THE PHOENIX MILLS LTD, MUMBAI V. ASST CIT CEN CIR 47, MUMBAI

ITA 1109/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1947 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 24-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Tangible material; Reason to believe
• Section: 143(3); 153A; 147; 148; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C, MU MBAI 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. 462, SENAPATI BAPAT MARG, LOWER PAREL, MUMBAI - 400013 PAN: AAACP3325J VS. ASSISTANT COMMISSIONER OF INCOME TAX,CENTRAL CIRCLE- 47, MUMBAI. (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 I NCOME-TAX (APPEALS)-50, MUMBAI DATED 23/04/2013 FOR ASSESSMENT YEAR (AY) 20 05-06. 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 REOPENIN G THE ASSESSMENT U/S. 147 OF THE INCOME TAX ACT, 1961. THE REOPENING OF THE A SSESSMENT 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 AP PEAL AT THE TIME OF ISSUE THE NOTICE U/S 148 OF THE ACT. ACCORDINGLY, IT IS PRAYE D 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 V OID. GROUND NO. 3 : WITHOUT PREJUDICE TO GROUND 1 & 2 ABOVE, ON THE FAC TS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED C IT(A) ERRED IN CONFIRMING THE ALLOCATION DONE BY AO AN AMOUNT OF RS. 48,83,79 4 OUT OF SALARIES/ WAGES THE PHOENIX MILLS LTD, AY 2005-06 ITA NO.1109/M/2015 2 TO THE INCOME FROM HOUSE PROPERTY, IGNORING THE FAC TS OF THIS ISSUE. THE APPELLANT PRAYS THAT DISALLOWANCE ON ACCOUNT OF ALL OCATION 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 FAC TS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED C IT(A) ERRED IN CONFIRMING THE ALLOCATION DONE BY AO AN AMOUNT OF RS. 11,67,15 4 OUT OF ADVERTISEMENT AND SALES PROMOTION EXPENSES TO THE INCOME FROM HOU SE PROPERTY, IGNORING THE FACTS OF THIS ISSUE. THE APPELLANT PRAYS THAT D ISALLOWANCE ON ACCOUNT OF ALLOCATION OF ADVERTISEMENT AND SALES PROMOTION EXP ENSES TO THE INCOME FROM HOUSE PROPERTY OF RS. 11,67,154 MAY KINDLY BE DELET ED. GROUND NO. 5 : WITHOUT PREJUDICE TO GROUND 1 & 2 ABOVE, ON THE FAC TS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED C IT(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 FAC TS OF THIS ISSUE. THE APPELLANT PRAYS THAT DISALLOWANCE ON ACCOUNT OF ALL OCATION 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 FACT S AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED C IT(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 HOUS E PROPERTY, IGNORING THE FACTS OF THIS ISSUE. THE APPELLANT PRAYS THAT DISAL LOWANCE ON ACCOUNT OF ALLOCATION OF REPAIRS AND MAINTENANCE EXPENSES TO T HE 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 ACTIV ITIES 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 28 TH OCTOBER 2005 DECLARING TOTAL INCOME AT RS.10,38,49,023/-. T HE ASSESSMENT U/S 143(3) WAS COMPLETED ON 31 ST MAY 2007. SUBSEQUENTLY, SEARCH WAS CONDUCTED AT AS SESSEES PREMISES IN THE MONTH OF FEB 2008. AFTER SEARCH THE ASSESSMENT WAS COMPLETED U/S 153A R.W.S 143(3) ON 29 TH DECEMBER 2010. AGAIN, THE CASE WAS REOPENED ON 29.03.2012. ACCORDINGLY, THE NOTICE U/S 148 WAS ISS UED TO THE ASSESSEE ON 29 TH MARCH 2012 FOR FILING RETURN OF INCOME. THE ASSESSE E FILED RETURN OF INCOME ON 24 TH APRIL 2012 AND DEMANDED REASONS RECORDED FOR REOPE NING OF THE ASSESSMENT. THE REASONS RECORDED FOR REOPENING WAS SUPPLIED TO THE ASSESSEE VIDE OFFICE LETTER DATED 6 TH FEB 2013. THE FOLLOWING REASONS OF REOPENING WERE SUPPLIED; THE PHOENIX MILLS LTD, AY 2005-06 ITA NO.1109/M/2015 3 '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. 15 3A ON 28.11.2008 DECLARING TOTAL INCOME OF RS. 10,36,49,020/-. THE S CRUTINY 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 ENGAG ED IN THE BUSINESS MANUFACTURING AND DISTRIBUTION OF COTTON TEXTILES A ND THE REAL ESTATE DEVELOPMENT. THE ASSESSEE BESIDES OTHER REVENUE REC EIPTS HAS SHOWN INCOME FROM LICENSE FEES AND RENTAL INCOME AND OFFERED THI S INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY CLAIMING STATUTORY DEDUC TION OF 30%. DURING THE YEAR UNDER CONSIDERATION OUT OF, THE TOTAL REVE NUE RECEIPTS OF RS. 45,39,82,689/- THE REVENUE RECEIPT FROM LICENCE FEE S 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. 2 009-10, THE FOLLOWING POINTS CAME TO LIGHT THAT ASSESSEE HAS SHOWN THE RENTAL IN COME SEPARATELY IN THE COMPUTATION UNDER THE HEAD INCOME FROM HOUSE PR OPERTY 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 EXPENDI TURE IS DISALLOWABLE FROM THE PROFIT & LOSS ACCOUNT ON THE FOLLOWING EXPENDIT URE. IN THE CASE OF REPAIRS & MAINTENANCE SINCE THE ASSE SSEE HAS ALSO INCOME FROM SERVICE CHARGES FOR THE COMMON AREA MAI NTENANCE FROM THE TENANTS FOR PROVIDING REPAIRS AND MAINTENANCE FACIL ITY TO THE TENANTS. THE RENTAL INCOME BEING CONSIDERED AS HOUSE PROPERTY IN COME, THE EXPENDITURE FOR REPAIRS AND MAINTENANCE SHALL EXCLUSIVELY BE ALLOTT ED 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 ES CAPED INCOME FROM ASSESSMENT. S L. N O EXPENSES DESERVING ALLOCATION TOTAL EXPENDITURE LESS ALREADY DISALLOWED BY THE ASSESSEE INCOME ESCAPING ASSESSMENT @35.18% RS. RS. RS. 1 SALARY/WAGES 2,49,21,463/- 27,02,200/- (ADDED BY THE ASSESSEE) 81,79,937/- 2 ADVERTISEMENT & SALES PROMOTION 53,10,074/- 11,67,154/- 3 SECURITY CHARGES 3,23,82,854/- - 71,17,751/- 4 MISCELLANEOUS EXP. 72,71,598/- - 15,98,297/- 5 REPAIRS MAINTENANCE(DISALLOW ABLE @90%) 65,46,365/- 58,91,728/- TOTAL 2,39,54,867/- THE PHOENIX MILLS LTD, AY 2005-06 ITA NO.1109/M/2015 4 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 ESCAP ED FROM ASSESSMENT WITHIN THE MEANING OF PROVISIONS OF SECTION 147 OF THE IT ACT, 1961. 3. THE ASSESSEE CONTESTED THE REOPENING OF THE ASSESSM ENT AND FILED ITS OBJECTION. THE ASSESSEE CONTENDED THAT ORIGINALLY RETURN OF IN COME WAS FILED ON 28 TH OCTOBER 2005 AND THE NOTICE U/S 143(2) WAS SERVED O N ASSESSEE ON 26 TH OCTOBER 2006. THE ASSESSMENT ORDER U/S 143(3) WAS PASSED ON 31 ST MAY 2007. IN THE ASSESSMENT ORDER, THE AO MADE CERTAIN ADDITIONS. IT WAS FURTHER CONTENDED THAT ALL THE RELEVANT MATERIAL FACTS WERE DISCLOSED FULL Y AND TRULY BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS. THE AO PASSED TH E ASSESSMENT ORDER AFTER CONSIDERING ALL THE MATERIAL ON RECORD AND AFTER AP PLICATION OF MIND. THE ASSESSEE CONTESTED THE ADDITIONS/DISALLOWANCE IS MADE BY AO, BEFORE COMMISSIONER (APPEALS). THE COMMISSIONER (APPEALS) PASSED ORDER U/S 250 ON 4 TH 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 AG AINST THE ORDER OF TRIBUNAL BEFORE THE HONBLE BOMBAY HIGH COURT WHICH IS PENDI NG. THE ASSESSEE ALSO CONTENDED THAT REASONS FOR REOPENING DO NOT INDICA TE THAT THERE IS ANY FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY AL L 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 F ROM 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 ORDE R PASSED U/S 147 R.W.S 143(3) ON 25 TH MARCH 2013. AGGRIEVED BY THE ORDER OF AO, THE ASS ESSEE FILED APPEAL BEFORE COMMISSIONER (APPEALS) BUT WITHOUT ANY SUCCE SS. HENCE, FURTHER AGGRIEVED BY THE ORDER OF COMMISSIONER (APPEALS) TH E 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 L D AR FOR ASSESSEE WOULD ARGUE THAT FOR THE YEAR UNDER CONSIDERATION THE ASS ESSEE FILED RETURN OF INCOME ON THE PHOENIX MILLS LTD, AY 2005-06 ITA NO.1109/M/2015 5 28.10.2005. THE ASSESSMENT U/S 143(3) WAS COMPLETED ON 31 ST 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 29 TH DECEMBER 2010. THE ASSESSEE CONTENDED THAT ORIGIN ALLY RETURN OF INCOME WAS FILED ON 28 TH OCTOBER 2005 AND THE NOTICE U/S 143(2) WAS SERVED ON ASSESSEE ON 26 TH OCTOBER 2006. THE ASSESSMENT ORDER U/S 143(3) WAS PASSED ON 31 ST MAY 2007. IN THE ASSESSMENT ORDER, THE AO MADE CER TAIN ADDITIONS. IT WAS FURTHER CONTENDED THAT ALL THE RE LEVANT MATERIAL FACTS WERE DISCLOSED FULLY AND TRULY BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS. THE AO PASSED THE ASSESSMENT ORDER AFTER CONSIDERING AL L THE MATERIAL ON RECORD AND AFTER APPLICATION OF MIND. THE ASSESSEE CONTESTED T HE ADDITIONS/DISALLOWANCE IS MADE BY AO, BEFORE COMMISSIONER (APPEALS). THE COMM ISSIONER (APPEALS) PASSED ORDER U/S 250 ON 4 TH 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 REL IEF. 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 FILIN G 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 FUL LY 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 C ASE OF ASSESSEE AS THERE IS NO NEW MATERIAL FOUND. THE CONTENTION OF ASSESSEE W AS NOT ACCEPTED AND THE AO PROCEEDED FOR REASSESSMENT AND MADE VARIOUS ADDITIO NS IN THE ORDER PASSED U/S 147 R.W.S 143(3) ON 25 TH MARCH 2013. THE LD AR FOR THE ASSESSEE ALSO RELIE D ON THE DECISION OF THIS TRIBUNAL DATE 06.10.2016, IN I TSS NO. 48 TO 52/M/2015 FOR AY 2006-07 TO 2010-100, WHEREIN THE ASSESSEE HAS CH ALLENGED THE ASSESSMENT REOPENED BY NOTICE U/S 148 DATED 29.03.2012. ON TH E OTHER HAND THE LD DR FOR THE REVENUE RELIED ON THE ORDER OF AUTHORITIES BELO W. THE LD DR WOULD ARGUE THAT THE PHOENIX MILLS LTD, AY 2005-06 ITA NO.1109/M/2015 6 FACT OF EACH YEAR HAS TO BE CONSIDERED SEPARATELY A ND PRAYED THAT THE ORDER OF LD COMMISSIONER (APPEALS) DOES NOT REQUIRE ANY INTERFE RENCE. 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF THE PAR TIES 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 MATERI AL 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. THE RE 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 I N 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 DET AILS ABOUT THE VARIOUS ADDITIONS. AND ALL THOSE ADDITIONS ON ACCOUNT OF EX PENSES 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 STRENGT HEN BY THE DECISIONS OF HONBLE BOMBAY HIGH COURT IN GERMAN REMEDIES VS DCIT (287IT R 494) AND IN HINDUSTAN LIVER LTD VS R.B. WADKAR (268 ITR 332). T HUS, 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 25 TH 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 THE PHOENIX MILLS LTD, AY 2005-06 ITA NO.1109/M/2015 7 BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/