NUSIL N WADIA, MUMBAI V. ASST CIT CIR 12(1), MUMBAI

ITA 6929/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3816 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 18-03-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 28-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AGAINST DATED PASSED
• Keywords: Capital receipt; Reason to believe; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI . . , , !' #$, % , & BEFORE SHRI R.C.SHARMA, AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO.6929/MUM/2013 ( %' ( / ASSESSMENT YEAR: 2005-06) MR. NUSLI N. WADIA NEVILLE HOUSE, J.N.HEREDIA MARG, BALLARD ESTATE, MUMBAI - 400001 ' / VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 2(1) MUMBAI ./ ./ PAN/GIR NO. : AAAPW0990M ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 22.04.2016 !' /DATE OF PRONOUNCEMENT: 10.08.2016 #$ / O R D E R PER AMARJIT SINGH, JM: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 23.09.2013 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-4, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO THE A.Y.2005-06. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- ASSESSEE BY: SHRI DILIP S. DAMLE DEPARTMENT BY: SMT. POOJA SWAROOP ITA NO.6929/MUM/13 A.Y.2005-06 2 1. THE LEARNED COMMISSIONER (APPEALS) ERRED IN THE CIRCUMSTANCES OF THE CASE AND IN LAW IN HOLDING THA T THE ASSESSING OFFICER HAD THE REASON TO BELIEVE THAT IN COME HAD ESCAPED ASSESSMENT IN THE HANDS OF THE APPELLANT AN D ACCORDINGLY UPHOLDING THE ACTION OF THE ASSESSING O FFICER WITH REFERENCE TO THE RE-OPENING PROCEEDINGS U/S.14 7 OF THE INCOME TAX ACT, 1961. 2. THE LEARNED COMMISSIONER (APPEALS) ERRED IN THE CIRCUMSTANCES OF THE CASE AND IN LAW IN TAXING THE AMOUNT OF RS.3,07,25,000/- REPRESENTING TAX FREE INTEREST ON RBI BONDS RECEIVED BY THE APPELLANT. 3. THE LEARNED COMMISSIONER (APPEALS) ERRED IN THE CIRCUMSTANCES OF THE CASE AND IN LAW IN NOT ADJUDIC ATING THE ALTERNATIVE PLEA OF THE APPELLANT THAT THE AMOU NTS RECEIVED FROM THE ESTATE OF EFD WERE DISTRIBUTION B EING CAPITAL RECEIPT AS HELD IN THE ASSESSEES OWN CASE IN THE ASSESSMENT YEAR 2004-05 AND 2005-06 WHERE THE HON. ITAT TREATED THE DISTRIBUTION AS A CAPITAL RECEIPT IN THE HANDS OF THE APPELLANT NOT LIABLE TO TAX. 4. EACH ONE OF THE ABOVE GROUND S OF APPEAL IS WITH OUT PREJUDICE TO THE OTHER. ADDITIONAL GROUNDS OF APPEAL:- 1. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS UNJUSTIFIED IN UPHOLDING VALIDITY OF THE REASSESSMENT PROCEEDINGS EVEN THOUGH CONDITIONS PRESCRIBED IN THE FIRST PROVISO TO SEC. 147 OF THE ACT WERE NOT FULFILLED AND IN THAT VIEW OF THE MATTER THE PR OCEEDINGS U/S.147 / 148 WERE AB INITIO VOID. 2. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, SINCE THE REASON RECORDED U/S.148(2) IT WAS NOWHERE RECORDED BY THE AOS THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY ALL MATERI AL FACTS NECESSARY FOR ASSESSMENT OF THE TOTAL INCOME FOR TH E A.Y.2005-06. THE CIT(A) OUGHT TO HAVE HELD THAT IN ITIATION OF REASSESSMENT PROCEEDINGS U/S.147 WAS BAD IN LAW AND IN ITA NO.6929/MUM/13 A.Y.2005-06 3 THAT VIEW OF THE MATTER THE CIT(A) OUGHT TO HAVE CA NCELLED THE ORDER U/S.147/143(3) OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL AND THE CHAIRMAN OF THE COMPANY BOMBAY DYEING & MFG . CO. LTD. AND BRITANNIA INDUSTRIES LTD. AND ALSO A DIRECTOR I N MANY WELL KNOWN COMPANIES. THE ASSESSMENT OF THE ASSESSEE WAS COMP LETED U/S.143(3) OF THE INCOME TAX ACT, 1961( IN SHORT THE ACT) ON 31.12.2007 COMPUTING TOTAL INCOME TO THE TUNE OF RS.31,77,09,7 80/-. THE CASE WAS REOPENED U/S.147 OF THE ACT BY ISSUING NOTICE U /S.148 OF THE ACT DATED 02.03.2011 ON THE FOLLOWING REASONS: AN AMOUNT OF RS.30,07,25,000/- RECEIVED FROM THE ESTATE OF MR. E. F. DINSHAW AND CLAIMED AS EXEMPT F ROM TAXATION. OUT OF RS.30,07,25,000/-, ASSESSEE HAS S HOWN A SUM OF RS.3,07,25,000/- WAS RECEIVED AS INTEREST ON TAX FREE BONDS AND RS.27,00,00,000/- WAS RECEIVED FROM THE SALE OF PROPERTIES IN THE NAME OF THE ASSESSEE. HO WEVER IN RESPECT OF RS.3,07,25,000/- NOTHING ON THE RECOR D SHOW THAT THE AMOUNT IS ELIGIBLE FOR EXEMPTION AND DEDUC TIBLE FROM RS.30,07,25,000/-. IT WAS ALSO OBSERVED THAT THE EXEMPTION ON INTEREST RECEIVED ON TAX FREE BONDS IS AVAILABLE IN THE HANDS OF THE ADMINISTRATOR OF THE ESTATE OF E. F. DINSHAW AND NOT IN THE HANDS OF THE ASSESS EE. ITA NO.6929/MUM/13 A.Y.2005-06 4 THE ADMINISTRATOR DISTRIBUTED A TOTAL SUM OF RS.50 CR TO THE ASSESSEE AND TO FOUR OTHER COMPANIES. THEREAFTER THE ASSESSMENT WAS COMPLETED BY ADDING T HE INTEREST RECEIVED ON TAX FREE ON RBI BONDS TO THE TUNE OF RS .3,07,25,000/-, THE TOTAL INCOME OF ASSESSEE WAS COMPUTED TO THE RS.6,8 9,17,640, THEREAFTER THE ASSESSEE WAS NOT SATISFIED ON THE SA ID ADDITION, THEREFORE FILED AN APPEAL BEFORE CIT(A) WHO CONFIRMED THE SAI D ADDITION, THEREFORE THE ASSESSEE HAS FILED AN APPEAL BEFORE U S. ADDITIONAL GROUND:- 4. THE ASSESSEE RAISED THE ADDITIONAL GROUND CHALLE NGING THE ASSESSMENT ORDER U/S.147 / 148 OF THE ACT. THE LEA RNED REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE ADDITIONAL GROU NDS ARE PURELY LEGAL IN NATURE THEREFORE IN THE SAID CIRCUMSTANCES ADMIS SION OF ADDITIONAL GROUNDS SQUARELY COMES WITHIN THE AMBIT OF ITATS P OWERS AS ENUMERATED