S.P. BUILDERS, MUMBAI V. DCIT 12(3), MUMBAI

ITA 3023/MUM/2013

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8477 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 29-07-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 18-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Keywords: Reopening of assessment; Depreciation; Business expenditure; Principle of natural justice; Reason to believe
• Section: 143(3); 234B; 147; 148; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH E, MU MBAI BEFORE SHRI B.R.BASKARAN, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.3023/MUM/2013 (ASSESSMENT YEAR- 2007-08) M/S S.P. BUILDERS 309, GUNDECHA CHAMBERS, N. M. ROAD, FORT, MUMBAI 400 023. PAN: AABFS0338Q VS. DCIT 12(2) AAYAKAR BHAVAN, M.K. MARG, MUMBAI-400020. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VIMAL PUNAMIYA (AR) REVENUE BY : SHRI V.JUSTIN (DR) DATE OF HEARING : 02.11.2017 DATE OF PRONOUNCEMENT : 08.11.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER : 1. THIS APPEAL FILED BY THE ASSESSEE U/S.253 OF THE IN COME TAX ACT (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER O F INCOME TAX (APPEALS)- 23, MUMBAI DATED 31.01.2013 FOR ASSESSMENT YEAR (AY ) 2007-08. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : LEGAL 1. THE LD. CIT(A) ERRED IN CONFIRMING THE REOPENING OF THE ASSESSMENT U/S 147 WITHOUT APPRECIATING THE FACT THAT THE RECORDED REA SONS BECAME INFRUCTUOUS AT THE TIME OF PASSING OF THE ORDER, AND HENCE THE REA SSESSMENT ORDER IS LIABLE TO BE QUASHED. 2. THE LD. CIT(A) ERRED IN CONFIRMING THE REOPENING OF ASSESSMENT U/S 147 WITHOUT APPRECIATING THE FACT THAT THE ADDITIONS MA DE BY THE ASSESSING OFFICER WERE ON THE GROUNDS OTHER THAN THE REASONS RECORDED , AND HENCE THE REOPENING IS BAD IN LAW AND LIABLE TO BE QUASHED. NATURAL JUSTICE 2 ITA NO.3023/M/2013 M/S S.P. BUILDERS 3. WITHOUT PREJUDICE TO ABOVE, THE LD. CIT(A) AND T HE LD. ASSESSING OFFICER FAILED TO GRANT SUFFICIENT OPPORTUNITY TO PRESENT T HE CASE AND HENCE, PRINCIPLES OF NATURAL JUSTICE ARE GROSSLY VIOLATED. ON MERITS 4. THE LD. CIT(A) ERRED IN TAXING RS.2,01,00,000/ - BEING BALANCE OF THE CONSIDERATION RECEIVED AS PER THE CONSENT TERMS WIT HOUT APPRECIATING THE FACT THAT ITAT, HIGH COURT AND THE SUPREME COURT HAVE CO NFIRMING THE FINDING THAT THE CONVEYANCE OF THE PROPERTY WAS ON 28TH FEBRUARY , 2005 AND SHOULD BE TAXED IN A.Y. 2005 - 2006. HENCE, NO AMOUNT CAN BE TAXED IN THE IMPUGNED YEAR I.E. A.Y. 2007-2008 AND THE ADDITION OF RS.2,0 1,00,000/- MAY BE DELETED . 5. THE LD. CIT(A) ERRED IN DISALLOWING RS.31,13,632 /- BEING COST OF PASCHIM PLOT ON THE GROUND THAT COST REMAINS UN-VERIFIABLE, WITHOUT APPRECIATING THE AS PER THE MATCHING PRINCIPLE, THE COST FOR ACQUISITIO N OF THE PLOT HAS TO BE ALLOWED. 6. THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWA NCE OF RS.2,75,48,472/- BEING PROPERTY ATTACHMENT EXPENSES PAYABLE TO M/S A NJIR PROPERTIES PVT. LTD., ON THE GROUND THAT SERVICES WERE COMPLETED IN A.Y. 2001 - 2002, WITHOUT APPRECIATING THE FACT, THAT THE AMOUNT WAS IN DISPU TE AND WAS CRYSTALLISED WHEN THE ARBITRATION AWARD WAS PASSED AND HENCE THE AMOU NT WAS DEDUCTIBLE AS BUSINESS EXPENSES U/S 37 IN THE IMPUGNED YEAR. 7. THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOW ANCE OF RS.27 ,00,000/- BEING COMPENSATION PAYABLE TO TENANTS WHO ILLEGAL O CCUPIED PORTION OF PROPERTY AT PLOT AT PASCHIM APARTMENT. 8. THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWA NCE OF ADMINISTRATIVE EXPENSES AND OTHER EXPENSES OF RS. 88, 19,183/ - ON THE GROUND THAT THE BUSINESS IS DORMANT, WITHOUT APPRECIATING THE FACT THAT THE ASSESSING OFFICER AND THE CIT(A) HAD MADE THE ADDITION OF COMPENSATIO N RECEIVED AND HENCE, THE FINDINGS ARE CONTRARY TO EACH OTHER. AS THE ASSESSE E IS STILL IN THE BUSINESS, THE DISALLOWANCE MADE MAY BE DELETED. 9. THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWA NCE OF DEPRECIATION OF RS.7,62,238/- ON THE GROUND THAT THE BUSINESS IS DO RMANT, WITHOUT APPRECIATING THE FACT THAT THE ASSESSING OFFICER AND THE CIT(A) HAD MADE THE ADDITION OF COMPENSATION RECEIVED AND HENCE, THE FINDINGS ARE C ONTRARY TO EACH OTHER. AS THE ASSESSEE IS STILL IN THE BUSINESS, THE DISALLOW ANCE MADE MAY BE DELETED. 10. THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOW ANCE OF AUDIT FEES OF RS.78,000/- U/S 40(A)(IA). 11. ON MERITS THE APPELLANT DENIES ITS LIABILITY TO THE LEVY OF PENAL INTEREST U/S. 234A, 234B AND 234C. 3 ITA NO.3023/M/2013 M/S S.P. BUILDERS 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A BUILDER AND DEVELOPER, FILED ITS RETURN OF INCOME FOR RELEVANT ASSESSMENT YEAR (AY) 2007-08 ON 21.05.2009 DECLARING TOTAL INCOME OF RS. 48,17,388/ -. THE RETURN WAS FILED AFTER DUE DATE. THE DUE DATE FOR FILING OF THE RETU RN FOR RELEVANT AY WAS 31.03.2009. THE RETURN OF INCOME WAS TREATED AS INV ALID. THEREFORE, THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 148 D ATED 23.12.2009 TO THE ASSESSEE. FOLLOWING THE REASONS OF RE-OPENING WAS S ERVED UPON THE ASSESSEE AS ARE FOLLOWS: 'IT IS SEEN THAT THE ASSESSEE HAS FILED RETURN OF I NCOME FOR A.Y.2007-08 ON 21.05.2009. THE LAST DATE FOR FILING BELATED RETURN OF INCOME 'FOR A.Y.2007-08 WAS ON 31.03.2009. SINCE THE ASSESSEE HAS FILED RET URN OF INCOME ON 21.05.2009 I.E, AFTER THE TIME LIMIT OF FILING OF R ETURN OF INCOME FOR A.Y.2007 - 08, THEREFORE THE RETURN OF INCOME FILED BY THE ASS ESSEE IS INVALID/NON-EST. IT IS ALSO SEEN THAT ASSESSMENT FOR A.Y.200 5-06 WAS DONE ON 28.12.2007 WHERE ASSESSEE'S RETURN OF INCOME FOR A.Y.2005-06 W AS NIL, THE ASSESSED INCOME FOR A.Y.2005-06 WAS DETERMINED AT RS.2.77 CR ORES. THE ASSESSEE HAD FILED APPEAL AGAINST THIS ORDER. THE CIT(A) PASSED THE ORDER ON 03.07.2008 WHERE IT WAS HELD THAT 'THE INCOME FROM SALE OF LAN D ACCRUES TO THE APPELLANT ONLY DURING THE A. Y. 2007-08 AND NOT IN A.Y. 2005- 06. THEREFORE THE TAXATION OF RS.2,77,00,000/- DURING THE YEAR UNDER APPEAL IS THEREFORE DELETED. THIS GROUND OF APPEAL IS THEREFORE ALLOWED. IT IS MADE C LEAR HERE THAT THE RECEIPTS BY THE APPELLANT (SUBJECT TO THE CLAIMS OF DEDUCTIONS FOR CORRELATING BUSINESS EXPENSES) ARE STILL HELD TO BE VERY MUCH TAXABLE BU T NOT DURING THE CURRENT A.Y.2005-06, WHICH SHOULD BE TAXED ONLY IN THE A.Y. 2007-08. 