POOJA R MAHTANEY, MUMBAI V. IT 7(3)(2), MUMBAI

ITA 146/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3182 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 06-04-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 04-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RADHA KATYAL NARAN G
• Assessee Lawyers: NITESH JOSHI D S KA BRA
• Keywords: Capital asset; Gift; Depreciation; Additional evidence; Cost of acquisition; Tangible material; Tax effect
• Section: 143(3); 147; 148

Judgement Text

, LH LHLH LH INCOME TAX APPELLATE TRIBUNAL,MUMBAI - J BENCH , IOU FLAG IOU FLAG IOU FLAG IOU FLAG BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & PAWAN SINGH,JUDICIAL MEMBER /.ITA NO.146/MUM/2013, /ASSESSMENT YEAR-2004-05 MS. POOJA R. MAHTANEY, C/O KABRA ASOCIATES, 204, NIRANJAN, 99 MARINE DRIVE, MUMBAI-400002. PAN:AAHPM3042R VS ITO-7(3)(2), AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020. ( / APPELLANT) ( / RESPONDENT) /ASSESSEE BY : SHRI NITESH JOSHI, D.S.KA BRA (AR) / REVENUE BY : MS. RADHA KATYAL NARANG (DR) ' / DATE OF HEARING : 28- 06 -2016 / DATE OF PRONOUNCEMENT : 24-08-2016 ORDER/ % & IOU F IOU F IOU F IOU FLAG LAGLAG LAG PER PAWAN SINGH, JM 1. THIS APPEAL IS FILED BY ASSESSEE AGAINST OF CIT(A)- 18, MUMBAI DATED 31.10.2012 FOR ASSESSMENT YEAR (AY) -2004-05. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME FOR RELEVANT AY ON 30.11.2004 DECLARING TOTAL INCOME OF RS. 7,54,996/- . THE RETURN OF INCOME WAS PROCESSED U/S 143(1) OF THE ACT ON 30.12.2005. SUBS EQUENTLY, THE RETURN OF INCOME WAS REOPENED U/S 147 OF THE ACT ON 13.02.2008. NOTICE U /S 148 WAS SERVED UPON THE ASSESSEE, WHO FILED REPLY DATED 31.03.2008. IN REPL Y, THE ASSESSEE SUBMITTED /CONTENDED THAT NO INCOME ESCAPED ASSESSMENT AND STATED THAT R ETURN ALREADY FILED MAY BE CONSIDERED IN COMPLIANCE OF NOTICE U/S 148 OF THE A CT. THE REASONS RECORDED WERE ALSO DEMANDED BY ASSESSEE. FOLLOWING REASONS FOR RE-OPEN ING OF ASSESSMENT WAS SUPPLIED TO THE ASSESSEE; AFTER GOING THROUGH THE RETURN OF INCOME FILED BY THE ASSESSEE FOR A.Y. 2004-05 IN THE CASE OF MRS. POOJA R. MAHATANEY, IT IS SEEN THA T WHILE COMPUTING SHORT TERM CAPITAL GAIN, THE ASSESSEE HAS REDUCED MANAGEMENT F EES OF RS. 16,54,459/- WHICH RESULTED IN CARRY FORWARD OF SHORT TERM CAPITAL LOS S OF RS. 13,90,499/-. THE TAX EFFECT INVOLVED IS RS. 2,63,960/-. WHILE MAKING RE-ASSESSMENT, THE ASSESSING OFFICER ( AO) OBSERVED THAT THE ASSESSEE WHILE COMPUTING SHORT TERM CAPITAL GAIN (STCG) OF R S. 2,66,744/-, ASSESSEE HAS SET 2 ITA NO. 146/M/13- MS. POOJA R. MAHTANEY OFF OF BROUGHT FORWARD SHORT TERM CAPITAL LOSS (STC L) OF RS. 2784/-. AND FURTHER, THE ASSESSEE HAS REDUCED THE MANAGEMENT FEES OF RS. 16, 54,459/- TO THE EXTENT OF STCG. ACCORDING TO THE PROVISION OF I.T. ACT, THE MANAGEM ENT FEES IS NOT DEDUCTIBLE FROM CAPITAL GAIN AND TAX INVOLVED IS RS. 2,63,960/- AND FURTHER OBSERVED THAT THERE IS NO AGREEMENT OF FLAT PURCHASED BY ASSESSEE AGAINST THE LTCG OF RS. 34,02,427/- WHICH WAS INVESTED U/S 54ED. THE AO ISSUED SHOW-CAUSE NOTICE AS TO WHY THE MANAGEMENT FEES OF RS. 16,54,459/- SHOULD NOT BE DISALLOWED AND ADD ED BACK TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSEE FILED ITS REPLY AND CONTENDE D THAT THE ASSESSEE IN COMPUTING CAPITAL GAIN EXPENDITURE WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER OF COST OF ACQUISITION OF ASSET AND COST OF IMPROVEMENT THE RETO WHICH ARE ALLOWABLE AS A DEDUCTION FROM THE VALUE OF CONSIDERATION RECEIVED AS A RESULT OF TRANSFER OF CAPITAL ASSET IN QUESTION, IT WAS FURTHER CONTENDED THAT THE MANA GEMENT FEES IS COST OF ACQUISITION AND CAPITAL ASSET, BEING SHARE ETC. IN QUESTION AN D CONSEQUENTLY THE SAME IS DEDUCTIBLE IN COMPUTING THE CAPITAL GAIN. THE AO CONCLUDED THA T ASSESSEE FAILED TO PROVIDE THE DOCUMENTARY EVIDENCE IN RESPECT OF PAYMENT OF MANAG EMENT FEES OF RS. 16,54,459/- DEBITED AGAINST THE STCG AND THE SAME WAS DISALLOWE D IN THE ASSESSMENT ORDER PASSED U/S 143(3) R.W.S. 147 OF THE ACT, DATED 15.10.2008 . AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE FILED THE APPEAL BEFORE THE CIT(A), WHEREI N BESIDES THE ADDITION OF MANAGEMENT FEES, THE VALIDITY OF THE RE-OPENING WAS CHALLENGED. THE CIT(A) UPHELD THE VALIDITY OF RE-OPENING AS WELL AS CONFIRMED THE ADDITION OF MANAGEMENT FEES IN ITS ORDER DATED 23.01.2009. FURTHER AGGRIEVED BY THE O RDER OF LD CIT(A) THE ASSESSEE FILED PRESENT APPEAL BEFORE US RAISING THE FOLLOWING GRO UNDS OF APPEAL: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS )-18, MUMBAI, HEREINAFTER REFERRED TO AS THE 'CIT(APPEALS)', ERRED IN DISMISS ING THE ADDITIONAL GROUND OF APPEAL RAISED BY THE APPELLANT BEFORE HIM. YOUR APPELLANT SUBMITS THAT, ON THE FACTS AND IN TH E CIRCUMSTANCES OF HER CASE, THE ADDITIONAL GROUND CHALLENGING THAT THE RE-OPENING O F THE ASSESSMENT AND THE CONSEQUENTIAL ORDER MADE U/S 143(3) R.W.S. 147 OF T HE IT ACT DATED 15-10-2008 IS BAD-IN-LAW AND WITHOUT JURISDICTION OUGHT TO HAVE B EEN UPHELD. 2. WITHOUT PREJUDICE TO THE GROUND OF APPEAL NO. 1, IT IS SUBMITTED THAT, THE CIT(APPEALS) HAS TAKEN INTO CONSIDERATION IN DISMIS SING THE ADDITIONAL GROUND RAISED BY THE APPELLANT BEFORE HIM, THE CONTENTS OF THE RE MAND REPORT SUBMITTED BY THE ASSESSING OFFICER ON ISSUES WHICH WERE NOT REFERRED TO HIM BY THE CIT(APPEALS). 