Income Tax Appellate Tribunal - Mumbai
Surya Darshan Co-Op. Hsg. Soc. Ltd., ... vs Assessee on 28 January, 2014
अिधकरण मुंबई Ûयायपीठ 'एफ' मुंबई ।
आयकर अपीलीय अिधकरण,
IN THE INCOME TAX APPELLATE TRIBUNAL " F" BENCH, MUMBAI
सव[ौी ǒवजय पाल राव, Ûयाियक सदःय एवं , नरे Ûि कुमार ǒबãलैáया, लेखा सदःय के सम¢
BEFORE SHRI VIJAY PAL RAO , JM AND SHRI N.K. BILLAIYA, AM
आयकर अपील सं./I.T.A. No.4955/Mum/2005
िनधा[रण वष[ / Assessment Year : 2000-01
(िनधा[
Suryadarshan Co. Op. Hsg. बनाम/ बनाम The ITO-16(1)(2),
Soc. Ltd., Mumbai
Vs.
44/50, Walkeshwar Road,
Walkeshwar,
Mumbai-400 006
ःथायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AAAAS 5676B
(अपीलाथȸ /Appellant) .. (ू×यथȸ / Respondent)
अपीलाथȸ ओर से/ Appellant by: Shri D.K. Doctor
Shri Jignesh R. Shah
ू×यथȸ कȧ ओर से/Respondent by: Shri O.P.Singh
सुनवाई कȧ तारȣख / Date of Hearing :28.01.2014
घोषणा कȧ तारȣख /Date of Pronouncement :31.01.2014
आदे श / O R D E R
PER N.K. BILLAIYA, AM:
This appeal by the assessee is directed against the order of the Ld. CIT(A)-XVI, Mumbai dt.21.04.2005 pertaining to A.Y. 2000-01.
2. The assessee has raised 9 grounds of appeal. At the very outset, the Ld. Counsel for the assessee stated that he is not pressing ground Nos. 2,3 & 4. These grounds are accordingly dismissed as not pressed.
2 ITA No. 4955/M/053. The grievance of the assessee revolves around two issues. First grievance relates to the reopening of the assessment in the absence of new material u/s. 147 of the Act and without prejudice to this grievance, the second grievance relates to the merits of the case.
4. In this case, the original assessment was made u/s. 143(1) of the Act. Subsequently, the said assessment was reopened u/s. 147 of the Act and accordingly statutory notices were issued and served upon the assessee. During the year under consideration, the assessee has received Hoarding charges of Rs. 14,70,000/-. It was explained that the advertising were displayed on the terrace, hoardings were put on the iron fabrication with the iron skeleton which is put on the pillar erected/constructed on the terrace of the society building. Because of the load of these pillars, there were cracks on the plaster as well as structures of the building because of which the building became very weak therefore structural repairs were carried out as it was necessary to keep the building in shape and strength and also to earn advertisement revenue. Since the assessment was not properly attended by the assessee, the AO proceeded u/s. 144 of the Act and completed the assessment by making an addition of Rs. 14.70 lakhs on account of hoarding charges.
5. The assessee carried the matter before the Ld. CIT(A). The assessee explained the reasons for the construction of six concrete foundations erected on the top of the terrace. Some structural changes were also made in the building to avoid any further damages because of the heavy weight of these concrete foundations. It was contended that because of this the assessee has claimed expenditure of Rs. 18,80,664/- incurred on these structural changes, the assessee set off this expenditure 3 ITA No. 4955/M/05 against the income from hoarding, therefore no income was shown by the assessee in the return from hoarding.
5.1. Before the Ld. CIT(A), the assessee filed details of the expenses. The Ld. CIT(A) forwarded the details to the AO for his comments. The AO sent his remand report vide letter dt. 4.4.2005. After considering the facts and the submissions and the remand report, the Ld. CIT(A) observed that the hoarding income received by the assessee to the tune of Rs. 14.70 lakhs has been assessed as income from other sources. The Ld. CIT(A) further observed that any expenditure to become eligible for deduction from income assessed under the head "income from other sources has to pass two tests - (i) it should be laid out or expended wholly and exclusively for the purpose of making such income and (ii) it should not be in the nature of capital expenditure. The Ld. CIT(A) was convinced that the expenditure incurred by the assessee to the tune of Rs. 18.80 lakhs has strengthen the building which is of enduring in nature. The Ld. CIT(A) further observed that by incurring such expenditure, the assessee was able to enter into a contract with M/s Orion Advertisers for a period of 5 years and thereby earn income from hoarding in the next 5 years. Keeping in view the enduring nature of the benefit derived by the assessee from the expenditure, the expenses are treated as capital expenditure. Accordingly, the Ld. CIT(A) did not allow the assessee to set off the expenditure from the hoarding income and confirmed the addition of Rs. 14.70 lakhs made by the AO.
6. Aggrieved by this, the assessee is before us. For the first time, the Ld. Counsel for the assessee raised a legal issue challenging the jurisdiction of the AO for reopening the assessment. This issue was never raised before the lower authorities. The Ld. Counsel relied upon 4 ITA No. 4955/M/05 the decision of the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. Vs CIT 229 ITR 383. Considering the ratio of the decision of the Hon'ble Supreme Court, the Ld. Counsel for the assessee was allowed to argue on the new plea raised by the assessee. It is the say of the Ld. Counsel that the AO had no new or additional tangible information/material in possession on which he could reopen the assessment u/s. 147 of the Act. The Ld. Counsel empathetically submitted that even if the original assessment was done u/s. 143(1), the AO cannot assume the jurisdiction to reopen the assessment u/s. 147 of the Act in the absence of any new information. The Ld. Counsel relied upon the decision of the Mumbai Bench of Tribunal in ITA No. 4613/M/05, ITA No. 2230/M/10, ITA No. 3476/M/08 and also on the decision of the Hon'ble Delhi High Court in ITA No. 555/2012.
7. Per contra, the Ld. Departmental Representative argued that at this stage, the assessee cannot challenge the reopening of the assessment when the same was not challenged before the lower authorities.
8. We have considered the rival submissions and perused the orders of the lower authorities and the decisions relied upon by the Ld. Counsel. It is not in dispute that the original assessment was done u/s. 143(1) of the Act. It is also not in dispute that in the immediately preceding assessment year, on identical facts, the assessment was reopened. A perusal of the record shows that the assessment order for A.Y. 1999-2000 was passed on 28.3.2005. However, the notice u/s. 148 for the impugned assessment year was issued on 30.7.2003 which means that on the date of issuing the notice u/s. 148, the AO had reason to believe , after considering the audited statement of accounts , that the assessee has not shown income from hoarding to the tune of Rs. 14.70 lakhs. As this was the information 5 ITA No. 4955/M/05 which prompted the AO to have a reason to believe that income to the extent of Rs. 14.70 lakhs as escaped assessment , we hold that the reopening is valid and as per law. The decisions relied upon by the Ld. Counsel are clearly distinguishable on facts because in all such decisions, the reopening was quashed on the ground that the AO had no fresh material available with him. However, in the instant case as mentioned hereinabove, the AO had reason to believe that income of Rs. 14.70 lakhs as escaped assessment. Ground No. 1 is accordingly dismissed.
9. With ground No. 2, the assessee has challenged on merit of the case. The Ld. Counsel for the assessee strongly submitted that in the immediately preceding assessment year which was also reopened , the AO has accepted the expenditure claimed by the assessee against hoarding income. The Ld. Counsel prayed that the same view should be followed.
10. We have carefully perused the assessment order for A.Y. 1999- 2000 which is placed at page 63 to 65 of the paper book. The AO has accepted the expenses by making the following observations:
"As far as excessive relief of Rs.11,29,654/- is concerned, the assessee's representative Mr. Mitesh Mehta, C.A. vide his letter dated 10th March, 2005 has field his submission which is reproduced below:
"The society received hoarding charges amounting to Rs.14,04,000/- during the year to earn this advertisement income society was duty bound to carry out certain structural changes as one hoarding was to be displayed on the terrace of the society building, which was very bulky and heavy. These necessary changes cost Rs.11,29,654/-. So in fact, the net receipts in the hands of the society was Rs.2,74,346/-( That is Rs.14,04,000/- as reduced by Rs.11,29,654/-) 6 ITA No. 4955/M/05 The society has shown the net receipts in the Income and Expenditure Account, the alternative system of representation is Rs.14,04,000/- on the credit side and Rs.11,29,654/- on the debit side of the Income & Expenditure Account. Both the system will yield the same result and the same taxable income. In this scenario, it cannot be said that the society has escaped assessment and therefore, this proceedings should be at once dropped."
I have carefully gone through the submission filed by the assessee society and accept the same."
11. Even during the Appellate proceedings, when the Ld. CIT(A) called for a remand report, the AO in the remand report has categorically admitted that the repair expenses incurred by the society for the advertising charges can be allowed to be set off against the hoarding charges received by the society. As no distinguishing facts have been brought before us by the Ld. DR and AO himself has accepted the repair expenses not only in the preceding assessment year but also in the remand report for the impugned assessment year, we direct the AO to allow the expenditure against hoarding charges as revenue expenditure. The second grievance of the assessee is accordingly allowed.
12. In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 31.01.2014 .
आदे श कȧ धोषणा खुले Ûयायालय मɅ Ǒदनांकः 31.1.2014 को कȧ गई ।
Sd/- Sd/-
(VIJAY PAL RAO ) (N.K. BILLAIYA)
Ûयाियक सदःय/JUDICIAL MEMBER लेखा सदःय / ACCOUNTANT MEMBER मुंबई Mumbai; Ǒदनांक Dated 31.1.2014 व.िन.स./ RJ , Sr. PS 7 ITA No. 4955/M/05 आदे श कȧ ूितिलǒप अमेǒषत/Copy षत of the Order forwarded to :
1. अपीलाथȸ / The Appellant
2. ू×यथȸ / The Respondent.
3. आयकर आयुƠ(अपील) / The CIT(A)-
4. आयकर आयुƠ / CIT
5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai
6. गाड[ फाईल / Guard file.
आदे शानुसार/ ार BY ORDER, स×याǒपत ूित //True Copy// उप/सहायक उप सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अिधकरण मुंबई / ITAT, Mumbai