DCIT 7(3), MUMBAI V. ZENRIBA ESTATE & INVESTMENT P. LTD, MUMBAI

ITA 5421/MUM/2013

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3314 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 28-06-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 08-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B B RAJENDRA PRASAD
• Assessee Lawyers: J D MISTRY SENIOR
• Keywords: Capital asset; Audit objection; Tangible material; Difference of opinion; Reason to believe; Change of opinion
• Section: 148; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI PAWAN SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 5421/MUM/2013 ASSESSMENT YEAR: 2007 - 08 DY. COMMISSIONER OF INCOME - TAX - 7(3), MUMBAI ROOM NO. 615, 6 TH F LOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020. VS. M/S ZENRIBA ESTATE & INVESTMENT PVT. LTD. LEVEL 6, CEEJAY HOUSE, SHIVSAGAR ESTATE, DR. ANNIE BESANT ROAD, WORLI, MUMBAI - 400018 PAN NO. AAACZ0249F APPELLANT RESPONDENT C.O. NO. 239 /MUM/201 4 (ITA NO. 5421 /MUM/201 3 ) ASSESSMENT YEAR: 2007 - 08 M/S ZENRIBA ESTATE & INVESTMENT PVT. LTD. LEVEL 6, CEEJAY HOUSE, SHIVSAGAR ESTATE, DR. ANNIE BESANT ROAD, WORLI, MUMBAI - 400018 VS. DY. COMMISSIONER OF INCOME - TAX - 7(3), MUMBAI ROOM NO. 615, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020. PAN NO. AAACZ0249F APPELLANT RESPONDENT REVENUE BY : MR. B.B. RAJENDRA PRASAD, DR ASSESSEE BY : MR.J.D. MISTRY , SENIOR ADVOCATE DATE OF HEARING : 28/11 /2018 DATE OF PRONOUNCEMENT : 18/02/2019 M/S ZENRIBA ESTATE ITA NO. 5421/MUM/2013 2 ORDER PER N.K. PRADHAN, AM THE APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS) - 13 , MUMBAI [IN SHORT CIT(A)] AND ARISE OUT OF THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER (AO) U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT 1961, (THE ACT). 2. IT IS FOUND THAT THE ISSUES RAISED BY THE ASSESSEE IN CROSS - OBJE CTION HAVE BEEN DECIDED BY THE ITAT B BENCH MUMBAI IN THE CASE OF DCIT V. NOSHIR D. TALATI (ITA NO. 5423/MUM/2013) . THEREFORE, IT WOULD BE RELEVANT TO FIRST DECIDE THE CROSS - OBJECTION, WHICH IS PRODUCED BELOW. 1) A) THE CIT(A) HAS ERRED IN LAW AND ON FACTS BY HOLDING THAT THE ENTIRE ASSESSMENT IS VALIDLY REOPENED. B) THE CIT(A) HAS WRONGLY COME TO THE CONCLUSION THAT THE ASSESSMENT HAS BEEN REOPENED ON THE BASIS OF THE INFORMATION RECEIVED BY THE ASSESSING OFFICER SUBSEQUENTLY. C) THE CIT (A) HAS ERRED IN LAW AND ON FACTS BY HOLDING THAT THE ASSESSING OFFICER WAS JUSTIFIED IN FORMING A BELIEF THAT INCOME HAS ESCAPED ASSESSMENT AND THEREFORE THE ASSESSING OFFICER WAS ALSO JUSTIFIED IN REOPENING THE ASSESSMENT U/S.147 OF THE ACT. D) THE CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT THE ASSESSEE HAS DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT FOR A.Y.2007 - 08 AND AS SUCH THERE IS NO QUESTION OF REOPENING THE ASSESSMENT. E) THE CIT(A) OUGHT TO HAVE HELD THAT THE REASSESSMENT ORDER IS BAD IN LA W AND VOID AB INITIO AS IN THE R EASONS RECORDED IT WAS STATED TO BE ESCAPEMENT OF CAPITAL GAIN TAX WHEREAS IN THE A SSESSMENT O RDER THE M/S ZENRIBA ESTATE ITA NO. 5421/MUM/2013 3 ADDITION HAS BEEN MADE ON ACCOUNT OF SUPPRESSION OF SALE CONSIDERATION. THE ASSESSING OFFICER AT THE TIME OF IS SUING NOTICE U/S.148 OF THE ACT DID NOT HAVE ANY REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT ON ACCOUNT OF SUPPRESSED SALE WHICH IS EVIDENT FROM THE FACT THAT THERE IS NO SUCH ASSERTION IN THE 'REASONS TO BELIEVE' RECORDED. 2 ) THE CIT(A) OUGHT TO HAVE HELD THAT THE REOPENI NG OF THE ASSESSMENT IS BAD IN L AW AND VOID AB INITIO AS THE REOPENING OF THE ASSESSMENT HAS BEEN MADE ON THE BASIS OF 'AUDIT OBJECTION' THE CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT THE REOPENING OF THE ASSESSMENT IS BAD IN LAW AS THE ASSESSING OFFICER HAS STATED IN HIS LETTER ADDRESSED TO THE INTERNAL AUDIT DEPARTMENT IN RESPONSE TO THE AUDIT OBJECTION THAT THE OBJECTION OF THE INTERNAL AUDIT DEPARTMENT IS NOT ACCEPTABLE TO HIM AND THUS THE REOPENING OF THE ASSESSMENT HAS BEEN MADE UNDER THE COMPULSION OF AUDIT OBJECTION. THE CIT(A) HAS ERRED IN LAW AND ON FACTS BY HOLDING THAT THE CORRESPONDENCE MADE BY THE ASSESSING OFFICER WITH THE COMMISSIONER REGARDING NON - ACCEPTANCE OF AUDIT OBJECTION IS INTERNAL MA TTER OF DEPARTMENT. 3. THE CIT(A) HAS ERRED IN LAW AND ON FACTS BY HOLDING THAT THE TRANSACTION WAS NOT A CASE OF SIMPLE LEASE OF LAND BUT IT WAS A CASE OF SALE /TRANSFER OF LAND. THE AFORESAID GROUNDS OF CROSS - OBJECTIONS ARE WITHOUT PREJUDICE TO ONE ANOT HER. 3. BRIEFLY STATED, THE FACTS ARE THAT THE ASSESSEE - COMPANY ALONG WITH ONE MR. NOSHIR TALATI AND HIS WIFE MRS. RASHNA TALATI GRANTED LEASE OF LAND ADMEASURING 63 ACRES AND 7.7 GUNTHAS TO WAVY CONSTRUCTION PVT. M/S ZENRIBA ESTATE ITA NO. 5421/MUM/2013 4 LTD. (LESSEE) FOR LEASE PREMIUM OF RS.50,00,000/ - VIDE AGREEMENT TO L EASE DATED 07.04.2005. THE NATURE OF BUSINESS OF THE ASSESSEE IS THAT OF DEALING IN PLOTS OF LAND. IN THE COMPUTATION OF INCOME FOR THE ASSESSMENT YEAR (AY) 2007 - 08, THE LEASE PREMIUM OF RS.34,28,500/ - (68.75% OF RS.50, 00,000/ - BEING ASSESSEES SHARE OF LEASE PREMIUM) WAS OFFERED FOR TAX @ 30%. THE ASSESSEE FILED ITS ORIGINAL RETURN OF INCOME FOR THE AY 2007 - 08 ON 31.07.2008 DECLARING TOTAL INCOME OF RS.2,08,55,723/ - INCLUDING THEREIN THE LEASE PREMIUM OF RS.34,28,500/ - . THE ASSESSING OFFICER (AO) COMPLETED THE ASSESSMENT U/S 143(3) ON 30.11.2009. THEREAFTER, HE ISSUED A NOTICE U/S 148 DATED 28.03.2012. THE REASONS RECORDED BY THE AO ARE PRODUCED BELOW: FROM THE PERUSAL OF RECORDS IT HAS BEEN FOUND THAT THE ASSESSEE, M/ S ZENRIBA ESTATE AND INVESTMENT PVT. LTD., ALONG WITH SHRI NASIR TALATI AND HIS WIFE RACHNATALATI (BOTH ARE THE ASSESSEE OF AC CENTRAL CIRCLE 30, MUMBAI) HAD ENTERED INTO THE LEASE AGREEMENT WITH M/S WAVY CONSTRUCTION PVT. LTD. AS PER THE AGREEMENT THE 63 ACRES OF LAND IN PUNE WAS LEASED OUT FOR 999 YEARS OF LEASE RENT OF RS.1 PER YEAR AND LEASE PREMIUM OF RS.50 LAKH VIDE AGREEMENT DATED 07.04.2005. THE REGISTRATION FOR THE LEASE AGREEMENT WAS MADE ON 12.01.2007. THE SAID LAND WAS VALUED AT 18,75,56,000/ - B Y THE OFFICE OF SUB REGISTRAR, PUNE. HENCE THE SAID PROPERTY HAD BEEN TRANSFERRED FO R A TOTAL CONSIDERATION OF RS.18,75,56,000/ - . IN THE LIGHT OF THE ABOVE, IT IS A CLEAR OF TRANSFER OF IMMOVABLE PROPERTY BY THE ASSESSEE AS THE PROVISION OF SECTION 2(47) A RE SQUARELY ATTRACTED. HENCE, THE ASSESSEE IS LIABLE FOR CAPITAL GAIN TAX IN AY 2007 - 08 AS THE REGISTRATION FOR THE LEASE AGREEMENT WAS MADE IN FY 2006 - 07. FROM THE PERUSAL OF THE RECORD, IT HAS BEEN FOUND THAT THE SCRUTINY ASSESSMENT FOR 2007 - 08 U/S 143(3) WAS COMPLETED ON 30.11.2009. IN THE M/S ZENRIBA ESTATE ITA NO. 5421/MUM/2013 5 COMPUTATION OF INCOME FILED DURING ASSESSMENT PROCEEDING, THE ASSESSEE HAS SHOWN THE RECEIPT OF LEASE PREMIUM OF RS.34 ,28,500/ - (68.570% OF RS.50,00,000/ - THE LEASE PREMIUM FROM M/S WAVY CONSTRUCTION PVT. LTD.). THE SAID AMOUNT HAS BEEN OFFERED @ 30% TO TAX IN AY 2007 - 08. HENCE THE SCRUTINY ASSESSMENT FOR AY 2007 - 08 WAS COMPLETED WITHOUT TAKING INTO CONSIDERATION THE TAXA BILITY OF TRANSFER OF AFORESAID CAPITAL ASSET. THUS THERE IS AN ESCAPEMENT OF INCOME TO THE EXTENT OF RS.18,75,56,000/ - THE INCOME CAN BE ASSESSED TO TAX U/S 147 OF THE ACT. I, THEREFORE, HAVE REASONS TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAS ESCAP ED ASSESSMENT AND THEREFORE, IT IS A FIT CASE OF ASSESSING THE SAME U/S 147 BY ISSUING NOTICE U/S 148 OF THE ACT. 4. IN APPEAL, THE LD. CIT(A) HELD THAT THE AO VALIDLY REOPENED THE COMPLETED ASSESSMENT ON THE BASIS OF INFORMATION RECEIVED SUBSEQUENTLY FR OM THE AO OF SHRI NOSHIR TALATI THAT THE MARKET VALUE OF SUCH LEASED LAND WAS RS.18.75 CRORE AND NOT RS.50 LAKHS AS CLAIMED BY THE APPELLANT. THIS WAS A SUFFICIENT INFORMATION/MATERIAL FOR FORMING A PRIMA FACIE BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCA PED ASSESSMENT. THEREFORE, THE AO WAS JUSTIFIED IN REOPENING THE ASSESSMENT U/S 147 OF THE ACT. 5. THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT ON SIMILAR REASONS, THE ITAT IN THE CASE OF NOSHIR D. TALATI (SUPRA) HA VE HELD THE REOPENING AS BAD IN LAW AND DISMISSED THE APPEAL FILED BY THE R EVENUE. ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. IT IS FOUND THAT ON THE BASIS OF SIMILAR REASONS M/S ZENRIBA ESTATE ITA NO. 5421/MUM/2013 6 REOPENING U/S 147 WAS DONE BY THE AO IN THE CASE OF NOSHI R D. TALATI FOR THE AY 2010 - 11, EXTRACTED BY THE ITAT B BENCH MUMBAI AT PARA 2 OF ITS ORDER DATED 06.04.2016, WHICH ARE PRODUCED BELOW: 'IN THIS CASE, ORDER UN DER SECTION 143(3) OF THE INCOME - TAX ACT, 1961 WAS PASSED ON 24.04.2009. THE ASSESSEE ALONG WITH HIS WIFE AND M/S. ZENRIBA ESTATES & INVEST. PVT. LTD. HAVE ENTERED INTO A LEASE AGREEMENT FOR LEASE OF 63 ACRES OF LAND AT PUNE FOR 999 YEARS ON A LEASE RENT O F RE. 1/ - PER YEAR AND LEASE PREMIUM OF RS.50 LACS VIDE AGREEMENT DATED 07.04.2005. THE VALUE OF THE SAID LAND WAS VALUED AT RS. 18,75,56,000,/ - BY THE SUB REGISTRAR PUNE. THE SAID PROPERTY HAS BEEN TRANSFERRED BY THE ASSESSEE FOR A TOTAL CONSIDERATION, OF RS.50,00,999/ - . THEREFORE, THE CAPITAL GAINS FOR A.Y . 2006 - 07 SHOULD BE BROUGHT TO TAX. ALSO THERE IS A CLEAR CASE OF TRANSFER OF IMMOVABLE PROPERTY BY THE ASSESSEE, THE PROVISIONS OF SECTION 2(47) ARE ATTRACTED AND CAPITAL GAINS ARE ATTRACTED IN THIS CAS E. ACCORDINGLY, THERE IS AN UNDER ASSESSMENT OF RS.18,75,56,000/ - LEADING TO SHORT LEVY OF TAX. THE ASSESSEE HAS SHOWN LONG TERM CAPITAL GAIN ON SALE OF SHARES. HOWEVER, BASED ON THE DATE OF AGREEMENT, THE SAME OUGHT TO HAVE TAXED AS SHORT TERM CAPITAL GAI N. THUS THERE IS SHORT LEVY OF TAX OF RS. 1,40,28,000/ - . IT IS CLEAR THAT THE ASSESSEE HAS UNDERSTATED THE INCOME. THUS, IT IS A CASE WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. T HE ASSESSEE FAILED TO DISCLOSE F ULY AND TRULY ALL MATERIAL FACTS N ECESSARY FOR ITS ASSESSMENT FOR A. Y. 2007 - 08. I, THEREFORE, HAVE REASON TO BELIEVE THAT INCOME TO THE EXTENT OF RS. 1.40 CRORES HAS ESCAPED ASSESSMENT.' AS MENTIONED EARLIER , THE ASSESSEE - COMPANY ALONG WITH ONE MR. NOSHIR TALATI AND HIS WIFE MRS. RASHNA TALATI GRANTED LEASE OF LAND ADMEASURING 63 ACRES AND 7.7 GUNTHAS TO WAVY CONSTRUCTION PVT. LTD. (LESSEE) FOR LEASE PREMIUM OF RS.50,00,000/ - VIDE AGREEMENT TO LEASE M/S ZENRIBA ESTATE ITA NO. 5421/MUM/2013 7 DATED 07.04.2005. THE TRIBUNAL VIDE ORDER DATED 06.04.2016 IN THE CASE OF NOSHIR D. TALATI HELD AS UNDER: FROM THE PERUSAL OF THE ABOVE FACTS AND FINDING RECORDED BY THE CIT(A) WHICH HAS NOT BEEN REBUTTED BEFORE US, WE FIND THAT IT IS A CLEAR - CUT KEY OF REAPPRAISAL OF THE SAME MATERIAL INFORMATION SO AS TO COME TO A DIFFERENT VIEW / OPINION A BOUT THE SAME SET OF TRANSACTIONS. SUCH A CHANGE OF OPINION AMOUNTS TO REVIEW NOT PERMISSIBLE IN THE LAW, WHICH HAS BEEN SETTLED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD, REPORTED IN [2010] 320 ITR 361, WHEREIN IT HAS B EEN HELD THAT, AO CANNOT REOPEN THE ASSESSMENT ON SOME CHANGE OF OPINION AND THIS CONCEPT IS A INBUILT TEST TO CHECK THE ABUSE OF POWER UNDER SECTION 147. FURTHER, THE AO CAN REOPEN THE ASSESSMENT ONLY WHEN THERE IS A TANGIBLE MATERIAL COMING ON RECORD P OST ASSESSMENT HAVING LIVE - LINK - NEXUS OF FORMATION OF BELIEF THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THIS PRINCIPLE HAS BEEN REITERATED BY HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PRASHANT S. DOSHI, 324 ITR 154; AND IN THE CASE OF ICICI HOME FINANCE CO. LTD VS ACIT, REPORTED IN 4 TAXMANN.COM 241 (BOM). THUS, FROM THE FACTS WHICH HAS BEEN ELABORATELY DISCUSSED BY LD. CIT(A) TO COME TO THE CONCLUSION THAT ALL THE INFORMATION AND MATERIAL AND INFORMATION WHICH HAS BEEN MADE GROUND FOR REOPENING THE ASSESSMENT UNDER SECTION 147 BY THE AO, ALREADY EXISTED AND WERE THERE BEFORE THE AO DURING THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS, AND ACCORDINGLY WE ALSO HOLD THAT SUCH A REOPENING ON SAME SET OF FACTS IS BAD IN LAW AND WE DO NO T FIND ANY REASON TO DEVIATE FROM SUCH FINDING OF FACT ON THIS ISSUE. THUS, THE ORDER OF THE CIT(A) IS CONFIRMED AND GROUNDS RAISED BY THE REVENUE ARE TREATED AS DISMISSED. 6.1 FACTS BEING IDENTICAL, WE FOLLOW THE ABOVE ORDER OF THE CO - ORDINATE BENCH AND HOLD THAT THE REOPENING DONE BY THE AO BY ISSUING NOTICE U/S M/S ZENRIBA ESTATE ITA NO. 5421/MUM/2013 8 148 IS BAD IN LAW. CONSEQUENTLY, THE APPEAL FILED BY THE R EVENUE DOES NOT SURVIVE. 7. IN THE RESULT, THE APPEAL FILED BY THE R EVENUE IS DISMISSED, WHEREAS THE CROSS - OBJECTION FILED BY THE ASSESSE E IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18/02/2019. SD/ - SD/ - ( PAWAN SINGH ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 18/02/2019 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// ( SR. PRIVATE SECRETARY ) ITAT, MUMBAI