ADF FOODS LTD ( SUCESSOR OF LUSTRE INVESTMENT P. LTD), MUMBAI V. ITO WD 6(3)(2), MUMBAI

ITA 3838/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49042 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 22-11-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 12-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: CHETAN A KARIA
• Keywords: Difference of opinion; Notional interest; Reason to believe; Change of opinion
• Section: 147; 148; 143(3)

Judgement Text

1 ITA NO 3836/MUM/2009 ASST YEAR 2000-01 ITA NO 3837/MUM/2009 ASST YEAR 2002-03 ITA NO 3838/MUM/2009 ASST YEAR 2001-02 IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI MUMBAI MUMBAI MUMBAI A AA A BENCH BENCH BENCH BENCH MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI R S SYAL, AM & R S SYAL, AM & R S SYAL, AM & R S SYAL, AM & VIJAY VIJAY VIJAY VIJAY PAL RAO, JM PAL RAO, JM PAL RAO, JM PAL RAO, JM ITA NO ITA NO ITA NO ITA NO 3836/MUM/2009 3836/MUM/2009 3836/MUM/2009 3836/MUM/2009 ASST YEAR 2000 ASST YEAR 2000 ASST YEAR 2000 ASST YEAR 2000- -- -01 0101 01 ITA NO ITA NO ITA NO ITA NO 3837/MUM/2009 3837/MUM/2009 3837/MUM/2009 3837/MUM/2009 ASST YEAR 2002 ASST YEAR 2002 ASST YEAR 2002 ASST YEAR 2002- -- -03 0303 03 ITA NO ITA NO ITA NO ITA NO 3838/MUM/2009 3838/MUM/2009 3838/MUM/2009 3838/MUM/2009 ASST YEAR 2001 ASST YEAR 2001 ASST YEAR 2001 ASST YEAR 2001- -- -02 0202 02 ADF FOODS LTD(SUCCESSOR OF LUSTRE INVESTMENT P LTD) C 23/24 ACME INDL. ESTATE 3 RD FLOOR SWEREE BUNDER ROAD, SWEREE (E) MUMBAI 15 VS THE INCOME TAX OFFICER WARD 6(3)(2), MUMBAI ( (( (APPELLANT APPELLANT APPELLANT APPELLANT) )) ) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO. PAN NO. PAN NO. PAN NO.AAACL1361J AAACL1361J AAACL1361J AAACL1361J A SSESSEE BY SHRI CHETAN A KARIA REVENUE BY SHRI SHARVAN KUMAR-DR PER PER PER PER VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM THESE THREE APPEALS FILED BY THE ASSESSEE ARE DIREC TED AGAINST THREE SEPARATE ORDERS ALL DATED 23.3.2009 OF THE CIT(A) R ELATING TO ASSESSMENT YEARS 2000-01, 2002-03 AND 2001-02 RESPECTIVELY. 2 THE ASSESSEE HAS RAISED COMMON GROUNDS IN ALL THE SE APPEALS. FOR THE SAKE OF CONVENIENCE, GROUND RAISED FOR THE AY 2002- 03 ARE REPRODUCED AS UNDER: I) THE LD CIT(A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN REOPENING ASSESSMENT U/S 147 AND FAILED TO APPRECIA TE THAT THE ACTION U/S 147 WAS WITHOUT JURISDICTION AND BAD IN LAW. II) THE LD CIT(A) ERRED IN CONFIRMING ASSESSMENT OF RS. 9,28,396/- AS INCOME FROM HOUSE PROPERTY. 2 ITA NO 3836/MUM/2009 ASST YEAR 2000-01 ITA NO 3837/MUM/2009 ASST YEAR 2002-03 ITA NO 3838/MUM/2009 ASST YEAR 2001-02 III) THE LD CIT(A) ERRED IN CONFIRMING THAT THE APP ELLANT IS OWNER OF PROPERTY AT SEWREE AND THAT ANNUAL VALUE U/S 22 IN RESPECT OF THE SAID PROPERTY IS ASSESSABLE IN THE HANDS OF THE APPELLAN T. IV) THE LD CIT(A) ERRED IN CONFIRMING DETERMINATION OF ANNUAL VALUE OF THE PROPERTY AT RS. 13,90,000/- V) THE LD CIT(A) FAILED TO APPRECIATE THAT NOTIONAL INTEREST ON DEPOSIT RECEIVED CANNOT B TREATED AS ANNUAL VALUE OF THE PR OPERTY. 3 GROUND NO.1 RELATES TO VALID OF REOPENING OF THE ASSESSMENT U/S 147. 3.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE IS A PRIVATE LIMITED COMPANY CARRYING ON INVESTMENT AND OTHER BUSINESS. THE ASSESSEE HAD ACQUIRED FACTORY PREMISES UNDER TENANCY RIGHT AT MI NRVA MOVIETONE COMPOUND SEWREE, MUMBAI. THE SAID PREMISES WERE IN DILAPIDATED CONDITION AND THEREFORE, WERE FULLY RECONSTRUCTED W ITH A FULL-FLEDGED COLD STORAGE AND OTHER ELECTRICAL INSTALLATIONS. A PORTI ON OF THE SAID FACTORY ALONG WITH COLD STORAGE WAS SUBSEQUENTLY GIVEN TO A COMPA NY ON LEASE BASIS. BESIDES, THE FACTORY PREMISES, THE LEASEHOLD PROPER TY BELONGING TO MUMBAI PORT TRUST. THE MUMBAI PORT TRUST HAD ORIGINALLY LE ASED OUT THE SAID PREMISES TO M/S MHASKAR & BHARUCHA. THE SAID MHASK AR & BHARUCHA HAD SUB-LET THE SAID PREMISES TO THE ASSESSEE. 3.2 FOR THE ASSESSMENT YEAR 2002-03, THE ORIGINAL A SSESSMENT WAS COMPLETED U/S 143(3). SUBSEQUENTLY, THE ASSESSING O FFICER HAS REOPENED THE ASSESSMENT BY ISSUING NOTICE U/S 148 ON 27.3.2007 O N THE REASONS THAT THE 3 ITA NO 3836/MUM/2009 ASST YEAR 2000-01 ITA NO 3837/MUM/2009 ASST YEAR 2002-03 ITA NO 3838/MUM/2009 ASST YEAR 2001-02 ASSESSEE HAS TAKEN DEPOSIT OF RS. 64 LACS AGAINST L ET-OUT THE PREMISES IN QUESTION FOR A MONTHLY RENT OF RS. 10,000/-. THEREF ORE, IN THE OPINION OF THE ASSESSING OFFICER, THE INCOME RECEIVED FROM LETTIN G OUT OF SUCH PREMISES IS TAXABLE AS INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND PROPORTIONATE INCOME ON SUCH DEPOSIT RECEIVED BY TH E ASSESSEE IS CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY, WHICH HAS ESCAPED ASSESSMENT. 3.4 THE ASSESSING OFFICER COMPLETED THE REASSESSMEN T ON 28.12.2007 BY TREATING THE RENTAL INCOME AS INCOME FROM HOUSE PRO PERTY DETERMINING THE ANNUAL LETTING VALUE U/S 23(1)(A) AT RS. 13,90,000/ - BEING 10% OF THE DEPOSIT RECEIVED BY THE ASSESSEE. 3.5 THE ASSESSEE CHALLENGED THE REASSESSMENT BEFORE THE CIT(A), WHO HELD THAT THE ASSESSING OFFICER IS JUSTIFIED IN REOPENI NG THE ASSESSMENT AS HE HAS VALID REASON TO BELIEVE THAT THE INCOME HAS ESCAP ED ASSESSMENT. 4 BEFORE US, THE LD AR OF THE ASSESSEE SUBMITTED TH AT FOR THE ASSESSMENT YEAR 1999-00, THE ASSESSMENT WAS COMPLET ED U/S 143(3). WHILE COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER HA S TAKEN INTO CONSIDERATION ALL THE FACTS INCLUDING THE MONTHLY R ENT OF RS. 10,000/- AND 4 ITA NO 3836/MUM/2009 ASST YEAR 2000-01 ITA NO 3837/MUM/2009 ASST YEAR 2002-03 ITA NO 3838/MUM/2009 ASST YEAR 2001-02 ALSO INTEREST FREE DEPOSIT OF RS. 64 LACS. THE LD AR OF THE ASSESSEE HAS POINTED OUT THAT THE ASSESSING OFFICER MADE THE ADD ITION OF RS. 1,20,000/- BEING THE RENTAL INCOME AND ASSESSED THE SAME UNDER THE HEAD INCOME FROM OTHER SOURCES WHILE COMPLETING THE ASSESSMENT FOR THE ASSESSMENT YEAR 1999-00. HE HAS FILED A COPY OF THE ASSESSMENT ORD ER DATED 28.2.2002 FOR THE ASSESSMENT YEAR 1999-00. THE LD AR OF THE ASSES SEE HAS SUBMITTED THAT WHEN THE SAID RENTAL INCOME WAS EXAMINED AND ASSESS ED BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 1999-00 AS INCOME F ROM OTHER SOURCES AND THEREAFTER THE ASSESSMENT FOR ASSESSMENT YEAR 2002- 03 WAS COMPLETED U/S 143(3) THEN THE REOPENING OF THE ASSESSMENT ON THE GROUND THAT THE RENTAL INCOME HAS TO BE ASSESSED UNDER THE HEAD INCOME FR OM HOUSE PROPERTY, IS BASED ON CHANGE OF OPINION. THE LD AR OF THE ASSES SEE HAS SUBMITTED THAT THE ISSUE OF ASSESSMENT OF THE RENTAL INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES HAD ATTAINED THE FINALITY BECAUSE THE ASSESSEE HAS NOT CHALLENGED THE ASSESSMENT IN THE AY 1999-00. HE FU RTHER POINTED OUT THAT ALL THE FACTS AND MATERIAL RELEVANT ON THE ISSUE WE RE AVAILABLE BEFORE THE ASSESSING OFFICER AT THE TIME OF ORIGINAL ASSESSMEN T AND NO NEW MATERIAL OR INFORMATION CAME TO THE KNOWLEDGE OF THE ASSESSING OFFICER AFTER COMPLETING THE ASSESSMENT U/S 143(3) FOR ASSESSMENT YEAR 2002- 03; THEREFORE, REOPENING OF THE ASSESSEE IS BASED ON CHANGE OF OPI NION. HE RELIED UPON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF KELVINATOR OF INDIA LTD REPORTED IN 256 ITR 1 (FB) WHICH HAS BEEN UPHE LD BY THE HONBLE SUPREME COURT REPORTED IN 320 ITR 561. 5 ITA NO 3836/MUM/2009 ASST YEAR 2000-01 ITA NO 3837/MUM/2009 ASST YEAR 2002-03 ITA NO 3838/MUM/2009 ASST YEAR 2001-02 5 AS REGARDS TO THE ASSESSMENT YEAR 2000-01 AND 20 01-02, THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THOUGH THE ORIGI NAL ASSESSMENT WAS PROCESSED U/S 143(1), HOWEVER, WHEN THE ISSUE OF RE NTAL INCOME HAS ALREADY BEEN ADJUDICATED BY THE ASSESSING OFFICER IN THE A SSESSMENT YEAR 1999-00 AND ATTAINED THE FINALITY THEN IN THE ABSENCE OF AN Y CHANGE IN THE FACTS AND CIRCUMSTANCES THE REOPENING OF THE ASSESSMENT ON GROUND OF TREATING THE RENTAL INCOME FROM HOUSE PROPERTY IS BASED ON CHAN GE OF OPINION AND NOT SUSTAINABLE. HE REFERRED TO THE REASONS RECORDED B Y THE ASSESSING OFFICER AT PAGE 5 OF THE PAPER BOOK AND SUBMITTED THAT THE ASS ESSING OFFICER HAS REOPENED THE ASSESSMENT FOR THESE TWO YEARS ON SIMI LAR REASONS. 5.1 ON THE OTHER HAND, THE LD DR HAS SUBMITTED THAT FOR THE ASSESSMENT YEARS 2000-01 AND 2001-02 THERE WAS NO ASSESSMENT B UT THE RETURN WAS PROCESSED U/S 143(1). THEREFORE, THE REOPENING OF T HE ASSESSMENT IS NOT BASED ON CHANGE OF OPINION. HE RELIED ON THE DECISI ON OF THE HONBLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI STOCK B ROKERS REPORTED IN 291 ITR 500 AND SUBMITTED THAT WHEN THE ASSESSING OFFIC ER HAS REASONS TO BELIEVE THAT THE INCOME ASSESSABLE TO TAX HAS ESCAP ED ASSESSMENT THEN AT THE TIME OF REOPENING OF THE ASSESSMENT, THE ASSESS ING OFFICER NEED NOT TO GO INTO THE MERITS OF THE ISSUE ON WHICH THE ASSESSMEN T HAS BEEN REOPENED. 6 ITA NO 3836/MUM/2009 ASST YEAR 2000-01 ITA NO 3837/MUM/2009 ASST YEAR 2002-03 ITA NO 3838/MUM/2009 ASST YEAR 2001-02 5.2 AS REGARDS TO THE ASSESSMENT YEAR 2002-03, THE LD DR HAS RELIED ON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT WHEN THE ISSUE OF ASSESSMENT OF RENTAL INCOME WAS NOT INVOLVED IN THE ORIGINAL ASSESSMENT THEN THERE IS NO QUESTION OF TAKING A VIEW BY THE ASSESSING OFFICER AT THE TIME OF ORIGINAL ASSESSMENT. THUS, THE LD DR HAS SU BMITTED THAT WHEN THE ISSUE OF ASSESSMENT OF THE RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY HAS NOT BEEN CONSIDERED AND ADJUDICATED I N THE ORIGINAL ASSESSMENT THEN THE REASSESSMENT CANNOT BE SAID TO BE BASED ON CHANGE OF OPINION. 6 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE PARTIES AND PERUSED THE RELEVANT MATERIAL ON RECORD. UNDIS PUTEDLY, THE ORIGINAL ASSESSMENT WAS PROCESSED U/S 143(1) FOR THE ASSESSM ENT YEAR 2000-01 AND 2001-02 WHEREAS THE ASSESSMENT FOR ASSESSMENT YEAR 2002-03 HAS COMPLETED U/S 143(3). 6.1 FIRST, WE TAKE UP THE ISSUE OF VALIDITY OF THE REOPENING OF THE ASSESSMENT FOR ASSESSMENT YEAR 2002-03. IN THE ORI GINAL ASSESSMENT, THE ASSESSING OFFICER HAS ADJUDICATED THE ISSUE OF DEP RECIATION ON THE FACTORY PREMISES AND CLAIM OF DEPRECATION OF RS. 2,18,145/- WAS DISALLOWED ON THE GROUND THAT NO BUSINESS ACTIVITY WAS CONDUCTED FROM THE GALA AS WELL AS THE OWNERSHIP OF THE GALA WAS NOT PROVED BY THE ASSESSE E. THOUGH THE ISSUE OF 7 ITA NO 3836/MUM/2009 ASST YEAR 2000-01 ITA NO 3837/MUM/2009 ASST YEAR 2002-03 ITA NO 3838/MUM/2009 ASST YEAR 2001-02 ASSESSMENT OF RENTAL INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES OR INCOME FROM HOUSE PROPERTY WAS NOT AT ALL DISCUSS ED OR ADJUDICATED BY THE ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT; HOWE VER, WHEN THE SAID ISSUE WAS ALREADY BEEN ADJUDICATED BY COMPLETING THE ASSE SSMENT FOR THE ASSESSMENT YEAR 1999-00 THEN, IN THE ABSENCE OF AN Y CHANGE IN THE FACTS AND CIRCUMSTANCES AS IN THE ASSESSMENT YEAR 1999- 00 AND FOR THE ASSESSMENT YEAR 2002-03, THE ISSUE HAS ATTAINED TH E FINALITY AS REGARDS THE RENTAL INCOME ASSESSABLE UNDER THE HEAD INCOME FR OM OTHER SOURCES. THE ASSESSING OFFICER HAS RECORDED THE REASONS FOR REO PENING OF THE ASSESSMENT AS UNDER: (2002-03) THE RETURN OF INCOME IN THIS CASE WAS FILED ON 30. 10.2002 DECLARING LOSS OF RS. 4,08,033/-, THE SAME WAS PROCESSED U/S 143(1) ON 9.1.2003. THE ASSESSMENT U/S 143(3)(II) WAS COMPLET ED ON 28.10.2004 ASSESSING THE TOTAL INCOME AT RS. 10,2000/-. HOWEVE R, IT IS SEEN THAT AS PER BALANCE SHEET ATTACHED WITH THE RETURN OF INCOM E FILED BY THE ASSESSEE IT IS SEEN THAT THE ASSESSEE HAS RECEIVED THE FOLLOWING SECURITY DEPOSITS: AMERICAN DRY FRUITS LTD RS. 75 L ACS AMERICAN FOODS I LTD RS 23 L ACS AMERICAN DRY FRUIT STORES R S. 41 LACS AS PER COPY OF LEASE AGREEMENT DATED 1.4.1988 WITH AMERICAN FOODS I LTD, FILED DURING THE COURSE OF ASSESSMENT PROCEEDI NGS FOR ASSESSMENT YEAR 2002-03, IT IS SEEN THAT THE ASSESSEE HAS LET OUT ITS PREMISES TO AMERICAN FOODS I LTD FOR A MONTHLY RENT OF RS. 1000 0/- AND TAKEN DEPOSITS OF RS. 64 LACS. IT IS SEEN THAT THE ASSESS EE HAS TAKEN THIS PREMISES UNDER TENANCY RIGHT FROM FY 94-95 AND IS D EEMED TO BE THE OWNER OF THE PREMISES AS PER PROVISIONS OF SEC. 27( IIIB) OF THE I T ACT 1961 AND THE INCOME RECEIVED FROM LETTING OUT SUCH PREMISES IS TAXABLE AS INCOME UNDER THE HEAD HOUSE PROPERTY AS PER TH E PROVISIONS OF SEC. 23(1)(A) OF THE I T ACT 1961 THE ANNUAL VALUE OF T HE PROPERTY SHALL BE 8 ITA NO 3836/MUM/2009 ASST YEAR 2000-01 ITA NO 3837/MUM/2009 ASST YEAR 2002-03 ITA NO 3838/MUM/2009 ASST YEAR 2001-02 DEEMED TO BE THE SUM FOR WHICH THE PROPERTY MIGHT R EASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR AND HENCE THE AMO UNTS FOR WHICH THE PROPERTIES GIVEN TO AMERICAN DRY FRUITS LTD AND AME RICAN DRY FRUIT STORES MIGHT REASONABLY BE EXPECTED TO LET FROM YEA R TO YEAR IS TO BE TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. CONSIDERING THE ABOVE I HAVE REASON TO BELIEVE THAT INCOME TO THE EXTENT OF RS. 2,22,857/- CALCULATED PROPORTIONATELY ON THE BASIS OF DEPOSIT RECEIVED WHICH IS CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY HAS ESCAPED ASSESSMENT. 6.2 FROM THE REASONS RECORDED BY THE ASSESSING OFFI CER, IT IS APPARENT THAT THE ASSESSING OFFICER HAS REOPENED THE ASSESSM ENT ON THE BELIEF THAT PROPORTIONATE INCOME ON THE INTEREST FREE DEPOSIT R ECEIVED BY THE ASSESSEE IN RESPECT OF THE PREMISES LET OUT HAS ESCAPED ASSESSM ENT IN VIEW OF THE PROVISIONS OF SEC. 23(1)(A) OF THE I T ACT AS THE R ENTAL INCOME IS ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 6.3 THE ISSUE OF DETERMINATION OF THE FAIR RENT U/S 23(1)(A) OF THE I T ACT BY TAKING INTO CONSIDERATION THE INTEREST FREE DEPO SIT RECEIVED BY THE ASSESSEE IS DEBATABLE ISSUE. ONCE THE RENTAL INCOM E HAS BEEN ASSESSED BY THE ASSESSING OFFICER UNDER THE HEAD INCOME FROM OTHER SOURCES THEN, IN OUR OPINION, THE REOPENING OF THE ASSESSMENT ON THE REASON THAT THE SAID INCOME HAS TO BE ASSESSED UNDER THE HEAD INCOME FR OM HOUSE PROPERTY IS NOTHING BUT CLEARLY ON CHANGE OF OPINION. IT IS AN UNDISPUTED FACT THAT THE ASSESSING OFFICER HAS NOT CAME ACROSS ANY FRESH FA CTS OR MATERIAL OR ANY 9 ITA NO 3836/MUM/2009 ASST YEAR 2000-01 ITA NO 3837/MUM/2009 ASST YEAR 2002-03 ITA NO 3838/MUM/2009 ASST YEAR 2001-02 NEW INFORMATION AFTER COMPLETING THE ORIGINAL ASSES SMENT TO FORM AN OPINION THAT THE INCOME ASSESSABLE TO TAX HAS ESCAP ED ASSESSMENT. THEREFORE, IN VIEW OF THE DECISION OF THE HONBLE D ELHI HIGH COURT IN THE CASE OF KELVINATOR OF INDIA LTD (SUPRA) WHICH HAS BEEN U PHELD BY THE HONBLE SUPREME COURT, REOPENING OF THE ASSESSMENT FOR AY 2 002-03 IS NOT SUSTAINABLE AND LIABLE TO BE QUASHED. ACCORDINGLY , THE REASSESSMENT FOR THE ASSESSMENT YEAR 2002-03 IS BAD IN LAW. 7 AS REGARDS THE ISSUE ON MERIT FOR THE AY 2002-03, WHEN WE HOLD THAT REOPENING OF THE ASSESSMENT IS INVALID AND BAD IN L AW, WE DO NOT PROPOSE TO GO INTO THE MERITS OF THE OTHER ISSUES. 8 NOW, WE TAKE UP THE ASSESSMENT FOR ASSESSMENT YEA R 2001-02. THE ASSESSING OFFICER HAS REOPENED THE ASSESSMENT ON TH E REASONS RECORDED AS UNDER: THE RETURN OF INCOME IN THIS CASE WAS FILED ON 30. 10.2002 DECLARING LOSS OF RS. 10,65,614/-, THE SAME WAS PROCESSED U/S 143(1) ON 26.02.2002. AS PER THE BALANCE SHEET ATTACHED WITH THE RETURN OF INCOME FILED BY THE ASSESSEE IT IS SEEN THAT THE AS SESSEE HAS RECEIVED THE FOLLOWING SECURITY DEPOSITS: AMERICAN DRY FRUITS LTD RS. 75 L ACS AMERICAN FOODS I LTD RS 23 L ACS AMERICAN DRY FRUIT STORES R S. 41 LACS 10 ITA NO 3836/MUM/2009 ASST YEAR 2000-01 ITA NO 3837/MUM/2009 ASST YEAR 2002-03 ITA NO 3838/MUM/2009 ASST YEAR 2001-02 AS PER COPY OF LEASE AGREEMENT DATED 1.4.1988 WITH AMERICAN FOODS I LTD, FILED DURING THE COURSE OF ASSESSMENT PROCEEDI NGS FOR ASSESSMENT YEAR 2002-03, IT IS SEEN THAT THE ASSESSEE HAS LET OUT ITS PREMISES TO AMERICAN FOODS I LTD FOR A MONTHLY RENT OF RS. 1000 0/- AND TAKEN DEPOSITS OF RS. 64 LACS. HOWEVER, NO SUCH INCOME FR OM LETTING OUT OF PREMISES HAS BEEN SHOWN BY THE ASSESSEE IN ITS P&L ACCOUNT FOR FY 2000-01 RELEVANT TO AY 2001-02. IT IS SEEN THAT TH E ASSESSEE HAS TAKEN THIS PREMISES UNDER TENANCY RIGHT FROM FY 94-95 AND IS DEEMED TO BE THE OWNER OF THE PREMISES AS PER PROVISIONS OF SEC. 27(IIIB) OF THE I T ACT 1961 AND THE INCOME RECEIVED FROM LETTING OUT SUCH PREMISES IS TAXABLE AS INCOME UNDER THE HEAD HOUSE PROPERTY AS PER TH E PROVISIONS OF SEC. 23(1)(A) OF THE I T ACT 1961 THE ANNUAL VALUE OF THE PROPERTY SHALL BE DEEMED TO BE THE SUM FOR WHICH THE PROPERTY MIGHT R EASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR. CONSIDERING THE ABOVE I HAVE REASON TO BELIEVE THAT INCOME TO THE EXTENT OF RS. 2,22,857/- CALCULATED PROPORTIONATELY ON THE BASIS OF DEPOSIT RECEIVED WHICH IS CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY HAS ESCAPED ASSESSMENT. 8 THE REASONS RECORDED BY THE ASSESSING OFFICER ARE IDENTICAL TO THE REASONS FOR THE ASSESSMENT YEAR 2002-03. THOUGH THE ORIGINAL ASSESSMENT WAS PROCESSED U/S 143(1) WHEN THE ISSUE OF ASSESSME NT OF THE RENTAL INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES HAS ALRE ADY BEEN ADJUDICATED BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 1999- 00 THEN THE PROCESSING OF THE ASSESSMENT U/S 143(1) HAS TO BE CONSIDERED A S ACCEPTANCE OF THE ISSUE AS DECIDED FOR THE ASSESSMENT YEAR 1999-00. T HEREFORE, THE REOPENING OF THE ASSESSMENT FOR ASSESSMENT YEAR 2001-02 IS NO T SUSTAINABLE AND LIABLE TO BE QUASHED. 11 ITA NO 3836/MUM/2009 ASST YEAR 2000-01 ITA NO 3837/MUM/2009 ASST YEAR 2002-03 ITA NO 3838/MUM/2009 ASST YEAR 2001-02 9 THE ASSESSING OFFICER RECORDED THE REASONS FOR RE OPENING OF THE ASSESSMENT FOR ASSESSMENT YEAR 2000-01 AS UNDER: THE RETURN OF INCOME IN THIS CASE WAS FILED ON 30. 10.2002 DECLARING LOSS OF RS. 11,02,280/-, THE SAME WAS PROCESSED U/S 143(1) ON 26.02.2002. AS PER THE BALANCE SHEET ATTACHED WITH THE RETURN OF INCOME FILED BY THE ASSESSEE IT IS SEEN THAT THE AS SESSEE HAS RECEIVED THE FOLLOWING SECURITY DEPOSITS: AMERICAN DRY FRUITS LTD RS. 75 L ACS AMERICAN FOODS I LTD RS 23 L ACS AS PER COPY OF LEASE AGREEMENT DATED 1.4.1988 WITH AMERICAN FOODS I LTD, FILED DURING THE COURSE OF ASSESSMENT PROCEEDI NGS FOR ASSESSMENT YEAR 2002-03, IT IS SEEN THAT THE ASSESSEE HAS LET OUT ITS PREMISES TO AMERICAN FOODS I LTD FOR A MONTHLY RENT OF RS. 1000 0/- AND TAKEN DEPOSITS OF RS. 64 LACS. HOWEVER, NO SUCH INCOME FR OM LETTING OUT OF PREMISES HAS BEEN SHOWN BY THE ASSESSEE IN ITS P&L ACCOUNT FOR FY 1999-00 RELEVANT TO ASSESSMENT YEAR 2000-01. THUS IT I SEEN THAT THE INCOME OF RS. 1,20,000/-BEING INCOME FROM LETTING O UT OF PREMISES HAS ESCAPED ASSESSMENT AS PER PROVISIONS OF SEC. 147 OF THE I T ACT, 1961. 9.1 IT IS APPARENT AND MANIFEST FROM THE REASONS RE CORDED BY THE ASSESSING OFFICER FOR ASSESSMENT YEAR 2000-01 THAT THE ASSESSEE DID NOT OFFER THE RENTAL INCOME FOR TAX IN THE RETURN OF IN COME. THE RETURN OF INCOME WAS PROCESSED U/S 143(1); THEREFORE, TO THE EXTENT OF RENTAL INCOME, WHICH WAS NOT OFFERED BY THE ASSESSEE, THE ASSESSING OFFI CER HAS A VALID REASON TO BELIEVE THAT THE INCOME ASSESSABLE TO TAX HAS ESCAP ED ASSESSMENT. THUS, IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT I N THE CASE OF RAJESH JHAVERI STOCK BROKERS (SUPRA), WE HOLD THAT THE REO PENING OF THE ASSESSMENT FOR ASSESSMENT YEAR 2000-01 IS VALID. 12 ITA NO 3836/MUM/2009 ASST YEAR 2000-01 ITA NO 3837/MUM/2009 ASST YEAR 2002-03 ITA NO 3838/MUM/2009 ASST YEAR 2001-02 10 ON MERIT, THE ASSESSING OFFICER, IN THE REASSES SMENT DETERMINED THE ANNUAL LETTING VALUE OF THE PROPERTY U/S 23(1)(A) OF THE I T ACT AT RS. 13,90,000 BEING 10% OF THE INTEREST FREE DEPOSIT RECEIVED BY THE ASSESSEE. SINCE THE ISSUE OF ASSESSMENT OF THE RENTAL INCOME HAS ALREADY BEEN SETTLED WHEN ASSESSING OFFICER, FOR THE AY 1999-00, HAD MADE ADDITION OF T HE RENTAL INCOME AND ASSESSED THE SAME UNDER THE HEAD INCOME FROM OTHER SOURCES; THEREFORE, THE ASSESSMENT OF THE RENTAL INCOME UNDER THE HEAD INC OME FROM HOUSE PROPERTY IN THE REASSESSMENT IS CONTRARY TO THE VIEW TAKEN BY T HE ASSESSING OFFICER FOR THE AY 1999-00. ACCORDINGLY, THE ASSESSMENT OF THE REN TAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY IS NOT JUSTIFIED AND S USTAINABLE AND THEREFORE, THE SAME IS LIABLE TO BE SET ASIDE. HOWEVER, AS THE RE NTAL INCOME HAS ALREADY BEEN TREATED AS INCOME FROM OTHER SOURCES AND THE ASSESS MENT HAS ATTAINED THE FINALITY THEREFORE, FOR THE ASSESSMENT YEAR UNDER CONSIDERATION WHEN THE ASSESSEE DID NOT OFFERED THE RENTAL INCOME TO TAX, THE SAME IS LIABLE TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES AND ACCORDINGLY, WE SET ASIDE THE ISSUE TO THE RECORDS OF THE ASSESSING OF FICER TO ASSESS THE RENTAL INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES AS THE FACTS IN THE ASSESSMENT UNDER CONSIDERATION AND THE ASSESSMENT 1 999-00 ARE PARI-MATERIA. WE HOLD AND DIRECT ACCORDINGLY. THE GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSE. 13 ITA NO 3836/MUM/2009 ASST YEAR 2000-01 ITA NO 3837/MUM/2009 ASST YEAR 2002-03 ITA NO 3838/MUM/2009 ASST YEAR 2001-02 11 IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2001-02 AND 2002-03 ARE ALLOWED AND APPEAL FOR ASSE SSMENT YEAR 2000-01 IS PARTY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON THE 20 TH DAY OF MAY 2011. SD/- SD/- ( (( ( R S SYAL R S SYAL R S SYAL R S SYAL ) )) ) ACCOUNTANT MEMBER ( (( ( VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO ) )) ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 20 TH , MAY 2011 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI