BRANDON & CO. P. LTD, MUMBAI V. ACIT (OSD)2 CITY-2, MUMBAI

ITA 6371/MUM/2009

• Counselvise Citation: 637119914 RSA 2009
• Duration Of Justice: 4 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-12-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 10-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Assessee Lawyers: M M GOLVALAAMEY WAGLE
• Keywords: Reopening of assessment; Business income; Difference of opinion; Capital receipt; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 147; 143(3)

Judgement Text

, CH CHCH CH INCOME TAX APPELLATE TRIBUNAL,MUMBAI - B BENCH. . .. . . .. . , ,, , !'#$ !'#$ !'#$ !'#$ , ' ' ' ' %& %& %& %& BEFORE S/SH.H.L.KARVA,PRESIDENT & RAJENDRA,ACCOUNTA NT MEMBER /. ITA NO. 6371/MUM/2009 , ' ' ' ' ( ( ( ( / ASSESSMENT YEAR-2005-06 M/S BRANDON & CO. PVT. LTD. C/O KALYANIWALLA & MISTRY, ARMY & NEVY BUILDING, 34D FLOOR, 148, MAHATMA GANDHI ROAD, FORT, MUMBAI- 400001 VS. ASST. CIT 2(1), AAYAKAR BHAVAN, MAHARSHI KARVE ROAD, MUMBAI- 400020 PAN:AACCB0491M ( )* / APPELLANT ) ( +,)* / RESPONDENT ) )* )* )* )* - - - - ' '' ' / APPELLANT BY : SHRI M.M.GOLVALA/AMEY WAGLE +,)* . - ' / RESPONDENT BY : SHRI SURENDRA KUMAR ' ' ' ' . .. . /0 /0 /0 /0 / DATE OF HEARING : 16 -12-2013 12( . /0 / DATE OF PRONOUNCEMENT : 18-12-2013 PER RAJENDRA, A.M. CHALLENGING THE ORDER DT.05.11.2009 OF THE CIT(A)-4 ,MUMBAI,ASSESSEE-COMPANY HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1)LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRE D IN UPHOLDING THE INITIATION OF REASSESSMENT PROCEEDINGS UNDER SECTION 147,WHEN THE JURISDICTION AL CONDITIONS WERE NOT SATISFIED. 2)THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO CONSIDER THAT THE RECORDED REASONS WERE ERRONEOUS,AND ON THE BASIS OF THE SAID REASONS , THE ASSESSING OFFICER COULD NOT HAVE HAD REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX H AD ESCAPED ASSESSMENT. 3)BOTH THE LOWER AUTHORITIES ERRED IN HOLDING THAT MESNE PROFITS-RS.6,75,000/- RECEIVED BY THE APPELLANT DURING THE YEAR WERE REQUIRED TO BE TAXED AS A REVENUE RECEIPT. 4)THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)E RRED IN IGNORING THE DECISION OF THE SPECIAL BENCH IN NARANG OVERSEAS (P) LTD.-111TD 1 (MUM.) (S B) WHICH WAS CITED BEFORE HIM. 5)HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF T HE CASE, AND THE PROVISIONS OF LAW, THE APPELLANT SUBMITS THAT THE ASSESSING OFFICER BE DIRECTED TO D ELETE THE SAID MESNE PROFITS-RS.6,75,000/- FROM THE TAXABLE INCOME. 6)THE ASSESSING OFFICER ERRED IN RESORTING TO A ROV ING AND FISHING INQUIRY IN THE COURSE OF REASSESSMENT PROCEEDING UNDER SECTION 147. 7)THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT EXPENDITURE WAS REQUIRED TO BE ALLOCATED TO THE EARNING OF DIVIDEND INCOME. 