TOLANI P. LTD, MUMBAI V. ACIT CEN CIR 17, MUMBAI

ITA 4119/MUM/2010

• Counselvise Citation: 411919914 RSA 2010
• Duration Of Justice: 1 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 07-12-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 20-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S M AGARWAL
• Keywords: Reopening of assessment; Depreciation; Earning of tax free income; Deemed to accrue or arise in india; Retrospective amendment; Additional evidence; Tangible material; Difference of opinion; Change of opinion
• Section: 143(3); 14A

Judgement Text

1 M/S TOLANI PVT LTD 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 D D D D BENCH BENCH BENCH BENCH MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI P M JAGTAP P M JAGTAP P M JAGTAP P M JAGTAP AM AM AM AM & SHRI & SHRI & SHRI & SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM ITA NO. ITA NO. ITA NO. ITA NO. 4117/MUM/2010 4117/MUM/2010 4117/MUM/2010 4117/MUM/2010 (ASST YEAR (ASST YEAR (ASST YEAR (ASST YEAR 2001 2001 2001 2001- -- -02 0202 02) )) ) ITA ITA ITA ITA 4118/MUM/2010 4118/MUM/2010 4118/MUM/2010 4118/MUM/2010 - -- - (ASST YEAR 2006 (ASST YEAR 2006 (ASST YEAR 2006 (ASST YEAR 2006- -- -07) 07) 07) 07) & & & & ITA 4119/MUM/2010 (ASST YEAR 2007 ITA 4119/MUM/2010 (ASST YEAR 2007 ITA 4119/MUM/2010 (ASST YEAR 2007 ITA 4119/MUM/2010 (ASST YEAR 2007- -- -08) 08) 08) 08) M/S TOLANI PVT LTD 10A BAKHTAWAR NARIMAN POINT MUMBAI 21 VS THE ASST COMMR OF INCOME TAX CEN CIR 17, MUMBAI (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO. PAN NO. PAN NO. PAN NO. AAACT4125A AAACT4125A AAACT4125A AAACT4125A ASSESSEE BY SH S M AGARWAL REVENUE BY SH PARTHASARATHI NAIK DT.OF HEARING 7 TH DEC 2011 DT OF PRONOUNCEMENT 13 TH JAN 2012 ORDER ORDER ORDER ORDER PER PER PER PER VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO, , , , JM JMJM JM THESE THREE APPEALS BY THE ASSESSEE ARE DIRECTED A GAINST THE SEPARATE ORDERS OF THE CIT(A) DATED 8.2.2010, 24.2.2010 & 24 .10.2010 FOR THE ASSESSMENT YEARS 2001-02, 2006-07 & 2007-08 RESPECTIVELY. 2 FOR THE ASSESSMENT YEAR 2001-02, THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS: 1 THE LEARNED ASSESSING OFFICER HAS ERRED IN REOP ENING ASSESSMENT U/S.147 OVERLOOKING THAT ORIGINAL ASSESSMENT ORDER WAS PASSED AS SCRUTINY ASSESSMENT U/S.143(3) AND FULL DISCLOSURE WAS MADE DURING THE COURSE OF SCRUTINY ASSESSMENT AND THEREFORE REASSESSMENT PROC EEDINGS ARE TIME BARRED AS NO ACTION CAN BE TAKEN AFTER EXPIRY OF FO UR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR WHICH EXPIRED ON 31ST MARC H, 2006 WHEREAS NOTICE U/S. 148 WAS ISSUED ON 28.3.2008 OVERLOOKING THAT APPELLANT HAD FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR TH E ASSESSMENT. 2 THE LEARNED ASSESSING OFFICER HAS ERRED IN NOT AC CEPTING THE 2 M/S TOLANI PVT LTD CONTENTION OF THE APPELLANT COMPANY THAT THE PROPER TIES PURCHASED BY APPELLANT IN SPRINGFIELD CO. OP. HSG. SOC. LTD. WAS UNDER DEVELOPED AND OCCUPATION CERTIFICATE WAS NOT RECEIVED FROM PUNE M UNICIPAL CORPORATION AND THE OFFICE PREMISES AT SHARADA CENTRE WERE ALSO NOT FULLY DEVELOPED DUE TO NON INSTALLATION OF AIR-CONDITIONING, MARBLE FLOORING CONCEALED ELECTRIC FITTINGS AND OTHER WORK. 3. THE LEARNED ASSESSING OFFICER HAS ERRED IN NOT CONSIDERING THAT AS PER BOARD RESOLUTION THE PROPERTIES WERE PURCHASED FOR BUSINESS PURPOSES AND AS PER SECTION 22 OF THE ACT IT IS CLARIFIED THAT P ROPERTIES OTHER THAN THE PROPERTIES ASSESSEE MAY OCCUPY FOR THE PURPOSE OF B USINESS SHALL BE CHARGEABLE TO TAX UNDER THE HEAD HOUSE PROPERTY A ND IN THE CASE OF APPELLANT, PROPERTIES WERE PURCHASED FOR USE OF BUS INESS AND PROPERTIES WERE NEITHER USED NOR RENTED OUT AND THEREFORE THE QUESTION OF CONSIDERING DEEMED RENT DOES NOT ARISE. 4. THE LEARNED ASSESSING OFFICER HAS ERRED IN OVERL OOKING THAT APPELLANT COMPANY FILED COPY OF LETTER DATED 3.5.2004 ISSUED BY CHAIRMAN OF SPRINGFIELD CO. OP. HS2. SOC. LTD. CONFIRMING THAT OCCUPATION CERTIFICATE FROM MUNICIPAL CORPORATION IN RESPECT OF FLATS BELO NGING TO THE APPELLANT COMPANY HAS NOT BEEN RECEIVED SIMULTANEOUSLY THE CO NSTRUCTION OF OFFICE PREMISES AT SHARADA CENTRE WAS NOT COMPLETE AS CERT AIN WORK HAS REMAINED TO THE COMPLETED. 5. ALTERNATIVELY, WITHOUT PREJUDICE ASSESSING OFFIC ER HAS ERRED IN ESTIMATING ANNUAL VALUE OF PROPERTIES AT RS.23,38,7 40/- ON THE BASIS OF 1% PER MONTH OF TOTAL COST OF PROPERTIES OVERLOOKING T HE MUNICIPAL VALUE OF SIMILAR PROPERTIES FIXED BY THE MUNICIPAL CORPORATI ON AND NOT CONSIDERING THE SETTLED LAW THAT IN CASE OF PROPERTIES WHICH AR E NOT LET OUT THE BASIS OF DETERMINING ANNUAL VALUE SHOULD BE THE ANNUAL VALUE AS FIXED BY MUNICIPAL CORPORATION FOR SIMILAR PROPERTIES. 3 GROUND NO. 1 IS REGARDING VALIDITY OF REOPENING O F THE ASSESSMENT. 3.1 THE FACTS RELEVANT TO THE ISSUE AS CULLED OUT B Y THE CIT(A) IN PARA 3 AND 3.2 OF HIS ORDER ARE AS UNDER: 3. THE FACTS RELATED TO THE ISSUES IN APPEAL ARE A S FOLLOWS: THE APPELLANT IS AN INVESTMENT COMPANY. THE APPELLA NT FILED ITS RETURN OF INCOME FOR ASST.YEAR 2001-02 ON 31-10-2001 DECLARIN G LOSS OF RS.4,92,491/-. THE ASSESSMENT WAS COMPLETED U/S. 14 3(3) OF THE I.T. ACT ON 25-03-2004 DETERMINING TOTAL INCOME (LOSS) AT RS.1, 09,563/- AND INCOME FROM CAPITAL GAINS (LOSS) AT RS.4,94,291/-. 3 M/S TOLANI PVT LTD 3.1 SUBSEQUENTLY THE A.O. NOTED THAT THE ASSESSEE I N ITS BALANCE SHEET FILED ALONG WITH RETURN OF INCOME HAS SHOWN INVESTM ENT IN IMMOVABLE PROPERTIES VIZ, OFFICE PREMISES IN SHARADA CENTRE A T PUNE OF RS.61,37,000/- AND 12 RESIDENTIAL FLATS AT SPRING FIELDS CHS LTD. AT PUNE OF RS.1,33,52,500/- TOTALING TO RS.1,94,89,500/- AND T HE APPELLANT COMPANY HAS NOT SHOWN ANY INCOME UNDER THE HEAD INCOME FRO M HOUSE PROPERTY. THE A.O. ALSO NOTICED THAT THE ASSESSEE HAD NOT CLA IMED DEPRECIATION IN RESPECT OF THESE IMMOVABLE PROPERTIES. 3.2 THE ASSESSMENT WAS REOPENED U/S. 147 OF THE I.T . ACT AFTER RECORDING REASONS AND AFTER OBTAINING THE ADMINISTRATIVE APPR OVAL FROM CIT CENTRAL II, MUMBAI ON 25-03-2008 AND NOTICE U/S. 148 OF THE I.T. ACT DATED 28-03- 2008 WAS ISSUED AND SERVED ON THE ASSESSEE ON THE S AME DATE. THE REASONS RECORDED BY THE A.O. FOR RE-OPENING THE ASS ESSMENT ARE AS UNDER: RETURN OF INCOME WAS FILED ON 31-10-2001 DECLARING LOSS OF RS.4,94,291/-. ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT ON 25-03-2004 DETERMINING LOSS OF RS. 1,09,563/- AND I NCOME FROM CAPITAL GAIN (-)RS.4, 94,291/-. 2. ON PERUSAL OF THE BALANCE SHEET FILED ALONG WITH THE RETURN OF INCOME IT IS NOTICED THAT THE ASSESSEE HAD SHOWN IN VESTMENT IN IMMOVABLE PROPERTIES VIZ, OFFICE PREMISES IN SHARA DA CENTRE AT PUNE OF RS.61,37,000/- AND 12 RESIDENTIAL FLATS AT SPRING FIELDS CHS LTD. AT PUNE OF RS. 1,33,52,500/-, TOTALING TO RS. 1,94,89,500/-. IN THE COMPUTATION OF TOTAL INCOME ASSESSEE HAS NOT SH OWN ANY INCOME UNDER THE HEAD INCO ME FROM HOUSE PROPERTY ; 3. THE PROVISIONS OF SECTION 22 OF THE I. T. ACT, 1 961 ARE APPLICABLE IN THIS CASE AS THE ASSESSEE COMPANY HAD NOT CLAIME D ANY DEPRECIATION ON THE PREMISES AS BUSINESS PREMISES N OR HAS IT SHOWN THE PREMISES AS BUSINESS ASSETS IN THE SCHEDULE OF FIXED ASSETS. FWTHER ON PERUSAL OF THE RECORD FOR A. Y.2003-04 IT IS NOTICED THAT PREMISES HAVE NOT BEEN ACTUALLY OCCUPIED FOR USED F OR THE PURPOSE OF ITS BUSINESS. IN VIEW OF THE ABOVE THE PROPERTIE S HELD BY THE ASSESSEE COMPANY ARE CLEARLY HOUSE PROPERTIES WITHI N THE PROVISIONS OF SECTION 22 OF THE I. T. ACT, 1961. TH US, THE DEEMED INCOME FROM THE SAID PROPERTIES IS TO BE BEEN TAXED AS INCOME FROM HOUSE PROPERTY. 