Income Tax Appellate Tribunal - Ahmedabad
Dy.Cit.,(Osd)-I,Circle-4,, ... vs J.P.Infrastructure Pvt.Ltd., ... on 18 November, 2016
आयकर अपीलीय अिधकरण,
अिधकरण अहमदाबाद यायपीठ 'डी
डी'
डी अहमदाबाद।
IN THE INCOME TAX APPELLATE TRIBUNAL
"D" BENCH, AHMEDABAD
BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER
AND SHRI S.S. GODARA, JUDICIAL MEMBER
आयकर अपील सं./ ITA No. 1760/Ahd/2012
And
CO No.159/Ahd/2012
नधारण वष/Assessment Year: 2007-08
DCIT (OSD)-I, Vs. J.P. Infrastructure Pvt Ltd,
Circle-4, Iscon House, B/h. City Bank,
Ahmedabad CG Road, Ahmedabad
PAN : AABCJ 4936 C
अपीलाथ / (Appellant) यथ / (Respondent) &
Cross-Objector
Revenue by : Shri Sita Ram Meena, Sr DR
Assessee by : Shri M.J. Shah, AR
सुनवाई क तार ख/ Dateof Hearing : 17/11/2016
घोषणा क तार ख / Date of Pronouncement: 18/11/2016
आदे श/O R D E R
PER N.K. BILLAIYA, ACCOUNTANT MEMBER:
ITA No. 1760/Ahd/2012 and CO No.159/Ahd/2012 are appeal of the
Revenue and Cross-objection of the assessee respectively directed against the very same order of the CIT(A)-VIII, Ahmedabad dated 10.05.2012 pertaining to AY 2007-08.
2. At the very outset, the Counsel for the assessee took an additional plea challenging the jurisdiction of the Assessing Officer in issuing notice u/s 148 of the Act. It is the say of the Counsel that the issue challenging the jurisdiction of the Assessing Officer can be raised at this stage even if the same was not raised before the lower authorities.
3. We heard the ld. Counsel at length on this additional plea. The ld. DR simply relied upon the findings of the Assessing Officer.
ITA No. 1760 & CO 159/Ahd/2012 DCIT vs. JP Infrastructure Pvt Ltd AY 2007-2008 2
4. After giving a thoughtful consideration to the additional plea taken by the ld. Counsel, we find that objection to jurisdiction, even if taken for the first time before the Tribunal, is permissible. Our view is fortified by the decision of the Hon'ble jurisdictional High Court of Gujarat given in the case of P.V. Doshi Vs. CIT, reported in (1978) 113 ITR 22 (Guj.), which has been followed by the Co-ordinate Bench in the case of Shrimant F.P. Gaekwad through legal heir Smt. Mrinalini Devi Puar, reported in [2010] 3 ITR (Trib) 476 (Ahd). The relevant findings of the Co-ordinate Bench read as under:-
""11. We find that this issue of admissibility of a jurisdictional issue for the first time even though the same was not raised at the stage of remand by the Tribunal, the assessee can raise this issue, as held by the Hon'ble jurisdictional High Court in the case of P.V. Doshi vs. CIT (1978) 113 ITR 22 (Guj), wherein it is held as under (from headnote) :
"Held, that as a jurisdictional provision which was mandatory and enacted in public interest could never be waived and the want of jurisdiction was discovered by the AAC, there was no question of waiver by the assessee. No question of finality of the remand order of the Tribunal could arise because the mandatory conditions for founding jurisdiction for initiating reassessment proceedings had not been fulfilled. The order of reassessment was, therefore, not valid."
5. In the light of the aforementioned judicial rulings, we proceed by admitting the additional issue raised by the ld. Counsel.
6. We find that the reasons recorded for reopening the assessment are as follows:-
"1. The assessee is engaged in the business of builder - construction of immovable property, development and sale of residential plots. The assessee has filed return of income of Rs.21,94,16,8687/. The total income is determined at Rs.21,99,31,210/- for the year 2007-08. The assessee company declared total income of Rs.21,94,16,868/- for the year 2007-08. The total income includes Rs.1,03,81,135/- as income from house property on account of leased out area of Iscon Mall, Rajkot, on which 30% standard deduction of Rs31,14.341/- was claimed under section 24 of the Act. Audit scrutiny of the ITA No. 1760 & CO 159/Ahd/2012 DCIT vs. JP Infrastructure Pvt Ltd AY 2007-2008 3 records revealed that the construction / development of the Iscon Mall, Rajkot had been carried out by the assessee from the PY 2005-06 and completed in PY 2006-07. The construction cost of Rs.4,37,68,672/- incurred during AY 2006-07 was shown WIP as on 31/3/2006. During the AY 2006-
07 and 2007-08 the assessee had sold 78975.7 sq.ft area of the Mall for consideration of Rs.15,68,75,200/-. Remaining unsold area of the Mall (17658.90 sq.ft.) shown as inventories (stock in trade) as on 31.3.2007 which was valued at Rs.2,90,39,545/-.Thus, it signified that the assessee company had leased out the unsold area of the ISCON MALL during the year which was actually held under 'stock-in-trade'. Therefore, in view of the judgment in case of M/s. Neha Builders Pvt Ltd, the income of Rs. 1,03,81,135/- earned by leasing of assets held under stock-in-trade was required to be treated as 'Business Income'. Therefore, the standard deduction of Rs.31,14,341/- allowed u/s 24 of the Act, was irregular and required to be disallowed.
Therefore I have reason to believe that for the relevant assessment year the above income chargeable to tax has escaped from assessment within the meaning of section 147 of the Act and the case is fit for issue of notice u/s 148 of the Income Tax Act, 1961.
2. As per Section 14A of the income-tax Act, 1961 deduction is not admissible in respect of expenditure incurred by the assessee in relation to income which does not form pan of the total income. Further, Section 10(34) of the Act provided that dividend income is not includible in the total income. Expenditure incurred by way of interest etc. to earn dividend income is therefore required to be disallowed under Rule 8D of the Income-tax Rules. The Mumbai ITAT (Special Branch) in case of Daga Capital has held that Rule 8D if the Income-tax Rules would have retrospective operation.
It was seen from assessment records of the assessee that assessee incurred interest expenditure to the extent of Rs.5,03,32,591/- during the F.Y.2006-
07. The assessee earned dividend income to the tune of Rs.21,336/- in the F.Y.06-07. However, proportionate interest paid during the year was not disallowed in view of the provisions cited above. Due to this income of the assessee was assessed less to the extent of Rs.2,15,14,609/- with consequent short levy of tax and interest to the extent of Rs.96,31,617/-.
Therefore I have reason to believe that for the relevant assessment year, the above income chargeable to tax has escaped from assessment within the meaning of section 147 of the Act and the case is fit for issue of notice u/s 148 of the Income Tax act, 1961."
7. We find that the following queries were raised during the course of the original assessment proceedings:-
ITA No. 1760 & CO 159/Ahd/2012 DCIT vs. JP Infrastructure Pvt Ltd AY 2007-2008 4 "4. Details of exempt income. Whether any expenses have been claimed in respect of any exempt income. If yes then submit complete details of the same."
22. Clarification regarding whether any interest bearing fund has been derived for non business purposes. If yes then party wise, amount wise and date wise details of such diversions of funds, alongwith the rate of interest and quantum of interest received from such persons.
24. Whether any expenses have been claimed in respect of any exempt income. If yes then submit the complete details of same.
7. Explain why the rental income should not be treated as income from House Property and give details of all the expenses relatable to lease rental."
7.1 To these specific queries, the relevant replies of the assessee were as under:-
"12. Whether any expenses have been claimed in respect of any exempt income. If yes then submit complete details of the same. (Para 24 of Annexure to notice) In this regard during the year exempt income claimed in computation of income share profit from firm and mutual fund dividend income details are as under:-
SN Nature of Income Amount Remarks
1 5% share of profit from 727585 Contra confirmation
partnership firm M/s. JP with ITR ackn
Construction Exhibit-13
2 Mutual Fund Dividend 21336 A/c copy Exhibit-14
In this regard no any expenditure claimed to earn exempt income"
"14. Your goodself has called for to explain why the rental income should not be treated as income from House Property and give details of all the expenses relatable to lease rental ( Para 07 of Annexure to notice dated 08.10.09) In this regard, it is furnished that rent is received from brands for providing shops / showrooms in ISCON Mall, Rajkot, part of rent of is transferred to the investors, who ultimately buys shops / showrooms. The balance rent of shops / showrooms of Rs.103,81,135/- is accounted as rent income and treated as income from house property, as called for by your goodself. A/c copy of rent income is furnished Exh.10."
ITA No. 1760 & CO 159/Ahd/2012 DCIT vs. JP Infrastructure Pvt Ltd AY 2007-2008 5
8. We further find that the specific replies of the assessee were supported by the respective copies of the ledger account which are exhibited in the paper-book at pages 102 to 126 and 173 to 184.
9. In our considered opinion, if specific queries were raised during the course of original assessment proceedings to which specific replies were filed by the assessee supported by relevant documentary evidences, issuing notice u/s 148 to re-open the assessment on the very same issues considered at the time of the original assessment proceedings amount to change of opinion. Our view is fortified by the decision of Hon'ble Supreme Court in the case of CIT vs. Kelvinator of India Ltd, reported in [2010] 320 ITR 651 (SC), wherein the Hon'ble Apex Court has held as under:-
"4. On going through the changes, quoted above, made to s. 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, reopening could be done under above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the AO to make a back assessment, but in s. 147 of the Act (w.e.f. 1st April, 1989), they are given a go by and only one condition has remained, viz., that where the AO has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post 1st April, 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, s. 147 would give arbitrary powers to the AO to reopen assessments on the basis of "mere change of opinion", which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The AO has no power to review; he has the power to reassess. But reassessment has to be based on fulfillment of certain pre-condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the AO. Hence, after 1st April, 1989, AO has power to reopen, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to s. 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words "reason to believe" but also inserted the word "opinion" in s. 147 of the Act. However, on receipt of representations from the companies against omission of the ITA No. 1760 & CO 159/Ahd/2012 DCIT vs. JP Infrastructure Pvt Ltd AY 2007-2008 6 words "reason to believe", Parliament re-introduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the AO."
10. Considering the facts in totality in the light of the ratio laid down by the Hon'ble Supreme Court (supra), we find that the notice issued u/s 148 of the Act was without jurisdiction and deserves to be quashed. Consequently, the assessment made u/s 143(3) r.w.s. 147 of the Act vide order dated 27.12.2011 is quashed.
11. Since we have quashed the assessment order, we do not find it necessary to delve into the merits of the case.
12. In the result, appeal filed by the Revenue is dismissed and the Cross- objection filed by the assessee is also dismissed.
Order pronounced in the Court on 18th November, 2016 at Ahmedabad.
Sd/- Sd/-
(S.S. GODARA) (N.K. BILLAIYA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad; Dated 18/11/2016
Biju T., Sr. PS
आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. संबं!धत आयकर आयु#त / Concerned CIT
4. आयकर आयु#त(अपील) / The CIT(A)
5. &वभागीय त न!ध, आयकर अपील य अ!धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड फाईल / Guard file.
/ BY ORDER,
आदे शानुसार
TRUE COPY
उप/सहायक पंजीकार (Dy./Asstt.Registrar)
/ ITAT, Ahmedabad
आयकर अपील#य अ$धकरण, अहमदाबाद