Writ petition — Under Income-tax Act, the unit of assessment is a ‘year’ and hence it is not open to a court to direct by an omnibus order that all subsequent years are connected years and that income be treated in same manner for all the years.

[Dy. CIT v. Divya
Investment P. Ltd., (2004) 313 ITR 363 (SC)]

 

The assessee, a private
limited company, carried on the business, inter alia, of hire-purchase.
The assessee took on lease a land with existing structure. The lease deed was
entered into on October 30, 1986. The lease was for ten years. The assessee
demolished the structure and constructed a multi-storeyed building which was
let out to Canara Bank and others. The assessee received hiring charges and
maintenance charges from the lessees. Thereafter, the respondent filed its
return for the A.Y. 1997-98. The Assessing Officer held that it was an income
from house property and not from business as claimed by the assessee in its
return. The assessment order was confirmed by the Commissioner of Income-tax
(Appeals) and cases for earlier assessment years from 1992 to 2000 were
ordered to be reopened by issuance of notice u/s.148 of the Income-tax Act.

Aggrieved by the decision of
the Commissioner of Income-tax (Appeals), the matter was carried in appeal to
the Tribunal. The Tribunal held that hire charges received by the assessee
were liable to be assessed as business income and not as income from property.

Against the notices issued
u/s.148 reopening the assessments, the assessee filed a separate writ petition
for each of the assessment years in which reopening was ordered. The High
Court held in all the writ petitions that the income should be treated as
business income and not as income from house property as held by the Tribunal.
The decision of the High Court was based on the fact that for one assessment
year of the assessee (viz. 1997-98), the Tribunal had held that income
should be treated as income from business and not as income from house
property and so long as this view of the Tribunal was not reversed, all the
subordinate authorities were bound by this decision.

On an appeal the Supreme Court
held that it was not open to the High Court to direct by an omnibus order that
all subsequent years were connected years and that income be treated only as
business income. Under the Income-tax Act, the unit of assessment is a ‘year’.
According to the Supreme Court the parties should have been relegated to move
the Tribunal by filing an appeal u/s.253(1) and it was not open to the High
Court to entertain the writ petitions.

The Supreme Court, however,
clarified that in this case there were two separate proceedings involved,
viz., the order of the Commissioner of Income-tax (Appeals) plus
proceedings u/s.148. Unfortunately, all proceedings were clubbed in the writ
petitions. The exact status of those proceedings was not known. If the
assessee objected to the reopening of assessment, then, it was required to
file revised returns. The Supreme Court refrained from expressing any opinion
in that regard. Similarly, if the decision of the Commissioner of Income-tax
(Appeals) was sought to be challenged for a given year, then, the assessee
ought to have filed appeals u/s. 253(1) before the Tribunal. However, since
the writ petitions were pending in the High Court, the Supreme Court directed
that if appeals were required to be filed, then they shall be filed within
four weeks from the date of the order in which they shall not be dismissed on
the ground of delay.