CHAMBERS EQUITY & FINANCIAL CO.LTD, MUMBAI V. ITO 3(1)(3), MUMBAI

ITA 1462/MUM/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3514 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 16-05-2013
• Assessment Year: 2002-2003
• Appeal Filed On: 22-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SHRIKANT CHATURVEDI
• Keywords: Business income; Difference of opinion; Change of opinion
• Section: 143(3); 147

Judgement Text

. , IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI , BEFORE SHRI R. K. GUPTA , JM ITA NO. 1 462 / MUM/ 20 1 3 ( ASSESSMENT Y EAR : 200 2 - 20 03 ) CHAMBERS EQUITY & FINANCIAL CO. LTD., 410, DEV PLAZA, SV ROAD, ANDHERI WEST, MUMBAI - 400 058 VS. ITO 3(1)(3), MUMBAI - 400 020 PAN/GIR NO. : A A ACC 3505 F ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : SHRI SHRIKANT CHATURVEDI /REVENUE BY : SHRI ARUN KUMAR DATE OF HEARING : 2 1 ST MAY , 201 3 DATE OF PRONOUNCEMENT : 12/06/ 2013 O R D E R TH I S APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 21 - 1 - 2013 OF CIT(A) - 6 , MUMBAI RELA TING TO THE ASSESSMENT YEAR 200 2 - 03 . 2 . THE ASSESSEE IN ITS APPEAL IS OBJECTING IN CONFIRMING THE REOPENING OF THE ASSESSMENT UNDER SECTION 147 OF THE ACT . 3 . IN THIS CASE, THE ORIGINAL ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) ON 30 - 11 - 2004 AND THEREAFTER THE ASSESSMENT WAS REOPENED AFTER RECORDING THE REASONS. AFTER COMPLETING THE ASSESSMENT THE AO NOTICED THAT THE ASSESSEE HAS BEEN RECEIVING RENT FR OM M/S RED HAT INDIA PVT. LTD. AMOUNTING TO RS. 7,20,000/ - , WHICH HAS BEEN TREATED BY IT AS INCOME FROM BUSINESS CENTRE OPERATIONS. HOWEVER, IN HIS VIEW THAT THE ASSESSEE HAS LET OUT THE PROPERTY AGAINST WHICH RENT HAS BEEN RECEIVED BELONGED TO SHRI SRIKANT CHATURVEDI. THE AO ALSO NOTED THAT THE ASSESSEE IS THE ITA NO. 1462 /20 1 3 2 OWNER OF THE PROPERTY, THEREFORE, INCOME FROM THE SUBLETTING OF THE PROPERTY HAS TO BE TREATED AS INCOME FROM OTHER SOURCES. ACCORDINGLY, THE ASSESSMENT COMPLETED WAS REOPENED. 4 . IN APPEAL, LEARNED CIT(A) CONFIRMED THE ACTION OF THE AO. 5 . NOW, THE ASSESSEE IS IN APPEAL HERE BEFORE THE TRIBUNAL. 6 . LEARNED COUNSEL OF THE ASSESSEE INVITED THE ATTENTION OF THE BENCH TO THE ORIGINAL ASSESSMENT FROM WHERE THE AO HAS MENTIONED THAT THE ASSESSEE IS E NGAGED IN THE BUSINESS OF OPERATING BUSINESS CENTRE AND ALSO RECEIVED ASSIGNMENT FOR MONITORING OF ACCOUNTING AND REPORTING SYSTEMS. THE DETAILS HAVE BEEN VERIFIED. IT WAS FURTHER SUBMITTED THAT THE AO ASKED THE COPY OF AGREEMENT OF RENT, WHICH WAS FILED BEFORE HIM. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAS EXPLAINED THE AO VIDE LETTER DATED 14 - 10 - 2004 THAT COMPANY HAS TAKEN AS RENT FURNISHED OFFICE PREMISES SITUATED AT B - 133, MITTAL TOWER, NARIMAN POINT, MUMBAI ON RENT FROM SHRI SRIKANT CHATURVEDI . THE ASSESSEE HAS RECEIVED RS. 60,000/ - FROM RED HAT INDIA PVT.LTD. AS USAGE CHARGES. THEREAFTER THE AO AFTER CONSIDERING THE LETTERS AND SUBMISSION, HAS ACCEPTED THE USAGE CHARGES FROM RED HAT INDIA PVT. LTD. AS BUSINESS INCOME. NOW, TREATING THE SAME CHA RGES AS INCOME FROM OTHER SOURCES AFTER REOPENING OF THE ASSESSMENT WAS MERELY ON ACCOUNT OF CHANGE OF OPINION, WHICH IS NOT PERMISSIBLE. RELIANCE WAS PLACED ON THE DECISION OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF IDEA CELLULAR LTD. VS. DCIT, REPOR TED IN [2008] 301 ITR 0407 AND IN THE CASE OF WYETH (INDIA) PVT. LTD, REPORTED IN [1982] 137 ITR 0020 (BOM) . COPIES OF THESE JUDGMENTS WERE ALSO FILED. ITA NO. 1462 /20 1 3 3 7 . ON THE OTHER HAND, LEARNED DR PLACED STRONG RELIANCE ON THE ORDER OF THE AO LAND CIT(A). 