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Income Tax Appellate Tribunal, “G”, BENCH MUMBAI
Before: SHRI C. N. PRASAD, JM &DR. A.L.SAINI, AM
IN THE INCOME TAX APPELLATE TRIBUNAL “G”, BENCH MUMBAI BEFORE SHRI C. N. PRASAD, JM &DR. A.L.SAINI, AM आयकरअपीऱसं./ITA No.5466/M/2016 (निर्धारणवषा / Assessment Year: 2008-09) Lodha Estate India Ltd. Vs. DCIT Cen Cir.7(3), Mumbai 412, 4th Floor, 17G, Vardhaman Room No.655, AaykarBhavan, M.K. Chamber, Cawasji Patel Road, Road, Mumbai – 400 020. Horniman Circle, Fort, Mumbai – 400 001. स्थायीऱेखासं./ जीआइआरसं./ PAN/GIR No. : AAACL 1723 E (Assessee) .. (Respondent) Assessee by :Shri Jitendra Jain, Advocate Respondent by :Shri V. Vidhyadhar, DR सुनवाईकीतारीख/ Date of Hearing : 22/02/2018 घोषणाकीतारीख/Date of Pronouncement : 27/02/2018 आदेश / O R D E R Per Dr. Arjun Lal Saini, AM:
The captioned appeal filed by the Assessee, pertaining to Assessment Year 2008-09, is directed against an order passed by the Commissioner of Income Tax- (Appeals)-49, Mumbai, in Appeal No.CIT(A)-49/IT-109/2015-16, dated 08.07.2016, which in turn arises out of anorder passed by the Assessing Officer u/s 143(3)/147of the Income Tax Act, 1961 (hereinafter referred to as the „Act‟), dated 31.03.2015.
2.The grounds of appeal raised by the assessee read as under: “1. On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming re-opening the assessment u/s 147 of the LT. Act.
2. On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the addition of Rs.10,00,000/- being alleged land brokerage earned by the assessee.
3. On the facts and circumstances of the case and in law, the learned CIT(A) erred in Lodha Estate India Ltd. Assessment Year: 2008-09 confirming addition of Rs 5,33,334/- u/s 37 of the Act.
4. On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming addition of Rs. 16,18,395/- being alleged disallowance u/s 40(a) 5. On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the above addition of Rs 10,00,000/-, Rs 5,33,334/- and Rs. 16,18,395/- withoutany evidence and without making independent enquiry by AO and by solely relyingonthe application u/s 245C (1) of the LT. Act filed by the Assessee before the Hon'ble Income Tax Settlement Commission (ITSC), which was not admitted on the ground fnon pendency of proceedings. 6.On the facts and circumstances of the case and in law, the ld. CIT(A) erred in confirming non-granting of deduction u/s 80IB(10) on the enhanced business income after the disallowances.
The Assessee craves leave to add, to amend, to delete, to modify the above grounds of appeal.”
3.Ground No.1 relates to validity of reopening of the assessment u/s 147/148 of the I.T. Act, 1961.
3.1 The brief facts apropos this issue are that the assessee is engaged in the business ofdealing in land development and construction of real estate properties. A search and seizure action u/s.132(1) of the I.T. Act was conducted in the Lodha Group of cases by the Investigation Wing on 10/01/2011. During the search proceedings, Shri Abhinandan Lodha, key person of the Lodha group made a declaration of additional income on 12.01.2011 in the hands of various entities of the group amounting to Rs.199.80 crores. M/s. Lodha Estate Pvt. Ltd. is an entity connected to the Lodha Group. The assessee has filed its return of income declaring income at Rs.1,17,04,2121-. Since it was noticed that income had escaped assessment for A.Y. 2008-09, the proceedings for reopening of assessment u/s.147 were initiated with necessary approval and accordingly, notice u/s.148 dated 14.10.2013 was issued and served on the assessee. The reasons recorded for reopening of the assessment are as below:
“The assessee i.e. M/s Lodha Estate Private Limited filed return of income for A.Y 2008-09 declaring an income of Rs.1,17,04,212/-. An application for settlement was filed by M/s. Lodha Estate Private Limited before the Hon'ble Income Tax Settlement Commission u/s.245C of Income Tax Act, 1961 on 30.01.2013 vide application No. MH/MUCC-4/133/2012-13/IT. The application before the Settlement Commission included a prayer made by M/s Lodha Estate Private Limited for A.Y 2008-09 also wherein an additional incomeof Rs.31,51,729/- was disclosed before the Commission, which was earlier, not disclosed before the Assessing Officer.
