TMI Blog2020 (1) TMI 994X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(3) r.w.s 147, dated 30.06.2014 cannot be sustained. Accordingly, in the absence of any valid assumption of jurisdiction by the A.O under Sec. 147 of the Act, the assessment framed by him under Sec. 143(3) r.w.s 147, dated 30.06.2014 cannot hold the ground and is liable to be quashed. On the basis of our aforesaid deliberations, we herein quash the assessment framed by the A.O under Sec. 143(3) r.w.s 147, dated 30.06.2014 for want of jurisdiction. As we have quashed the assessment order passed under Sec. 143(3) r.w.s 147, dated 30.06.2014, for the reason, that the A.O had exceeded his jurisdiction, therefore, we refrain from adverting to and therein adjudicating upon the other contentions advanced by the ld. A.R, which thus are left open. - ITA Nos.2982 & 413/Mum/2016 - - - Dated:- 23-1-2020 - Shri G. Manjunatha, Accountant Member And Shri Ravish Sood, Judicial Member For the Appellant : Shri Deepak Trashwala, A.R For the Respondent : Ms. Kavita P. Kaushik, D.R ORDER PER RAVISH SOOD, JM The captioned appeals filed by the assessee are directed against the respective orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income be treated as having been filed in response to the aforesaid notice issued under Sec. 148 of the Act. Acting upon the aforesaid reply the A.O issued notice to the assessee under Sec. 143(2) of the Act. 3. During the course of the assessment proceedings it was observed by the A.O that the assessee during the year under consideration was a co-owner of a property viz. Munshi Manor (earlier known as Gandhi Mansion ). On a perusal of the details, it was observed by the A.O that the assessee had claimed to have received an amount ₹ 17,012/- (1/2 share of rent) from the tenants of the aforesaid property viz. (i) Ashoka Guest House; (ii). Ravikanta Munshi; and (iii). Sanjay Munshi, HUF. After claiming the statutory deduction under Sec. 24(a) of the Act, the assessee had shown the balance income of ₹ 12,070/- under the head income from house property . As per the details gathered in the course of the assessment proceedings, it was observed by the A.O that the aforesaid property which comprised of ground plus four floors was situated in a posh locality and was during the year occupied by various tenants, other than the tenants, detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty Pvt. Ltd. as the ALV of the property under consideration. At the same time, observing, that part of the amount of ₹ 60,99,851/- received by M/s Alt Property Pvt. Ltd from its various tenants was also for the various services provided to and costs borne by it on behalf of the tenants, therefore, the A.O attributed 15% of the total receipts for rendering/bearing of the aforesaid services/charges. Accordingly, the A.O worked out the ALV of the property at ₹ 51,84,873/- [85% of ₹ 60,99,851]. As the assessee was a co-owner (holding 50% share), therefore, his share of ALV was worked out by the A.O at ₹ 25,92,436/-. As such, the A.O after allowing the statutory deduction under Sec. 24(a) worked out the income of the assessee from house property at ₹ 18,14,705/-. 4. Aggrieved, the assessee inter alia on the aforesaid issue assailed the assessment order before the CIT(A). Observing, that no infirmity did arise from the working of the ALV of the aforesaid property by the A.O, the CIT(A) principally upheld the same. At the same time, the CIT(A) holding a conviction that 30% of the total rent received by M/s Alt Property P. Ltd. could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the property under consideration as a business centre could not have been adopted as the ALV of the said property; and (ii). that, the revenue had accepted the 50% share of the rental income in the case of the other co-owner viz. Shri. N.K Munshi and had not subjected the same to reassessment. In fact, the Tribunal in its aforesaid order had observed as under: 6. We have heard both the parties and perused the orders of the Revenue Authorities as well as the relevant material placed before us. On perusal of the facts, we find, the case of the Revenue, in principle, is that the assessee s rental income of the property should be based on the earning of the APPL-company, which runs a business centre in the said premises and also other rentals from other tenants in it (ie Gandhi Mansion / Munshi Manor). But in practice, there are number of issues that were thrown to dust bin. (i) Principle of consistency:- Assessee partly owned the said Munshi Manor / Gandhi Mansion for many years and the Revenue has been accepting the claim of assessee qua the rateable rental value of the buildings without any disturbances. Details are already discussed in the portion of the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tainable. We find, the AO / CIT (A) has allowed certain percentage of business income of the APPL as expenses and allowed the same before taxing the rental income in the hands of the assessee. As such, AO / CIT (A) failed to justify the said percentage with any data or comparable cases. Whole of this exercise of the officers lack the strength of the Statute or the judicial precedents and it is a case of adhocisam. The same is unacceptable and unsustainable. Further, the Apex Court in the case of M/s. Chennai Properties Investments Ltd, Chennai vs. CIT in Civil Appeal No. 4494 OF 2004, dated April 09, 2015 held that the object of the company matters so far as the head of income is concerned. AO cannot alter the business income to property income and cannot alter the company status to AOP or otherwise, whimsically, without making out the good case with evidence. The conclusions of the AO / CIT (A), when unsupported by the evidence, become mere opinions and surmises. Such mere opinions do not constitute validity legally. 9. Thus, in our view, the conclusions drawn by the AO / CIT (A) in the assessment order and CIT (A) order are unsustainable in law. Accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Not following the order ITA No. 2981/M/2015 dt. 03.01.2017 of the Hon'ble Tribunal in the Assessee's own case for AY 2007-08. 3. Ignoring that the said order ITA No. 2981/M/2015 dt 03.01.2017 was followed by the Ld CIT(A)- 10 for the A.Ys. 2009-10 and 2010-11 who deleted the additions made by the Ld AO. 4. Ignoring that the said order ITA No. 2981/M/2015 dt. 03.01.2017 that was followed by the Ld CIT(A)-10 for the A.Y's 2009-10 and 2010-11 became final as they were not challenged in appeal at the Hon'ble High Court or at the Hon'ble ITAT. 5. Failing to follow not only the Rule of Consistency but also the rule of judicial hierarchy. 6. Instead of Quashing the order of re-assessment as it was not based on any new tangible material, but, as recorded in the reasons for re-opening, merely On perusal of the computation of income and TDS statement for AY. 2011-12.......... , i.e. facts that were already very much on record. 7. He failed to consider that the re-assessment order was merely a reappraisal of the details that were already filed on record. 10. Briefly stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be taken at ₹ 64,15,059/-. In his reply the assessee tried to impress upon the A.O that there was no justification in dislodging the income that was reflected by him under the head income from house property . However, the A.O declined to accept the aforesaid claim of the assessee. As such, the A.O after attributing 15% of the rent received by M/s Alt Properties P. Ltd. to the services which were rendered to and charges borne on behalf of the tenants, worked out the ALV of the property at ₹ 54,52,800/- (85% of ₹ 64,15,059/- ). Accordingly, the A.O determined the ALV of the property for the year under consideration at ₹ 1,53,52,800/- viz. [(i). ALV for the period 01.04.2010 to 30.09.2010 : ₹ 54,52,800/- (+) (ii). Rent received from M/s Mapletree Property Pvt. Ltd. for the period 01.10.2010 to 31.03.2011S: ₹ 99,00,000/-]. 13. Further, it was observed by the A.O that the assessee had claimed deduction of interest paid u/s 24 of ₹ 47,65,420/- and loan processing fee of ₹ 4,47,500/-. On a perusal of the details, it was observed by the A.O that the interest bearing funds were utilised by the assessee for giving deposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the reason, that as the same was not based on any new tangible material, therefore, the proceedings which therein followed were devoid and bereft of any force of law. It was the claim of the ld. A.R that the case of the assesee was reopened on the basis of a mere reappraisal of the facts which were already available on record and not on the basis of any fresh material. The ld. A.R drawing our attention to the reasons to believe submitted that the fact that the TDS statement which reflected a rental receipt of ₹ 1,35,32,274/- as against ₹ 99,34,023/- already formed part of the record and was not in the nature of fresh tangible material. Apart from that, it was submitted by the ld. A.R that as no addition was made by the A.O in respect of the issue on which the case of the assessee was reopened, therefore, the reopening was in itself bad and could not be sustained. On merits, it was averred by the ld. A.R that as regards the substitution of the rental receipts of M/s Alt Property P. Ltd for the period 01.04.2010 to 30.09.2010 as the ALV of the property under consideration viz. Munshi Manor , the same was squarely covered by the order of the Tribunal in the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 148 of the Act, dated 26.09.2013 was issued to the assessee by the A.O. On a perusal of the reasons to believe on the basis of which the case of the assessee was reopened by the A.O, we find that the same read as under: The assessee has filed Return of Income for A.Y. 2011-12 on 28.07.2011 declaring total income of ₹ 13,90,598/-. The return was processed u/s. 143(1) on 24.09.2011. On perusal of the computation of income and TDS statement for A.Y. 2011-12, it is noticed that the assessee has declared receipt of rent at ₹ 99,34,023/-. However, on going through the TDS statement for which TDS has been claimed, the amount credited by the deductor towards payment of rent amounts to ₹ 1,35,32,274/-. 2. Hence, I have reason to believe that the income to the tune of ₹ 35,98,251/ - has escaped assessment within the meaning of sect ion 147 of the I.T. Act. The case of the assessee for A.Y. 2011-12 is, therefore, reopened u/ s. 147 and Notice u/ s. 149 is issued herewith. Sd/- DCIT-5(1), Mumbai 19. However, as can be gathered from a perusal of the assessment order passed by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argeable to tax had escaped assessment for any assessment year, the A.O may assess or reassess such income and also any other income chargeable to tax which comes to his notice subsequently during the proceedings as having escaped assessment. In our considered view, the words and also are used in cumulative and conjunctive sense. Although the Explanation 3 has been made available on the statute by the legislature in all its wisdom vide the Finance Act (No.2) of 2009, however, the same does in no manner override the necessity of fulfilling the conditions set out in the substantive part of Sec.147 of the Act. As such, if the A.O assesses or re-assesses the income of the assessee which had escaped assessment and had formed the very basis for reopening the case of the assessee, he can also assess or re-assess any other income which had escaped assessment and which comes to his notice during the course of the proceedings. However, if after issuing a notice under Sec. 148, the A.O does not assess or re-assess such income which had initially formed a reason to believe that the income of the assessee had escaped assessment, it would not be open for him to independent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guage used in s. 147(1) and on the basis of the precedent on the subject. We agree with the submissions which has been urged on behalf of the assessee that s. 147(1) as it stands postulates that upon the formation of a reason to believe that income chargeable to tax has escaped assessment for any assessment year, the AO may assess or reassess such income and also any other income chargeable to tax which comes to his notice subsequently during the proceedings as having escaped assessment. The words and also are used in a cumulative and conjunctive sense. To read these words as being in the alternative would be to rewrite the language used by Parliament. Our view has been supported by the background which led to the insertion of Expln. 3 to s. 147. Parliament must be regarded as being aware of the interpretation that was placed on the words and also by the Rajasthan High Court in Shri Ram Singh (supra). Parliament has not taken away the basis of that decision. While it is open to Parliament, having regard to the plenitude of its legislative powers to do so, the provisions of s. 147(1) as they stood after the amendment of 1st April, 1989 continue to hold the field. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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