ITO 11(1)-3, MUMBAI V. NEW ERA TALKIES, MUMBAI

ITA 8736/MUM/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75601 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-02-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 14-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Assessee Lawyers: BHUPENDRA SHAH
• Keywords: Reopening of assessment; Cost of acquisition; Tangible material; Difference of opinion; Assessment record; Reason to believe; Change of opinion
• Section: 147; 148; 143(3)

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL MUMBAI - B BENCH MUMBAI . . , / ! ! ! ! , BEFORE S/SH.B.R.MITTAL,JUDICIAL MEMBE R & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 8736/MUM/2010, ' ' ' ' # # # # / ASSESSMENT YEAR 2003-04 INCOME TAX OFFICER 11(1)-3, R NO. 438, AAYAKAR BHAVAN, MUMBAI. VS. NEW ERA TALKIES 3E, NAAZ BUILDING, LAMINGTON ROAD, MUMBAI-400004 PAN: AACFN7269N ( $% / APPELLANT) ( &'$% / RESPONDENT) $% $% $% $% ( (( ( ) ) ) ) / REVENUE BY : SHRI SURENDRA KUMAR &'$% ( ) / ASSESSEE BY : SHRI BHUPENDRA SHAH ' ' ' ' ( (( ( *+ *+ *+ *+ / DATE OF HEARING : 06.02.2014 ,-# ( *+ / DATE OF PRONOUNCEMENT : 19.02.2014 ' ' ' ' , 1961 ( (( ( 254 )1( *.* *.* *.* *.* / / / / ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,A.M : CHALLENGING THE ORDER DT.17.09.2010 OF THE CIT(A)-3 ,MUMBAI,ASSESSING OFFICER(AO)HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) HAS ERRED IN HOLDING THE RE-OPENING OF ASSESSMENT U/S 148 OF THE I T ACT 1961 TO BE BAD IN LAW AND NOT VALID. 2.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN COMING TO THE CONCLUSION THAT THE RECORDING OF REAS ONS AND THE SUBSEQUENT ASSESSMENT FRAMED IS A CHANGE OF OPINION, WHEN NO ORIGINAL ASSESSMENT U/S 143(3) HAD BEEN FRAMED FOR AY.2003-04. 3.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) MUMBAI HAS ERRED IN NOT DECIDING THE ISSUE ON MERIT REGARDING THE DATE OF TRANSFER OF PROPERTY WHEN THE ASSESSMENT HAD SPECIFICALLY BEEN MADE ON PROTECTIVE BASIS. 4.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) MUMBAI HAS ERRED IN RELYING UPON THE JUDGEMENT OF HONBLE APEX COURT IN CASE OF CIT VS. KELVINATOR INDIA LTD. 2010 187 TAXMAN 312(SC) WHICH IS NOT APPLICABLE IN THIS CASE. 5.THE APPELLANT PRAYS THAT THE ORDER OF CIT(APPEALS ) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 6.THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. ASSESSEE-FIRM,ENGAGED IN THE BUSINESS OF EXHIBITION OF CINE-FILMS,FILED ITS RETURN OF INCOME ON 25.11.2003DECLARING TOTAL INCOME OF RS. 36,22,466/- .IT WAS PROCESSED U/S.143(1) OF THE ACT AND THEREAFTER,A NOTICE U/S.148 OF THE ACT,DATED 4.3.20 09,WAS ISSUED TO THE ASSESSEE INTIMATING IT OF REOPENING THE CASE.BY ITS LETTER DATED 21.8.2009,AS SESSEE SUBMITTED THAT HIS RETURN FILED ON 25.11. 2013 MIGHT BE CONSIDERED AS RETURN FILED IN PURSUAN CE OF NOTICE U/S.148.ASSESSMENT U/S. 143(3) R.W.S.147 WAS PASSED ON 16.12. 2009 ASSESSING TOTAL INCOME OF THE ASSESSEE AT RS.2,79,16,302/-. EFFECTIVE GROUND OF APPEAL PERTAINS TO REOPENING OF THE ASSESSMENT. BRIEF FACTS OF THE CASE : 2 ITA NO.8736/MUM/2010 NEWERA TALKIES ASSESSMENT FOR AY.04-05 WAS COMPLETED U/S.143(3) OF THE ACT ON 20.10.2006 ON TOTAL INCOME OF RS.2.57CRORES.IT INCLUDED INCOME UNDER THE HEAD LON G TERM CAPITAL GAINS(LTCG)WHICH WAS COMPUTED AT RS.2,15,75,316/-.LTCG HAD ARISEN OUT OF SALE AGREEMENT DATED 7.7 2003.FROM THE ASSESSMENT RECORD OF AY.2004-05,AO FURTHER FOUND TH AT THE ASSESSEE HAD ENTERED INTO A DEVELOP- MENT AGREEMENT ON 31.L 2003 WITH M/S NEW ERA DEVELO PERS FOR RS 2.5 CRORES FOR DEVELOPMENT OF PORTION OF PROPERTY.OUT OF THE PLOT OF THE LAND,ADM EASURING 2118.40 SQ.MTRS.,ASSESSEE RETAINED 1207 SQ MTRS.OF THE PLOT.AO CALCULATED THE PROPORTI ON OF RETAINED LAND AND COST OF ACQUISITION. HOLDING THAT THESE WERE ASSETS ON WHICH DEPRECIATIO N HAD BEEN CLAIMED BY THE ASSESSEE,HE DETERMINED THE STCG AS TAXABLE IN IMPUGNED YEAR BY TAKING THE NET SALE CONSIDERATION SHOWN BY THE ASSESSEE AND REDUCING COST OF ACQUISITION OF LA ND BY EXCLUDING THE COST OF AREA RETAINED BY THE ASSESSEE-COMPANY.AS PER THE AO,IN THE YEAR UNDER AP PEAL,STCG,AMOUNTING TO RS.2,42,93,834/-, HAD ARISEN TO THE ASSESSEE.HE WAS OF THE OPINION TH AT POSSESSION OF THE PROPERTY HAD BEEN GIVEN BEFORE 31.1.2003,SO THERE WAS UNDERSTATEMENT OF INC OME FOR THE AY.2003-04.FINALLY,HE HELD THAT THERE WERE REASON TO BELIEVE THAT INCOME TO THE EXT ENT OF RS.2,42,93,834/- HAD ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 READ WITH EXPLANA TION 2(B) OF ACT.ACCORDINGLY,A NOTICE U/S.148 WAS ISSUED.AS STATED EARLIER,AO PASSED AN ORDER U/S .147 R.W.S.143(3)OF THE ACT AND TAXED THE ESCAPED INCOME. 2.1. 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 THE ASSESSMENT ORDER DID NOT INDICATE THAT THE AO HAD F URNISHED A COPY OF REASONS RECORDED BY HIM TO THE ASSESSEE,THAT THE ASSESSEE HAD NO CHANCE TO FUR NISH HIS SAY ON THE REASONS FOR REOPENING THE CASE,THAT THE REASONS FOR REOPENING NARRATED IN THE ASSESSMENT ORDER INDICATING THAT THE INFORMATION OR MATERIAL ON THE BASIS OF WHICH IMPUGNED ASSESSME NT WAS REOPENED WERE ALL OBTAINED FROM THE RETURN OF INCOME OF THE ASSESSEE AND ASSESSMENT REC ORD FOR AY.04-05,THAT THE COPY OF AGREEMENT DATED 31.1.2003, COPY OF REGISTRATION OF THE SAME W ERE FURNISHED BY ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS OF AY.2004-05,THAT IN THAT Y EAR THE SUBMISSIONS OF THE ASSESSEE WERE ACCEPTED AND CAPITAL GAIN WAS SUBSTANTIVELY TAXED I N THAT ASSESSMENT YEAR,THAT ON THE SAME DOCUMENTS AND INCOME ARISING FROM THE SAME TRANSACT ION AO HAD RELIED UPON FOR REOPENING THE ASSESSMENT ORDER FOR AY.2003-04.REFERRING TO THE JU DGMENT OF THE HONBLE APEX COURT DELIVERED IN THE CASE KELVINATOR INDIA LTD. (187TAXMAN312),HE HELD THAT THERE WAS NO TANGIBLE MATERIAL TO COME TO CONCLUSION OF ESCAPEMENT OF INCOME,THAT ON THE SAME FACTS AO HAD FOUND CAPITAL GAINS SUBSTANTIVELY TAXABLE FOR AY.2004-05,THAT ASSESSMEN T FOR THAT YEAR WAS PASSED U/S.143(3) OF THE ACT,THAT INCOME FROM CAPITAL GAINS ON THE SALE OF T HE SAME PROPERTY WAS BROUGHT TO TAX BY AO FOR AY.2004-05 WHICH BY REOPENING WAS BEING TAXED AGAIN FOR AY 2003-04,THAT THE REASONS RECORDED FOR REOPENING BY THE AO AS NARRATED IN THE IMPUGNED ASSESSMENT ORDER, COULD ONLY BE CONSIDERED A CHANGE OF OPINION,THAT THERE WAS NO TANGIBLE MATE RIAL BEFORE THE AO THAN ALREADY CONSIDERED BY HIM WHILE PASSING ORDER FOR THE YEAR 2004-05 FOR TA XING CAPITAL GAINS ON THE SALE OF THE SAME PROPERTY,THAT REOPENING WAS NOT VALID AND WAS BAD I N LAW. 2.2. BEFORE US,DEPARTMENTAL REPRESENTATIVE(DR)SUPPORTED THE ORDER OF THE AO.AUTHORISED REPRES -ENTATIVE(AR) SUBMITTED THAT THE AGREEMENT WAS SIGN ED,EXECUTED AND ADJUDICATED BEFORE JOINT SUB REGISTRAR ON 26.5.2003 WHICH WAS RELEVANT TO AY .04-05,THAT THE ASSESSMENT OF CAPITAL GAINS HAD RIGHTLY TAKEN PLACE IN AY.2004-05,THAT POWER OF ATTORNEY IN FAVOUR OF DEVELOPER WAS SIGNED ON 30.6.2003 WHICH WAS REGISTERED ON 7.7.2003 AND O THER DATES REGARDING PAYMENT ETC. WERE IN A LATER PERIOD,THAT AO HAD TAXED THE SAME INCOME TWIC E,THAT THERE WAS NO REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT,THAT AO DID NOT SUPPL Y COPY OF THE REASONS TO THE ASSESSEE. 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT FOR REOPENING THE ASSESSMENT FOR THE YEAR UNDER APPEAL, AO HAD RELIED UPON THE MATERIAL THAT WAS FURNISHED DURING THE TAXATION PROCEEDINGS OF AY.200 4-05,THAT THE AO HAS SPECIFICALLY MENTIONED 3 ITA NO.8736/MUM/2010 NEWERA TALKIES THAT ASSESSMENT FOR YEAR UNDER CONSIDERATION WAS MA DE ON A PROTECTIVE BASIS,THAT AO DID NOT SUPPLY COPY OF REASONS TO THE ASSESSEE.IT IS A FACT THAT LTCG ARISING OUT OF THE PLOT OF LAND HAD BEEN ASSESSED SUBSTANTIVELY IN THE AY.2004-05 AND T HE BASIS FOR REOPENING OF ASSESSMENT WAS THE RETURN FILED BY THE ASSESSEE FOR THAT YEAR AND THE DOCUMENTS PRODUCED BEFORE THE AO FOR THAT YEAR. IN OUR OPINON,FAA HAS CORRECTLY HELD THAT THERE WER E NO REASONS TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT AND IT WAS A MERE CHANGE OF OPIN ION.THEREFORE,CONFIRMING HIS ORDER,WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE A O. AS A RESULT,A PPEAL FILED BY THE AO STANDS DISMISSED. 0 1 '0* VF/KDKJH VF/KDKJH VF/KDKJH VF/KDKJH 2 3 V VV V 5* ( * 67 . ORDER PRONOUNCED IN TH E OPEN COURT ON 19 TH FEBRUARY, 2014. / ( ,-# 8 19 9+ , 2014 - ( . . SD/- SD/- ( . . . B.R.MITTAL) ( ! ! ! ! / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, :' /DATE:19.02.2014 SK / / / / ( (( ( &*; &*; &*; &*; < ;#* < ;#* < ;#* < ;#* / 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 / ;?. &*' , . . . 6. GUARD FILE/ . 9 . ';* &* //TRUE COPY// /' / BY ORDER, @ / 6 DY./ASST. REGISTRAR , /ITAT, MUMBAI.