1
Popley Diamond and Gold Plaza Pvt Ltd
(Formerly known as
Sears Super Market Ltd)
ITA 5053 /M/2003
& 14 Other Group appeals
""
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "C", MUMBAI
. ,
,
BEFORE SHRI D KARUNAKARA RAO, ACCOUNTANT MEMBER
AND SHRI AMIT SHUKLA, JUDICIAL MEMBER
ITA No. : 5053 /Mum/2009
(Assessment years: 2002-03)
ITA No. : 5054/Mum/2009
(Assessment year: 2003-04)
ITA No. : 5055/Mum/2009
(Assessment year: 2004-05)
ITA No. : 5056/Mum/2009
(Assessment year: 2005-06)
ITA No. : 5057/Mum/2009
(Assessment year: 2006-07)
Popley Diamond and Gold Plaza Vs DCIT CC-9(3),
Pvt Ltd, (Formerly known as Sears Mumbai
Super Market Ltd)
188-A, Turner Road,
Bandra (West),
Mumbai -400 050
.:PAN : AAACS 5154 L
(Appellant) (Respondent)
Appellant by :
Mr Soli E. Dastur
Respondent by :
Ms Amrita Misra
ITA No. : 4895 /Mum/2009
(Assessment years: 2002-03)
ITA No. : 4896/Mum/2009
(Assessment year: 2003-04)
ITA No. : 4897/Mum/2009
(Assessment year: 2004-05)
ITA No. : 4898/Mum/2009
(Assessment year: 2005-06)
ITA No. : 4899/Mum/2009
(Assessment year: 2006-07)
ACIT CC-38, Vs Popley Diamond and Gold Plaza
Mumbai Pvt Ltd, (Formerly known as Sears
Super Market Ltd)
Mumbai -400 050
.:PAN : AAACS 5154 L
(Appellant) (Respondent)
Appellant by : Ms Amrita Misra
Respondent by : Mr Soli E Dastur
2
Popley Diamond and Gold Plaza Pvt Ltd
(Formerly known as
Sears Super Market Ltd)
ITA 5053 /M/2003
& 14 Other Group appeals
ITA No. : 3581/Mum/2012
(Assessment year: 2002-03)
ITA No. : 3582/Mum/2012
(Assessment year: 2003-04)
ITA No. : 3583/Mum/2012
(Assessment year: 2004-05)
ITA No. : 3584/Mum/2012
(Assessment year: 2005-06)
ITA No. : 3585/Mum/2012
(Assessment year: 2006-07)
DCIT (2), Vs Popley Diamond and Gold Plaza
Mumbai Pvt Ltd, (Formerly known as Sears
Super Market Ltd)
Mumbai -400 050
.:PAN : AAACS 5154 L
(Appellant) (Respondent)
Appellant by : Ms Amrita Misra
Respondent by : Mr Soli E Dastur
/Date of Hearing : 05-08-2015
/Date of Pronouncement : 12-08-2015
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 of penalty levied by the Assessing Officer
u/s 271(1)(c) in relation to the additions made in aforesaid
assessment years. Since the issues involved in all the appeals are
common arising out of identical set of facts, therefore, they were
heard together and are being disposed off by this consolidated
order for the sake of brevity.
2. To understand the implication of the facts and issues
involved, we shall take-up the cross appeals for the assessment
3
Popley Diamond and Gold Plaza Pvt Ltd
(Formerly known as
Sears Super Market Ltd)
ITA 5053 /M/2003
& 14 Other Group appeals
year 2002-03 being ITA 5053/Mum/2009 and 4895/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 Business" as returned by the Appellant.
3. The CIT(A) erred in computing the annual value of the
property at 8.5% of Rs. 15,48,76,529/- instead of
computing it at the municipal rateable 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 Rs. 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 Rs. 3,09,75,305/-
being 20% of the cost of investment of Rs.
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
4
Popley Diamond and Gold Plaza Pvt Ltd
(Formerly known as
Sears Super Market Ltd)
ITA 5053 /M/2003
& 14 Other Group appeals
the Assessing Officer after confronting the
assessee through show cause notice dated
14.11.2008, with comparable cases of Smt. Asha
Hampanwar 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
that in this year, the assessee has filed its return of income u/s
139(1) on 30.09.2002 declaring total loss of (-) Rs. 13,03,330/-.
