Principle of Res Judicata not Applicable to Income Tax Proceedings as Each Year is a Separate Event: ITAT [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that the principle of Res judicata would not be applicable to the income tax proceedings as each year is a separate event.

The assessee company, International Recreation Parks (P) Ltd was allotted land by Noida Authority on a 90 years lease of the development of the amusement park. The permissible use was on an area of 85% under ‘theme amusement and entertainment park’ and an area of 15% under commercial facilities supportive of park. The assessee had claimed that during the year under review it derived its income from development of real estate purpose of amusement park, signage, kiosks and promotional services, maintenance and parking charges at tenancy of licensed area.

The claim of assessee was that it had been offering income from tenancy of licensed area as income from house property since beginning and there had been no change in the facts of the company. In the assessment of the last three years under Section 143(3) of the Income Tax Act, the income from tenancy right had been offered to tax and accepted. It was submitted that later on the income tax assessment for the year 2010-11, 2011-12 and 2012-13, assessment year was completed under Section 153A and the property income so declared had been accepted.

 It was the case of assessee that for A.Y. 2014-15 and 2015-16 also with rental income under head ‘income from house property’ had been accepted. AO however taking note of the nature of business activities observed that the main operational revenue of assessee was coming from letting out commercial complex and maintenance charges and parking charges at commercial complex out of the total revenue earned. Thus, the income which assessee claimed to be from tenancy was to be assessed as income from business. Accordingly, I made the addition which had been deleted.

Kanv Bali, on behalf of the revenue primarily submitted that there was no error in the findings of AO and he had duly appreciated the nature of business and the manner of revenue generation.

Kapil Goel, on behalf of the revenue submitted that each year was a separate event and the principle of res judicata was not applicable.

The reliance of revenue and AO on the judgement of Supreme Court of India in the case of Chennai Properties & Investments Ltd. vs. CIT, was not of much consequence and benefit to the Revenue.

The two-member Bench of M. Balaganesh, (Accountant Member) and Anubhav Sharma, (Judicial Member) observed that the assessee was holding the properties and earning income by letting out those properties under the main objective of the company and accordingly, the Supreme Court had upheld the factual finding that letting of the properties was the business of assessee. The Bench further observed that the revenue’s claim to treat was as income from house property was not accepted and here it was otherwise, as Revenue wanted the rental income claim to be considered as business income.

The Bench further dismissed the appeal of the revenue holding that the reliance of CIT(A) on the judgement of the Supreme Court in the case of Raj Dadarkar & Associates Vs. ACIT

Could not be interfered.

To Read the full text of the Order CLICK HERE

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