DCIT 9(3), MUMBAI V. POPLEY DIAMOND & GOLD PLAZA P. LTD ( FORMERLY KNOWN AS SEARS SUPER MARKET LTD), MUMBAI

ITA 4894/MUM/2009

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79018 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 27-01-2015
• Assessment Year: 2001-2002
• Appeal Filed On: 25-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJEEV JAIN
• Assessee Lawyers: S E DASTUR
• Keywords: Reopening of assessment; Business income; Depreciation; Difference of opinion; Validity of assessment; Assessment record; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 147; 148; 139; 143(3); 142(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE S/SHRI P.M.JAGTAP (AM) AND DR. S. T. M.PAVALAN (JM) ./I.T.A.NO.4894/MUM/2009 ( / ASSESSMENT YEAR: 2001-02) ASSTT.CO MMISSIONER OF INCOME TAX -9(3), ROOM NO.229, 2 ND FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 / VS. M/S POPLEY DIAMOND AND GOLD PLAZA PVT LTD (FORMERLY KNOWN AS SEARS SUPER MARKET LTD), 188-GURUNANAK ROAD, TURNER ROAD, BANDRA (W), MUMBAI-400050 ( / APPELLANT) ( / RESPONDENT) ./ ./PAN/GIR NO. : AAACS5154L / APPELLANT BY : SHRI S AJEEV JAIN /RESPONDENT BY SHRI S E DASTUR # / DATE OF HEARING : 7.4.2014 # /DATE OF PRONOUNCEMENT : 28.5.2014 / O R D E R PER P.M.JAGTAP,AM: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)-9, MUMBAI, DATED 16.9.2009 WHEREBY HE CANCELLED THE A SSESSMENT MADE U/S 143(3) READ WITH SECTION 147 OF THE INCOME TAX ACT, 1961 (THE ACT) TREATING THE SAME AS BAD IN LAW. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY IN CORPORATED ON 25.4.1991 WITH THE MAIN OBJECT TO CARRY ON BUSINESS AS MERCHANTS O F GENERAL ITEMS. IT ACQUIRED A PLOT OF LAND ADMEASURING ABOUT 780 SQ MTRS OF AREA WITH FSI 523 SQ.MTRS IN THE PRIME LOCALITY AND CONSTRUCTED A SHOW ROOM THEREON. THE SAID SHOW ROOM WAS LET OUT BY THE I.T.A.NO.4894/MUM/2009 2 ASSESSEE TO ITS SISTER CONCERN M/S M/S POPLEY GOLD PLAZA FROM 1.4.1999 AND IN THE RETURN OF INCOME ORIGINALLY FILED ON 31.10.2001, T HE COMPENSATION (RENT) RECEIVED FROM THE SISTER CONCERN WAS DECLARED BY THE ASSESSEE COM PANY AS ITS BUSINESS INCOME AFTER CLAIMING VARIOUS EXPENSES AGAINST THE SAME THEREBY DECLARING THE LOSS OF RS.11,85,250/-. IN THE ORIGINAL ASSESSMENT COMPLET ED U/S 143(3) VIDE ORDER DATED 12.3.2003, THE LOSS SO DECLARED WAS ACCEPTED BY THE AO. SUBSEQUENTLY, HE FOUND FROM THE MATERIAL AVAILABLE ON RECORD THAT THE ASSESSEE HAD DISCONTINUED ITS BUSINESS AND THERE WERE NO DETAILS AVAILABLE ON RECORD TO SUGGE ST THAT THE ASSESSEE-COMPANY CONTINUED ITS BUSINESS FOR WHICH IT WAS INCORPORA TED. HE WAS OF THE OPINION THAT THE ASSESSEE COMPANY THUS HAD TREATED THE RENTAL INCOME AS BUSINESS INCOME AND CLAIMED CERTAIN EXPENSES AND DEPRECIATION ON THE ENTIRE BLO CK OF ASSETS BY NOT DISCLOSING FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. HE, THEREFORE, REOPENED THE ASSESSMENT ORIGINALLY COMPLETED U/S 143(3) AND ISSUED NOTICE U/S 147 R.W.S.148 OF THE ACT TO THE ASSESSEE ON 6.1.2007. IN REPLY, A LETTER DATED 15.12.2007 WAS FILED BY THE ASSESSEE STATING THEREIN THAT THE RETURN ORIGIN ALLY FILED BY IT MAY BE TREATED AS RETURN FILED IN RESPONSE TO THE NOTICE U/S 148 OF T HE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE, ACCORDING TO THE AO, FAILED TO ESTABLISH THAT ITS BUSINESS WAS CONTINUED DURING THE YEAR UNDER CONSID ERATION OR THERE WAS ANY INTENTION TO RESUME THE SAME IN FUTURE. HE HELD THAT THE O NLY INCOME EARNED BY THE ASSESSEE IN THE FORM OF RENT/COMPENSATION BY EXPLOITATION OF PROPERTY OWNED BY IT WAS CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND NOT UNDER THE HEAD PROFIT AND GAINS FROM BUSINESS OR PROFESSION AS ASSESSED IN THE ORIGINAL ASSESSMENT. HE, THEREFORE, PROCEEDED TO DETERMINE THE ANNUAL LETTIN G VALUE (ALV) OF THE HOUSE PROPERTY LET OUT BY THE ASSESSEE TO ITS SISTER CONC ERN. IN THIS CONTEXT, HE HELD THAT THE AGREEMENT ENTERED INTO BY THE ASSESSEE COMPANY WITH ITS SISTER CONCERN WAS NOT A RELIABLE DOCUMENT TO DETERMINE THAT THE RENT OF RS .3 LAKHS AGREED TO BE PAID WAS A REASONABLE RENT. AFTER DISCUSSING THE RELEVANT FAC TS OF THE CASE AS WELL AS VARIOUS I.T.A.NO.4894/MUM/2009 3 JUDICIAL PRONOUNCEMENT, THE AO HELD THAT ALV OF T HE ASSESSEES PROPERTY COULD REASONABLY BE TAKEN AT RS.3,09,75,305/- BEING 20% OF THE TOTAL INVESTMENT MADE BY THE ASSESSEE IN THE BUILDING AS WELL AS OTHER ASSE TS PROVIDED IN THE SAID BUILDING AGGREGATING TO RS.15,48,76,529/-. ACCORDINGLY, AF TER ALLOWING DEDUCTION OF 30% U/S 24 OF THE ACT FROM THE ALV OF THE PROPERTY DETERMIN ED BY HIM, THE SUM OF RS.2,16,82,714/- WAS BROUGHT TO TAX BY THE AO IN T HE HANDS OF THE ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY IN THE ASSESSME NT COMPLETED U/S 143(3) R.W.S.147 OF THE ACT VIDE ORDER DATED 24.12.2008. 3. AGAINST THE ORDER PASSED BY THE AO U/S 143 (3) R .W.S.147, THE APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(A) CH ALLENGING THE VALIDITY OF THE ASSESSMENT MADE BY THE AO U/S 143(3) R.W.S.147 AS WELL AS DISPUTING THE ADDITION MADE THEREIN UNDER THE HEAD INCOME FROM HOUSE PROP ERTY. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE VALIDITY OF ASSESSMENT U /S 143(3) R.W.S. 147 WAS CHALLENGED BY THE ASSESSEE MAINLY ON TWO GROUNDS BY MAKING THE FOLLOWING SUBMISSIONS : 1. THERE IS NO FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS IN THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDING S/ THE AO VIDE LETTER DATED 12 NOVEMBER 2002 HAD ASKED THE APPELLANT TO GIVE A BRIEF NOTE ON THE NATURE AND MODUS OPERANDI OF THE BUSINESS CONDUCTED BY THE APPELLANT. VIDE LETTER DATED 15TH NOVEMBER 2002, THE APPELLANT REPLIED THA T IT HAD LET OUT THE PREMISES OWNED BY IT ALONG WITH FURNITURE & FIXTURES AND THA T IT HAD NO OTHER ACTIVITY. THE NOTICE ISSUED BY THE AO AND THE APPELLANTS REPLY THERETO ARE ENCLOSED HEREWITH AND MARKED ANNEXURE A1 AND A2. THE ORIGINAL AS SESSMENT PROCEEDINGS WERE COMPLETED UNDER SECTION 143(3) OF THE ACT. THEREAF TER, THE IMPUGNED NOTICE UNDER SECTION 148 DATED 6 TH DECEMBER 2007 WAS YOUR HONOUR'S ATTENTION IS INVITED TO THE PROVISO TO SECTION 140 WHICH STATES THAT WHERE AN ASSESSMENT UNDER SECTION 143(3) OF THE ACT HAS BEEN MADE FOR T HE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER SECTION 147 AFTER TH E EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS ANY INCO ME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REAS ON OF THE FAILURE ON THE PART OF THE APPELLANT: TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SECTION 142(1) OR SECTION 148/ OR I.T.A.NO.4894/MUM/2009 4 TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NE CESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. . ' . THE APPELLANT SUBMITS THAT THERE IS NO FAILURE ON T HE PART OF THE APPELLANT OF THE KIND ENVISAGED IN THE PROVISO. AS EXPLAINED ABOVE, THERE HAS BEEN A FULL AND TRUE DISCLOSURE BY THE APPELLANT OF ALL MATERIAL FACTS R ELATING TO THE ACTIVITY CARRIED ON BY IT PURSUANT TO WHICH THE COMPENSATION INCOME WAS EARNED. FURTHER; EVEN IN THE RECORDED REASONS, THE AO HAS N OWHERE ALLEGED THAT INCOME HAS ESCAPED ASSESSMENT BY REASON OF THE FACT THAT T HERE HAS BEEN ANY FAILURE OR OMISSION ON THE PART OF THE APPELLANT TO MAKE A FUL L AND TRUE DISCLOSURE OF ANY MATERIAL FACTS. IN FACT THE REASONS START WITH THE WORDS 'IT IS SEEN FROM THE RECORDS . THEREFORE, IT IS RESPECTFULLY SUBMITTED THAT THE JURISDICTIONAL CONDITIONS NECESSARY FOR VALIDLY INITIATING THE REASSESSMENT P ROCEEDINGS ARE NOT SATISFIED IN THE APPELLANT'S CASE. THEREFORE, ON THIS GROUND ALO NE, THE REASSESSMENT DESERVES TO BE STRUCK DOWN. ACCORDINGLY, WE REQUEST YOUR HON OUR TO HOLD THAT THE REASSESSMENT PROCEEDINGS ARE INVALID. RELIANCE IS P LACED ON THE FOLLOWING DECISIONS OF THE BOMBAY HIGH COURT WHEREIN THE HIGH COURT HAS CATEGORICALLY HELD THAT WHERE THE CONDITIONS OF THE PROVISO TO SE CTION 147 HAVE NOT BEEN FULFILLED, AND WHERE NO FAILURE IS ALLEGED, THE REA SSESSMENT PROCEEDINGS MUST BE HELD TO BE INVALID AND THEREFORE QUASHED. SESA GOA LTD. V. JT.CIT [2007] 294 ITR 101 (BOM ) CARTINI INDIA LTD. V. ASST. CIT [2007} 291 ITR 355 (BOM) JASHAN TEXTILE MILLS PVT. LTD. V. DY. CIT [2006 ] 284 ITR 542 (BOM) DEVIDAYAL ROLLING MILLS V. ASST. CIT [2006] 285 IT R 514 (BOM) HINDUSTAN LEVER LIMITED V. R.8. WADKAR [2004] 268 J TR 332 (80M) 2. THE FIRST REASON FOR REOPENING IS BAD IN LAW SINCE IT IS A CASE OF A MERE CHANGE OF OPINION, WHICH CANNOT CONSTITUTE A R EASON TO BELIEVE THE APPELLANT SUBMITS THAT IT IS WELL SETTLED THAT A MERE CHANGE IN OPINION DOES NOT CONSTITUTE ''REASON TO BELIEVE' THAT INCOME HAS ESCAPED ASSESSMENT. IT HAS BEEN REPEATEDLY LAID DOWN THAT SECTION 147 DOES NOT PERMIT FRESH APPLICATION OF MIND TO THE SAME ISSUE SO AS TO ENABLE THE ASSESSIN G OFFICER TO CORRECT OR REVISE HIS OWN OR HIS PREDECESSOR'S ERROR OF JUDGMENT. THE ASSESSING OFFICER CANNOT TAKE ACTION UNDER THIS SECTION MERELY BECAUSE HE HA PPENS TO CHANGE HIS OPINION OR TO HOLD AN OPINION DIFFERENT FROM THAT OF HIS OW N OR THAT OF HIS PREDECESSOR ON THE SAME SET OF FACTS. IN THE ASSESSMENT ORDER DATED 12 TH MARCH 2003 PASSED UNDER SECTION 143(3) OF THE ACT THE AO HAD ACCEPTED THE APPELLANTS CLAI M OF TREATING THE INCOME AS BUSINESS INCOME. THE REASSESSMENT PROCEEDINGS ARE B ASED ON A MERE :CHANGE OF OPINION THAT THE INCOME SHOULD BE REGARDED AS F ALLING UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IN THIS CONNECTION RELIANCE IS PLACED ON THE FOLLOW ING DECISIONS OF THE BOMBAY HIGH COURT WHEREIN IT HAS BEEN HELD THAT A DIFFEREN T VIEW TAKEN BY THE OFFICER SUBSEQUENT TO COMPLETION OF THE ASSESSMENT PROCEEDI NGS WOULD AMOUNT TO A CHANGE OF OPINION ON THE BASIS OF MATERIAL ALREADY BEFORE HIM. I.T.A.NO.4894/MUM/2009 5 CITV. KILLICK INDUSTRIES LTD. [1980] 126 ITR 147 (BOM) WYETH INDIA PVT. LTD. V. IAC [1982] 137 ITR 20 (B OM) 4. THE ISSUE RELATING TO THE VALIDITY OF THE ASSESS MENT MADE BY AO U/S 143(3) R.W.S.147 OF THE ACT WAS EXAMINED BY THE LD. CIT( A) IN THE LIGHT OF THE SUBMISSIONS MADE BY THE ASSESSEE, THE MATERIAL AVAILABLE ON REC ORD AND THE RELEVANT CASE LAWS. ON SUCH EXAMINATION, HE AGREED WITH BOTH THE POINTS R AISED BY THE ASSESSEE CHALLENGING THE VALIDITY OF THE ASSESSMENT AND CANCELLED THE SA ID ASSESSMENT HOLDING THE SAME TO BE BAD IN LAW. THE RELEVANT OBSERVATIONS/FINDINGS OF THE LD. CIT(A) AS RECORDED IN PARAS 2.7 AND 2.8 OF HIS IMPUGNED ORDER ARE REPRODUCED BE LOW: 2.7 ON PERUSAL OF THE ABOVE FACTS AND THE REASONS RECORDED FOR RE-OPENING, I FIND THAT THERE IS NO FAILURE ON THE PART OF THE AS SESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. IT IS ON RECORD THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO VIDE LETTER 12.11.2002 HAD ASKE D THE APPELLANT TO GIVE A BRIEF NOTE ON THE NATURE AND MODUS OPERANDI OF THE BUSINESS CONDUCTED BY THE APPELLANT (ANNEXURE 8). VIDE LETTER DTD. 15.11.2002 THE APPELLANT REPLIED THAT IT HAD LET OUT THE PREMISES OWNED BY IT ALONGWITH FURN ITURE AND FIXTURE AND THAT IT HAD NO OTHER ACTIVITY ( ANNEXURE 9). THE ORIGINAL A SSESSMENT PROCEEDINGS WERE COMPLETED U/S. 143(3) OF THE IT ACT, WHEREIN THE INCOME DISCLOSED BY THE APPELLANT UNDER THE HEAD BUSINESS INCOME HAS BEEN ACCEPTED BY THE AO. IN FACT, THE REASONS RECORDED BY THE AO START WITH TH E WORKS IT IS SEEN FROM THE RECORD WHICH SHOWS THAT THE REASONS ARE PRIMARILY BASED ON THE RECORD AS FURNISHED BY THE APPELLANT AND NO FRESH MATERIAL H AS BEEN BROUGHT ON RECORD. THE HONBLE MUMBAI HIGH COURT IN THE CASE OF CARTIN I INDIA LTD. VS. ADDL.CIT AND OTHERS (291 ITR 355- BOM) (224 CTR BOM 82) HAS HELD THAT ONCE THE AO ON CONSIDERATION OF MATERIAL ON RECORD AND THE EXPLANA TION OFFERED ARRIVES AT A FINAL CONCLUSION IN THE ORIGINAL ASSESSMENT THAT THE ASSE SSEE IS ENTITLED FOR THE DEDUCTION AS CLAIMED ON THE BASIS OF THE VERY SAME MATERIAL, THE AO CANNOT FORM A PRIMA-FACIE OPINION THAT THE DEDUCTION IS NOT ALL OWABLE AND ACCORDINGLY, REOPEN THE ASSESSMENT THAT INCOME CHARGEABLE TO TAX HAS ES CAPED ASSESSMENT. THE OTHER CASES REFERRED ARE ACIT VS. RAJESH JHAVERI ST OCK BROKERS (P) LTD. (2007 210 CTR (SC) 30 (2007) 291 ITR 500 (SC), CENTRAL PR OVINCES MANGANESE ORE CO. LTD. VS. ITO (1991) 98 CTR (SC) 161: (1991) 191 ITR 662(SC), ITO VS. SELECTED DALURBAND COAL CO. (P) LTD. (1996) 132 CTR(SC) 162: (1996) 217 ITR 597 (SC), RAYMOND WOOLLEN MILLS LTD. VS. ITO (1999) 152 CTR ( SC) 418 : (1999) 236 ITR 34(SC). 2.8 UNDER THE CIRCUMSTANCES AND FACTS OF THE CASE, I HOLD THAT THE ASSESSEE HAD DISCLOSED TRULY AND FULLY ALL MATERIAL FACTS AL ONG WITH THE RETURN OF INCOME FILED. THE AO HAD ALL PRIMARY FACTS AND INFORMATION NECESSARY FOR THE PURPOSE OF THE ASSESSMENT OF THE APPELLANT'S RETURN OF INCOME. IN FACT THE ASSESSMENT HAS BEEN REOPENED BASED ON THE INFORMATION CONTAINED IN THE RETURN OF INCOME AND NOT ON THE BASIS OF ANY INFORMATION WHICH CAME IN T HE POSSESSION OF THE AO I.T.A.NO.4894/MUM/2009 6 SUBSEQUENTLY, OR DUE TO ANY CHANGE IN FACTS OF LAW. CONSIDERING THE TOTALITY OF THE FACTS, THE REASSESSMENT ORDER DESERVES TO BE CA NCELLED 5. KEEPING IN VIEW HIS DECISION ON THE PRELIMINARY ISSUE CANCELLING THE ASSESSMENT MADE BY THE AO U/S 143(3) R.W.SECTION 147 OF THE A CT, THE LD. CIT(A) DID NOT GO IN TO THE MERITS OF THE OTHER ISSUES RAISED BY THE ASSES SEE RELATING TO THE ADDITION MADE BY THE AO IN THE SAID ASSESSMENT ON ACCOUNT OF INCOM E FROM HOUSE PROPERTY. AGGRIEVED BY THE ORDER OF LD. CIT(A), THE REVENUE HAS PREFER RED THIS APPEAL BEFORE THE TRIBUNAL. 6. THE LD. DR, AT THE OUTSET, INVITED OUR ATTENTIO N TO THE COPY OF REASONS RECORDED BY THE AO PLACED AT PAGE 40 OF THE PAPER BOOK AND P OINTED OUT THAT THE FACT THAT SON OF THE DIRECTOR OF THE ASSESSEE COMPANY IS ONE OF THE PARTNERS OF M/S POPLEY DIAMOND AND GOLD PLAZA, THE LESSEE FIRM WAS NOT DISCLOSED BY T HE ASSESSEE. HE SUBMITTED THAT ALTHOUGH THIS FACT WAS DISCLOSED SOMEWHERE ELSE BY THE ASSESSEE SEPARATELY, THE SAME WAS NOT SPECIFICALLY BROUGHT TO THE NOTICE OF THE A O DURING THE COURSE OF ASSESSMENT PROCEEDINGS. HE CONTENDED THAT THERE WAS THUS A C LEAR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE MATERI AL FACTS NECESSARY FOR THE ASSESSMENT AND THE REOPENING OF THE ASSESSMENT MADE BY THE AO WITHIN THE PERIOD OF SIX YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR WAS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 147 R.W.FIRST PROVISO THERETO. IN SUPPORT OF THIS CONTENTION, HE RELIED ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF DR. AMINS PATHOLOGY LABORATORY VS JCIT (2001) 252 ITR 683 (BOM) AND T HE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF ALAPPAT JEWELS V. ACIT [2013] 350 ITR 471(KERALA) 7. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, SUBMITTED THAT THERE WAS NO SPECIFIC MENTION MADE BY THE AO IN THE REASONS RECORDED ABOUT ASSESSEES FAILURE TO DISCLOSE ANY MATERIAL FACT NECESSARY FOR THE PUR POSE OF ASSESSMENT. HE INVITED OUR ATTENTION TO THE REASONS RECORDED BY THE AO AND PO INTED OUT THAT THE SAID REASONS FOR I.T.A.NO.4894/MUM/2009 7 REOPENING OF THE ASSESSMENT WERE BASED ON ALL THE MATERIAL FACTS AND RECORD WHICH WERE AVAILABLE BEFORE THE AO AT THE TIME OF COMPLET ION OF ORIGINAL ASSESSMENT U/S 143(3) OF THE ACT. HE CONTENDED THAT THE ASSESS MENT THUS WAS REOPENED BY THE AO ON THE BASIS OF THE SAME FACTS AND MATERIAL WHICH W ERE AVAILABLE AT THE TIME OF COMPLETION OF ORIGINAL ASSESSMENT AND THE SAME THUS , WAS CLEARLY BASED ON A MERE CHANGE OF OPINION WHICH IS NOT PERMISSIBLE IN LAW . HE INVITED OUR ATTENTION TO THE COPY OF AGREEMENT BETWEEN THE ASSESSEE-COMPANY AND ITS SISTER CONCERN PLACED AT PAGES 26 TO 29 OF THE PAPER BOOK AND POINTED OUT THAT THE FACT THAT SOME OF THE SHAREHOLDERS OF THE ASSESSEE COMPANY ARE INTERESTE D AS PARTNERS IN THE SISTER CONCERN WAS SPECIFICALLY MENTIONED IN THE SAID AGREEMENT, A COPY OF WHICH WAS FILED DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDING BEFORE THE AO. HE ALSO TOOK UP THROUGH THE COPIES OF VARIOUS WRITTEN SUBMISSIONS FILED BY TH E ASSESSEE DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDING TO POINT OUT THAT ALL THE MAT ERIAL FACTS NECESSARY FOR THE ASSESSMENT WERE BROUGHT ON RECORD BY THE ASSESSEE B EFORE THE ASSESSING OFFICER AND THE ASSESSMENT WAS COMPLETED BY THE AO ORIGINALLY U/S 143(3) BY APPLYING HIS MIND TO ALL THESE FACTS. HE REITERATED THAT THERE WAS NO TA NGIBLE MATERIAL THAT HAD COME TO THE POSSESSION OF THE AO AFTER COMPLETION OF THE ORIGINAL ASSESSMENT AND SINCE THE ASSESSMENT WAS REOPENED BY THE AO ON THE BASIS OF SAME FACTS AND MATERIAL WHICH WERE AVAILABLE AT THE TIME OF COMPLETION OF ORIGIN AL ASSESSMENT, THE REOPENING WAS ITSELF BAD IN LAW AS IT WAS BASED MERELY ON CHAN GE OF OPINION. IN SUPPORT OF THIS CONTENTION, HE RELIED ON THE FOLLOWING DECISIONS : A) ASIAN PAINTS LTD V/S DCIT (2009) 308 ITR 195 (BO M); B)RABO INDIA FINANCE LIMITED V/S DCIT (2012) 346 I TR 528 (BOM) C) ASTEROIDS TRADING AND INVESTMENT P LTD V/S DCI T (2009) 308 ITR 190(BOM); D)HINDUSTAN LEVER LTD V/S ACIT AND ORS (2004) (26 8 ITR 332) (BOM) 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT THE ASSESSMENT ORIGINAL LY COMPLETED U/S 143(3) IN THE PRESENT CASE WAS REOPENED BY THE AO AFTER A PERIOD OF FOUR YEARS FROM THE END OF RELEVANT I.T.A.NO.4894/MUM/2009 8 ASSESSMENT YEAR BY ISSUING NOTICE U/S 148 AFTER RE CORDING THE REASONS. AS PER FIRST PROVISO TO SECTION 147, ASSESSMENT COMPLETED U/S 14 3(3) CAN BE REOPENED AFTER A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR ONLY IF THERE IS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND T RULY ALL THE MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR AND AND AS HELD BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF HINDUSTAN LEVER LTD (SUPRA) CI TED BY LD. COUNSEL FOR THE ASSESSEE, THE AO MUST DISCLOSE IN THE REASONS AS TO WHICH FAC T OR MATERIAL WAS NOT DISCLOSED BY THE ASSESSEE FULLY AND TRULY NECESSARY FOR ASSESSME NT SO AS TO ESTABLISH THE VITAL LINK BETWEEN THE REASONS AND EVIDENCE. IN HIS IMPUGNED ORDER, THE LD. CIT(A) HAS RECORDED THE FINDING ON THE PERUSAL OF THE REASONS RECORDED BY THE AO FOR REOPENING THAT THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCL OSE FULLY AND TRULY ALL THE MATERIAL FACTS. THE REASONS RECORDED BY THE AO BEING RELEVA NT IN THE PRESENT CONTEXT ARE EXTRACTED BELOW : IN THIS CASE, THE RETURN OF INCOME WAS FURNISHED O N 31.10.2001 DECLARING A LOSS OF RS.11,85,250/-. THE RETURN WAS PICKED UP 'FOR SC RUTINY AND AN ASSESSMENT ORDER U/S.143(3) WAS PASSED ON 12.3.2003 ACCEPTING THE TOTAL LOSS AS DECLARED. IT IS SEEN FROM THE RECORDS THAT THE ASSESSEE HAS S HOWN AN AMOUNT OF RS. 3 LACS AS COMPENSATION RECEIVED IN RESPECT OF ITS BUS INESS PREMISES FROM MIS. POPLEY GOLD PLAZA AS PER AN AGREEMENT DATED 01.04.1 999. IT IS ALSO SEEN THAT THE ASSESSEE RECEIVED UNSECURED LOAN OF RS. 16.07 CRORE S FROM SHRI RAMCHANDRA K. POPLEY, DIRECTOR OF ASSESSEE COMPANY. AS THE RECOR DS INDICATE, SHRI SURAJ RAMCHANDRA POPLEY, SON OF THE SAID DIRECTOR IS ONE OF THE PARTNERS OF M/S. POPLEY GOLD PLAZA, THE LESSEE FIRM. THE ASSESSEE HA S TREATED THE LETTING OUT OF THE PROPERTY AS A BUSINESS THEREBY CLAIMING DEPRECI ATION ETC. THIS CLAIM MAY NOT E ACCEPTED. IT IS FURTHER SEEN THAT THE SO CALLED COMPENSATION PER ANNUM OF RS.3 LAC IS BEING RECEIVED AT THIS RATE RIGHT FROM ASSESSMENT YEAR 20 01-02 OR SO. THE LOAN ADVANCED BY THE DIRECTOR IS ALSO CONTINUING FROM A. Y. 2001-02 FOR WHICH NO INTEREST IS CLAIMED NOR PAID ALL THESE YEARS. OBVIO USLY, THE AMOUNT OF COMPENSATION RECEIVED BY THE ASSESSEE IS AN INSIGN IFICANT SUM AS COMPARED WITH THE TOTAL BOOK VALUE OF THE LEASED PREMISED WHICH IS MORE THAN RS. 10 CRORES.LT IS OBVIOUS FROM THE DETAILS ON RECORD THAT BECAUSE OF THE CLOSE NEXUS BETWEEN THE LESSOR -ASSESSEE AND THE LESSEE-PARTNERSHIP FIR M, NO INTEREST IS CHARGED ON THE WHOPPING AMOUNT OF RS. 16.07 CRORES. IF INTERES T IS CHARGED, SAY AT THE RATE OF 12%, THE INTEREST AMOUNT WILL BE ABOUT RS.1.93 C RORES WHICH WOULD HAVE BEEN PAYABLE BY THE ASSESSEE PER ANNUM, WHEREAS THE ASSE SSEE RECEIVED ONLY A VERY MEAGRE AMOUNT OF RS. 3 LAC STATED TO BE COMPENSATIO N, OBVIOUSLY FOR THE REASON I.T.A.NO.4894/MUM/2009 9 THAT INTEREST ( OTHERWISE) PAYABLE BY THE ASSESSEE IS FORGONE BY THE RELATIVE OF PARTNER(S) OF THE LESSEE-FIRM. IN OTHER WORDS, THE USUFRUCTUS OF THE LOAN RECEIVED REQUIRES TO BE TREATED AS CONSIDERATION FOR THE USE R OF THE LEASED PROPERTY AND ACCORDINGLY ANNUAL VALUE OF THE LEASED PROPERTY NEE DS TO BE RE-WORKED OUT. REFERENCE IN THIS REGARD MAY ALSO BE MADE TO THE DE CISION OF HON'BLE ITAT, MUMBAI IN THE CASE OF TRIVOLI INVESTMENT & TRADING CO.PVT LTD ( ITA NO.3269/BOM/93 AND 3009/BOM/94) WHICH HAS BEEN CIR CULATED VIDE CIT(JUDICIAL), MUMBAI'S LETTER NO.ADDL.CIT(J,C & L) -1/2003-04 DATED 29.01.2004 AND THE FACTS OF THE RESENT CASE ARE ALMOST IDENTIC AL WITH THOSE OF THE DECIDED CASE. IN VIEW OF THE ABOVE, I HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX AS ESCAPED ASSESSMENT WITHIN THE MEANING OF PROVISIONS OF SECTION 147 OF THE I.T. ACT, INASMUCH AS THE INCOME CHARGEABLE-TO TAX HAS NOT BEEN CORRECTLY SHOWN NOR ASSESSED CORRECTLY. ACCORDINGLY, THE PROPOSALS ARE SUBMITTED REQUESTING APPROVAL OF THE CIT-9, MUMBAI IN ACCORDANCE WITH THE PROVISO TO SECTION 151(1) OF THE I.T. ACT. TO REOPEN THE ASSESSMENT U/S.147 O F THE I.T. ACT FOR A.Y. 2001- 02 9. WHEN THE LD. DR, AT THE TIME OF HEARING BEFORE US, WAS REQUIRED BY US TO POINT OUT EXACTLY AS TO WHICH FACT OR MATERIAL WAS NOT D ISCLOSED BY THE ASSESSEE FULLY AND TRULY NECESSARY FOR ITS ASSESSMENT, HE HAS SUBMITTED THA T THE FACT THAT SON OF THE DIRECTOR OF THE ASSESSEE COMPANY IS ONE OF THE PARTNER OF M/S P OPLEY DIAMOND AND GOLD PLAZA, LESSEE FIRM WAS NOT FURNISHED BY THE ASSESSEE. H OWEVER, AS POINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE FROM THE COPY OF THE RELE VANT AGREEMENT BETWEEN THE ASSESSEE COMPANY AND M/S POPLEY DIAMOND AND GOLD PL AZA, WHICH WAS DULY FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE AO, THE FACT OF RELATIONSHIP BETWEEN THE DIRECTORS OF THE ASSESSEE COMPANY AND THE PARTNER OF M/S POPLEY DIAMOND AND GOLD PLAZA WAS CLEARLY MENTIONED THERE . MOREOVER, IT WAS STATED BY THE AO HIMSELF IN THE REASONS RECORDED THAT THIS FACT WAS GATHERED BY HIM FROM THE ASSESSMENT RECORD AVAILABLE BEFORE HIM. THERE WA S THUS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR THE ASSESSMENT WHICH WAS SPECIFICALLY POINTED OUT BY THE AO IN TH E REASONS RECORDED AND THEREFORE WE AGREE WITH THE LD. CIT(A) THAT IN THE ABSENCE OF SUCH FAILURE SPECIFICALLY POINTED OUT BY THE AO IN THE REASONS RECORDED, THE REOPENING OF AS SESSMENT ORIGINALLY COMPLETED U/S 143(3) WAS BAD IN LAW. I.T.A.NO.4894/MUM/2009 10 10. A PERUSAL OF THE REASONS RECORDED BY THE AO AL SO CLEARLY SHOWS THAT THE ASSESSMENT ORIGINALLY COMPLETED U/S 143(3) WAS REOP ENED BY HIM WITHOUT THERE BEING ANY NEW INFORMATION OR MATERIAL COMING TO HIS PO SSESSION AFTER THE COMPLETION OF SAID ASSESSMENT AND THIS POSITION CLEARLY EVIDENT FROM T HE REASONS RECORDED BY THE AO HAS NOT BEEN DISPUTED EVEN BY LD. DR. THE LD. COUNSE L FOR THE ASSESSEE, ON THE OTHER HAND, HAS TAKEN US THROUGH THE SUBMISSIONS MADE BY THE ASSESSEE IN WRITING DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 143(3) TO SHOW THAT ALL THE NECESSARY FACTS AND MATERIAL WERE BROUGHT ON RECORD BY THE ASSESSEE AND THE ASSESSMENT WAS COMPLETED BY THE AO U/S 143(3) BY APPLYING HIS MIN D TO THE SAID FACTS AND MATERIAL. IN THE CASE OF ASTEROIDS TRADING AND INVESTMENT P LTD (SUPRA) CITED BY THE LD. COUNSEL FOR THE ASSESSEE, THE ASSESSEE HAD MADE FULL DISCLOSUR E NECESSARY FOR CLAIMING DEDUCTION U/S 80M AND THE AO AFTER APPLYING HIS MIND TO THE R ELEVANT RECORD HAD MADE A SPECIFIC ORDER ALLOWING THE SAID DEDUCTION. SUBSEQUENTLY, T HE ASSESSMENT WAS REOPENED BY THE AO BECAUSE, ACCORDING TO HIM, DEDUCTION U/S 80M WAS WRONGLY ALLOWED. THE SAID REOPENING, HOWEVER, WAS NOT BASED ON ANY NEW MATERI AL OR ANY NEW INFORMATION THAT HAD COME TO THE POSSESSION OF THE AO AFTER COMPLET ION OF THE ORIGINAL ASSESSMENT. THERE WAS NO CHANGE OF LAW AND THE REOPENING WAS BA SED MERELY ON FRESH APPLICATION OF MIND BY THE AO TO THE SAME SET OF FACTS. IN THESE FACTS AND CIRCUMSTANCES INVOLVED IN THE CASE OF ASTEROIDS TRADING AND INVESTMENT P. LTD (SUPRA), HONBLE BOMBAY HIGH COURT HELD THAT IT WAS A CASE OF MERE CHANGE OF O PINION WHICH DID NOT PROVIDE JURISDICTION TO THE AO TO INITIATE PROCEEDINGS U/S 148 OF THE ACT. IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD., 320 ITR 561(SC), THE HON BLE SUPREME COURT HAD AN OCCASION TO CONSIDER THE SIMILAR ISSUE AND IT WAS HELD BY T HE HONBLE APEX COURT THAT ALTHOUGH THE POWER TO REOPEN THE ASSESSMENT IS MUCH WIDER P OST 1.4.1989, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WORDS REASONS TO BELIEVE FAILING WHICH, SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE AO TO REOPEN TH E ASSESSMENT ON THE BASIS OF MERE CHANGE OF OPINION WHICH COULD NOT BE PER-SE REAS ONS TO RE-OPEN. EXPLAINING FURTHER, I.T.A.NO.4894/MUM/2009 11 THE HONBLE SUPREME COURT OBSERVED THAT THE SPECI FIC DIFFERENCE BETWEEN THE POWER TO REVIEW AND POWER TO RE-ASSESS SHOULD ALSO BE KEPT IN MIND AND IF THE CONCEPT OF CHANGE OF OPINION IS REMOVED, THEN, UNDER THE GAR B OF REOPENING OF THE ASSESSMENT, REVIEW WOULD TAKE PLACE. IT WAS HELD THAT ONE MUS T TREAT THE CONCEPT OF CHANGE OF OPINION AS AN IN-BUILT TEST TO CHECK ABUSE OF POWERS BY THE AO AND HENCE, THE AO HAS POWER TO REOPEN PROVIDED THERE IS TANGIBLE MA TERIAL TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMEN T. 11. KEEPING IN VIEW THE LEGAL POSITION EMANATING FR OM THE JUDICIAL PRONOUNCEMENTS OF HONBLE SUPREME COURT AS WELL AS HONBLE BOMBAY HIGH COURT DISCUSSED ABOVE AND HAVING REGARD TO THE FACTS OF THE PRESENT CASE, WE ARE OF THE VIEW THAT THE REOPENING OF ASSESSMENT ORIGINALLY COMPLETED U/S 143(3) BY T HE AO BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR WAS BAD IN LAW AS RIGHTLY HELD BY THE LD. CIT(A) AS THE SAME WAS BASED MERELY ON CHA NGE OF OPINION AND THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE, SPECIFICALLY POINTED BY THE AO IN THE REASONS RECORDED, TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT. THE ASSESSMENT COMPLETED BY THE AO US/ 143(3) R.W.S. 1 47 IN PURSUANCE OF SUCH INVALID INITIATION, THEREFORE, WAS BAD IN LAW AND THE LD. CIT(A), IN OUR OPINION, WAS FULLY JUSTIFIED IN CANCELLING THE SAID ASSESSMENT. WE, THEREFORE, UPHOLD THE IMPUGNED ORDER OF LD. CIT(A) CANCELLING THE ASSESSMENT MADE BY AO U/S 143(3) R.W.S.147 OF THE ACT AND DISMISS THE APPEAL FILED BY THE REVENUE. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 28T H MAY, 2014 ( * + 28TH MAY, 2014 SD SD ( DR. S. T. M.PAVALAN) (P .M.JAGTAP) ( / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI: ON THIS 28TH DAY OF MAY, 2014 I.T.A.NO.4894/MUM/2009 12 . . ./ SRL , SR. PS ! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT /APPLICANT 2. / THE RESPONDENT. 3. 0 ( ) / THE CIT(A)- 4. 0 / CIT 5. 1 3 , # 3 , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) # 3 , /ITAT, MUMBAI