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TMI Blog2018 (10) TMI 356X X X X Extracts X X X X X X X X Extracts X X X X ..... plies filed by the assessee are contradictory. In the former letter, the assessee itself has stated that interest expenditure has not been claimed for the A.Y. 2007-08 and the same were classified under preoperative expenses. In the latter submissions, knowing well that commercial operations have not been started, the assessee has made general statements regarding business and Accounting standards. It may be pertinent to mention here that for the A.Y. 2012-13, also, wherein scrutiny assessment was completed, the assessee has offered only other income comprising of interest and dividend and no business income was offered. Further, on verification in the system, for the subsequent years also (upto A.Y.2015-16) revenue from operations is shown as 'Nil' which goes on to prove that the assessee has not commenced commercial operations. For a moment, if the assessee's argument that "eggs have to be hatched for certain period before they are delivered" is to be considered, there should be some reasonable time. Seven years is too long a gestation period in any line of business. The assessee should have classified the interest paid and other expenses during the year under p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies and not from the bank and hence this interest income not to be taxed as other income as treated by the Assessing Officer. As per Profit and Loss account, the expenses debited by the appellant was of Rs. 64,38,02,573/- which includes interest and finance charges of Rs. 63,94,67,045/-. This interest and finance charges further includes earlier year interest of Rs. 9,31,63,045/ - which does not pertain to this assessment year and hence not to be allowed as expenses during this year. Hence, the balance expenses of Rs. 55,06,39,528/- to be allowed as expenses for this year. Hence, the addition made by AO deleted. 5. Aggrieved by the order of CIT(A) the revenue is in appeal before us challenging the deletion of addition made by the AO and assessee filed CO. In the C.O., assessee has challenged the reopening of assessment. That being the case, we heard the ld. AR who made submissions in this regard. 6. Ld. AR submitted that AO reopened the assessment without having tangible material. He submitted that assessee vide letter dated 29/04/2015 requested the AO to furnish the reasons for reopening of the assessment for AY 2008-09. The AO vide letter dated 30/04/2015, communicated the rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inality is sought to be disturbed by issuing a notice under section 148, the proceedings cannot be challenged on the ground of "change of opinion". It was not opined by the Supreme Court that the strict requirements of section 147 can be compromised. On the contrary, from the observations (quoted by us earlier) it would appear clear that the court reiterated that "so long as the ingredients of section 147 are fulfilled" an intimation issued under section 143(1) can be subjected to proceedings for reopening. The court also emphasised that the only requirement for disturbing the finality of an intimation is that the assessing officer should have "reason to believe" that income chargeable to tax has escaped assessment. In our opinion, the said expression should apply to an intimation in the same manner and subject to the same interpretation as it would have applied to an assessment made under section 143(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 subjec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Orient Craft Ltd. (supra). 8.1 In the given case, AO supplied the reasons for reopening of assessment on 30/05/2015 and the reasons recorded were merely extracted from the return of income filed by the assessee, as such, there is no tangible material available with the AO to reopen the assessment. We are inclined to follow the decision of the Hon'ble Delhi High Court in the case of Orient Craft Ltd. (supra) and accordingly, ground raised in the C.O. by the assessee is allowed. 9. Though we have held that the reopening is bad in law in the C.O. filed by the assessee, since the appeal is filed by revenue, we are dealing with the merits of the case as well. Ld. DR submitted that assessee has not commenced commercial activities even in AY 2012-13 also wherein scrutiny assessment was completed and the assessee has offered only other income comprising of interest and dividend income and no business income was offered. It clearly shows that assessee has not commenced the commercial activities. He submitted that even in AY 2015-16, assessee has shown revenue from operation as 'Nil' and it clearly indicates that assessee has not commenced commercial operations. Further, he submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Capital India P. Ltd. [2016] 70 Taxmann.com 374 (Mumbai - Trib.) 3. Globex Energia P. Ltd., Vs. ACIT [2017] 77 Taxmann.com 203 (Mumbai - Trib.) 11. Considered the rival submissions and perused the material on record. We notice that the coordinate bench of ITAT, Mumbai in the case of Globex Energia P. Ltd. (supra) on the issue of commencement of business/setting up of business, has held as under: * Setting up of the business is the crucial event for determining the starting point for allowing the business expenses. Even if the assessee has not been successful in earning the business income, but if the assessee has done requisite preparations and if assessee can be said to be in a position to cater to its customers, then it can be said that business is 'set up', and therefore, expenses would become allowable thereafter. * Various factors depending upon the nature of the business need to be taken into account and properly analysed to decide this fact that whether the assessee was in a position to cater to its customers or not. It was firstly noted from the perusal of the financial statements of the assessee and other documentary evidences that various employees were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out by any of the lower authorities on merits of these expenses. Thus, taking into account all the facts and circumstances of the case, it is held that expenses claimed by the assessee n the return of income are allowable and therefore the Assessing Officer is directed to delete the disallowance." 11.1 In the present case, assessee is into real estate business. Various courts have held that commercial activities and setting up of the business depends upon the industry to industry. In the case of real estate business, as soon as the assessee commences the activities of buying the land for development, it amounts to set up of the business. In the given case, we notice that assessee has procured huge land for the purpose of development. Therefore, as soon as the assessee procured the land for development, setting up of the business has commenced. Therefore, in our view, assessee has commenced the commercial activity and setting up of business and, hence, the assessee is eligible for claiming revenue expenditure and he can treat the expenditure incurred during the year subsequent to setting up of business, as revenue expenditure relevant for that AY. In the given case, assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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