4. THEREFORE, I AM OF THE OPINION THAT INCOME HAS E SCAPED ASSESSMENT AND THIS IS A FIT CASE FOR INVOKING THE PROVISIONS OF SECTION 147 OF THE ACT. IT IS, THEREFORE, PROPOSED TO REOPEN THE ASSESSMENT OF THE ASSESSEE FOR THE ABOVE ASSESSMENT YEAR FOR COMPUTING THE INCOME FROM HOUSE PROPERTY. THE ESCAP ED INCOME IS WORKED OUT AS UNDER: 4 M/S TOLANI PVT LTD ANNUAL VALUE OF THE PROPERTY TAKEN AT 1% OF VALUE O F THE PROPERTIES I.E. 1,94,895X 12 MONTHS WHICH WORKS OUT TO RS.23,38,740 LESS: 30% DEDUCTION U/S.24(1) RS. 7,01,622 INCOME FROM HOUSE PROPERTY RS. 16,37,118 3.2 THE ASSESSING OFFICER COMPLETED THE REASSESSMEN T VIDE ORDER DATED 3.12.2008 INTER-ALIA ASSESSED THE INCOME FROM HOUSE PROPERTY AT RS. 16,37,118/. THE ASSESSEE CHALLENGED THE ACTION OF THE ASSESSING OFFICER BEFORE THE CIT(A) AND RAISED THE ISSUE OF VALIDITY OF REOPENING. THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER AND JUSTIFIED THE REOPENING OF THE ASSESSMENT VIDE IMPUGNED ORDER. 4 BEFORE US, THE LD AR OF THE ASSESSEE HAS SUBMITTE D THAT THE NOTICE U/S 148 WAS ISSUED AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. HE HAS FURTHER CONTENDED THAT THE ASSESSEE DISCLOSE D ALL THE RELEVANT PARTICULARS FULLY AND TRULY AND THE FACTS OF THE PROPERTY IN QU ESTION WERE ALSO DISCLOSED BY THE ASSESSEE. HE HAS REFERRED THE BALANCE SHEET AN D P&L ACCOUNT FOR THE YEAR ENDING 31.3.2001 AND SUBMITTED THAT THE ASSESSEE HA S SHOWN THE OFFICE PREMISES IN QUESTION AS WELL AS 12 RESIDENTIAL FLAT S AT SPRING FIELDS CHS LTD UNDER INVESTMENT IN IMMOVABLE PROPERTIES IN SCHEDULE F TO THE BALANCE SHEET. HE HAS FURTHER SUBMITTED THAT EVEN IN SCHEDULE N I.E. NOTE S ATTACHED TO AND FORMING PART OF BALANCE SHEET , THE ASSESSEE HAS MENTIONED THES E INVENTORIES UNDER THE HEAD LONG TERM INVESTMENT AND NO DEPRECIATION WAS PROV IDED FOR THESE ASSETS DURING THE YEAR. THUS, THE LD AR HAS SUBMITTED THAT WHEN THE ASSESSEE HAS DISCLOSED ALL THE FACTS, THEN THE REOPENING AFTER EXPIRY OF FOUR YEARS IS NOT VALID. HE HAS FURTHER SUBMITTED THAT THE FLATS IN SPRING FIELDS C OOPERATIVE HOUSING SOCIETY WERE NOT COMPLETED IN THE YEAR UNDER CONSIDERATION AND THE SOCIETY HAS GIVEN A CERTIFICATE DATED 3.5.2004 IN THIS RESPECT. THEREF ORE, WHEN THE PROPERTY WAS NOT 5 M/S TOLANI PVT LTD CONSTRUCTED AND OCCUPIED BY THE ASSESSEE, THEN THE ANNUAL VALUE U/S 22 OF THE I T ACT CANNOT BE ASSESSED. HE HAS REFERRED THE PRO VISO TO SEC. 147 AND SUBMITTED THAT WHEN THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULL AND TRUE PARTICULARS, THEN THE EXERCISE OF JUR ISDICTION U/S 148 IS INVALID AND BARRED BY THE SAID PROVISO. 4.1 THE LD AR OF THE ASSESSEE, THUS REFERRED THE LE TTER DATED 3.12.2002 AT PAGE 98 OF THE PAPER BOOK AND SUBMITTED THAT AFTER THE SAID PREMISES WAS SOLD TO THE SISTER CONCERN VIDE AGREEMENT DATED 2.11.200 2, THE CONCERNED BUILDER WRITTEN THE SAID LETTER TO THE SISTER CONCERN OF TH E ASSESSEE REGARDING THE AMENITIES TO BE PROVIDED BUT WERE NOT ACTUALLY PROV IDED AND ACCORDINGLY, THE BALANCE AMOUNT PAYABLE WAS ADJUSTED/REDUCED. 4.2 THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT TH E ASSESSING OFFICER HAS SERIOUSLY ERRED IN REOPENING THE ASSESSMENT U/S 147 OVERLOOKING THAT THE ORIGINAL ASSESSMENT WAS PASSED U/S 143(3) AND THE ASSESSEE MADE FULL DISCLOSURE DURING THE SCRUTINY ASSESSMENT. THEREF ORE, THE ASSESSMENT PROCEEDINGS ARE TIME BARRED AS HIT BY SEC. 147. 4.3 ON THE OTHER HAND, THE LD DR HAS SUBMITTED THAT THERE IS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE THE INCOME FROM HO USE PROPERTY. HE HAS REFERRED EXPLANATION 1 TO SEC. 147 AND SUBMITTED THAT MERE P RODUCTION OF BOOKS OF ACCOUNT WOULD NOT AMOUNT TO DISCLOSURE FULL AND TRU E PARTICULARS OF INCOME NECESSARY FOR ASSESSMENT. HE HAS SUPPORTED THE ORD ERS OF THE LOWER AUTHORITIES AND ALSO RELIED UPON THE DECISION OF THE HONBLE DE LHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX V. HONDA SIEL POWER PROD UCTS LTD. REPORTED IN 197 TAXMAN 415/340 ITR 53 (DEL). 6 M/S TOLANI PVT LTD 5 WE HAVE CONSIDERED THE RIVAL CONTENTION AS WELL AS RELEVANT MATERIAL ON RECORD. IN THIS CASE THE ORIGINAL ASSESSMENT WAS PA SSED U/S 143(3) AND THE REOPENING OF THE ASSESSEE IS AFTER FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. THEREFORE, IN VIEW OF THE FIRST PROVISO TO SE C. 147, THE REQUIREMENT OF TWIN CONDITIONS FOR REOPENING OF THE ASSESSMENT ARE EXIS TENCE OF REASONS TO BELIEVE THAT THE INCOME ASSESSABLE TO TAX HAS ESCAPED ASSES SMENT AND THE SAID ESCAPEMENT IS DUE TO THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE RELEVANT MATERIAL NECESSARY FOR A SSESSMENT. 5.1 AS EVIDENT FROM THE REASONS RECORDED FOR REOPEN ING THAT THE ASSESSING OFFICER CAME TO KNOW THAT THE ASSESSEE SHOWN THE IN VESTMENT IN THE PROPERTY IN QUESTION BUT NOT OFFERED THE INCOME FROM HOUSE PRO PERTY. FURTHER, THE ASSESSING OFFICER IN THE SUBSEQUENT YEAR I.E. 2003- 04 HAS EXAMINED THE ISSUE AND ASSESSED THE INCOME FROM HOUSE PROPERTY BY DETE RMINING THE ALV U/S 23(1)(A). THUS, THE ASSESSING OFFICER HAS ALREADY MADE AN ENQUIRY AND ON THE BASIS OF THE INFORMATION AND THE EVIDENCE GATHERED DURING THE ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2003-04 HAS TAK EN A VIEW. THEREFORE, THE MATERIAL GATHERED DURING THE ASSESSMENT PROCEEDINGS FOR THE SUBSEQUENT YEAR IS A TANGIBLE MATERIAL TO FORM A BELIEF THAT THE INCOM E ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT. HOWEVER, THE REOPENING IS AFTER FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. THEREFORE, FIRST PROVISO TO S EC. 147 IS APPLICABLE TO THIS CASE AND THE ASSESSING OFFICER CAN EXERCISE THE JUR ISDICTION TO REOPEN THE ASSESSMENT ONLY WHEN THERE IS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE RELEVANT MATERIAL NECESSARY FOR THE ASSESSMENT. THERE IS NO DOUBT THAT THE ASSESSEE HAS SHOWN THE INVESTMENT IN THE PROPERTY IN QUESTION UNDER SCHEDULE F & N TO THE BALANCE SHEET; BUT WHET HER THE INVESTMENT SHOWN IN THE BOOK OF ACCOUNT IS SUFFICIENT TO DISCHARGE T HE ASSESSEE FROM HIS OBLIGATION 7 M/S TOLANI PVT LTD OF DISCLOSING FULLY AND TRULY ALL THE RELEVANT MATE RIAL FACTS NECESSARY FOR THE ASSESSMENT. 5.2 THIS IS NOT A CASE WHERE THE ASSESSEE CLAIMED C ERTAIN EXPENSES, DEDUCTION, EXEMPTION OR OTHER CLAIM AS PER THE PROV ISIONS OF THE ACT WHICH WERE ALLOWED BY THE ASSESSING OFFICER WHILE PASSING THE ORIGINAL ASSESSMENT U/S 143(3). IN SUCH MATTER THE ASSESSING OFFICER IS UND ER DUTY BOUND TO EXAMINE AND ADJUDICATE THE CLAIM OF THE ASSESSEE. IN THE CASE IN HAND, THE REOPENING IS ON THE GROUND OF NOT OFFERING OF INCOME FROM HOUSE PRO PERTY. THEREFORE, UNTIL AND UNLESS THE ASSESSEE MAKES IT CLEAR THAT IN THE RETU RN OF INCOME OR COMPUTATION OF INCOME ITSELF THAT WHY THE ASSESSEE IS NOT OFFERING THE SAID INCOME FROM HOUSE PROPERTY IN RESPECT OF THE PROPERTY SHOWN AS INVEST MENT BY THE ASSESSEE. MERE MENTION OF THE INVESTMENT WOULD NOT FULFIL THE SAID REQUIREMENT OF ONUS CAST ON THE ASSESSEE. THE DISCLOSURE OF FULLY AND TRULY A LL THE MATERIAL FACTS NECESSARY FOR THE ASSESSMENT AS PER THE PROVISO TO SEC. 147 P OSTULATE THE COMPLETE DISCLOSURE OF PRIMARY FACTS. THUS, THE ASSESSEE IS UNDER OBLIGATION TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FO R ASSESSMENT. EVERY DISCLOSURE IS NOT AND CANNOT BE TREATED TO BE TRUE AND FULL DISCL OSURE, IF IT BRINGS OUT A PARTIAL BUT MISLEAD THE FACT. 5.3 IN THIS CASE, THE ASSESSEE HAS SHOWN THE PROP ERTY IN QUESTION UNDER THE INVESTMENT BUT NO INDICATION OR ANY AVERMENT OR FAC T HAS BEEN MENTIONED EITHER IN THE RETURN OF INCOME OR IN THE OTHER RELEVANT RE CORD TO EXPLAIN WHY THE INCOME FROM HOUSE PROPERTY HAS NOT BEEN DISCLOSED B Y THE ASSESSEE. THEREFORE, THIS MATERIAL FACT HAS COMPLETELY LOST SIGHT AND A TTENTION OF THE ASSESSING OFFICER, AT THE TIME OF PASSING THE ASSESSMENT ORDE R U/S 143(3) AND SUBSEQUENTLY IN THE SUBSEQUENT ASSESSMENT YEARS WHEN THE ASSESSI NG OFFICER HAS TAKEN NOTE OF THIS IMPORTANT ITEM AND MADE AN ADDITION OF INC OME BY COMPUTING THE ALV OF 8 M/S TOLANI PVT LTD THE PROPERTY U/S 23(I)(A), THEN MERE PRODUCTION OF BALANCE SHEET, P&L ACCOUNT OR BOOKS OF ACCOUNT WOULD NOT AMOUNT TO DISCLOSURE OF ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT FULLY AND TRULY WITHIN THE MEANING O F PROVISO TO SEC. 147. THE HONBLE DELHI HIGH COURT IN CASE OF HONDA SIEL POWE R PRODUCTS LTD REPORTED IN 340 ITR 53 HAS OBSERVED AND HELD AS UNDER: THE PETITIONER HAS RELIED UPON THE PROVISO TO SECT ION 14A OF THE ACT. THE PROVISO, ACCORDING TO US, IS NOT APPLICABLE IN VIEW OF THE FACTUAL MATRIX OF THE PRESENT CASE AND DOES NOT PROTECT OR COME TO TH E AID OF THE PETITIONER. IN THE PRESENT CASE, AFTER RETURN OF INCOME FOR THE ASSESSMENT YEAR 2000- 01 WAS FILED ON NOVEMBER 30, 2000, THE CASE WAS TAK EN UP IN SCRUTINY. ASSESSMENT ORDER UNDER SECTION 143(3) OF THE ACT WA S PASSED ON MARCH 7, 2003. THE PROVISO ONLY BARS REASSESSMENT/RECTIFICAT ION AND NOT ORIGINAL ASSESSMENT ON THE BASIS OF THE RETROSPECTIVE AMENDM ENT. THE PROVISO DOES NOT STIPULATE AND STATE THAT SECTION 14A OF TH E ACT CANNOT BE RELIED UPON DURING THE COURSE OF THE ORIGINAL ASSESSMENT P ROCEEDINGS. THE ASSESSING OFFICER WAS, THEREFORE, REQUIRED TO DISAL LOW EXPENSES INCURRED FOR EARNING EXEMPT OR TAX-FREE INCOME. FAILURE ON T HE PART OF THE ASSESSING OFFICER TO APPLY SECTION 14A WHEN HE PASSED THE ASS ESSMENT ORDER UNDER SECTION 143(3) OF THE ACT DATED MARCH 7, 2003, HAS PRIMA FACIE RESULTED IN ESCAPEMENT OF INCOME. THE PROVISO IS NOT INTENDED T O APPLY TO THE CASES OF THE PRESENT NATURE. THE OBJECT AND PURPOSE OF TH E PROVISO IS TO ENSURE THAT THE RETROSPECTIVE AMENDMENT IS NOT MADE AS A T OOL TO REOPEN PAST CASES, WHICH HAVE ATTAINED FINALITY. THE LAW POSTULATES A DUTY ON EVERY ASSESSEE TO DISC LOSE FULLY AND TRULY ALL MATERIAL FACTS FOR ITS ASSESSMENT. THE DISCLOSURE M UST BE FULL AND TRUE. MATERIAL FACTS ARE THOSE FACTS WHICH IF TAKEN INTO ACCOUNTS THEY WOULD HAVE AN ADVERSE EFFECT ON ASSESSEE BY THE HIGHER ASSESSM ENT OF INCOME THAN THE ONE ACTUALLY MADE. THEY SHOULD BE PROXIMATE AND NOT HAVE ANY REMOTE BEARING ON THE ASSESSMENT. OMISSION TO DISCL OSE MAY BE DELIBERATE OR INADVERTENT. THIS IS NOT RELEVANT, PR OVIDED THERE IS OMISSION OR FAILURE ON THE PART OF THE ASSESSEE. THE LATTER CONFERS JURISDICTION TO REOPEN THE ASSESSMENT. WHETHER OR NOT THERE WAS A FAILURE OR OMISSION TO D ISCLOSE FULLY AND TRULY MATERIAL FACTS, IS ESSENTIALLY A QUESTION OF FACT. SECTION 14A WAS INTRODUCED WITH RETROSPECTIVE EFFECT BY THE FINANCE ACT, 2001, WHICH WAS TABLED IN PARLIAMENT ON FEBRUARY 28, 2001, AND WAS PASSED BY PARLIAMENT ON APRIL 1, 2001. THE PETITIONER IS A MULTINATIONAL COMPANY AND IT IS DIFFICULT TO PERCEIVE AND ACCEPT THAT THEIR TAX OR THE LEGAL DEP ARTMENT WAS NOT AWARE AND DID NOT HAVE KNOWLEDGE ABOUT SECTION 14A OF THE ACT. IT IS CLEAR FROM THE AFORESAID PARAGRAPH THE PETITI ONER HAS ACCEPTED THAT 'MATERIAL PARTICULAR' REFERRED TO IN THE FIRST PROV ISO NOT ONLY REFERS TO DETAILS IN THE RETURN BUT ALSO EXPLANATIONS AND DET AILS FURNISHED DURING THE COURSE OF ASSESSMENT. THE PETITIONER HAD NOT STATED ANYTHING OR GIVEN FACTUAL MATRIX TO JUSTIFY AND STATE THAT THE MATERI AL FACTS HAD BEEN FULLY 9 M/S TOLANI PVT LTD AND TRULY DISCLOSED IN THE ASSESSMENT PROCEEDINGS A ND THERE WAS NO OMISSION OR FAILURE ON THE PART OF THE PETITIONER. THE EXPLANATION TO SECTION 147 STIPULATES THAT MERE PRODUCTION OF BOOKS OF ACC OUNT OR OTHER EVIDENCE IS NOT SUFFICIENT. (REFER PARAGRAPH 11 ABOVE WHEREI N THE JUDGMENT IN CONSOLIDATED PHOTO AND FINVEST LTD. [2006] 281 ITR 394 (DELHI) HAS BEEN QUOTED). THEREFORE, MERELY BECAUSE MATERIAL LIES IM BEDDED IN MATERIAL OR EVIDENCE, WHICH THE ASSESSING OFFICER COULD HAVE UN COVERED BUT DID NOT UNCOVER IS NOT A GOOD GROUND TO DENY OR STRIKE DOWN A NOTICE FOR REASSESSMENT. WHETHER THE ASSESSING OFFICER COULD H AVE FOUND THE TRUTH BUT HE DID NOT, DOES NOT PRECLUDE THE ASSESSING OFF ICER FROM EXERCISING THE POWER OF REASSESSMENT TO BRING TO TAX THE ESCAPED I NCOME. THERE WAS AN OMISSION AND FAILURE ON THE PART OF TH E PETITIONER TO POINT OUT THE EXPENSES INCURRED RELATABLE TO TAX-FREE/EXE MPT INCOME WHICH PRIMA FACIE HAVE BEEN CLAIMED AS A DEDUCTION IN THE INCOME AND EXPENDITURE ACCOUNT. THERE WAS, THEREFORE, OMISSION AND FAILURE ON THE PART OF THE PETITIONER TO DISCLOSE FULLY AND TRULY MATERIAL FACTS. THE HONBLE SUPREME COURT CONFIRMED THE DECISION OF THE HONBLE HIGH COURT IN 340 ITR 64 AS UNDER: IN OUR VIEW, THE REOPENING OF ASSESSMENT IS FULLY JUSTIFIED ON THE FACTS AND CIRCUMSTANCES OF THE CASE. HOWEVER, ON THE MERITS O F THE CASE, IT WOULD BE OPEN TO THE ASSESSEE TO RAISE ALL CONTENTIONS WITH REGARD TO THE AMOUNT OF RS 98.46 LACS BEING OFFERED FOR TAX AS WELL AS ITS CONTENTION ON SEC 14A OF THE I T ACT, 1961. SUBJECT TO THE ABOVE, THE SPECIA L LEAVE PETITION IS DISMISSED. THIS VIEW HAS ALSO BEEN SUPPORTED BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE DR. AMIN'S PATHOLOGY LABORAT ORY V. JCIT REPORTED IN 252 ITR 673(BOM) AND THE HONBLE HIGH COURT HAS OBSER VED AS UNDER: UNDER EXPLANATION 1 TO THE PROVISO, MERE PRODUCTIO N OF ACCOUNT BOOKS FROM WHICH MATERIAL EVIDENCE COULD HAVE BEEN DISCOV ERED BY THE ASSESSING OFFICER WILL NOT NECESSARILY AMOUNT TO DI SCLOSURE WITHIN THE MEANING OF THE PROVISO. THEREFORE, MERE PRODUCTION OF THE BALANCE-SHEET, PROFIT AND LOSS ACCOUNT OR ACCOUNT BOOKS WILL NOT N ECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE PROVISO. IN TH E PRESENT CASE, THE FACTS SHOW THAT THE ASSESSING OFFICER OVER- LOOKED THE AF ORESTATED ITEM. THAT, HE NOTICED IT SUBSEQUENTLY. THAT, AT THE TIME OF P ASSING THE ORIGINAL ORDER OF ASSESSMENT, HE COULD NOT BE SAID TO HAVE OPINED ON THE ABOVE ITEM. THEREFORE, THERE WAS NO CHANGE OF OPINION. THEREFOR E, IN THE PRESENT CASE, THE IMPUGNED NOTICE IS SUSTAINED. 10 M/S TOLANI PVT LTD 6 IN VIEW OF THE ABOVE DISCUSSION AND THE DECISION OF THE HONBLE SUPREME COURT (SUPRA) WE DO NOT FIND ANY ERROR OR ILLEGALIT Y IN THE ORDER OF THE CIT(A) ON THIS ISSUE. NEXT ISSUE IS IN GROUNDS NO. 2 TO 5: 7 WE HAVE HEARD THE LD AR OF THE ASSESSEE AS WELL A S THE LD DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AN IDEN TICAL ISSUE HAS BEEN CONSIDERED BY THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2003-04 VIDE ORDER DATED 20.4.2 010 IN ITA NO.6569/MUM/2007 IN PARAS 7 & 8 AREA S UNDER: 7. ALTHOUGH THE LEARNED D.R. HAS STRONGLY OBJECTED TO THE ADMISSION OF THE ADDITIONAL EVIDENCE SOUGHT TO BE FILED BY THE A SSESSEE ON THE GROUND THAT NO REASON HAS BEEN GIVEN BY THE ASSESSEE FOR I TS FAILURE TO FILE THE SAME BEFORE THE AUTHORITIES BELOW, IT IS OBSERVED T HAT THE DOCUMENTS SOUGHT TO BE FILED BY THE ASSESSEE AS ADDITIONAL EV IDENCE HAVE ALREADY BEEN FILED BY IT BEFORE THE A.O. DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS FOR A.Y. 2002-03 AND 2003-04 AND THE SA ME HAVE ALSO BEEN FILED BY THE ASSESSEE DURING THE COURSE OF APPELLAT E PROCEEDINGS BEFORE THE LD. CIT(A) FOR A.Y. 2004-05 WHEREIN A SIMILAR I SSUE IS INVOLVED. MOREOVER, THE SAID ADDITIONAL EVIDENCE FILED BY THE ASSESSEE APPEARS TO BE RELEVANT FOR ADJUDICATING UPON THE ISSUE UNDER CONS IDERATION AND THE SAME, IN OUR OPINION, CAN APPROPRIATELY BE ADMITTED IN THE INTEREST OF SUBSTANTIAL JUSTICE. WE, THEREFORE, ADMIT THE SAID ADDITIONAL EVIDENCE AND RESTORE THIS ISSUE TO THE FILE OF THE A.O. FOR DECI DING THE SAME AFRESH IN THE LIGHT OF THE SAID ADDITIONAL EVIDENCE. GROUND NO. 1 & 2 OF THE ASSESSES APPEAL ARE ACCORDINGLY TREATED AS ALLOWED FOR STATI STICAL PURPOSES. 8. AS REGARDS GROUND NO. 3, IT IS OBSERVED THAT THE ISSUE INVOLVED THEREIN RELATING TO DETERMINATION OF ANNUAL RENTAL VALUE OF OFFICE PREMISES AND RESIDENTIAL FLATS HELD BY THE ASSESSEE COMPANY AT PUNE IS CONSEQUENTIAL TO THE MAIN ISSUE INVOLVED IN GROUND NO. 1 & 2 OF THE ASSESSEES APPEAL. AS THE SAID MAIN ISSUE IS RESTO RED BY US TO THE FILE OF THE A.O. FOR DECIDING THE SAME AFRESH, WE DEEM IT F AIR AND PROPER TO RESTORE THIS CONSEQUENTIAL ISSUE RELATING TO THE DE TERMINATION OF ANNUAL RENTAL VALUE ALSO TO THE FILE OF THE A.O. FOR DECID ING THE SAME IN ACCORDANCE WITH LAW DEPENDING ON THE OUTCOME OF THE MAIN ISSUE . GROUND NO. 3 OF ASSESSEES APPEAL IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 11 M/S TOLANI PVT LTD 9 ACCORDINGLY, THIS ISSUE IS REMANDED TO THE RECORD OF THE ASSESSING OFFICER TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE OBSE RVATION OF THE TRIBUNAL (SUPRA). ITA NO. 4118/MUM/2010 (ASSESSMENT YEAR 2006 ITA NO. 4118/MUM/2010 (ASSESSMENT YEAR 2006 ITA NO. 4118/MUM/2010 (ASSESSMENT YEAR 2006 ITA NO. 4118/MUM/2010 (ASSESSMENT YEAR 2006- -- -07) 07) 07) 07) 10 THE ONLY ISSUE RAISED BY THE ASSESSEE IN THIS AP PEAL IS WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) IS JUSTIF IED IN CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OF THE E XPENDITURE OF `,1,53,159/- U/S 14A BY APPLYING RULE 8D OF THE I T RULES. 10.1 DURING THE ASSESSMENT YEAR, THE ASSESSING OFFI CER NOTICED THAT THE ASSESSEE CLAIMED EXPENDITURE IN THE P&L ACCOUNT OF ` 1,53,159/-. THE ASSESSING OFFICER HAS OBSERVED THAT SINCE THE ASSESSEE HAS NO BUSINESS DURING THE YEAR AND IT HAD INVESTED IN THE SHARES INCLUDING IN THE GROUP COMPANIES FOR EARNING DIVIDEND INCOME WHICH HAS BEEN CLAIMED AS EXEMPT U/ S 10(34) AS WELL AS LONG TERM CAPITAL GAINS CLAIMED U/S 10(38) OF THE I T AC T. THE SAID EXPENDITURE IS FOR EARNING THE EXEMPT INCOME I.E. DIVIDEND AND LONG TE RM CAPITAL GAIN. ACCORDINGLY, THE ASSESSING OFFICER DISALLOWED THE T OTAL EXPENDITURE OF `.1,53,159/- BY APPLYING PROVISIONS OF SEC. 14A. 10.2 ON APPEAL, THE CIT(A) HAS CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 11 BEFORE US, THE LD AR OF THE ASSESSEE HAS SUBMITT ED THAT THE ASSESSEE HAS NOT PAID ANY INTEREST ON THE LOANS UTILISED FOR E ARNING TAX FREE INCOME AND ALSO HAS NOT INCURRED ANY EXPENDITURE FOR EARNING EXEMPT INCOME. THEREFORE, SECTION 14A IS NOT APPLICABLE FOR DISALLOWING THE EXPENDITU RE. HE HAS FURTHER SUBMITTED THAT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, R ULE 8D IS ALSO NOT APPLICABLE 12 M/S TOLANI PVT LTD AND THE LOWER AUTHORITIES HAVE COMMITTED A MISTAKE BY APPLYING RULE 8D IN DISALLOWING THE EXPENDITURE. 11.1 ON THE OTHER HAND, THE LD DR HAS SUBMITTED THA T WHEN THERE IS NO BUSINESS ACTIVITY CARRIED OUT BY THE ASSESSEE, THEN THE EXPE NDITURE CLAIMED BY THE ASSESSEE IS ONLY FOR EARNING THE EXEMPT INCOME AND THEREFORE DISALLOWED THE SAME. 12 WE HAVE CONSIDERED THE RIVAL CONTENTION AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS DEBITED THE FOLLOWING EXPENSES IN THE P&L ACCOUNT: SR.NO. PARTICULARS PARTICULARS PARTICULARS PARTICULARS AMOUNT AMOUNT AMOUNT AMOUNT (IN_`) (IN_`) (IN_`) (IN_`) I) LEGAL AND PROFESSIONAL FEES FOR CONDUCTING INCOME-T AX MATTERS BEFORE INCOME-TAX AUTHORITIES 1,00,000/- II) PROFESSIONAL FEES FOR COMPLIANCE CERTIFICATE ISSUED BY PRACTICING COMPANY SECRETARY 3,000/- III) RENT FOR OFFICE PREMISES 7,342/- IV) RATES AND TAXES 1,800/- V) AUDIT FEES 7,857/- VI) APPEAL FEES FOR FILING APPEAL BEFORE HONBLE I TAT 11,500/- VII) APPEAL FEES FOR FILING APPEAL BEFORE HONBLE HIGH COURT 20,000/- VIII) SUNDRY EXPENSES 1,660/- TOTAL 1,53,159/- 12.1 SINCE IS IT NOT THE CASE OF THE REVENUE THAT T HE ASSESSEE HAS CLOSED ITS BUSINESS; THEREFORE, EVEN IF THERE IS NO BUSINESS D URING THE YEAR UNDER CONSIDERATION THE ENTIRE EXPENDITURE CANNOT BE ASSI GNED TO EXEMPT INCOME I.E. DIVIDEND AND CAPITAL GAIN. AS IT IS CLEAR FROM THE DETAILS OF THE EXPENSES THAT THESE EXPENSES ARE FOR GENERAL ADMINISTRATION AND F OR MAINTAINING THE STATUS OF THE ASSESSEE AS A COMPANY; THEREFORE, THESE EXPENSE S ARE NOT DIRECTLY RELATED TO THE EXEMPT INCOME. FURTHER, RULE 8D IS NOT APPLICA BLE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION AS HELD BY THE HONBLE JURISDIC TIONAL HIGH COURT IN THE CASE OF GODREJ AND BOYCE MFG. CO. LTD. V. DCIT REPORTED IN328 ITR 81(BOM). THEREFORE, THE ENTIRE EXPENDITURE CANNOT BE DISALLOWED BY APPL YING PROVISIONS OF SEC. 14A. 13 M/S TOLANI PVT LTD HOWEVER, THIS ISSUE IS REQUIRED TO BE CONSIDERED AF RESH IN VIEW OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT (SUPRA). ACCO RDINGLY, WE SET ASIDE THIS ISSUE TO THE RECORD OF THE ASSESSING OFFICER TO DECIDE TH E SAME IN THE LIGHT OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF GODREJ & BOYECE MFG CO LTD (SUPRA). ITA NO.4119/MUM/2010 ITA NO.4119/MUM/2010 ITA NO.4119/MUM/2010 ITA NO.4119/MUM/2010 ( ( ( ( ASSESSMENT YEAR 2007 ASSESSMENT YEAR 2007 ASSESSMENT YEAR 2007 ASSESSMENT YEAR 2007- -- -08) 08) 08) 08) 13 THE ONLY ISSUE RAISED BY THE ASSESSEE IN THIS A PPEAL IS WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) IS JUSTIF IED IN CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OF THE E XPENDITURE OF `,91,039/- U/S 14A BY APPLYING RULE 8D OF THE I T RULES. 14 IN VIEW OF OUR FINDINGS IN ITA NO. ITA NO.4118/M UM/2010, WE SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER TO DECID E THE ISSUE IN THE LIGHT OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF GODREJ & BOYECE MFG CO LTD (SUPRA). 15 IN THE RESULT, ALL THE APPEALS FILED BY THE ASSE SSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON THE 13 TH , DAY OF JAN 2012. SD/ SD/.- ( (( ( P M JAGTAP P M JAGTAP P M JAGTAP P M JAGTAP ) )) ) ACCOUNTANT MEMBER ( (( ( VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO ) )) ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 13 TH , JAN 2012 RAJ* RAJ* RAJ* RAJ* 14 M/S TOLANI PVT LTD COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI