Income Tax Appellate Tribunal - Mumbai
Saif Ali Khan Mansurali, Mumbai vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "E", MUMBAI
BEFORE SHRI P.M. JAGTAP, A.M. AND SHRI V. DURGA RAO, J.M.
ITA No. 1093/Mum/2009
Assessment Year: 2000-01
Saif Alikhan Mansurali, ... Appellant
C/o KK Lalkaka & Co.,
507, Churchgate Chambers,
5, New Marine Lines,
Mumbai - 400 020.
(PAN - AAHPK0520E)
Vs.
Asstt. Commisioner of Income-tax, ...Respondent
11(1), Mumbai.
Appellant by : Mr. K.K. Lalkaka
Respondent by : Mr. C.G.K. Nair
.
ORDER
PER V. DURGA RAO, J.M.:
This appeal filed by the assessee is directed against the order of CIT(A)- XI, Mumbai, passed on 3/12/2008 for the assessment year 2000-01 wherein the assessee has raised the following grounds of appeal:-
"1. On the f acts and in the circumstances of the case and in case, the learned Assessing Officer has erred in initiating reassessment proceedings u/s 148 of the income act, although the conditions precedent to the issue of notice under section 148 of the income tax act for reopening the assessment did not exist.
2. Without prejudice to the above, and on the f acts and in the circumstances of the case and in law, the learned CIT(A) has erred in sustaining the disallowance of Rs. 3,23,635/- made by the Assessing Off icer under section 80 RR of the Income Tax Act on the alleged ground that the assessee did not exercise profession in earning US $ 10,000 equivalent to Rs. 4,31,500/- from Superstar Promotions, 1625 South Bush, Fresno, USA merely 2 ITA NO. 1093/M/09 Saif Ali Khan Mansurali because the show was not performed although the remittance was received in course of carrying out professional duties of your appellant.
Your appellant therefore prays that the claim of Rs. 3,23,635/- be deleted to meet the ends of justice."
2. Briefly the facts of the case are that the assessee filed return of income on 27/10/2000 declaring total income of Rs. 75,35,061/- along with audit report u/s 44AB of the At with balance sheet and profit and loss account. The return was processed u/s 143(1) of the Act, 1961. Subsequently, the case was reopened by issuing notice u/s 148 of the Act, on the following reasons:-
"M/s Tips Films Pvt. Ltd., 501, Durga Chambers, 5 th Floor, linking road, Khar (W), Bombay 400 052, vide undated letter f iled on 10/05/2004 has informed that they had effected cash payment of Rs. 20,00,000/- (Rupees Twenty Lacs only) to Mr. Saif Ali Khan in addition TO PAYMENT OF Rs. 20,00,000/- (Rupees Twenty Lacs only) made by cheque. For rendering services as Artist in the f irm 'Kachche Dhaage'. M/s Tips Films Pvt. Ltd. in their undated letter has also informed that the cash payment of Rs. 20,00,000/- was not recorded in their books of accounts and was made in cash to Mr. Saif Ali Khan.
Therefore, having reason to believe that income chargeable to tax of Rs. 20,00,000/- has escaped assessment, notice u/s 148 of the IT Act was issued on 07/06/2004 for AY 2000-01."
3. In response to the notice, the assessee vide letter dated 23/07/2004 replied as under:-
"I acknowledge receipt of your notice u/s 148 dated 7 th June, 2004 received by me on 10 th July, 2004. I wish to record that the conditions precedent to the issue of the said notice u/s 148 of the Income Tax Act are not at all applicable in my case.
Notwithstanding the above contention, I request you to treat the original return of income as a return of income deemed to be f iled in response to notice u/s 148 of the Act."
4. Subsequently notice u/s 142(1) was issued by the Assessing Officer and in response to the same, learned AR of the assessee attended and filed details.
3 ITA NO. 1093/M/09Saif Ali Khan Mansurali
5. As regards cash payments of Rs. 20,00,000/-, the assessee was asked to explain why the said cash payment of Rs. 20,00,000/- was not accounted in the books, and in reply, the AR of the assessee desired to cross examine the person representing Tips Films Pvt. Ltd., in order to disprove the said allegation. On cross examination, it came to the light that the film Kachche Daage was released in February, 1999 and it was stated by the Director of Tips Films Pvt. Ltd. that the cash payment was made prior to the release of the film in 1999. Therefore, the Assessing Officer concluded that since the payments do not pertain to AY 2000-01, the same was not considered for the assessment. However, the Assessing Officer disallowed an amount of Rs. 3,23,625/- u/s 80RR of the Act and the facts pertaining to this disallowance are that the assessee had claimed deduction u/s 80 RR to the tune of Rs. 18,72,2996/- being 75% of foreign receipts of Rs. 24,96,235/-. On being asked to produce supportings to prove eligibility of these foreign receipts, the assessee filed reply vide letter dated 10/01/06, which was reproduced by the Assessing Officer in his order. After considering the submissions, the Assessing Officer held that though the amount of Rs. 4,31,500/- was initially received for performing a show, subsequently no shows were held. Yet the amount of Rs. 4,31,500/- was not returned back and was shown as a part of income. Since the assessee had not exercised his profession, the Assessing Officer was of the view that the assessee will not be eligible for deduction u/s 80 RR, Hence Rs. 3,23,625/- claimed as deduction u/s 80RR being 75% of Rs. 4,31,500/- was disallowed. Aggrieved the assessee carried the matter in appeal before the CIT(A). The CIT(A) confirmed the action of the Assessing Officer.
6. Before us, the learned counsel for the assessee has submitted that the Assessing Officer has reopened the assessment u/s 148 on the ground that the income chargeable to tax of Rs. 20,00,000/- had escaped assessment. It is submitted that on examination of the issue, 4 ITA NO. 1093/M/09 Saif Ali Khan Mansurali the Assessing Officer came to know that the amount received by the assessee is pertaining to the AY 1999-2000, therefore, the same was not considered for assessment. The learned counsel pointed out that the income, on which the assessee has reopened the assessment has not escaped assessment, therefore, the reopening of assessment by the u/s 148 is not valid as Assessing Officer made the addition on some other issue u/s 80RR. The learned counsel for the assessee has relied upon the judgment of the Hon'ble jurisdictional High Court in the case of CIT Vs. Jet Airways (I) Ltd., [2010] 195 Taxman 117 (Bom.).
7. On the other hand, the learned Departmental Representative has relied on the orders of the authorities below and submitted that the amount of income escaped on the basis of which assessment for the year under consideration was reopened has already been added in the reassessment completed for AY 1999-00 and contended that judgment of the Bombay High Court in the case of CIT Vs. Jet Airways (I) Ld. (supra) is not applicable to the case of the assessee.
8. We have heard the learned representatives of the parties and perused the record. The issue for consideration is whether reopening is valid when the Assessing Officer was reopened the assessment on particular issue and the assessment was made on another issue. In this context, we refer to the Hon'ble Jurisdictional High Court in the case of CIT Vs. Jet Airways (I) Ltd., [2010] 195 Taxman 117 (Bom.) wherein similar legal issue came up for consideration before the Hon'ble Court and the Court in its order vide para No. 16 held as under:-
"Explanation 3 lif ts embargo, which was inserted by judicial interpretation, on the making of an assessment or reassessment on grounds other than those on the basis of which a notice was issued under section 148 setting out the reasons for the belief that income had escaped assessment. Those judicial decisions had held that when the assessment was sought to be reopened on the ground that income had escaped assessment on a certain issue, the Assessing Officer could not make an assessment or 5 ITA NO. 1093/M/09 Saif Ali Khan Mansurali reassessment on another issue which came to his notice during the proceedings. This interpretation will no longer hold the f iled af ter the insertion of Explanation 3 by the Finance Act (No.2) of 2009. However, Explanation 3 does not and cannot override the necessity of fulf illing conditions set out in the substantive part of section 147. An Explanation to a statutory provision is intended to explain its contents and cannot be construed to override it or render the substance and core nugatory. Section 147 has this effect that the Assessing Off icer has to assess or reassess the income ('such income') which escaped assessment and which was the basis of the formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which, comes to his notice during the course of the proceedings. However, if af ter issuing a notice under section 148, he accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assess some other income. If he intends to do so, a fresh notice under section 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee."
9. As per the above decision, the income, which the Assessing Officer initially formed a reason to believe had escaped assessment, has as a matter of fact, not escaped assessment, it is not open to the Assessing Officer independently to assess some other income. In the present case, the Assessing Officer reopened the assessment for the reason to believe that the cash payment of Rs. 20,00,000/- received by the assessee from M/s Tips Films Pvt. Ltd. was not recorded in the books of account and, therefore, the same had escaped assessment. While making assessment the Assessing Officer had made an assessment on a different ground in respect of foreign receipts and disallowed an amount of Rs. 3,23,625/- u/s 80RR of the Act. In so far as the argument raised by the learned DR based on the escaped income as recorded in the reasons added in the assessment year 1999-2000, we find no merit in the same keeping in view that the unit of assessment is assessment year and every assessment year is different. The validity of the reopening each assessment year has to be decided on the basis of the facts of that year including the reasons recorded by the AO for reopening of assessment of that year. The 6 ITA NO. 1093/M/09 Saif Ali Khan Mansurali above judgement of the Hon'ble Jurisdictional High Court in the case of Jet Airways (I) Ltd. (supra) is squarely applies to the facts of the assessee's case. We, therefore, respectfully following the said judgment of the Hon'ble Jurisdictional High Court, hold that the addition made by the AO is not sustainable and the same is hereby deleted.
10.. In the result, appeal of the assessee is allowed.
Pronounced in the open court on this day of 27 t h May, 2011.
Sd/- Sd/-
(P.M. JAGTAP) (V. DURGA RAO)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: 27 t h May, 2011
kv
Copy to:-
1) The Appellant.
2) The Respondent.
3) The CIT (A) concerned.
4) The CIT concerned.
5) The Departmental Representative, "E" Bench, I.T.A.T., Mumbai.
By Order //true copy// Asst. Registrar, I.T.A.T., Mumbai.
7 ITA NO. 1093/M/09 Saif Ali Khan Mansurali Description Date Intls S.No. 1. Draft dictated on 23/05/11 Sr.P.S./P.S 2. Draft placed before author 25/05/11 Sr.P.S/PS 3 Draft proposed & placed before JM/AM the second Member 4 Draft discussed/approved by JM/AM second Member 5 Approved Draft comes to the Sr.P.S./P.S Sr.P.S./PS 6. Kept for pronouncement on Sr. P.S./P.S. 7. File sent to the Bench Clerk Sr.P.S./P.S 8 Date on which file goes to the Head Clerk 9 Date of Dispatch of order