the Assessing Officer to decide and to pass assessment order. It is also the admitted position when the notice under section 148 was issued there was no order of assessment only return was processed under section 143(1). It appears from the order of the Assessing Officer invalidity and illegality of the notice issued under section 148 and also the question of jurisdiction with regard to the reopening of the assessment under section 147 was not raised. In the memorandum of appeal, the ground of illegality and invalidity of the notice as well as jurisdiction was not taken before the Commissioner of Income-tax (Appeals) nor before the learned Tribunal.
14. The argument of Dr. Pal that since the Commissioner of Income-tax (Appeals), being the first appellate authority, granted relief to the assessee, there was no occasion to raise the point of jurisdiction does not impress us. We fail to understand why this point was not raised before the first appellate authority (Commissioner of Income-tax (Appeals)) who would have decided the matter. We hold that the appellant waived this point to urge. This waiver legally estop the appellant from raising this question here particularly when factually there has been no order of assessment earlier. The scope of sections 147 and 148, as it stood then and now, stands has been interpreted and explained by the Supreme Court in case of Asst CIT v. Rajesh Jhaveri Stock Brokers P. Ltd., [2007] 291 ITR 500 (SC). Considering earlier decisions of the Supreme Court in paragraph 16 as follows (page 511):
“At the stage of issue of notice, the only question is whether there was relevant material. On which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction.”
15. In paragraphs 17-and 18 it is observed as follows (page 511):
“The scope and effect of section 147 as substituted with effect from April 1, 1989, as also sections 148 to 152 are substantially, different from the provisions as they stood prior to such substitution. Under the old provisions of section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under section 147(a) two conditions were required to be satisfied: firstly, the Assessing Officer must have reason to believe that income, profits or gains chargeable to income-tax have escaped assessment, and, secondly, he must also have reason to believe that such escapement has occurred by reason of either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a). But under the substituted section 147 existence of only the first condition suffices. In other words, if the Assessing Officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is, however, to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147. The case at hand is covered by the main provision and not the proviso.
So long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate proceeding under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under section 143(1) had been issued.”
16. We are, therefore, of the view questions Nos. 1 and 2 do not require to be dealt with as such we are refrained ourselves from giving any answer as rightly pointed out by Mr. Agarwal on the strength of the Bombay High Court decisions reported in Commissioner Of Income Tax… v. Tata Chemicals Ltd.…., [2002] 256 ITR 395 (Bom) which records statement of law as follows:
“When this question was not determined by the Appellate Tribunal nor even the Commissioner of Income-tax (Appeals) the High Court should refrain itself from answering the question raised.”
17. Now, we consider the decision of the learned Tribunal on the merits. We have read the assessment order passed by the Assessing Officer and that of the decisions of the two authorities thence. It appears to us the Assessing Officer as well as the learned Tribunal thought that the appellant-assessee is not entitled to any deduction otherwise than under section 21 of the Income-tax Act at the rate of 30 per cent, of rent. In the premises both the two authorities have held the sum of Rs. 3,50,000 as brokerage and commission and also expenses relating to building and property are not deductible. It further appears to us both the Assessing Officer as well as the Tribunal proceeded as if the income is from house property and both the authorities though having recorded in their orders that the assessee have been carrying on real estate business also, therefore, his income is not rental of house property alone but construction and the maintenance of the building. The types of business being carried on by the assessee is to be found from the articles of association annexed with this paper book and also from the audit report. Under such circumstances, the approach of the learned Tribunal is patently erroneous. According to us, deduction under section 24 of the Act is applicable when the income is exclusively derived from house property as mentioned in section 22. The language of section 24 of the said Act clearly suggests so as the same is relatable to the head of “Income from house property”. The said section is set out hereunder:
“24. Income chargeable under the head ‘Income from house property shall be computed after making the following deductions, namely:—
(a) a sum equal to thirty per cent, of the annual value;
(b) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital
18. Section 14 provides for several heads of “income”. Income from house property is one of such heads whereas gains from business and profession is another head. In this case, we find that there has been mixed income arising out of profit and gains of business and real estate as well as income from house property both. Under such circumstances, usual statutory deduction as allowable under different heads has to be taken note of. The Commissioner of Income-tax (Appeals) has taken pain in examining the profit and loss account attached to the returns and has found that the brokerage commission and administrative expenses is allowable deduction as such granted, relief. The decision of the first appellate authority found support of the decision of earlier assessment year in respect of the same heads of deduction. As rightly contended. by Dr. Pal it appears from the records that in the assessment year of, 1998-99 the Commissioner of Income-tax (Appeals), had allowed 50 per cent, of the administrative expenses as relatable to real estate business and such deduction was allowed. It is true, the principle of res judicata has, no application in the tax assessment but when it is found that, on the same facts and point on earlier occasion without there being any change of position of law decides the matter there cannot be a different decision in the subsequent year for the same assessee. It is not a question of res judicata but the question of quasijudicial discipline which demands that the decision of the superior authority should not be attempted to be upset on identical facts and law on the plea of different assessment years. Therefore, the judgment and order of the learned Tribunal is not sustainable and the judgment of the Commissioner of Income-tax (Appeals) is restored on file. Thus, we answer the third question in the affirmative. We direct the Assessing Officer in terms of this judgment to do the needful in accordance with law. Thus, the appeal is disposed of without any order as to costs.
I.P Mukerji, J.:— I agree.
Alert