3. THE CIT(APPEALS) ERRED IN UPHOLDING THE ADDITION MADE BY THE ASSESSING OFFICER BY DISALLOWING THE EXPENDITURE INCURRED BY THE APPE LLANT TOWARDS MANAGEMENT FEES IN COMPUTING CAPITAL GAINS AND CONSEQUENTLY DISMISS ING THE APPELLANT'S APPEAL BY CONCLUDING THAT THE ASSESSING OFFICER HAS RIGHTLY D ISALLOWED THE MANAGEMENT FEES IN ABSENCE OF ANY DOCUMENTARY EVIDENCE FILED. YOUR APPELLANT SUBMITS THAT, ON THE FACTS AND IN TH E CIRCUMSTANCES OF HER CASE, ADEQUATE DOCUMENTARY EVIDENCE TO SUPPORT THE GENUIN ENESS OF THE CLAIM AND THE 3 ITA NO. 146/M/13- MS. POOJA R. MAHTANEY PAYMENT HAVING BEEN MADE AS FILED BEFORE THE CIT(AP PEALS) BY WAY OF ADDITIONAL EVIDENCE IN RESPECT OF WHICH REMAND REPORT WAS CALL ED FOR FROM THE ASSESSING OFFICER OUGHT TO HAVE BEEN CONSIDERED AND ACCORDING LY CLAIM OF THE APPELLANT SHOULD HAVE BEEN ALLOWED. 4. WITHOUT PREJUDICE TO THE ABOVE, IT IS SUBMITTED THAT, THE APPELLANT HAVING FILED THE DOCUMENTARY EVIDENCE IN SUPPORT OF HER CLAIM FOR MA NAGEMENT FEES AND PROOF FOR CONSTRUCTIVE PAYMENT THEREOF, THE CIT(APPEALS) OUGH T TO HAVE BEEN CONSIDERED THE SAME AND DECIDED THE GROUND OF APPEAL RAISED BEFORE HIM ACCORDINGLY. 3. WE HAVE HEARD THE AUTHORISED REPRESENTATIVE (AR) OF ASSESSEE AND DEPARTMENTAL REPRESENTATIVE (DR) FOR REVENUE AND PERUSED THE MAT ERIAL AVAILABLE ON RECORD. LD. AR OF THE ASSESSEE ARGUED THAT IN THE REASONS OF RE-OP ENING, THE AO HAS NOT MADE ANY REFERENCE THAT ANY INCOME CHARGEABLE TO TAX HAS ESC APED ASSESSMENT FOR THE RELEVANT AY OR THE SOME OTHER TANGIBLE MATERIAL CAME TO HIS KNO WLEDGE SUBSEQUENTLY AND THUS THE RE- OPENING IS BAD-IN-LAW. LD. AR OF ASSESSEE RELIED UP ON THE DECISIONS OF JURISDICTIONAL HIGH COURT IN HINDUSTAN LEVER LTD. VS. ACIT 268 ITR 332 AND IN NIVI TRADING LTD. VS. UNION OF INDIA & ORS. (2015) 375 ITR 308 (BOM). LD. DR FOR THE REVENUE HAS ARGUED THAT REASONS HAVE CORRECTLY BEEN RECORDED BY THE AO . THE ASSESSEE HAS NOT FILED ANY OBJECTION THAT THE RE-OPENING OF THE ASSESSMENT WAS INVALID. THE ASSESSEE FAILED TO SHOW ANY DOCUMENTARY EVIDENCE ABOUT THE PAYMENTS OF MANA GEMENT FEES. LD. DR FOR REVENUE FURTHER STRONGLY SUPPORTED THE ORDERS OF AU THORITIES BELOW. 4. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WHILE RECORDING THE REASONS OF RE-OPENING, THE AO HAS NOT RECORDED THAT ANY INCOME OF THE ASSESSEE ESCAPED THE ASSESSM ENT. DURING THE FIRST APPELLATE PROCEEDING, THE ASSESSEE SPECIFICALLY AGITATED THAT NO FRESH TANGIBLE MATERIAL CAME TO THE POSSESSION OF AO ON THE BASIS OF WHICH, THE AO HAVE REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. ON THE ADDITIONAL GROUND REGARD ING THE RE-OPENING PROCEEDING, THE LD. CIT(A) CALLED THE REMAND REPORT DURING THE APPE LLATE PROCEEDING, IN THE REMAND REPORT, THE AO SUBMITTED THAT A NOTICE U/S 148 OF T HE ACT WAS ISSUED ON THE GROUND THAT THE INCOME ASSESSABLE TO TAX HAD ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT. WE HAVE ONCE AGAIN PERUSED THE REASONS RECORDED (PAGE 7 OF PB), WHEREIN WE HAVE NOT FIND ANY REFERENCE REGARDING THE SATISF ACTION OF AO THAT ANY INCOME ESCAPED ASSESSMENT. HONBLE BOMBAY HIGH COURT IN NI VI TRADING LTD. (SUPRA) HAS HELD AS UNDER: THE PRINCIPLE CONDITION FOR ISSUANCE OF NOTICE IS TO BE FOUND IN SECTION 147 OF INCOME-TAX ACT AND THAT IS ON THE REASON TO BELIEF THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR THAN ASSESSING OFFICER, MAY SUBJECT TO THE PROVISIONS OF SECTION 148 TO 153 ASSESSEE OR REASSESSES SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPE D ASSESSMENT AND WHICH COMES 4 ITA NO. 146/M/13- MS. POOJA R. MAHTANEY TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PRO CEEDINGS UNDER THIS SECTION, OR RE- COMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE OR A NY OTHER ALLOWANCE AS THE CASE MAY BE. IN THE PRESENT CASE, THE RESPONDENTS DO NOT STATE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. ALL THAT REVENUE DES IRES IS VERIFICATION OF CERTAIN DETAILS AND PERTAINING TO THE GIFT. THAT IS NOT FOU NDED ON THE BELIEF THAT ANY INCOME WHICH IS CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT A ND, HENCE, SUCH VERIFICATION IS NECESSARY. THAT BELIEF IS NOT RECORDED WHICH ALONE WOULD ENABLE THE ASSESSING OFFICER TO PROCEED. THUS, THE REASONS MUST BE FOUND ED ON THE SATISFACTION OF THE AO THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMEN T. ONCE, THAT IS NOT TO BE FOUND THEN WE ARE NOT IN A POSITION TO SUSTAIN THE IMPUGN ED NOTICE. ADMITTEDLY, IN THE PRESENT CASE NO SUCH SATISFACTIO N, THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT IS RECORDED BY THE AO, THUS THE NOTICE OF RE-OPENING WAS INVALID. THUS RESPECTFULLY FOLLOWING THE DECISION O F HONBLE JURISDICTIONAL HIGH COURT AS REFERRED ABOVE THE NOTICE OF RE-OPENING OF THE A SSESSMENT IS INVALID, HENCE, THE ORDER PASSED U/S 143(3) R.W.S. 147 OF THE ACT BECAME INCO NSEQUENTIAL AND THE SAME IS DECLARED AS SUCH. THUS, THE GROUND NO.1 RAISED IN THE PRESEN T APPAL IS ALLOWED. 5. AS WE HAVE DECLARED THE NOTICE U/S 148 OF THE I.T. ACT DATED 13.02.2008 IS INVALID, THUS, ALL CONSEQUENTIAL ACTION INITIATED BY AO AUTOMATICA LLY BECAME INVALID. AS WE HAVE ALREADY DECLARED THE RE-OPENING AS INVALID, THUS TH E DISCUSSION OF OTHER GROUNDS OF APPEAL RAISED BY THE ASSESSEE HAS BECOME ACADEMIC I N NATURE. 6. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH AUGUST, 2016. # $ %& '() 24 VXLR ,20 16 -. / SD/- SD/- ( /RAJENDRA) ( IOU FLAG IOU FLAG IOU FLAG IOU FLAG / PAWAN SINGH) & / ACCOUNTANT MEMBER / JUDICIAL MEMBER % $ ). /MUMBAI, '() /DATE: 24.08.2016 SK ' '() *) / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ )12 $ 3 , 4. THE CONCERNED CIT / )12 $ 3 5. DR C BENCH, ITAT, MUMBAI / 45- (62 , LH LHLH LH ) , . . . % $ ). 6. GUARD FILE/ - . 4 //TRUE COPY// #( $ / BY ORDER, / ) DY./ASST. REGISTRAR 62 , % $ ). /ITAT, MUMBAI.