DHANRAJGIR BUSINESS P.LTD, MUMBAI V. DCIT 2(1), MUMBAI

CO 241/MUM/2012

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 0580 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 14 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 08-04-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 18-03-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 25-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: LOVE KUMAR
• Keywords: Business income; Business expenditure; Reason to believe; Reassessment proceedings
• Section: 143(3); 147

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI . . , , !' # $, % & BEFORE SHRI B.R. BASKARAN, AM AND SHRI AMIT SHUKLA, JM . / ITA NOS. 8315 & 8323 /MUM/2011 ( / ASSESSMENT YEARS : 2003-04, & 2004-05 ) DCIT 2(1) AAYAKAR BHAVAN, R.NO.561, 5 TH FLOOR, M.K.RD. MUMBAI -400020 .. / APPELLANT V/S M/S. DHANRAJGIR BUSINESS PVT. LTD. G 43, DHANRAJ MAHAL, CSM ROAD, APOLLO BUNDER, COLABA, MUMBAI 400039 .... / RESPONDENT CO NO . 241 / /MUM/2012(ARISING ITA NO.8315/MUM/2011) ( / ASSESSMENT YEAR : 2003-04, ) & CO NO.242/ /MUM/2012(ARISING ITA NO.8323/MUM/2011) ( / ASSESSMENT YEARS : 2004-05, ) M/S. DHANRAJGIR BUSINESS PVT. LTD. G 43, DHANRAJ MAHAL, CSM ROAD, APOLLO BUNDER, COLABA, MUMBAI 400039 .. / APPELLANT V/S DCIT 2(1) AAYAKAR BHAVAN, R.NO.561, 5 TH FLOOR, M.K.RD. MUMBAI -400020 .... / RESPONDENT DHANRAJGIR BUSINESS P. LTD. 2 &' . / PERMANENT ACCOUNT NUMBER AABCD3080D REVENUE BY : SHRI LOVE KUMAR (DR) RESPONDENT BY : SHRI FIROZE B. ANDHYARUJINA (AR) ( ) * +,' / DATE OF HEARING 19.03.2015 -&. /0 * +,' / DATE OF ORDER 08 .04.2015 # / ORDER !' # $, % ' / PER AMIT SHUKLA, J.M. THE AFORESAID APPEALS HAVE BEEN FILED BY THE REVENU E AND CROSS OBJECTIONS BY THE ASSESSEE AGAINST ORDER DATED 26.09.2 011 & 27.09.2011, PASSED BY THE LEARNED COMMISSIONER (APPE ALS), MUMBAI, FOR THE ASSESSMENT YEARS 2003-04 & 2004-05 RESPECTIVE LY, FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143(3) R.W .S. SECTION 147. IN THE CROSS OBJECTIONS THE ASSESSEE HAS CHALLE NGED THE VALIDITY OF REOPENING U/S.147 ON THE GROUND THAT INITIATION OF P ROCEEDINGS U/S.147 BASED ON THE REASONS RECORDED IS BAD IN L AW. THE REVENUE HAS MAINLY CHALLENGED THE IMPUGNED ORDER ON MERITS, ON THE GROUND THAT LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN TREAT ING THE INCOME RECEIVED AS LICENSE FEES AND SERVICE CHARGES FROM F LATS AS BUSINESS INCOME AND INCOME FROM HOUSE PROPERTY AND NOT UNDER THE HEAD INCOME FROM OTHER SOURCES AS HELD BY THE AO. SINCE THE ISSUES INVOLVED IN BOTH THE APPEALS ARE COMMON ARISING OUT OF SIMILAR SET OF DHANRAJGIR BUSINESS P. LTD. 3 FACTS, THEREFORE SAME ARE BEING DISPOSED OFF BY WAY OF THIS CONSOLIDATED ORDER. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C OMPANY IS ENGAGED IN THE BUSINESS OF DEALING IN HOUSE PROPERTY FOR COMMERCIAL EXPLOITATION. THE ASSESSEE HAD TAKEN OVER SEVERAL FL ATS AT CHATRAPATI SHIVAJI MARG, MUMBAI ON TENANCY BASIS AND INCOME FRO M THESE FLATS WAS SHOWN IN THE RETURN OF INCOME AS INCOME RECEIVED IN RESPECT OF LICENSE FEE AND SERVICE CHARGES RECEIVABLE FROM THE TENANTS AND WAS DECLARED AS INCOME FROM BUSINESS ACTIVITY. THIS WAS SHOWN UP TO A.Y.2001-02 AND WAS ALSO ACCEPTED AND ASSESSED UNDER THE HEAD BUSINESS INCOME BY THE DEPARTMENT. THE RETURN FOR THE A.YS. 2003-04 AND 2004-05 WAS FILED ON 24.11.2003 AND 29.10.2004, DECLARING INCOME OF RS.4,24,725/- AND RS.2,28,989/- RESPECTIV ELY AS BUSINESS INCOME LIVE IN EARLIER YEARS. THE SAID RETURNS WERE DULY PROCESSED U/S.143(1) ON 18.03.2004 FOR THE A.Y.2003-04 AND ON 20.12.2005 FOR THE A.Y.2004-05. THEREAFTER, THE ASSESSEES CASE WERE RE-OPENED U/S.147 BY ISSUANCE OF NOTICE U/S.148 DATED 23.03.20 10 ON THE FOLLOWING REASONS RECORDED WHICH IS SIMILARLY REC ORDED FOR BOTH THE YEARS. THE REASONS RECORDED FOR A.Y. 2003-04 IS A S UNDER:- FOR A.Y. 2003-04, YOU HAVE SHOW INCOME UNDER THE HE AD LICENCE OF FEES RS.3,30,967/-, SERVICE CHARGES RS.33,05,328/-, INTEREST ON SECURITY DEPOSIT RS.44,377/-, INTEREST ON F.D. WITH DEUTCHE BANK DHANRAJGIR BUSINESS P. LTD. 4 RS.7,36,405/-, INTEREST ON I.T. REFUND RS.12,907/- AND PROVISION FOR DEFERRED TAX ASSET RS.21,033/-. AGAINST THIS INCOME YOU HAVE CLAIMED EXPENSES AMOUNTING TO RS.42,19,760/-. BESIDES, YOU HAVE ALSO BEEN IN RECEIPT OF INCOME FR OM HOUSE PROPERTY, WHICH HAS BEEN WRONGLY CLAIMED AS INCOME FROM BUSIN ESS. AGAINST THIS INCOME YOU HAVE CLAIMED EXPENDITURE, WHICH IS NOT A LLOWABLE. THE INCOME UNDER THE HEAD HOUSE PROPERTY WAS MORE THAN RS.25 LAKHS FOR A.Y. 2003-04. ON SUCH INCOME EXPENDITURE WAS ALLOWABLE ONLY AS PER SECTION 24(I) OF THE I.T. ACT. HOWEVER, YOU HAVE CLAIMED EXPENDITURE AT A FIGURE MORE THAN WHAT WAS ALLOWABL E AS PER PROVISIONS OF SECTION 24(1). IN VIEW OF THE ABOVE, THERE BEING ABUNDANT REASON T O BELIEVE THAT THERE HAS BEEN A SUBSTANTIAL ESCAPEMTN OF INCOME OF SECTION 147 OF THE INCOME TAX ACT, 1961 AND AFTER TAKING THE APPRO VAL OF ADDL. COMMISSIONER OF INCOME TAX, RANGE-2(1), MUMBAI, ASS ESSMENT FOR A.Y.2003-04 HAS BEEN REOPENED AFTER ISSUE OF NOTICE U/S.148 OF THE I.T. ACT ON 23.03.3010. 3. IN RESPONSE, THE ASSESSEE RAISED ITS OBJECTION V IDE LETTER FILED ON 10 TH AUGUST 2010 ON THE FOLLOWING GROUNDS;- A READING OF THE RECORDED REASON CONVEYED THROUGH YOUR 1ETTER UNDER REFERENCE SHOWS THAT YOU HAVE PROCEEDED TO INITIATE PROCEEDING U/S 147 ON MISCONCEPTION OF LAW AS WELL AS WITHOUT PROPER APPRECIATION OF FACTS ON RECORD. THESE ARE EXPLAINE D HEREUNDER. YOUR V IEW THAT LICENCE FEE AND SERVICE CHARGE ARE LIABLE TO B E ASSESSED AS INCOME FROM HOUSE PROPERTY MAY NOT BE S AID AS CORRECT UNLESS IT IS ESTABLISHED THAT SUCH RECEIPTS HAVE ARISEN FROM BUILDING OWNED BY THE COMPANY. THIS IS CLEAR F ROM THE LANGUAGE OF SECTION 22 OF THE ACT. THE RE1EVANT PROVISIONS ARE REPRODUCED FOR SAKE OF CONVENIENCE AS UNDER: - DHANRAJGIR BUSINESS P. LTD. 5 THE ANNUAL VALUE OF PROPERTY CONSISTING OF ANY BUILDIN GS OR LANDS APARTMENT THERETO OF WHICH THE ASSESSEE IS TH E OWNER. SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD IN COME FROM HOUSE PROPERTY' 3. THE FACTUAL POSITION EMERGING FROM RECORDS WILL REV EAL THAT THE COMPANY TOOK OVER SIX FLATS (G-43 TO 47 & G-51) AT DHANRAJ MAHAL, CHATRAPATI SHIVAJI .MARG, MUMBAI 400039 ON T ENANCY BASIS FROM RENUKADEVI DHANRAJGIR DURING THE PERIOD RELEVANT TO ASSESSMENT YEAR 2001-02. IN THE ASSESSMENT FOR THIS YEAR THEN A.O. RIGHTLY CONSIDERED THE LICENSE FEE & SERVICE C HARGES AS BUSINESS INCOME SINCE THESE FLATS WERE TAKEN ON TENANCY BASI S. THE ASSESSMENT COMPLETED U/S 143(3) FOR ASSESSMENT YEAR 2007-08 RECENTLY FURTHER CONFIRMS THE FACT REGARDING ,ASSESABILITY OF LICENS E FEE & SERVICE CHARGES FROM THESE SIX FLATS UNDER THE HEAD BUSINES S AS THE . COMPANY IS NOT THE OWNER. 4. THREE FLATS VIZ E-26A & C-10A OWNED BY THE COM PANY AND FOR WHICH LICENSE FEE AND SERVICE CHARGES HAVE BEEN AS ASSESSED AS INCOME FROM HOUSE PROPERTY IN ORDER U/S 143(A) FOR ASSESSMENT YEAR 2007-08 WERE NOT PURCHASED DURING THE PERIODS RELEV ANT TO ASSESSMENT YEARS 2003-04 OR .. 2004-05. AS SUCH THE ALLEGATION REGARDING ESCAPEMENT OF INCOME IN ASSESSMENT YEARS 2003-04 & 2004-05 IN RESPECT OF FLATS OWNED BY THE COMPANY AN D LET OUT TO TENANTS DOES NOT STAND BEING CONTRARY TO FACTS ON R ECORD. 5. WE LIKE TO ADD THAT THREE FLATS VIZ E-26, E-26A C-10A WERE PURCHASED BY THE COMPANY DURING THE PERIOD RELEVANT TO ASSESSMENT YEAR 2005-06. THIS FACT WILL CORROBORATE FROM A COMPARATIVE ANALYSIS OF FIXED ASSETS SCHEDULES ANNE XED TO BALANCE SHEET AS ON 31.03.2004 AND 31.03.2005. HENCE THERE CANNOT BE ANY REASONABLE BELIEF TO HOLD THAT LICENSE FEE AND SERV ICE CHARGES ATTRIBUTABLE TO FLATS OWNED BY THE COMPANY HAS ESCA PED ASSESSMENT BY NOT CONSIDERING SUCH RECEIPTS AS INCOME FROM HOU SE PROPERTY IN ASSESSMENT YEARS 2003-04 & 2004-05. DHANRAJGIR BUSINESS P. LTD. 6 6. IT IS WELL SETTLED THAT BELIEF ENTERTAINED BY THE A SSESSING OFFICER MUST NOT BE ARBITRARY OR IRRATIONAL. IT MUST BE REA SONABLE . OR IN OTHER WORDS MUST BE BASED ON REASONS WHICH ARE RELEVANT AND MATERIAL TO THE FACTS ON RECORD. 7. THE EXPRESSION 'REASON TO BELIEVE' DOES NOT MEAN A PURELY SUBJECTIVE SATISFACTION. THE BELIEF MUST BE HELD I N GOOD FAITH, IT CANNOT MERELY BE A PRETENCE. THERE MUST BE SOME DIR ECT NEXUS BETWEEN THE CONCLUSION OF FACTS ARRIVES BY THE AUTH ORITY CONCERNED AND THE PRIMARY FACTS UPON WHICH THAT CONCLUSION IS BAS ED. THE USE OF EXTRANEOUS AND IRRELEVANT MATERIAL IN ARRIVING AT T HAT CONCLUSION WOULD VITIATE THE CONCLUSION OF FACT. RELIANCE IS P LACED TO THE DECISIONS IN CIT -VS -- DAU1AT RAM RAWATMULL. 87 ITR 349 (SC) AND ITO VS LAKSHMANI MEWAL DAS 103 ITR 437 (SC). IN THE CIRCUMSTANCES, PROCEEDINGS INITIATED U/S.147 OF THE ACT IN RESPECT OF ASSESSMENT YEARS 2003-04 & 2004-05 ARE R EQUIRED TO BE DROPPED. 4. THE LD. AO DISMISSED THE ASSESSEES OBJECTION ON THE GROUND THAT ON THE SAME FLATS, THE INCOME HAS BEEN TREATED AS INCO ME FROM HOUSE PROPERTY IN THE ASSESSMENT ORDER PASSED U/S.143(3) F OR THE A.Y. 2007- 08. HOWEVER, IN THE IMPUGNED ASSESSMENT ORDER THE LD . AO HAS HELD THAT THE INCOME FROM THE SUB-LETING OF THE PROPERTIES SH OULD BE TAXED AS INCOME FROM OTHER SOURCES AND THEREBY DENIED VA RIOUS CLAIMS OF EXPENSES DEBITED BY THE ASSESSEE. 5. THE LD. CIT(A), SO FAR AS THE VALIDITY OF REOPENI NG OF THE ASSESSMENT U/S.147, HELD THAT THE SAME IS VALID BECAU SE IN THE DHANRAJGIR BUSINESS P. LTD. 7 ASSESSMENT YEAR 2007-08, THE AO HAS HELD IT TO BE IN COME RECEIVED FROM TENANCY WHICH IS TAXABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND THEREFORE, HE HAD PRIMA FACIE GOOD REA SON TO REOPEN THE CASE FOR THE A.YS. 2003-04 & 2004-05 AND TO DISALLOW THE BUSINESS EXPENSES CLAIMED BY THE ASSESSEE. 6. BEFORE US LD. SENIOR COUNSEL, SHRI FIROZE B. ANDHYARUJINA SUBMITTED THAT, FROM THE BARE PERUSAL OF THE REASON S RECORDED IT CAN BE SEEN THAT THE AO DID NOT HAD ANY MATERIAL COMING I NTO RECORD SO AS TO ENTERTAIN REASON TO BELIEVE FOR REOPENING THE CASE U/S.147, EVEN THOUGH THE ASSESSMENT STOOD COMPLETED U/S.143(1). THE A SSESSING OFFICER IS MAINLY TRYING TO CHANGE THE HEAD OF INCOM E FROM BUSINESS INCOME TO INCOME FROM HOUSE PROPERTY, WITHOUT ANY TANG IBLE MATERIAL OR INFORMATION. THERE IS NO REFERENCE OF ASSESSMENT ORDER FOR A.Y. 2007-08 IN THE REASONS RECORDED. OTHERWISE ALSO IN THE A.Y. 2007- 08, THE MATTER HAD TRAVELLED UP TO THE STAGE OF ITAT, WHEREIN THE TRIBUNAL, SO FAR AS SERVICE CHARGES WAS CONCERNED, THE SAME WAS TREATED AS BUSINESS INCOME AND LICENSE FEE RECEIVED WAS TREATED AS INCOME FROM HOUSE PROPERTY. NOW IN THE IMPUGNED ASS ESSMENT ORDER, THE AO HAS TAKEN ENTIRELY DIFFERENT STAND ALTOGETHER AND INSTEAD HAS TAXED THE RECEIPTS UNDER THE HEAD INCOME FROM OTHER S OURCES. THEREFORE, SUCH A REASONS RECORDED BY THE AO CANNO T CLOTHE HIM WITH DHANRAJGIR BUSINESS P. LTD. 8 THE JURISDICTION TO REOPEN THE CASE U/S.147. IN SUPPOR T OF HIS CONTENTION, HE RELIED UPON THE FOLLOWING DECISIONS;- 1. RATNA TRAYI REALITY SERVICE P. LTD. VS. ITO [20 13] 356 ITR 493 (GUJ). 2. CIT VS. ORIENT CRAFT LTD. [2013] 354 ITR 536 (D ELHI). 3.INDUCTOTHERM (INDIA) P. LTD. VS. M. GOPALAN, DY. CIT [2013] 356 ITR 481 (GUJ). 4. INDIVEST PTE. LTD. VS. ADDL. DIT [2013] 350 ITR 120 (BOM). THUS, HE SUBMITTED THAT THE REASONS RECORDED BY THE AO FOR REOPENING THE CASE ARE NOT BASED ON REASONS TO BELI EVE AS CONTEMPLATED UNDER THE LAW AND THEREFORE, THE ENTIRE PR OCEEDINGS INITIATED VIDE NOTICE DATED 23.03.2010 U/S.148 IS BA D IN LAW. 7. ON THE OTHER HAND, LD. DR SUBMITTED THAT, AT THE TI ME OF REASONS RECORDED, THE ASSESSING OFFICER DID HAD PRIMA FACI E REASONS TO BELIEVE WHICH WAS BASED ON THE FACT THAT THE RECEIPTS ACCRUED TO THE ASSESSEE WERE FROM HOUSE PROPERTY AND THEREFORE, THE SAME SHOU LD HAVE BEEN ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY, INSTEAD OF BUSINESS INCOME THEREFORE, THE ASSESSEES CLAIM OF VA RIOUS EXPENDITURES WERE NOT ALLOWABLE UNDER THE LAW. HE FU RTHER RELIED UPON THE ORDER OF THE CIT(A) HOLDING THAT IN THE A.Y.2007- 08 ALSO THE ASSESSING OFFICER HAD HELD THAT INCOME OF THE ASSESS EE RECEIVED FROM TENANCY IS TAXABLE UNDER THE HEAD INCOME FROM HOUSE P ROPERTY, DHANRAJGIR BUSINESS P. LTD. 9 THEREFORE, IT WAS A SUFFICIENT MATERIAL FOR REOPENING THE CASE FOR IMPUGNED ASSESSMENT YEARS. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS QUA THE ISSUE RAISED ON THE VALIDITY OF REOPENING U/S.147 VIS-A-VIS MATERIAL PLA CED ON RECORD. IT IS AN UNDISPUTED FACT THAT THE ASSESSEES RETURN OF INCOM E WAS ACCEPTED U/S.143(1) AND ACCORDINGLY, THE RETURNED INCOME HAD ATTAINED FINALITY. SUCH AN ASSESSMENT HAS BEEN SOUGHT TO BE REOPENED ON THE GROUND THAT THE RECEIPTS FROM TENANCY IS TO BE TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY INSTEAD OF BUSINESS INCOME. I T IS A TRITE LAW THAT U/S.147, THE REOPENING OF THE ASSESSMENT CAN BE IN ITIATED ONLY IF THE AO HAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR. THE QUES TION WHETHER THE AO HAD REASON TO BELIEVE OR NOT IS ALWAYS A QUESTIO N OF A JURISDICTION WHICH NEEDS TO BE EXAMINED WHETHER SUCH A COMPLETED ASSESSMENT CAN BE REOPENED WITHIN THE FRAME WORK OF LAW. THE HONBLE SUPREME COURT IN THE CASE OF GANGA SARAN AN D SONS PVT. LTD. VS. ITO REPORTED IN (1981) 130 ITR 1, HELD THAT THE W ORD REASON TO BELIEVE IS MUCH STRONGER THAN THE WORDS IS SATISFI ED. THE BELIEF ENTERTAINED BY THE AO MUST NOT BE ARBITRARY OR IRRATIONAL AS IT MUST BE BASED ON REASONS WHICH ARE RELEVANT AND MATERIAL, AN D MUST BE HELD IN A GOOD FAITH. THE REASONS FOR BELIEF MUST HAVE A RATI ONAL CONNECTION OR DHANRAJGIR BUSINESS P. LTD. 10 RELEVANT BEARING WITH THE MATERIAL COMING INTO RECORD. IT SHOULD NOT BE BASED ON EXTRANEOUS OR IRRELEVANT CONSIDERATION. T HE RATIONAL CONNECTION POSTULATES THAT THERE IS A DIRECT NEXUS OR LI VE LINK BETWEEN THE MATERIAL COMING TO THE NOTICE OF AO AND THE FORMATION OF HIS BELIEVE THAT THERE HAS BEEN ESCAPEMENT OF INCOME. 9. IN THE PRESENT CASE, FROM THE PERUSAL OF THE REAS ONS RECORDED, IT IS EVIDENT THAT THE AO HAS ENTERTAINED REASON TO BELIEVE MERELY ON THE GROUND THAT CERTAIN RECEIPTS OF INCOME HAS BEEN S HOWN BY THE ASSESSEE UNDER THE HEAD BUSINESS INCOME INSTEAD OF I NCOME FROM HOUSE PROPERTY AND THEREFORE, EXPENSES CLAIMED BY THE ASSESSEE ARE NOT ALLOWABLE. IN THE REASONS RECORDED, HE HAS NOT MENTIONED AS TO WHAT IS THE MATERIAL OR INFORMATION WHICH HAS COME TO HIS POSSESSION OR TO HIS NOTICE, ON THE BASIS OF WHICH HE IS ENTERTAIN ING HIS BELIEF THAT SUCH AN INCOME IS TO BE TAXED ONLY UNDER THE HEAD INC OME FROM HOUSE PROPERTY. THE LD. CIT(A) HAS TRIED TO JUSTIFY THE BEL IEF OF THE AO ON THE GROUND THAT IN THE ASSESSMENT ORDER FOR A.Y.2007-08 I NCOME RECEIVED FROM TENANCY HAS BEEN HELD TO BE TAXABLE UNDER THE HEA D INCOME FROM HOUSE PROPERTY. IF THIS IS THE ALLEGED MATERIAL, THEN ALSO SAME CANNOT BE HELD TO BE RELEVANT FOR REOPENING THE CASE U/S.14 7, BECAUSE IT IS A MATTER OF RECORD THAT THE ASSESSMENT ORDER FOR A.Y.200 7-08 HAS BEEN PARTLY REVERSED BY THE TRIBUNAL, WHEREIN IT WAS HELD THAT THE INCOME OF DHANRAJGIR BUSINESS P. LTD. 11 THE ASSESSEE IN THE FORM SERVICE CHARGES AND OTHER RE CEIPTS FROM THE FLATS NOT OWNED BY THE ASSESSEE CANNOT BE TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IT IS ALSO A MATTER OF REC ORD THAT DURING THE RELEVANT ASSESSMENT YEARS 2003-04 & 2004-05, ASS ESSEE WAS NOT THE OWNER OF THE FLATS AS THEY WERE PURCHASED IN THE SUBSEQUENT YEAR. HENCE FORTH THE INCOME FROM THESE FLATS WERE ACCEPTED TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THIS FINDI NG OF FACT ITSELF VITIATES THE FORMATION OF REASON TO BELIEVE BY THE AO . IN ANY CASE IN THE REASONS RECORDED, THERE IS NOT A WHISPER ABOUT TH E FINDINGS RELATING TO A.Y.2007-08. ANOTHER PECULIAR FACT IS THAT , IN THE REASONS RECORDED THE AO HAS ENTERTAINED REASON TO BELIEVE TH AT INCOME OF THE ASSESSEE SHOULD BE ASSESSED UNDER THE HEAD INCOME FR OM HOUSE PROPERTY WHEREAS IN THE IMPUGNED ASSESSMENT ORDER PAS SED IN PURSUANCE OF SUCH REASON RECORDED THE ASSESSING OFF ICER HAS TREATED THE INCOME TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. THUS, THE VERY PREMISE AND THE BASIS ON WHICH REASO NS WERE RECORDED AND REASON TO BELIEVE WAS ENTERTAINED BY THE AO HAS ITSELF BEEN NEGATED BY HIM IN THE ASSESSMENT ORDER. THUS, SUC H A REASONS RECORDED CANNOT CLOTHE THE AO WITH THE JURISDICTION TO REOPEN THE CASE WITHIN THE SCOPE OF SECTION 147, BECAUSE THERE IS NO REASON TO BELIEVE BASED ON ANY TANGENT MATERIAL ON RECORD OR ANY LIVE LINK NEXUS WITH THE INCOME CHARGEABLE TO TAX ESCAPING ASSESSMENT. FU RTHER THE DHANRAJGIR BUSINESS P. LTD. 12 ASSESSEE IN ITS OBJECTIONS HAS CATEGORICALLY BROUGH T TO THE NOTICE OF THE AO THAT THE FLATS WERE ACQUIRED BY THE ASSESSEE IN THE SUBSEQUENT YEAR. DURING THESE PERIOD THE FLATS WERE TAKEN ON TENAN CY BASIS, FROM WHICH THE ASSESSEE WAS EARNED THE INCOME AND IT WAS ON LY FROM THE ASSESSMENT YEAR 2005-06, WHEN THE ASSESSEE HAD PURC HASED THESE FLAT AND BECAME THE OWNER. IT WAS IN THIS BACKGROUN D THAT IN A.Y.2007- 08, THE ASSESSEE ADMITTED THAT INCOME FROM FLATS OWNED BY THE ASSESSEE SHOULD BE ASSESSED AS INCOME FROM HOUSE PR OPERTY. UPTO THE ASSESSMENT YEAR 2001-02, THE DEPARTMENT ITSELF HAS TR EATED THE LICENCE FEE AND THE SERVICE CHARGES FROM THE FLAT TAKE N ON TENANCY BASIS AS BUSINESS INCOME. THUS, THE MATERIAL ON RECOR D ITSELF NEGATES THE PREMISE ON WHICH THE AO HAS ENTERTAINED HIS REASON TO BELIEVE WHICH IS BASED ON WRONG PRESUMPTION OF FACTS AND THER EFORE, SAME CANNOT BE HELD TO BE A VALID GROUND FOR REOPENING THE CASE WITHIN THE SCOPE OF SECTION 147. ACCORDINGLY, WE HOLD THAT THE RE ASONS RECORDED BY THE AO FOR REOPENING CASE U/S.147 IS BAD IN LAW AS THERE IS NO REASON TO BELIEVE OR ANY RELEVANT MATERIAL ON THE BAS IS OF WHICH THE ASSESSEES CASE CAN BE REOPENED. ACCORDINGLY, THE E NTIRE PROCEEDINGS INITIATED VIDE NOTICE U/S.148, IS VOID AB INITIO AND CONSEQUENTLY THE ASSESSMENT ORDERS ARE QUASHED. DHANRAJGIR BUSINESS P. LTD. 13 10. SINCE SIMILAR FACTS ARE PERMEATING IN A.Y. 2004- 05, WHEREIN SIMILAR REASON HAVE BEEN RECORDED AS DISCUSSED ABOV E, THEREFORE, THE REASSESSMENT PROCEEDINGS U/S.147 FOR A.Y.2004-05 IS ALSO HELD AS BAD IN LAW. ACCORDINGLY, THE IMPUGNED ASSESSMENT ORDERS F OR BOTH THE YEARS ARE QUASHED. THUS, THE ASSESSEES CROSS OBJECT ION IS TREATED AS ALLOWED. 11. IN WAKE OF THE AFORESAID FINDING THE DEPARTMENTAL APPEALS HAVE BECAME PURELY ACADEMIC AND, THEREFORE THE SAME ARE NOT ADJUDICATED REOPENED AND IS BEING TREATED AS INFRUCTUOUS. 12 . IN THE RESULT, THE DEPARTMENTAL APPEALS ARE DISMIS SED AND ASSESSEES CROSS OBJECTIONS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH DAY OF APRIL 2015. SD/- SD/- SD SD/ - . . B.R. BASKARAN ACCOUNTANT MEMBER SD/ - !' # $ % AMIT SHUKLA JUDICIAL MEMBER MUMBAI, () DATED: 08.04.2015 PATEL DHANRAJGIR BUSINESS P. LTD. 14 -&. * +12 3&2+ / COPY OF THE ORDER FORWARDED TO : (1) 4+ / THE ASSESSEE; (2) 5 / THE REVENUE; (3) ( 6+( ) / THE CIT(A); (4) ( 6+ / THE CIT, MUMBAI CITY CONCERNED; (5) 29 +:, , :, ( ) / THE DR, ITAT, MUMBAI; (6) 9 <) / GUARD FILE. 2+ + / TRUE COPY -&. ( / BY ORDER = / > 5 / (DY./ASSTT. REGISTRAR) , :, ( ) / ITAT, MUMBAI