Income Tax Appellate Tribunal - Mumbai
The Phoenix Mills Ltd, Mumbai vs Asst Cit Cen Cir 47, Mumbai on 25 November, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH "C", MUMBAI BEFORE SH. B.R. BASKARAN, ACCOUNTANT MEMBER AND SH. PAWAN SINGH, JUDICIAL MEMBER ITA No.1109/Mum/2015 for A Y : 2005-06 M/s The Phoenix Mills Ltd. Assistant Commissioner of 462, Senapati Bapat Marg, Income Tax,Central Circle-47, Vs. Lower Parel, Mumbai -400013 Mumbai.
PAN: AAACP3325J
(Appellant) (Respondent)
Assessee by Sh. Vijay Mehta - AR
Revenue by Sh. C.W. Angolkar -DR
Date of hearing 07.11.2016
Date of pronouncement 25.11.2016
Order under section 254(1) of Income Tax Act
PER PAWAN SINGH JUDICIAL MEMBER:
1. This appeal under section 253 of the Income Tax Act ('Act') is directed by assessee against the order of Ld. Commissioner of Income-tax (Appeals)-50, Mumbai dated 23/04/2013 for Assessment Year (AY) 2005-06. The assessee has raised the following grounds of appeal:
Ground No. 1 : On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in sustaining the reopening the assessment u/s. 147 of the Income Tax Act, 1961. The reopening of the assessment is bad in law, illegal and otherwise void.
Ground No. 2:
Without prejudice to the generality of Ground No. l, on the facts and in the circumstances of the case and in law, the learned A.O. is not justified in assuming jurisdiction for reopening the assessment u/s 147 of the Act on the issue of "allocation of expenses" towards the house property income, when the said issue is already a subject matter of an appeal at the time of issue the notice u/s 148 of the Act. Accordingly, it is prayed that said reopening is in violation of express third proviso to section 147. Thus, the reassessment order is consequently bad in law, illegal and otherwise void. Ground No. 3 :
Without prejudice to Ground 1 & 2 above, on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the allocation done by AO an amount of Rs. 48,83,794 out of salaries/ wages The Phoenix Mills Ltd, AY 2005-06 ITA No.1109/M/2015 to the income from house property, ignoring the facts of this issue. The appellant prays that disallowance on account of allocation of salaries/ wages to the income from house property of Rs. 48,83,794 may kindly be deleted. Ground No. 4 :
Without prejudice to Ground 1 & 2 above, on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the allocation done by AO an amount of Rs. 11,67,154 out of advertisement and sales promotion expenses to the income from house property, ignoring the facts of this issue. The appellant prays that disallowance on account of allocation of advertisement and sales promotion expenses to the income from house property of Rs. 11,67,154 may kindly be deleted. Ground No. 5 :
Without prejudice to Ground 1 & 2 above, on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the allocation done by AO an amount of Rs. 3,78,865 out of Security Charges to the income from house property, ignoring the facts of this issue. The appellant prays that disallowance on account of allocation of security charges to the income from house property of Rs. 3,78,865 may kindly be deleted.
Ground No. 6 :
Without prejudice to Ground 1& 2 above, on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the allocation done by AO of additional sum of Rs. 53,93,684 out of repairs and maintenance expenditure to the income from house property, ignoring the facts of this issue. The appellant prays that disallowance on account of allocation of Repairs and Maintenance expenses to the income from house property of Rs. 53,93,684 may kindly be deleted.
2. The brief facts of the case are that assessee is in the business of manufacturing of yarn, trading in clothes rental, warehousing activities and letting out of the premises and allied charges for rendering services related amentias to the occupants. The assessee filed return of income for relevant AY on 28th October 2005 declaring total income at Rs.10,38,49,023/-. The assessment u/s 143(3) was completed on 31st May 2007. Subsequently, search was conducted at assessee's premises in the month of Feb 2008. After search the assessment was completed u/s 153A r.w.s 143(3) on 29th December 2010. Again, the case was reopened on 29.03.2012. Accordingly, the notice u/s 148 was issued to the assessee on 29th March 2012 for filing return of income. The assessee filed return of income on 24th April 2012 and demanded reasons recorded for reopening of the assessment. The reasons recorded for reopening was supplied to the assessee vide office letter dated 6th Feb 2013. The following reasons of reopening were supplied;
2The Phoenix Mills Ltd, AY 2005-06 ITA No.1109/M/2015 "Recording of reasons for initiating proceedings u/s.148 of the I.T. Act 1961 :
The assessee has filed its return of income u/s. 153A on 28.11.2008 declaring total income of Rs. 10,36,49,020/-. The scrutiny assessment u/s.153A r.w.s.143(3) was completed on 29-12-2010, determining total income of Rs. 10,84,43,560/-. The assessee is engaged in the business manufacturing and distribution of cotton textiles and the real estate development. The assessee besides other revenue receipts has shown income from license fees and rental income and offered this income under the head Income from House Property claiming statutory deduction of 30%. During the year under consideration out of, the total revenue receipts of Rs. 45,39,82,689/- the revenue receipt from Licence fees and rental income is Rs. 9,97,90,983/-. Thus the rental income to the total revenue works out to 21.98%. .
During the course of regular assessment for A. Y. 2009-10, the following points came to light that assessee has shown the rental income separately in the computation under the head Income from House Property by which the assessee becomes eligible for deduction u/ s. 24 @ 30% of the Annual Lettable Value. Simultaneously in the Profit & Loss Account the assessee has debited expenses which are relatable to income from house property and as such allocation of such expenses has not been made resulting into income escaping assessment.
During the year under consideration thus the ratio of 21.98% to the revenue is applicable and the proportionate expenditure is disallowable from the Profit & Loss Account on the following expenditure.
In the case of Repairs & Maintenance since the assessee has also income from Service Charges for the common area maintenance from the tenants for providing repairs and maintenance facility to the tenants. The rental income being considered as house property income, the expenditure for repairs and maintenance shall exclusively be allotted to the House Property in the ratio of the area under Office Space and to that of the Letable Premises, The area under the office space-is around 10% of the total area. Therefore the expenditure under this head shall be allowed only to the extent of 1`0% of the total expenditure.
Accordingly, the below mentioned expenditure has escaped income from assessment.
S Expenses deserving Total Less Already Income
l. allocation Expenditure disallowed Escaping
N by the assessment
o assessee @35.18%
Rs. Rs. Rs.
1 Salary/Wages 2,49,21,463/- 27,02,200/- 81,79,937/-
(Added by
the assessee)
2 Advertisement & Sales 53,10,074/- 11,67,154/-
Promotion
3 Security Charges 3,23,82,854/- - 71,17,751/-
4 Miscellaneous Exp. 72,71,598/- - 15,98,297/-
5 Repairs 65,46,365/- 58,91,728/-
Maintenance(Disallow
able @90%)
TOTAL 2,39,54,867/-
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The Phoenix Mills Ltd, AY 2005-06
ITA No.1109/M/2015
In view of the above, I have reason to believe that income chargeable to tax to the extent of Rs. 2,39,54,867/- has escaped from assessment within the meaning of provisions of section 147 of the IT Act, 1961."
3. The assessee contested the reopening of the assessment and filed its objection. The assessee contended that originally return of income was filed on 28th October 2005 and the notice u/s 143(2) was served on assessee on 26th October 2006. The assessment order u/s 143(3) was passed on 31st May 2007. In the assessment order, the AO made certain additions. It was further contended that all the relevant material facts were disclosed fully and truly before the AO during the assessment proceedings. The AO passed the assessment order after considering all the material on record and after application of mind. The assessee contested the additions/disallowance is made by AO, before Commissioner (Appeals). The Commissioner (Appeals) passed order u/s 250 on 4th January 2008 and granted partial relief to the assessee. It was further contended that that assessee again preferred appeal before the Tribunal. Wherein, the assessee again got partial relief. The revenue has filed appeal against the order of Tribunal before the Hon'ble Bombay High Court which is pending. The assessee also contended that reasons for reopening do not indicate that there is any failure on the part of assessee to disclose fully and truly all material facts necessary for the assessment nor indicate that any tangible material came to the knowledge of AO to come to the conclusion that any income escape from the assessment. Thus, the reopening cannot be made in case of assessee as there is no new material found. The contention of assessee was not accepted and the AO proceeded for reassessment and made various additions in the order passed u/s 147 r.w.s 143(3) on 25th March 2013. Aggrieved by the order of AO, the assessee filed appeal before Commissioner (Appeals) but without any success. Hence, further aggrieved by the order of Commissioner (Appeals) the assessee has filed the present appeal before us.
4. We have heard ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for revenue. The ld AR for assessee would argue that for the year under consideration the assessee filed return of income on 4 The Phoenix Mills Ltd, AY 2005-06 ITA No.1109/M/2015 28.10.2005. The assessment u/s 143(3) was completed on 31st May 2007. Subsequently, a search was conducted by revenue at the premises of assessee in the month of Feb 2008. After search the assessment was completed u/s 153A r.w.s 143(3) on 29th December 2010. The assessee contended that originally return of income was filed on 28th October 2005 and the notice u/s 143(2) was served on assessee on 26th October 2006. The assessment order u/s 143(3) was passed on 31st May 2007. In the assessment order, the AO made certain additions. It was further contended that all the relevant material facts were disclosed fully and truly before the AO during the assessment proceedings. The AO passed the assessment order after considering all the material on record and after application of mind. The assessee contested the additions/disallowance is made by AO, before Commissioner (Appeals). The Commissioner (Appeals) passed order u/s 250 on 4th January 2008 and granted partial relief to the assessee. It was further argued that that assessee again preferred appeal before the Tribunal and the assessee again got partial relief. The revenue has filed appeal against the order of Tribunal before the Hon'ble Bombay High Court which is pending. Now, the case was again reopened on 29.03.2012 and the notice u/s 148 was issued to the assessee for filing return of income. The assessee also contended that reasons for reopening do not indicate that there is any failure on the part of assessee to disclose fully and truly all material facts necessary for the assessment nor indicate that any tangible material came to the knowledge of AO to come to the conclusion that any income escape from the assessment. Thus, the reopening cannot be made in case of assessee as there is no new material found. The contention of assessee was not accepted and the AO proceeded for reassessment and made various additions in the order passed u/s 147 r.w.s 143(3) on 25th March 2013. The ld AR for the assessee also relied on the decision of this Tribunal date 06.10.2016, in ITS's No. 48 to 52/M/2015 for AY 2006-07 to 2010-100, wherein the assessee has challenged the assessment reopened by notice u/s 148 dated 29.03.2012. On the other hand the ld DR for the revenue relied on the order of authorities below. The ld DR would argue that 5 The Phoenix Mills Ltd, AY 2005-06 ITA No.1109/M/2015 fact of each year has to be considered separately and prayed that the order of ld Commissioner (Appeals) does not require any interference.
5. We have considered the rival contentions of the parties and have perused the order of the authorities below. We, find that the AO nowhere mentioned in the reasons of reopening that income escape assessment on the failure on the part of the assessee to disclose fully and truly all material facts, thus reasons recorded by Assessing Officer suffers from infirmity as the same is not in consonance with the requirement of section 147 of the Act. There is no whisper in the reasons of reopening of any failure on the part of assessee to furnish fully and truly all material facts necessary for assessment in the notice u/s 148. We have further seen that during the assessment proceeding pursuant to search and order framed u/s 153A rws 143(3) the AO dealt with in details about the various additions. And all those additions on account of expenses were subject matter of appeal before the CIT(A) and before Tribunal. Thus we hold that the reopening was bad in law. Further, our view is also strengthen by the decisions of Hon'ble Bombay High Court in German Remedies Vs DCIT (287ITR 494) and in Hindustan Liver Ltd Vs R.B. Wadkar (268 ITR 332). Thus, we hold that the reopening proceeding is bad in law, and the same is set-aside. As we have hold the reopening as bad in law hence the discussion on merit of the case became academic.
6. In the result appeal of the assessee is allowed.
Order pronounced in open court on 25th day of November 2016.
Sd/- Sd/-
(B.R.BASKARAN) (PAWAN SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai; Dated 25/11/2016
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. The CIT(A), Mumbai.
4. CIT
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The Phoenix Mills Ltd, AY 2005-06
ITA No.1109/M/2015
5. DR, ITAT, Mumbai
6. Guard file.
स ािपत ित //True Copy/
BY ORDER,
(Asstt.Registrar)
ITAT, Mumbai
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