LODHA BULDERS P. LTD, MUMBAI V. DCIT CEN CIR 7(3), MUMBAI

ITA 2870/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0568 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: 2007-2008
• Appeal Filed On: 13-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARJU GARODIA
• Keywords: Reopening of assessment; Business income; Audit objection; Maximum Marginal Rate; Tangible material; Difference of opinion; Assessment record; Tax effect; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI MANJUNATHA G , ACCOUNTANT MEMBER ITA NO.2870/MUM./2015 (ASSESSMENT YEAR: 2007 - 08 ) LODHA BUILDERS PVT. LTD., 412, 4 TH FLOOR, 17G, VARDHMAN CHAMBERS, CASWAJI PATEL RD, HORNIMAN CIR CLE FORT, MUMBAI 400001 PAN AACL1722F . APPELLANT V/S DCIT, CENTRAL CIRCLE, 7(3) , ( ERSTWHILE CENTRAL CIRCLE 42, ) 412, 4 TH FLOOR R.NO 655 AAYAKAR BHAVAN MUMBAI 400020 . RESPONDENT ASSESSEE BY : SHRI. VIJAY MEHTA REVENUE BY : SHRI. ARJU GARODIA DATE OF HEARING 09.05 .2017 DATE OF ORDER - 24 .05.2017 O R D E R PER: MANJUNATHA G. THIS APPEAL FILED BY THE A SSESSEE IS DIRECTED A GAINST ORDER OF THE CIT( A ) - 48 , MUMBAI DATED 23.03.2015 AND IT PERTAINS TO THE ASSESSMENT YEAR 2007 - 08. LODHA BUILDERS PVT. LTD., ITA NO.2870/MUM./2015 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY, ENGAGE D IN THE BUSINESS OF LAND DEVELOPMENT AND C ONSTRUCTION OF BUILDING FILE D ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007 - 08 , ON 25.10.2007 , DECLARING LOSS OF RS.7,5 12/ - . THE CASE HAS BEEN SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETE D U/S . 143 (3) ON 23.12.2009, DETERMINING THE TOTAL INCOME OF RS 24,13,217 / - AFTER MAK ING ADDITIONS OF RS.20,4 8,143/ - . 3. SUBSEQUENTLY , THE ASSESSMENT FOR THE ASSESSMENT YEAR 2007 - 08 , HAS BEEN REOPENED BY ISSUANCE OF NOTICE U/ S. 148 OF THE ACT. T HE A . O REOPENED THE ASSESSMENT AFTER RECORDING REASONS FOR REOPENING, AS PER WHICH THE ASSESSMEN T HAS BEEN REOPENED FOR THE REASON THAT IN COME CHARGEABLE TO TAX HAD BEEN ESCAPED ASSESSMENT WITHIN THE MEANIN G OF SECTION 147 OF THE INCOME T A X A CT, ON ACCOUNT OF EXCESS INTEREST PAID AT THE RATE OF 2.46% ON THE UNSECURED LOANS GIVEN TO SISTER CONCERN. AC CORDINGLY , ISSUED NOTICE U/S. 148 OF THE ACT, REQUIRING THE ASSESSEE TO FURNISH RETURN OF INCOME. IN RESPONSE TO NOTICE, A RETURN SHOWING NIL INCOME WAS FILED ON 23.04.2012. MEANTIME , DURING THE PENDENCY OF ASSES SMENT PROCEEDINGS, THE ASSESSEE APPROACHED T HE HONBLE BOMBAY HIGH COURT BY FILING WRIT PETITIONS, AGAINST REOPENING OF ASSESSMENT WHICH WAS ULTIMATELY DISMISSED. THEREAFTER , DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE ASSESSE E HAS FILED A LETTER OPPOSING LODHA BUILDERS PVT. LTD., ITA NO.2870/MUM./2015 