Notice issued without complying with the CBDT instruction specifying the format for such notices is invalid
Kolkata Tribunal in the case of Hind Ceramics Pvt Ltd (ITA No 608/Kol/2024) has directed to tax income from license fees as “Income from House Property” by relying on the Principle of Consistency. It has further held that notice issued without complying with the CBDT instruction specifying the format for such notices is invalid.
Let us have a Short Overview of the case:
The Tribunal allowed the appeals filed by Hind Ceramics Pvt. Ltd. for AYs 2012-13 and 2017-18. The Tribunal directed the AO to assess the income from license fees under the head “house property” and delete the additions made to the total income. Additionally, the Tribunal quashed the assessment order for AY 2017-18 due to the invalidity of the notice issued under Section 143(2) of the Act.
Let us have a Short Overview of the case:
Primary Issues:
Whether the income from license fees received by the assessee should be assessed under the head “house property” or “business or profession.”
The validity of the notice issued under Section 143(2) for AY 2017-18, which did not specify the type of scrutiny (limited, complete, or compulsory manual scrutiny).
Assessee’s arguments:
The income from license fees should be assessed under the head “house property” as it has been consistently treated in previous AYs.
The notice issued under Section 143(2) for AY 2017-18 was invalid as it did not comply with the CBDT instruction specifying the format for such notices.
The assessment order passed based on the invalid notice should be quashed.
Revenue’s arguments:
The income from license fees should be assessed under the head “business or profession” as the assessee’s business activity involves tenancy/ logistics of godowns/ warehouses.
The notice issued under Section 143(2) was valid despite not specifying the type of scrutiny, as it was a computer-generated notice.
Tribunal’s decision:
The Tribunal directed the AO to assess the income from license fees under the head “house property” and delete the additions made to the total income for AY 2012-13.
The Tribunal emphasized that the income from license fees had been consistently treated as “house property” income in previous AYs, and there was no reason to change this treatment.
The Tribunal referred to the Supreme Court’s decision in Radha Soami Satsang vs. CIT, which held that while the doctrine of res judicata does not apply to income tax proceedings, it is not appropriate to change a fundamental aspect that has been consistently accepted in previous years.
The Tribunal quashed the assessment order for AY 2017-18 due to the invalidity of the notice issued under Section 143(2). The Tribunal found that the notice issued under Section 143(2) did not comply with the CBDT instruction, rendering it invalid.
The views expressed in this summary are entirely personal and do not reflect those of any professional firm.
The copy of the order is as under:
