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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI D.S. SUNDER SINGH
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
All the three appeals of the assessee are directed against the respective orders of the Commissioner of Income Tax (Appeals)-5, Chennai, pertaining to assessment years 2002-03, 2003-04 and 2004-05. Since common issue arises for consideration in all these appeals, we heard these appeals together and disposing of the same by this common order.
Sh. T. Banusekar, the Ld. representative for the assessee, submitted that for the assessment years 2002-03 and 2003-04, the assessee is challenging the reopening of assessments made under Section 147 of the Income-tax Act, 1961 (in short 'the Act'). However, for the assessment year 2004-05, the assessee is challenging the impugned order on merit.
Referring to assessment years 2002-03 and 2003-04, the Ld. representative for the assessee submitted that the assessments were reopened beyond the period of limitation. According to the Ld. representative, the original assessments were completed under Section 143(3) of the Act on 31.03.2003. When the Revenue challenged the order of the CIT(Appeals) for the assessment year 2004-05, this Tribunal found that spreading of unaccounted investments over the period of construction of the property is not beyond the powers of the CIT(Appeals) and the order of the CIT(Appeals) was set aide and the matter was remitted back to the file of the Assessing Officer for reconsideration. On the basis of order of this Tribunal for assessment year 2004-05, the Assessing Officer reopened the assessment relating to assessment years 2002-03 and 2003-04.
Referring to the order of this Tribunal for the assessment year 2004-05, the Ld. representative submitted that admittedly the Revenue was challenging the order of the CIT(Appeals) for the assessment year 2004-05. The records pertaining to assessment years 2002-03 and 2003-04 were not available before the Tribunal.
The Tribunal confined its order only to the assessment year 2004- 05. According to the Ld. representative, of course, in the course of disposing of the appeal, the Tribunal made some observations regarding assessment of income. Referring to the order of this Tribunal in Emgeeyar Pictures Pvt. Ltd. v. DCIT (2016) 6 TMI 418, a copy of which is available at page 6 of the paper-book, the Ld. representative submitted that on identical set of facts, this Tribunal by majority of opinion, found that even in case there was direction or finding by this Tribunal, the assessments which are barred by limitation cannot be reopened. In view of this finding of the Tribunal in Emgeeyar Pictures Pvt. Ltd. (supra), according to the Ld. representative, the assessments reopened after expiry of four years from the end of the relevant assessment year, especially, when there was no negligence on the part of the assessee in furnishing the particulars required for completion of assessment, are barred by limitation. The Ld. representative has also placed reliance on the judgment of Madras High Court in Goldmine Investments v. DCIT (2010) 237 CTR 196.
On the contrary, Shri V. Nandakumar, the Ld. Departmental Representative, submitted that the assessment for the assessment year 2004-05 was completed by the Assessing Officer by an order dated 29.12.2006. The assessee carried the matter before the CIT(Appeals). The CIT(Appeals) found that 20% deduction has to be given from the value of the construction to arrive at State PWD value. The CIT(Appeals) further found that the property was constructed over a period of three years, namely, assessment years 2002-03, 2003-04 and 2004-05 and accordingly, he apportioned the cost of construction between the three years. The Revenue preferred an appeal before the Tribunal against the order of the CIT(Appeals). This Tribunal by an order dated 11.10.2012 found that spreading over of the investments over a period of construction was not beyond the powers of the CIT(Appeals). Accordingly, the matter was remitted back to the file of the Assessing Officer for reconsideration in accordance with law. Therefore, the Assessing Officer has no other alternative to apportion the cost of construction for all the years under consideration. In order to give effect to the order of the ITAT to apportion the cost of construction, the Assessing Officer has no other alternative except to reopen the assessments for 2002-03 and 2003-04. Therefore, according to the Ld. D.R., it is not correct to say that the Assessing Officer cannot reopen the assessment beyond the four years period. In view of the finding recorded by the ITAT regarding the apportionment of investments made in the construction spread over the three years, according to the Ld. D.R., the Assessing Officer has rightly reopened the assessments.
We have considered the rival submissions on either side and perused the relevant material available on record. When the appeal of the Revenue was considered by this Tribunal, this Tribunal by an order dated 11.10.2012, found that spreading of unaccounted investments over the period of construction of the property was not beyond the powers of the CIT(Appeals). Accordingly, the matter was remitted back to the file of the Assessing Officer for reconsideration in accordance with law. There is no specific direction from this Tribunal for reopening the assessments for assessment year 2002-03 and 2003-04. Moreover, the appeals for the assessment years 2002-03 and 2003-04 were not available before this Tribunal when the appeal of the Revenue for assessment year 2004-05 was disposed of. In the absence of records relating to assessment years 2002-03 and 2003-04, this Tribunal is of the considered opinion that this Tribunal cannot issue any direction for the assessment years 2002-03 and 2003-04. In other words, this Tribunal has to confine itself only to the assessment year for which the appeal is filed either by the assessee or by the Revenue relates to. Since the appeals relating to assessment years 2002-03 and 2003-04 are not pending before this Tribunal, this Tribunal is of the considered opinion that even a casual reference made by ITAT with regard to assessment years of construction cannot be treated as direction or finding. When this issue came before another co-ordinate Bench of this Tribunal in Emgeeyar Pictures Pvt. Ltd. (supra), on a majority opinion, this Tribunal found that when the assessment was barred by limitation, the Revenue cannot reopen the assessments by virtue of opinion expressed by higher forum at a later stage. In fact, this Tribunal has observed at para 17 as follows:
“17. I have carefully considered the rival submissions and perused the record. As could be noticed from the observations made by the Tribunal, while disposing of the appeals for assessment years 2003-04 and 2004-05, a casual observation was made to deal with the issue before them as to whether the capital gains is attracted in assessment year 2003-04 and 2004-05; but there is no specific finding or direction that it is assessable to tax in assessment year 2001-02. Even if it is assumed that there is a finding or direction, in my humble opinion, the Hon'ble Madras High Court, in the case of M/s Goldmine Investments (supra), has considered an identical issue wherein it was held that in respect of any assessment year wherein further proceedings are barred by limitation, the same cannot be reopened merely by virtue of an opinion expressed by any higher forum at a later date i.e. subsequent to the date of limitation period. In fact, the judgments of the Apex Court are also on the same lines. Having regard to the circumstances of the case, I am of the view that the reopening of assessment is bad in law since the proceedings u/s 148 of the Act are sought to be initiated by issuing a 59 notice after the period of limitation. In the light of the above findings, the reframed questions are answered as follows:
(1) The notice issued u/s 148 r.w.s 150(1) of the Act, cannot be said to be based on any finding or direction issued by the ITAT in I.T.A.Nos.327 & 328/Mds/2010.
(2) Even otherwise the notice issued u/s 148 of the Act is barred by limitation.”
In view of the above, this Tribunal is of the considered opinion that reopening of assessments under Section 147 of the Act for assessment years 2002-03 and 2003-04 are barred by limitation.
Therefore, there cannot be any assessments under Section 147 of the Act for assessment years 2002-03 and 2003-04.
Now coming to assessment year 2004-05, the only issue arises for consideration is cost of construction.
Sh. T. Banusekar, the Ld. representative for the assessee, submitted that the Assessing Officer made addition on the basis of the Departmental Valuation Officer’s certificate which computed the cost of construction on Central PWD rate. The only objection of the Ld.counsel is that the cost of construction has to be estimated only on State PWD rate and not on Central PWD rate. According to the Ld. counsel, the State PWD rate may be more accurate than the Central PWD rate, therefore, the Assessing Officer is not justified in computing the cost of construction as per the Central PWD rate.
On the contrary, Shri V. Nandakumar, the Ld. Departmental Representative, submitted that cost of construction has always to be estimated on the basis of the Central PWD rate. State PWD rate may not be relevant for the purpose of computing the cost of construction. Therefore, according to the Ld. D.R., the Assessing Officer has rightly found that Central PWD rate has to be adopted.
We have considered the rival submissions on either side and perused the relevant material available on record. State Government has prescribed a rate for construction of building in the State. Central Government has also prescribed rate for construction of building. When there was a variation in the cost of construction between the State PWD and Central PWD, this Tribunal is of the considered opinion that the State PWD rate would be more relevant rather than Central PWD rate. The Central PWD rate might have been fixed by taking the cost of material available at the Headquarters, namely, New Delhi. The State PWD rate may be fixed on the basis of rate prevailing in a particular State. Adopting State PWD rate for construction may be preferable rather than Central PWD rate. Therefore, the orders of the lower authorities are set aside and the Assessing Officer is directed to estimate the cost of construction on the basis of State PWD rate.
In the result, the appeals of the assessee for assessment years 2002-03 and 2003-04 are allowed, whereas, the appeal for the assessment year 2004-05 is allowed for statistical purposes.
Order pronounced on 31st January, 2017 at Chennai.