TaxTMI 
TaxTMI 
2020 (1) TMI 994
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....the case and in law, has erred in accepting the Id. AO order of treating the rent received by Alt Property Private Limited as the Rent of the Appellant resulting into addition of Income under the head Income from House Property to the Appellant. The said addition may please be deleted and the returned Income of the Appellant under the head income from House Property may please be accepted. (b) Without prejudice to the above, if the income of Alt Property private Limited may be treated as income of the appellant, suitable directions be given towards giving credit of taxes paid by Alt Property Private Limited towards such income. (c) Without prejudice to the above grounds of appeal, the Id. CIT(A) has erred in estimating tie Alt Property Private Limited share of Income @ 30 % for the various services rendered by the said company to the tenant. The said proportion may kindly be revised considering the expenses incurred by the said company for the provision of the various services and addition if any may please be restricted to certain percentage of the profits earned in totality. (d) The assessee craves leave to add, alter, amend, modify or drop the....
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....[mother of the assessee]; and (iii). Sanjay Munshi, HUF [assesse's HUF]. 2. Aforesaid three tenants : (i). Ashoka Guest House [Prop: Mother of assessee]; (ii). Ravikanta Munshi [mother of the assessee]; and (iii). Sanjay Munshi, HUF [assesse's HUF]. Let out the property to : M/s Alt Property Pvt. Ltd. (assessee was 98% shareholder) 3. M/s Alt Property Pvt. Ltd. (assessee was 98% shareholder) Let out the property to various tenants. Also, M/s Alt Property Pvt. Ltd. had provided some services to its tenants, and also/borne certain costs viz. telephone expenses, electricity bills, water charges and other dues on their behalf. It was observed by the A.O that M/s Alt Property Pvt. Ltd. had during the year under consideration received a rent of Rs. 60,99,851/- from letting out the aforesaid property. On the basis of the aforesaid facts, the A.O called upon the assessee to explain that as to why the 'Annual lettable Value ('ALV') of the aforesaid property may not be taken at Rs. 60,99,851/-. As the reply filed by the assessee did not find favour with the A.O, therefore, he adopted the rent received by M/s Alt Property Pvt. Ltd. as the 'ALV' of the prope....
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....red by the ld. A.R that the Tribunal vide its aforesaid order viz. Shri Sanjay Munshi vs. The Income-tax officer, Ward 5(10(3), Mumbai [ITA No. 2981/Mum/2015; dated 03.01.2017] had thereafter vacated the aforesaid addition that was made by the A.O. 6. We have given a thoughtful consideration to the issue before us and have also perused the order passed by the Tribunal in the assesse's own case for A.Y 2007-08. On a perusal of the order of the tribunal in the assesse's own case for A.Y 2007-08, we are persuaded to subscribe to the claim of the ld. A.R that the issue involved in the present appeal is squarely covered in favour of the assessee. We find that the Tribunal while disposing off the appeal of the assessee for A.Y. 2007-08 had vacated the working of the ALV of the property under consideration by the lower authorities for multiple reasons viz. (i). that, the revenue had consistently been accepting the rateable rental value as claimed by the assessee in the preceding years; (ii). that, the income fetched by M/s Alt Property P. Ltd. by commercially exploiting the property under consideration as a 'business centre' could not have been adopted as the ALV of the said property; ....
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....dismiss the relevant conclusions of the AO / CIT (A). 7. Further, we find the Revenue has not taxed / re-assessed the other 50% of the said Mansion for he reasons unknown to us. This kind of half-backed attempt of AO in taxing the income of property is unsustainable in law. 8. Further also, we find that the Revenue has not considered the fact of valid incorporation APPL and object of the said company. Without any sustainable reasons, the profits of the said company are taken as the basis for taxing 50% of the ALV of the said Mansion in the hands of the assessee. In the process, the profits are twice-taxed ie once in the hands of the assessee partly and then in the hands of the APPL. In this regard, AO has not granted any relief to the said company. Rather, same is taxed twice and he denied the tax credit too while reassessing in the hands of the assessee. Actually, assessee raised this as the ground of appeal without prejudice. Thus, the approach of the Revenue in dealing with the whole issue is deplorable and legally unsustainable. We find, the AO / CIT (A) has allowed certain percentage of business income of the APPL as expenses and allowed the same before taxin....
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....tion viz. "Munshi Manor". Accordingly, the order of the CIT(A) is 'set aside' in terms of our aforesaid observations. 8. Resultantly, the appeal of the assessee is allowed in terms of our aforesaid observations. ITA No. 413/Mum/2016 A.Y 2011-12 9. We shall now advert to the appeal of the assessee for A.Y 2011-12. The assessee has assailed the impugned order on the following grounds of appeal before us : "On the facts and circumstances of the case and in law the learned CIT (Appeals)-10 erred in upholding the re-assessment order of the assessing officer who assessed the total income at Rs. 99.42,722/- instead of the returned income of Rs. 13,90,598/-, whereas 1. Upholding the Annual Letting Value of the rented property for the period 1.4.2010 to 30.9.2010 at Rs. 38,30,172/ - , as against Rs. 34,023/ - declared by the appellant in the return of income. 2. Not following the order ITA No. 2981/M/2015 dt. 03.01.2017 of the Hon'ble Tribunal in the Assessee's own case for AY 2007-08. 3. Ignoring that the said order ITA No. 2981/M/2015 dt 03.01.2017 was followed by the Ld CIT(A)- 10 for the A.Ys. 2009-10 and 2010-11 who deleted the ad....
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....unt of Rs. 11,86,496/- as his income from 'house property'. 12. The A.O while framing the assessment observed that though the assessee during the period 01.04.2010 to 30.09.2010 had claimed to have received a rent of Rs. 34,023/- from his tenants viz (a) Ashoka Guest House; (b). Ravikanta Munshi; and (c). Sanjay Munshi, HUF, they had further sub-let the said property to M/s Alt Property P. Ltd, which had commercially exploited the same during the aforesaid period and fetched a rental receipt of Rs. 64,15,059/-. On the basis of the rent which the aforesaid property viz. "Munshi Manor" had ultimately fetched during the period 01.10.2010 to 31.03.2011, the A.O called upon the assessee to explain as to why the ALV of the said property for the said part of the year may not be taken at Rs. 64,15,059/-. In his reply the assessee tried to impress upon the A.O that there was no justification in dislodging the income that was reflected by him under the head income from 'house property'. However, the A.O declined to accept the aforesaid claim of the assessee. As such, the A.O after attributing 15% of the rent received by M/s Alt Properties P. Ltd. to the services which were rendered to and....
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....roperty under consideration at 70% of the total rent receipts of Rs. 64,05,687/-. As regards the disallowance of the assesses claim of deduction u/s 24 of interest expenditure of Rs. 47,65,420/- and loan processing fees of Rs. 4,47,500/-, the CIT(A) upheld the view taken by the A.O. As regards the assesses claim for deduction of 'Municipal taxes' of Rs. 7,92,000/- the CIT(A) directed the A.O to verify the factual position and restored the said issue to his file. 16. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The assessee has assailed the validity of the reopening of his case, for the reason, that as the same was not based on any new tangible material, therefore, the proceedings which therein followed were devoid and bereft of any force of law. It was the claim of the ld. A.R that the case of the assesee was reopened on the basis of a mere reappraisal of the facts which were already available on record and not on the basis of any fresh material. The ld. A.R drawing our attention to the 'reasons to believe' submitted that the fact that the TDS statement which reflected a rental receipt of Rs. 1,35,32,274/- as against Rs. 9....
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....ee under Sec. 147 of the Act. As observed by us hereinabove, the return of income filed by the assessee was processed as such under Sec. 143(1) of the Act. Observing, that the assessee in his return of income had understated the rental receipts at Rs. 99,34,023/-, as against those reflected in his TDS statement at Rs. 1,35,32,274/-, the A.O holding a belief that the income of the assessee amounting to Rs. 35,98,251/- [Rs. 1,35,32,274/- (-) Rs. 99,34,023/-] had escaped assessment, reopened the case of the assessee under Sec. 147 of the Act. Accordingly, a notice under Sec. 148 of the Act, dated 26.09.2013 was issued to the assessee by the A.O. On a perusal of the 'reasons to believe' on the basis of which the case of the assessee was reopened by the A.O, we find that the same read as under: "The assessee has filed Return of Income for A.Y. 2011-12 on 28.07.2011 declaring total income of Rs. 13,90,598/-. The return was processed u/s. 143(1) on 24.09.2011. On perusal of the computation of income and TDS statement for A.Y. 2011-12, it is noticed that the assessee has declared receipt of rent at Rs. 99,34,023/-. However, on going through the TDS statement for which TDS has been....
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....ment within the meaning of Sec.147 of the Act, but no addition was made by the A.O in respect of the issue on the basis of which the case was reopened. 20. In the backdrop of the aforesaid facts of the case, we shall now advert to the sustainability of the assessment framed by the A.O under Sec.143(3) r.w.s 147, dated 30.06.2014. On a perusal of Sec.147 of the Act, we find that upon the formation of a belief that the income of the assessee chargeable to tax had escaped assessment for any assessment year, the A.O may assess or reassess such income "and also" any other income chargeable to tax which comes to his notice subsequently during the proceedings as having escaped assessment. In our considered view, the words "and also" are used in cumulative and conjunctive sense. Although the 'Explanation 3' has been made available on the statute by the legislature in all its wisdom vide the Finance Act (No.2) of 2009, however, the same does in no manner override the necessity of fulfilling the conditions set out in the substantive part of Sec.147 of the Act. As such, if the A.O assesses or re-assesses the income of the assessee which had escaped assessment and had formed the very basis ....
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.... not escaped assessment, it is not open to him independently to assess some other income. If he intends to do so, a fresh notice under s. 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee. 22. We have approached the issue of interpretation that has arisen for decision in these appeals, both as a matter of first principle, based on the language used in s. 147(1) and on the basis of the precedent on the subject. We agree with the submissions which has been urged on behalf of the assessee that s. 147(1) as it stands postulates that upon the formation of a reason to believe that income chargeable to tax has escaped assessment for any assessment year, the AO may assess or reassess such income "and also" any other income chargeable to tax which comes to his notice subsequently during the proceedings as having escaped assessment. The words "and also" are used in a cumulative and conjunctive sense. To read these words as being in the alternative would be to rewrite the language used by Parliament. Our view has been supported by the background which led to the insertion of Expln. 3 to s. 147. Parliament must be regarded as bei....