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Income Tax Appellate Tribunal, “SMC” Bench, Mumbai
Before: Shri Shamim Yahya (AM)
This appeal by the assessee is directed against the order dated 4.5.2018 and pertains to A.Y. 2010-11.
The grounds of appeal read as under :-
The Ld. Commissioner of Income Tax (Appeals)-6, Mumbai [hereinafter referred to as "Ld. CIT(A)"] erred in passing the appellate order dated 04.05.2018 upholding the action of Ld. A.O. in making various additions/disallowances in the assessment order dated 26.03.2014 passed under section 143(3) r.w.s. 147 of the Act without appreciating the facts and circumstances of the case. The Appellant strongly objects to the order dated 04.05.2018 passed by Ld. CIT(A) on the following grounds .
2. Reopeninq of assessment under section 147 of the income Tax Act 1961 is bad in law i. The Ld. CIT(A) erred in upholding the action of Ld. A.O. in reopening the assessment completed under section 143(3) of the Act vide order dated 27.12.2012 without recording any valid and proper reasons. The Appellant, therefore, prays that the notice issued under section 148 as well as the subsequent assessment order is bad in law and the same may be quashed. ii. The Ld. CIT(A) failed to appreciate the fact that original assessment under section 143(3) was completed after examining the claim of the Appellant. Hence, reopening of the assessment on the same set of facts
2 Chetan Chandulal Framewala available during the course of original assessment amounts to change of opinion. The Appellant, therefore, prays that the notice under section 148 as well as subsequent assessment order is void ab initio and the same may be quashed.
3. Addition by treating the purchases as bogus unjustified - Rs. 28.547 /- i. The Ld. CIT(A) erred in upholding the action of Ld. A.O. in making addition of Rs.28,547/- i.e 12.5% of Rs. 2,28,375/- being purchases made from M/s. Swastik Enterprises during the year as bogus purchase without appreciating the fact that the purchases has been duly supported by relevant evidence Hence treating purchases as bogus and thereby making addition of Rs.28,547/- is unjustified and the same may be deleted. ii. The Ld. CIT(A) failed to appreciate that the addition of Rs.28,547/-is made merely on the basis of the certain investigation carried out by Sales Tax Department without providing the Appellant an opportunity to cross examine the persons relying on whose statement an adverse inference has been drawn against the Appellant. Thus, the addition of Rs.28,547/- is not at all justified and the same may be deleted.
4. Treating the 'Business Income' as 'Income from House Property' unjustified - Rs.3.71.200/- i. The Ld. CIT(A) erred in confirming the action of Ld. A. O. in treating the compensation received amounting to Rs.3,71,200/-on letting out of unsold flats declared under the head 'Business Income' as 'Income from House Property' without appreciating the facts that unsold flats are business assets of the Appellant. The Appellant, therefore, prays that treating the amount of Rs.3,71,200/- as 'Income from House Property' is not at all justified and the same may be deleted.
5. Addition under the head 'Income from House Property' unjustified - Rs.19.54.652/- i. The Ld. CIT(A) erred in confirming the action of Ld. A.O in making addition of Rs.19,54,652/- being 8.5% of Rs.2,29,95,900/-representing closing stock of unsold offices, flats and shops as income from house property without appreciating facts and circumstances of the case. ii. The Ld. CIT(A) failed to appreciate that the amount of Rs.2,29,95,900/- represents closing stock of the Appellant which is not chargeable to tax. Hence, ad-hoc addition of Rs.19,54,652/-under the head Income from House Property by treating the closing stock of unsold flat, shops as deemed to be let out, is not at all justified and the same may be deleted.
The first issue raised is that learned CIT(A) erred in sustaining validity of reopening in this case u/s. 147 of the I.T. Act.
3 Chetan Chandulal Framewala
Brief facts are as under :- The assessee is an individual carrying on the business activities through his proprietary concerns viz. M/s.Panchali Furniture and Interiors which deals in reselling of furniture etc. and M/s.Akhil Associates which is involved in construction and development of its maiden Roop Maya Project. Assessee is also stated to be a partner in M/s.Framewala Associates. The assessee e-filed his return of income for A.Y.2010-11 on 25.09.2010 declaring total income at Rs.3,05,381/-. The return was processed u/s.143(1) of the Act. The assessment was completed u/s.143(3) on 27.12.2012 determining total income at Rs.3,05,380/-. Thereafter, the case was re-opened u/s.147 of the Act by issue of notice under section 148 dated 15.03.2013 after recording the reasons. A copy of reasons recorded for re-opening of assessment was also provided to the assessee. Subsequently, notices u/s. 143(2) and 142(1) along with questionnaire were issued and duly served on the assessee. The AO completed the assessment u/s. 143(3) r.w.s.147 of the Act on 26.03.2014 determining total income at Rs.19,33,480/-. In the assessment so completed, the AO made an addition of Rs.34,256/- being 15% of total non-genuine purchases of Rs.2,28,375/-. He further made addition of Rs.19,54,652/- being 8.5% of the closing stock of unsold offices, flats and shops amounting to Rs.2,29,95,900/-.
Upon assessee’s challenge to jurisdiction learned CIT(A) upheld the validity of reopening by inter alia noting that in this case there was no assessment or reassessment for the year under consideration prior to issue of notice u/s. 148 dated 15.3.2013 by the Assessing Officer.
Upon hearing both the counsel and perusing the records it transpires that the above is mistaken finding by learned CIT(A) earlier assessment was duly completed u/s. 143(3) of the act. This aspect was very much clear from the reassessment order itself which mentions that assessment was completed u/s. 143(3) earlier vide order dated 27.12.2012. Learned CIT(A) also himself has noted this in ………….. part of this order. In this view of the matter in our
4 Chetan Chandulal Framewala considered opinion reasoning given by learned CIT(A) for upholding the validity of reopening on the ground that earlier no assessment has been done u/s. 143(3) and reliance placed upon the decision of Hon'ble Apex Court in the case of Rajesh Jhaveri Stock Brokers (291 ITR 500) is misplaced. As in the case of Rajesh Jhaveri Stock Brokers (supra), Hon'ble Apex Court has expounded that processing of order u/s. 143(1) cannot be equated to assessment. However, in the present case assessment has been completed u/s. 143(3) f the Act. Hence, finding of learned CIT(A) that there was no assessment earlier and that Hon'ble Apex Court decision in the case of Rajesh Jhaveri Stock Brokers (supra) is applicable is clearly erroneous. In this view of the matter in our considered opinion reopening sustained by learned CIT(A) is not based upon correct law and facts. Hence, we set aside the order of learned CIT(A) on the issue of upholding the assessment. Accordingly, we set aside the order of learned CIT(A) wherein he has upheld the validity of reopening on erroneous facts and case law.
6. Since we have already held that upholding of reassessment was not legal by learned CIT(A), other issue on merits in this appeal are only of academic. Hence, I am not engaging into the same.
In the result, this appeal by the assessee stands partly allowed. Order has been pronounced in the Court on 13.11.2019.