8)THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING APPELLATE DECISIONS IN THE ASSESSEES OWN CASE IN EARLIER YEARS, REGARDING ALL OCATION OF EXPENSES TO EARNING OF DIVIDEND INCOME. 9)THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DIRECTING THE ASSESSING OFFICER TO RECOMPUTE DISALLOWANCE UNDER SECTION 14A, BY APPLYI NG RULE 8D.THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)FAILED TO CONSIDER THAT THE PRO VISIONS OF RULE 8D WERE NOT RETROSPECTIVE. 10)THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE LEVY OF INTEREST 2 ITA NO.6371/MUM/2009 M/S BRANDON & CO. PVT. LTD. UNDER SECTION 234B. IN ANY EVENT, THE APPELLANT SUB MITS THE LEVY IS HIGHLY EXCESSIVE AND ARBITRARY, AND REQUIRES TO BE REDUCED SUBSTANTIALLY. THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER OR AMEN D, THE ABOVE GROUNDS OF APPEAL AS AND WHEN ADVISED. 2. ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF TRADING IN SHARES SUB-LETTING OF PROPERTIES,FILED ITS RETURN OF INCOME ON 29.10.2005 DECLARING TOTAL INCO ME OF RS.1.12 CRORES.INITIALLY THE RETURN WAS PROCESSED U/S. 143(1)OF THE ACT.LATER ON ASSESSING OFFICER (AO)FINALISED THE ASSESSMENT ORDER U/S.143(3) R.W.S.147 OF THE ACT,ON 28.11.2007,DETER MINING THE TOTAL INCOME AT RS.1,26,85, 510/- .FIRST TWO GROUND OF APPEAL PERTAIN TO REOPENING OF ASSESSMENT U/S.147 OF THE ACT.GROUNDS NO.3-10 DEAL THE ISSUES ON MERITS.FIRST WE WOULD LIKE TO DE AL WITH THE JURISDICTIONAL GROUNDS. BRIEF HISTORY: AFTER AN INTIMATION U/S.143(1)WAS ISSUED TO THE ASS ESSEE,AO ISSUED A NOTICE,ON 12.2.2007,U/S. 148 OF THE ACT,AS HE WAS OF THE OPINION THAT INCOME HAD ESCAPED ASSESSMENT.REASONS RECORDED BY HIM FOR INVOKING THE PROVISIONS OF SECTION WERE FORWARD ED TO THE ASSESSEE ON 16.10.2007.AS PER THE AO ON PERUSAL OF THE NOTE BELOW THE COMPUTATION OF INC OME IT WAS SEEN THAT THE ASSESSEE HAD APPENDED NOTES AND NOTE 2 AND 3 READ AS UNDER : (2) THE ASSESSEE HAD GRANTED A SUB-LICENSE TO KELVI NATOR OF INDIA LIMITED (NOW WHIRLPOOL OF INDIA LIMITED) IN 1978 IN RESPECT OF A PART OF 2ND FLOOR OF ELPHINSTONE BUILDING THE AGREEMENT CAME TO AN ON 30 TH ,SEPTEMBER, 1999.THE ASSESSEE FILED A SUIT IN THE S MALL CAUSES COURT AT MUMBAI FOR EVICTION OF THE SAID SUB-TENANT. THE COURT VIDE ORD ER AND DECREE DATED 30TH NOVEMBER, 2001 INTER ALIA ORDERED WHIRLPOOL OF INDIA LIMITED TO VACATE AND HAND OVER POSSESSION.THE COURT LATER ISSUED A WARRANT OF POSSESSION BY VIRTUE OF WHICH THE ASSE SSEE OBTAINED POSSESSION OF THE SAID PREMISES THROUGH THE BAILIFF ON 5TH FEBRUARY, 2003.THE DECRE E DATED 30TH NOVEMBER, 2001 PROVIDED FOR A SEPARATE INQUIRY INTO MESNE PROFITS IN ACCORDANCE WITH THE ORDER OF THE COURT THE ASSESSEE HAS RECEIVED DURING THE YEAR MESNE PROFITS AMOUNTING TO RS.6,75,000/ FOR THE WRONGFUL OCCUPATION OF THE PREMISES BY WHIRLPOOL OF INDIA LIMITED. THE ASSESSE E SUBMITS THAT THE SAID PROFITS ARE A CAPITAL RECEIPT NOT LIABLE TO TAX. RELIANCE IS PLACED ON: CIT V. J. D. ITALIA 141 ITR 948 (AP) CIT V. MRS. ANNAMMA ALEXANDRA AND OTHERS 191 ITR 55 1 (KER.) (3) DURING THE YEAR 2004-2005, UPON SETTLEMENT OF A DISPUTE WITH WHIRLPOOL OF INDIA LTD., IN RESPECT OF SUB-LEASED PREMISES, THE ASSESSEE COMPANY RECEIV ED FROM WHIRLPOOL OF INDIA LTD., ARREARS OF COMPENSATION FOR THE PERIOD 1.10.1999 TO 5.12.2003 ALONG WITH THE TDS CERTIFICATES IN RESPECT OF THE SAME. THE TDS CERTIFICATES PERTAIN TO THE PERIOD OF THE COMPENSATION I.E,1999-2004.THE ASSESSEE - COMPANY HAS CLAIMED CREDIT IN RESPECT OF THE TDS CE RTIFICATES IN THE CURRENT ASSESSMENT YEAR IN ACCORDANCE WITH THE PROVISIONS OF SECTION 199, AS T HE COMPENSATION INCOME FOR THE SAID PERIOD HAS BEEN OFFERED TO TAX IN THE CURRENT ASSESSMENT YEAR. ASSESSEE OBJECTED TO PROCEEDINGS INITIATED U/S.147, HOWEVER AO,VIDE HIS LETTER DTD.2.11.2007 REJECTED THE OBJECTIONS RAISED BY THE ASSESSEE-COMP ANY. 2.1. AS PER THE AO ASSESSEE-COMPANY HAD RECEIVED RS.6.75 LACS AS MESNE PROFIT FOR THE WRONGFUL OCCUPATION OF THE PREMISES BY WHIRLPOOL OF INDIA LT D AND THE AMOUNT OF MESNE PROFIT WAS A RECEIPT OF REVENUE NATURE AND HENCE TAXABLE,WHEREAS THE ASS ESSEE HAD CLAIMED THAT SAME WAS A CAPITAL RECEIPT AND THEREFORE NOT LIABLE TO TAX.IT WAS ARGU ED BY THE ASSESSEE THAT THE AMOUNT RECEIVED WAS DAMAGE RECEIVED FOR WRONGFUL OCCUPATION OF PREMISES A COMPENSATION FOR DEPRIVATION OF THE PROPERTY.AFTER CONSIDERING THE SUBMISSIONS OF THE A SSESSEE,AO HELD THAT THERE WAS NO DISPUTE ABOUT THE NATURE OF THE SUM RECEIVED OR THE MEANING OF WO RD MESNE PROFIT,THAT ONLY DISPUTE WAS ABOUT TAXABILITY OF THE SAID RECIPTS.HE REFERRED TO THE J UDGMENT OF THE HONBLE APEX COURT DELIVERED IN THE CASE OF P. MORIYAPPA GOUNDER(232ITR1)AND HELD THAT MESNE PROFITS WERE ALSO A SPECIE OF TAXABLE INCOME.FINALLY,HE HELD THAT MESNE PROFITS RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER 3 ITA NO.6371/MUM/2009 M/S BRANDON & CO. PVT. LTD. CONSIDERATION HAD TO BE ASSESSED AS REVENUE RECEIPT .AO FURTHER MADE ADDITION U/S.14A OF THE ACT,AMOUNTING TO RS.2.61 LACS. 2.2. AGAINST THE ORDER OF THE AO ASSESSEE PREFERRED AN A PPEAL BEFORE THE FIRST APPEAL AUTHORITY (FAA).AFTER CONSIDERING THE SUBMISSIONS OF THE ASSE SSEE AND THE ASSESSMENT ORDER HE HELD THAT AFTER THE AMENDMENT TO SECTION 147 W.E.F.01.04.1989 THE P OWER TO REOPEN THE ASSESSMENT WAS MUCH WIDER AND COULD BE EXERCISED EVEN IF ASSESSEE HAD D ISCLOSED FULLY AND TRULY ALL THE MATERIAL FACTS, THAT UNLESS THE CASE WAS COVERED BY THE PROVISO TO SECTION 147 OF THE ACT FAILURE OF THE ASSESSEE WAS NOT RELEVANT,THAT THE ASSUMPTION OF JURISDICTION U/ S.147 WAS BASED ON MATERIAL,THAT IF SOME MATERIAL EXISTED THEN AO COULD FORM BELIEF OF ESCAPEMENT OF INCOME,THAT WORDS ESCAPEMENT OF INCOME COVERED THE CASE OF DISCOVERY OF A MISTAKE IN THE A SSESSMENT CAUSED EITHER ON ACCOUNT OF ERRONEOUS CONSTRUCTION OF THE TRANSACTION OR DUE TO ITS NON C ONSIDERATION OF OR CAUSED BY A MISTAKE OF LAW APPLICABLE TO SUCH TRANSACTION,THAT AT THE INITIAL STAGE FORMATION OF A REASONABLE BELIEF WAS NEEDED AND NOT A CONCLUSIVE FINDING OF A FACT.HE FINALLY HELD THAT AO WAS JUSTIFIED IN RE-OPENING OF THE ASSESSMENT. 2.3. BEFORE US, AUTHORISED REPRESENTATIVE(AR) SUBMITTED THAT THE ASSESSEE WAS LEASEHOLD OWNER OF THE PREMISES,THAT IT HAD GRANTED SUB LICENCE TO WHI RLPOOL IN RESPECT OF A PART OF THAT BUILDING, THAT THE AGREEMENT CAME TO AN END ON 30 TH SEPTEMBER, 1999,THAT THE ASSESSEE FILED A SUIT IN THE SMALL CAUSES COURT FOR EVICTION OF THE SAID SUB-TENANT,THAT COUR T VIDE ORDER DTD.30.11.2001 ORDERED WHIRLPOOL TO VACATE THE PREMISES,THAT THE ASSESSEE GOT THE POSSE SSION OF THE PREMISES IN FEB.,2003,THAT IN ACCORDANCE WITH THE DECREE OF THE COURT ASSESSEE RE CEIVED MESNE PROFITS, AMOUNTING TO RS.6.75 LACS, DURING THE YEAR UNDER CONSIDERATION FOR WRONGFUL OC CUPATION OF THE PREMISES,THAT THE RELEVANT FACTS WERE REVEALED BY THE ASSESSEE IN THE RETURN BY WAY OF NOTE,THAT NO REASONS EXISTED TO JUSTIFY THE REOPENING THE ASSESSMENT,THAT IN THE NOTE NO.2 AND 3 ASSESSEE HAD DISCLOSED EVERYTHING,THAT INCOME OF RS.13.28 LACS RECEIVED AS RENT WAS DISCLOSED IN THE RETURN, THAT MESNE PROFIT OF RS.6.75 LACS WAS PART OF BALANCE SHEET,THAT REASONS RECORDED BY THE AO WERE BASED ON ERRONEOUS ASSUMPTION AND WERE CONTRARY TO THE FACTS,THAT THE INCOME FROM THE SUB-LETTING OF THE PREMISES HAD BEEN TAXED AS INCOME FROM BUSINESS FROM THE AY.1975-76 ONWARDS, T HAT THE TRIBUNAL HAD HELD,WHILE DECIDING THE APPEAL FOR THE AY.1981-82 THAT THE COMPENSATION REC EIVED FROM SUB LETTING HAD TO BE ASSESSED UNDER THE HEAD BUSINESS INCOME,THAT AS THE ASSESSEE WAS NOT OWNER OF THE PROPERTY INCOME FROM THE PREMISES COULD NOT BE ASSESSED AS HOUSE PROPERTY IN COME,THAT THERE WAS ABSENCE OF REASONS TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT.HE REFER RED TO PAGES NO.3,5-6,13-17 AND 24-25 OF THE PAPER-BOOK(PB).HE RELIED UPON THE JUDGMENTS OF HIND USTAN LEVER LTD.(268ITR332),PRASHANT JHAVERI(324ITR154),KELVINATOR INDIA(320ITR 561)OF D ELIVERED BY THE HONBLE HIGH COURT OF BOMBAY AND THE SUPREME COURT RESPECTIVELY. DEPARTM ENTAL REPRESENTATIVE (DR) SUBMITTED THAT THE AO HAD RECORDED THE REASONS AND SUPPLIED A COPY OF THE REASONS TO THE ASSESSEE,THAT INITIALLY RETURN WAS PROCESSED U/S.143(1) OF THE ACT,THAT THE RE WAS NO CHANGE OF OPINION AS NO OPINION WAS FORMED BY THE AO.HE RELIED UPON THE JUDGME -NT OF R AJESH JHAVERI(291ITR500)DELIVERED BY THE HONBLE APEX COURT. 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.RE-OPENING OF ASSESSMENT IS GOVERNED BY SOME BASIC PRINCIPLES.FIR ST AND FOREMOST AMONG THEM IS THE EXISTENCES OF REASONS TO BELIEVE THAT TAXABLE INCOME HAS ESCAP ED ASSESSMENT.COURTS ARE UNANIMOUS THAT BEFORE ISSUING NOTICE U/S.148 PRIMA FACIE CASE SHOULD EXIS T TO PROVE THAT THERE IS ESCAPEMENT OF INCOME.EACH AND EVERY CASE HAS ITS OWN PARTICULAR F ACTS AND CIRCUMSTANCES,HENCE,NO SINGLE FORMULA CAN BE DEVISED TO HOLD THAT WHETHER OR NOT REASONS TO INITIATE PROCEEDINGS AS PER THE PROVISIONS OF SECTION 147 OF THE ACT WERE EXISTENT.HOWEVER, PROCE DURAL REQUIREMENTS HAVE TO BE ADHERED TO IN ALL THE CASES.RECORDING OF REASONS,OBTAINING PRIOR APPR OVAL OF THE COMPETENT AUTHORITIES, SUPPLY OF A COPY OF THE RECORDED REASONS TO THE ASSESSEE,PASSIN G AN ORDER IF OBJECTIONS ARE FILED BY THE ASSESSEE AGAINST INITIATION OF REASSESSMENT ARE SOME OF THE COMPULSORY THINGS TO BE DONE BY THE AO.SIMILARLY,ASSESSEES ARE ALSO REQUIRED TO FILE RE TURN OF INCOME OR INTIMATE THE AO THAT RETURN ALREADY FILED COULD BE CONSIDERED AS A RETURN FILED IN RESPONSE TO THE REASSESSMENT NOTICE.ACT 4 ITA NO.6371/MUM/2009 M/S BRANDON & CO. PVT. LTD. EXPECTS AO AND THE ASSESSEE TO OBSERVE CERTAIN DISC IPLINE WHEN ACTION IS INITIATED U/S. 147 OF THE ACT.BUT,THE CORNERSTONE OF THE WHOLE EXERCISE IS RE ASONS RECORDED BY THE AO,AS THEY GIVE LEGITIMACY TO THE ACTION.IF THE REASONS,AS ENVISAGE D BY THE PROVISIONS OF THE ACT DO NOT EXIST, ACTION TAKEN BY THE AO,EVEN AFTER FOLLOWING THE PROCEDURE, CANNOT BE ENDORSED. THEREFORE,FIRST OF ALL WE WOULD LIKE TO CONSIDER THE FACTS OF THE CASE.FROM THE RECORDS IT IS CLEAR THAT THE ASSESSEE IS NOT TH E OWNER OF THE PREMISES IN QUESTION,THAT IT HAD SUB-L ET THE SAID PREMISES TO WHIRLPOOL FOR A CERTAIN PERIOD,THAT WHIRLPOOL DID NOT VACATE THE PREMISES O N EXPIRY OF THE LICENCE PERIOD,THAT MATTER WENT TO THE COURT AND A DECREE WAS PASSED IN PURSUANCE O F WHICH ASSESSEE GOT THE POSSESSION OF THE PREMISES,THAT ASSESSEE RECEIVED RENT AMOUNTING TO R S.13.28 LACS IN ADDITION TO MESNE PROFITS OF RS.6.75 LACS FOR THE ILLEGAL POSSESSION OF THE PREM ISES BY WHIRLPOOL FOR THE PERIOD 01.10.1999 TO FEBRUARY,2003,THAT RENTAL INCOME FROM THE PREMISES WAS BEING ASSESSED BY THE DEPARTMENT UNDER THE HEAD BUSINESS INCOME FOR LAST MORE THAN THIRTY YEARS,THAT ASSESSEE HAD SHOWN THE COMPENSATION RECEIVED FROM WHIRLPOOL IN THE PROFIT AND LOSS ACCO UNT AND OFFERED THE SUM FOR TAXATION IN THE YEAR UNDER CONSIDERATION,THAT IN THE RETURN OF INCOME BY WAY OF NOTES IT HAD MENTIONED THAT MESNE PROFITS RECEIVED BY IT WERE TO BE TREATED AS CAPITA L RECEIPT,THAT IN THE REASONS RECORDED BY THE AO IT HAS BEEN MENTIONED THAT THE AMOUNT OF RS.6.75 LACS WAS ACTUALLY COMPENSATION RECEIVED BY THE ASSESSEE FROM WHIRLPOOL,THAT SAID SUM WAS INCOME OF THE ASSESSEE FROM HOUSE PROPERTY AND SAME WAS TAXABLE U/S.22 OF THE ACT.WE FIND THAT AO HAS H ELD THAT RS.6.75 LACS RECEIVED BY THE ASSESSEE WERE COMPENSATION FOR THE EXTENDED PERIOD AND WAS T O BE ASSESSED U/S.22 OF THE ACT.IN OUR OPINION BOTH THE CONCLUSIONS OF THE AO WERE FACTUALLY INCOR RECT.AS STATED EARLIER,ASSESSEE HAD RECEIVED RS.13.28 LACS AND RS.6.75 LACS RESPECTIVELY FROM WH IRLPOOL AS COMPENSATION AND AS MESNE PROFITS RESPECTIVELY. AMOUNT OF RS. 6.75 LACS WAS PAID TO T HE ASSESSEE AS PER THE DECREE OF THE COURT FOR UNAUTHORISED OCCUPATION OF THE PREMISES BY WHIRLPOO L.WE FIND THAT THE DECISION OF THE TRIBUNAL IN TREATING THE RENTAL INCOME AS INCOME FROM BUSINESS WAS NOT CHALLENGED BY THE AO AND NO NEW FACTS WERE BROUGHT ON RECORD BY THE AO ON FILE FOR THE YE AR UNDER CONSIDERATION.THUS,AO WAS NOT FACTUALLY CORRECT TO HOLD THAT THE SUM RECEIVED HAD TO BE TAXED U/S.22 OF THE ACT.IN THESE CIRCUMSTANCES,IN OUR OPINION FAA WAS NOT JUSTIFIED IN UPHOLDING THE ORDER OF THE AO WITH REGARD TO RE-OPENING OF ASSESSMENT.WE DO NOT FIND ANY TANGIBL E MATERIAL ON RECORD THAT COULD HAVE JUSTIFIED THE INVOKING OF THE PROVISIONS OF SEC.147 OF THE AC T.AO HAD ISSUED NOTICE ON THE BASIS OF THE REASONS THAT WERE NOT EXISTENT.WE HAVE PERUSED THE JUDGMENT OF RAJESH JHAVERI(SUPRA)RELIED UPON BY THE DR.WE FIND THAT SAME IS NOT APPLICABLE TO TH E FACTS OF THE PRESENT CASE.HERE WE WOULD LIKE TO REFER TO THE CASE OF ORIENT CRAFT LTD.(354ITR536) D ELIVERED BY THE HONBLE HIGH COURT OF DELHI.AFTER CONSIDERING THE MATTER OF RAJESH JHAVE RI(SUPRA) HONBLE COURT HAS HELD AS UNDER: 13. HAVING REGARD TO THE JUDICIAL INTERPRETATION P LACED UPON THE EXPRESSION 'REASON TO BELIEVE', AND THE CONTINUED USE OF THAT EXPRESSION RIGHT FROM 1948 TILL DATE, WE HAVE TO UNDERSTAND THE MEANING OF THE EXPRESSION IN EXACTLY THE SAME MANNE R IN WHICH IT HAS BEEN UNDERSTOOD BY THE COURTS. THE ASSUMPTION OF THE REVENUE THAT SOMEHOW THE WORD S 'REASON TO BELIEVE' HAVE TO BE UNDERSTOOD IN A LIBERAL MANNER WHERE THE FINALITY OF AN INTIMA TION UNDER SECTION 143(1) IS SOUGHT TO BE DISTURBED IS ERRONEOUS AND MISCONCEIVED. AS POINTED OUT EARLIER, THERE IS NO WARRANT FOR SUCH AN ASSUMPTION BECAUSE OF THE LANGUAGE EMPLOYED IN SECT ION 147; IT MAKES NO DISTINCTION BETWEEN AN ORDER PASSED UNDER SECTION 143(3) AND THE INTIMATIO N ISSUED UNDER SECTION 143(1). THEREFORE IT IS NOT PERMISSIBLE TO ADOPT DIFFERENT STANDARDS WHILE INTE RPRETING THE WORDS 'REASON TO BELIEVE' VIS-A-VIS SECTION 143(1) AND SECTION 143(3). WE ARE UNABLE TO APPRECIATE WHAT PERMITS THE REVENUE TO ASSUME THAT SOMEHOW THE SAME RIGOROUS STANDARDS WHICH ARE APPLICABLE IN THE INTERPRETATION OF THE EXPRESSION WHEN IT IS APPLIED TO THE REOPENING OF A N ASSESSMENT EARLIER MADE UNDER SECTION 143(3) CANNOT APPLY WHERE ONLY AN INTIMATION WAS ISSUED EA RLIER UNDER SECTION 143(1). IT WOULD IN EFFECT PLACE AN ASSESSEE IN WHOSE CASE THE RETURN WAS PROC ESSED UNDER SECTION 143(1) IN A MORE VULNERABLE POSITION THAN AN ASSESSEE IN WHOSE CASE THERE WAS A FULL-FLEDGED SCRUTINY ASSESSMENT MADE UNDER SECTION 143(3). WHETHER THE RETURN IS PU T TO SCRUTINY OR IS ACCEPTED WITHOUT DEMUR IS NOT A MATTER WHICH IS WITHIN THE CONTROL OF ASSESSEE; H E HAS NO CHOICE IN THE MATTER. THE OTHER CONSEQUENCE, WHICH IS SOMEWHAT GRAVER, WOULD BE THA T THE ENTIRE RIGOROUS PROCEDURE INVOLVED IN REOPENING AN ASSESSMENT AND THE BURDEN OF PROVING V ALID REASONS TO BELIEVE COULD BE CIRCUMVENTED BY FIRST ACCEPTING THE RETURN UNDER SECTION 143(1) AND THEREAFTER ISSUE NOTICES TO REOPEN THE 5 ITA NO.6371/MUM/2009 M/S BRANDON & CO. PVT. LTD. ASSESSMENT. AN INTERPRETATION WHICH MAKES A DISTINC TION BETWEEN THE MEANING AND CONTENT OF THE EXPRESSION 'REASON TO BELIEVE' IN CASES WHERE ASSES SMENTS WERE FRAMED EARLIER UNDER SECTION 143(3) AND CASES WHERE MERE INTIMATIONS WERE ISSUED EARLIE R UNDER SECTION 143(1) MAY WELL LEAD TO SUCH AN UNINTENDED MISCHIEF. IT WOULD BE DISCRIMINATORY TOO . AN INTERPRETATION THAT LEADS TO ABSURD RESULTS OR MISCHIEF IS TO BE ESCHEWED. 14.CERTAIN OBSERVATIONS MADE IN THE DECISION OF RAJ ESH JHAVERI (SUPRA) ARE SOUGHT TO BE RELIED UPON BY THE REVENUE TO POINT OUT THE DIFFERENCE BETWEEN AN 'ASSESSMENT' AND AN 'INTIMATION'. THE CONTEXT IN WHICH THOSE OBSERVATIONS WERE MADE HAS TO BE KEP T IN MIND. THEY WERE MADE TO POINT OUT THAT WHERE AN 'INTIMATION' IS ISSUED UNDER SECTION 143(1 ) THERE IS NO OPPORTUNITY TO THE ASSESSING AUTHORITY TO FORM AN OPINION AND THEREFORE WHEN ITS FINALITY IS SOUGHT TO BE DISTURBED BY ISSUING A NOTICE UNDER SECTION 148, THE PROCEEDINGS CANNOT BE CHALLENGED ON THE GROUND OF 'CHANGE OF OPINION'. IT WAS NOT OPINED BY THE SUPREME COURT TH AT THE STRICT REQUIREMENTS OF SECTION 147 CAN BE COMPROMISED. ON THE CONTRARY, FROM THE OBSERVATIONS (QUOTED BY US EARLIER) IT WOULD APPEAR CLEAR THAT THE COURT REITERATED THAT 'SO LONG AS THE INGR EDIENTS OF SECTION 147 ARE FULFILLED' AN INTIMATION ISSUED UNDER SECTION 143(1) CAN BE SUBJECTED TO PRO CEEDINGS FOR REOPENING. THE COURT ALSO EMPHASISED THAT THE ONLY REQUIREMENT FOR DISTURBING THE FINALITY OF AN INTIMATION IS THAT THE ASSESSIN G OFFICER SHOULD HAVE 'REASON TO BELIEVE' THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IN OUR OPINION, THE SAID EXPRESSION SHOULD APPLY TO AN INTIMATION IN THE SAME MANNER AND SUBJECT TO THE SAME INTERPRETATION AS IT WOULD HAVE APPLIED TO AN ASSESSMENT MADE UNDER SECTION 143(3). THE ARGUMENT OF THE REVENUE THAT AN INTIMATION CANNOT B E EQUATED TO AN ASSESSMENT, RELYING UPON CERTAIN OBSERVATIONS OF THE SUPREME COURT IN RAJESH JHAVERI (SUPRA) WOULD ALSO APPEAR TO BE SELF-DEFEATING, BECAUSE IF AN 'INTIMATION' IS NOT AN 'ASSESSMENT' T HEN IT CAN NEVER BE SUBJECTED TO SECTION 147 PROCEEDINGS, FOR, THAT SECTION COVERS ONLY AN 'ASSE SSMENT' AND WE WONDER IF THE REVENUE WOULD BE PREPARED TO CONCEDE THAT POSITION. IT IS NOBODYS C ASE THAT AN 'INTIMATION' CANNOT BE SUBJECTED TO SECTION 147 PROCEEDINGS; ALL THAT IS CONTENDED BY T HE ASSESSEE, AND QUITE RIGHTLY, IS THAT IF THE REVENUE WANTS TO INVOKE SECTION 147 IT SHOULD PLAY BY THE RULES OF THAT SECTION AND CANNOT BOG DOWN. IN OTHER WORDS, THE EXPRESSION 'REASON TO BELIEVE' CANNOT HAVE TWO DIFFERENT STANDARDS OR SETS OF MEANING, ONE APPLICABLE WHERE THE ASSESSMENT WAS EA RLIER MADE UNDER SECTION 143(3) AND ANOTHER APPLICABLE WHERE AN INTIMATION WAS EARLIER ISSUED U NDER SECTION 143(1). IT FOLLOWS THAT IT IS OPEN TO THE ASSESSEE TO CONTEND THAT NOTWITHSTANDING THAT T HE ARGUMENT OF 'CHANGE OF OPINION' IS NOT AVAILABLE TO HIM, IT WOULD STILL BE OPEN TO HIM TO CONTEST THE REOPENING ON THE GROUND THAT THERE WAS EITHER NO REASON TO BELIEVE OR THAT THE ALLEGED REA SON TO BELIEVE IS NOT RELEVANT FOR THE FORMATION OF THE BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPE D ASSESSMENT. IN DOING SO, IT IS FURTHER OPEN TO TH E ASSESSEE TO CHALLENGE THE REASONS RECORDED UNDER SE CTION 148(2) ON THE GROUND THAT THEY DO NOT MEET THE STANDARDS SET IN THE VARIOUS JUDICIAL PRONOUNCE MENTS. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE UNDER CONSIDERATION,WE DECIDE THE ISSUE OF RE- OPENING OF THE ASSESSMENT U/S.147 OF THE ACT (GOA-1 &2) IN FAVOUR OF THE ASSESSEE.AS WE ARE OF THE OPINION THAT THE REASON RECORDED BY THE A.O FOR REO PENING THE ASSESSMENT ARE BASED ON NO MATERIAL, AND FURTHER MORE THE SAME ARE ERRONEOUS WHICH LEADS TO THIS CONCLUSION THAT THE A.O COULD NOT HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. INFACT, THERE WAS NO JUSTIFICATION IN INVOKING THE PROVISIONS OF SECTION 147/148 OF THE ACT. CONSEQUENTLY, WE QUASH THE RE-ASSESSMENT ORDER DATED 28.11.2007. SINCE, WE HAV E QUASHED THE RE-ASSESSMENT ORDER, THEREFORE, WE DO NOT THINK IT NECESSARY TO DECIDE THE GROUNDS RAISED BY THE ASSESSEE ON MERITS. AS A RESULT,APPEAL FILED BY THE ASSESSEE STANDS ALL OWED. 3 &4 ' 3/ . !5 . !/ 67. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH DECEMBER,2013 . %'8 . 12( ' # 9 :%' 18 FNLACJ FNLACJ FNLACJ FNLACJ , 2013 2 . ;. SD/- SD/- ( . . - H.L.KARWA) ( !'#$ !'#$ !'#$ !'#$ / RAJENDRA) / PRESIDENT ' ' ' ' %& %& %& %& /ACCOUNTANT MEMBER 6 ITA NO.6371/MUM/2009 M/S BRANDON & CO. PVT. LTD. / MUMBAI, :%' /DATE: 18 TH DECEMBER,2013 SK %'8 %'8 %'8 %'8 . .. . +/< +/< +/< +/< ='<(/ ='<(/ ='<(/ ='<(/ / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / )* 2. RESPONDENT / +,)* 3. THE CONCERNED CIT (A) / > ? , 4. THE CONCERNED CIT / > ? 5. DR B BENCH, ITAT, MUMBAI / <@; +/' CH CHCH CH , . . # . 6. GUARD FILE/ ; A ,