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Income Tax Appellate Tribunal, DELHI BENCH “G” NEW DELHI
Before: SHRI I.C. SUDHIR & SHRI O.P. KANT
ORDER
PER I.C. SUDHIR: JUDICIAL MEMBER The assessee has questioned first appellate order on the following grounds:
1. Because the Learned CIT(Appeals)-II, Dehradun, was not justified in confirming the Assessing Officers action u/s. 148. He failed to appreciate the fact that all necessary details regarding letting out of property on rent and of the property sold-(Land with the building constructed thereon) were already on record while processing the return u/s. 143(1) or rectifying the same u/s. 154.
2. Because the Learned CIT(Appeals)-II, Dehradun, misunderstood the whole facts, and confused himself between the property inherited from an ancestor before 1.04.1981 and the property acquired by the appellant himself. He failed to appreciate the fact 2 that the value of property sold adopted by the assessee at Rs.80,000.00 as on 01.04.1981 included the value of the land and the superstructure thereon and the appellant could reasonably adopt this value under the provisions of law.
3. Because in view of the matter the findings of the first appellate authority and wrong and legally not sustaining and are liable to be set aside and the assessment u/s. 148 under appeal is liable to be quashed.
We heard and considered the arguments advanced by the parties in view of orders of the authorities below, material available on record and the decisions relied upon.
Ground Nos. 1 and 3: In these grounds, the validity of initiation of reopening proceedings and assessment framed in furtherance thereto has been questioned.
The original return was processed under sec. 143(1)(a) of the Act. Thereafter, the Assessing Officer allowed the requested rectification in the application filed under sec. 154 of the Act. Subsequently, reopening proceedings were initiated and notice under sec. 148 of the Act was issued. In compliance, the assessee requested to adopt original return filed. The 3 reassessment was framed under sec. 147 of the Act wherein the Assessing Officer treated the rental income of Rs.1,08,000 as business income and disallowed 30% thereof for repair charges deductible against property income. The capital gain was worked out at Rs.4,01,500. Thus, two additions of Rs.32,400 on account of disallowance of rental income and Rs.4,01,500 on account of disallowance of indexation were made. Before the Learned CIT(Appeals), the assessee questioned the validity of initiation of reopening proceedings and the additions made by the Assessing Officer but could not succeed on both the issues.
In support of the grounds on the validity of initiation of reopening proceedings, the Learned AR submitted that no specific amount has been mentioned in the reasons to believe recorded for initiation of reopening proceedings, which as per the Assessing Officer had escaped assessment. He submitted that assessment was reopened to assess the income from capital gains without allowing benefit of indexation. He drew out attention to the relevant reasons recorded reproduced as under: “Assessee has sold “old shop” i.e. one immoveable asset in which commercial activities are being run. It is settled law that commercial building subjected to depreciation are not covered under the ambit of indexation of inflation for calculating CP for C gains purpose.”
4 6. The Learned AR submitted that in the return of income originally filed and processed under sec. 143(1) of the Act, the assessee has declared capital gains of Rs.59,200 on shop sold to one Shri Ahad Tanvir for Rs.5,00,000 being the land with building constructed thereon. He submitted that on the said shop sold, the assessee had never claimed any depreciation. The assessee was earning rent from the said shop. The action of the Assessing Officer in initiation of reopening proceedings was nothing but change of opinion about the particular head under which an income could be assessed. He placed reliance on the following decisions: i) Pr.CIT Vs. Tupperware India Pvt. Ltd. – – order dated 10.8.2015 (Del.); ii) DCIT vs. M/s. K.L.M. Royal Dutch Airlines& Ors. – ITA No. 1259/Del/2009 & Ors. (A.Y. 2000-01) – order dated 04.1.2016; iii) CIT vs. Expeditors International India Pvt. Ltd. – ITA No. 596/2011 – order dated 8.12.2011 (Del.);
The Learned Senior DR on the other hand placed reliance on the orders of the authorities below with the submission that the decision relied upon having distinguishable facts are not helpful to the assessee. She submitted that it is not a case of change of opinion as no assessment was framed on earlier occasion since return was processed under sec. 143(1) of the Act. She submitted that the assessee has participated in the assessment 5 proceedings, hence, his grievance on the validity of reopening proceedings cannot be entertained in view of the provisions laid down under sec. 292-BB of the Act. The Learned Senior DR submitted further that sufficiency of belief while recording reasons belief that taxable income has escaped assessment cannot be questioned before the Court of Law since only prima facie belief of the Assessing Officer is required to be recorded at that stage. She placed reliance on the decision of Hon'ble Delhi High Court (Full Bench) in the case of CIT vs. Usha International Ltd.- 348 ITR 485(FB)(Del.).
Having gone through the decisions cited above, we find that in the case of CIT vs. Expeditors International India Pvt. Ltd. (supra), the Hon'ble Delhi High Court has been pleased to hold that the assessee can also object to reopening in the appellate proceedings. Whether or not the pre-conditions for reopening are satisfied is a matter of jurisdiction or lack of jurisdiction. It goes to the root of the matter. If the jurisdictional pre-conditions are missing and are absent, the assessee can object and question the reopening in the appellate proceedings. It is not necessary that the assessee must file a writ petition and question the reassessment proceedings, held the Hon'ble High Court. Again, in the case of Tupperware India Pvt. Ltd. (supra), reference of 6 decision in the case of CIT vs. Orient Craft Ltd. (2013) – 354 ITR 536 (supra) has been given wherein Revenue had questioned the order of the ITAT as to whether the ITAT was right in law in holding that in absence of any tangible material available with the Assessing Officer to form the requisite belief regarding escapement of income, the reopening (under sec. 147/148) of the assessment made under sec. 143(1) was bad in law? The Hon'ble High Court after discussing several decisions including the decision in the cases of CIT vs. Usha International Ltd. (supra), ACIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) – 291 ITR 500 (S.C), and CIT vs. Kelvinator India Ltd. (2010) – 320 ITR 561 and CIT vs. Usha International Ltd. (supra) has come to the conclusion that questions framed for consideration by the Full Bench in Usha International Ltd. as set out in para No. 1 of the said judgment did not pertain to reopening of an assessment under sec. 143(1) of the Act. The central issue examined in the said decision of the Full Bench was as to what constituted a “change of opinion”. The Hon’ble Court, therefore, does not consider the decision in Orient Craft Ltd. as being contrary to the decision in Usha International. The Hon’ble Court had observed that there was no occasion for the court to refer to a larger bench the question of correctness of the decision in Orient Craft Ltd. which decision squarely applies to the facts of the case before the Hon’ble Court.
7 The issue raised before the Hon'ble Delhi High Court in the case of Tupperware India Pvt. Ltd. (supra) was as to whether the ITAT was justified in holding that the reassessment proceedings under sec. 147/148 of the Act were not legally initiated? In that case, the assessee had filed its return of income which was processed under sec. 143(1) of the Act. Subsequently, the Assessing Officer recorded reasons for belief that income has escaped assessment. The Assessing Officer noted that in the audit report under sec. 44AB in form 3CD, the statutory auditor had reported that the management service fee to the extent of Rs.1,36,89,075 payable to Tupperware International Holdings E.V. Ltd. was paid without deducting tax at source. Since the said deduction was inadmissible under sec. 40(a) (ia) of the Act, the Assessing Officer held that he had reasons to belief that the aforementioned amount had escaped assessment and consequently issued notice to the assessee under sec. 148 of the Act. The ITAT relying on the decisions in the cases of CIT vs. Orient Craft Ltd. (supra) and CIT vs. Smt. Jyoti Devi (2008) 218 CTR 264(Raj.) answered the issue in favour of the assessee. After discussing several decisions on the issue, the Hon’ble Court has upheld the decision of the ITAT on the issue and the appeal preferred by the Revenue has been dismissed.
8 9. When we examine the facts of the present case, in view of the ratios laid down in the above cited decisions, we find that after processing the return under sec. 143(1) of the Act. No tangible material was available with the Assessing Officer to form the requisite belief regarding escapement of income. In the present case, the reasons recorded for initiation of reopening are as under: “Assessee has sold “old shop” i.e. one immoveable asset in which commercial activities are being run. It is settled law that commercial building subjected to depreciation are not covered under the ambit of indexation of inflation for calculating CP for C gains purpose.”