3 REOPENING OF ASSESSMENT ON THE GROUND T HAT THE A . O HAS REOPENED THE ASSESSMENT MERELY ON THE BASIS OF CHANGE OF OPINION WITHOUT THERE BEING ANY MATERIAL CAME TO THE KNOWLEDGE OF THE A . O SUBSEQUENT TO COMPLETION OF ORIGINAL ASSESSMENT U/S. 143 (3) OF THE ACT. THE ASSESSEE FURTHER CONTENDED THA T THE REOPENING HAS BEEN DONE FULLY ON THE BASIS OF AUDIT OBJECTION WITHOUT APPLICATION OF MIND TO THE MATERIALS AVAILABLE ON RECORD WHICH IS EVIDENT FROM THE FACT THAT THE A . O TOOK CIT , SANCTION FOR REOPENING AS SESSMENT WHEN NO SUCH SANCTION WAS REQUIRED A S PER THE LAW. THE REOPENING OF ASSESSMENT IS DONE BY RELYING ON THE SAME MATERIAL THAT WAS BEFORE THE A . O DURING THE ASSESSMENT PROCEEDINGS. THE A . O HAS NOT ANALYZED THE MAIN ISSUE RAISED IN THE AUDIT OBJECTION WHICH IS EVIDENCE FROM THE FACT THAT, HE HAD CONSIDERED MATERIAL WHICH WAS ALREADY WITH HIM. THE ASSESSEE FURTHER SUBMITTED THAT DURING THE ASSESSMENT PROCEEDINGS THE A . O HAD EXAMINED COMPLETE DETAILS OF INTEREST RECEIVED ON LOANS AND INTEREST PAID ON LOANS ADVANCE D, THEREFORE THERE IS NO REASON FOR REOPENING ASSESSMENT. 4. THE A . O , AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E , HELD THAT IN COME CHARGEABLE TO TAX HAD BEEN ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT , ON ACCOUNT OF EXCESS PAYM ENT OF INTEREST ON LOANS BORROWED FROM SISTER CONCERNS WHICH HAS NOT BEEN EXAMINED DURING THE COURSE OF ORIGINAL ASSESSMENT LODHA BUILDERS PVT. LTD., ITA NO.2870/MUM./2015 4 PROCEEDINGS AND HENCE , REJECTED OBJECTIONS FILLED BY THE ASSESSEE AND COMPLETED REASSESSMENT U/S. 143 (3) READ WITH SECTION 147 OF T HE INCOME TAX ACT 1961. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO HAS COMPUTED EXCESS PAYMENT OF INTEREST OF RS.31,29,152/ - BEING DIFFERENCE BETWEEN INT EREST RECEIVED ON LOANS ADVANCED AND INTEREST PAID ON LOAN RECEIVED FROM SISTER CONCERNS. 5. AGGRIEVED BY THE ASSESSMENT ORDER , THE ASSESSE E PREFERRED AN APPEAL BEFORE THE CIT( A ) . BEFORE THE CIT (A) , THE ASSESSE E CHALLENGED THE VALIDITY OF REOPENING ASSESSMENT. THE ASSESSE E ALSO AGITATED ISSUE S ON MERITS. THE CIT( A ) , AFTER CONSIDERING THE RELEVANT SUBMISSIONS OF THE ASSESSE E AND ALSO RELIED UPON CERTAIN JUDICIAL PRECEDENTS INCLUDING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF KALYANJI MAVJI & CO VS CIT (1976) CTR 85 SC, OBSERVED THAT REOPENING OF ASSESSMENT I S VALID. THE CIT( A ) FURTHER OBSERVED THAT THE ASSESSE E HAS FAILED TO EXPLAIN THE REASONS FOR PAYING MORE INTEREST THAN INTEREST RECEIVED ON LOANS GIVEN TO SISTER CONCERN THEREFORE , ENHANCE D THE ASSESSMENT TO RECOMPUTE THE EXCESS INTEREST PAID TO M/S. MICRO TECH CONSTRUCTIONS P VT. LTD. WITH THESE OBSERVATIONS , UPHELD THE REASSESSMENT ORDER PASSED BY THE A . O SUBJECT TO ENHANCEMENT OF ASSESSMENT TO THE EXTENT OF RS.15,73,658/ - , TOWARDS EXCESS INTEREST PAID ON LOANS BORROWED LODHA BUILDERS PVT. LTD., ITA NO.2870/MUM./2015 5 FROM SIST ER CONCERN . A GGRIEVED BY THE CIT( A ) , THE ASSESS E E IS IN APPEAL BEFORE US. 6. THE LD. A . R FOR THE ASSESSEE SUBMITTED THAT REASSESSMENT IS INVALID AS THE A . O HAS REOPENED THE ASSESSMENT MERELY ON C HANGE OPINION WITHOUT THERE BEING ANY MATERIAL CAME TO HIS KNOWLEDGE SUBSEQUEN T TO ORIGINAL ASSESSMENT. THE LD. A . R REFERRING TO THE REASONS RECORDED BY THE A . O , SUBMITTED THAT THE A . O HAS REOPENED THE ASSESSMENT BASED ON THE FINANCIAL STATEMENT OF THE ASSESS E E WHICH IS EVIDENT FROM THE FACT THAT THE A . O HAS ARRIVED AT ESCAPEMENT OF INCO ME BY REFERRING TO THE LOANS AND ADVANCES AND INTEREST PAID AND RECEIVED FIGURES APPEARED IN THE BALANCE SHEET. THE A . R FURTHER SUBMITTED THAT THE A . O HAS FORMED THE REASON T O BELIEVE ON INCORRECT ASSUMPTION OF FACTS WITHOUT POINTING OUT ANY SPECIFIC INSTA NCE OF ESCAPEMENT OF INCOME IN THE FORM OF EXCESS PAYMENT OF INTEREST ON LOANS BORROWED FROM SISTER CONCERN WHICH IS EVIDENT OF THE FACT THAT THE A . O ARRIVED AT AVERAGE RATE OF INTEREST PAID ON LOANS BORROWED AND AVERAGE RATE OF INTEREST ON LOANS GIVEN TO SISTER CONCERNS BY ANALYZING THE YEAR END BALANCES APPEARING IN THE BALANCE SHEET. THE MATERIAL RELIED UPON BY THE A . O TO FORM REASON TO BELIEVE IS THE RETURN OF INCOME FILED BY THE ASSESSE E ALONG WITH FINANCIAL STATEMENT WHICH WAS ALREADY AVAILABLE WITH T HE A . O AT THE TIME OF COMPLETION OF ORIGINAL ASSESSMENT. THE A . O RELIED UPON LODHA BUILDERS PVT. LTD., ITA NO.2870/MUM./2015 6 SAME SET OF DOCUMENT TO FORM REASONABLE BELIEF WHICH IS NOTHING BUT MERE CHANGE OF OPINION WHICH IS NOT PERMISSIB LE UNDER LAW. IN SUPPORT OF HIS ARGUMENT, RELIED UPON THE FOLLOWI NG CASES LAWS. 1. ASIAN PAINTS LTD. V. DCIT [308 ITR 195 (BOM)] 2. SIEMENS INFORMATION SYSTEM LTD. V. ACIT [295 ITR 335:214 CTR 16 (BOM)] 3. CARTINI INDIA LTD. V. ADDL. CIT [314 ITR 275 (BOM)] 4. 3I INFOTECH LIMITED V. ACIT [329 ITR 257: 235 CTR 240: 192 TAXMAN 137 (BOM)] 5. ARONI CHEMICALS LTD. V. DCIT [362 ITR 403 (BOM)] 6. YESHWANT TALKIES V CIT [157 ITR 103 (MP)] 7. IMC LTD. AND ANR. V. JT. CIT [261 ITR 731 (CAL)] 8. RALLIES INDIA LTD. V. A CIT [232 CTR 143 (BOM)] 9. CIT V. KEL VINATOR OF INDIA LTD. [256 ITR 1 (FB) (DEL) AFFIRMED IN 320 ITR 561 (SC)] 7. THE LD. D . R , ON THE OTHER HAND , STRO NGLY SUPPORTED ORDER OF THE CIT( A ) . THE D . R FURTHER SUBMITTED , THAT FOR REOPENING ASSESSMENT THE A . O HAS TO FRAME PRIMA FACIE REASONING BASED ON SUBJECTIVE ASSESSMENT OF MATERIALS AVAILABLE WITH HIM WHICH MAY BE FROM THE ASSESSMENT RECORDS , BUT NO NEED OF FRESH MATERIALS TO FORM REASON TO BELIEVE OF ESCAPEMENT OF INCOME. THE D . R FURTHER SUBMITTED , THAT THE A . O FORMED THE REASON TO BELIEVE BASED ON THE MATERIAL ON RECORDS WHICH SUGGEST THAT THERE IS ESCAPEMENT OF INCOME ON ACCOUNT OF EXCESS INTEREST PAID ON LOANS BORROWED FROM LODHA BUILDERS PVT. LTD., ITA NO.2870/MUM./2015 7 SISTER CONCERNS , WHEN COMPARE TO INTEREST RECEIVED ON LOANS ADVANCED , THEREFOR E THERE IS A VALID REASON FOR REOPENING OF ASSESSMENT AND HENCE , THE ASSESSMENT SHOULD BE UPHELD. 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIALS AVAILABLE ON RECORDS AND GONE THROUGH THE ORDER OF THE AUTHORITIES BELOW. THE A . O HAS REOPENED THE ASSESSMEN T ON THE GROUND THAT THE ASSESS E E HAS PAID EXCESS INTEREST ON LOANS BORROWED FROM SISTER CONCERNS , WHEN COMPARE TO INTEREST RECEIVED ON LOANS ADVANCE D . THE A . O HAS ARRIVED AT AN ESCAPEM ENT OF INCOME BY TAKING INTO AVERAGE RATE OF INTEREST RECEIVED ON LOANS & ADVANCES AND AVERAGE RATE OF INT EREST ON INT EREST RECEIVED ON LOANS GIVEN AND W ORKED OUT DIFFERENCE OF 2.46% BETWEEN INTEREST PAYMENTS AND INTEREST RECEIPTS. ACCORDING TO THE A . O , THE ASSESS E E HAS EARNED AVERAGE RATE OF INTEREST OF 2.07% ON LOANS ADVANCED , WHEREAS PAID AVERAGE RATE OF INTEREST 4.53% ON LOANS BORROWED THEREBY , GIVEN LOANS AND ADVANCES AT CONCESSIONAL RATE OF INTEREST OF 2.46%. IT IS THE CONTENTION OF THE ASSESSEE THAT THE A . O HAS FORMED A REASON T O BELIEVE BASED ON CHANGE OF OPINION WITH OUT ANY MATERIAL IN HIS POSSESSION CAME TO HIS KNOWLEDGE SUBSEQUENT TO COMPLETION OF ORIGINAL ASSESSMENT , WHICH IS EVIDENT FROM THE FACT THAT THE A . O HAD RECORDED REASONS FOR REOPENING ASSESSMENT BY REFERRING TO T HE BALANCE SHEET FILED ALONG WITH ORIGINAL RETURN OF INCOME. THE LODHA BUILDERS PVT. LTD., ITA NO.2870/MUM./2015 8 ASSESS E E FURTHER CONTENDED THAT IN THE ORIGINAL ASSESSMENT PROCEEDINGS , THE A . O HAS EXAMINED IN DETAIL THE ISSUE OF INTEREST RECEIPTS AND INTEREST PAID ON LOAN AND ADVANCES BEFORE COMPLETION OF ASSESSMENT , THEREFORE REOPENING ON THE SAME ISSUE ON WHICH THE A . O HAS CALLED FOR DETAILS AND APPLIED HIS MIND BEFORE COMPLETION OF ASSESSMENT IS INCORRECT. THE ASSESS E E FURTHER CONTENDED THAT THE A . O HAS ASSUMED IN CORRECT FACTS TO ARRIVE AT A REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD BEEN ESCAPED ASSESSMENT BY SUSPICIOUS AND SURMISES MANNER WITHOUT POINTING OUT ANY SPECIFIC INSTANCE OF EXCESS PAYMENT OF INTEREST ON LOANS BORROWED WHICH IS EVIDENT FROM THE FACT THAT THE A . O HAS ARRIVED AT RATE OF INTEREST OF 2.07% ON INTEREST RECEIPTS AND 4.53% ON INTEREST PAYMENT WHICH IS QUITE CONTRARY TO THE RATE OF INTEREST PREVAILIN G IN THE MARKET WHICH IS OVER AND ABOVE 10.75% TO 12.75% DURING THAT PERIOD. THE A . O HAS ARRIVED AT ESCAPEMENT OF INCOME BY ANALYZING THE LOANS AND ADVANCES FIGURES APPEARING IN THE BALANCE SHEET TO THE INTERES T INCOME AND INTEREST EXPENDITURE APPEARING IN THE PROFIT AND LOSS ACCOU NT TO COME TO THE CONCLUSION THAT ASSESSEE HAS PAID EXCESS INTEREST ON LOANS BORROWED. 