DCIT, New Delhi V. M/s. Ansal Properties & Infrastructure Ltd., New Delhi

ITA 5177/DEL/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 4216 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 05-05-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 11-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SATYAM SETHI
• Keywords: Reopening of assessment; Search and seizure; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 80IB; 147; 148

Judgement Text

ITA NO. 5177/D/2013 M/S ANSAL PROPERTIES & INFRASTRUCTURE LTD. PAGE 1 OF 9 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE VICE PRESIDENT & SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.-5177/DEL/2013 ( ASSESSMENT YEAR: 2006-07) DCIT CENTRAL CIRCLE 20, ROOM NO. 333, ARA CENTRE, JHANDEWALAN EXTN., NEW DELHI. VS ANSAL PROPERTIES & INFRASTRUCTURE LTD. 115, ANSAL BHAWAN, 16, KASTURBA GANDHI MARG, CONNAUGHT PLACE, NEW DELHI. AAACA0006D ASSESSEE BY SH. SATYAM SETHI, ADV. REVENUE BY SH. SARABJEET SINGH, DR ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER : THE PRESENT APPEAL HAS BEEN PREFERRED BY THE DEPART MENT AGAINST THE ORDER DATED 05/06/2013 PASSED BY THE LD. CIT(APPEAL S)-XXXI, NEW DELHI FOR AY 06-07, WHEREIN HE HAS HELD THE REASSESSMENT PROCEEDINGS U/S 147/148 OF THE INCOME TAX ACT (THE ACT IN SHORT) AS INVALID. DATE OF HEARING 05.05.2016 DATE OF PRONOUNCEMENT 05.08.2016 ITA NO. 5177/D/2013 M/S ANSAL PROPERTIES & INFRASTRUCTURE LTD. PAGE 2 OF 9 2. IN THIS CASE THE ORIGINAL ASSESSMENT WAS COMPLET ED ON 31/12/08 U/S 143(3) OF THE ACT AT A TOTAL INCOME OF RS. 581,352, 929/-. THEREAFTER, A NOTICE U/S 148 OF THE ACT WAS ISSUED ON 28/03/11 AN D THE ASSESSEE FILED ITS RETURN OF INCOME ON 29/04/11 UNDER PROTEST. THE AS SESSEE OBJECTED TO THE INITIATION OF REASSESSMENT PROCEEDINGS WHICH WAS NO T ACCEPTED BY THE AO AND THE ASSESSEE WAS REQUIRED TO SHOW CAUSE AS TO W HY INTEREST ON BORROWED CAPITAL AMOUNTING TO RS. 120,368,000/- AND EXPENDIT URE ON DIRECTORS MEETING FEE AT RS. 478,000/- SHOULD NOT BE CONSIDERED FOR W ORKING OUT THE DEDUCTION U/S 80IB(10) OF THE ACT. THE REASONS RECORDED FOR THE REASSESSMENT PROCEEDINGS READ AS UNDER: WHILE COMPUTING DEDUCTION U/S 80IB (10) OF THE INC OME TAX ACT, 1961, THE ASSESSEE HAS NOT CONSIDERED INTEREST ON BORROWED CAPITAL AT RS. 120368000/- AND EXPENDITURE ON DIREC TORS MEETING FEE AT RS. 478000/-. THUS, CLAIMING EXCESS DEDUCTI ON UNDER THE SECTION. BOTH THESE EXPENSES ARE RELATABLE TO THE PROJECTS IN RESPECT OF SUCH DEDUCTION HAS BEEN CLAIMED. THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSME NT BY REASON OF FAILURE ON THE PART OF THE ASSESSEE AND T O DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSE SSMENT. THEREFORE, I HAVE REASONED TO BELIEVE THAT INCOME A S MENTIONED ABOVE HAS ESCAPED ASSESSMENT. ACCORDINGLY, NOTICE ISSUED U/S 148 OF THE INCOME TAX ACT, 1961. ITA NO. 5177/D/2013 M/S ANSAL PROPERTIES & INFRASTRUCTURE LTD. PAGE 3 OF 9 3. THE REASSESSMENT WAS FINALLY COMPLETED ON 30/12/ 11 AFTER MAKING A DISALLOWANCE OF RS. 8,994,689/- BY RE-COMPUTING THE DEDUCTION U/S 80IB (10). 4. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFOR E THE LD. CIT (APPEALS). THE LD. CIT (APPEALS) HELD THAT THERE W AS NO MENTION OF ANY NEW FACTS/FRESH MATERIAL WHICH CAME INTO THE POSSES SION OF THE AO ON THE BASIS OF WHICH HE HAD REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT. THE LD. CIT (APPEALS), RELYING ON THE DECISION OF T HE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ORIENT CRAFT LTD. IN I TA NO. 555/2012, ALLOWED THE ASSESSEES APPEAL AND HELD THAT THE REASSESSMEN T WAS INVALID. 5. AGGRIEVED THE DEPARTMENT HAS PREFERRED THIS PRES ENT APPEAL AND HAS RAISED THE FOLLOWING GROUND OF APPEAL: 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LD. CIT (A) IS CORRECT IN LAW IN HOLDING THAT IN THE AB SENCE OF FRESH MATERIAL, ASSESSMENT CANNOT BE RE-OPENED BY ISSUE O F NOTICE U/S 148 OF THE I.T. ACT, 1961 WHEREAS THE APEX COURT HA S HELD THAT IF SOME MATERIAL FOR THE ASSESSMENT LAY EMBEDDED IN TH E EVIDENCE WHICH THE REVENUE COULD HAVE UNCOVERED BUT DID NOT, THEN IT IS THE DUTY OF THE ASSESSEE TO BRING IT TO THE NOTICE OF T HE ASSESSING AUTHORITY. ITA NO. 5177/D/2013 M/S ANSAL PROPERTIES & INFRASTRUCTURE LTD. PAGE 4 OF 9 6. THE LD. DR PLACED HEAVY RELIANCE ON THE ASSESSME NT ORDER AND THE REASONS RECORDED BY HIM FOR THE REOPENING AND SUBMI TTED THAT THE REASSESSMENT PROCEEDINGS HAD BEEN CORRECTLY INITIAT ED AND THAT THE LD. CIT (APPEALS) WAS PATENTLY WRONG IN QUASHING THE REASSE SSMENT PROCEEDINGS. 7. THE LD. AR SUBMITTED THAT MERELY BECAUSE THERE W AS NO DISCUSSION IN THE ASSESSMENT ORDER ON THE ISSUE OF INTEREST AND D IRECTORS FEE, IT WAS NOT A SUFFICIENT GROUND TO ALLEGE THAT ASSESSMENT HAD BEE N MADE WITHOUT FORMING ANY OPINION. IT WAS FURTHER SUBMITTED THAT THE AO HAS THE POWER TO REOPEN THE ASSESSMENT ONLY WHERE THERE IS A FRESH TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE HAS BEEN AN ESCAPEMENT OF INC OME AND THAT THERE CAN BE NO REVIEW OF AN ASSESSMENT IN THE GUISE OF REOPE NING. IT WAS FURTHER SUBMITTED THAT IN THE PRESENT APPEAL NO FRESH TANGI BLE MATERIAL IN RESPECT OF THE CLAIM OF DEDUCTION U/S 80IB (10) HAS COME ON RE CORD SUBSEQUENT TO THE ORIGINAL ASSESSMENT AND HENCE, THERE WAS NO NEXUS B ETWEEN THE REASONS AND ESCAPEMENT OF INCOME. IT WAS FURTHER SUBMITTED THA T FROM THE BALANCE SHEET IT WAS EVIDENT THAT AS COMPARED TO THE YEAR ENDED 3 1/03/05, ASSESSEES SHARE CAPITAL AND RESERVE AS ON 31/03/06 HAD INCREASED FR OM RS. 10,564.70 LACS TO RS. 14,193.52 LACS AND IN THE SAME PERIOD THE BORRO WED FUNDS DECREASED FROM RS. 12,674.02 LACS TO RS. 9,800.44 LACS AND EV EN THE INTEREST ITA NO. 5177/D/2013 M/S ANSAL PROPERTIES & INFRASTRUCTURE LTD. PAGE 5 OF 9 EXPENDITURE HAS BEEN REDUCED FROM RS. 1,742.24 LACS TO RS. 1,203.68 LACS THUS, RAISING A VALID PRESUMPTION IN FAVOUR OF THE ASSESSEE THAT THE FUNDS PROVIDED TO VALLEY VIEW ESTATE PROJECT WAS FROM THE ASSESSEES OWN FUNDS AND HENCE THE CLAIM OF DEDUCTION U/S 80IB (10) WAS CORRECT. IT WAS ALSO SUBMITTED THAT THE SCHEDULE XVII TO THE BALANCE SHE ET SPECIFICALLY STATES THAT BORROWING COSTS WHICH HAVE A DIRECT NEXUS AND ARE DIRECTLY ATTRIBUTABLE TO THE CONSTRUCTION PROJECTS ARE CHARGED TO THE PROJEC T AND OTHER BORROWING COSTS ARE EXPENSED AS PERIOD COSTS. IT WAS ALSO SUBMITTED THAT THE IMPUGNED AMOUNTS RELATING TO INTEREST ON BORROWED C APITAL (RS. 12,036,8000/-) AND DIRECTORS MEETING FEE (RS. 478,0 00/-) WERE DULY DISCLOSED IN THE PROFIT AND LOSS ACCOUNT FILED ALON G WITH RETURNED INCOME. THUS, ALL THE PRIMARY FACTS WERE DULY DISCLOSED AT THE TIME OF FILING OF THE RETURN. IT WAS FURTHER SUBMITTED THAT THE LD. CIT (APPEALS) IN THE APPELLATE ORDER FOR AY 07-08 HAS ADJUDICATED THAT THE PROFIT ELIGIBLE FOR DEDUCTION U/S 80IB (10) CANNOT BE REDUCED BY THE AMOUNT OF DIRECT ORS MEETING FEE AS THE SAME IS NOT ATTRIBUTABLE TO ANY PROJECT AND WOULD H AVE TO BE INCURRED EVEN IF THERE IS NO PROJECT IN HAND. IT WAS SUBMITTED THAT THIS FINDING BY THE LD. CIT (APPEALS) HAS NOT BEEN CHALLENGED BY THE DEPARTMENT IN A FURTHER APPEAL. 8. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED T HE MATERIAL ON ITA NO. 5177/D/2013 M/S ANSAL PROPERTIES & INFRASTRUCTURE LTD. PAGE 6 OF 9 RECORD. A PERUSAL OF THE REASONS RECORDED BY THE A O CLEARLY SHOWS THAT THE ASSESSMENT ORIGINALLY COMPLETED U/S 143(3) OF THE A CT WERE REOPENED BY HIM WITHOUT ANY NEW MATERIAL OR INFORMATION WHICH COUL D BE SAID TO HAVE COME INTO HIS POSSESSION AFTER THE COMPLETION OF THE ORI GINAL ASSESSMENT. IT IS VERY MUCH CLEAR THAT THE ASSESSMENT WAS REOPENED ON THE BASIS OF FRESH APPLICATION OF MIND TO THE SAME MATERIAL WHICH WAS AVAILABLE EVEN AT THE TIME OF ORIGINAL ASSESSMENT. IT IS AMPLY CLEAR ON THE FACTS OF THE CASE THAT THE INITIATION OF REASSESSMENT PROCEEDINGS WAS BASED ON A MERE CHANGE OF OPINION OF THE AO WHICH IS NOT PERMISSIBLE IN LAW. WHEN A REGULAR ASSESSMENT IS PASSED IN TERMS OF PROVISIONS OF SECT ION 143(3), PRESUMPTION CAN BE RAISED THAT SUCH AN ORDER HAS BEEN PASSED ON APPLICATION OF MIND BY THE AO AND SUBSEQUENT TO THAT THERE LIES NOTHING IN THE MOUTH OF THE AO TO SAY THAT SUCH AN ORDER WAS PASSED WITHOUT APPLICATI ON OF MIND AND THUS TO CONFER JURISDICTION UPON HIM TO REOPEN THE PROCEEDI NGS. IT IS A WELL SETTLED LAW THAT POWER U/S 147 OF THE ACT CANNOT BE USED TO REVIEW AN EARLIER ORDER. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD., 256 ITR 1 HAS HELD AS UNDER: WHEN A REGULAR ASSESSMENT IS PASSED IN TERMS OF SU B-SECTION (3) OF SEC. 143, A PRESUMPTION CAN BE RAISED THAT SUCH AN ORDER HAS BEEN PASSED ON APPLICATION OF MIND. SUCH A PRESUMP TION CAN BE ITA NO. 5177/D/2013 M/S ANSAL PROPERTIES & INFRASTRUCTURE LTD. PAGE 7 OF 9 RAISED IN TERMS OF CLAUSE (E) OF SEC. 114 OF THE IN DIAN EVIDENCE ACT, 1872 THAT SUCH AN ACT HAS BEEN REGULARLY PERFO RMED. IF IT BE HELD THAT AN ORDER WHICH HAS BEEN PASSED PURPORTEDL Y WITHOUT APPLICATION OF MIND WOULD ITSELF CONFIRM JURISDICTI ON UPON THE AO TO REOPEN THE PROCEEDINGS WITHOUT ANYTHING FURTHER, THE SAME WOULD AMOUNT TO GIVING A PREMIUM TO AN AUTHORITY EX ERCISING QUASI JUDICIAL FUNCTION TO TAKE BENEFIT OF ITS OWN WORKING. HENCE IT IS CLEAR THAT SEC. 147 OF THE ACT DOES NOT POSTU LATE CONFERMENT OF POWER UPON THE AO TO REINITIATE REASSESSMENT PROCEE DINGS UPON A MERE CHANGE OF OPINION WHICH IS NOT PERMISSIBLE. 9. THE HONBLE APEX COURT AFFIRMED THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF KELVINATOR OF INDIA LTD. (SUPRA) IN ITS DECISION IN CIT VS. KELVINATOR OF INDIA LTD., 320 ITR 561 (SC). THE HONBLE APEX COURT HELD AS UNDER: HOWEVER, ONE NEEDS TO GIVE SCHEMATIC INTERPRETATIO N TO THE WORDS REASON TO BELIEF FAILING WHICH, WE ARE AFRAID , SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICE R THROUGH REOPENING ASSESSMENTS ON THE BASIS OF MERE CHANGE O F OPINION, WHICH CANNOT BE PER SE REASON TO REOPEN. WE MUST A LSO KEEP IN MIND THE CONCEPTUAL DIFFERENCE BETWEEN POWER TO REV IEW AND POWER TO REASSESS. THE AO HAS NO POWER TO REVIEW; HE HAS THE POWER TO REASSESS. BUT REASSESSMENT HAS TO BE BASE D ON FULFILLMENT OF PRE-CONDITIONS AND IF THE CONCEPT OF CHANGE OF OPINION IS REMOVED, AS CONTENDED ON BEHALF OF THE D EPARTMENT, ITA NO. 5177/D/2013 M/S ANSAL PROPERTIES & INFRASTRUCTURE LTD. PAGE 8 OF 9 THEN, IN THE GARB OF REOPENING OF ASSESSMENT, REVIE W WOULD TAKE PLACE. ONE MUST BEAT THE CONCEPT OF CHANGE OF OPIN ION AS AN INBUILT TEST TO CHECK ABUSE OF POWER BY THE AO. 10. THE HONBLE SUPREME COURT IN ITO VS. LAKHMANI M EWALDAS 103 ITR 437 (SC) LAID DOWN THE FOLLOWING PRINCIPLES: A) THE POWERS OF THE AO TO REOPEN AN ASSESSMENT, THOU GH WIDE, ARE NOT PLENARY; B) THE WORDS OF THE STATUTE ARE REASON TO BELIEVE AND NOT REASON TO SUSPECT; C) THE REOPENING OF AN ASSESSMENT AFTER THE LAPSE OF M ANY YEARS IS A SERIOUS MATTER. SINCE THE FINALITY OF A JUDICIAL O R QUASI JUDICIAL PROCEEDINGS ARE SOUGHT TO BE DISTURBED, IT IS ESSEN TIAL THAT BEFORE TAKING ACTION OF REOPEN THE ASSESSMENT, THE REQUIRE MENTS OF THE LAW SHOULD BE SATISFIED; D) THE REASONS TO BELIEVE MUST HAVE A MATERIAL BEARING ON THE QUESTION ON ESCAPEMENT OF INCOME. IT DOES NOT MEAN A PURELY SUBJECTIVE SATISFACTION OF THE ASSESSING AUTHORITIES; THE REAS ON BE HELD IN GOOD FAITH AND CANNOT MERELY BE A PRETENCE; E) THE REASONS TO BELIEVE MUST HAVE A RATIONAL CONNECT ION WITH OR RELEVANT BEARING ON THE FORMATION OF THE BELIEF. R ATIONAL CONNECTION POSTULATES THAT THERE MUST BE A DIRECT NEXUS OR LIV E LINK BETWEEN THE MATERIAL GIVING TO THE NOTICE OF THE AO AND THE FOR MATION IS BELIEVED REGARDING ESCAPEMENT OF INCOME. F) THE FACT THAT THE WORDS DEFINITE INFORMATION WHICH WERE THERE IN SEC. 34 OF THE ACT 1922 BEFORE 1948, ARE NOT THERE IN SE C. 147 OF THE1961 ACT, WOULD NOT LEAD TO THE CONCLUSION THAT ACTION C AN NOW BE TAKEN FOR ITA NO. 5177/D/2013 M/S ANSAL PROPERTIES & INFRASTRUCTURE LTD. PAGE 9 OF 9 REOPENING AN ASSESSMENT EVEN IF THE INFORMATION IS WHOLLY VAGUE, INDEFINITE, FARFETCHED OR REMOTE. 11. HAVING REGARD TO THE FACTS OF THE CASE IN THE I NSTANT APPEAL BEFORE US AS WELL AS THE JUDICIAL PRONOUNCEMENTS AS DISCUSSED AF ORESAID, WE HAVE NO HESITATION IN HOLDING THAT FROM THE REASONS RECORDE D IT IS VERY MUCH CLEAR THAT THERE WAS NO FRESH MATERIAL AVAILABLE WITH THE AO W HEN HE REOPENED THE ASSESSMENT WHICH WAS ORIGINALLY COMPLETED U/S 143(3 ). IT IS VERY MUCH A CHANGE OF OPINION BY THE AO AND HIS ACTION IS NOT L EGALLY TENABLE. HENCE, WE UPHOLD THE ORDER OF THE LD. CIT (APPEALS) AND DI SMISS THIS DEPARTMENTAL APPEAL. 12. IN THE FINAL RESULT, THE APPEAL OF THE DEPARTME NT IS DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 05.08.2016 SD/- SD/- (G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA ) VICE PRESIDENT JUDICIAL MEMBER DATED: 05.08.2016 *KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI