ASHRAY REALTORS, MUMBAI V. ITO 24(1)(3), MUMBAI

ITA 3699/MUM/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3601 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 16-06-2015
• Court: TRIBUNAL
• Department Lawyers: A RAMACHANDRANDR
• Assessee Lawyers: PARESH VAKHARIA
• Keywords: Reopening of assessment; Depreciation; Difference of opinion; Notional interest; Reason to believe; Change of opinion
• Section: 143(3); 148; 139

Judgement Text

, - , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI , ! ' , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, ITA NO.3699/MUM/2015 ASSESSMENT YEAR: 2007-08 M/S ASHRAY REALTORS, 11/12, NAGARWALA COLONY, PODDAR ROAD, MALAD (EAST), MUMBAI-400097 / VS. ITO-24(1)(3), MUMBAI / ASSESSEE / REVENUE P.A. NO . AALFA0469J $ % & / ASSESSEE BY SHRI PARESH VAKHARIA $ % & / REVENUE BY SHRI A. RAMACHANDRAN-DR / DATE OF HEARING 05/07/2016 & / DATE OF ORDER: 05/07/2016 ITA NO.3699/MUM/2015 M/S ASHRAY REALTORS 2 & / O R D E R THE INSTANT APPEAL HAS BEEN FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2007-08 AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-41, MUMBAI, ARISING OUT OF ASSESSEES APPEAL RELATED TO ASSESSM ENT U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (HERE INAFTER THE ACT). THE ASSESSEE HAS RAISED TWO GROUNDS OF A PPEAL, ONE OF WHICH RELATES TO THE CHALLENGE TO REOPENING OF ASSESSMENT U/S 147 OF THE ACT. 2. THE ASSESSEE IS A PARTNERSHIP FIRM AND FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2007-08 ON 23/11/2007 DECLARING NIL INCOME. THE RETURN OF INCO ME WAS PROCESSED U/S 143(1) OF THE ACT AND SUBSEQUENTL Y, TAKEN FOR SCRUTINY ASSESSMENT U/S 143(3) OF THE ACT . THE ASSESSMENT U/S 143(3) WAS COMPLETED BY THE LD. ASSE SSING OFFICER VIDE ITS ORDER DATED 21/08/2009 ACCEPTING T HE RETURN OF INCOME AS SUCH. SUBSEQUENTLY, THE CASE O F THE ASSESSEE WAS SOUGHT TO BE REOPENED BY THE LD. ASSES SING OFFICER U/S 147 OF THE ACT VIDE NOTICE DATED 26/09/ 2012. THE ASSESSEE REQUESTED FOR REASON OF REOPENING WHIC H WAS SUPPLIED BY THE LD. ASSESSING OFFICER VIDE ITS LETT ER NO. ITO/24(1)(3)/ASHRAY 148/12-13 DATED 01/11/2012. THE FOLLOWING REASONS WERE SUPPLIED FOR REASONS OF REOP ENING OF ASSESSMENT:- ON PERUSAL OF DETAILS AND BALANCE SHEET OF THE ASSE SSEE, IT IS NOTICED THAT THE ASSESSEE HAS PAID HUGE INTEREST OF RS.59,48,641 /- ON BORROWED LOANS OF RS.9,58,46,107/- @ 6%. HOWEVER, ON THE OTHER HA ND, IT HAS GIVEN ITA NO.3699/MUM/2015 M/S ASHRAY REALTORS 3 INTEREST FREE LOANS AMOUNTING TO RS.3,66,32,152/- T O FOUR PARTIES. AS ON ONE HAND ASSESSEE IS PAYING HUGE INTEREST ON THE AM OUNTS BORROWED AND ON THE OTHER HAND IT IS ADVANCING INTEREST FREE LOA NS/ADVANCES TO SOME PARTIES FOR WITHOUT ANY BUSINESS CONSIDERATION. ON PERUSAL OF RECORDS, IT IS SEEN THAT THE ASSESSEE HAS NOT GIVEN ANY EXPLANATIO N IN THIS REGARD. IT CAN BE SEEN FROM THE BALANCE SHEET THAT THE ASSESSEE UT ILIZED BANK OD ON WHICH THE ASSESSEE HAS PAID INTEREST. IN VIEW OF AF ORESAID FACTS, THE INTEREST AMOUNT TO THE TUNE OF RS.21,97,929/- (6% O F RS.3,66,32,152/-) HAS ESCAPED ASSESSMENT. 2.1. THE ASSESSEE AGITATED THE REOPENING BOTH ON TECHNICAL GROUND AS WELL AS ON MERIT. THE AO COMPLE TED THE ASSESSMENT U/S 143(3) R.W.S. 147 OF THE ACT VID E ITS ORDER DATED 31/12/2013. ADJUSTMENTS WITH RESPECT TO INTEREST WERE MADE AND THE TOTAL INCOME WAS ASSESSE D AT RS.21,97,929/-, AGAINST WHICH, THE ASSESSEE PREFERR ED APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ASSAILING THE ORDER OF THE LD. ASSESSING OFFICER. THE APPEAL OF THE ASSESSEE WAS REJECTED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) VIDE ITS ORDER DATED 18/03/2015. THE ASSESSEE IS IN SECOND APPEAL BEFORE US AND ASSAILED THE ORDER OF THE LD. COMMISSIONER OF I NCOME TAX (APPEALS). THE ASSESSEE HAS CHALLENGED THE REOP ENING OF ASSESSMENT AS WELL AS RAISED CONTENTION ON MERIT S TO SUPPORT HIS CASE. 2.2. BEFORE US, THE ASSESSEE HAS RAISED VARIOUS CONTENTIONS IN ITS SUPPORT AND SUBMITTED COPIES OF QUESTIONNAIRES RAISED DURING ORIGINAL ASSESSMENT PROCEEDINGS AND SUBMISSION MADE THERETO. THE FACTS ARE NOT IN DISPUTE. THE INITIAL AND FOREMOST CONTENTION OF THE LD. AR IS THAT THE NOTICE ISSUED U/S 147 OF THE ACT IS NOT VALID ON THE GROUND THAT IT IS BASED ON MERE CHANGE OF ITA NO.3699/MUM/2015 M/S ASHRAY REALTORS 4 OPINION AND NO NEW MATERIAL FACTS HAS COME TO THE KNOWLEDGE OF LD. ASSESSING OFFICER SO AS TO JUSTIF Y THE REOPENING OF THE CASE. ALL QUERIES IN RESPECT OF U NSECURED LOANS WERE RAISED BY THE LD. ASSESSING OFFICER DURI NG ORIGINAL ASSESSMENT PROCEEDINGS AND ALL NECESSARY D ETAILS WERE SUPPLIED BY THE ASSESSEE. THE SUBMISSIONS OF THE ASSESSEE INTER-ALIA INCLUDED COMPLETE DETAILS OF UN SECURED LOANS. THE MATERIAL FACTS WERE WELL APPRECIATED AND EXAMINED BY LD. ASSESSING OFFICER WHILE FRAMING THE ASSESSMENT. THE ASSESSMENT IS SOUGHT TO BE REOPEN O N THE BASIS THAT ASSESSEE HAS OBTAINED INTEREST BEARING L OANS BUT IT HAS ADVANCED INTEREST FREE LOANS. THE LD. AS SESSING OFFICER HAS SOUGHT TO TAX NOTIONAL INTEREST ON INTE REST FREE UNSECURED LOANS GIVEN BY THE ASSESSEE. ON THE OTHER HAND, THE LD. DR CONTENDED THAT ASSESSEE DID NOT PR OVIDE THE COMPLETE DETAILS AS CALLED FOR BY THE LD. ASSES SING OFFICER AND HAS JUSTIFIED THE REOPENING OF ASSESSME NT. 3. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE GONE THRO UGH THE QUESTIONNAIRE SEEKING DETAILS FROM THE ASSESSEE AND THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE LD. ASSESSING OFFICER DURING THE ORIGINAL ASSESSMENT PROCEEDINGS. WE FIND THAT ADEQUATE DETAILS HAVE BEE N PROVIDED IN THIS REGARD BY THE ASSESSEE. THE REASON S SUPPLIED BY THE LD. ASSESSING OFFICER FOR REOPENING OF THE ASSESSMENT SHOWS THAT THERE IS NO NEW TANGIBLE MATE RIAL WHICH HAS COME TO THE POSSESSION/KNOWLEDGE OF THE L D. ITA NO.3699/MUM/2015 M/S ASHRAY REALTORS 5 ASSESSING OFFICER AND REOPENING IS BEING INITIATED ONLY ON THE BASIS OF MERE CHANGE OF OPINION. ALL THE MATERI AL AND RECORDS INCLUDING FINANCIAL STATEMENTS AND SUBMISSI ONS OF THE ASSESSEE WERE ALREADY AVAILABLE WITH HIM DURING THE ORIGINAL ASSESSMENT PROCEEDINGS AND THE SAME CONCLU SION IS DRAWN BY HIM AT THAT TIME ONLY. THE ASSESSMENT Y EAR IN QUESTION IS 2007-08 AND THE NOTICE OF REASSESSMENT IS ISSUED ON 26/09/2012 WHICH IS BEYOND THE PERIOD OF FOUR YEARS FROM END OF RELEVANT ASSESSMENT YEAR. THE OR IGINAL ASSESSMENT HAS BEEN COMPLETED U/S 143(3) OF THE ACT . I ALSO QUOTE THE RELEVANT STATUTORY PROVISIONS OF SEC TION 147 OF THE ACT TO SETTLE THE DISPUTE IN HAND:- 147. IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THA T ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY AS SESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 T O 153, ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHAR GEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, OR RECOMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESSMENT Y EAR CONCERNED (HEREAFTER IN THIS SECTION AND IN SECTIONS 148 TO 1 53 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR) : PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER T HE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PAR T OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE T O A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECT ION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR HIS ASSESSMENT , FOR THAT ASSESSMENT YEAR: (EMPHASIS SUPPLIED BY ME) 3.1. ACCORDINGLY, IF ASSESSMENT HAS BEEN COMPLETE D U/S 143(3) OF THE ACT AND THE CASE IS SOUGHT TO BE REOPEN ITA NO.3699/MUM/2015 M/S ASHRAY REALTORS 6 BEYOND FOUR YEARS THEN ONE OF THE CONDITIONS FOR RE OPENING IS THAT THERE IS EITHER FAILURE ON THE PART OF THE ASSESSEE TO MAKE PRESCRIBED RETURNS OR FAILURE TO DISCLOSE FUL LY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR THE ASSE SSMENT. AS ALL THE MATERIAL FACTS HAS BEEN DISCLOSED BY THE ASSESSEE AT THE STAGE OF ORIGINAL ASSESSMENT AND TH E LD. ASSESSING OFFICER HAS DULY SCRUTINIZED THE SAME AND FURTHER NO NEW MATERIAL HAS COME BEFORE THE AO SO A S TO JUSTIFY THE REOPENING AND IT IS MERE CHANGE OF OPIN ION, THEREFORE, THE REOPENING IS BAD IN LAW AS PER THE S TATUTORY PROVISIONS. THEREFORE, THE REOPENING IS INVALID. T HE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE ON TECHNICAL G ROUNDS ITSELF AND ACCORDINGLY THE CONSEQUENT ASSESSMENT DO NE IS QUASHED. THERE IS NO NEED TO GO INTO THE MERITS OF CASE. FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN IN TH E PRESENCE OF LD. REPRESENTATIVE FROM BOTH SIDES AT T HE CONCLUSION OF THE HEARING ON 05/07/2016. SD/- (JOGINDER SINGH) ! ' / JUDICIAL MEMBER MUMBAI; DATED : 05/07/2016 F{X~{T? P.S / ! &($)!*+,&+-* / COPY OF THE ORDER FORWARDED TO : 1. '#$%& / THE APPELLANT 2. '(%& / THE RESPONDENT. 3. )) * / THE CIT, MUMBAI. 4. )) * / CIT- , MUMBAI 5. +,-' , )'#$' / , / DR, ITA NO.3699/MUM/2015 M/S ASHRAY REALTORS 7 ITAT, MUMBAI 6. -01$ / GUARD FILE. &( / BY ORDER, (+#' //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI