Income Tax Appellate Tribunal - Mumbai
Pankaj Wadhawa, Mumbai vs Income Tax Officer-1(3)(4), Mumbai on 30 November, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL,MUMBAI BENCH "C", MUMBAI
BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBERAND
SHRI RAVISH SOOD, JUDICIAL MEMBER
ITA No. 5005/Mum/2017, A.Y: 2008-09
ITA No. 5007/Mum/2017, A.Y: 2013-14
Shri Pankaj Wadhwa, Income Tax Officer - 1(3)(4),
8, Candy House, Room No. 564, Aayakar Bhavan,
Mandlik Road, Vs. M.K. Marg,
Colaba, Mumbai - 400 004. Mumbai 400 021.
PAN - AABPW0921B
(Appellant) (Respondent)
ITA No. 5698/Mum/2016, A.Y: 2012-13
Shri Pankaj Wadhwa, Addl. CIT,
8, Candy House, Range 1(2),
Mandlik Road, Vs. Aayakar Bhavan, M.K. Road,
Colaba, Mumbai - 400 004. Mumbai - 400 020.
PAN - AABPW0921B
(Appellant) (Respondent)
Assessee by : Shri Prakash Jotwani
Revenue by : Shri V. Vidhyadhar (DR)
Date of hearing : 28.11.2018
Date of Pronouncement : 30.11.2018
ORDER
PER PRADIP KUMAR KEDIA, AM:
The above bunch of captioned appeals of the assessee concerns A.Ys. 2008-09, 2012-13 and 2013-14. As informed, controversy involved in all the three appeals are interconnected. Hence, all the three cases were heard together and disposed by this common order.
2 ITA Nos. 5005 & 5007/Mum/2017.& 5698/Mum/2016 Pankaj Wadhawa, Mumbai ITA No. 5005/Mum/2017, A.Y 2008-09.
2. We shall first take appeal of the assessee in ITA. No. 5005/Mum/2017 concerning assessment year 2008-09 for adjudication purposes. The grounds of appeal raised by the assessee reads as under:
"Reopening of assessment
1. The Ld. CIT(A)-3, Mumbai erred on f acts and in law in upholding the reopening of assessment u/s 147 by holding that "The appellant has not provided out any reasons to not invoke Sec. 147 of the Act.
2. The Ld.CIT(A) erred on f acts and in law in not considering the submissions of the appellant in connection with the reopening of assessment.
3. The Ld. CIT(A) erred in not appreciating that there was no f ailure on the part of the appellant which would justif y the reopening of assessment u/s 147. Hence, the reopening of assessment is bad in law.
4. The Ld. CIT(A) f urther erred in not appreciating that the reopening of assessment amounted to change of opinion and hence the reopening of assessment was bad in law.
5. The appellant prays that the reopening of assessment u/s 147 may be held to bad in law and the order u/s 143(3) r.w.s 147 may be annulled.
B. Without prejudice to the above, assessing income from house property at Rs. 3,09,372/- as against the returned "Income from house property" of Rs. 155/-.
6. The Ld. CIT(A) erred on f acts and in law in upholding the order of the A.O assessing the income f rom house property at Rs. 3,09,372/- as against the returned income f rom house property of Rs. 155/-.
7. The Ld. CIT(A) erred in not appreciating that the appellant had only 50% shares in f lat No. 15 and the balance 50% was owned by the appellant's mother, who was residing in the said f lat and hence the said f lat could not be let out by the appellant.
8. Without prejudice to the above, the Ld. CIT(A) erred in not appreciating that the society had at the time of transf er of f lat No. 15 placed a condition that the said f lat could not be let and was to be used only f or 3 ITA Nos. 5005 & 5007/Mum/2017. & 5698/Mum/2016 Pankaj Wadhawa, Mumbai self occupation. Hence, there could be no annual letable value with respect to the said f lat.
9. The appellant prays that the A.O may be directed to assessee the income f rom house property at Rs. 155/- as returned by the appellant.
C. General
10. The above Grounds of Appeal are without prejudice to the one another and the appellant craves leave to add, alter, amend, delete or modif y6 any of the above grounds of appeal".
3. When the matter was called for hearing, the Ld. Authorized Representative for the assessee at the outset submitted that the A.O has wrongly assumed jurisdiction u/s 147 of the Income-tax Act, 1961 ('the Act') without fulfilment of prerequisites of cardinal nature and consequently passed an order u/s 143(3) r.w.s 147 of the Act which is null and void. The Ld. Authorized Representative of the assessee accordingly submitted that he first seek to press incurable legal defect of lack of jurisdiction for adjudication.
4. Continuing further, the Ld. Authorized Representative of the assessee submitted that the subject assessment year 2008-09 was earlier assessed u/s 143(3) of the IT Act. Thereafter, a notice u/s 148 of the Act was issued to the assessee on 30.03.2015. Therefore, the reasons recorded for reopening the completed assessments are required to be tested on the touch stone of the main provision as well as the first proviso to Sec. 143(3) of the Act. The Ld. Authorized Representative of the assessee thereafter adverted to reasons recorded as appearing it page No. 9 of the paper book which reads as under:
"During the year under consideration the assessee o wns two properties at Worli, Mumbai and income f rom one of the property is not off ered to tax. As per provision of Sec. 23(4) of the IT Act, 1961, one house as per the choice of the assessee shall be treated as self -occupied and the second house shall be treated as deemed let-out and the annual lettable value of the second house shall be determined as provided in Sec. 23(1) of the Act.4 ITA Nos. 5005 & 5007/Mum/2017.
& 5698/Mum/2016 Pankaj Wadhawa, Mumbai In vie w of above I have reason to believe that there is an escapement of income in respect of deemed let-out property f or the A.Y 2008-09. I am f ully satisf ied that this is a f it case f or reopening the assessment u/s 147 of the Income tax Act".
5. With reference to the aforestated reasons recorded, the Ld. Authorized Representative of the assessee submitted that it is obvious from the reasons recorded itself that all the relevant facts were placed at the time of the original assessment and the A.O had completed assessment based on such facts. It was inter-alia made known to the A.O that assessee owns two properties at the time of the original assessment. Therefore, the taxability of deemed rental income with reference to one of properties in terms of Sec. 23(1) r.w.s 23(4) of the IT Act was presumably present to the mind of the A.O. Thereafter, the Ld. AR for the assessee submitted that from a bare reading of the reasons recorded, it will be apparent that there is no allegation whatsoever on the part of the A.O as to whether there is any failure on the part of the assessee to disclose material fats fully and truly at the time of original assessment which is a condition precedent in terms of first proviso to Sec. 147 of the Act which is squarely applicable in the facts of the case. It was contended that in the absence of express allegation of non-disclosure of material facts, the jurisdiction under 147 of the Act could not be usurped in the instance case. The Ld. AR accordingly submitted that the jurisdiction assumed u/s 147 of the Act is without any legal foundation. In this regard, the Ld. AR also referred to the decision of the Co-ordinate Bench of this Tribunal in assessee's own case for the A.Y 200-10 in ITA No. 5006/Mum/2014 order dated 16.11.2018 where the action u/s 147 of the Act was struck down on similar facts.
6. The Ld. DR on the other hand relied upon the order of the A.O and submitted that in the absence of any express opinion on the issue in the original assessment, it was quite permissible for the A.O 5 ITA Nos. 5005 & 5007/Mum/2017. & 5698/Mum/2016 Pankaj Wadhawa, Mumbai in law to invoke the provisions of Sec. 147 of the Act in the facts of the case.
7. We have carefully considered the rival submissions on the jurisdictional issue. Admittedly, the assessment has been reopened after four years from the end of the relevant assessment year. It is also admitted fact that the original assessment was earlier completed u/s 143(3) of the Act. Therefore, the first proviso gets triggered which casts onerous obligations on the A.O before invoking the provisions of Sec. 147 of the Act. The conditions postulated in main provision as well as the first proviso are therefore required to be followed scrupulously to initiate reassessment proceedings. As per the first proviso, no action can be taken u/s 147 of the Act unless there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The reasons disclosed to the assessee in fact indicates otherwise. From the reasons recorded it appears that the relevant facts were made available to the A.O at the time of the original assessment. Coupled with this, we do not see any allegation from the A.O against the assessee in the reasons recorded under section 148(2) of the Act towards any such failure on the part of the assessee to disclose relevant facts fully and truly. Therefore, apparently the conditions prescribed in the first proviso are not complied with and therefore the notice under section 148 of the Act seeking to re-open the completed assessment is clearly timed barred. The reassessment proceedings under section 147 of the Act is therefore clearly bad in law and requires to be quashed.
8. Once it is found that the action under section 147 of the Act is not sustainable in law, the consequent order passed under section 143(3) r.w.s 147 is clearly void at the threshold. Consequently, the reassessment order so passed is set aside and cancelled.
9. In the result appeal of the assessee stands allowed.
6 ITA Nos. 5005 & 5007/Mum/2017.& 5698/Mum/2016 Pankaj Wadhawa, Mumbai ITA No. 5689/Mum/2016, A.Y 2012-13
10. As per the grounds of appeal, assessee has sought to impugn the action of the CIT(A) (i) in sustaining the addition under the head income from house property; and (ii) determination of long term capital loss on transfer of mutual fund units at Rs. 5,95,975/- as against revised claim of the assessee at Rs. 22,18,723/-.
11. In the course of hearing, the Ld. AR for the assessee at the outset pointed out that the assessee has declared annual lettable value (ALV) from house property at Rs. 217/- (net) having regard to the municipal rentable value. The A.O, however, has substituted the ALV determined as per the municipal rentable value by so called reasonable and expected rent notionally valued by the A.O at Rs. 8,00,317/- for the purpose of determination of taxable income from house property u/s 23(1)(a) of the Act. The Ld. AR for the assessee next referred to various judicial pronouncements including the decision of Hon'ble Bombay High Court in the case of CIT Vs. Tip Top Typography, [2014] 368 ITR 330 (Bombay), wherein it has been held that for determination of ALV, the municipal rentable value can be adopted by the A.O in appropriate circumstances. The Ld. Authorized Representative of the assessee accordingly submitted the action of the lower authorities in enhancing the deemed income by way of substituted ALV is not justified.
12. The Ld. DR, on the other hand, relied upon the orders of the authorities below.
13. We have carefully considered the rival submissions. It is the case of the assessee that the lower authorities have wrongly computed the ALV of its property (deemed let out property) under section 23(1)(a) of the Act based on some unauthentic information as per some local enquiry instead of adopting plausible method of determination of ALV with reference to municipal rentable value. It is further case of the assessee that in terms of Sec. 23(1)(a) of the 7 ITA Nos. 5005 & 5007/Mum/2017. & 5698/Mum/2016 Pankaj Wadhawa, Mumbai Act, actual rent or municipal rentable value whichever is higher, should ordinarily be taken by the A.O for the purposes of computing the ALV. We straightaway find that the issue is no longer res integra and adjudicated in favour of the assessee in the similar circumstances by Co-ordinate Bench of this Tribunal in the case of Owais M. Hussain Vs. ITO in ITA No. 4320/Mum/2016 dated 11.05.2018; and in the case of M/s Europa Chemicals Pvt Ltd., Vs. ITO in ITA No. 387, 388 & 390/Mum/2018 dated 15.06.2018, wherein the Co-ordinate Bench of this Tribunal has accepted the plea of the assessee that municipal rateable value is a recognised basis for determination of ALV, having regard to the decision of the Hon'ble Bombay High Court in the case of Tip TOP Typography (supra). In view of the legal proposition emerging from the precedents cited above, we do not find any justification for the action of the lower authorities in disregarding the municipal rateable value for determination of estimated ALV and substitution thereof by some expected rent based on some unauthentic information. Consequently, the action of the deserves to be set aside and the additions made on this score requires to be cancelled.
14. In the result grievance of the on this score is resolved in favour of the assessee.
15. Second ground concerns quantification of long term capital loss on transfer of mutual fund units.
16. As pointed out on behalf of the assessee, certain evidences are alleged to have not been produced to support the revised claim before the lower authorities. In the circumstances we consider it expedient to restore the issue back to the file of the A.O to enable the assessee to avail afresh opportunity for corroboration of the revised loss so claimed and decide the issue in accordance with law denovo. Needless to say, the A.O shall adjudicate the issue after giving reasonable opportunity to the assessee.
8 ITA Nos. 5005 & 5007/Mum/2017.& 5698/Mum/2016 Pankaj Wadhawa, Mumbai
17. Consequently, the ground raised in this regard is allowed for statistical purposes.
18. In the result, appeal of the assessee is allowed.
ITA No. 5007/Mum/2017, A.Y 2013-1419. In parity with the discussion in ITA No. 5698/Mum/2016 for the A.Y 2012-13 in preceding paragraphs, the solitary grievance of the assessee concerning addition under head house property is allowed. The A.O is accordingly directed to decide the addition of Rs. 8,64,108/- made under the head 'Income from house property'.
20. The appeal of the assessee in ITA No. 5007/Mum/2017 is accordingly allowed.
21. In the result, all the appeals filed by the assessee is allowed in terms of direction noted above.
Order pronounced in the open court on this 30 th Nov, 2018.
Sd/- Sd/-
(RAVISH SOOD) (PRADIP KUMAR KEDIA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
मुंबई Mumbai; दनांक Dated 30/11/2018
KRK / PS
आदेशक ितिलिपअ
ेिषत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2.
यथ / The Respondent.
3. आयकरआयु (अपील) / The CIT(A), Mumbai.
4. आयकरआयु / CIT
5. िवभागीय
ितिनिध, आयकरअपीलीयअिधकरण, मुंबई/ DR,
ITAT, Mumbai
आदेशानुसार/BY
ORDER,
6. गाड फाईल / Guard file.
स यािपत
ित //True Copy/
उप सहायकपंजीकार
/
(Asstt.Registrar)
आयकरअपीलीयअिधकरण, मुंबई / ITAT, Mumbai
9 ITA Nos. 5005 & 5007/Mum/2017.
& 5698/Mum/2016
Pankaj Wadhawa, Mumbai
S.No. Details Date Initials Designation
1 Draft dictated on PC 28.11.2018 JM/AM
2 Draft Placed before author 29.11.2018 JM/AM
3 Draft proposed & placed before the Second JM/AM
Member
4 Draft discussed/approved by Second Member JM/AM
5. Approved Draft comes to the Sr.PS/PS Sr.PS/PS
6. Kept for pronouncement on Sr.PS/PS
7. File sent to the Bench Clerk Sr.PS/PS
8 Date on which the file goes to the Head clerk
9 Date of Dispatch of order
10. Draft Dictation enclosed in file