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

ITA 1463/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93109 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2015
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 15-06-2015
• Assessment Year: 2001-2002
• Appeal Filed On: 22-02-2013
• Court: TRIBUNAL
• Keywords: Business income; Difference of opinion; Change of opinion
• Section: 143(3); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO 1463 /MUM/201 3 ASSESSMENT YEAR: - 2001 - 02 .) CHAMBERS EQUITY & FINANCIAL CO. LTD. 410, DEV PLAZA, SV ROAD, ANDHERI WEST, MUMBAI 400058. VS.` ITO - 3(1)(3), AAYKAR BHAVAN, NEW MARINE LINES, MUMBAI 400 020. APPELLANT RESPONDENT ORDER PER G.S. PANNU, AM THE CAPTIONED CROSS APPEALS ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] DATED 02.01.2003 WHICH IN - TURN HAS ARISEN FROM AN ORD ER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961(HEREINAFTER REFERRED TO AS THE ACT) DATED 31.08.2006 PERTAINING TO ASSESSMENT YEAR 2001 - 02 . 2. IN THIS APPEAL, THE SOLITARY GRIEVANCE OF THE ASSESSEE IS WITH REGARD TO THE VALIDITY OF THE PROCEEDINGS INITIATED BY THE ASSESSING OFFICER BY ISSUANCE OF NOTICE U/S 147/148 OF THE ACT. 3. IN BRIEF, THE FACTS ARE THAT ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF INVESTMENT S AND OPERATION OF BUSINESS CENTRES. THE RETURN OF INCO ME WAS FILED BY THE ASSESSEE ON 29.10.2011 DECLARING A LOSS OF RS. 1,55,130/ - WHICH WAS SUBJECT TO A ASSESSEE BY SHRI ABHINAV CHATURVEDI REVENUE BY SHRI PREMANAND J. DATE OF HEARING 15.06.2015 DATE OF PRONOUNCEMENT 30 .06.2015 2 ITA NO 1463/MUM/2013 ASSESSMENT YEAR: - 2001 - 02. PAGE 2 OF 5 SCRUTINY ASSESSMENT U/S 143(3) OF THE ACT, WHEREBY, THE RETURNED LOSS WAS ACCEPTED. SUBSEQUENTLY, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS BEEN RE CEIVING RENT FROM M/S RED HAT INDIA PVT. LTD AMOUNTING TO RS. 1,11,500/ - WHICH WAS TREATED AS BUSINESS INCOME. FURTHER THE ASSESSING OFFICER NOTED THAT THE PROPERTY F ROM WHICH SUCH RENTALS WERE EARNED BELONGED TO SHRI SRIKANT CHATURVEDI, THE DIRECTOR OF ASSESSEE COMPANY. AS PER THE ASSESSING OFFICER, ASSESSEE WAS NOT OWNER OF THE PROPERTY BUT HAD TAKEN THE SAME ON LEASE FROM THE SAID DIRECTOR AND EARNED THE RENTAL INCOME OF RS. 1,11,500/ - BY SUB - LETTING IT TO M/S RED HAT INDIA PVT. LTD. THEREFORE, THE ASS ESSING OFFICER FORMED A BELIEF THAT SUCH RENTAL INCOME WAS REQUIRED TO BE TAXED AS INCOME FROM OTHER SOURCES AND NOT AS BUSINESS INCOME ASSESSED EARLIER, WHICH ACCORDING TO HIM , REFLECTED THE ESCAPEMENT OF INCOME FOR THE PURPOSES OF SECTION 147/148 OF THE ACT. IN THE ENSUING ASSESSMENT ORDER PASSED U/S 143(3) R.W. SECTION 147 OF THE ACT DATED 31.08.2006, THE INCOME FROM RENT EARNED FROM RED HAT INDIA PVT. LTD., HAS BEEN ASSESS ED AS INCOME FROM OTHER SOURCES AND THE CIT(A) HAS ALSO CONFIRMED THE ACTION OF A SSESSING OFFICER. 4. BEFORE US, THE LD. REPRESENTATIVE SUBMITTED THAT SIMILAR ISSUE CAME UP BEFORE THE TRIBUNAL FOR ASSESSMENT YEAR 2002 - 03, WHEREIN, THE TRIBUNAL UPHELD THE PLEA OF THE ASSESSEE THAT ACTION OF THE ASSESSING OFFICER WAS UNSUSTAINABLE. IN TH IS CONTEXT, ORDER OF THE TRIBUNAL IN ITA NO. 1462/MUM/2013 DATED 12.06.2013, A COPY OF THE ORDER HAS BEEN FILED. 5. THE LD. DR DID NOT DISPUTE THE FACTUAL MATRIX THAT SIMILAR ISSUE HAS BEEN CONSIDERED BY THE MUMBAI BENCH OF THE TRIBUNAL IN ITA NO. 1462/MU M/2013 VIDE ORDER DATED 12.06.2013 (SUPRA). IN FACT, IN THE IMPUGNED ORDER THE CIT(A) HAS ALSO RELIED UPON HIS ORDER IN ASSESSEES CASE FOR ASSESSMENT YEAR 2002 - 03 , WHILE DISPOSING OF THE APPEAL. 3 ITA NO 1463/MUM/2013 ASSESSMENT YEAR: - 2001 - 02. PAGE 3 OF 5 6. IN THIS CONTEXT, THE FOLLOWING DISCUSSION IN THE ORDER O F THE TRIBUNAL DATED 12.06.2013 (SUPRA) IS RELEVANT: - 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 ALSO 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. ACC ORDINGLY, 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 O THER 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. 9. THE HONBLE HIGH COURT IN THE CASE OF WYETH (INDIA) PVT. LTD (SUPRA), HAS HELD THAT THE ASSESSEE HAS DISCLOSED ALL THE RELEVANT 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 ASSESSABLE 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 HERE 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. THIS, 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 HONBLE BOMBAY HIGH COURT, I HOLD THAT THE REOPENING OF THE ASSESSEE WAS BAD IN LAW. THEREFORE, I QUASH THE ASSESSMENT. 4 ITA NO 1463/MUM/2013 ASSESSMENT YEAR: - 2001 - 02. PAGE 4 OF 5 7. FOLLOWING THE AFORESAID PRECEDENT, WHICH HAS BEEN RENDERED UNDER IDENTICAL CIRCUMSTANCES, WE UPHOLD THE PLEA OF THE ASSESSEE THAT THE RE - OPENING OF THE ASSESSMENT IS BAD IN LAW AND, THEREFORE, THE IMPUGNED ORDER IS HEREBY QUASHED. 15. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF JUNE 2015. SD/ - SD/ - (AMIT SHUKLA) (G.S. PANNU) (JUDICIAL MEMBER/ U;KF;D LNL; ) (ACCOUNTANT MEMBER/ YS[KK LNL; ) MUMBAI DATED 30 - 06 - 2015 SKS SR. P.S, COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, C BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI 5 ITA NO 1463/MUM/2013 ASSESSMENT YEAR: - 2001 - 02. PAGE 5 OF 5 S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 16.06.2015 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 17.06.2015 SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR. PS/PS 6 KEPT FOR PRONOUNCEMENT .06.2015 SR. PS/PS 7 FILE SENT TO BENCH CLERK .6.2015 SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER