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TMI Blog2024 (10) TMI 882X X X X Extracts X X X X X X X X Extracts X X X X ..... (1), the case was taken up for scrutiny and assessment order u/s. 143(3) was completed on 29.12.2009 by making an addition of difference in lodge and club house expenses of Rs. 29,06,359/- and Income from other sources of Rs. 1,55,65,851/- towards interest on fixed deposit. The order of the AO was challenged before the ld.CIT(A) and the Ld.CIT(A) passed an order on 28/03/2012 by partly allowing the assessee's appeal. 3. Meanwhile, the AO issued a notice u/s. 148 dated 20.04.2011 for reopening the assessment. The assessee filed return in pursuant to the above notice. The reason for reopening was furnished vide their letter dated 30.05.2011, which reads as under: "It was seen from the income and expenditure account and the Schedule VIII to the balance sheet that you are in receipt of interest income of Rs. 1,55,65,852/-. However, in the computation of taxable income, mutuality income / loss alone has been separately dealt with and interest income has been made part of the racing operations. Infact the interest income has to be dealt under the head income from other sources and brought to tax apart from that the profit and account shows a lease rent of Rs. 3.90 crores which does no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me has been treated as 'income from other sources' and reduced from profits. The very same issue has been subject matter of appeal against the order u/s. 143(3) of the Act. The CIT(A) in his order dated 28.03.2012 in Para 8 has held as under: 8. The additional grounds relates to double addition of interest income of Rs. 1,55,65,851/-, During appeal the appellant raised additional grounds which are forwarded to the AO on 28.11.2011 to examine, its admissibility and furnish a report. The AO in the remand report after examining the issue vide letter dated 15.02.2012 submitted that: "On verifying the facts from the balance sheet, statement of computation of income and the assessment order for the AY 2007-08, it is seen that as per the balance sheet, the interest income received has been considered as 'other sources and business loss of Rs. 2,32,12,010/- has been arrived in the Profit and Loss Account. In the computation statement, as per the Income Tax Act, 1961, the assessee has started the computation with the business income of the same amount (Rs.2,32,12,010/-) and after making, adjustments as per the Income Tax Act, 1961 the assessee arrived at a loss of Rs. 56,73,976/-. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The second point in the reason for reopening is that the rental income of Rs. 3.90 Crores does not have the character of racing income or mutuality income and hence it has escaped assessment. The Assessee has considered the Racing income, interest income and the lease rental as their business income and has arrived at a net loss of Rs. 56,73,976/-. As mentioned, in the case of interest income, the rental income has also been taken into account while arriving at the net loss. As pointed out by the CIT(A) in his order dated 28.03.2012, in the appeal against the order of assessment u/s. 143(3) of the Act for the impugned Assessment year, in the case of interest income, if the lease rental of Rs. 3.90 Crores is to be assessed as 'income from other sources' (as it is lease of land only), the loss figure will correspondingly increase and if the lease rental is set off against such increased loss (in accordance with sec.71), the net loss figure will still be Rs. 56,73,976/-. Hence, the ld. Counsel pleaded that there is no escapement of income. The basic requirement of escapement of income is not met and hence the reopening on this point is also without jurisdiction. 10. The Learned Autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of Assessment merged with the order of CIT(A) on issues of treating interest income as 'income from other sources' and setting of loss against income from other sources has been decided by the CIT(A). Hence, the AO loses assumption of jurisdiction to reopen on issues decided by the ld.CIT(A). 11. In this view of the matter the ld.AR summarised that the reopening is without jurisdiction and there was no escapement of income, which was sought to be reassessed as per the reasons for reopening and therefore the reopening as invalid and the order of reassessment should be set aside. Further, in the course of reassessment proceedings, the AO had picked up two more issues. (1) the losses incurred by the Assessee is loss to which sec.74A applies and hence cannot be set off against other income and; (2) the long term lease deed dated 05.12.2006 is in fact a sale deed and assessed capital gains on the basis of deemed consideration at the guide line value. The Ld.AR further stated that it was held in the following decisions that the reasons mentioned in the reopening notice has to be read as it is. No additions and/or inferences are permissible. No amendment or substitution to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale. The deed provided for return of property after certain years. It is only a lease deed and Section 50C does not apply to a Lease deed. The Lessee referred the matter to Arbitration. Before the Arbitral Tribunal, the parties entered into a Memo of compromise on the basis of the very same land was transferred by a registered conveyance deed dated 13.04.2018 in favour of the Lessee. The Assessee has offered capital gains on sale of this property for the AY 2019-20. The Ld.CIT(A) has recognised this fact in Para 6.9.9 of his order. There cannot be two sales of the same property between the same parties. It is the sale deed executed on 13.04.2018 which is the proper sale of the property and not under the lease deed 20.12.2006. Under the circumstances it is not clear on what basis the AO and CIT(A) concluded that the sale was completed under the lease deed dated 20.12.2006. The terms of the lease deed clearly stipulated return of property on the termination of the lease. Hence, factually as well as legally, the Lease deed dated 20.12.2006 cannot be considered as a sale deed. The reliance placed by the revenue on the decision of the Apex Court in the case of R.K.Palshikar (HUF) v Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... review cannot be done in the garb of reopening the assessment. The concept of 'change of opinion' must be treated as an in-built test to check abuse of power by the Assessing Officer. The CBDT in Circular No. 549 dated 31 October 1989 provided that it was to allay the fears that the Assessing Officer shall reopen past assessments on mere change of opinion that the expression 'has reason to believe' was reintroduced in place of the words 'for reasons to be recorded by him in writing, is of the opinion' (by the Amending Act, 1989) in the then existing Section 147 of the Act. The Circular itself indicates that Legislature has never been the intention to permit the Assessing Officer to reopen an assessment on the basis of 'change of opinion'. Therefore, in the cases where an original assessment had taken place and the Assessing Officer had formed a particular view based on the available material, the Assessing Officer could not have validly reopened an assessment. In the present case, the AO has reopened the original assessment with no fresh tangible material but based on the material available in the assessment records which was also taken upto the CIT(A). Therefore, the action of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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