TMI Blog2007 (11) TMI 448X X X X Extracts X X X X X X X X Extracts X X X X ..... same are dismissed. 4. Briefly the facts leading to the filing of the present appeals are that the assessee company owned Flat No. 801, Mehar Deep Co-operative Housing Society Ltd., 1/9, Sarojini Naidu Road, Santa Cruz (West), Mumbai-54. During the assessee s case for assessment year 2001-02 under the Income-tax Act the Assessing Officer found that assessee has claimed depreciation and maintenance charges in respect of the said flat which is stated to be used for business purposes. The Assessing Officer deputed the Income-tax Inspector on 4-12-2002 in order to make enquiry about the user of the said flat. It has been reported by the Income-tax Inspector, Mumbai vide his report dated 9-12-2002 that the flat was found to be locked and on enquiry with the security guard of the premises, it was learnt that the flat remained locked and once in a month somebody comes for cleaning and maintenance of the Flat. The secretary of the housing society vide his letter dated 5-3-2003 stated that their society is residential society and do not promote any commercial activity to be carried out in the society premises. The Assessing Officer therefore disallowed depreciation and maintenance c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 2( ea ) of the Wealth-tax Act and assessments was framed accordingly. 5. The re-opening of the assessments and additions on merits were challenged before the ld. Commissioner of Income-tax (Appeals) and the ld. Commissioner of Income-tax (Appeals) confirmed the addition and dismissed the appeals of the assessee. 6. On the basis of the above facts the assessee has raised several issues in all the appeals which we would like to dispose of issue-wise as under : Issue No. 1 - Whether initiation of reassessment proceedings is justified in these cases? The initiation of the reassessment proceedings is raised in Income-tax Appeals 3960 and 3961 of 2006 and all the wealth-tax appeals. Ld. Counsel for the assessee submitted that the basis for initiation of re-assessment proceedings is the findings given in assessment year 2001-02 in which the matter travelled to Income-tax Appellate Tribunal Delhi C Bench in ITA No. 3412/Delhi/2004 in which the disallowance of depreciation and maintenance charges was deleted by the Tribunal and the action of the Assessing Officer under section 143 (3)( i ) and 143(2)( i ) and ( ii ) of the Income-tax Act have not been approved by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and that there was no specific averments in the report of the security guard etc. about the user. Ld. Counsel for the assessee further submitted that Inspector has not given any report for the user in earlier years and as such the formation of belief by the Assessing Officer to re-open the assessment was incorrect and was based only on presumption and without any material. Ld. Counsel for the assessee submitted that even the Assessing Officer at the assessment stage, did not deny the expenditure spent by the assessee like conveyance, salary, electricity and telephone expenses of the Mumbai Office and the same have been allowed as business expenditure. Ld. Counsel for the assessee also filed confirmation from several clients of the assessee-company to show that Mumbai property was used for business/commercial purposes and the clients of the assessee had been visiting the business premises of the assessee at the Mumbai. Ld. Counsel for the assessee therefore submitted that Assessing Officer was having no material to support his belief that re-opening of the assessment was legally justified in the matter. He has submitted that Assessing Officer has therefore wrongly assumed jurisdic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 71] 82 ITR 147 : "The words reason to believe suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that the Income- tax Officer may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. The Income-tax Officer would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or its not material or relevant to the belief required by the section. The court can always examine this aspect though the declaration or sufficiency of the reasons for the belief cannot be investigated by the court." 10. Hon ble Delhi High Court in the case of United Electrical Co. (P.) Ltd. v. CIT [2002] 258 ITR 317 considering the following facts and held : "The petitioner, a company engaged in the business of manufacturing electrical goods, filed its return of income for the assessment year 1996-97 declaring an income of Rs. 9,26,867. The return of income was accompanied by various documents and annexures including the audit report and the list of loans. One of the loans was for Rs. 7,40,000 raised from VFL company, and, according to the petitioner, the loan w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and this fact was gathered from some security guards. The assessee however has explained that it has stopped using the said premises for business purpose from October 2002. The Income-tax Inspector has nowhere mentioned in the report as to whether assessee was not using the said property for business purposes in the earlier years and more so Inspector cannot say anything for the earlier year prior to his visit on 4-12-2002. No material was brought on record even to justify the report of the Inspector because the same is too vague and general and did not lead to any conclusion whatsoever. The belief of the Assessing Officer that income has escaped assessment was not based on any information on record. Since there were no relevant material was available on record, therefore, Assessing Officer was not justified in forming his belief that income escaped assessment. The belief of the Assessing Officer was not based on any material and as such the Assessing Officer acted without jurisdiction in the matter because his belief that the other conditions are satisfied does not exist at all. These facts rather would show that even there was no prima facie case made out by the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce under section 148 of the Income-tax Act. We have considered the rival submissions and material on record. The assessee has written a letter before the Assessing Officer that the returns already filed on record may be taken as return filed in response to the notice under section 148 of the Income-tax Act. It would amount to acceptance on the part of the assessee that notice is served upon them. The same point was decided by Income-tax Appellate Tribunal Delhi Bench in the case of Smt. Gurinder Kaur ( supra ). Considering the above we are of the view that though it is a condition president for validity of the reassessment proceedings that notice under section 148 shall have to be served. However in the peculiar facts and circumstances of the case, we are unable to hold that reassessment proceedings can be invalidated in that ground. We may also mention that assessee has joined the reassessment proceedings. We therefore, do not find any merit in the contention of the ld. Counsel for the assessee. This issue is therefore decided in favour of the Revenue and against the assessee. Issue No. 3 - Whether assessee has used Mumbai Flat for business or professional purposes and wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty for business purpose from October 2002. Therefore there was no material available before the Assessing Officer to deny deduction of depreciation and maintenance charges in respect of the Mumbai Flat. The assessee has filed several evidences before the Assessing Officer in the form of books of account, details of bank account, details of the expenditure and certificates from Customers dealing with assessee from the flat in question. Even the Assessing Officer has not disallowed certain expenditure like salary, electricity and telephone expenses of Mumbai Office and allowed them as business expenditure. These details and expenditure would clearly prove that assessee was occupying and using the Mumbai flat for the purposes of business carried on by him from there. Merely because certificate is given by the Secretary that it has residential Complex would not deny the exemption to the assessee under the law because there is no such requirement that assessee should carry on business from commercial premises only. The nature of the business is also such that it can be conducted from even residential property. Considering the above discussion and material on record, we are of the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Value as held in the decisions of Hon ble Supreme Court in Mrs. Shiela Kaushish v. CIT [1981] 131 ITR 435, Dewan Daulat Rai Kapoor v. NDMC [1980] 122 ITR 700, decision of Delhi High Court in CIT v. Raghubir Saran Charitable Trust [1990] 183 ITR 297 and other decisions given in the right up. Ld. Counsel for the assessee stated in the write-up that in the case of the assessee evidences have been filed at pages 14, 15 and 16 of the Paper Book to show that Brihan Mumbai Municipal Corporation (BMC) has fixed the rateable value of the impugned property at Rs. 68,955 for the full year which has not been disputed by the authorities below, the proportionate rateable value for five months via November 2002 to March 2003 which comes to Rs. 28,731 for say Rs. 30,000 may be included in the total income for assessment year 2003-04 only. In view of the submission of ld. Counsel for the assessee filed on 2-11-2007, we direct the authorities below to make the addition of Rs. 30,000 only because there is no other material available on record to justify the findings of the authorities below. The assessee would be entitled for usual deduction under Chapter IV-C of the Income-tax Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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