BY THE HONBLE SUPREME COURT IN ITS DECI SION IN THE CASE OF NTPC VS. CIT (229 ITR 383). HOWEVER, ON THE OTH ER HAND THE LEARNED REPRESENTATIVE OF THE DEPARTMENT HAS REFUTE D THE SAID CONTENTIONS. SINCE THE ASSESSEE HAS ONLY RAISED LEG AL ISSUES OF THE ORDER PASSED U/S.143(3) OF THE ACT UNDER CHALLENGE, THEREFORE IN VIEW OF THE SAID CIRCUMSTANCES WE ADMIT THE ADDITIONAL G ROUND. UNDER THIS ISSUES THE ASSESSEE HAS CHALLENGED THE REOPENING OF THE CASE FOR THE ASSESSMENT YEAR OF 2005-06 WHICH WAS BEYOND THE FO UR. ITA NO.6929/MUM/13 A.Y.2005-06 5 THE ORIGINAL ASSESSMENT ORDER FOR A.Y.2005-06 WAS P ASSED U/S.143(3) OF THE ACT AND PROVISION U/S.148 CAN ONLY BE VALIDL Y INITIATED IF AND ONLY IF THE ASSESSING OFFICER DEMONSTRATES IN THE R ECORDED REASONS THAT THERE WAS FAILURE OF ASSESSEES PART TO DISCLOSE T RULY AND FULLY MATERIAL FACTS NECESSARY FOR ASSESSMENT OF THE RELEVANT ASSE SSMENT YEAR. ON APPRAISAL OF RECORD IT IS QUITE CLEAR THAT THE ASSE SSMENT OF THE ASSESSEE WAS COMPLETED U/S. 143(3) OF THE ACT ON 31.12.2007 FOR THE A.Y.2005- 06 COMPUTING TOTAL INCOME TO THE TUNE OF RS.31,77,0 9,780/-. SUBSEQUENTLY THE CASE WAS REOPENED U/S.148 OF THE A CT DATED 02.03.2011 BY ENUMERATING THE REASONS MENTIONED BEL OW:- AN AMOUNT OF RS.30,07,25,000/- RECEIVED FROM THE ESTATE OF MR. E. F. DINSHAW AND CLAIMED AS EXEMPT F ROM TAXATION. OUT OF RS.30,07,25,000/-, ASSESSEE HAS S HOWN A SUM OF RS.3,07,25,000/- WAS RECEIVED AS INTEREST ON TAX FREE BONDS AND RS.27,00,00,000/- WAS RECEIVED FROM THE SALE OF PROPERTIES IN THE NAME OF THE ASSESSEE. HO WEVER IN RESPECT OF RS.3,07,25,000/- NOTHING ON THE RECOR D SHOW THAT THE AMOUNT IS ELIGIBLE FOR EXEMPTION AND DEDUC TIBLE FROM RS.30,07,25,000/-. IT WAS ALSO OBSERVED THAT THE EXEMPTION ON INTEREST RECEIVED ON TAX FREE BONDS IS AVAILABLE IN THE HANDS OF THE ADMINISTRATOR OF THE ESTATE OF E. F. DINSHAW AND NOT IN THE HANDS OF THE ASSESS EE. ITA NO.6929/MUM/13 A.Y.2005-06 6 THE ADMINISTRATOR DISTRIBUTED A TOTAL SUM OF RS.50 CR TO THE ASSESSEE AND TO FOUR OTHER COMPANIES. 5. IN VIEW OF THE ABOVE MENTIONED RECORD IT IS QUIT E CLEAR THAT THE NOTICE U/S.148 OF THE ACT DATED 02.03.2011 WAS ISSU ED AFTER EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT A.Y.2004-05. NOW IT IS TO BE SEEN WHETHER THE ASSESSEE IS FAILURE ON HIS PART TO DISCLOSE TRULY AND FULLY MATERIAL FACTS NECESSARY FOR ASSESSMENT OF TH E RELEVANT ASSESSMENT YEAR. IN BRIEF THE ASSESSMENT WAS REOPE NED ON THE GROUND OF THE RECEIPT OF INTEREST TO THE TUNE OF RS.3,07,2 5,000/- ACCRUED FROM TAX FREE BONDS. IT IS TO BE SEEN WHERE THESE FACTS HAVE BEEN MENTIONED BY THE