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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC’, NEW DELHI
Before: Sh. N. K. Saini
ORDER This is an appeal by the assessee against the order dated 07.09.2016 of ld. CIT(A)-21, New Delhi.
Following grounds have been raised in this appeal:
“1 That the learned Commissioner of Income Tax (Appeals) 21, New Delhi has grossly erred both in law and on facts in upholding the initiation of proceedings under section 147 of the Act and, completion of assessment under section 147/143(3) of the Act without appreciating that, statutory pre-conditions for neither the initiation of proceedings and, nor the completion of assessment under the Act had been fulfilled and, therefore, the same were without jurisdiction and hence deserve to be quashed as such.
2 Vineet Sethi 1.1 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that, there was no material on record on the basis of which, it could be held that, there was any reason to believe with the learned Income Tax Officer that, income of the appellant had escaped assessment and, in view thereof, the proceedings initiated were illegal, untenable and therefore, unsustainable.
2. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in sustaining a disallowance of Rs. 1,35,986/- representing interest claimed as deduction under Section 24(b) of the Act.
3. That furthermore, the learned Commissioner of Income Tax (Appeals) while upholding the disallowance has failed to appreciate that since deduction of Rs. 1,35,986/- has not been claimed in the hands of wife of the appellant and therefore, even otherwise the disallowance is not called for and hence untenable. It is therefore, prayed that, it be held that assessment made by the learned Income Tax Officer and sustained by the learned Commissioner of Income Tax (Appeals) be quashed and, further addition so upheld by the learned Commissioner of Income Tax (Appeals) alongwith interest levied be deleted and appeal of the appellant be allowed.”
The main grievance of the assessee vide Ground Nos. 1 & 1.1 relates to the jurisdiction of the AO in initiating the 3 Vineet Sethi proceedings u/s 147 of the Income Tax Act, 1961 (hereinafter referred to as the Act).
Facts of the case in brief are that the assessee filed its return of income on 27.07.2009 declaring an income of Rs.19,39,439/- which was processed u/s 143(1) of the Act on 24.02.2011 at the same income. Later on, the case was selected for scrutiny and the assessment was completed u/s 143(3) of the Act on 08.12.2011 by making an addition of Rs.29,638/- on account of interest not declared in ITR, excess claim of medical insurance and housing loan etc. The total income was assessed at an income of Rs.19,69,080. Subsequently, the AO issued the notice u/s 148 of the Act and reopened the assessment by recording the following reasons: “Reasons for the belief that the income has escaped assessment in the case of Shri Vineet Sethi (PAN AHCPS8765K) for the assessment year 2009-10 The assessee has filed return declaring an income of Rs. 19,39,439/- on 27/07/2009. Assessment under section 143(3) of the I.T Act has been completed on 08-12-2011 at total income of Rs, 19,69,080/-. The assessee had claimed loss under the head "Income from House Property" at Rs. 2,47,543/- due to interest of Rs. 2,71,973/- on housing loan. As per the information available on record, it is seen that the housing loan was taken by the assessee from IDBI Bank in joint name with Mrs. Shama Sethi. It is also evident that the property i.e. 1105, 10th Floor, SBI CGHS Ltd. Plot No.19, Bodella, Vikas Puri, New Delhi, on which said loan was taken was also in the joint names.
Hence, it is a case of joint-ownership of the property and the interest on housing loan should also be claimed by the individual co-owners in respect of their individual share and if the same is not specified, in equal proportion. In the case of the assessee, share of the assessee and other joint owner is not specified. Hence, the assessee was entitled to claim only 1/2 of the interest of Rs. 2,71,973/- which comes to Rs. 1,35,986/-. Hence, the assessee has been allowed excess deduction u/s 24(b) of the I.T. Act by Rs.1,35,986/- being 1/2 of the interest on housing loan attributable to the other co-owner. I have examined the above and have reason to believe that the income of Rs. 1,35,986/- has escaped assessment due to excess claim under section 24(b) of the I T Act as defined by Section 147 of the Income Tax Act, 1961. The income chargeable to tax has escaped assessment for this assessment year by reason of the failure on the part of the assessee to disclose fully and truly all material facts. Therefore, it is a fit case for the issuance of notice u/s 148 of the Income Tax Act, 1961.” Dated: 13-01-2014 sd/- (VINOD KUMAR CHOPRA) INCOME TAX OFFICER WARD 47(1), NEW DELHI”
Subsequently, the AO assessed the income at Rs.20,92,852/- and made the addition of Rs.1,23,771/- in the earlier income assessed u/s 143(3) of the Act on 08.12.2011.
Being aggrieved the assessee carried the matter to the ld. CIT(A) and challenged the initiation of the reopening. The ld. CIT(A) did not 5 Vineet Sethi find merit in the submissions of the assessee and sustained the addition made by the AO.
Now the assessee is in appeal. The ld. Counsel for the assessee submitted that the assessee disclosed all the facts before the AO who framed the assessment u/s 143(3) of the Act by considering the claim of the assessee on account of loss under the head “income from house property” and no new tangible material was brought on the record while reopening the assessment. Therefore, the reopening of the assessment in the absence of any new tangible material was not justified. The reliance was placed on the following case laws: � Donaldson India Filters Systems (P) Ltd. Vs DCIT 371 ITR 87 (Del.) � Madhukar Khosla Vs ACIT 367 ITR 165 (Del.) � Indu Lata Rangwala Vs DCIT 384 ITR 337 (Del.) 8. In her rival submissions the ld. DR strongly supported the orders of the authorities below and further submitted that the income of the assessee escaped the assessment since the claim of loss from house property was not correctly made as the property was in joint name and the assessee was eligible for deduction u/s 24(b) of the Act to the extent of his share in the property. Therefore, the assessment was rightly reopened by the AO u/s 147 r.w.s. 148 of the Act.
I have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, on 6 Vineet Sethi perusal of the reasons recorded by the AO for reopening the assessment, it is clear that the claim for loss under the “head income from property” was made by the assessee in the original return of income which was properly scrutinized and the claim was accepted by the AO wile framing the original assessment u/s 143(3) of the Act and no new tangible material is brought on record while reopening the assessment u/s 147 r.w.s 148 of the Act.
On a similar issue their lordships in the case of Indu Lata Rangwala Vs DCIT (supra) observed as under: “35.6 Whereas in a case where the initial assessment order is under Section 143(3), and it is sought to be reopened within four years from the expiry of the relevant assessment year, the AO has to base his ‘reasons to believe’ that income has escaped assessment on some fresh tangible material that provides the nexus or link to the formation of such belief.”
Similarly, the Hon’ble Delhi High Court in the case of Donaldson India Filters Systems Pvt. Ltd. Vs DCIT (2015) 371 ITR 87 (Supra) held as under: “that the reopening of the assessment failed to pass muster on both the tests. The satisfaction note did not disclose the foun- dation of "reasons to believe" as it vaguely referred to the perusal of "the records" without specifying the fresh "tangible material" that had come to light giving rise to a need for such action. Since the assessment had earlier been concluded under section 143(3), the restrictions on the exercise of the power of reassessment as contained in the first proviso to section 147 would inhibit further action in the absence of material 7 Vineet Sethi showing default by the assessee to fully or truly disclose. Hence, the view taken by the Commissioner (Appeals) that it was a case of impermissible change of opinion was correct. The order whereby the proceedings had been reopened for assessment under section 147/148 thus, suffered from the jurisdictional error. Consequently, the proceedings taken pursuant thereto could not be sustained.” 12. In the present case also the original assessment was framed by the AO u/s 143(3) of the Act and the AO while reopening the assessment did not bring on record any fresh tangible material which provides the nexus or link to the formation of belief that the income had escaped assessment. therefore, the reopening was not valid. In that view of the matter the impugned order is set aside and the reassessment framed after reopening the original assessment u/s 147 r.w.s. 148 of the Act is quashed.
In the result, the appeal of the assessee is allowed. (Order Pronounced in the Court on 16/03/2017)