ASST CIT 20(3), MUMBAI V. S.S.BUILDERS, MUMBAI

ITA 6372/MUM/2013

• Counselvise Citation: 637219914 RSA 2013
• Duration Of Justice: 1 year(s) 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2006-2007
• Appeal Filed On: 30-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: AJAY R SINGH; NEELAM C JADHAV
• Keywords: Difference of opinion; Change of opinion
• Section: 143(3); 147; 145; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E , MUMBAI BEFORE SHRI R.C. SHARMA , ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ITA NO. 6372/M/2013 ASSESSMENT YEAR: 2006 - 07 ACIT 20(3), ROOM NO.506, 5 TH FLOOR, PIRAMAL CHAMBER, PAREL, MUMBAI 400 0 1 2 VS. M/S. S.S. BUILDERS, 62, LAND MARK, 175 CARTER ROAD, BANDRA (W), MUMBAI 400 050 PAN: AANFS 0339P (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI AJAY R. SINGH, A.R. & MISS NEELAM C. JADHAV, A.R. REVENUE BY : SHRI NEIL PHILIP, D.R. DATE OF HEARING : 19.03. 201 5 DATE OF PRONOUNCEMENT : 29.05. 2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAINST THE ORDE R DATED 27.08.2013 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [(HEREINAFTER REFERRED TO AS CIT(A)] RELEVANT TO ASSESSMENT YEAR 2006 - 07. 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: I. THE LD. CIT(A) ERRED ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN QUASHING THE REOPENING OF THE CASE U/S 148 OF THE INCOME TAX ACT, 1961 WITHOUT APPRECIATING THE FACTS AND REASONS PROPERLY. II. THE LD. CIT(A) HAS ERRED IN TAKING THE VALUE OF CLOSING STOCK AT NIL ON THE GROUND OF PENDING LITIGATION IGNORI NG THE AVERAGE COST OF THE CLOSING STOCK. ITA NO.6372/M/2013 M/S. S.S. BUILDERS 2 III . THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(APPEALS) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED. IV . THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR TO SUBMIT ADDITIONAL NE W GROUND WHICH MAY BE NECESSAR Y. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE , A BUILDER AND DEVELOPER, FILED ITS RETURN FOR THE YEAR UNDER CONSIDERATION ON 30.08.06 DECLARING TOTAL INCOME OF RS.30 , 80 , 790/ - . THE RETURN WAS SELECTED FOR SCRUTINY AND AN ASSESSMENT ORDER UNDER SECTION 143(3) WAS PASSED. AFTER MAKING CERTAIN DISALLOWANCE THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) COMPUTED THE TOTAL INCOME OF THE ASSESSEE AT RS.31,06,150/ - . THEREAFTER, THE ASSESSMENT WAS REOPENED UNDE R SECTION 147 OF THE ACT BY THE AO. THE REASONS RECORDED FOR THE REOPENING OF THE ASSESSMENT AS REPRODUCED IN THE IMPUGNED ORDER WERE AS UNDER: IT IS SEEN FROM THE RECORDS THAT ASSESSEE HAD 3 FLATS UNSOLD IN A.Y. 2006 - 07, HOWEVER VALUE OF THE 3 UNSOLD F LATS WERE NOT TAKEN INTO ACCOUNT WHILE VALUING THE CLOSING STOCK OF THE ASSESSEE RESULTING IN SUPPRESSION OF GROSS PROFIT SUBSTANTIALLY. I HAVE, THEREFORE, REASONS TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT DUE TO FAILURE ON THE PAR T OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE NOTIONAL, FACTS IN ACCORDANCE WITH THE PRINCIPLES ESTABLISHED IN SECTION 147 READ WITH SECTION 148 OF THE I.T. ACT, 1961. NOTICE U/S 148 OF THE IT. ACT 1961 IS THEREFORE ISSUED' 4. DURING THE REOP ENED ASSESSMENT PROCEEDINGS, THE ASSESSEE AGITATED THAT THE REOPENING WAS BAD IN LAW. NO NOTICE UNDER SECTION 148 WAS SERVED UPON THE ASSESSEE. HOWEVER, THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE. THE AO OBSERVED THAT THE ASSESSEE HAD NOT SHOW N IN THE CLOSING STOCK THE VALUE OF THE THREE UNSOLD FLATS. THE ASSESSEE SUBMITTED THAT THE VALUE OF THE THREE UNSOLD FLATS , DUE TO PENDING LITIGATION BEFORE THE HIGH COURT, WAS NIL OR THAT THE SAME WAS NOT ASCERTAINABLE, HENCE THE VALUE OF THE SAME WAS N OT SHOWN IN THE ITA NO.6372/M/2013 M/S. S.S. BUILDERS 3 CLOSING STOCK. THE AO, HOWEVER, DID NOT AGREE WITH THE SUBMISSION OF THE ASSESSEE. HE THEREFORE CALCULATED THE VALUE OF THE THREE UNSOLD FLATS AT AVERAGE STOCK METHOD AT RS.32,50,723/ - AND ADDED BACK THE SAME TO THE CLOSING STOCK OF THE F IRM AND COMPUTED THE INCOME OF THE ASSESSEE AT RS.63,56,873/ - . AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). 5. THE LD. CIT(A) OBSERVED THAT NO NEW INFORMATION OR FACT HAS COME TO THE KNOWLEDGE OF THE AO REGARDING T HE ESCAPEMENT OF INCOME OF THE ASSESSEE. THE ORIGINAL ASSESSMENT WAS DONE BY THE AO UNDER SECTION 143(3) OF THE ACT AND ALL THE DETAILS WERE AVAILABLE BEFORE THE AO. HE FURTHER OBSERVED THAT THE RETURN WAS ACCOMPANIED WITH FORM 3CB & 3CD. IN FORM 3CD AT POINT NO.12 IT WAS STATED AS UNDER: '(A) METHOD OF VALUATION OF CLOSING STOCK EMPLOYED IN THE PREVIOUS YEAR: : THE PROJECT IS SHOWN AS COMPLETED THIS YEAR. (B) DETAILS OF DEVIATION, IF ANY, IN THE METHOD OF VALUATION PRESCRIBED UNDER SECTION 145 AND THE EFFECT THEREOF ON THE PROFIT OR LOSS. : VALUE OF UNSOLD FLATS NOT ACCOUNTED. EFFECT NO ASCERTAINABLE. 6. HE FURTHER OBSERVED THAT I N NOTES TO ACCOUNTS O F FORM 3CD , IT WAS MENTIONED AS UNDER: '1. THE ASSESSEE HAS SHOWN THE PROJECT AS COMPLETE D IN THIS YEAR AS ALL THE SHOPS HAVE BEEN SOLD IN THIS YEAR. 2. 3 FLATS THAT HAVE REMAINED UNSOLD DUE TO LITIGATION HAVE NOT BEEN TAKEN INTO CONSIDERATION AS PER OUR REPORT IN FORM 3 CB. .. 7. THE LD. CIT(A) FURTHER OBSERVED THAT CERTAIN QUERIES W ERE RAISED BY THE AO REGARDING THE COMPUTATION OF INCOME AND VALUE OF THE FLATS ETC. AND THEREFORE THE AO HAD FULLY APPLIED HIS MIND. THE LD. CIT(A) THEREAFTER , RELYING UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. ITA NO.6372/M/2013 M/S. S.S. BUILDERS 4 KELVINATOR INDI A LTD. REPORTED AT (2010) 320 ITR 561 (SC) AND OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF ASTEROIDS TRADING & INVESTMENTS (P) LTD. VS. DCIT (2009) 223 CTR (BOM.) 144 AND IN THE CASE OF ASIAN PAINTS LTD. VS. CIT (2009) 308 ITR 195 (BOM.) , OBSERVED THAT THE HIGHER COURTS ARE UNANIMOUS ON THE POINT THAT THE PROVISIONS OF SECTION 147 CANNOT BE USED TO REVIEW THE ORDER. WHERE NOTHING NEW HAS HAPPENED, NO NEW MATERIAL HAS COME ON RECORD , NO INFORMATION HAS BEEN RECEIVED BY THE AO REGARDING ESCAPEMENT O F INCOME OF THE ASSESSEE, T HE REASSESSMENT IS NOT JUSTIFIABLE BY WAY OF A FRESH APPLICATION OF MIND BY THE AO TO THE SAME SET OF FACTS AS IT WILL BE JUST A CHANGE OF OPINION. THERE MUST BE SOMETHING POSITIVE TO INDICATE THAT THE INCOME CHARGEABLE TO TAX H AS ESCAPED ASSESSMENT. THE BELIEF OF THE AO THAT THE INCOME HAS ESCAPED ASSESSMENT SHOULD NOT BE BASED ON MERE CHANGE OF HIS OPINION . W HEN THE AO HAD APPLIED HIS MIND TO A PARTICULAR ISSUE, INCOME OR EXPENDITURE AND HAS ACCEPTED THE CLAIM OF THE ASSESSEE , THEN HE CANNOT TAKE THE ASSISTANCE OF SECTION 147 FOR RE - EVALUATING SUCH ITEMS UNLESS SOMETHING NEW COMES TO HIS NOTICE AFTER THE COMPLETION OF ASSESSMENT WHICH BELIES THE ASSESSEES CLAIM ON THAT ISSUE. THE LD. CIT(A) THEREAFTER NOTICED THAT THE INFORM ATION , ON WHICH THE REOPENING WAS DONE BY THE AO , WAS ALREADY BEFORE THE AO AT THE TIME OF ORIGINAL ASSESSMENT UNDER SECTION 143(3) OF THE ACT. NO NEW MATERIAL HAS COME ON RECORD. THE FACT THAT THREE FLATS WERE LYING UNSOLD WHICH WERE SUBJECT MATTER OF LI TIGATION BEFORE THE HONBLE HIGH COURT WAS ALSO WITHIN THE KNOWLEDGE OF THE AO. THE REOPENING OF THE ASSESSMENT IN THIS CASE WAS JUST A REVIEW OF THE INFORMATION THAT WAS ALREADY ON RECORD. THE LD. CIT(A) AS PER HIS DETAILED DISCUSSION MADE IN THE IMPUGN ED ORDER, THEREFORE, HELD THAT THE REOPENING IN THIS CASE WAS BAD IN LAW. HE THEREFORE QUASHED THE SAME. THE LD. CIT(A) EVEN THEREAFTER PROCEEDED TO DECIDE THE ISSUES ON MERITS ALSO. HE OBSERVED THAT EVEN ON MERITS, THE ADDITIONS WERE NOT WARRANTED IN T HIS CASE AS THE THREE FLATS IN QUESTION WERE UNDER LITIGATION BEFORE THE HONBLE HIGH ITA NO.6372/M/2013 M/S. S.S. BUILDERS 5 COURT IN RELATION TO FIRE REFUSE AREA AND IT WAS DISPUTED THAT THE ASSESSEE HA D NO RIGHTS TO SALE THOSE FLATS. EVEN NO BUYER WAS READ Y TO PURCHASE THOSE FLATS. EVEN OUT OF THREE FLATS, ONE FLAT WAS DEMOLISHED BY THE BMC. HENCE, UNDER SUCH CIRCUMSTANCES PREVAILING AT THAT TIME , ALL THREE FLATS HAD NO VALUE AT ALL. THE LD. CIT(A) HAS FURTHER OBSERVED THAT OUT OF THE THREE FLATS, SINCE ONE FLAT WAS DEMOLISHED AND THE OTHE R TWO FLATS WERE SOLD IN FINANCIAL YEAR 2010 - 11 , THE INCOME FROM WHICH WAS RETURNED BY THE ASSESSEE IN A.Y. 2011 - 12 . THE LD. CIT(A) ALSO TOOK NOTICE OF THE FACT THAT THERE WAS A COMMUNICATION DURING THE ORIGINAL ASSESSMENT PROCEEDINGS BETWEEN THE ASSESSEE AND THE AO WHEREIN THE ASSESSEE HAS EXPLAINED VIDE LETTER DATED 24.02.08 EXPLAINING THAT THERE WAS LITIGATION REGARDING THE FLATS AND AS PER THE DIRECTIONS OF THE HONBLE BOMBAY HIGH COURT 25 FLATS WERE SOLD AT THE RATE OF RS.1500/ - . FURTHER , THREE FLATS WERE SOLD AS PER THE DIRECTIONS OF THE CONSUMER COURT WITHOUT GETTING ANY AMOUNT AND THAT THE ASSESSEE WAS FACING DIFFICULTY TO SELL AND DISPOSE OF F THE FLATS AS THE BUILDING WAS SITUATED AT THE DEAD END OF THE ROAD AND THE SAME WAS LYING VACANT AND UNATT ENDED FOR A LONG TIME. EX PARTNER OF THE ASSESSEE FIRM WAS SHOT DEAD IN THE UNDER CONSTRUCTION BUILDING AND FURTHER THAT TWO TO THREE PEOPLE HAD COMMITTED SUICIDE IN THE BUILDING. THE PLACE HAD VERY BAD AND INDIFFERENT IMPRESSION IN THE MINDS OF THE PEOP LE AND THEREFORE IT WAS DIFFICULT FOR THE ASSESSEE TO ATTRACT BUYERS AND WAS COMPELLED TO SELL FEW FLATS AT VERY LOW PRICE. THE LD. CIT(A) FURTHER OBSERVED THAT THE FACT OF LITIGATION ALSO FINDS MENTIONED IN THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3 ) FOR A.Y. 2005 - 06. HE THEREFORE HELD THAT AS ON 31.03.06 THERE WAS NO VALUE ASCRIBED TO THE UNSOLD FLATS WHICH WAS RIGHTLY CLAIMED BY THE ASSESSEE IN THE RETURN OF THE INCOME. HE ALSO OBSERVED THAT EVEN IN FORM 3CD FILED FOR THE PREVIOUS ASSESSMENT YEAR 2005 - 06, THE VALUE OF THE CLOSING STOCK HAD BEEN SHOWN AS NIL FOR THAT YEAR ALSO. HE, THUS, TAKING INTO CONSIDERATION THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE, HELD THAT THE ADDITIONS WERE NOT JUSTIFIABLE EVEN ON MERITS. ITA NO.6372/M/2013 M/S. S.S. BUILDERS 6 8 . WE HAVE HEARD THE RIVAL CONTENTIONS OF THE LD. REPRESENTATIVES OF BOTH THE PARTIES AND HAVE ALSO GONE THROUGH THE RECORDS. 9. THE LD. D.R. COULD NOT CONVINCE US AS TO ANY INFIRMITY OR WRONG FINDING OF THE LD. CIT(A) IN THE IMPUGNED ORDER. WE THEREFORE DO NOT FIND ANY REASON TO INTERFERE WITH THE WELL REASONED ORDER OF THE LD. CIT(A) AND THE SAME IS ACCORDINGLY UPHELD. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS THEREFORE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.05. 201 5 . SD/ - SD/ - ( R.C. SHARMA ) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 29.05.2015 . * KISHORE , SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.