POOJA R MAHTANEY,MUMBAI vs. IT 7(3)(2), MUMBAI

ORDER/आदेश �या�यक सद�य iou f iou f iou flag iou f lag lag के अनुसार PER PAWAN SINGH, JM lag 1. This appeal is filed by assessee against of CIT(A)-18, Mumbai dated 31.10.2012 for Assessment Year (AY) -2004-05.

off of brought forward Short Term Capital Loss (STCL) of Rs. 2784/-. And further, the assessee has reduced the Management Fees of Rs. 16,54,459/- to the extent of STCG. According to the provision of I.T. Act, the Management Fees is not deductible from capital gain and tax involved is Rs. 2,63,960/- and further observed that there is no agreement of flat purchased by assessee against the LTCG of Rs. 34,02,427/- which was invested u/s 54ED. The AO issued show-cause notice as to why the Management Fees of Rs. 16,54,459/- should not be disallowed and added back to the total income of the assessee. The assessee filed its reply and contended that the assessee in computing capital gain expenditure wholly and exclusively in connection with the transfer of cost of acquisition of asset and cost of improvement thereto which are allowable as a deduction from the value of consideration received as a result of transfer of capital asset in question, it was further contended that the Management Fees is cost of acquisition and capital asset, being share etc. in question and consequently the same is deductible in computing the capital gain. The AO concluded that assessee failed to provide the documentary evidence in respect of payment of Management Fees of Rs. 16,54,459/- debited against the STCG and the same was disallowed in the assessment order passed u/s 143(3) r.w.s. 147 of the Act, dated 15.10.2008 . Aggrieved by the order of AO, the assessee filed the appeal before the CIT(A), wherein besides the addition of Management Fees, the validity of the re-opening was challenged. The CIT(A) upheld the validity of re-opening as well as confirmed the addition of Management Fees in its order dated 23.01.2009. Further aggrieved by the order of Ld CIT(A) the assessee filed present appeal before us raising the following Grounds of appeal: “1. The learned Commissioner of Income Tax (Appeals)-18, Mumbai, hereinafter referred to as the "CIT(Appeals)", erred in dismissing the additional ground of appeal raised by the appellant before him. Your appellant submits that, on the facts and in the circumstances of her case, the additional ground challenging that the re-opening of the assessment and the consequential order made u/s 143(3) r.w.s. 147 of the IT Act dated 15-10-2008 is bad-in-law and without jurisdiction ought to have been upheld.

2. Without prejudice to the Ground of Appeal No. 1, it is submitted that, the CIT(Appeals) has taken into consideration in dismissing the additional ground raised by the appellant before him, the contents of the remand report submitted by the Assessing Officer on issues which were not referred to him by the CIT(Appeals).

3. The CIT(Appeals) erred in upholding the addition made by the Assessing Officer by disallowing the expenditure incurred by the appellant towards management fees in computing capital gains and consequently dismissing the appellant's appeal by concluding that the Assessing Officer has rightly disallowed the management fees in absence of any documentary evidence filed. Your appellant submits that, on the facts and in the circumstances of her case, adequate documentary evidence to support the genuineness of the claim and the payment having been made as filed before the CIT(Appeals) by way of additional evidence in respect of which remand report was called for from the Assessing Officer ought to have been considered and accordingly claim of the appellant should have been allowed.

raised before him accordingly.”

3. We have heard the Authorised Representative (AR) of assessee and Departmental Representative (DR) for Revenue and perused the material available on record. Ld. AR of the assessee argued that in the reasons of re-opening, the AO has not made any reference that any income chargeable to tax has escaped assessment for the relevant AY or the some other tangible material came to his knowledge subsequently and thus the re- opening is bad-in-law. Ld. AR of assessee relied upon the decisions of jurisdictional High Court in Hindustan Lever Ltd. vs. ACIT 268 ITR 332 and In Nivi Trading Ltd. vs. Union of India & Ors. (2015) 375 ITR 308 (Bom). Ld. DR for the Revenue has argued that reasons have correctly been recorded by the AO. The assessee has not filed any objection that the re-opening of the assessment was invalid. The assessee failed to show any documentary evidence about the payments of management fees. Ld. DR for Revenue further strongly supported the orders of authorities below.

4. We have considered the rival contention of the parties and perused the material available on record. While recording the reasons of re-opening, the AO has not recorded that any income of the assessee escaped the assessment. During the first appellate proceeding, the assessee specifically agitated that no fresh tangible material came to the possession of AO on the basis of which, the AO have reasons to believe that income has escaped assessment. On the additional ground regarding the re-opening proceeding, the ld. CIT(A) called the remand report during the appellate proceeding, in the remand report, the AO submitted that a notice u/s 148 of the Act was issued on the ground that the income assessable to tax had escaped assessment within the meaning of section 147 of the Act. We have once again perused the reasons recorded (page 7 of PB), wherein we have not find any reference regarding the satisfaction of AO that any income escaped assessment. Hon’ble Bombay High Court in Nivi Trading Ltd. (supra) has held as under: “The principle condition for issuance of notice is to be found in section 147 of Income-tax Act and that is on the reason to belief that any income chargeable to tax has escaped assessment for any assessment year than Assessing Officer, may subject to the provisions of section 148 to 153 assessee or reassesses such income and also any other income chargeable to tax which has escaped assessment and which comes