Income Tax Appellate Tribunal - Mumbai
Popley Diamond And Gold Plaza P. Ltd ( ... vs Assessee on 12 August, 2015
1
Popley Diamond and Gold Plaza Pvt Ltd
(Formerly known as
Sears Super Market Ltd)
ITA 5053 /M/2003
& 14 Other Group appeals
आयकर अपीलीय अिधकरण "सी" यायपीठ मुब
ं ई म।
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "C", MUMBAI
ी डी. क णाकर राव, लेखा सद य एवं
ी अिमत शु ला, याियक सद य के सम ।
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
थयी लेखा सं.:PAN : AAACS 5154 L
अपीलाथ (Appellant) यथ (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
थयी लेखा सं.:PAN : AAACS 5154 L
अपीलाथ (Appellant) यथ (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
थयी लेखा सं.:PAN : AAACS 5154 L
अपीलाथ (Appellant) यथ (Respondent)
Appellant by : Ms Amrita Misra
Respondent by : Mr Soli E Dastur
सुनवाई क तार ख /Date of Hearing : 05-08-2015
घोषणा क तार ख /Date of Pronouncement : 12-08-2015
आदेश
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.
17Popley 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/-
(डी. क णाकर राव) (अिमत शु ला)
लेखा सद य याईक सद य
(D KARUNAKARA RAO) (AMIT SHUKLA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Date: 12th August, 2015
त/Copy to:-
1) अपीलाथ /The Appellant.
2) यथ /The Respondent.
3) The CIT(A) -41, Mumbai
4) The CIT-Central -III, Mumbai.
5) िवभागीय ितिनिध "सी", आयकर अपीलीय अिधकरण, मुंबई/ The D.R. "C" Bench, Mumbai.
18Popley Diamond and Gold Plaza Pvt Ltd (Formerly known as Sears Super Market Ltd) ITA 5053 /M/2003 & 14 Other Group appeals
6) गाड फाईल Copy to Guard File.
आदे शानस ु ार/By Order / / True Copy / / उप/सहायक पंजीकार आयकर अपील य अ धकरण, मब ुं ई Dy./Asstt. Registrar I.T.A.T., Mumbai *च हान व.िन.स *Chavan, Sr.PS