The said return of income was duly processed vide intimation u/s
143(1) and was accepted as such as no notice u/s 143(2) was
issued. The assessment so completed had been sought to be
reopened by issuance of notice u/s 148 dated 18.11.2007 on the
following "reasons recorded":
"In this case, the return of income was furnished on 30.09.2012
declaring a loss of Rs. 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 Rs. 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 Rs. 16.07 crores from Shri Ramchandra K. Popley, director
of assessee-company. As the records indicate, Shri Suraj
Ramchandra Popley, son of the said director is one of the partners
of M/s. Popley Gold Plaza, the lessee firm. The assessee has
treated the letting out of the property as a business thereby
claiming depreciation etc. This claim may not be acceptable.
It is further seen that the so called compensation per annum of Rs.3
lac is being received at this rate right from assessment year 2001-
02 or so. The loan advanced by the director is also continuing from
A.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 Rs. 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
5
Popley Diamond and Gold Plaza Pvt Ltd
(Formerly known as
Sears Super Market Ltd)
ITA 5053 /M/2003
& 14 Other Group appeals
interest is charged on the whopping amount of Rs.16.07 crores. If
interest is charged say at the rate of 12%, the interest amount will
be about Rs.1.93 crores which would have been payable by the
assessee per annum, whereas the assessee received only a very
meager amount of Rs. 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.
In view of the above, I have reason to believe that income
chargeable to tax as escaped assessment within the meaning of
provisions of section 147 of the I.T. Act, inasmuch as the income
chargeable to tax has not been correctly shown nor assessed
correctly. Accordingly, the proposals are submitted requesting
approval of the Addl.CIT, Rg.9(3) under section 151(2) of the J. Act.
to reopen the assessment u/s.147 of the I.T. Act for AY. 2002-03".
6. From the perusal of the "reasons recorded", Mr. Dastur
submitted that it can be very well seen that there is 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 letting out the business premises. Since
then the assessee has been showing lease income from letting out
of its business premises (along with furnitures, fixtures etc.) as
"business income". The said receipts has been accepted by the
Department as `business income' even under the scrutiny
proceedings u/s 143(3). He pointed out that in assessment year
2001-02, during the course of scrutiny proceedings, Assessing
Officer had raised specific query not only with regard to the
unsecured loan received from Director of the assessee company
6
Popley Diamond and Gold Plaza Pvt Ltd
(Formerly known as
Sears Super Market Ltd)
ITA 5053 /M/2003
& 14 Other Group appeals
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 completed u/s 143(3) accepting the assessee's
computation of business income. He further pointed out that in the
AY 2001-02, the assessment so completed as above was reopened
precisely on same `reasons', however, from the stage of the
Tribunal, the action taken u/s 147 vide notice issued u/s 148 has
been struck down on the ground, 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 any "reason to
7
Popley Diamond and Gold Plaza Pvt Ltd
(Formerly known as
Sears Super Market Ltd)
ITA 5053 /M/2003
& 14 Other Group appeals
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 where the assessments have been
completed u/s143(1), the reopening u/s 147 cannot be done
unless there is some tangible material coming on record or any
information coming into possession of the Assessing Officer to
entertain, `reason to believe' for reopening the assessment u/s 147.
The list of such decision relied upon by him are as under:
(i) Gujarat High Court in the case of Inductotherm (India) Pvt.
Ltd vs CIT, Civil Application No. 858 of 2006 order dated
06.08.2012. The Hon'ble High Court after 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 assessment, otherwise can
not.
(ii) Delhi High Court decision in the case of CIT vs Orient Craft
Ltd reported in [2007] 215 Taxman 28 wherein, the Hon'ble
High Court concluded that even if the return has been
accepted u/s 143(1), the Assessing Officer cannot reopen the
case u/s 147 unless some tangible material comes into
possession of the Assessing Officer subsequent to the issue
8
Popley Diamond and Gold Plaza Pvt Ltd
(Formerly known as
Sears Super Market Ltd)
ITA 5053 /M/2003
& 14 Other Group appeals
of intimation u/s 143(1). In absence of any such material
available with the Assessing Officer, requisite reason to
believe 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
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 Rs. 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 Rs. 3 lakhs per
9
Popley Diamond and Gold Plaza Pvt Ltd
(Formerly known as
Sears Super Market Ltd)
ITA 5053 /M/2003
& 14 Other Group appeals
annum was far less than the market value. Not only that, the
assessee had also claimed depreciation on the property which was
let out. Thus, the compensation of Rs. 3 lakhs received per annum
cannot be held to be reasonable compensation at all and this fact
itself is sufficient that it requires proper scrutiny of the case. The
Assessing Officer has recorded the detailed reasons 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 issue
raised before us, the brief background and facts of the case are
being reiterated. The assessee company owns a premise (building)
along with furnitures fixtures, equipments and plants. Said
building along with its fixtures and furnitures and plants is
appearing in the Balance sheet under the schedule of fixed assets.