Lodha Estate India Ltd. Assessment Year: 2008-09 The application of M/s. Lodha Estate Private Limited before the Settlement Commission for A. Y.2008-09 has not been allowed to be proceeded with vide order u/s.245D(1) dated 12.02.2013 of the Hon'ble Settlement Commission. In view of rejection of the application of the assessee for A. Y. 2008-09 by the Hon'ble Commission and the fact that the declaration of the assessee before the Settlement Commission clearly shows evidence of undisclosed income which has not been declared before the Assessing Officer, it is aptly clear, that income to the extent of Rs. 31,51,729/- has escaped assessment for A. Y. 2008-09. This case was not scrutinized u/s.143(3) of the Income Tax Act, 1961. Since no scrutiny was done, therefore, no assessment has been made to express the correctness of the income as declared in the return of income for A. Y. 2008-09. Since no scrutiny was done in the case for A. Y. 2008-09, hence reopening the same within the meaning of section 147 does not need to meet the stringent requirements of proviso to section 147/148. Reliance is placed on the case law in the case of ACIT v. Rajesh Jhaveri Stock Brokers Pvt. Ltd., 291 ITR 500 (SC). Hence, I have reason to believe that income chargeable to tax has escaped assessment for A. Y. 2008-09 in the case of the assessee within the meaning of section 147 of the Income Tax Act, 1961.”
In response to notice u/s.148 the assessee submitted that the assessee has filed its return of income for A.Y.2008-09 on 30.09.2008, declaring income of Rs.10,90,24,333/- which may be treated as having been filed in compliance with the notice u/s.148. The assessee had filed an application u/s.245C of I.T. Act, 1961 for settlement of their case before the Settlement Commission on 30.01.2013 showing additional income of Rs.31,51,729/-. It was observed by the assessing officer that the assessee had disclosed additional income, on account of Land and Brokerage income of Rs.10,00,000/-, Disallowance u/s.37 of Rs.5,33,334/-, and Disallowance of expenditure u/s.40(a) at Rs.16,18,395/-, before the Hon'ble ITSC, Mumbai. The assessee was asked to explain why the same should not be taxed as the undisclosed income of the assessee in the period under consideration.The submission of the assessee was considered,but not accepted, since this income was offered as additional income by the assessee in its application and statement of facts filed before the Hon'ble ITSC, Mumbai. The contention of the assessee that there are no evidences/supporting documents with the department regarding the additional income offered before the Hon'ble ITSC, Mumbai is not tenable since the facts have been accepted by the assessee in the form of affidavit before ITSC and therefore no further evidences/supporting documents are to be produced by the department. It is rather the assessee on whom the burden lies to offer the explanation best known to the assessee regarding the additional income offered for taxation before
Lodha Estate India Ltd. Assessment Year: 2008-09 the Hon'ble ITSC, Mumbai. Thus, AO held that this income hadto taxed in the relevant period under consideration, as the Hon'ble ITSC, Mumbai has rejected the application of the assessee and also the Hon'ble Bombay High Court has dismissed the writ petition of the assessee in the case, the department is not barred from assessing the said undisclosed additional income in the hands of the assessee. Thus, addition of Rs.10,00,000/-, Rs.16,18,395/-, and Rs.5,33,334/- had been made to the income of Rs.1,17,04,212/- declared in the original return.
3.2.We have heard both the parties on this preliminary issue of validity of reopening of assessment u/s 147/148 of the Act and we find that the AO has recorded the reasons for reopening the case which is reproduced above. From the reasons recorded, it is evident that the AO had a precise and definite information as regards the escapement of income of Rs.31,51,729/-, since the said amount was declared as additional income before the Income Tax Settlement Commission (ITSC). The assessee has been provided necessary opportunity of being heard in the course of assessment proceedings and appellate proceedings but the assessee was not able to prove that reopening of assessment u/s 147/148 was bad in law.
We note that reasons must have a live link with the formation of the belief. This is supported by Circular No.549 dated 31.10.1989 which clarified that the words “reason to believe” did not mean a change of opinion. The Hon‟ble Supreme Court in ITO vs LakhmaniMewal Das [1976 ]103 ITR 437 has lucidly explained the power of assessing officer to bring to tax income escaping assessment u/s.147 of the Act. The Hon‟ble Court first held that the section provides that there must exist “reasons to believe“ and not “reasons to suspect”. We note that in the assessee`s case under consideration, there was reason to believe, that is, declaration before the Income Tax Settlement Commission ( ITSC) was a tangible material to reopen the assessment and the assessing officer was right in reopening the assessment U/s 147/148 of the Act.
Therefore, it is clear that reopening of the assessment has been done on the basis of tangible material after duly recording the reasons, that being so, we decline to interfere with the order of the ld. CIT(A) in upholding the reopening valid.
3.3.In the result, the appeal filed by the assessee (Ground No.1) is dismissed. Page | 4
Lodha Estate India Ltd. Assessment Year: 2008-09
In Ground Nos.2, 3, 4 & 5, the grievance of the assessee is that the additions were made by the assessing officer solely relying on the application u/s 245C(1) of the I.T. Act, 1961,filed by the assessee before the Income Tax Settlement Commission(ITSC), which was not admitted by the ITSC on the ground of non-pendency of proceedings.
4.1. The brief facts apropos this issue are that the assessee made an application for settlement before the Hon'ble Income Tax Settlement Commission u/s.245C of Income TaxAct, 1961 on 30.01.2013 videapplication No. MH/MUCC-4/133/2012-13/IT. Theapplication before the Settlement Commission included a prayer made by M/s Lodha Estate Private Limited for A.Y 2008-09 wherein an additional income ofRs.31,51,729/- was disclosed before the Commission, which was earlier, not disclosed before the Assessing Officer.
The application of M/s. Lodha Estate Private Limited before the Settlement Commission for A. Y. 2008-09 has not been allowed to be proceeded with videorder u/s.245D(1) dated 12.02.2013 of the Hon'ble SettlementCommission. Inview of rejection of the application of the assessee for A. Y. 2008-09 by the Hon'ble Commission and the fact that the declaration of the assessee before the Settlement Commission clearly shows evidence of undisclosed income which hasnot been declared before the Assessing Officer, it was aptly clear, that income to theextent of Rs.31,51,729/- ( Rs.10,00,000/- on account of land and brokerage, Rs.5,33,334/- disallowance u/s 37 and Rs.16,18,395/- disallowance of expenditure U/s 40(a).), has escaped assessment for A. Y. 2008-09 therefore, assessing officer reopened the assessment under section 147/148 of the Act.
During the reassessment proceedings, the assessee submitted before the assessing officer that there was neither any direct evidence nor any Page | 5
Lodha Estate India Ltd. Assessment Year: 2008-09 corroborative proof that assessee has earned the income which is escaped from assessment. The assessee also submitted that merely a disclosure in the ITSC petition, without substantiating any evidence, cannot by itself be a legal basis for assessing the income under the Act. However, the AO did not accept the contention of the assessee and made an addition of Rs.10,00,000/- being alleged income on account of land brokerage income, Rs.5,33,334/- on account of disallowance u/s 37 and Rs.16,18,395/- being disallowance of expenditure u/s 40(a) of the Act, thus aggregating all at Rs.31,51,729/- 4.2. On appeal, the ld. CIT(A) confirmed the addition made by the AO. The ld. CIT(A) held that assessee had not been able to show that the said disclosure before the ITSC was not bona fide or incorrect. Therefore, AO was correct in assessing the said additional income u/s 143(3) of the Act and this way, the ld. CIT(A) confirmed the addition of Rs.31,51,729/- (Rs.10,00,000/- + Rs.5,33,334/- + Rs.16,18,395/- ).
4.3. Not being satisfied with the order of the ld. CIT(A), the assessee is in appeal before us. The ld. Counsel for the assessee has submitted before us that because the assessee made an application before the Income Tax Settlement Commission (ITSC), no addition can be made unless there is a corroborative evidence to prove that the income belongs to assessee and chargeable income has escaped assessment. The assessee explained during the assessment proceedings, that no incriminating material was found by the search team. However the assessee, in the settlement petition, filed before the ITSC, had offered an income of Rs.10,00,000/- being alleged land brokerage income by the assessee, Rs.5,33,334/- on account of disallowance u/s 37 and Rs.16,18,395/- being disallowance of expenditure u/s 40(a). The assessee submitted that the above amount has been offered as income before the ITSC for the sake of meeting the threshold limit for maintainability of the petition before the ITSC in spite of the fact that the assessee has neither earned such income nor belonged to Lodha Estate India Ltd. Assessment Year: 2008-09 him. Thus, the assessee submitted that in absence of any material proving that the assessee has really earned any undisclosed income, it is not justifiable to make addition to the returned income of the assessee solely relying on the petition the assessee filed before the ITSC, more particularly when neither there was any direct evidence nor any corroborative proof that assessee has earned the income which is undisclosed.
4.4 In addition to this, the ld. Counsel for the assessee has relied on the judgment of Hon`ble Mumbai ITAT in the assessee`s own case in dated 25.04.2017, wherein it was held that the provisions of sub-section (5) are found to be para materia with the provisions of section 32L of The Central Excise Act. There is no dispute on the fact of abetment of the Applications before the ITSC in all these nine cases. Further, there is no dispute on the absence of 6 any additional information or evidence supporting the addition of income offered by the assessee in the said Applications by nine assessees before the ITSC. Considering the same, the orders of the AO and CIT (A) were required to be reversed. Consequently, all the additions of income made by the AOs merely relying on the assessees disclosures in the Application before the ITSC were deleted.
The ld Counsel also relied on the judgment of Hon`ble Gujarat High Court in the case of Maruti Fabrics, [2014]47 taxmann.com 298 (Gujarat), wherein it was held that whatever is admitted by the assessee while submitting the application before the Settlement Commission submitted under Section 32E(1) of the Central Excise Act, 1944, of the Act straight way cannot be said to be admission on behalf of the assessee accepting the liability.
The ld Counsel also relied on the judgment of Hon`ble ITAT Mumbai in the case of M/s. Anntnadh Constructions and Farms Pvt, wherein it was held that the assessee has declared additional brokerage income before Settlement Commission under section 145D of the Act. The Settlement Commission has rejected the application of the assessee and thereafter the AO reopened the assessment under section 147 of the Act. Page | 7
Lodha Estate India Ltd. Assessment Year: 2008-09 After reopening the assessment order, the AO has not brought any material or information but relied only on the basis of declaration made by the assessee before Settlement Commission and made the addition of Rs.5 lakhs. Therefore, the reopening was held to be invalid.
4.5 On the other hand, the ld. DR for the Revenue has primarily reiterated the stand taken by the AO which we have noted in our earlier para and is not being repeated for the sake of brevity.
4.6 We have given a careful consideration to the rival submissions and perused the materials available on record, we note that assessee has filed petition before the ITSC and offered an income of Rs.10,00,000/- being alleged land brokerage income by the assessee, Rs.5,33,334/- on account of disallowance u/s 37 and Rs.16,18,395/- being disallowance of expenditure u/s 40(a) of the Act, aggregating Rs.31,51,729/-. The assessee submitted that the above amount has been offered as income before the ITSC for the sake of meeting the threshold limit of maintainability of the petition before the ITSC in spite of the fact that the assessee has neither earned such income nor any income belonged to him. Thus, in the absence of any material proving that the assessee has really earned any undisclosed income, it is not justifiable to make addition to the returned income of the assessee solely relying on the petition of the assessee filed before the ITSC, more particularly when neither there was any direct evidence nor any corroborative proof that assessee has earned the income which has escaped assessment. We also note that this issue is squarely covered by the judgment of Hon`ble Mumbai ITAT in the assessee`s own case in dated 25.04.2017, wherein it was held that the provisions of sub-section (5) are found to be para materia with the provisions of section 32L of the Central Excise Act. There is no dispute on the fact of abetment of the Applications before the ITSC in all these nine cases. Further, there is no dispute on the absence of 6 any additional information or evidence supporting the addition of income offered by the assessee in the said Page | 8
Lodha Estate India Ltd. Assessment Year: 2008-09 Applications by nine assessees before the ITSC. Considering the same, the orders of the AO and CIT (A) were required to be reversed. Consequently, all the additions of income made by the AOs merely relying on the assessees disclosures in the Application before the ITSC were deleted. As the issue is squarely covered in favour of the assessee by the decision of the coordinate bench, in assessee`s own case in ITA No.5465/M/2016, dated 25.04.2017 (supra) and there is no change in facts and law and the Revenue is unable to produce any material to controvert the aforesaid findings therefore, we delete the additions of Rs.10,00,000/- being alleged land brokerage income by the assessee, Rs.5,33,334/- on account of disallowance u/s 37 and Rs.16,18,395/- being disallowance of expenditure u/s 40(a) of the Act, aggregating Rs.31,51,729/-.
4.6 In the result, the appeals filed by the assessee (in Grounds Nos.2 to 5) are allowed.
Ground No.6 raised by the assessee relates to non-granting of deduction u/s 80IB(10) of the Act on the enhanced business income after the disallowances. We note that this ground raised by the assessee is consequential in nature and does not require any adjudication.
Order is pronounced in the open court on 27.02.2018.