TMI Blog2015 (8) TMI 707X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 material. As discussed in earlier part that it is not trite that income from leased of business assets is to be taxed under the head income from house property only and not under any other heads of 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 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 g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of the property. 4. If the municipal rateable value was not to be adopted, the CIT(A) ought to have computed the annual value at the rate of 7% of ₹ 9,04,63,112/-, being the cost of investment in the building. 5. The CIT(A) erred in upholding levy of interest under section 234B of the Act . 3. Besides 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 (ALV) of the house property let out by the assessee from ₹ 3,09,75,305/-being 20% of the cost of investment of ₹ 15,48,76,529/- (as per balance sheet as on 31.03.2002) to 8.5% of the cost of investment u/s 23(1)(a) of the Income-tax Act, 1961 without appreciating the fact that annual letting value @ 20% of the cost of investment was arrived at by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 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 of 12%, the interest amount will be about ₹ 1.93 crores which would have been payable by the assessee per annum, whereas the assessee received only a very meager amount of ₹ 3 lac stated to be compensation, obviously for the reason that interest (otherwise) payable by the assessee is forgone by the relative of partner(s) of the lessee-firm. In other words, the usufructus of the loan received requires to be treated as consideration for the user of the leased property and accordingly 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, that such a reopening is bad in law in view of the proviso to section 147 [ i.e. reopened beyond the period of 4 years without there being any failure on the part of the 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 income under the head business income and also accepted by the Department or such assessments had attained finality, then without there being any fresh material coming into record or possession of the Assessing Officer so as to suggest that income shown by the assessee has to be taxed under the head income from house property or that it requires fresh determination of the ALV after taking into consideration the amount of the loans received by the assessee, reopening of the assessment is bad in law. There could not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t case also there is no requisite tangible material coming on record to suggest that the income shown by the assessee is to be assessed as income from house property so as to deviate from the past history of the assessee s case and accordingly, there could not be any reason to believe for reopening the case u/s 143(1). 8. On the other hand, the Ld. DR on behalf of the revenue, submitted that once the assessment has not been completed under scrutiny u/s 143(3) and merely return has been processed u/s 143(1), then Assessing Officer has a vast power to reopen the case u/s 147. There cannot 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 closely related concern had taken the property on lease and, therefore, the compensation received at ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he part of the 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 on the ground that the income chargeable to tax has not been correctly shown nor has been assessed correctly. In the reasons recorded, the Assessing Officer observes that the assessee has received unsecured loan of ₹ 16.07 crores from Shri Ramchandra K Popley, Director of the assessee company and his son, Shri S R Popley is one of the partners of the lessee firm i.e. M/s Popley Gold Plaza (who has taken the premises on lease). Further the assessee has also claimed depreciation on the said 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trite law that the reason to believe entertained by the Assessing Officer should have a rational connection and relevant bearing on the formation of belief with the tangible material coming on record having live link nexus with the income chargeable to tax escaping the assessment. The belief entertained by the Assessing Officer must be held in good faith and not merely a pretence for review and roving and fishing enquiry. Here in this 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 reference to any concrete material to show that either the compensation received is inadequate or it should be necessarily be taxed as income from house property. There is no settled law or legal proposition that whenever the business premises are let out, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 allowed, whereas the appeals of the revenue are treated as dismissed, because they have been rendered academic. 16. In the assessment year 2005-06, the Ld. Senior Counsel, Mr Dastur, submitted that though the facts are identical and even the reasons are by and large same, except for minor difference in the wordings recorded by the Assessing Officer. Reasons recorded for the assessment year 2005-06, which is exactly similar for AY 2006-07, reads as under: The return of income was filed on 23.01.06 declaring 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 comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind that there is no material change in the reasons and grounds taken for reopening the case as has been recorded in the earlier years, inasmuch as in this year also the Assessing Officer has sought to reopen the case on the ground that the 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. 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 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 material. As discussed in earlier part that it is not trite that income from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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