3. IN RESPONSE TO THE NOTICE UNDER SECTION 148, THE AS SESSEE FILED RETURN OF INCOME ON 20.01.2010 DECLARING TOTAL INCOME OF RS. 48,17,388/-. THE ASSESSMENT WAS COMPLETED ON 24.12.2010. THE ASSESSI NG OFFICER (AO) 4 ITA NO.3023/M/2013 M/S S.P. BUILDERS WHILE FRAMING THE ASSESSMENT ORDER MADE THE ADDITIO N OF TOTAL INCOME OF RS. 2,77,00,000/-, DISALLOWED AUDIT AND INTERNAL AU DIT FEES OF RS. 78,000/-. ON APPEAL BEFORE THE LD. CIT(A), THE ACTION OF AO F OR RE-OPENING AS WELL AS ADDITION OF RS. RS. 2,77,00,000/- WAS SUSTAINED. TH US, FURTHER AGGRIEVED BY THE ORDER OF LD. CIT(A), THE 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 THE REVENU E AND PERUSED THE MATERIAL AVAILABLE ON RECORD. GROUND NO. 1 & 2 REL ATES TO THE VALIDITY OF RE-OPENING AND CONSEQUENT ADDITION ON THE BASIS OF REASONS RECORDED. THE LD. AR OF THE ASSESSEE ARGUED THAT THE AO RECORDED THE REASONS AT THE TIME OF INVOKING THE SECTION 147 ONLY WITH REGARD TO THE TAXABILITY OF RS.2,77,00,000/- IN AY 2007-08 ON THE BASIS OF ORDE R OF LD. CIT(A). CONSEQUENT TO THE ORDER OF LD. CIT(A), THE REVENUE FILED APPEAL BEFORE TRIBUNAL. THE APPEAL FILED BY REVENUE WAS ALLOWED B Y THE TRIBUNAL VIDE ORDER DATED 18.02.2010 WHEREIN IT WAS HELD THAT RS. 2,77,00,000/- IS TAXABLE IN AY 2005-06 AND NOT IN AY 2007-08. IT WAS ARGUED THAT THE REASONS FOR ISSUING NOT ICE UNDER SECTION 148 WAS RELATED WITH THE TAXABILITY OF RS. 2,77,00,000/- I N THE AY 2007-08. HOWEVER, THE AMOUNT OF RS. 2,77,00,000/- WAS NOT BE EN ADDED AT THE TIME OF PASSING THE ASSESSMENT ORDER UNDER SECTION 143( 3) R.W.S. 147. THE TRIBUNAL HAS REVERSED THE DECISION OF LD. CIT(A) HO LDING THAT AMOUNT OF RS. 2,77,00,000/- IS TAXABLE IN AY 2005-06, THUS, THE S AID AMOUNT WHICH WAS 5 ITA NO.3023/M/2013 M/S S.P. BUILDERS THE BASIS FOR ASSESSMENT UNDER SECTION 147 WAS NOT CORRECTLY ADDED BY ASSESSING OFFICER. THE AO HAS NOT ISSUED ANY FRESH NOTICE UNDER SECTION 148 TO SHOW THAT ANY OTHER INCOME ESCAPE ASSESSMENT. TH EREFORE, THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 147, IN MAKING OTHER ADDITION BECAME INVALID. IN SUPPORT OF HIS SUBMISSI ON, THE LD. AR OF THE ASSESSEE RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN CIT VS. JET AIRWAYS (I) LTD. (2011) 331 ITR 236 (BOM), THE DECISION OF TRIBUNAL IN ANUGRAH VARSHNEY VS. ITO (ITA NO. 134/A G/2014 DATED 05.04.2016, ORIENTAL BANK OF COMMERCE VS. ACIT (201 4) 49 TAXMANN.COM 485(DEL), CIT VS. MOHMED JUNED DADANI (2013) 30 TAX MANN.COM 1 (GUJARAT), RANBAXY LABORATORIES LTD. VS. CIT (2011) 12 TAXMANN.COM 74 (DEL) AND CIT VS. SHRI RAM SINGH (2008) 217 CTR 34 5 (RAJ.). ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPORTED TH E ORDER OF AUTHORITIES BELOW. THE LD. DR FOR THE REVENUE ARGUED THAT IN VI EW OF THE EXPLANATION- 3 TO SECTION 147, THE AO IS EMPOWERED TO MAKE THE A DDITION EVEN ON GROUND ON WHICH RE-ASSESSMENT NO NOTICES WAS ISSUE D. IN SUPPORT OF HIS SUBMISSION, THE LD. DR FOR THE REVENUE RELIED UPON THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN CASE OF CIT VS. MEHA K FINVEST P. LTD. (2014) TAXMANN.COM 51 (P&H). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE AO WHILE ISSUING NOTICE UNDER SECTION 148 DATED 23.12.2009 NOTED THAT THAT THE LD. CIT(A) WHILE PASSING THE ORDER 6 ITA NO.3023/M/2013 M/S S.P. BUILDERS FOR AY 2005-06 ON 30.07.2008 HELD THAT INCOME ON AC COUNT OF SALE OF LAND ACCRUED TO THE ASSESSEE ONLY DURING THE AY 2007-08 AND NOT IN AY 2005- 06 AND THEREFORE, INCOME OF RS. RS. 2,77,00,000/- I S TAXABLE DURING AY 2007-08 ONLY. WE HAVE NOTED THAT WHILE PASSING THE ASSESSMENT ORDER, THE AO RECORDED AS PER HONBLE HIGH COURT ORDER A SOM E OF RS. RS. 2,77,00,000/- HELD TO BE TAXABLE IN AY 2005-06. ADM ITTEDLY, NO ADDITION ON ACCOUNT OF SALE OF LAND FOR WHICH THE ASSESSMENT WAS RE-OPENED WAS MADE IN THE ASSESSMENT ORDER. THE AO MADE THE ADDIT ION ON ACCOUNT OF CERTAIN EXPENSES. THE HONBLE BOMBAY HIGH COURT IN CIT VS. JET AIRWAY (I) LTD. (SUPRA) WHILE CONSIDERING THE EXPLANATION- 3 TO SECTION 147 HELD THAT THE CONDITION PRECEDENT TO THE EXERCISE OF JUR ISDICTION UNDER SECTION 147 IS THE FORMATION OF REASON TO BELIEVE BY ASSESS EE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE AO IS EMPOWER TO ASSESS OR RE-ASSESS, AND ALSO ANY OTHER INCOME CHARGEABLE T O TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH CAME TO HIS NOTICE SUBSEQUENTL Y. THE EFFECT OF EXPLANATION-3 IS THAT EVEN THOUGH THE NOTICE ISSUED UNDER SECTION 148 CONTAINED THE REASONS FOR RE-OPENING OF THE ASSESSM ENT, THUS, NOT CONTAINED A REFERENCE TO A PARTICULAR ISSUE WITH REFERENCE TO WHICH INCOME HAS ESCAPED ASSESSMENT. 6. CONSIDERING THE DECISION OF JURISDICTIONAL HIGH COU RT, THE AO IS NOT EMPOWER TO ASSES OR RE-ASSESS THE INCOME IN RESPECT OF ANY OTHER ISSUE WHICH HAS ESCAPED ASSESSMENT AND WHICH CAME TO HIS NOTICE SUBSEQUENTLY 7 ITA NO.3023/M/2013 M/S S.P. BUILDERS IN THE COURSE OF THE PROCEEDING UNDER THE SECTION. THE AO DESPITE COMING TO HIS NOTICE, THE INCOME WHICH ESCAPED ASSESSMENT, WHICH WAS ADDED BY WAY OF DISALLOWANCE WHILE PASSING THE ASSESSMENT OR DER, FOR WHICH NO FRESH NOTICE UNDER SECTION 148 WAS ISSUE. THUS, RES PECTFULLY FOLLOWING THE DECISION OF JURISDICTIONAL HIGH COURT, WE HOLD THAT THE ADDITION MADE BY AO OTHER THAN THE REASON RECORDED IS INVALID AND CA NNOT BE ADDED IN THE INCOME OF ASSESSEE. WITH DUE REGARD TO THE DECISION OF PUNJAB & HARYANA HIGH COURT IN CIT VS. MEHAK FINVEST P. LTD. (SUPRA) , NO RELIANCE CAN BE MADE AS THE DECISION OF JURISDICTIONAL HIGH COURT I S A BINDING PRECEDING ON US. THUS, GROUND NO. 1 & 2 OF THE APPEAL IS ALLOWED AND THE ASSESSMENT ORDER IS HELD BAD-IN-LAW. THE DISCUSSION ON GROUND WHICH RELATES TO VIOLATION OF NATURAL JUSTICE AND OTHER ADDITIONS MA DE BY AO HAS BECOME ACADEMIC. 7. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 8 TH DAY OF NOVEMBER, 2017. SD/- SD/- (B.R.BASKARAN) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 08/11/2017 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRA R) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/