DY.CIT CENTRAL CIRCLE-4(2) , MUMBAI V. M/S. MINDSPACE BUSINESS PARKS PVT LTD, MUMBAI

ITA 433/MUM/2022

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 1555 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2015-2016
• Appeal Filed On: 03-03-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Revised return
• Section: 147; 132; 139; 143(3); 153A; 139(5); 143(2); 139(1); 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER ITA NOs.433& 434/MUM/2022 (A.Ys. 2015-16& 2016-17) DCIT – Central Circle – 4(2) Room No. 1918, 19 th Floor Air India Building, Nariman Point Mumbai – 400 021 v. MindspaceBusiness Park Pvt. Ltd., Plot No. C-30, Block-G, Raheja Tower Bandra Kurla Complex, Bandra (E) Mumbai -400051 PAN: AAHCS8388M (Appellant) (Respondent) Assessee by : Shri Vijay Mehta Department by : Shri T. Sankar Date of Hearing : 14.07.2022 Date of Pronouncement : 29.08.2022 O R D E R PER S. RIFAUR RAHMAN (AM) 1. These appeals are filed by the Revenue against different orders of Learned Commissioner of Income Tax (Appeals)-52, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 16.12.2021 for the A.Ys. 2015-16 and 2016-17. 2 ITA NOs. 433 & 434/MUM/2022 (A.Ys. 2015-16 & 2016-17) Mindspace Business Park Pvt. Ltd., 2. Brief facts of the case are, assessee is a company incorporated under the Companies Act, 1956 with the main objective of carrying on the business of real estate development and related activities. During the years under consideration, the assessee was engaged in the real estate development and operating SEZ project at Airoli, Navi Mumbai and Pocharam, Hyderabad. For A.Y. 2015-16, the assessee filed its return of income under Section 139(1) of the Income Tax Act, 1961 ("the Act") on 28.11.2015 declaring total loss of (-) ₹.30,15,28,157. The total loss reported in the return of income comprise of the loss under the head House Property as well as Business and Profession. Subsequently, a revised return of income was filed by the assessee under section 139(5) of the Act on 22.03.2016 declaring the same loss as was reported in the return filed under section 139(1) of the Act. Thereafter, the case was selected for scrutiny and notice under section 143(2) of the Act was issued on 15.04.2016. 3. A search action under section 132 of the Act was conducted on the assessee on 30.11.2017 and assessment proceedings under section 143(3) of the Act got abated due to the search action. Pursuant to search action, notice under section 153A of the Act was issued to the 3 ITA NOs. 433 & 434/MUM/2022 (A.Ys. 2015-16 & 2016-17) Mindspace Business Park Pvt. Ltd., assessee on 01.08.2018 calling for the return of income. In response to the notice, the assessee filed its return of income on 30.08.2018 declaring a total loss of Rs (-) 41,98,52,777/- comprising of loss from business and profession only. 4. In the return filed under section 153A of the Act, the assessee offered income from let out of premises situated in the above referred SEZs under the head "Profit and Gain from Business and Profession" as against "House Property" in which income was originally offered to tax in the return of income filed u/s 139(1) of the Act. 5. Similarly in A.Y. 2016-17, the assessee filed its return of income under Section 139(1) of the Act on 30.11.2016 declaring total loss of (-) ₹35,83,82,086. The total loss reported in the return of income comprised of Income from House Property, loss from Business Profession and Capital loss. Subsequently, a revised return of income was filed by the assessee under section 139(5) of the Act on 28.03.2018 in which the income remained unchanged. Thereafter, the case was selected for scrutiny and notice under section 143(2) of the Act was issued on 29.07.2017. As stated above, a search action under section 4 ITA NOs. 433 & 434/MUM/2022 (A.Ys. 2015-16 & 2016-17) Mindspace Business Park Pvt. Ltd., 132 of the Act was conducted on the assessee on 30.11.2017 and assessment proceedings under section 143(3) of the Act got abated due to the search action. 6. Pursuant to search action, notice under section 153A of the Act was issued to the assessee on 01.08.2018 calling for the return of income. In response to the notice, the assessee filed its return of income on 30.08.2018 declaring a total loss of Rs (-) 30,68,35,981. The total loss reported in the return of income comprise of loss from Business Profession and Capital Loss. 7. In the return filed under section 153A of the Act, the assessee offered income from let out of premises situated in the above referred SEZs under head "Profit and Gain from Business and Profession" as against "House Property" in which income was originally offered to tax. 8. During the assessment proceedings, Assessment orders under section 143(3) r.w.s 153A of the Act were passed for both A.Y. 2015-16 and A.Y. 2016-17 on 30.12.2019, wherein, Assessing Officer considered the submission made by the assessee in respect of change of stand for offering income from let out of premises under head Profit and Gain 5 ITA NOs. 433 & 434/MUM/2022 (A.Ys. 2015-16 & 2016-17) Mindspace Business Park Pvt. Ltd., from Business and Profession instead of under the head income from House Property and duly acknowledged the fact that the years under consideration represent abated years. However, following the principle of consistency, the Assessing Officer rejected the change of stand taken by the assessee and assessed income from lease rentals under the head income from house property as offered in the return of income filed under section 139(1) and 139(5) of the Act. It is relevant to note that in the previous years i.e A.Y. 2013-14 and A.Y. 2014-15, the assessee had adopted similar change of stand however those years were unabated and thus the Assessing Officer did not accept assessee's return filed under section 153A of the Act for those years. Accordingly, in his assessment orders, the Assessing Officer assessed income under section 153A of the Act as was returned in the return filed under section 139 of the Act and rejected the income reported in the return furnished under section 153A of the Act. In other words, the Assessing Officer treated the rental income from the premises situated in SEZ as income from "House Property" instead of Income from "Profit and Gain from Business and Profession". 6 ITA NOs. 433 & 434/MUM/2022 (A.Ys. 2015-16 & 2016-17) Mindspace Business Park Pvt. Ltd., 9. Aggrieved by the orders of Assessing Officer for A.Y. 2015-16 and 2016-17, the assessee preferred appeals before Ld.CIT(A). 10. Ld.CIT(A), with respect to change of stand in offering income from lease rentals under head Profit and Gains from Business and Profession instead of House Property, the Ld. CIT(A) made the following observations: - A. For A.Y. 2015-16 and for A.Y. 2016-17, the Ld. CIT(A) has acknowledged the fact that the years under consideration represent abated years. B. The Ld.CIT(A) relied on the decision of Hon'ble Mumbai bench of ITAT in case of All Cargo Logistics Ltd. [(2012) 23 Taxmann.com 103 (Mum) (SB)] and Hon'ble Delhi High Court in case of CIT v. Kabul Chawla [281 CTR 45] and held that for an abated year, the assessing officer is competent and empowered to decide any issue based on material on record. C. Further, the Ld. CIT(A), took cognizance of the CBDT circular no. 16/2017 dated 25.04.2017, wherein it was clarified that income from letting out of premises/ developed space along with other amenities in an industrial park/SEZ is to be charged under head Income from "Business or Profession". Accordingly, for A.Y. 2015-16 at para 5.12 and for A.Y. 2016-17at 5.13, the Ld. CIT(A) held that board's circular are binding on the subordinate authorities and the case of the assessee is covered by the circular no. 16/2017. 11. While adjudicating the ground for both the years in favor of the assessee, the Ld. CIT(A) held that since, the years under consideration represent abated years, the assessing officer was fully capable of 7 ITA NOs. 433 & 434/MUM/2022 (A.Ys. 2015-16 & 2016-17) Mindspace Business Park Pvt. Ltd., making an assessment based on material available on record. It was the duty of Assessing Officer to ensure that correct assessment is done in accordance with the existing law while completing the assessment, rather than maintaining the status quo in the name of consistency. Accordingly, Ld CIT(A) held that the action of Assessing Officer in rejecting the claim of the assessee was not correct and the assessing officer was directed to compute income from lease rentals in line with directions issued by board in Circular No. 16 of 2017. 12. Aggrieved by the above order of Ld.CIT(A), Revenue preferred appeal before us raising following common grounds in its appeals. Grounds raised for the A.Y. 201516 are reproduced below: - “1. The Ld. CIT(A) erred in considering lease rentals income earned by the appellant as income under the Profit or Gains from Business and Profession (Profit and Gain from Business and Profession) as against Income from House Property as claimed in its Return of Income filed u/s 139(1) of the Act. 2. The Ld. CIT(A) erred in not considering the decision held by Hon'ble Apex Court in CIT v. Sun Engineering Works (P) Ltd. and by the Hon'ble Bombay High Court in K. Sudhakar S. Shanbhag v, ITO with regard to the fact that assessee can't seek relief not claimed earlier during post search assessment as per section 153A of the Act. 3. The Ld. CIT(A) erred in partly allowing the appeal of the assessee on the ground of depreciation on assets without considering the fact that in post search assessment proceedings, an 8 ITA NOs. 433 & 434/MUM/2022 (A.Ys. 2015-16 & 2016-17) Mindspace Business Park Pvt. Ltd., assessee can neither claim nor be allowed a deduction that was not claimed in the original return." 13. At the time of hearing Ld DR brought to our notice the findings of assessing officer and submitted that the assessee cannot the change the head of income for the lease rentals earned under the head income from Business and Profession while filing the return of income u/s 153A instead of income under the head House Properties as declared in the original return of income filed u/s 139 of the Act. He submitted that the Ld CIT(A) while adjudicating failed to consider the decision of Hon’ble Supreme Court in the case of Sun Engineering Works (P) Ltd (supra) and Hon’ble Bombay High Court decision in the case of K Sudhakar S Shanbhag (supra). Similarly, he submitted that the assessee cannot claim or allowed to claim the depreciation of assets that was not claimed originally in the return of income in the subsequent proceedings u/s.153A of the Act. Therefore, he vehemently supported the findings of assessing officer. 14. Ld. Counsel for the assessee reiterated the submissions made before the Ld.CIT(A). Ld. AR submitted that the years under 9 ITA NOs. 433 & 434/MUM/2022 (A.Ys. 2015-16 & 2016-17) Mindspace Business Park Pvt. Ltd., consideration i.e A.Y. 2015-16 and A.Y. 2016-17 represent abated years. He submitted the below chart with the relevant dates: Particulars A.Y. 2015-16 A.Y. 2016-17 Original Return under section 139(1) 28.11.2015 30.11.2016 Revised return under section 139(5) 22.03.2016 28.03.2018 Notice under section 143(2) of the Act 15.04.2016 29.07.2017 Date of search 30.11.2017 Notice under section 153A 01.08.2018 01.08.2018 15. Ld AR submitted that from the above table, it can be concluded that during the years under consideration, proceedings under section 143(3) of the Act were initiated but the same were never completed on account of search action under section 132 of the Act. Accordingly, the years under consideration represents abated years. Ld. AR of the assessee submitted that the said fact was also acknowledged by the Assessing Officer in the assessment orders for A.Y.2015-16 and A.Y.2016-17. 16. With respect to the legal position, Ld. AR placed reliance on the judgement of Hon'ble Bombay High Court in the case of Commissioner of Income Tax v. B.G. Shirke Construction Technology P. Ltd [(2017) 395 ITR 371 (Bom)], wherein, it was held that in case of an abated assessment year, once the return is filed under section 153A of the Act, 10 ITA NOs. 433 & 434/MUM/2022 (A.Ys. 2015-16 & 2016-17) Mindspace Business Park Pvt. Ltd., the return filed under section 139 of the Act is replaced by it and the entire assessment proceedings will be conducted by the revenue considering the return filed under section 153A of the Act only. Accordingly, all the provisions which are applicable to the return filed under regular course will be applicable to the return filed under section 153A of the Act. 17. Further, Ld AR brought to our notice the decision of Hon'ble Bombay High Court in case of Pr.CIT v. JSW Steel Limited [(2020) 422 ITR 71 (Bom)], wherein, Hon'ble Bombay High Court revisited the issue as to whether in case of an abated year, the assesse is allowed to raise fresh claim, which was not raised in the original return of income. While adjudicating the matter, Hon'ble Bombay High Court held that in accordance with second proviso to section 153A of the Act, once the assessment got abated, it is open for both assessee and revenue to make claims for allowance or disallowances as the case maybe. It has been held that once the assessment gets abated, the original return loses its originality and the subsequent return filed under section 153A of the Act takes place of the original return. Accordingly, all the 11 ITA NOs. 433 & 434/MUM/2022 (A.Ys. 2015-16 & 2016-17) Mindspace Business Park Pvt. Ltd., legitimate claims would be open to the assessee to raise in the return filed under section 153A (1) of the Act. 18. Further, in respect of the judgment of Hon'ble Apex Court in the case of CIT v. Sun Engineering Works Pvt Ltd relied by the department as mentioned in Ground No. 2 of grounds of appeal, Ld AR submitted that the said decision was relied by the department before the Hon'ble Bombay High Court in the case of CIT v. B.G. Shirke Construction Technology P. Ltd [(2017) 395 ITR 371 (Bom)]. While adjudicating the matter, the Hon'ble Bombay High Court has held that the department has misplaced its reliance, as the judgement of Hon'ble Apex Court in Sun Engineering was restricted to the order passed under section 147/148 of the Act only. 19. Ld. AR further submitted that although, the department has not challenged the merits of the case but for the sake of completeness it is submitted that the merits are covered by the CBDT Circular No.16/2017 dated 25.04.2017. In the instant circular, it has been clarified that the income arising from letting out of premises/ developed space along with 12 ITA NOs. 433 & 434/MUM/2022 (A.Ys. 2015-16 & 2016-17) Mindspace Business Park Pvt. Ltd., amenities in an Industrial Park/SEZ will be charged to tax under head "Profit and Gains from Business" 20. Further, with respect to Ground No. 3, wherein the department has contested the Ld. CIT(A)'s jurisdiction in respect to the claim of depreciation, Ld AR submitted that once the years under consideration are held as "abated years", it becomes open for an assessee to make a fresh claim which needs to be considered on merits. Thus, the Ld.CIT(A) was well within his jurisdiction while allowing the assessee the claim of depreciation. However, he submitted that the said ground is consequential to the adjudication of the other grounds raised by the revenue. 21. Considered the rival submissions and material placed on record. We observe that the assessee is earning income from the let of out of the premises situated in the SEZs and offered to tax in the original return of income filed by the assessee under the head income from House property. However, subsequent to the Search, while filing the return u/s 153A, it changed the head of income to declare the income from let out of premises under the head Income from Business and 13 ITA NOs. 433 & 434/MUM/2022 (A.Ys. 2015-16 & 2016-17) Mindspace Business Park Pvt. Ltd., Profession. This action of the assessee was rejected by the Assessing Officer that the assessee cannot claim new benefit in the revised proceedings u/s 153A of the Act. However, Ld CIT(A) decided the issue in favour of the assessee considering the fact on record that the assessment years under consideration are abated, therefore, the assessee can claim fresh or modified claim. After considering the submissions of both counsels, we observe that this issue is well settled and the Hon’ble Bombay High Court held in the case of B.G. Shirke Construction Technology P Ltd (supra) that in the case of abated assessments the return filed u/s 153A replaces the return filed u/s 139 of the Act, for the sake of clarity, it is reproduced below: - "10. The reliance on the decision of the Apex Court in Sun Engineering Works (P.) Ltd. (supra) by the Revenue is misplaced. The above case dealt with re-opening of an assessment under Section 147 of the Act. It was in that context that the Apex Court observed that the Order passed under Section 147/148 and the Assessing Officer is primarily restricted to such income which has escaped assessment and does not permit reconsideration of issue which are concluded in the earlier assessment years in favour of the Revenue. 11. In the present facts for the subject assessment years it is an undisputed position that the pending assessment before the Assessing Officer consequent to return filed under Section 139(1) of the Act for the subject Assessment years had abated. This was on account of the search and as provided in second proviso to Section 153A(1) of the Act. The consequence of notice under Section 153A(1) of the Act is that assessee is required to furnish fresh return of income for each of the six assessment years in 14 ITA NOs. 433 & 434/MUM/2022 (A.Ys. 2015-16 & 2016-17) Mindspace Business Park Pvt. Ltd., regard to which a notice has beenissued. It is this return which is filed consequent to the notice which would be subject of assessment by the Revenue for the first time in the case of abated assessment proceedings. Consequent to notice under Section 153A of the Act the earlier return filed for the purpose of assessment which is pending, would be treated as non est in law. Further, Section 153A(1) of the Act itself provides on filing of the return consequent to notice, the provision of the Act will apply to the return of income so filed. Consequently, the return filed under Section 153A(1) of the Act is a return furnished under Section 139 of the Act. Consequently, the assessee-assessee is being assessed in respect of abated assessment for the first time under the Act. Therefore the provisions of the Act which would be otherwise applicable in case of return filed in the regular course under Section 139(1) of the Act would also continue to apply in case of return filed under Section 153A of the Act and the case laws on the provision of the Act would equally apply." 22. We observe that similar view was expressed by Hon’ble Bombay High Court while adjudicating similar issues in the case of JSW Steel Ltd (supra) and held as under: - "13. In the present case, search was conducted on the assessee on 30-11-2010. At that point of time assessment in the case of assessee for the assessment year 2008-09 was pending scrutiny since notice under section 143(2) of the Act was issued and assessment was not completed. Therefore, in view of the second proviso to section 153A of the said Act, once assessment got abated, it meant that it was open for both the parties, i.e. the assessee as well as revenue to make claims for allowance or to make disallowance, as the case may be, etc. That apart, assessee could lodge a new claim for deduction etc. which remained to be claimed in his earlier/regular return of income. This is so because assessment was never made in the case of the assessee in such a situation. It is fortified that once the assessment gets abated, the original return which had been filed looses its originality and the subsequent return filed under section 153A of the said Act (which is 15 ITA NOs. 433 & 434/MUM/2022 (A.Ys. 2015-16 & 2016-17) Mindspace Business Park Pvt. Ltd., in consequence to the search action under section 132) takes the place of the original return. In such a case, the return of income filed under section 153A(1) of the said Act, would be construed to be one filed under section 139(1) of the Act and the provisions of the said Act shall apply to the same accordingly. If that be the position, all legitimate claims would be open to the assessee to raise in the return of income filed under section 153A(1). 16. From the above we conclude that in view of the second proviso to section 153A(1) of the said Act, once assessment gets abated, it is open for the assessee to lodge a new claim in a proceeding under section 153A(1) which was not claimed in his regular return of income, because assessment was never made/finalised in the case of the assessee in such a situation." 23. With regard to submissions made by the Ld DR that the Ld CIT(A) has ignored the decision of Sun Engineering Works (P) Ltd decision, we observe that the Hon’ble Bombay High Court already considered the above decision in the case of B.G Shirke Construction (supra) in the Para No.10 of the decision (refer para no 22 above). It held that the stand of the revenue is misplaced as the issue is relating to the assessment u/s.147/148 of the Act, the same cannot be applied for the issue under consideration. Therefore, the submissions made by the Ld.DR are substantially answered. 24. Considering the above discussion, we are inclined to dismiss the grounds raised by the revenue in the appeal filed for the AY 2015-16. The issues raised in the appeal for the AY 2016-17 are mutandis 16 ITA NOs. 433 & 434/MUM/2022 (A.Ys. 2015-16 & 2016-17) Mindspace Business Park Pvt. Ltd., mutatis, we are inclined to dismiss the grounds raised in that appeal as well. 25. In the result, appeals filed by the Revenue are dismissed. Order pronounced in the open court on August, 2022. Sd/- Sd/- (AMIT SHUKLA) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated .08.2022 Giridhar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER (Assistant Registrar) ITAT, Mum