It had entered into a lease agreement dated 01.04.1999 with its
sister concern `M/s Popley Gold Plaza' for letting out the said
business premises/building along with the furnitures, fixtures and
equipments for a compensation of Rs. 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 143(3). Later
on, such an assessment was reopened u/s 148 on the reason that
the compensation of Rs. 3 lakhs received by the assessee from
10
Popley Diamond and Gold Plaza Pvt Ltd
(Formerly known as
Sears Super Market Ltd)
ITA 5053 /M/2003
& 14 Other Group appeals
letting out of the business premises should be taxed/assessed as
"income from house property" and such "reasons" were identically
worded with the reasons recorded for the impugned assessment
year. However, the Tribunal vide order dated 28.05.2014 had
quashed the proceedings u/s 148 as invalid firstly, on the ground
that there was no failure on the 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 Rs.
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 Rs. 3 lakhs per annum is
insignificant as compared to the book value of the leased premises,
which is more than Rs. 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
Investment and Trading Co P Ltd.
10. From the perusal of the "reasons recorded", it is seen that,
firstly, the Assessing Officer himself has noted the fact that the fact
11
Popley Diamond and Gold Plaza Pvt Ltd
(Formerly known as
Sears Super Market Ltd)
ITA 5053 /M/2003
& 14 Other Group appeals
of compensation amount of Rs. 3,00,000/- from let out of the
premise is coming from the earlier assessment years. Secondly,
there is no whisper about any fresh material or information coming
on record to suggest even remotely that this compensation received
is not correct or that income shown should be assessed as income
from house property. 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 can it
be held that Assessing Officer can entertain to `reason to believe'
for reopening the case u/s 147 in this year. The main plank of the
argument of Ld. DR is that the return of income filed by the
assessee for the impugned assessment year was accepted u/s
143(1), without any scrutiny and, therefore, the Assessing Officer
was justified in entertaining `reason to believe' for reopening the
case u/s 147.
11. The Statute has given sufficient power to the Assessing
Officer for reopening the assessment 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 examined whenever the reopening
u/s 147 is challenged. It is a trite law that the `reason to believe'
12
Popley Diamond and Gold Plaza Pvt Ltd
(Formerly known as
Sears Super Market Ltd)
ITA 5053 /M/2003
& 14 Other Group appeals
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,
then lease income has to be necessarily taxed as `income from
house property'. Such income can be taxed either as `income from
other sources'; or as business income; or as income from house
property, depending upon the facts and circumstances of 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 that the ratio of the
Hon'ble Supreme Court has been explained by various High Courts
including that of the Gujarat High Court in the case of
13
Popley Diamond and Gold Plaza Pvt Ltd
(Formerly known as
Sears Super Market Ltd)
ITA 5053 /M/2003
& 14 Other Group appeals
Inductotherm (India) Pvt. Ltd (supra) and Delhi High Court
decision in the case of CIT vs Orient Craft Ltd (supra). The Hon'ble
Supreme Court does not envisage that the "reason to believe"
entertained by the Assessing Officer cannot be examined or can be
examined sans any material coming on record. Thus, the decision
of the Hon'ble Supreme Court will not apply 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 dismissed as
such.
13. As regards the issue raised in the additional ground, the
same are though admitted, however, are not adjudicated separately
in view of our conclusion that entire assessment order itself is bad
in law and has been quashed.
14. Similarly, the issues raised in the departmental appeal also
have become purely academic in view of the above finding and
same are treated as dismissed as infructuous.
15. As admitted by both the parties, similar "reasons" have been
recorded by the Assessing 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
14
Popley Diamond and Gold Plaza Pvt Ltd
(Formerly known as
Sears Super Market Ltd)
ITA 5053 /M/2003
& 14 Other Group appeals
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 Rs. 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 or not.
Without prejudice to the above, as per sec. 22 of the I.T. Act, the
income derived from the above said property is assessable under
the head `Income from House Property' and not business income, as
claimed by the assessee.
Further, the compensation received by the assessee for letting an
entire building with furniture and fixture worth Rs. 13.69 crores, is
merely Rs. 3 lakhs per annum, which is when compared with other
cases found to be very low. Thus, the provisions of sec. 23(1)(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 Rs. 50,000/- per month for a property (411.462 sq. ft.) worth Rs.
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
15
Popley Diamond and Gold Plaza Pvt Ltd
(Formerly known as
Sears Super Market Ltd)
ITA 5053 /M/2003
& 14 Other Group appeals
should have been Rs. 3.91 crore per annum (approx.). Of course,
considering the market trend, there can be an increase &/or
decrease of some percentage of rent, which should be taken into
account. However, the assessee has offered merely Rs. 3 lakhs.
Besides the above, it is seen from the depreciation chart, the
assessee has sold for a sum of Rs. 50.75 lakhs, out of the block of
building (Building-2) and incurred loss of Rs. 18.04 lakhs. The WDV
as on 31.3.2004 comes to Rs. 68.79 lakhs. No supporting enclosed
with the return, which is also requires verification.
I have therefore, reason to believe that the income has escaped to
the tune of Rs. 4.10 crore (approx) with the meaning of sec. 147 of
the I.T. Act, 1961. Tax effect involved Rs. 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 believe" for reopening the
assessment u/s 147. All his arguments and the arguments of the
Ld. DR for this year also are the same.
18. After considering the aforesaid "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,
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 Rs. 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
16
Popley Diamond and Gold Plaza Pvt Ltd
(Formerly known as
Sears Super Market Ltd)
ITA 5053 /M/2003
& 14 Other Group appeals
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 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
recorded" is bad in law and consequentially the proceedings
initiated vide notices u/s 148 are quashed. Thus, the appeal of the
assessee for the assessment year 2005-06 is treated as allowed,
whereas the revenue's appeal for the same year is treated as
dismissed as the same has become purely academic in view of our
aforesaid finding.
19. Similarly, in the assessment year 2006-07 as discussed
above the same reasons have been recorded as in AY 2005-06,
therefore, the finding given above will apply mutatis mutandis for
AY 2006-07 also. Consequently, the reopening u/s 147 for AY
2006-07 are hereby quashed.
17
Popley Diamond and Gold Plaza Pvt Ltd
(Formerly known as
Sears Super Market Ltd)
ITA 5053 /M/2003
& 14 Other Group appeals
20. In the result, appeal of the assessee is allowed whereas the
revenue's appeal is dismissed.
21. The revenue has preferred appeal against deletion of penalty
u/s 271(1)(c) by the CIT(A) in respect of the additions made in the
aforesaid assessment years. Since we have already quashed the
assessment orders for the all the impugned assessment years
2002-03 to 2006-07 and consequently additions also get deleted,
therefore, the penalty levied u/s 271(1)(c) does not have any legs to
stand.
22. Accordingly, all the revenue's appeals in the penalty
proceedings are dismissed.
23. In the result, appeal of the assessee for the A.Ys. 2002-03,
2003-04, 2004-05, 2005-06 & 2006-07 are allowed, whereas the
departmental appeal for the above assessment years for the
quantum as well as penalty stands dismissed.
Order pronounced in the open court on 12th August, 2015.
Sd/- Sd/-
(. ) ( )
(D KARUNAKARA RAO) (AMIT SHUKLA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Date: 12th August, 2015
/Copy to:-
1) /The Appellant.
2) /The Respondent.
3) The CIT(A) -41, Mumbai
4) The CITCentral III, Mumbai.
5) "", , /
The D.R. "C" Bench, Mumbai.
18
Popley Diamond and Gold Plaza Pvt Ltd
(Formerly known as
Sears Super Market Ltd)
ITA 5053 /M/2003
& 14 Other Group appeals
6)
Copy to Guard File.
/By Order
/ / True Copy / /
/
,
Dy./Asstt. Registrar
I.T.A.T., Mumbai
* ..
*Chavan, Sr.PS
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