SAIF ALI KHAN MANSURALI, MUMBAI V. ACIT 11(1), MUMBAI

ITA 1093/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48993 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 23-05-2011
• Assessment Year: 2000-2001
• Appeal Filed On: 17-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C G K NAIR
• Assessee Lawyers: K K LALKAKA
• Keywords: Reopening of assessment; Reason to believe; Reassessment proceedings
• Section: 142(1); 143(1); 195; 147; 148

Judgement Text

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 AGA INST THE ORDER OF CIT(A)- XI, MUMBAI, PASSED ON 3/12/2008 FOR THE ASSESSMENT YEAR 2000-01 WHEREIN THE ASSESSEE HAS RAISED THE FOLLOWI NG GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN CASE, THE LEARNED ASSESSING OFFICER HAS ERRED IN INITIATI NG REASSESSMENT PROCEEDINGS U/S 148 OF THE INCOME ACT, ALTHOUGH THE CONDITIONS PRECEDENT TO THE ISSUE OF NOTICE UND ER SECTION 148 OF THE INCOME TAX ACT FOR REOPENING THE ASSESSMENT DID NOT EXIST. 2. WITHOUT PREJUDICE TO THE ABOVE, AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED C IT(A) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF RS. 3,23,63 5/- MADE BY THE ASSESSING OFFICER UNDER SECTION 80 RR OF THE IN COME TAX ACT ON THE ALLEGED GROUND THAT THE ASSESSEE DID NOT EXE RCISE PROFESSION IN EARNING US $ 10,000 EQUIVALENT TO RS. 4,31,500/- FROM SUPERSTAR PROMOTIONS, 1625 SOUTH BUSH, FRESNO, USA MERELY ITA NO. 1093/M/09 SAIF ALI KHAN MANSURALI 2 BECAUSE THE SHOW WAS NOT PERFORMED ALTHOUGH THE REM ITTANCE 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 ASSES SEE 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 BAL ANCE SHEET AND PROFIT AND LOSS ACCOUNT. THE RETURN WAS PROCESSED U /S 143(1) OF THE ACT, 1961. SUBSEQUENTLY, THE CASE WAS REOPENED BY I SSUING 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 FILED 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/- (RUP EES TWENTY LACS ONLY) MADE BY CHEQUE. FOR RENDERING SER VICES AS ARTIST IN THE FIRM KACHCHE DHAAGE. M/S TIPS FILMS PVT. LTD. IN THEIR UNDATED LETTER HAS ALSO INFORMED THAT THE CAS H 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 CHA RGEABLE 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 LET TER 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 NOTIC E 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 DEE MED TO BE FILED 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. ITA NO. 1093/M/09 SAIF ALI KHAN MANSURALI 3 5. AS REGARDS CASH PAYMENTS OF RS. 20,00,000/-, THE ASSESSEE WAS ASKED TO EXPLAIN WHY THE SAID CASH PAYMENT OF RS. 2 0,00,000/- WAS NOT ACCOUNTED IN THE BOOKS, AND IN REPLY, THE AR OF THE ASSESSEE DESIRED TO CROSS EXAMINE THE PERSON REPRESENTING TI PS FILMS PVT. LTD., IN ORDER TO DISPROVE THE SAID ALLEGATION. ON CROSS EXAMINATION, IT CAME TO THE LIGHT THAT THE FILM KACHCHE DAAGE WAS RELEAS ED IN FEBRUARY, 1999 AND IT WAS STATED BY THE DIRECTOR OF TIPS FILM S PVT. LTD. THAT THE CASH PAYMENT WAS MADE PRIOR TO THE RELEASE OF THE F ILM IN 1999. THEREFORE, THE ASSESSING OFFICER CONCLUDED THAT SIN CE THE PAYMENTS DO NOT PERTAIN TO AY 2000-01, THE SAME WAS NOT CONSIDE RED FOR THE ASSESSMENT. HOWEVER, THE ASSESSING OFFICER DISALLOW ED AN AMOUNT OF RS. 3,23,625/- U/S 80RR OF THE ACT AND THE FACTS PE RTAINING TO THIS DISALLOWANCE ARE THAT THE ASSESSEE HAD CLAIMED DEDU CTION U/S 80 RR TO THE TUNE OF RS. 18,72,2996/- BEING 75% OF FOREIG N 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 ASSESSI NG OFFICER IN HIS ORDER. AFTER CONSIDERING THE SUBMISSIONS, THE A SSESSING OFFICER HELD THAT THOUGH THE AMOUNT OF RS. 4,31,500/- WAS I NITIALLY RECEIVED FOR PERFORMING A SHOW, SUBSEQUENTLY NO SHOWS WERE H ELD. 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 EXERCISE D HIS PROFESSION, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSE SSEE WILL NOT BE ELIGIBLE FOR DEDUCTION U/S 80 RR, HENCE RS. 3,23,62 5/- 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 OF FICER. 6. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSING OFFICER HAS REOPENED THE ASSESSM ENT 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 EXAMINA TION OF THE ISSUE, ITA NO. 1093/M/09 SAIF ALI KHAN MANSURALI 4 THE ASSESSING OFFICER CAME TO KNOW THAT THE AMOUNT RECEIVED BY THE ASSESSEE IS PERTAINING TO THE AY 1999-2000, THEREFO RE, 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 HONBLE JURISDICTIO NAL HIGH COURT IN THE CASE OF CIT VS. JET AIRWAYS (I) LTD., [2010] 19 5 TAXMAN 117 (BOM.). 7. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE HAS RELIED ON THE ORDERS OF THE AUTHORITIES BELOW A ND SUBMITTED THAT THE AMOUNT OF INCOME ESCAPED ON THE BASIS OF WHICH ASSESSMENT FOR THE YEAR UNDER CONSIDERATION WAS REOPENED HAS ALREA DY BEEN ADDED IN THE REASSESSMENT COMPLETED FOR AY 1999-00 AND CONTE NDED THAT JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF CI T VS. JET AIRWAYS (I) LD. (SUPRA) IS NOT APPLICABLE TO THE CASE OF TH E 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 TH E ASSESSMENT ON PARTICULAR ISSUE AND THE ASSESSMENT WAS MADE ON ANO THER ISSUE. IN THIS CONTEXT, WE REFER TO THE HONBLE JURISDICTIONA L HIGH COURT IN THE CASE OF CIT VS. JET AIRWAYS (I) LTD., [2010] 195 TA XMAN 117 (BOM.) WHEREIN SIMILAR LEGAL ISSUE CAME UP FOR CONSIDERATI ON BEFORE THE HONBLE COURT AND THE COURT IN ITS ORDER VIDE PARA NO. 16 HELD AS UNDER:- EXPLANATION 3 LIFTS EMBARGO, WHICH WAS INSERTED BY JUDICIAL INTERPRETATION, ON THE MAKING OF AN ASSESSMENT OR R EASSESSMENT ON GROUNDS OTHER THAN THOSE ON THE BASIS OF WHICH A NOTICE WAS ISSUED UNDER SECTION 148 SETTING OUT THE REASONS FO R 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 ASSE SSMENT OR ITA NO. 1093/M/09 SAIF ALI KHAN MANSURALI 5 REASSESSMENT ON ANOTHER ISSUE WHICH CAME TO HIS NOT ICE DURING THE PROCEEDINGS. THIS INTERPRETATION WILL NO LONGER HOLD THE FILED AFTER THE INSERTION OF EXPLANATION 3 BY THE FINANCE ACT (NO.2) OF 2009. HOWEVER, EXPLANATION 3 DOES NOT AND CANNOT OV ERRIDE THE NECESSITY OF FULFILLING CONDITIONS SET OUT IN THE S UBSTANTIVE PART OF SECTION 147. AN EXPLANATION TO A STATUTORY PROVISIO N 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 OFFICER 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 ESCAP ED ASSESSMENT AND WHICH, COMES TO HIS NOTICE DURING TH E COURSE OF THE PROCEEDINGS. HOWEVER, IF AFTER 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 T O BELIEVE HAD ESCAPED ASSESSMENT, HAS AS A MATTER OF FACT NOT ESC APED ASSESSMENT, IT IS NOT OPEN TO HIM INDEPENDENTLY TO ASSESS SOME OTHER INCOME. IF HE INTENDS TO DO SO, A FRESH NOTIC E 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 ES CAPED ASSESSMENT, HAS AS A MATTER OF FACT, NOT ESCAPED ASSESSMENT, IT IS NOT OPEN TO THE ASSESSING OFFICER INDEPENDENTLY TO ASSESS SOME OTHE R INCOME. IN THE PRESENT CASE, THE ASSESSING OFFICER REOPENED THE AS SESSMENT FOR THE REASON TO BELIEVE THAT THE CASH PAYMENT OF RS. 20,0 0,000/- RECEIVED BY THE ASSESSEE FROM M/S TIPS FILMS PVT. LTD. WAS N OT RECORDED IN THE BOOKS OF ACCOUNT AND, THEREFORE, THE SAME HAD ESCAP ED ASSESSMENT. WHILE MAKING ASSESSMENT THE ASSESSING OFFICER HAD M ADE AN ASSESSMENT ON A DIFFERENT GROUND IN RESPECT OF FORE IGN 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 ASSE SSMENT YEAR 1999-2000, WE FIND NO MERIT IN THE SAME KEEPING IN VIEW THAT THE UNIT OF ASSESSMENT IS ASSESSMENT YEAR AND EVERY ASSESSME NT YEAR IS DIFFERENT. THE VALIDITY OF THE REOPENING EACH ASSES SMENT YEAR HAS TO BE DECIDED ON THE BASIS OF THE FACTS OF THAT YEAR INCL UDING THE REASONS RECORDED BY THE AO FOR REOPENING OF ASSESSMENT OF T HAT YEAR. THE ITA NO. 1093/M/09 SAIF ALI KHAN MANSURALI 6 ABOVE JUDGEMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF JET AIRWAYS (I) LTD. (SUPRA) IS SQUARELY APPLIES TO THE FACTS OF THE ASSESSEES CASE. WE, THEREFORE, RESPECTFULLY FOLLOW ING THE SAID JUDGMENT OF THE HONBLE 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 ALLO WED. PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 27 TH MAY, 2011. SD/- SD/- (P.M. JAGTAP) (V. DURGA RA O) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI, DATED: 27 TH 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. ITA NO. 1093/M/09 SAIF ALI KHAN MANSURALI 7 S.NO. DESCRIPTION DATE INTLS 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 THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 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