TaxTMI 
TaxTMI 
2019 (4) TMI 271
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.... grounds: "1. For that on the facts and in the circumstances of the case, the CIT was unjustified in law and on facts in revising the assessment order u/s 143(3) passed for the A.Y. 2013-14 revenue even though the order not assessing the FD interest of Rs. 4,06,41,567/- was neither erroneous nor prejudicial to the interest of the revenue within the meaning of Sec. 263 of the Act. 2. For that on the facts and in the circumstances of the case, there was sufficient material available before the AO on the basis of which it was evident that the FDs with Indian Bank made by MIs. Ferani Hotels Pvt. Ltd. did not belong to the appellant and as such interest on FDs made in the name of Ferani Hotels Pvt. Ltd did not constitute appellant's income and in that view of the matter the AO had rightly not included such interest in the assessed income of the appellant for A.Y. 2013-14. 3. For that on the facts and in the circumstances of the case, the CIT was wrong in holding that because the tax deduction in respect of interest oil by Indian flank was reported against Permanent A/c No. of the appellant the said interest was liable to be assessed as income of the appellant. 4. For that....
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....In that capacity the Administrator not only administered the affairs of the Estate but he regularly filed Income Tax Returns in respect of income derived by the Estate of EFD in India. In respect of the income earned by the Estate & which was assessable under the head Income from Other Sources, the assessee regularly followed cash system of accounting. This method of accounting was accepted by the Department in all the assessments including the assessment for the A.Y. 2013-14. Upon rapid urbanization in the City of Mumbai and with increasing pressure of population, the tracts of land owned by the Estate were considerably encroached upon by the unauthorized occupiers. Besides, after coming into force of ULCA in 1976, there was a danger to the lands belonging to Estate of EFD being declared and held as excess land. In the circumstances, in order to protect the interest of the beneficiary of the Estate of EFD, the Administrator with the consent of the beneficiary i.e. Baehoobai entered into two Development Agreements dated 02-01-1995 with Ferani Hotels Pvt. Ltd (Ferani) & Ivory Properties & Hotels Pvt. Ltd respectively. Under the Development Agreement dated 02-01-1995 Ferani was grant....
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....though the registered Power of Attorney granted in favour of Ferani was revoked by the Administrator. Prior to termination of the Agreement in 2008, when Ferani was entering into Agreements for sale with prospective Flat Purchasers, 12% share of the sale value was deposited in an Account with ICICI Bank which was maintained by Estate of EFD for collection purposes. Upon termination of the Development Agreement in May 2008, the Administrator had instructed ICICI Bank not to accept deposits being 12% share of the sale proceeds receivable under the Agreement dated 02-01-1995. Since Estate of EFD as well as its Banker i.e. ICICI Bank was not receiving or accepting the payment of 12% share of the sale proceeds but Ferani suo motto opened a Current A/c bearing No.843 184512 with Indian Bank, Bandra Branch, Mumbai under the nomenclature/ cause title of "Ferani Hotels Pvt. Ltd-NN Wadia share". Although such A/c was opened by Kerani, the Administrator was never informed about opening of such an A/c. The Administrator came to know about existence of such A/c only in 2012 when the statement was made before Hon'ble Bombay High Court in that behalf. 4. Be the same as it may, even after Estate ....
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....by making notice of Motion in May 2008, but such an application was moved only in February 2010 and as such there was lapse of considerable time. In this regard, the defendant Ferani raised the plea of limitation in terms of Sec. 9A(1) of the Civil Procedure Code. The Court noted that since the plea regarding bar of limitation was a preliminary issue which went to the root of jurisdiction of the Court, it had to be decided in the first instance. Since the preliminary issue of limitation was required to be decided first, in Para-81 of its order the Court ordered Ferani not to put any party either genuine third party or related parties in possession of the constructed premises except with the approval of the plaintiff pending the Suit. The Court also directed that the issue relating to limitation would be decided first on 26-07-2010 being the jurisdictional issue. Since in the order dated 19-07-2010 Hon'ble Bombay High Court had issued injunction against Ferani from handing over possession to the Flat purchasers, an appeal No. 817 of 2010 was moved before the Division Bench of Hon'ble Bombay High Court by Ferani. Similarly, since the injunction as sought for by Estate of EFD was not ....
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....ms of the directions issued." From bare perusal of the judgment dated 19-07-2012, it will therefore be clear that the Division Bench of Hon'ble High Court did not adjudicate the Suit filed by the assessee, wherein the assessee had requested for granting relief in the form of cancellation of Agreement dated 02-01-1995 and restitution of the property. Hon'ble High Court while disposing the appeal on 19-07-2012 only dealt with the Notice of Motion moved by the applicant seeking interim directions restraining Ferani from constructing the new buildings, creating third party interest and handing over possession. 6. The CIT (International Taxation)-2, Mumbai passed revision order u/s 263 of the Act dated 08.02.2018 for the A.Y. 2013-14 directing AO to pass an assessment order afresh by bringing the sum of Rs. 4,06,41,567/- to tax in accordance with the discussions made by him in the Revision Order. According to CIT prior to passing of the assessment order u/s 143(3) of the Act, the AO had not applied her mind and had failed to consider taxability of interest received by the assesse from Indian Bank during FY 2012-13, which made the assessment order erroneous and prejudicial to the inter....
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....bservation that the moneys deposited in the designated A/c by Ferani could be appropriated by Estate of EFD or that the Estate of EFD could exercise contract or domain either over the amounts deposited in the designated A/c or over the fixed deposits made by Ferani out of the sums deposited in the designated A/c. Nowhere the Court had even indicated that in its opinion Estate of EFD could have any access to the sums collected by Ferani. Keeping in mind the fact that Estate EFD in the Suit filed had requested for cancellation of the Agreement dated 02-01-1995, the assessee had sought restitution of the property in its original form and the Court had categorically directed that the amounts invested by Ferani in fixed deposit would abide by the further orders of the Trial Judge trying the Suit filed by Estate of EFD. 9. Ld Counsel also stated that the Court was very categorical in its direction that the amount collected by Ferani would remain under its exclusive control and over which Estate of EFD would neither have any control or access. Even CIT acknowledged in para 2.2 of supplementary show cause notice u/s 263 of the Act dated 24.11.2017 as follows: - "Even though the amount i....
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....3(6) of the Act to Indian Bank. In response, the Bank had furnished statement in respect of A/c No. 843184512 for the F.Y. 2012-13 in which Ferani had deposited various sums being 12% of the sale price collected by Ferani from Flat purchasers. Indian Bank also provided a statement of fixed deposits made during F.Y. 2012-13 out of the amounts deposited in A/c No. 843184512. The relevant copy of the letter of Indian Bank addressed to the AO and the relevant Bank statements & Fixed Deposit statement are attached at Pages 367 to 353 of the assessee Paper Book. It would be noted from the said Bank statements that even though certain entries appeared in the Bank statement indicating transfer of funds from Current A/c to Fixed Deposit A/c, there is no entry appearing in the Bank statement which in any manner shows that Indian Bank had actually paid or credited any interest on FD to the A/c No. 843184512. Even the statement of FDs for F.Y.2012-13 nowhere indicates that during F.Y. 2012-13 the Bank had actually paid any interest on FDs made with the said Bank. 11. Ld Counsel in view of the above facts argued that in the Show cause notice u/s 263 of the Act the CIT however alleged that the ....
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.... be brought to tax in the assessment order of the AY 2013-14 in the same way that it was done by the same AO in the assessment of the AY 2014-15. Since this was not done in the assessment order of the AY 2013-14 there has been under assessment of the total income of the assessee by Rs. 4,05,41,567/- and hence, the assessment order is erroneous and prejudicial to the interest of the revenue. 13. We have heard rival contentions and gone through facts and circumstances of the case. We have gone through the detailed arguments made by Ld Counsel for the assessee. We have also heard LD CIT-DR and gone through case records. We noted that the amount of Rs. 4,06,41,567/- credited by Indian Bank on the FDs did not constitute income chargeable to tax for the A.Y. 2013-14 for the present assesse merely on the ground that the bank had deducted tax at source and the tax payment was reported against the PAN allotted in the name of Estate of EFD. We have notice from the judgment of Hon'ble Bombay High Court dated 19.07.2012 that the relevant directions of the High Court were pronounced while disposing the appeal filed by Ferani against the judgment of the Single Judge disposing Notice of Motion f....
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....ame as it may, in the present case the issue is not whether the part of the sale price deposited in the A/c No. 843184512 was assessable as income of the assessee. After the A/c No. 843184512 was unilaterally opened by Ferani in July 2009, the amounts collected & kept in said Current A/c did not yield any further income. In July 2012 the Division Bench of Hon'ble Bombay High court while disposing of the appeal of Ferani, however issued directions to Ferani to maintain the account of the amounts collected and deposited in the designated A/c. The Hon'ble High Court further directed Ferani (and not Estate of EFD) to make FDs out of the sums collected. The Hon'ble High Court's order further clarified that the amount invested in the Fixed Deposit would abide by further orders of the Trial Judge. As such the directions of Hon'ble Bombay High Court were express in their intent and language. Nowhere the order Court required Estate of EFD to take any steps with regard or with reference to amounts collected by Ferani. It was not for Administrator to keep account of the moneys collected. The directions of the Court expressly bound Ferani to deal with the amounts collected by it in a part....
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....f the funds under the custody of the Court & therefore not liable to be taxed as income of the Registrar General in whose name the fixed deposit was made. The Court therefore held that Bank had no obligation to deduct tax at source. 16. We have also noted that the CIT further observed that in the AIR information the Bank had reported the interest of Rs. 4,06,41,567/- against the assessee's name and against the PAN No. allotted to the assessee. It is further observed in Para-11 of the order that similar information was reported in Statement 26AS which reports the tax deductions made by the tax deductors from the payments made. According to CIT, if the Bank deducted the tax from interest and reported such tax deduction in Form-26AS of the assessee, then it was obligatory for the AO to assess the income because the tax was deducted at source from income reported in the name of Estate of EFD. We are of the view that an amount/receipt is assessable as income of an assessee only on the basis of charging provisions of Sec. 4 & 5 of the Act. Sec. 4 is the charging provision of the Act & it is therefore necessary for the AO to prove that the receipt though received by some other person....
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....k. This fact clearly proves that A/c No. 843184512 belonged to Ferani which was an existing A/c Holder of Indian Bank. The Bank also admitted that in order to comply with KYC requirements, a/c Holder had provided PAN Cards & Ration Cards of Gopal L Raheja through Sonali N Arora, who have no connection with Estate of EFD. The Bank informed that as per its record A/c No. 843184512 was authorized to be operated by Gopal L Raheja, Sandeep G Raheja or Durga S Raheja. None of the said 3 persons were related with the affairs of Estate of EFD. The Bank further admitted that it never had in its possession any A/c opening or A/c operating documents which bore signature of Mr. N N Wadia even though the cause title of the a/c contained his name. As regards making of the fixed deposits the Bank admitted that the FDs were created or made on the basis of instruction letters issued by Ferani Hotels Pvt Ltd addressed to the Bandra Branch and not because of any instruction issued by the Administrator of EF Dinshaw. Lastly the Bank admitted that the TDS from interest was reported against PAN: AAEPD8394A belonging to Estate of EFD as per the instruction given by Ferani Hotels Pvt Ltd and based on such....