Jammula Shyam Sundar Rao(HUF), Berhampur v. The ACIT, Berhampur

ITA 169/CTK/2010 | 2004-2005
Pronouncement Date: 14-03-2011

Appeal Details

RSA Number 16922114 RSA 2010
Assessee PAN AACHJ2596C
Bench Cuttack
Appeal Number ITA 169/CTK/2010
Duration Of Justice 10 month(s) 7 day(s)
Appellant Jammula Shyam Sundar Rao(HUF), Berhampur
Respondent The ACIT, Berhampur
Appeal Type Income Tax Appeal
Pronouncement Date 14-03-2011
Appeal Filed By Assessee
Bench Allotted SMC
Date Of Final Hearing 17-02-2011
Next Hearing Date 17-02-2011
Assessment Year 2004-2005
Appeal Filed On 07-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK ( ) BEFORE . . HONBLE SHRI K.K.GUPTA ACCOUNTANT MEMBER. /AND . . . S HRI K.S.S.PRASAD RAO JUDICIAL MEMBER / I.T.A.NO S . 169 170 AND 171/CTK/2010 / ASSESSMENT YEAR S 2004 - 05 2005 - 06 AND 200 6 - 07 JAMMULA SHYAM SUNDAR RAO (HUF) C/O. SHRI J.B.KARUNA KUMAR (KARTA) BIG BAZAR BERHAMPUR 760 002 PAN : AACHJ 2596 C - - - VERSUS - THE ASST. COMMISSIONER OF INCOME - TAX BERHAMPUR CIRCLE BERHAMPUR. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI S.K.TULSYAN AR / FOR THE RESPONDENT : / SHRI S.C.MOHANTY DR / ORDER . . . SHRI K.S.S.PRASAD RAO JUDICIAL MEMBER . THESE THREE APPEALS BY THE ASSESSEE AGAINST ORDERS DT.15.2.2010 OF THE COMMISSIONER OF INCOME - TAX (APPEALS) PERTAINING TO THE ASSES SMENTS MADE U/S.143(3)/147 FOR THE ASSESSMENT YEARS 2004 - 05 2005 - 06 AND 2006 - 07 RAISING COMMON ISSUES WERE HEARD TOGETHER AND ARE NOW DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 2. BEFORE DECIDING THE ISSUES IT IS NECESSAR Y TO STATE THE FACTS IN BRIEF LEADING TO THE PRESENT APPEALS. THE HUF OF SRI JAMULA SHYAM SUNDAR RAO OWNS TWO HOUSE PROPERTIES ONE LOCATED AT GATE BAZAR UNDER THE NAME AND STYLE OF BRUNDAVAN COMPLEX AND ANOTHER AT ASKA ROAD. THE SAID PROPERTIES HAD BEEN LEASED OUT TO A PARTNERSHIP FIRM I.E. M/S. RAJYALAXMI & CO. (WHERE THE DAUGHTERS - IN - LAW OF THE KARTA OF THE ASSESSEE HUF ARE PARTNERS) SINCE 01.04.1992 AND 01.04.1995. THE AGREEMENT PERMITTED SUB - LEASE OF THE SAID PROPERTIES AND ACCORDINGLY THE PROPERTIE S HAVE BEEN FURTHER LET OUT BY M/S. I.T.A.NOS. 169 170 AND 171/CTK/2010 2 RAJYALAXMI & CO. THE ASSESSEE HUF HAS BEEN SHOWING THE LEASE RENT AS INCOME FROM OTHER SOURCES SINCE THE ASSESSMENT YEAR 1992 - 93. THE ASSESSING OFFICER IN COURSE OF ASSESSMENT PROCEEDING FOR THE IMPUGNED ASSESSMENT YE AR FOUND THAT THE ASSESSEE HAS SHOWN 1 08 000 AS LEASE RENT RECEIVED FROM THE GROUP CONCERN M/S. RAJYALAXMI & CO. WHEREAS THE COMPANY RENTED OUT THE SAME PROPERTIES TO RUSHIKULYA GRAMMYA BANK FOR YEARLY RENT OF 3 03 408 . THEREFORE THE ASSESSING OFF ICER WAS OF THE VIEW THAT THE WHOLE AMOUNT OF THE RENT FOR THE YEAR IN QUESTION RECEIVED BY M/S. RAJYALAXMI & CO. AMOUNTING TO 3 03 408 SHOULD BE TAXABLE IN THE HANDS OF THE ASSESSEE UNDER THE HE AD INCOME FROM HOUSE PROPERTY. ACCORDINGLY HE WAS FURT HER VIEW THAT 1 04 386 HAS ESCAPED ASSESSMENT AND REOPENED THE CASE U/S. 147. DURING THE COURSE OF HEARING THE ASSESSEE FILED A COPY OF LEASE AGREEMENT DATED 01. 04.1997 FOR A PERIOD OF 11 MONTHS EXECUTED BETWEEN THE ASSESSEE AND LESSEE VIZ. J. RAJYALA XMI W/O . J .B. KARUNA KUMAR AND J . RAJYALAXMI W/O. J . VNKATA SURESH. AS PER THE SAID AGREEMENT THE LESSEES WOULD BE ENTITLED TO SUBLET THE BUILDING FOR ANY AMOUNT OF MONTHLY RENT AND COLLECT THE SAID RENT FROM THE SUB - TENANT. I T WAS ALSO AGREED THAT THE LEASE PERIOD OF 11 MONTHS COULD BE EXTENDED FOR ANOTHER PERIOD OF 11 MONTHS IF BOTH THE LEASER AND LESSEE SO DESIRES AND THE EXTENSION WOULD BE TH R OUGH A SEPARATE LEASE DEED/DEEDS AS THE CASE MAY BE. IT WAS STATED THAT NO FURTHER DEED/AGREEMENT WERE EXECUT ED SINCE THEN . CONSIDERING THE FACT THAT THE VALIDITY OF THE AGREEMENT EXPIRED AFTER 11 MONTHS FROM THE SAID DATE 01.04.1997 WAS PRESUMED THAT THERE IS NO SUCH LEASE DEED RELEVANT TO THE PRESENT AY THAT WOULD SUBSTANTIATE THE ASSESSEES CLAIM THAT A LEASE AGREEMENT SUBSTITUTED VIS - - VIS THE RENTAL INCOME GENERATED FROM THE PROPERTIES AT BRUNDABAN COMPLEX (GATE BAZAR) AND ASKA ROAD. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE SAID AGREEMENT WAS I.T.A.NOS. 169 170 AND 171/CTK/2010 3 UNREGISTERED AND IS BASICALLY A FAMILY ARRANGEMENT BETWEEN THE KARTA OF THE ASSESSEE HUF AND HIS TWO DAUGHTERS - IN - LAW. THE ASSESSING OFFICER OPINED THAT IT WAS ON THE BASIS OF AN INVALID LEASE AGREEMENT THAT EXPIRED ABOUT A DECADE AGO THAT THE RENTAL INCOME GENERATED WITH REGARD TO THE AFORESAID PROPERTIES WERE R OUTED TO THE ASSESSEE THROUGH THE PURPORTED LESSEES. THE INVOLVEMENT OF AN INTERMEDIARY (M/S. RAJYALAXMI & CO. GROUP CONCERN) IS ONLY WITH AN OBJECTIVE TO REDUCE THE INCIDENCE OF TAX BY DIVERSION OF INCOME SO DERIVED FROM RENTS. IN VIEW OF THE ABOVE AND FOLLO WING THE RATIOS LAID DOWN BY THE ALLAHABAD HIGH COURT IN THE CASE OF SMT. PUTLI BIBI VS. CIT (2005) 279 ITR 294(A LL ) THE ASSESSING OFFICER CONSIDERED THE INCOME SO DERIVED FROM THE RENTS RECEIVED FROM THE TENANT R.G. BANK AS INCOME FROM HOUSE PROPERT IES IN THE ASSESSEES HAND. AGGRIEVED THE ASSESSEE PREFERRED APPEAL BEFORE THE COMMISSIONER OF INCOME - TAX (APPEALS). IT WAS CONTENDED BY THE ASSESSEE BEFORE THE LEARNED CIT(A) THAT THE ASSESSING OFFICER HAS WRONGLY INVOKED SECTION 147 OF THE I. T ACT ON MERE CHANGE OF OPINION. HE HAS FAILED TO APPRECIATE THAT ENTERTAINING A DIFFERENT OPINION ON THE SAME SET OF FACTS IS AGAINST THE RULE OF CONSISTENCY. THE FACTS AND THE CIRCUMSTANCES OF THE CASE RELIED BY THE ASSESSING OFFICER ON THE DECISION OF THE ALLAHA BAD HIGH COURT IN SMT. PUTH BIBI VS. CIT(2005) 279 ITR 294 (ALL) IS MISPLACED AS THE SAID CASE IS FACTUALLY DIFFERENT. BESIDES THE ASSESSING OFFICER HAS ERRED I N MAKING AN ADDITION OF 2 48 198 UNDER THE HEAD INCOME FROM HOUSE PROPERTIES AGAINST INCOME OF 1 08 000 DECLARED BY THE ASSESSEE UNDER INCOME FROM OTHER SOURCES. IT WAS ALSO CONTENDED THAT M/S RAJYALAXMI & CO. HAS CONTINUED TO OFFER THE INCOME FROM SUB - LEASE OF SUCH PROPE RTIES AS BUSINESS INCOME MEANS THAT ASSESSMENT OF THE SAID INCOME IN THE HANDS OF THE ASSESSEE WOULD RESULT IN DOUBLE - TAXATION OF THE SAID AMOUNT. RELIANCE WAS ALSO PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF I.T.A.NOS. 169 170 AND 171/CTK/2010 4 BHARAT SANCHAR NIGAM LTD. V. UNION OF INDIA (201 CTR 346) AND CIT V.J.K.CHARITABLE TRUST (15 DTR 41) FOR THE PROPOSITION THAT CHANGE OF OPINION ON THE SAME SET OF FACTS IS AGAINST THE RULE OF CONSISTENCY AND THE DEPARTMENT IS PRECLUDED FROM TAKING A DIFFERENT VIEW ON THE SAME SET OF FACTS. AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE SUBMISSIONS OF THE ASSESSEE THE LEARNED CIT(A) CONFIRMED THE ACTION OF INITIATING PROCEED INGS U/S.147 AS VALID AND LEGAL AND ALSO THE ASSESSMENT OF ESCAPED INCOME GENERATED FROM T HE PROPERTY IN QUESTION. IT MAY BE MENTIONED HERE THAT THERE IS NO DISPUTE TO THE FACT THAT THE FACTS NOTED IN THE ASSESSMENT YEAR 2004 - 05 ARE VERY MUCH SIMILAR EXCEPT FOR FIGURES IN REST TWO ASSESSMENT YEARS UNDER CONSIDERATION IN WHICH THE LEARNED CIT( A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. IT IS AGAINST SUCH ORDERS THAT THE ASSESSEE HAS COME UP IN THE PRESENT APPEALS HERE BEFORE THE TRIBUNAL. 3. THE GROUNDS RAISED BY THE ASSESSEE IN THESE THREE YEARS ARE COMMON EXCEPT FOR FIGURES. WE REPROD UCE THE GROUNDS OF APPEAL TAKEN IN THE ASSESSMENT YEAR 2004 - 05 WHICH READS AS UNDER: 1. THE ORDERS PASSED BY THE ASSESSING OFFICER AND THE COMMISSIONER OF INCOME TAX (APPEALS) ARE ARBITRARY ERRONEOUS WITHOUT PROPER REASONS INVALID AND BAD IN LAW. 2 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT (A) ERRED IN REFERRING TO THE SO - CALLED SEIZED MATERIALS STATED TO HAVE FOUND OUT DURING THE COURSE OF A SEARCH & SEIZURE OPERATION CONDUCTED IN CASE OF THE GROUP OF CASES ON 21.04.2001 WHICH HAD NOT BEEN UTILIZED IN THE CASE OF THE APPELLANT SO FAR SINCE THE SEARCH WITHOUT PROVIDING THE APPELLANT ANY OPPORTUNITY TO CONTROVERT HIS FINDING. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT (A) ERRED IN HOLDING THE RE - OPENING OF THE ASSESSMENT U/S 147 OF THE INCOME - TAX ACT 1961 TO BE NOT BASED ON CHANGE OF OPINION AND HENCE VALID. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT (A) ERRED IN UPHOLDING THE ORDER OF THE A.O. IN NEGLECTING TO CO NSIDER THE ACTUAL RENTAL INCOME 1 08 000 BEING DERIVED BY THE APPELLANT SINCE LONG AND THEREAFTER IN I.T.A.NOS. 169 170 AND 171/CTK/2010 5 ADDING THE ADDITIONAL INCOME EARNED BY THE LESSEES/TENANTS OF THE TWO PROPERTIES OWNED BY THE APPELLANT IN THE HANDS OF THE APPELLANT AND THUS IN COMPUTING THE GROSS INCOME FROM HOUSE PROPERTIES AT 3 03 408. 5. THE APPELLANT CRAVES LEAVE TO AMEND ALTER MODIFY REVISE ADD TO ABRIDGE OR RESCIND ANY OR ALL OF THE ABOVE GROUNDS. 4. THE LEARNED AR OF THE ASSESSEE NARRATING THE FACTS AS NOTED ABOVE FIRSTLY CONTENDED THAT THE REOPEN ING OF ASSESSMENT U/S.147 IS INVALID AND IMPROPER SINCE THE SAME IS BASED ON MERE CHANGE OF OPINION ON SAME SET OF FACTS. UNDISPUTEDLY THE ASSESSEE IS A HIDU UNDIVIDED FAMILY (HUF) WITH SHRI JAMULA SHYAM SUNDAR RAO AS ITS KARTA. IT IS EARNING ITS INCOME M AINLY FROM HOUSE PROPER TY AND ALSO FROM OTHER SOURCES IN THE FORM OF LEASE RENT AND BANK INTERESTS. THE ASSESSEE IS A REGULAR INCOME - TAX ASSESSEE AND HAS BEEN CONSISTENTLY FILING ITS RETURN SINCE THE PAST TWO DECADES AND MORE. THE ASSESSEE IS HAVING TWO IMMO VABLE HOUSE PROPERTIES ONE LOCATED AT GATE BAZAR BERHAMPUR UNDER THE NAME AND STYLE OF BRUNDAVAN COMPLEX AND THE OTHER LOCATED AT ASKA ROAD WHICH WAS INHERITED BY THE ASSESSEE FROM ITS ANCESTORS. THE SAID PROPERTIES WERE DULY LET OUT BY THE ASSESSEE TO TENANTS AND THE RENTAL INCOME EARNED THEREON WAS FULLY OFFERED AS THE INCOME FROM HOUSE PROPERTY. WHILE SO IN THE ASSESSMENT YEAR 1991 THE KARTA OF THE ASSESSEE HUF DUE TO HIS OLD AGE AND HIS INABILITY TO MANAGE THE DAY TO DAY AFFAIRS OF ITS PROPERTIES INTENDED TO LEASE OUT THE SAID PROPERTIES AFTER CARRYING ON CERTAIN RENOVATIONS AND RESTRUCTURING OF THE SAID PROPERTIES. A PARTNERSHIP FIRM NAMELY M/S. RAJYAMLAXMI & CO. WAS CONSTITUTED ON1.7.1991 IN ORDER TO CARRY OUT THE BUSINESS OF REAL ESTATE DEVELOP ERS LEASING AND TRADING. THE PARTNERS OF THE SAID FIRM ARE TWO DAUGHTERS - IN - LAWS OF THE KARTA. ACCORDINGLY THE HOUSE PROPERTY AT GATE BAZAR WAS LEASED OUT BY THE ASSESSEE HUF TO M/S. RAJYAMLAXMI & CO. VIDE LEASE DEED I.T.A.NOS. 169 170 AND 171/CTK/2010 6 DT.1.4.1992. THE SAID LEASE DEED P ERMITTED THE SUB - LETTING OF THE PROPERTY AND ACCORDINGLY THE SAID PROPERTY WAS LET OUT BY THE LESSEE M/S.RAJYAMLAXMI & CO. TO VARIOUS SUB - TENANTS. THE FIRST AND SECOND FLOOR OF THE SAID PROPERTY WAS LET OUT TO RUSHIKULYA GRAMMYA BANK AND THE GROUND FLOO R WAS LET OUT TO SIX TENANTS WHO WERE TRADERS. THE LEAST RENT PAID BY THE LESSEE AT A FIXED MONTHLY LEASE RENT AS PER THE LEASE DEED WAS DULY OFFERED BY THE ASSESSEE TO TAXATION UNDER THE HEAD INCOME FROM OTHER SOURCES AND IT IS ASSESSED AS SUCH BY THE DEPARTMENTAL AUTHORITIES SINCE 1993 - 994 ONWARDS. THE LESSEE FIRM IS REGULARLY SHOWING THE LEASE AMOUNT RECEIVED FROM THE TENANTS AS ITS BUSINESS INCOME IN ITS RETURN OF INCOME AND IT WAS ASSESSED AS SUCH BY THE DEPARTMENT SINCE 1992 - 93 ONWARDS. THE LEA SE DEED USED TO BE REVISED BY THE ASSESSEE AND THE LESSEE FROM TIME TO TIME AS EVIDENT BY THE LEASE DEED DT.1.4.195 AND 1.4.97.AS PER THE LATEST REVISED LEASE DEED DT.1.4.1997 THE ASSESSEE LEASED OUT BOTH THE PROPERTIES I.E. PROPERTY AT GATE BAZAR AND AT ASKA ROAD TO LESSEE M/S.RAJYAMLAXMI & CO WITH A RIGHT TO SUBLET THEM. ACCORDINGLY THE SAID FIRM M/S.RAJYAMLAXMI & CO. IS COLLECTING RENT FROM THE TENANTS AND PAYING THE RENT TO THE ASSESSEE AS PER THE LEASE DEED. SINCE THERE ARE NO ALTERNATION IN THE T ERMS AND CONDITIONS OF THE LEASE DEED AFTER 1.4.1997 NO FURTHER LEASE DEED WAS DRAWN UP BY THE ASSESSEE AND THE LESSEE THEREBY BOTH OF THEM ARE FOLLOWING THE LEASE DEED DT.1.4.1997 TILL DATE AND BASING ON THE SAID LEASE DEED THE RETURNS FOR ALL OF THE YEAR S SINCE 1997 - 98 WERE FILED BY THE ASSESSEE SHOWING THE LEASE RENT RECEIVED BY THE ASSESSEE FROM M/S.RAJYAMLAXMI & CO. AS INCOME FROM OTHER SOURCES. THAT WERE ACCEPTED BY THE DEPARTMENT AS SUCH. 4.1. WHILE SO THERE WAS A SEARCH O N 27.4.2001 U/S.132 OF THE I.T.ACT 1961 CONDUCTED IN THE RAO GROUP OF CASES WHICH INCLUDES THE ASSESSEE. ACCORDINGLY BLOCK RETURN WAS FILED BY THE ASSESSEE DECLARING NIL INCOME FOR I.T.A.NOS. 169 170 AND 171/CTK/2010 7 THE BLOCK FROM1.4.1991 TO 27.4.2001 . THE SAID RETURN WAS PROCESSED AND ASSESSMENT ORDER U/S.158BC(C) O F THE ACT WAS PASSED ON 31.6.2003 COMPUTING THE INCOME OF THE ASSESSEE FOR THE BLOCK PERIOD AT 25 27 280.IN THE SAID BLOCK ASSESSMENT ORDER THE LEARNED ASSESSING OFFICER HAS DISCUSSED IN DETAIL IN PAGES 2 TO 12 OF THE SAID ORDER STATING THE INCOME OF THE ASSESSEE FROM THE SAID LEASING BUSINESS AS ADDITION BUT MADE ADDITIONS ON ACCOUNT OF THE SAID TWO PROPERTIES TO THE TUNE OF 3 13 568. 4.2. AGGRIEVED BY THE SAID BLOCK ASSESSMENT ORDER APPEAL WAS FILED BEFORE THE LEARNED CIT(A) BUT IN THE MEANTIME I.E. ON 29.2.2005 THE ASSESSEE HAS FILED APPLICATION FOR SETTLEMENT BEFORE THE HONBLE SETTLEMENT COMMISSION SHOWINGRS.1 75 000 AS THE UNDISCLOSED INCOME OF THE ASSESSEE EXPLAINING THE SAID AMOUNT AS UNACCOUNTED INTEREST EARNED BY THE INDIVIDUALS OF THE GROUPS BY ADVANCING LOANS IN CASH. IT WAS ALSO MENTIONED THEREIN THAT THE SOURCE OF SUCH INCOME WAS THE EARNINGS OF THE FAMILY MEMBERS OF THE FAMILY BY UNDERTAKING CERTAIN ACTIVITIES LIKE EMBROIDERY KNITTING TAILORING ETC. THE SAID APPLICATION FILED BY THE ASS ESSEE WAS ADMITTED BY THE HONBLE SETTLEMENT COMMISSION VIDE ITS ORDER DT.31.3.2006 U/S. 245D(91) OF THE ACT. THE HONBLE SETTLEMENT COMMISSION PASSED THE FINAL ORDER U/S.245D(4) OF THE ACT ON DT.19.3.2008 ACCEPTED THE DISCLOSURE OF ADDITIONAL INCOME OF RS. 1 75 000 IN THE CASE OF THE HUF TO BE COVERING ALL THE ISSUES ARISING OUT THE SEIZED PAPERS AS WELL AS SEIZED ASSETS. THIS IMPLIES THAT HONBLE SETTLEMENT COMMISSION HAS ACCEPTED THE DECLARATION OF THE ASSESSEE TO BE FULL AND TRUE REPRESENTATION OF THE UND ISCLOSED INCOME FOR THE BLOCK PERIOD. ACCORDINGLY THE ASSESSEE FOLLOWED THE SAME PROCEDURE WITH RESPECT TO THE ACCOUNTING AND ASSESSABILITY OF ITS LEASE INCOME WHICH WAS ALSO ACCEPTED BY THE SETTLEMENT COMMISSION WITH RESPECT TO THE YEARS 1991 TO 2001 WH EREIN THE ASSESSEE HAS FILED RETURN OF INCOME FOR THE SAID PERIOD SHOWING THE LEASE I.T.A.NOS. 169 170 AND 171/CTK/2010 8 RENTAL OF 1 08 000 EARNED BY IT FROM THE FIRM M/S.RAJYAMLAXMI & CO. SHOWING IT UNDER THE HEAD INCOME FROM OTHER SOURCES. THE SAID LESSEE M/S.RAJYAMLAXMI & CO. HAD ALSO IN ITS RETURN FOR THE SAID PERIOD SHOWN THE RENT RECEIPTS BY IT FROM TENANTS AS ITS BUSINES S INCOME AND WAS ACCEPTED BY THE DEPARTMENT. 4.3. HOWEVER THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS IN THE CASE OF THE ASSESSEE ALLEGED THAT THE RENTAL INCOME ACCRUING FROM THE SAID HOUSE PROPERTY OF THE ASSESSEE WAS SHOWN TO HAVE BEEN RECEI VED AS LEASE RENT FROM THE GROUP CONCERN THEREBY IT WAS TREATED AS INCOME FROM OTHER SOURCES AS AGAINST INCOME FROM HOUSE PROPERTY. THEREFORE THE LEARNED ASSESSING OFFICER INITIATED PROCEEDINGS U/S.147 OF THE I.T.ACT BY ISSUING NOTICE U/S.148 FOR THE ASSESSMENT YEARS 2004 - 05 2005 - 06 AND 2006 - 07. IN REPLY TO THE SAID NOTICE THE ASSESSEE HAS STATED THAT THE ORIGINAL RETURNS FILED BY IT TO BE TREATED AS RETURN IN RESPONSE TO THE NOTICE ISSUED U/S.148. AT THE SAME TIME THE ASSESSEE HAS REQUESTED THE ASS ESSING OFFICER TO STATE THE REASONS FOR ISSUANCE OF NOTICE U/S.148. SUBSEQUENTLY NOTICES U/S.143(2) AND 142(1) WERE ISSUED BY THEAO FOR WHICH THE ASSESSEE HAS EXPLAINED ITS CASE AND ALSO SUBMITTED THE REQUIRED DETAILS ANDDOCUMENTS PARTICULARLY THE LEASE DEED DT.1.4.97 THAT WAS FOLLOWED BY THE ASSESSEE AND M/S.RAJYAMLAXMI & CO. WITH REGARD TO THE LEASE OF THE SAID PROPERTIES. BUT THE ASSESSING OFFICER IN HIS ORDER PASSED/S.147/143(3 DT.17.12.2008 FOR ALL THE AYS UNDER APPEAL HELD THAT THE INCOME DERIV ED FROM THE RENT RECEIVED FROM THE TENANTS WAS TO BE TREATED AS INCOME FROM HOUSE PROPERTY IN THE HANDS OF THE ASSESSEE BY STATING THAT THE LEASE DEED DT.1.4.1997 FOLLOWED BY THE ASSESSEE AND THE LESSEE WAS INVALID LEASE AGREEMENT INASMUCH AS THE SAID D EED EXPIRES AFTER ELEVEN MONTHS FROM THE DATE OF ITS EXECUTION AS LAID OUT IN THE SAID DEED ITSELF APART FROM THE SAID DEED BEING UNREGISTERED I.T.A.NOS. 169 170 AND 171/CTK/2010 9 AND IT IS NOTHING BUT A MERE FAMILY ARRANGEMENT. ACCORDINGLY THE ASSESSING OFFICER WAS OF THE VIEW THAT THE INC OME FROM THE SAID TWO PROPERTIES SHOULD BE ASSESSED IN THE HANDS OF THE ASSESSEE ITSELF AS INVOLVEMENT OF INTERMEDIARY WAS ONLY WITH THE OBJECTIVE OF REDUCING THE INCIDENCE OF TAX BY DIVERSION OF INCOME BY RELYING ON THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF SMT.PUTLI BIBI V.CIT (279 ITR 294). ON APPEAL BEFORE THE COMMISSIONER OF INCOME - TAX (APPEALS) THE ORDER OF THE ASSESSING OFFICER WAS CONFIRMED BY THE LEARNED CIT(A) HOLDING THAT THE LEASE DEED DT.1.4.1997 WAS INDEED AN INVALID DEED AS THERE WAS NO RENEWAL SUBSEQUENTLY AFTER LAPSE OF ELEVEN MONTHS FROM THE DATE OF THE DEED ON THE GROUND THAT IT WAS UNREGISTERED AND WAS BASICALLY A FAMILY ARRANGEMENT AS WAS HELD BY THE ASSESSING OFFICER. IT WAS FURTHER OBSERVED BY THE LEARNED CIT(A) IN THE APPELLATE ORDER THAT THERE IS NO ASSESSMENT ORDER U/S.143(3) OF THE I.T.ACT WAS PASSED IN THE CASE OF THE ASSESSEE AS THE RETURNS OF THE ASSESSEE WERE ACCEPTED WITHOUT APPLICATION OF MIND AND NO OPINION WAS EVER FORMED BY THE ASSESSING OFFICER. IT WAS FURTHER OBSERVED THAT THE DOCUMENTS IDENTIFIED AS JSSR - 35 AND JSSR - 40 THAT WERE SEIZED DURING THE COURSE OF SEARCH MADE ON 27.4.2001 REVEALED THAT THE ASSESSEE ITSELF HAD LET OUT THE PROPERTY DIRECTLY TO RUSHIKULYA GRAMMYA BANK AND ACCORDINGLY CONFIRMED THE ORDERS OF THE ASSESSING OFFICER. AS CAN BE SEEN FROM THE ORDER OF ASSESSMENT AS WELL AS THE ORDER OF THE CIT(A) BOTH THE DEPARTMENTAL AUTHORITIES ARE OF THE VIEW THAT THE LEASE DEED DT.1.4.1997 HAS BECOME INVALID AS IT WAS NOT RENEWED SUBSEQUENTLY AFT ER LAPSE OF THE PERIOD OF ELEVEN MONTHS STATED THEREIN AND ACCORDINGLY TOTALLY IGNORED THE FORGETTING FOR A MOMENT THAT THE DEPARTMENT IS ACCEPTING THE RENTAL INCOME OF THESE PROPERTIES EARNED BY THE LESSEE M/S.RAJYAMLAXMI & CO. WHICH WAS CONSTITUTED ON 1.4.1991 BY ACCEPTING SALES TAX REGISTRATION AND SALES TAX I.T.A.NOS. 169 170 AND 171/CTK/2010 10 ASSESSMENT ORDERS OF THE SAID FIRM. BOTH THE LOWER AUTHORITIES HAVE NOT TAKEN INTO CONSIDERATION THE SAID LEASE DEED WAS NOT FURTHER RENEWED AS THERE IS NO CHANGE WHATSOEVER THE TERMS AND CONDITIO NS STATED THEREIN FOR THE SUBSEQUENT PERIOD ALSO AND BOTH OF THEM ARE FOLLOWING THE SAME TERMS AND CONDITIONS AND ACCORDINGLY FILING THE RESPECTIVE INCOME - TAX RETURNS WHICH WERE DULY ACCEPTED BY THE DEPARTMENT WITHOUT ANY OBJECTION FROM THEIR SIDE. IT IS N OT THE CASE OF THE DEPARTMENT THAT THE DOCUMENTS STATED TO HAVE BEEN FOUND DURING THE COURSE OF SEARCH ARE DISCLOSING ANYTHING CONTRARY TO THE SAID LEASE DEED DT.1.4.1997 WHICH IS CLEAR FROM NON - OBSERVATION OF ANYTHING TO SUCH EXTENT BY BOTH THE LOWER AUTH ORITIES IN THEIR RESPECTIVE ORDERS. THE VALIDITY OF THE LEASE DEED CAN BE CHALLENGED BY EITHER OF THE PARTIES OF THE LEASE DEED IF ANY DISPUTE AROSE INTER SE BETWEEN THEM. AS FAR AS IT RELATES TO THIRD PARTIES THERE IS NO RIGHT TO CONTEND THAT THE SAID LE ASE DEED BETWEEN THE ASSESSEE AND THE LESSEE DT.1.4.1997 IS INVALID FOR ANY REASON SUCH AS EXPIRY OF LEASE PERIOD AND UNREGISTERED DOCUMENT ETC. THE ACCEPTANCE OF THE AMOUNTS OFFERED BY THE ASSESSEE AND M/S.RAJYAMLAXMI & CO. IN THEIR RESPECTIVE RETURNS AS AMOUNT RECEIVED FROM LESSEE M/S.RAJYAMLAXMI & CO. AND THE TENANTS RESPECTIVELY ARE ACCEPTED BY THE DEPARTMENT FROM YEAR TO YEAR IN PASSING THE ASSESSMENT ORDERS. THIS PRECLUDES THE DEPARTMENT FROM TAKING ANOTHER VIEW ON THE SAID LEASE DEED DT.1.4.1997 .BECUASE PARTIES CANNOT IMPROBATE AND PROBATE REGARDING THE FACTUAL ASPECTS INVOLVED IN THE CASE. 4.4. MORE SO THE DEPARTMENT COULD NOT ESTABLISH THAT EITHER THE ASSESSEE OR THE LESSEE M/S.RAJYAMLAXMI & CO. HAS RECEIVED ANYTHING MORE THAN WHAT WAS OFFER ED BY THEM IN THEIR RESPECTIVE RETURNS FOR ASSESSMENT S . IN THE ORIGINAL RETURNS THE DEPARTMENT HAS NOT RAISED ANY OBJECTION REGARDING THE NATURE OF THE AMOUNT OFFERED BY THE ASSESSEE AS WELL AS THE LESSEE I.T.A.NOS. 169 170 AND 171/CTK/2010 11 M/S.RAJYAMLAXMI & CO. ON THE AMOUNT RECEIVED BY THE M AS PER THE SAID LEASE DEED DT.1.4.1997. THEREFORE THE DEPARTMENT IS NOT PERMITTED UNDER LAW TO TURN AROUND AND SAY THAT THE INVOLVEMENT OF AN INTERMEDIARY (M/S. RAJYALAXMI & CO. GROUP CONCERN) IS ONLY WITH AN OBJECTIVE TO REDUCE THE INCIDENCE OF TAX B Y DIVERSION OF INCOME SO DERIVED FROM RENTS . MORE SO THE SETTLEMENT COMMISSION ALSO ACCEPTED THE APPLICATION OF THE ASSESSEE WHEREIN ALSO THE SAME STAND WAS TAKEN BY THE ASSESSEE THROUGHOUT THE ASSESSMENT ORDERS INCLUDING THE ORDERS IN APPEAL AND THE SAME DOCUMENTS AND EVIDENCES ARE VERY MUCH PRESENT BEFORE THE DEPARTMENT AND THERE IS NO ADDITIONAL CONTRARY DOCUMENTS THAT WERE RECOVERED DURING THE COURSE OF SEARCH CONDUCTED IN THE CASE OF THE ASSESSEE. THE LEARNED AR OF THE ASSESSEE RELIED ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF RADHASOAMI SATSANG V. CIT (193 ITR 321) WHEREIN IT WAS HELD THAT IN THE ABSENCE OF ANY MATERIAL CHANGE JUSTIFYING THE DEPARTMENT TO TAKE A DIFFERENT VIEW FROM THAT TAKEN IN EARLIER PROCEEDINGS THE QUESTION OF THE EXE MPTION OF THE ASSESSEE APPELLANT SHOULD NOT HAVE BEEN REOPENED. THOUGH THE PRINCIPLES OF RES JUDICATA DOES NOT APPLY TO INCOME - TAX PROCEEDINGS WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AN D PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER IT WOULD NOT BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. SINCE IN THE PRESENT CASE ON HAND AS CAN BE SEEN FROM THE FACTS S TATED SUPRA THE STAND TAKEN BY THE DEPARTMENT THAT THE LEASE DEED DT.1.4.1997 WAS INVALID DUE TO ITS NON - RENEWAL IS TOTALLY UNFOUNDED AND CONTRARY TO THE STAND OF THE DEPARTMENT ON THE SAID DOCUMENT FOLLOWED BY IT TILL ASSESSMENT YEAR 2004 - 05. I.T.A.NOS. 169 170 AND 171/CTK/2010 12 4.5. THE OB SERVATION OF THE LEARNED CIT(A) THAT NO OPINION WAS EVER FORMED BY THE ASSESSING OFFICER SINCE THE ASSESSMENT YEAR 1992 - 93 ONWARDS AND ASSESSMENT FOR 2003 - 04 NO ASSESSMENT U/S.143(3) WAS PASSED IN THE CASE OF THE ASSESSEE IT CANNOT BE SAID THAT NOW THE DE PARTMENT IS COMING TO ANOTHER OPINION. THE ALLEGATION OF THE DEPARTMENT IS THAT AS CAN BE SEEN FROM THE SEIZED JSSR 35 AND JSSR 40 DURING THE COURSE OF SEARCH CONDUCTED IN THE CASE OF THE ASSESSEE REVEALED THAT THE ASSESSEE HAS LET OUT THE SAID PROPERTY TO RUSHIKULYA GRAMMYA BANK WHEREIN THE LEASE AGREEMENT WAS MADE DIRECTLY BY THE ASSESSEE WITH RUSHIKULYA GRAMMYA BANK . REGARDING THIS ASPECT THE ASSESSING OFFICER WHILE PASSING THE BLOCK ASSESSMENT ORDER DT.30.6.2003 THE ASSESSEES INCOME FOR THE BLOCK PER IOD FROM 1.4.1991 TO 27.4.2001 WAS ASSESSED ON 25 27 280. THIS ORDER WAS PASSED CONSIDERING ALL THE SEIZED DOCUMENTS IN PARTICULAR THE DOCUMENTS MARKED JSSR - 35 AND JSSR - 40 AND DISCUSSING IN DETAIL THE INCOME OF THE ASSESSEE FROM THE SAID LEASING BUSINESS ASSESSED RENTAL INCOME AT 3 13 568. AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE THE LEARNED CIT(A) BUT IN THE MEANWHILE THE ASSESSEE MOVED THE SETTLEMENT COMMISSION WHO PASSED ORDER DT.19.3.2008 U/S.24D(4) OF THE ACT ACCEPTING THE DISCLOSURE OF ADDITIONA L INCOME AT 1 75 000 COVERING ALL THE ISSUES ARISING OUT OF THE SEIZED DOCUMENTS AS WELL AS THE SEIZED ASSETS. BUT THE LEARNED CIT(A) IN HIS ORDER BY RELYING ON THE SEIZED DOCUMENTS OBSERVED THAT THE DOCUMENTS REVEALED THAT THE ASSESSEE ITSELF HAS LET OU T THE PROPERTY DIRECTLY TO RUSHIKULYA GRAMMYA BANK FORGETTING FOR A MOMENT THAT THE RENTAL INCOME OF THE ASSESSEE FROM THE SAID TWO PROPERTIES HAS BEEN SHOWN AND ASSESSED AS INCOME FROM OTHER SOURCES SINCE 1.4.1992.THELEASE AGREEMENT WAS REVISED BY THE ASSESSEE AND ITS LESSEE I.E. ON 1.4.1995 AND 1.4.1997. NO FURTHER LEASE AGREEMENT WAS ENTERED INTO BY THEM SUBSEQUENTLY. THIS FACT WAS WELL KNOWN TO THE I.T.A.NOS. 169 170 AND 171/CTK/2010 13 DEPARTMENT AS IT WAS NOTED BY THE ASSESSEE IN THE YEARLY RETURN AND THE LESSEE M/S.RAJYAMLAXMI & CO . WHEREIN THE ASSESSEE IS OFFERING THE INCOME AS INCOME FROM OTHER SOURCES AND M/S.RAJYAMLAXMI & CO. OFFERED INCOME AS INCOME FROM BUSINESS. OF LATE THE DEPARTMENT HAS EXPRESSED DIFFERENT OPINION BASED ON THE VERY SIMILAR FACTS STATED SUPRA. THIS ACTION OF THE DEPARTMENT IS NOT SUSTAINABLE UNDER LAW AS PER THE DECISION OF HONBLE APEX COURT RENDERED IN THE CASE OF BHJARAT SANCHAR NIGAM LTD. V. UNION OF INDIA (201 CTR 346) AND CIT V. J.K.CHARITABLETRUST (15 DTR 41). THUS CONTENDING THE LEARNED AR OF TH E ASSESSEE HAS SOUGHT FOR SETTING ASIDE THE ORDERS PASSED BY THE LOWER AUTHORITIES BY ALLOWING THE APPEALS OF THE ASSESSEE. 4.6. WHILE ARGUING THE LEARNED AR OF THE ASSESSEE HAS ALSO POINTED OUT THAT IN THE PROCEEDINGS U/S.245 BEFORE THE SETTLEMENT COMMISS ION THE ASSESSING OFFICERS ACTION OF TREATING THE IMPUGNED INCOME FROM INCOME FROM HOUSE PROPERTY ON THE BASIS OF SEIZED DOCUMENTS WAS NOT ACCEPTED. THE ORDERS OF THE SETTLEMENT COMMISSION PASSED U/S.245D(4) IN TERMS OF SECTION245(I)BEING FINAL AND CONCL USIVE THE AOS ACTION IN INITIATING THE PROCEEDINGS U/S.147 BASIS ON THE VERY SAME DOCUMENTS IS WITHOUT JURISDICTION AS PER THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF SMT. NEERU AGARWAL V. UNION OF INDIA (330 ITR 422) WHEREIN IT WAS HELD THAT ORDER PASSED BY SETTLEMENT COMMISSION IS CONCLUSIVE -- SETTLEMENT OF CASE AFTER SEARCH OPERATION -- ORDER OF SETTLEMENT COMMISSION NOT CHALLENGED - NO ALLEGATION OF FRAUD OR MISREPRESENTATION BEFORE SETTLEMENT COMMISSION NOTICE UNDER SECTION 142(1 ) BASED ON MATERIAL DISCOVERED DURING SEARCH OPERATION - NOTICE NOT VALID . IT WAS OBSERVED IN THE SAID JUDGMENT THAT THE FACTS FOUND IN THE DOCUMENTS SEIZED IN SEARCH OPERATION WERE MATTERS WHICH RELATED TO THE SETTLEMENT OF UNDISCLOSED INCOME OF THE I.T.A.NOS. 169 170 AND 171/CTK/2010 14 PETIT IONER AND THEREFORE WERE THE SUBJECT MATTER OF CONSIDERATION OF THE SETTLEMENT COMMISSION. HE FURTHER ARGUED THAT THE DECISION RENDERED IN THE CASE OF PUTLI BIBI V. CIT ()279 ITR 294) RELIED ON BY THE DEPARTMENT HAS NO BEARING TO THE CASE OF THE ASSESSE E AS IT IS FACTUALLY DISTINGUISHABLE. MORE SO THE INCOME DERIVED BY LEASING OUT THE PROPERTIES HAD BEEN ACCEPTED BY THE DEPARTMENT AND THEREFORE THERE IS NO REASON WHATSOEVER AS TO CHANGE THE STAND ON THE SAID SET OF FACTS. THIS IS QUITE CONTRARY TO THE DECISION OF HONBLE APEX COURT RENDERED IN THE CASE OF RADHASOAMI SATSANG V. CIT (193 ITR 321) RELIED ON BY THE LEARNED AR OF THE ASSESSEE. 5. CONTRARY TO THIS THE LEARNED DR HAS VEHEMENTLY ARGUED SUPPORTING THE ORDERS OF THE DEPARTMENTAL AUTHORITIES AN D RELIED ON THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF DESH RAJ UDHYOG & OTHERS V. ITO (318 ITR 6). 6. ON CAREFUL ANALYSIS OF THE MATERIAL MADE AVAILABLE TO THE TRIBUNAL IN THE LIGHT OF THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AS WELL AS THE LEGAL ASPECTS INVOLVED THEREIN DECISIONS OF VARIOUS JUDICIAL FORUMS RELIED ON BY BOTH TH E PARTIES IT IS FOUND THAT UNDISPUTEDLY THE ASSESSEE IS THE OWNER OF THE TWO PROPERTIES IN QUESTION SITUATED AT GATE BAZAR BERHAMPUR AND AT ASKA ROAD. THE KAR TA OF ASSESSEE HUF SRI JAMULA SHYAM SUNDAR RAO IS FILING THE RETURN OF INCOME SHOWING THE INCOME DERIVED FROM THESE TWO PROPERTIES AS INCOME FROM OTHER SOURCES SINCE INCEPTION AND ACCEPTED BY THE DEPARTMENT. BUT DURING THE YEAR 1991 AS THE KARTA OF THE H UF BECAME OLD AND WAS UNABLE TO MANAGE THE DAY TO DAY AFFAIRS OF THE PROPERTIES HE INTENDED TO LEASE THEM OUT AFTER NECESSARY RENOVATION AND RESTRUCTURING. ACCORDINGLY HE LET OUT THEM TO M/S.RAJYAMLAXMI & CO. A PARTNERSHIP FIRM CONSTITUTED BY HIS DAU GHTERS - IN - LAW. THEREAFTER ONWARDS THE ASSESSEE IS I.T.A.NOS. 169 170 AND 171/CTK/2010 15 RETURNING THE RENT RECEIVED FROM THE FIRM TOWARDS THE SAID PROPERTIES UNDER THE HEAD INCOME FROM OTHER SOURCES AND THE SAME WAS ACCEPTED BY THE DEPARTMENT. THE LESSEE M/S.RAJYAMLAXMI & CO. OFFERED THE R ENT RECEIVED FROM THE TENANTS OF THE SAID TWO PROPERTIES AS INCOME FROM BUSINESS AND THE SAME WAS ACCEPTED BY THE DEPARTMENT. THE LESSEE OF THE SAID TWO PROPERTIES INITIALLY STARTED FROM 1.4.1992 AND REVISED FROM TIME TO TIME LAST RENEWAL BEING 1.4.1997 . THE SAME PROCESS IS BEING CONTINUED BY THE ASSESSEE AND THE LESSEE AND THE DEPARTMENT IS ACCEPTING THE STAND TAKEN BY THEM TILL THE YEAR WHEN SEARCH AND SEIZURE OPERATION U/S.132 WAS CONDUCTED IN RAO GROUP CASES INCLUDING THE HUF AFTER RECEIPT OF NOTICE U/S.158BC(C) THE ASSESSEE FILED RETURN SHOWING NIL INCOME FOR THE BLOCK PERIOD FR OM1.4.91 TO 27.4. 2001. THE ASSESSMENT ORDER WAS PASSED ON 30.6.2003 ASSESSING THE INCOME FOR THE BLOCK PERIOD AT 25 27 280. WHILE DOING THE BLOCK ASSESSMENT THE INCOME OF THE ASSESSEE FROM THE SAID LEASING BUSINESS WAS ASSESSED AT 3 13 568.THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) AGGRIEVED BY THE SAID ORDER OF ASSESSMENT. WHILE SO ON 22.9.2005. THE ASSESSEE APPROACHED THE SETTLEMENT COMMISSION IN WHICH 1 75 000 WAS OFFERED AS THE UNDISCLOSED INCOME OF THE ASSESSEE HUF. ON THE SAID APPLICATION HONBLE SETTLEMENT COMMISSION AS ADMITTED THAT THE SAME U/S.245D(1) AND PASSED ORDER ON31.3.2006. FINALLY ON 19.3.20 08 ON 19.3.2008 HONBLE SETTLEMENT COMMISSION IN THE ORDER PASSED U/S.245D(4) ACCEPTED THE DISCLOSURE OF INCOME AT 1 75 000 BY THE ASSESSEE WHICH COVERS ALL THE ISSUES ARISING OUT OF THE SEIZED PAPERS AS WELL AS SEIZED ASSETS. ACCORDINGLY THE ASSESSEE IS FILING REGULAR RETURNS AND ACCEPTED BY THE DEPARTMENT AND THE LESSEE M/S.RAJYAMLAXMI & CO. ALSO FILING ITS RETURN SHOWING THE RENT RECEIPTS FROM THE TENANTS OF THE SAID PROPERTIES AS BUSINESS INCOME AS THE LEASE AGREEMENT PROVIDED FOR SUB - LETTING BY THEM. DURING THE I.T.A.NOS. 169 170 AND 171/CTK/2010 16 ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER OPINED THAT THE RENTAL INCOME ACQUIRING FROM THE SAID PROPERTIES SHOWN TO AS LEASE RENT FRO THE GROUPS CONCERN AND THUS TREATED THE SAME AS INCOME FROM OTHER SOURCES. HENCE HE INITIATED PROCEE DINGS U/S.147 BY ISSUING NOTICE U/S.148 FOR REOPENING THE ASSESSMENTS FOR THE AYS 2004 - 05 2005 - 06 AND 2006 - 07. THE ASSESSEE HAS GIVEN REPLY DT.25.3.2008 REQUESTING THE AO TO TREAT THE RETURNS ORIGINAL FILED AS THE RETURNS FILED IN RESPONSE TO NOTICE U/S.1 48.THE ASSESSEE HAS ALSO REQUESTED THE ASSESSING OFFICER TO STATE THE REASONS FOR ISSUING NOTICES U/S.148. AFTER ISSUING NOTICE U/S.143(2) AND 142(1) THE ASSESSEE HAS EXPLAINED HIS CASE BY SUBMITTING ALL REQUIRED DETAILS AND DOCUMENTS SPECIFICALLY THE LEA SE DEED DT.1.4.1997 AS THE SAID DEED WAS FOLLOWED BY THE ASSESSEE AND THE LESSEE ALSO WITH REGARD TO THE LEASE OF THE SAID PROPERTIES. THE ASSESSING OFFICER HAS PASSED ASSESSMENT ORDER U/S.147/143(3) ON 17.12.2008 FOR ALL THE THREE AYS UNDER APPEAL HOLDING THAT THE INCOME DERIVED FROM THE RENT RECEIVED TREATING AS INCOME FROM HOUSE PROPERTY IN THE HANDS OF THE ASSESSEE. WHILE DOING SO THE LEARNED ASSESSING OFFICER HAS HELD THAT THE LEASE DEED DT.1.4.1997 IS INVALID AS IT WAS EXPIRED ALREADY AND THE LEASE DEED IS UNREGISTERED AND IT IS MORE IN THE NATURE OF FAMILY ARRANGEMENT. HE FURTHER OPINED THAT THE INCOME FROM THE SAID TWO PROPERTIES SHOULD BE ASSESSED IN THE HANDS OF THE ASSESSEE AND THE LEASE TRANSACTION WAS THE BRAIN CHILD OF THE ASSESSEE FOR REDUCI NG THE INCIDENCE OF TAX BY DIVERSION OF INCOME. IN SUPPORT OF THIS HE RELIED ON THE ALLAHABAD HIGH COURT IN THE CASE OF SMT. PUTLI BIBI VS. CIT (2005) 279 ITR 294(A LL ) / AGGRIEVED BY THIS ORDER THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE LEARNED CI T(A) AFTER HEARING THE ASSESSEE AND CONSIDERING THE ASSESSMENT RECORDS HAS UPHELD THE ORDERS OF THE ASSESSING OFFICER. WHILE DOING SO THE LEARNED CIT(A) HAS OBSERVED THAT THE DOCUMENTS IDENTIFIED AS JSSR - 35 AND I.T.A.NOS. 169 170 AND 171/CTK/2010 17 JSSR - 40 FOUND AND SEIZED DURING THE COURSE O F SEARCH ON 27.4.2001 REVEALED THAT THE ASSESSEE HAS LET OUT THE SAID PROPERTY DIRECTLY TO THE RUSHIKULYA GRAMMYA BANK. 7. FROM THE ABOVE UNDISPUTED FACTS IT IS CLEAR THAT THE ASSESSEE HAS LEASED OUT THE PROPERTIES IN QUESTION TO THE FIRM M/S.RAJYAMLAXMI & CO. FORMED BY HIS DAUGHTERS - IN - LAW AS PARTNERS. THE SEIZED DOCUMENTS DURING THE SEARCH PROCEEDINGS WERE ULTIMATELY CONSIDERED AFTER HEARING THE ASSESSEE BY THE HONBLE SETTLEMENT COMMISSION AND ACCEPTED THE UNDISCLOSED INCOME AS SHOWN BY THE ASSESSEE PASSING ORDER U/S.245D(4). THIS ORDER HAS BECOME FINAL AND BINDING ON THE PARTIES. THIS INCOME AS OFFERED BY THE ASSESSEE COVER ALL THE ISSUES ARISING OUT OF THE SEIZED PAPERS AND ASSETS SEIZED DURING THE COURSE OF SEARCH. THEREFORE THE T HEORY OF THE ASSESSEE THAT THE INCOME RECEIVED BY IT FROM THE LESSEE IS ONLY INCOME FROM OTHER SOURCES IN ITS HANDS WHEREAS IT IS INCOME FROM BUSINESS IN THE HANDS OF THE LESSEE FIRM M/S.RAJYAMLAXMI & CO. AND THE DEPARTMENT IS ACCEPTING THE SAME. THE AS SESSING OFFICER WHILE ISSUING NOTICE U/S.148 WAS NOT ABLE TO POINT OUT ANY NEW DOCUMENT OR MATERIAL TO COME TO A DIFFERENT CONCLUSION THAN THAT WAS ACCEPTED BY THE DEPARTMENT AS CONTENDED BY THE ASSESSEE ACTION OF THE TREATMENT OF THE NATURE OF INCOME RE CEIVED FROM THE SAID TWO PROPERTIES IN THE HANDS OF THE ASSESSEE. IN THAT VIEW OF THE MATTER AND RESPECTFULLY RELYING ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF RADHASOAMI SATSANG V. CIT (193 ITR 321) WHEREIN IT WAS HELD THAT WHEREIN IT WAS HELD THAT IN THE ABSENCE OF ANY MATERIAL CHANGE JUSTIFYING THE DEPARTMENT TO TAKE A DIFFERENT VIEW FROM THAT TAKEN IN EARLIER PROCEEDINGS THE QUESTION OF THE EXEMPTION OF THE ASSESSEE APPELLANT SHOULD NOT HAVE BEEN REOPENED. THEREFORE WE ARE OF THE CONSIDERE D VIEW THAT NOTICES U/S.148 FOR REOPENING OF ASSESSMENT FOR THE PERIODS UNDER CONSIDERATION IS I.T.A.NOS. 169 170 AND 171/CTK/2010 18 NOT SUSTAINABLE FOR LEGAL SCRUTINY. THE NATURE OF THE INCOME DERIVED FROM THE SAID TWO PROPERTIES AS DECIDED BY THE HONBLE SETTLEMENT COMMISSION BY PASSING ORDE R U/S.245D(4) ON 20.3.2008 HAVING BECOME FINAL AND BINDING ON PARTIES THE DEPARTMENT CANNOT TURN AROUND AND SAY OTHERWISE AT THIS STAGE. HONBLE ALLAHABAD HIGH COURT HAS HELD IN THE CASE OF SMT. NEERU AGARWAL V. UNION OF INDIA (330 ITR 422) HAS HELD THAT ORDER PASSED BY THE SETTLEMENT COMMISSION IS CONCLUSIVE WHEN IT WAS NOT WHEN IT WAS NOT CHALLENGED FURTHER NOR THERE IS ANY ALLEGATION OF FRAUD OR MISREPRESENTATION BEFORE THE SETTLEMENT COMMISSION NOTICE U/S.142(1) BASED ON MATERIAL DURING THE SEARCH OP ERATION IS NOT VALID. IN THE SAID DECISION IT WAS FURTHER HELD THAT THE FACTS FOUND AND DOCUMENTS SEIZED IN THE SEARCH OPERATION WERE MATTERS WHICH RELATED TO THE SETTLEMENT OF UNDISCLOSED INCOME OF THE PETITIONER AND THEREFORE WERE THE SUBJECT MATTER OF CONSIDERATION OF THE SETTLEMENT COMMISSION. ADMITTEDLY THERE IS NO ACTION TAKEN BY THE DEPARTMENT AGAINST THE LESSEE M/S.RAJYAMLAXMI & CO. . IN THAT VIEW OF THE MATTER WHEN THE INCOME REALIZED BY THE PAYEE FROM THE TENANTS OF THE SAID PROPERTIES HAS RE TURNED AS BUSINESS INCOME THE ASSESSMENT OF THE SAID INCOME IN THE HANDS OF THE ASSESSEE AGAIN WOULD AMOUNT TO DOUBLE TAXATION OF THE SAME INCOME WHICH IS NEVER THE INTENTION OF THE ACT. THERE ARE CATENA OF DECISIONS RENDERED BY THE JUDICIAL FORUMS THAT I F THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR CAN REOPEN THE ASSESSMENT BY INVOKING SECTION 147 BUT HE CANNOT DO SO ON THE BASIS OF SAME SET OF FACTS THAT WERE ALREADY CONSID ERED BY THE DEPARTMENT TO A DIFFERENT OPINION OTHER THAN WHAT HE HAS ENTERTAINED EARLIER ON THE SAME FACTS. THEREFORE UNDER THESE FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE CONSIDERED VIEW THAT REOPENING ACTION TAKEN BY THE ASSESSING OFFICER IN TH E CASE OF THE ASSESSEE ARE BAD IN LAW LIABLE TO BE SET I.T.A.NOS. 169 170 AND 171/CTK/2010 19 ASIDE. ACCORDINGLY THE REOPENING OF ASSESSMENTS FOR THE PERIODS UNDER CONSIDERATION IS HEREBY HELD AS INVALID AND CONSEQUENTLY THE ASSESSMENT ORDERS PASSED ARE ALSO HELD AS NON - EST. 8. IN THE RESULT A LL THE THREE APPEALS OF THE ASSESSEE ARE ALLOWED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 14 TH MARCH 2011 S D/ - S D/ - ( . . ) (K.K.GUPTA) ACCOUNTANT MEMBER. ( . . . ) (K.S.S.PRASAD RAO) JUDICIAL MEMBER. ( ) DAT E: 14 TH MARCH 2011 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : JAMMULA SHYAM SUNDAR RAO (HUF) C/O. SHRI J.B.KAR UNA KUMAR (KARTA) BIG BAZAR BERHAMPUR 760 002 2 / THE RESPONDENT: THE ASST. COMMISSIONER OF INCOME - TAX BERHAMPUR CIRCLE BERHAMPUR. 3 . / THE CIT 4 . ( )/ THE CIT(A) 5 . / DR CUTTACK BENCH 6 . GUA RD FILE . / TRUE COPY / BY ORDER [ ] SENIOR PRIVATE SECRETARY ( ) ( H.K.PADHEE ) SENIOR.PRIVATE SECRETARY.