9. THE A . O REOPENED THE ASSESSMENT ON THE GROUND THAT INCOME CHARGEABLE TO TAX HAD BEEN ESCAPED ASSESSMENT WITHIN THE M EANING LODHA BUILDERS PVT. LTD., ITA NO.2870/MUM./2015 9 OF SECTION 147 OF THE ACT. T HE A . O HAS RECORDED REASONS WHICH WERE REPRODUCED AS U NDER FOR THE SAKE OF CONVEYANCE : IT IS SEEN FROM THE BALAN CE SHEET THAT YOU HAVE TAKEN UNSECURED LOAN AMOUNTING TO RS. 98,52,40,108/ - FROM BODY CORPORATE, DIRECTORS, SHARE HOLDERS AND PARTNERSHIP FIRMS AND ALSO SHOWN LOANS AND ADVANCES AMOUNTING TO RS. 82,19,26,277/ - TO COMPANIES/FIRMS UNDER THE SAME MANAGEMENT. IN THE P&L A/C FILED, ASSESSEE HAS SHOWN INTEREST INCOME AMOUNTING TO RS. 1,70,68,105/ - AND CLAIMED INTEREST OF RS. 4,46,54,774/ - THUS, ASSESSEE HAS PAID INTEREST OF RS. 4,46,54,774/ - ON LOAN OF RS. 98,52,40,108/ - AT OVERAGE RATE OF INTEREST OF 4.53. THE A SSESSEE HAS RECEIVED INTEREST OF RS.1,70,68,105/ - ON LOON ADVANCES OF RS. 82,19,26,277/ - AT AVERAGE RATE OF INTEREST OF 2.07. FROM THIS IT IS CLEAR THAT THE ASSESSEE IS UTILIZING INTEREST BEARING FUNDS PROCURED AT HIGHER RATE AND ADVANCING LOANS AT LOWER RATE TO ITS SISTER CONCERNS/ SOME MANAGEMENT. THE ASSESSEE HAS THUS, GIVEN LOANS AND ADVANCES AT CONCESSIONAL RATE OF INTEREST (4.53 - 2.07) OF 2.46. HENCE EXCESS INTEREST PAID AT 2.46% ON THE UNSECURED LOAN GIVEN TO THE SISTER CONCERNS IS TO BE DISALLOWED B EING EXCESS INTEREST PAID WHICH IS 2,42,36,900/ - . THUS THERE IS UNDERASSESSMENT OF RS. 2,42,36,900 AND TAX EFFECT COMES TO RS. 81,58,140/ - . HENCE I HAVE REASON TO BELIEVE THAT INCOME TO THE ABOVE EXTENT HAS ESCAPED ASSESSMENT FOR A. YR. 2007 - 08 WITHIN THE MEANING OF SEC 147 OF THE ACT. HENCE ISSUE OF NOTICE U/S 148 OF THE IT ACT. LODHA BUILDERS PVT. LTD., ITA NO.2870/MUM./2015 10 10. ON PERUSAL OF REASONS RECORDED BY THE A . O FOR REOPENING ASSESSMENT, WE FIND THAT THE A . O HAS RECORDED REASONS ON THE BASIS OF RETURN OF INCOME FILED BY THE ASSESS E E ALONG WITH FINANCIAL STATEMENTS TO COME TO THE CONCLUSION THAT THE ASSESSEE HAS PAID EXCESS INTEREST ON LOANS BORROWED. ADMITTEDLY, THE A . O HAS NOT REFERRED ANY OTHER MATERIAL, EXCEPT RETURN OF INCOME FILED BY THE ASSESSE E . I T IS ALSO AN ADMITTED FACT TH AT THESE DOCUMENTS ARE ALREADY AVAILABLE WITH THE A . O AT THE TIME OF ORIGINAL ASSESSMENT PROCEEDINGS U /S. 143( 3 ) OF THE ACT. I T IS ALSO UNDISPUTED FACT THAT THE A . O HAS REFERRED TO THE FINANCIAL STATEMENT AND ALSO EXAMINED THE ISSUE OF INTEREST PAYMENT AND RECEIPTS ON LOANS AND ADVANCES WHICH IS EVIDENT FROM THE FACT THAT THE A . O HAS MADE ADDITIONS DURING THE COURSE OF A SSESSMENT PROCEEDINGS U/S. 143( 3 ) OF THE A CT. ONCE THE ISSUES ON WHICH THE A . O HAS CALLED FOR DETAILS DURING THE COURSE OF ORIGINAL ASSESSM ENTS, THEN THE A . O CANNOT REOPEN THE ASSESSMENT ON THE SAME ISSUES WITHOUT ANY MATERIAL CAME TO HIS KNOWLEDGE SUB SEQUENT TO COMPLETION OF ORIGINAL ASSESSMENT. WE FURTHER OBSERVED THAT THE A . O HAS ARRIVED AT ESCAPEMENT OF INCOME BY ANALYZING THE FIGURES APP EARED IN THE BALANCE SHEET WITHOUT POINTING OUT ANY SPECIFIC CASE OF EXCESS PAYMENT OF INTEREST ON LOANS BORROWED. O N PERUSAL OF REASONS RECORDED BY THE A . O , WE FIND THAT THE A . O HAS WORKED OUT AVERAGE RATE OF INTEREST ON LOANS AND LODHA BUILDERS PVT. LTD., ITA NO.2870/MUM./2015 11 ADVANCES GIVEN AN D AVERA GE RATE OF INTEREST ON LOANS AND ADVANCES BORROWED TO ARRIVE AT A DIFFERENCE OF EXCESS INTERES T PAYMENT BASED ON INCORRECT ASSUMPTION OF FACTS AND FIGURES WHICH LEAD TO OBSERVED RESULT. THEREFORE, WE ARE OF THE VIEW OF THAT THE A . O WAS ERRED IN REOPENING ASSESSMENT BASED ON SAME SET OF FACTS WITHOUT ANY FRESH MATERIAL IN HIS HANDS. 11. COMING TO THE CASE LAWS RELIED UPON THE ASSESS E E. THE ASSESS E E HAS RELIED UPON THE DECISION OF HONBLE HIGH COURT OF BOMBAY , IN TH E CASE OF ICICI HOME FINANCE COMPANY LTD. VS ACIT (2012 210 TAXMAN 67). THE HONBLE HIGH COURT OF BOMBAY , UNDER SIMILAR SET OF FACTS , HAS OBSERVED THAT REOPENING OF ASSESSMENT ON ISSUE ALREADY CONSIDERED DURING ASSESSMENT IS BARRED , WHERE SAME FACTS BEFORE A . O AND HE HAD CONSIDERED VERY ISSUE. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED BELOW: THE POWER TO REOPEN A COMPLETED ASSESSMENT U/S.147 HAS BEEN BESTOWED ON THE A.O IF HE HAS TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR. HOWEVER, THIS BELIEF T HAT INCOME HAS ESCAPED ASSESSMENT HAS TO BE THE REASONABLE BELIEF OF THE ASSESSING OFFICER HIMSELF AND CANNOT BE AN OPINION AND/OR BELIEF OF SOME OTHER AUTHORITY. IN FACT, THE SUPREME COURT IN THE CASE OF INDIAN & EASTERN NEWSPAPER SOCIETY V. CIT [1979} 11 9 ITR 996 / 2 TAXMAN 121 HAS HELD THAT WHETHER AN ASSESSMENT HAS ESCAPED ASSESSMENT OR NOT MUST BE LODHA BUILDERS PVT. LTD., ITA NO.2870/MUM./2015 12 DETERMINED BY THE ASSESSING OFFICER HIMSELF. THE ASSESSING OFFICER CANNOT BLINDLY FOLLOW THE OPINION OF AN AUDIT AUTHORITY FOR THE PURPOSE OF ARRIVING AT A B ELIEF THAT INCOME HAS ESCAPED ASSESSMENT. IN THE INSTANT CASE, IT WOULD BE NOTICED THAT THE REASONS FOR WHICH THE ASSESSMENT IS SOUGHT TO BE REOPENED ARE IDENTICAL TO THE OBJECTION OF THE AUDIT AUTHORITY DATED 29 - 12 - 2009. THE REASONS DO NOT RELY UPON ANY T ANGIBLE MATERIAL IN THE AUDIT REPORT BUT MERELY UPON AN OPINION AND THE EXISTING MATERIAL ALREADY ON RECORD. THIS ITSELF INDICATES THAT THERE WAS NO INDEPENDENT APPLICATION OF MIND BY THE ASSESSING OFFICER BEFORE HE ISSUED THE IMPUGNED NOTICE. ON THIS GROU ND ALONE, THE ASSUMPTION OF JURISDICTION BY THE ASSESSING OFFICER CAN BE FAULTED. [PARA 6] FURTHER THE SUPREME COURT IN THE CASE OF CIT V. KELVINATOR INDIA L TD. [2010} 320 ITR 561/ 187 TAXM AN 312 (SC) HAS OBSERVED THAT THE ASSESSING OFFICER HAS ONLY POWER TO REASSESS ON FULFILMENT OF CERTAIN PRECONDITIONS, NAMELY, HE MUST HAVE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AND THAT THERE MUST BE TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE IS AN ESCAPEMENT OF INCOME FROM ASSESSMENT. SUCH REA SON TO BELIEVE SHOULD NOT BE ON ACCOUNT OF MERE CHANGE OF OPINION. THEREFORE, WHERE FACTS HAVE BEEN VIEWED DURING THE ORIGINAL PROCEEDING AND AN ASSESSMENT ORDER HAS BEEN PASSED THEN IN SUCH CASES, REOPENING OF AN ASSESSMENT ON THE SAME FACTS WITHOUT ANYTH ING MORE WOULD BE A REVIEW AND NOT PERMITTED UNDER THE GARB OF REASSESSMENT. THIS WOULD BE A MERE CHANGE OF OPINION IN THE ABSENCE OF ANY TANGIBLE MATERIAL AND IS NOT SUFFICIENT TO ASSUME JURISDICTION TO ISSUE THE IMPUGNED LODHA BUILDERS PVT. LTD., ITA NO.2870/MUM./2015 13 NOTICE. IN FACT, THE BOMBAY HIGH COURT IN THE CASE OF IDEA CELLULAR LTD. V. DY. CIT [2008] 101 ITR 407 HAS HELD THAT ONCE ALL THE MATERIAL WITH REGARD TO PARTICULAR ISSUE IS BEFORE THE ASSESSING OFFICER AND HE CHOOSES NOT TO DEAL WITH THE SAME, IT CANNOT BE SAID THAT HE HAD NOT APPLIED HI S MIND TO ALL THE MATERIAL BEFORE HIM. [PARA 7] THEREFORE, IN THE INSTANT CASE ONE WOULD HAVE TO EXAMINE THE CONTENTION OF THE ASSESSEE THAT THE IMPUGNED NOTICE IS WITHOUT JURISDICTION AS THE SELF SAME FACTS WERE NOT ONLY BEFORE THE ASSESSING OFFICER BUT H E HAD ALSO VIEWED THE VERY ISSUES ON WHICH THE ASSESSMENT IS SOUGHT TO BE REOPENED. SO FAR AS THE ISSUE IN RESPECT OF PROVISIONS CLAIMED AS DEDUCTION FOR ARRIVING AT TAXABLE PROFIT AGGREGATING TO RS. 52.87 CRORES IS CONCERNED, THE SAME WAS NOT ONLY DISCLOS ED IN THE NOTES TO ACCOUNT FILED WITH THE RETURN OF INCOME BUT ALSO IN RESPONSE TO SPECIFIC QUERIES RAISED DURING THE ASSESSMENT PROCEEDINGS. IT WAS REITERATED AT THE HEARING THAT ON THE AFORESAID ACCOUNT OF PROVISION, THE TAX HAD ALREADY BEEN PAID IN THE EARLIER YEARS AND THE AMOUNTS WERE MERELY WRITTEN BACK IN THIS YEAR TO THE EXTENT THEY WERE IN EXCESS OF THE PROVISIONS REQUIRED. SO FAR AS FAILURE TO DEDUCT TDS ON ADVERTISEMENT AND SALES PROMOTION ARE CONCERNED LEADING TO DISALLOWANCE OF THE ENTIRE AMOUN T OF RS. 22.48 CRORES UNDER SECTION 40(A)( IA), THE SAME WAS ALSO SUBJECT TO SCRUTINY BY THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS. IN FACT, THE TAX AUDIT REPORT SUBMITTED ALONG WITH RETURN OF INCOME CLEARLY BRINGS OUT THE FACT THAT WHERE TAX HAS NOT BEEN DEDUCTED, THEN THE ENTIRE AMOUNT OF PAYMENT HAS BEEN OFFERED FOR DISA LLOWANCE UNDER SECTION 40(A)(IA ). SO FAR AS THE REASON TO LODHA BUILDERS PVT. LTD., ITA NO.2870/MUM./2015 14 REOPEN THE ASSESSMENT ON THE GROUND THAT THE ASSESSEE HAD DECLARED SHORT TERM CAPITAL GAINS OF RS. 3.63 CRORES IN RESPECT OF INCOME EARNED OUT OF INVESTMENTS HAD TO BE TAXED/CLASSIFIED AS BUSINESS INCOME IS CONCERNED, IT IS NOT DISPUTED THAT THE TREATMENT GIVEN WAS CONSISTENT WITH THE EARLIER YEAR PRACTICE AND ACCEPTED BY THE REVENUE. FURTHER IT IS NOT DISPUTED THAT T HE SHORT TERM CAPITAL GAINS HAVE BEEN ASSESSED TO THE MAXIMUM MARGINAL RATE AND EVEN IF CONSIDERED AS BUSINESS INCOME, THE TAX EFFECT WOULD BE THE SAME. CONSEQUENTLY, THERE COULD BE NO REASONABLE BASIS TO HAVE A BELIEF THAT THERE IS ANY ESCAPEMENT OF INCOM E. [PARA 8] IN THE CIRCUMSTANCES, THE IMPUGNED NOTICE ISSUED U/S. 148 AS WELL AS THE IMPUGNED ORDER REJECTING THE OBJECTIONS TO INITIATION OF REOPENING THE ASSESSMENT WERE LIABLE TO BE QUASHED. [PARA 10] 12. IN THIS VIEW OF THE MATTER AND ALSO CONSIDERING THE RATIO OF HONBLE HIGH COURT OF BOMBAY , IN THE CASE O F ICICI HOME FINANCE COMPANY LTD . VS. ACIT (SUPRA), W E ARE OF THE VIEW THAT REOPENING OF REASSESSMENT IS BAD IN LAW AND LIABLE TO BE QUASH ED AS THE A . O HAS REOPENED ASSESSMENT MERELY BASED ON CHANGE OF OPINION WITHOUT ANY FRESH MATERIALS CAME TO HIS KNOWLEDGE SUBSEQUENT TO COMPLETION OF ASSESSMENT PROCEEDING U/S 143 ( 3 ) OF THE ACT. THEREFORE, WE ARE OF THE VIEW THAT THERE IS NO SOUND BASIS FOR FORMATION OF REASON TO BELIEVE FOR REOPENING OF LODHA BUILDERS PVT. LTD., ITA NO.2870/MUM./2015 15 REASSESSM ENT AND HENCE , REOPENING OF REASSESSMENT FOR ASSESSMENT YEAR 2007 - 08 , AND C ONSEQUENT ASSESSMENT PROCEEDING ARE QUASHED. 13. S INCE , WE HAVE QUASHED THE REASSESSMENT PROCEEDINGS , THE ISSUES ON MERITS ARE NOT ADJUDICATED AT THIS POINT OF TIME , AS THEY MERELY BECAME ACADEMIC IN NATURE. 14. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IN ITA NO. 2870/MUM./2015 IS ALLOWED. ORDER PRON OUNCED IN THE OPEN COURT ON 24 .05.2017 SD/ - SD/ - SAKTIJIT DEY MANJUNATHA G JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 24 .05 .2017 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE. LODHA BUILDERS PVT. LTD., ITA NO.2870/MUM./2015 16 BY ORDER NISHANT VERMA SR. PRIVATE SECRETARY (DY./ASSTT.REGISTRAR) ITAT, MUMBAI LODHA BUILDERS PVT. LTD., ITA NO.2870/MUM./2015 17