TaxTMI 
TaxTMI 
2015 (8) TMI 707
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....e implication of the facts and issues involved, we shall take-up the cross appeals for the assessment year 2002-03 being ITA 5053/Mum/2009 and 4895/Mum/2009. In the assessee's appeal following grounds have been raised: "1. The Commissioner of Income-tax (Appeals)-IX, Mumbai ["the CIT(A)'] erred in upholding the validity of the assessment proceedings initiated under section 147 of the Income-tax Act, 1961 ("the Act") by the Dy. Commissioner of Income-tax, 9(3) Mumbai ("the AO"). 2. The CIT(A) erred in upholding the AO's decision to treat the compensation from M/s Popley Gold Plaza as "Income from House Property" and not as "Profits and Gains of Business" as returned by the Appellant. 3. The CIT(A) erred in computing the annual value of the property at 8.5% of Rs. 15,48,76,529/- instead of computing it at the municipal rateable value of the property. 4. If the municipal rateable value was not to be adopted, the CIT(A) ought to have computed the annual value at the rate of 7% of Rs. 9,04,63,112/-, being the cost of investment in the building. 5. The CIT(A) erred in upholding levy of interest under section 234B of the Act". 3. Besides this, the assessee has also ra....
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....crores from Shri Ramchandra K. Popley, director of assessee-company. As the records indicate, Shri Suraj Ramchandra Popley, son of the said director is one of the partners of M/s. Popley Gold Plaza, the lessee firm. The assessee has treated the letting out of the property as a business thereby claiming depreciation etc. This claim may not be acceptable. It is further seen that the so called compensation per annum of Rs. 3 lac is being received at this rate right from assessment year 2001-02 or so. The loan advanced by the director is also continuing from A.Y. 2001-02 for which no interest is claimed nor paid all these years. Obviously, the amount of compensation received by the assessee is an insignificant sum as compared with the total book value of the leased premises which is more than Rs. 10 crores. It is obvious from the details on record that because of the close nexus between the lessor-assessee and the lessee-partnership firm, no interest is charged on the whopping amount of Rs. 16.07 crores. If interest is charged say at the rate of 12%, the interest amount will be about Rs. 1.93 crores which would have been payable by the assessee per annum, whereas the assessee receiv....
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....bout the lease rental income derived from the letting out of the property. In response, the assessee had filed all the details of unsecured loans and also regarding the income shown by the assessee from the business assets. The relevant questionnaire issued by the Assessing Officer during the course of the assessment proceedings has been placed in the paper book at page 40 and the reply of the assessee at pages 41 & 42. Thereafter, the assessment was completed u/s 143(3) accepting the assessee's computation of business income. He further pointed out that in the AY 2001-02, the assessment so completed as above was reopened precisely on same 'reasons', however, from the stage of the Tribunal, the action taken u/s 147 vide notice issued u/s 148 has been struck down on the ground, that such a reopening is bad in law in view of the proviso to section 147 [ i.e. reopened beyond the period of 4 years without there being any failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment] and also on the ground that there was no new information or material coming to the possession of the Assessing Officer to reopen the completed assessment. Even ....
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....an 28 wherein, the Hon'ble High Court concluded that even if the return has been accepted u/s 143(1), the Assessing Officer cannot reopen the case u/s 147 unless some tangible material comes into possession of the Assessing Officer subsequent to the issue of intimation u/s 143(1). In absence of any such material available with the Assessing Officer, requisite reason to believe of escapement of income cannot be formed. In this case also Hon'ble High Court have taken note of decision of Hon'ble Apex Court in the case of ACIT vs. Rajesh Jhaveri Stock Brokers P Ltd. (supra). (iii) Delta Air Lines, Inc. vs ITO, ITAT Mumbai Bench reported in [2013] 153 TTJ 506. (iv) Bapalal & Co. Exports vs JCIT reported in [2007] 289 ITR 37 (Mad). 7. Thus, he concluded that in the present case also there is no requisite tangible material coming on record to suggest that the income shown by the assessee is to be assessed as income from house property so as to deviate from the past history of the assessee's case and accordingly, there could not be any 'reason to believe' for reopening the case u/s 143(1). 8. On the other hand, the Ld. DR on behalf of the revenue, submitted that once the assess....
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....0-01, the said business income stood assessed and accepted by the department. In the assessment year 2001-02, again the assessee had offered the receipts from letting out of the business premises as business income, which too was accepted under scrutiny assessment completed u/s 143(3). Later on, such an assessment was reopened u/s 148 on the reason that the compensation of Rs. 3 lakhs received by the assessee from letting out of the business premises should be taxed/assessed as "income from house property" and such "reasons" were identically worded with the reasons recorded for the impugned assessment year. However, the Tribunal vide order dated 28.05.2014 had quashed the proceedings u/s 148 as invalid firstly, on the ground that there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment; and secondly, no new information or material has come into the possession of the Assessing Officer after the completion of the said assessment. Thus, in this manner, up till A.Y. 2001-02, the receipts/compensation shown by the assessee stood assessed as "business income". Now, for the impugned assessment year i.e. A.Y. 2002-03, the ....
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....as justified in entertaining 'reason to believe' for reopening the case u/s 147. 11. The Statute has given sufficient power to the Assessing Officer for reopening the assessment either in the cases where return of income has been accepted u/s 143(1) or has been subjected to scrutiny assessment u/s 143(3). However, the common requirement in both the cases is that the Assessing Officer must have 'reason to believe' that income chargeable to tax has escaped assessment. The words "reason to believe" is the key element and are stronger than the word "satisfied" and whether the Assessing Officer had 'reason to believe' or not is always a question of jurisdiction which needs to be examined whenever the reopening u/s 147 is challenged. It is a trite law that the 'reason to believe' entertained by the Assessing Officer should have a rational connection and relevant bearing on the formation of belief with the tangible material coming on record having live link nexus with the income chargeable to tax escaping the assessment. The belief entertained by the Assessing Officer must be held in good faith and not merely a pretence for review and roving and fishing enquiry. Here in this case, no t....
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....n the assessee's appeals becomes academic and accordingly, the same are treated as infructuous and dismissed as such. 13. As regards the issue raised in the additional ground, the same are though admitted, however, are not adjudicated separately in view of our conclusion that entire assessment order itself is bad in law and has been quashed. 14. Similarly, the issues raised in the departmental appeal also have become purely academic in view of the above finding and same are treated as dismissed as infructuous. 15. As admitted by both the parties, similar "reasons" have been recorded by the Assessing Officer in the assessment years 2003-04 and 2004-05 which are identically worded and the facts are also completely same. Accordingly, the finding given in the appeal for the assessment year 2002-03 will apply mutatis mutandis in these years also and consequentially the reopening of assessment u/s 147 for both the years that is AYs. 2003-04 and 2004-05 are held to be bad in law and are hereby quashed. Thus, appeal of the assessee for the assessment year 2003-04 and 2004-05 are treated as allowed, whereas the appeals of the revenue are treated as dismissed, because they have been....
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....efore, reason to believe that the income has escaped to the tune of Rs. 4.10 crore (approx) with the meaning of sec. 147 of the I.T. Act, 1961. Tax effect involved Rs. 1.44 crore (approx.)". 17. From the reading of above reasons, Mr. Dastur submitted that in substance there is no change in the grounds for reopening the case as the basic facts remains the same. There is no fresh material or any tangible material for these years also so as to hold that Assessing Officer has "reason to believe" for reopening the assessment u/s 147. All his arguments and the arguments of the Ld. DR for this year also are the same. 18. After considering the aforesaid "reasons recorded", we find that there is no material change in the reasons and grounds taken for reopening the case as has been recorded in the earlier years, inasmuch as in this year also the Assessing Officer has sought to reopen the case on the ground that the compensation received by the assessee of Rs. 3 lakhs is inadequate and the provisions of section 23(1)(a) should be invoked and the income received by the assessee should be assessed as income from house property instead of business income. The said reasons again are in the ....