.DCIT -CC-5(4), MUMBAI V. EMERALD REALATORS PVT. LTD, MUMBAI

ITA 3536/MUM/2018

AI Insights

The case involves cross appeals by Emerald Realtors Pvt. Ltd. and the Income Tax Department against the order of the CIT (A)-53, Mumbai. The primary issue revolved around the treatment of the Debenture Redemption Reserve (DRR) of Rs 50.40 crore while computing book profit under section 115JB of the Income Tax Act, 1961. The assessee's original assessment was reopened, leading to a reassessment that treated the DRR as a reserve, thus altering the book profit. The CIT (A) found the reopening invalid but ruled against the assessee on the merits. Both parties appealed to the Tribunal, which dismissed the revenue's appeal and the assessee's appeal as the assessment was declared null and void.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123476 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 10-01-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 22-05-2018
• Other Referred Cases: CIT vs Kelvinator India Ltd (2010) 320 ITR 561(S.C)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Tangible material; Difference of opinion; Revised return; Change of opinion
• Section: 147; 148; 143(3); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “E”, MUMBAI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER AND SHRI GAGAN GOYAL, ACCOUNTANT MEMBER ITA No. 1374/Mum/2020 (A.Y. 2010-11) Emerald Realtors Pvt. Ltd. C/o Thar & Co- Nimesh R Thar, 203, Capri, Anant Kanekar Marg, Bandra (E) Mumbai-400 051 PAN: AAACE4757 ...... Appellant Vs. ACIT, Central Circle-5(4), Room No. 1927, 19 th Floor, Air India Building, Nariman Point, Mumbai-400021. ..... Respondent ITA No. 3536/Mum/2018(A.Y. 2010-11) DCIT, Central Circle-5(4), Room No. 1927, 19 th Floor, Air India Building, Nariman Point, Mumbai-400 021. ...... Appellant Vs. Emerald Realtors Pvt. Ltd. C/o Thar & Co- Nimesh R Thar, 203, Capri, Anant Kanekar Marg, Bandra (E) Mumbai-400 051 PAN: AAACE4757 ..... Respondent 2 ITA No. 1374/Mum/2020 Emerald Realtors Pvt. Ltd. Appellant by : None Respondent by : Smt. Esther Ninghauvung Hanghal, CIT-DR Date of hearing : 11/01/2023 Date of pronouncement : 21/03/2023 ORDER PER GAGAN GOYAL, A.M: These two appeals filed by assessee and department as cross appeals against the order of Ld.CIT (A)-53 (Mumbai) vide his order dated 12-03-2018 u/s250 of the I. T. Act. 1961. For sake of logical conclusion ITA No. 3536 /Mum/2018 is taken as lead case. Grounds taken by the assessee are as under: 1) The Learned CIT (A) has erred in law & on facts in upholding the Learned AC's action of disallowing treatment of reducing Debenture Redemption Reserve of Rs 50.40.00.000/- by treating the same as Reserves while computing book profit u/s 115JB of the Act 2) The Appellant craves leave to add to and/ or amend and/ or delete and/ or modify and/or alter the aforesaid grounds of appeal as and when the occasion demands 3) All the aforesaid grounds of appeal are independent, in the alternative and without prejudice to one another. Grounds taken by the Revenue are as under: 1. "Whether on the facts and circumstances of the case and in law, the LD CIT (A) erred in holding that the reopening u/s 147 was merely a change of opinion?" 2. "Whether on the facts and circumstances of the case and in law, the LD CIT (A) failed to appreciate that the computation alone in absence of any discussion will not imply that the Assessing Officer has duly applied his mind?" 3 ITA No. 1374/Mum/2020 Emerald Realtors Pvt. Ltd. 3. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the assessee had not made any submission on this issue before the AO at the time of original assessment?" The appellant prays that the order of Commissioner of Income Tax (Appeal) on the above ground be set aside and that the DC be restored. The appellant craves, leave to amend or alter any grounds or add a new ground, which may be necessary.” 2. Brief facts of the case are that the assessee filed its return of income declaring total income at Rs NIL under the normal provisions of the act claiming current year’s loss of Rs. 11,93,46,080/- and Rs 27,21,468/- at book-profit u/s 155JB of the Act. Case of the assessee was selected for scrutiny u/s 143(3) and assessment was completed on 31-12-2012 assessing the income at Rs 86,834/- under normal provisions of the act and book profit of Rs 27, 21,468/- u/s. 115JB of the act. 3. Thereafter the case of the assessee was reopened u/s 148 vide notice dated 10-02-2016 the reasons were supplied to the assessee vide departmental communication dated 10-02-2016 as attached vide page no. 69 of the paper-book no.1. The reasons for reopening as stated in the communication mentioned supra are as under: “it is revealed from revised return (revised computation) of income available on record that an amount of Rs 504000,000/- “on account of provisions of ascertained liabilities-debentures redemption reserve “ has been reduced from net-profit of Rs 50,67,21,468 while computing book-profit as per provision of section 115JB”. 4. It is also observed that assessee company filed a revised return also on 29- 03-2012 declaring a total income of Rs 86,834 under the normal provisions of the act claiming current year’s loss of Rs. 11, 93, 46,080/- and book profit at Rs 27, 4 ITA No. 1374/Mum/2020 Emerald Realtors Pvt. Ltd. 21,468/- u/s 115JB of the act. Case of the assessee was assessed at returned income u/s 143(3) of the act. Thereafter the assessment order passed u/s 143(3) r.w.s. 147 was passed disallowing assessee claim of Rs 50, 40, 00,000/- for the purposes of computation of book-profit u/s 115JB of the act treating the same as reserve. This resulted into income assessed at Rs 86,834 under the normal provisions of the act and Rs 50, 67, 21,468/- u/s. 115JB of the act. Aggrieved with this reassessment order assessee preferred an appeal before the Ld.CIT (A)-53 (Mumbai). In his order Ld.CIT (A) declared the reopening of the case as invalid but on merits decided against the assessee. In view of this, both the parties felt aggrieved and are in appeal before us. 5. We have gone through the original assessment order, notice for reopening along with reasons supplied for reopening, reassessment order passed u/s 143(3) r.w.s 147 and order of the Ld.CIT (A) along with the submissions of the assessee with paper-book. It is observed that issue of debenture redemption reserve (DRR) has already been discussed in the original assessment order vide para-6 of the order. It is further observed that the successor AO while supplying the reasons for reopening failed to point out how there was either non-disclosure of primary facts by the assessee or non-application of mind on the part of his predecessor at the time of passing the original assessment order. The details relevant to claim of DRR were duly called for in original assessment proceedings and furnished by the assessee. 6. On the given facts one thing is certain and unchallenged that issue of claim of DRR was duly called for and explained through its submissions by the assessee. To adjudicate the matter we have considered the land mark decision of 5 ITA No. 1374/Mum/2020 Emerald Realtors Pvt. Ltd. honourable apex court in the case of CIT vs Kelvinator India Ltd (2010) 320 ITR 561(S.C). In this decision honourable apex court defined the distinction between power TO review and power to reassess. Law empowered the AO to reassesses the income but not the review. As in this matter before us it is observed supra that issue relating to deduction of DRR was duly called for and discussed by the then AO in that case now it became a matter of review by the successor AO. 7. We further came across that there is no fresh tangible material before the successor AO to reach a reasonable belief that the income liable to tax has escaped assessment. It’s a well settled position of law that sec 147 allows reassessment but review under the garb of reassessment is not permissible secondly the AO has to establish that his proceeding on some tangible material which was missing earlier and his action is not a mere change of opinion. 8. In view of the above facts and settled legal position we do not find any perversity in the order of Ld.CIT (A). Consequently, appeal of the department is dismissed. ITA No. 1374/Mum/2018 (A.Y.2010-11) 9. ITA No. 1374/Mum/2018 pertains to assessee challenging order of Ld.CIT (A) wherein on jurisdiction matter was decided in favour of assessee. But on merits of the case the same was adjudicated against the assessee. Hence, the assessee is in appeal before us. As the matter has already been decided in favour of assessee by rejecting the appeal of the department on jurisdictional ground, this appeal of the assessee is academic now as the assessment itself is null and void and no change in the original position can be done. Hence, this issue raised 6 ITA No. 1374/Mum/2020 Emerald Realtors Pvt. Ltd. by assessee requires no further adjudication as the grounds raised in appeal have became academic. 10. In the result appeal of the revenue is dismissed and the appeal by assessee is dismissed as infructous. Order pronounced in the open court on 21 st day of March, 2023. Sd/- Sd/- Sd/- (VIKAS AWASTHY) (GAGAN GOYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, दिन ांक/Dated: 21/03/2023 Mahesh R. Sonavane Copy of the Order forwarded to: 1. अपील र्थी/The Appellant , 2. प्रदिव िी/ The Respondent. 3. आयकर आयुक्त(अ)/The CIT(A)- 4. दवभ गीय प्रदिदनदि, आय.अपी.अदि., मुबांई/DR, ITAT, Mumbai 5. ग र्ड फ इल/Guard file. BY ORDER, //True Copy// (Dy. /Asstt.Registrar) ITAT, Mumbai