JAYANT FURNISHERS P.LTD, MUMBAI V. DCIT 5(2), MUMBAI

ITA 5024/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75845 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 13-03-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 06-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MRS ADITI SAWANT
• Keywords: Reopening of assessment; Depreciation; Difference of opinion; Change of opinion
• Section: 143(3); 142(1); 5(2); 147; 148; 139

Judgement Text

JAYANT FURNISHERS P. LTD 1 IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUM BAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI NARENDRA KUMAR BILLAIYA, ACCOUNTANT MEMBER ITA NO. 5024/MUM/2012 ASSESSMENT YEAR. 2004-05 JAYANT FURNISHERS P. LTD 162, BATLIWALA AGYARI COMPOUND, TARDEO ROAD, MUMBAI 400034 VS. DCIT 5(2) 5 TH FLOOR, ROOM NO. 571, AAYAKAR BHAVAN, M.K. MARG, MUMBAI 400 020. PAN: AAACJ3771C APPELLANT RESPONDENT A SSESSEE BY MRS. ADITI SAWANT RE VENUE BY SHRI MAURYA PRATAP ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 15.05.2012 OF CIT(A) FOR THE ASSESSMENT YEAR 2004-0 5. THE ASSESEE IN THIS APPEAL HAS RAISED FOLLOWING EFFECTIVE GROUNDS:- GROUND NO. 1.THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 9, MUMBAI ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND I N LAW HAS ERRED:- A) IN CONFIRMING THE INITIATION OF THE PROCEEDINGS U/S 147 AND ISSUANCE OF NOTICE U/S 148 OF THE INCOME TAX ACT, 1961 BY THE L EARNED DCIT 5(2), MUMBAI BEYOND A PERIOD OF FOUR YEARS FROM THE END O F THE ASSESSMENT YEAR 2004-05 THOUGH THE ASSESSEE DISCLOSED FULLY AN D TRULY ALL MATERIAL FACTS IN RESPECT OF THE DEPRECIATION CLAIMED AT THE TIME OF ORIGINAL ASSESSMENT U/S 143(3) BEFORE THE ADDITIONAL COMMISS IONER OF INCOME TAX. DATE OF HEARING 13.03.2014 DATE OF PRONOUNCEMENT 21 - 03 - 2014 JAYANT FURNISHERS P. LTD 2 WITHOUT PREJUDICE TO GROUND NO. 1 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 9, MUMBAI ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW HAS ERRED: - A) IN CONFIRMING THE DISALLOWANCE OF THE DEPRECIATION CLAIM OF THE APPELLANT U/S 32 OF RS. 2,14,102/- 2. GROUND NO. 1 IS REGARDING VALIDITY OF RE-OPENING OF THE ASSESSMENT. 3. WE FIND THAT THE ORIGINAL ASSESSMENT IN THIS CAS E WAS COMPLETED U/S 143(3) OF THE INCOME TAX ACT VIDE ORDER DATED 27.09 .2006. LATER ON THE AO RE-OPENED THE ASSESSMENT BY ISSUING A NOTICE U/S 148 ON 29.3.2011. THE REASON FOR REOPENING AS STATED IN THE ASSESSM ENT ORDER ARE THAT:- ASSESSEE HAD CLAIMED DEPRECIATION OF RS. 2,14,102/ - ON TENANCY RIGHTS TREATING IT AS INTANGIBLE ASSET. AS TENANCY RIGHT IS NOT A B USINESS OR COMMERCIAL RIGHT USABLE BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS OR PROFESSION, DEPRECIATION ON THE SAME IS NOT ADMISSIBLE AND THEREFORE REQUIRED T O BE DISALLOWED. IN THE REASSESSMENT ORDER PASSED U/S 143(3) R.W.R 1 47, THE AO DISALLOWED THE DEPRECIATION OF RS. 2,14,102/- ON TENANCY RIGHT . THE ASSESSEEE CHALLENGED THE ACTION OF AO BEFORE CIT(A) BUT COUL D NOT SUCCEED. 3. BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMIT TED THAT THE CLAIM OF DEPRECIATION ON THE TENANCY RIGHT HAS BEEN CONSISTE NTLY ALLOWED BY THE AO FOR A.Y. 2001-02 TO 2003-04 IN THE ASSESSMENT ORDER PASSED U/S 143(3). THE LD. AR INVITED OUT ATTENTION AT PAGE 110 OF THE PAPER BOOK AND SUBMITTED THAT FOR THE A.Y. 2001-02, THE ASSESSING OFFICER HAS ISSUED SHOW CAUSE NOTICE CALLING UPON THE ASSESSEE TO SHOW AS TO WHY INTER ALIA THE DEPRECIATION ON TENANCY RIGHT SHOULD NOT BE DISALLO WED. THE ASSESSEE FILED ITS REPLY AT PAGE NO. 111 OF PAPER BOOK, WHEREBY IT EXPLAINED THE FACT THAT JAYANT FURNISHERS P. LTD 3 THE ASSESSEE PURCHASED THE TENANCY RIGHT VIDE AGREE MENT DATED 3.08.2000 AGAINST THE PAYMENT OF RS. 18,00,000/- AND SUBMITTE D THAT BY VIRTUE OF THE OWNERSHIP OF TANGIBLE TENANCY RIGHT THE ASSESSEE DE RIVES THE BUSINESS OF COMMERCIAL RIGHT TO USE THE OFFICE PREMISE TO THE E NTIRE EXCLUSION OF THE OTHERS. THE LD. AR SUBMITTED THAT AFTER CONSIDERIN G THE REPLY AND DETAILED EXAMINATION OF THE ISSUE, THE AO ALLOWED THE CLAIM OF THE ASSESSEE FOR THE A.Y. 2001-02 AS WELL AS FOR A.Y. 2002-03 AND 2003-0 4. FOR THE YEAR UNDER CONSIDERATION WHILE PASSING THE ORIGINAL ASSESSMENT U/S 143(3) THE AO HAS ALLOWED THE CLAIM OF THE ASSESSEE AFTER EXAMINATION OF THE ISSUE. THE LD. AR HAS REFERRED THE SUBMISSIONS OF THE ASSESSEE ON THIS ISSUE BEFORE THE AO IN THE ORIGINAL ASSESSMENT PROCEEDINGS AND SUBMI TTED THAT IN REPLY TO NOTICE U/S 142(1) AND 143(2), THE ASSESSEE VIDE ITS REPLY DATED 10.08.2006 EXPLAINED THE QUERY RAISED BY THE AO IN POINT NO. 8 OF THE QUESTIONNAIRE. THUS THE CLAIM OF THE ASSESSEE WAS ALLOWED BY THE A O AFTER DUE EXAMINATION OF THE ISSUE AND APPLICATION OF MIND. T HE LD. AR HAS POINTED OUT THAT THE ASSESSMENT HAS BEEN REOPENED AFTER EXP IRY OF FOUR YEARS AND, THEREFORE, UNLESS AN INCOME CHARGEABLE TO TAX HAS E SCAPED ASSESSMENT BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DI SCLOSE TRULY AND FULLY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT, THE ASSES SMENT COMPLETED U/S 143(3) CANNOT BE REOPENED ONLY ON THE BASIS OF CHA NGE OF OPINION. IN SUPPORT OF HER CONTENTION THE LD. AR HAS RELIED UPO N THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. KELVI NATOR (320 ITR 561). THE LD. AR HAS FURTHER CONTENDED THAT EVEN FOR THE ASSESSMENT YEAR 2009- 10, THE AO HAS ALLOWED THE CLAIM OF THE ASSESSEE RE GARDING DEPRECIATION OF TENANCY RIGHT. THUS THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT JAYANT FURNISHERS P. LTD 4 REOPENING BASED ON CHANGE OF OPINION IS NOT PERMITT ED AND THAT TOO AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT A SSESSMENT YEAR. 3. ON THE OTHER HAND LD. DR HAS RELIED UPON THE ORD ERS OF AUTHORITIES BELOW. 4. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. WE NOTE THAT THE ORIGINAL ASSESSMENT IN THIS CASE HAS BEEN COMPLETED U/S 143(3) VIDE ORDER DATED 27-09-2006. S UBSEQUENTLY THE AO HAS REOPENED THE ASSESSMENT VIDE NOTICE U/S 148 DA TED 30.03.2011. THEREFORE, THE REOPENING OF ASSESSMENT IN THIS CASE IS AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR 2004-05 A ND THUS THE PROVISO TO SECTION 147 HAS BECOME RELEVANT ON THE ISSUE OF VALIDITY OF REOPENING OF THE ASSESSMENT. AS WE HAVE NOTED ABOVE THE REASON F OR REOPENING IS DEPRECIATION ALLOWED ON TENANCY RIGHT WHILE PASSING THE ORIGINAL ASSESSMENT ORDER. WE FIND THAT RIGHT FROM THE A.Y. 2001-02 TO A.Y. 2003- 04, THE AO HAS CONSISTENTLY BEEN ALLOWING THE CLAIM OF THE ASSESSEE AFTER DUE VERIFICATION AND EXAMINATION. EVEN FOR THE A.Y. UNDER CONSIDERATION WHILE PASSING THE ORIGINAL ASSESSMENT U/S 143(3) TH E AO RAISED THE QUERY REGARDING THE CLAIM OF THE DEPRECIATION ON TENANCY RIGHT AND AFTER CONSIDERING THE REPLY OF THE ASSESSEE THE SAME WAS ALLOWED. THUS IT IS APPARENT AND MANIFEST FROM THE RECORD THAT THE CLAI M OF DEPRECIATION ON TENANCY RIGHT HAS BEEN CONSISTENTLY ALLOWED BY THE AO AND EVEN FOR THE YEAR UNDER CONSIDERATION WHILE PASSING THE ASSESSME NT U/S 143(3) THE AO HAS TAKEN CONSCIOUS DECISION WHILE ALLOWING THE CLA IM OF THE ASSESSEE. IT IS PERTINENT TO NOTE THAT NOT ONLY IN THE ORIGINAL ASS ESSMENT ORDER UNDER JAYANT FURNISHERS P. LTD 5 CONSIDERATION, THE CLAIM OF THE ASSESSEE WAS ALSO A LLOWED IN THE PRECEDING YEAR AS WELL AS IN THE SUBSEQUENT YEAR I.E. A.Y. 20 09-10, THEREFORE, THE DECISION ALLOWING DEPRECIATION IN THE ORIGINAL ASSE SSMENT HAS BEEN TAKEN AFTER DUE CONSIDERATION OF THE ISSUE AND REPLY FILE D BY THE ASSESSEE AND, THEREFORE, THE AO TOOK A CONSISTENT VIEW ON THIS IS SUE WITH THE EARLIER YEAR. SINCE THE REOPENING IS BEYOND FOUR YEARS FORM THE E ND OF A.Y. IN QUESTION, THEREFORE, THE AO HAS TO RECORD THE REASONS THAT IN COME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT DUE TO FAILURE ON THE PART O F THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR ASSESSMENT. IT IS APPARENT THAT IN THE REASONS RECORDED BY THE AO NO SUCH AVERMENTS OR FACTS BROUGHT ON RECORD TO SUGGEST THAT THERE IS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR ASSESSMENT AND PARTICULARLY FOR THE CLAIM OF DEPREC IATION. ACCORDINGLY THE ACTION OF THE AO IN REOPENING THE ASSESSMENT COMPLE TED U/S 143(3) IS HIT BY THE PROVISO TO SECTION 147 WHICH READS AS UNDER: - PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTIO N (3) OF SECTION 143OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT A SSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETUR N UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1 ) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATE RIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR THAT ASSESSMENT YEAR. 5. HONBLE SUPREME COURT IN THE CASE OF CIT VS. KEL VINATOR (SUPRA) HAS CONFIRMED THE DECISION OF FULL BENCH OF HONBLE DEL HI HIGH COURT AND HAS OBSERVED THAT THE CONCEPT OF CHANGE OF OPINION ON T HE PART OF THE AO TO OPEN AN ASSESSMENT DOES NOT STAND OBLITERATED AFTER SUBSTITUTION OF SECTION 147 OF THE INCOME TAX ACT BY AMENDMENT ACT 1987 AND 1989. THE AO JAYANT FURNISHERS P. LTD 6 CANNOT REOPEN THE ASSESSMENT ON MERE CHANGE OF OPIN ION AS THE CHANGE OF OPINION MAY BE TREATED AS IN BUILT TEST TO CHECK TH E ABUSE OF POWERS. THE ABOVE PRINCIPLE LAID DOWN BY THE HONBLE SUPREME CO URT IS SQUARELY APPLICABLE IN THE CASE OF THE ASSESSEE. ACCORDINGL Y IN VIEW OF THE ABOVE DISCUSSION, WE FIND THAT THE REOPENING OF ASSESSMEN T ORDER IS NOT SUSTAINABLE IN LAW AND HENCE QUASHED. 6. AS FAR AS GROUND NO. 2 IN THIS APPEAL IS CONCERN ED, SINCE THE REOPENING OF THE ASSESSMENT HAS BEEN QUASHED GROUND NO. 2 HAS BECOME INFRUCTUOUS AND WE DO NOT PROPOSE TO DECIDE THIS IS SUE. 7. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21/03/ 2014 SD/- SD/- (N.K.BILLAIYA) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED 21 /03/2014 SKS SR. P.S JAYANT FURNISHERS P. LTD 7 COPY TO: THE APPELLANT THE RESPONDENT THE CONCERNED CIT(A) THE CONCERNED CIT THE DR, J BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI