TaxTMI 
TaxTMI 
2011 (3) TMI 1056
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.... holding that the reopening of assessment is void ab initio since there was no valid reason for reopening the assessment. Therefore, revenue is in appeal before us. 2. Facts of the case are stated in brief. Assessee is a company which was not actively engaged in the business since past several years. The company purchased a property situated at S.V. Road admeasuring 859.93 sq. mtrs. In order to maintain the property it had to incur certain expenditure in the form of security charges, water charges, municipal taxes etc., and the company having continued its existence it had to mandatorily incur certain expenditure in the form of audit fees etc. From year to year it had incurred expenditure in the form of legal fees, security charges, bank charges, filing fees, audit fees, consultancy charges, professional charges, water charges, municipal taxes and miscellaneous expenditure. Since the company had no business activity other than holding the property, whatever expenditure was incurred for maintaining the said property was added to the cost of the property from year to year so as to depict true and correct picture of the company. It may be noticed here that the assessee-company had ....
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....d assessee had developed the property consisting of 110 units and sold the same during the period relevant to the assessment year 2000-01". 5. In response to the show-cause notice, assessee furnished a detailed reply and upon going through the reply the Assessing Officer noticed that the initial assumptions which were the basis for reopening of the assessment were wrong but, he, proceeded to recompute the total income on the ground that the assessee is not entitled to the benefit of indexed cost of acquisition of the property, by treating the sale proceeds as capital gains. In the opinion of the Assessing Officer, income on sale of property was assessable to tax under the head "profits and gains of business and profession". Accordingly, he arrived at the taxable income of Rs. 35,63,340. Since assessee capitalised various expenses over the years and enhanced the cost of the property he assumed that the assessee's intention was to treat this property as a commercial asset, to be developed subsequently, and hence it cannot be treated as an investment in property. 6. Aggrieved, assessee challenged the jurisdiction of the Assessing Officer in reopening the assessment and contended....
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....s reopened by issuing notice under section 148 of the Income-tax Act, 1961, why it could not have been vacated after receiving the reply/explanation of the appellant in the absence of substantial adverse material in his possession to suggest that the appellant has changed the usage of the property as understood in the beginning by the learned Assessing Officer. Thus, I am of the firm opinion that this was not a fit case for reopening the assessment under section 147 of the Income-tax Act, 1961. Nevertheless, I do not find any cogent reason for which the re-assessment could be sustained in law, as none of the fact perceived by the learned Assessing Officer at the time of recording reasons has been sustained with adequate material. It is needless to say that petty expenses such as legal fees, security charges, bank charges, filing fees, audit fees, consultancy charges, professional charges, legal charges, water charges, miscellaneous expenses, municipal taxes etc., are not substantial expenses, which if capitalised, would tantamount to change capital asset into developed "Oshiwara Plaza" as presumed by the learned Assessing Officer." 8. Aggrieved, revenue is in appeal before us. L....
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....t known as to what further details are required with regard to the same. The Assessing Officer claims to have "understood" that the property in question was developed into shops and marriage hall consisting of 110 units and these "facts" were found to be wrong while making the re-assessment proceedings which in itself shows that the assumption of jurisdiction is based on invalid grounds. He has also taken us through the reply dated 3-2-2006 in response to the notice issued under section 148 of the Act wherein it was clearly stated that in all the balance sheets the property was shown in the fixed assets column as 'Jogeshwari property' and it was wrong to state that it was shown as 'Andheri property'. It was also stated that the property was sold in 'as it is condition', without any change, and the so-called assumption that it was developed into 110 units known as "Oshiwara Building" is false. A letter to BMC, Andheri was addressed to obtain information about the condition of the plot and after obtaining the same it was furnished before the authorities. 10. Page 22 of the paper book is a letter addressed by the Income-tax Officer 5(1)(2), Mumbai wherein he appears to have conduct....
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....ssessing Officer would be liable to be struck-down as invalid. 13. Recently the Hon'ble Bombay High Court had an occasion to consider an identical issue in the case of CIT v. Jet Airways (I) Ltd. [2010] 195 Taxman 117. In the aforementioned case the undisputed facts are that assessment was reopened on a particular ground but no addition could be made on the said ground upon reopening the assessment but the Assessing Officer proceeded to make certain additions on certain other grounds, based upon the expression "and also" in section 147 of the Act. It may be relevant to notice that section 147 empowers the Assessing Officer to "assess or re-assess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of proceedings under this section- - -". Explanation 3 to section 147 which was inserted with retrospective effect from 1-4-1989 reads as under : "Explanation 3-For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the cour....
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....d in quashing the reassessment proceedings. He relied upon the decision of the ITAT, Jodhpur Bench in the case of Dr. Devendra Gupta v. ITO [2006] 282 ITR 18/[2005] 97 ITD 581 (AT) wherein similar view was taken by the Jodhpur Bench of ITAT. In the case of Asstt. CIT v. O.P. Chawla [2008] 114 ITD 69/[2006] 8 SOT 242 (TM) the ITAT, Delhi Bench observed that notice issued for reopening an assessment should be based on some material and in the event of finding that the re-assessment proceedings were not based on any investigation, reassessment proceedings cannot be upheld. He thus strongly submitted that in the instant case the Assessing Officer miserably failed to justify his action and arbitrarily sought to invoke the provisions of section 148 of the Act to reopen the assessment merely to prolong the litigation. 15. Joining the issue learned DR submitted that in the course of assessment proceedings for the assessment year 2001-02 Assessing Officer had genuinely felt that some construction had taken place and in the absence of proper details he had to take recourse to the provisions of section 148 of the Act to reopen the assessment for the assessment year 2000-01 and merely becau....