ASSESSEE IN HIS EARLIER ASSESSMENT OR NOT. THE COMPUTATION OF INCOME FOR THE A.Y.2005-06 FILED ALONG WITH ORIGINA L I.T. RETURNS U/S.139(1) OF THE ACT LIES AT PAGE 1 TO 4 OF THE PA PER BOOK, PERSONAL BALANCE SHEET AND INCOME AND EXPENDITURE ACCOUNT FI LED WITH ORIGINAL RETURN U/S.139(1) OF THE ACT WAS LIES AT P AGE NOS. 5 TO 6 OF THE PAPER BOOK. THIS ENTRY HAS ALSO BEEN REFLECTED FOR THE ASSESSMENT ORDER PASSED ON 31.12.2007 LIES AT PAGE 7 TO 37 OF THE PAPER BOOK. THE ASSESSING OFFICER HAS ALSO RAISED THE QUERY IN THIS REGARD AND THE ASSESSEE HAS GIVEN THE PROPER EXPLANATION BEFORE TH E ASSESSING OFFICER AND THEREAFTER, CONSIDERING THE SAME THE EA RLIER ASSESSMENT ORDER PASSED U/S.143(3) OF THE ACT. THERE IS NO NEW MATERIAL IN THE HANDS OF THE ASSESSING AUTHORITY. THERE IS NO LAPSE ON THE PART OF THE ITA NO.6929/MUM/13 A.Y.2005-06 7 ASSESSEE TO DISCLOSE THE MATERIAL FACTS BEFORE THE ASSESSING AUTHORITY AT THE TIME OF ASSESSMENT U/S.143(3) OF THE ACT DAT ED 31.12.2007. 6. IN VIEW OF THE SAID FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE ASSESSMENT U/S.147 / 148 OF THE ACT IS NOT LIABLE TO BE SUSTAINABLE IN THE EYES OF LAW. IN THIS REGARD WE F IND SUPPORT OF [2009] 120 ITD 374 (DELHI) IN THE ITAT DELHI BENCH IN CASE OF MOONBEAM FINVEST LEASE LTD. VS. INCOME TAX OFFICER WARD 5(4) AND ITAT, INDORE BENCH IN ITA NO.150/IND/2010 FOR A.Y.2001-02 IN CASE OF ACIT 1(1) VS. M/S. RAJENDRA KUMAR BHANDARI AND ITAT , DELHI BENCH IN ITA NO.2081/DEL./2009 FOR A.Y.2000-01 IN C ASE OF M/S. STAR FINVEST (P) LTD. VS. DCIT CIRCLE 9(1) AND IN ITAT, MUMBAI BENCH IN ITA NO.2910/M/13 FOR A.Y.2006-07 IN CASE O F MOTILAL R. TODI. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED IN QUEST ION. ISSUE NO.1 4:- 7. WHILE DECIDING THE ADDITIONAL GROUND, THE REOPEN ING U/S.148 OF THE ACT HAS BEEN ORDERED TO BE SET ASIDE THEREFORE IN THE SAID CIRCUMSTANCES THERE IS NO NEED TO DECIDE THESE ISSU ES AS THE SAME WOULD BE FUTILE EXERCISE AND IF DECIDE THE SAME WOU LD BE ACADEMIC IN NATURE. THEREFORE THERE IS NO NEED TO DECIDE THE S AME. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS HEREBY ALLOWED. ITA NO.6929/MUM/13 A.Y.2005-06 8 ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH AUGUST , 2016. SD/- SD/- (R.C.SHARMA) (AMARJIT SINGH) # / ACCOUNTANT MEMBER %& # /JUDICIAL MEMBER ' ( MUMBAI; )# DATED : 10 TH AUGUST, 2016 MP MP MP MP * +%'#, -,(' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. * ( ) / THE CIT(A)- 4. * / CIT 5. -./ &&01 , 01' , ' ( / DR, ITAT, MUMBAI 6. /34 5 / GUARD FILE. ' / BY ORDER, - & //TRUE COPY// ./$ ! /(DY./ASSTT. REGISTRAR) , ' ( / ITAT, MUMBAI