8 . AFTER CONSIDERING THE SUBMISSION AND PERUSING THE MATERIAL ON RECORD, I FOUND THAT THE REOPENING OF THE ASSESSMENT WAS NOT JUSTIFIED. I NOTED THAT THE AO HAS MADE ENQUIRY IN RESPECT OF RENT RECEIVED FROM M/S RED HAT INDIA PVT. LTD.. THE AGREEMENT OF RENT WAS ALS O EXAMINED. THEREAFTER IT WAS VIEWED BY THE AO THAT THE ASSESSEE HAS TAKEN PREMISES WHICH IS USED BY THE ASSESSEE FOR ITS BUSINESS USE AS WELL AS HAS GIVEN TO OTHERS FOR BUSINESS PURPOSES. ACCORDINGLY, THE USAGE CHARGES RECEIVED BY THE ASSESSEE TREATED AS BUSINESS INCOME. NOW, THE AO HAS REOPENED THE ASSESSMENT PLACING RELIANCE ON THE CERTAIN DECISION THAT SUCH INCOMES ARE ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. THERE ARE VARIOUS OTHER DECISIONS ALSO AVAILABLE WHEREBY IT HAS BEEN HELD THAT IF THE BUSINESS IS GIVEN FOR COMMERCIAL USE AND THE ASSESSEE IS TAKING CARE OF THE BUSINESS PREMISES, THEN THE RECEIPT ON ACCOUNT OF COMMERCIAL USE OF BUSINESS TO BE TREATED AS THE BUSINESS INCOME. THEREFORE, THE ISSUE IS A DEBATABLE ONE. EVEN OTHERWISE, THE AO HAS ADOPTED ONE VIEW THAT INCOME FROM M/S RED HAT PVT LTD. IS INCOME FROM BUSINESS WHILE PASSING THE ORDER UNDER SECTION 143(3). IT IS ALSO CLEAR FROM THE FACTS THAT PROPER ENQUIRY HAS BEEN MADE BY THE AO BEFORE ACCEPTING THE CLAIM OF THE ASSESSEE AS BUSINESS INCOME. NOW, REOPENING OF THE ASSESSMENT ON THE SAME ISSUE, IN MY VIEW, IS A CHANGE OF OPINION, WHICH IS NOT PERMISSIBLE. ITA NO. 1462 /20 1 3 4 9 . THE HON BLE HIGH COURT IN THE CASE OF WYETH (INDIA) PVT. LTD (SUPRA) , HAS HELD THAT THE ASSESSEE HAS DISCLOSED ALL THE RELE VANT MATERIAL IN RESPECT OF THE AMOUNT OF RENT AND COMPENSATION RECEIVED FROM THE COMPANY IN RELEVANT YEARS AND THE ITO HAD COMPLETED THE ASSESSMENT AFTER PERUSING THE MATERIAL . THE IMPRESSION OF THE ITO THAT THE RENT OR COMPENSATION RECEIVED WAS NOT ASSES SABLE AS INCOME FROM OTHER SOURCES BECAUSE WHAT WAS LET OUT WERE ONLY THE BUILDINGS AND NOT OTHER PARAPHERNALIA WHICH WENT WITH IT, WAS ONLY A CHANGE OF OPINION WHICH DID NOT ENTITLE THE ITO TO REOPEN THE ASSESSMENT. 10 . SIMILAR FACTS ARE ALSO INVOLVED HER E BEFORE ME AS THE AO ACCEPTED THE RECEIPTS ON ACCOUNT OF RENT RECEIVED FROM M/S RED HAT INDIA PVT. LTD. AS BUSINESS INCOME WHILE PASSING THE ORDER UNDER SECTION 143(3) . NOW, THE SAME HAS BEEN REOPENED FOR TREATING THE RENT AS INCOME FROM OTHER SOURCES. TH IS, IN MY VIEW, IS ONLY ON ACCOUNT OF CHANGE OF OPINION, WHICH IS NOT PERMISSIBLE. 11 . IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AND IN VIEW OF THE DECISION OF THE H O N BLE BOMBAY HIGH COURT , I HOLD THAT THE REOPENING OF THE ASSESSEE WAS BAD IN LAW. THEREFORE, I QUASH THE ASSESSMENT. 12 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF JUNE 2013 201 3 SD/ - ( ) ( R.K.GUPTA ) ITA NO. 1462 /20 1 3 5 / JUDICIAL MEMBER MUMBAI; DATED : 12/06/ 2013 /PKM , PS COP Y OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) , MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD F ILE. //TRUE COPY// / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI