TMI Blog2014 (1) TMI 290X X X X Extracts X X X X X X X X Extracts X X X X ..... - ITA No. 6371/Mum/2009, - - - Dated:- 18-12-2013 - Sh. H. L. Karva And Rajendra,JJ. For the Appellant : Shri M. M. Golvala/Amey Wagle For the Respondent : Shri Surendra Kumar ORDER Per Rajendra, A. M. Challenging the order dt. 05. 11. 2009 of the CIT(A)-4,Mumbai,assessee-company has raised following Grounds of Appeal: 1)Learned Commissioner of Income Tax (Appeals) erred in upholding the initiation of reassessment proceedings under Section 147,when the jurisdictional conditions were not satisfied. 2)The learned Commissioner of Income Tax (Appeals) failed to consider that the recorded reasons were erroneous,and on the basis of the said reasons, the Assessing Officer could not have had reason to believe that income chargeable to tax had escaped assessment. 3)Both the lower authorities erred in holding that mesne profits-Rs. 6,75,000/- received by the Appellant during the year were required to be taxed as a revenue receipt. 4)The learned Commissioner of Income Tax (Appeals)erred in ignoring the decision of the Special Bench in Narang Overseas (P) Ltd. -111TD 1 (Mum. ) (SB) which was cited before him. 5)Having regard to the facts and circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Limited (now Whirlpool of India Limited) in 1978 In respect of a part of 2nd Floor of Elphinstone Building The agreement came to an on 30th,September, 1999. The assessee filed a suit in the Small Causes Court at Mumbai for eviction of the said sub-tenant. The court vide order and Decree dated 30th November, 2001 inter alia ordered Whirlpool of India Limited to vacate and hand over possession. The court later issued a warrant of possession by virtue of which the assessee obtained possession of the said premises through the bailiff on 5th February, 2003. The Decree dated 30th November, 2001 provided for a separate inquiry into mesne profits In accordance with the order of the court the assessee has received during the year mesne profits amounting to Rs. 6,75,000/ for the wrongful occupation of the premises by Whirlpool of India Limited. The assessee submits that the said profits are a capital receipt not liable to tax. Reliance is placed on: CIT v. J. D. Italia 141 ITR 948 (AP) CIT v. Mrs. Annamma Alexandra and Others 191 ITR 551 (Ker. ) (3) During the year 2004-2005, upon settlement of a dispute with Whirlpool of India Ltd. , in respect of sub-leased premises, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of income,that words escapement of income covered the case of discovery of a mistake in the assessment caused either on account of erroneous construction of the transaction or due to its non consideration of or caused by a mistake of law applicable to such transaction,that at the initial stage formation of a reasonable belief was needed and not a conclusive finding of a fact. He finally held that AO was justified in re-opening of the assessment. 2. 3. Before us, Authorised Representative(AR) submitted that the assessee was leasehold owner of the premises,that it had granted sub licence to whirlpool in respect of a part of that building, that the agreement came to an end on 30th September, 1999,that the assessee filed a suit in the small causes court for eviction of the said sub-tenant,that Court vide order dtd. 30. 11. 2001 ordered Whirlpool to vacate the premises,that the assessee got the possession of the premises in Feb. ,2003,that in accordance with the decree of the court assessee received mesne profits, amounting to Rs. 6. 75 lacs, during the year under consideration for wrongful occupation of the premises,that the relevant facts were revealed by the assessee in the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st initiation of reassessment are some of the compulsory things to be done by the AO. Similarly,assessees are also required to file return of income or intimate the AO that return already filed could be considered as a return filed in response to the reassessment notice. Act expects AO and the assessee to observe certain discipline when action is initiated u/s. 147 of the Act. But,the cornerstone of the whole exercise is reasons recorded by the AO,as they give legitimacy to the action. If the reasons,as envisaged by the provisions of the Act do not exist, action taken by the AO,even after following the procedure,cannot be endorsed. Therefore,first of all we would like to consider the facts of the case. From the records it is clear that the assessee is not the owner of the premises in question,that it had sub-let the said premises to Whirlpool for a certain period,that Whirlpool did not vacate the premises on expiry of the licence period,that matter went to the Court and a Decree was passed in pursuance of which assessee got the possession of the premises,that assessee received rent amounting to Rs. 13. 28 lacs in addition to mesne profits of Rs. 6. 75 lacs for the illegal possessio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he continued use of that expression right from 1948 till date, we have to understand the meaning of the expression in exactly the same manner in which it has been understood by the courts. The assumption of the Revenue that somehow the words "reason to believe" have to be understood in a liberal manner where the finality of an intimation under Section 143(1) is sought to be disturbed is erroneous and misconceived. As pointed out earlier, there is no warrant for such an assumption because of the language employed in Section 147; it makes no distinction between an order passed under section 143(3) and the intimation issued under section 143(1). Therefore it is not permissible to adopt different standards while interpreting the words "reason to believe" vis-a-vis Section 143(1) and Section 143(3). We are unable to appreciate what permits the Revenue to assume that somehow the same rigorous standards which are applicable in the interpretation of the expression when it is applied to the reopening of an assessment earlier made under Section 143(3) cannot apply where only an intimation was issued earlier under Section 143(1). It would in effect place an assessee in whose case the return w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43(3). The argument of the revenue that an intimation cannot be equated to an assessment, relying upon certain observations of the Supreme Court in Rajesh Jhaveri (supra) would also appear to be self-defeating, because if an "intimation" is not an "assessment" then it can never be subjected to section 147 proceedings, for, that section covers only an "assessment" and we wonder if the revenue would be prepared to concede that position. It is nobody s case that an "intimation" cannot be subjected to section 147 proceedings; all that is contended by the assessee, and quite rightly, is that if the revenue wants to invoke section 147 it should play by the rules of that section and cannot bog down. In other words, the expression "reason to believe" cannot have two different standards or sets of meaning, one applicable where the assessment was earlier made under section 143(3) and another applicable where an intimation was earlier issued under section 143(1). It follows that it is open to the assessee to contend that notwithstanding that the argument of "change of opinion" is not available to him, it would still be open to him to contest the reopening on the ground that there was either n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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