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2015 (8) TMI 707 - ITAT MUMBAI

2015 (8) TMI 707 - ITAT MUMBAI - TMI - Reopening of assessment - compensation received by the assessee of ₹ 3 lakhs is inadequate and the provisions of section 23(1)(a) should be invoked and the income received by the assessee should be assessed as income from house property instead of business income - Held that:- As from the “reasons recorded”, we find that there is no material change in the reasons and grounds taken for reopening the case as has been recorded in the earlier years, inasm .....

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ntertain to ‘reason to believe’ that any income chargeable to tax has escaped assessment.

The so called information in the form of comparable example as referred by the Assessing Officer in “reasons” lacks credibility because nothing has been brought out regarding its comparability with the assessee. In any case the core issue and deciding factor here in the case of the assessee is that, whether the head of the income in which is to be assessed can be changed sans any tangible materi .....

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ess income. In these years also the Assessing Officer has no concrete ‘reason to believe’ except for reopening the case for making the verification of the past records and facts. This cannot be the ground for reopening the assessment even though return of income filed by the assessee has been accepted u/s 143(1). Our finding and reasons given in the appeal in assessment year 2002-03 will apply here also in these years. Accordingly, the reopening of the assessment based on the aforesaid “reasons .....

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584, 3585/Mum/2012 - Dated:- 12-8-2015 - SHRI D KARUNAKARA RAO AND SHRI AMIT SHUKLA, JJ. For The Appellant : Ms Amrita Misra For The Respondent : Mr Soli E Dastur ORDER PER BENCH: The aforesaid bunch of appeals have been filed by the assessee as well as by the revenue against separate impugned orders passed by CIT(A)-9, Mumbai for the quantum of assessments passed u/s 143(3) r.w.s. 147 for the assessment years 2002-03 to 2006-07. Besides this, the revenue has also filed appeals against deletion .....

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Mum/2009. In the assessee s appeal following grounds have been raised: 1. The Commissioner of Income-tax (Appeals)-IX, Mumbai [ the CIT(A) ] erred in upholding the validity of the assessment proceedings initiated under section 147 of the Income-tax Act, 1961 ( the Act ) by the Dy. Commissioner of Income-tax, 9(3) Mumbai ( the AO ). 2. The CIT(A) erred in upholding the AO s decision to treat the compensation from M/s Popley Gold Plaza as Income from House Property and not as Profits and Gains of .....

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des this, the assessee has also raised following as additional ground, which reads as under: In the event it is held that income of the Appellant is not chargeable under the head Profits and gains of business , the CIT(A) ought to have held that the income is chargeable under the head Income from Other Sources . 4. In the revenue s appeal, following ground has been raised: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in reducing the annual letting value ( .....

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r and M/s. Sahajwani Estate who had shown the annual rent @ 29.52% and 20.49% of the value of properties . 5. Before us, Ld. Senior Counsel, Mr. Soli Dastur, submitted that in all the appeals filed by the assessee, the main legal issue, which goes to the root of all the assessments is the validity of reopening of the assessment u/s 147, which has been raised vide ground no. 1 in all the years in dispute. Explaining the relevant facts qua the validity of reopening u/s 147, Mr. Dastur submitted th .....

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13,03,330/-. The same was processed u/s.143(1) on 24.01.2003 adopting the total loss as declared and no scrutiny u/s.143(2) was made subsequently. It is seen from the records that the assessee has shown an amount of ₹ 3 lacs as compensation received in respect of its business premises from M/s. Popley Gold Plaza as per an agreement dated 01.04.1999. It is also seen that the assessee received unsecured loan of ₹ 16.07 crores from Shri Ramchandra K. Popley, director of assessee-compan .....

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.Y. 2001-02 for which no interest is claimed nor paid all these years. Obviously, the amount of compensation received by the assessee is an insignificant sum as compared with the total book value of the leased premises which is more than ₹ 10 crores. It is obvious from the details on record that because of the close nexus between the lessor-assessee and the lessee-partnership firm, no interest is charged on the whopping amount of ₹ 16.07 crores. If interest is charged say at the rate .....

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annual value of the leased property needs to be re-worked out. Reference in this regard may also be made to the decision of Hon ble ITAT, Mumbai in the case of Trivoli Investment & Trading Co. Pvt Ltd (ITA No.3269/Bom/93 and 3009/Bom/94) which has been circulated vide CIT(Judicial), Mumbai s letter No. Addl. CIT(J,C & L)/2003-04 dated 29.01.2004 and the facts of the present case are almost identical with those of the decided case. In view of the above, I have reason to believe that incom .....

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no tangible material coming into possession of the Assessing Officer so as to entertain reason to believe that income chargeable to tax has escaped assessment within the scope and meaning of section 147. Giving background of the case, he submitted that assessee owned a building which was shown as business assets in the schedule of fixed assets in the balance sheet along with fixtures, fittings and plants. In the year 1999-2000 i.e. on 01.04.1999, assessee entered into lease agreement for lettin .....

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rector of the assessee company but also about the lease rental income derived from the letting out of the property. In response, the assessee had filed all the details of unsecured loans and also regarding the income shown by the assessee from the business assets. The relevant questionnaire issued by the Assessing Officer during the course of the assessment proceedings has been placed in the paper book at page 40 and the reply of the assessee at pages 41 & 42. Thereafter, the assessment was .....

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e assessee to disclose truly and fully all material facts necessary for assessment] and also on the ground that there was no new information or material coming to the possession of the Assessing Officer to reopen the completed assessment. Even prior to the assessment year 2001-02, the assessee has been showing the income from letting out the business premises as business income , which stood accepted by the Department. In this background, he submitted that, once the assessee had been showing the .....

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law. There could not be any reason to believe on already settled facts and issue in the case of the assessee. The reopening is only a pretence to change the head of income and take a different view on same set of facts. Such a reopening sans any tangible material coming on record is invalid and therefore, the assessment order passed in pursuance of impugned notice u/s 148 deserves to be quashed. In support of his contention, he relied upon catena of case laws on the point that even in the case w .....

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ter taking note of various decisions of the High Courts and also the Supreme Court decision in the case of ACIT vs. Rajesh Jhaveri Stock Brokers P Ltd. reported in [2007] 291 ITR 500 held that in the case of reopening of an assessment, which has been previously accepted u/s 143(1) without scrutiny, the Assessing Officer would have power to reopen the assessment only if he had some tangible material on the basis of which he could form reason to believe that income chargeable to tax has escaped as .....

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lieve of escapement of income cannot be formed. In this case also Hon ble High Court have taken note of decision of Hon ble Apex Court in the case of ACIT vs. Rajesh Jhaveri Stock Brokers P Ltd. (supra). (iii) Delta Air Lines, Inc. vs ITO, ITAT Mumbai Bench reported in [2013] 153 TTJ 506. (iv) Bapalal & Co. Exports vs JCIT reported in [2007] 289 ITR 37 (Mad). 7. Thus, he concluded that in the present case also there is no requisite tangible material coming on record to suggest that the incom .....

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be a case of change of opinion, the reason being that the assessee s return of income has not been scrutinized. In support she strongly relied upon the decision of Hon ble Supreme Court in the case of ACIT vs. Rajesh Jhaveri Stock Brokers P Ltd. reported in [2007] 291 ITR 500 (SC). After referring to the reasons recorded , she submitted that the Assessing Officer has taken note of the fact that assessee has received unsecured loan of ₹ 16,07,00,000/-, from one of the Director, whose closel .....

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for entertaining his reason to believe for reopening the case and such a reason to believe entertained by him cannot be questioned here in this case, therefore, the Assessing Officer has rightly acquired the jurisdiction for reopening the case and thereby issuing the notice u/s 148. She also strongly relied upon the order of the CIT(A) specifically the finding given in para 2.4. 9. We have heard the rival submissions and perused the relevant material on record. Before adjudicating the legal issu .....

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fixtures and equipments for a compensation of ₹ 3 lakhs per annum. Such a receipt from letting out of the business premises has been shown as business income since assessment year 2000-01. In the assessment year 2000-01, the said business income stood assessed and accepted by the department. In the assessment year 2001-02, again the assessee had offered the receipts from letting out of the business premises as business income, which too was accepted under scrutiny assessment completed u/s .....

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e assessee to disclose fully and truly all material facts necessary for the assessment; and secondly, no new information or material has come into the possession of the Assessing Officer after the completion of the said assessment. Thus, in this manner, up till A.Y. 2001-02, the receipts/compensation shown by the assessee stood assessed as business income . Now, for the impugned assessment year i.e. A.Y. 2002-03, the assessee s case has been reopened vide notice u/s 148 dated 28.11.2007, mainly .....

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property and, therefore, such a claim of the assessee may not be acceptable . Further, he has observed that compensation amount of ₹ 3 lakhs per annum is insignificant as compared to the book value of the leased premises, which is more than ₹ 10 crores. No interest has been charged on the loan amount received by the assessee, therefore the annual letting value of the lease property needs to be worked out. He has also referred to a one Tribunal decision in the case of Triuli Investmen .....

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operty. The factum of the amount of compensation, book value of the property shown in the fixed assets, amount of unsecured loan received etc. are all coming from the earlier years. No new fact even with regard to loan has been found for this year and so much so, they have been specifically examined in the course of assessment proceedings u/s 143(3) in the A.Y. 2001-02. So the factor of loan is also not new. Once these facts as recorded in the reasons are permeating from the earlier years, then .....

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ent either in the cases where return of income has been accepted u/s 143(1) or has been subjected to scrutiny assessment u/s 143(3). However, the common requirement in both the cases is that the Assessing Officer must have reason to believe that income chargeable to tax has escaped assessment. The words reason to believe is the key element and are stronger than the word satisfied and whether the Assessing Officer had reason to believe or not is always a question of jurisdiction which needs to be .....

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is case, no tangible material or information has come on record which can be remotely suggest that Assessing Officer has reason to believe that the income shown by the assessee either should be taxed as income from house property or it is inadequate. The entire reasons recorded are purely in the realm of surmises which is evident from the words like this claim may not be acceptable and consideration received for the user of lease property is inadequate which needs to be worked out. There is no r .....

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the case, which has not been spelt out by the Assessing Officer in the reasons. Thus, in our opinion, the reasons recorded by the Assessing Officer do not clothe the Assessing Officer with the jurisdiction to reopen the assessment u/s 147. Our decision is also fortified by various judicial decisions, as referred and relied upon by the Ld. Senior Counsel. As regards the decision of Hon ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers P Ltd. (supra) relied upon by the Ld. DR, we find .....

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ly on the facts of the present case. Accordingly, on this ground alone we hold that the initiation of reopening of assessment u/s 147 and issuance of notice u/s 148 is without jurisdiction and void ab initio and consequently the assessment order dated 24.12.2008 passed on the basis such notice u/s 148 is quashed. 12. In view of our finding given above, all other grounds raised on merits in all in the assessee s appeals becomes academic and accordingly, the same are treated as infructuous and dis .....

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ng Officer in the assessment years 2003-04 and 2004-05 which are identically worded and the facts are also completely same. Accordingly, the finding given in the appeal for the assessment year 2002-03 will apply mutatis mutandis in these years also and consequentially the reopening of assessment u/s 147 for both the years that is AYs. 2003-04 and 2004-05 are held to be bad in law and are hereby quashed. Thus, appeal of the assessee for the assessment year 2003-04 and 2004-05 are treated as allow .....

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laring total income of Rs. nil . The return was duly processed u/s 143(1) of the I.T. Act. The assessee is getting compensation on letting of property having net worth ₹ 13.69 crore (depreciated value) to its group concern and the same is offered for tax under the head business income . It is seen from the computation of income that the assessee has not claimed depreciation during the year. As per Expl. 5 to sec. 32 of the I.T. Act, the same is to be allowed, whether the assessee claim it .....

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a) of the I.T. Act, should be invoked in this case. As a comparable example to support the above observation, Ms. Asha Hampanwar, who is assessed in this charge, is offering a rent of ₹ 50,000/- per month for a property (411.462 sq. ft.) worth ₹ 20 lakhs in the same locality, for the AY 2005-06. This works out to 30% of the cost of asset. Therefore, in the assessee s case the rent should have been ₹ 3.91 crore per annum (approx.). Of course, considering the market trend, there .....

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efore, reason to believe that the income has escaped to the tune of ₹ 4.10 crore (approx) with the meaning of sec. 147 of the I.T. Act, 1961. Tax effect involved ₹ 1.44 crore (approx.) . 17. From the reading of above reasons, Mr. Dastur submitted that in substance there is no change in the grounds for reopening the case as the basic facts remains the same. There is no fresh material or any tangible material for these years also so as to hold that Assessing Officer has reason to belie .....

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he provisions of section 23(1)(a) should be invoked and the income received by the assessee should be assessed as income from house property instead of business income. The said reasons again are in the realm of surmises sans any tangible material and information coming to the possession of the Assessing Officer so as to entertain to reason to believe that any income chargeable to tax has escaped assessment. The so called information in the form of comparable example as referred by the Assessing .....

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income. No facts and circumstances or material has been brought by the Assessing Officer that the income shown by the assessee now in these years has to be taxed as income from house property in contradistinction and complete departure from the past history, where income stood assessed and accepted as business income. In these years also the Assessing Officer has no concrete reason to believe except for reopening the case for making the verification of the past records and facts. This cannot be .....

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