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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH, JM
Assessee by: Shri Dilip S. Damle Department by: Smt. Pooja Swaroop सुनवाई क" तार"ख / Date of Hearing: 22.04.2016 घोषणा क" तार"ख /Date of Pronouncement: 10.08.2016 आदेश / O R D E R PER AMARJIT SINGH, JM:
This is an appeal filed by the assessee against the order dated 23.09.2013 passed by the Commissioner Of Income Tax (Appeals)-4, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2005-06. 2. The assessee has raised the following grounds of appeal:- A.Y.2005-06 “1. The learned Commissioner (Appeals) erred in the circumstances of the case and in law in holding that the Assessing Officer had the reason to believe that income had escaped assessment in the hands of the Appellant and accordingly upholding the action of the Assessing Officer with reference to the re-opening proceedings u/s.147 of the Income Tax Act, 1961.
2. The learned Commissioner (Appeals) erred in the circumstances of the case and in law in taxing the amount of Rs.3,07,25,000/- representing tax free interest on RBI Bonds received by the Appellant.
3. The learned Commissioner (Appeals) erred in the circumstances of the case and in law in not adjudicating the alternative plea of the appellant that the amounts received from the Estate of EFD were distribution being Capital receipt as held in the Assessee’s own case in the Assessment year 2004-05 and 2005-06 where the Hon. ITAT treated the distribution as a capital receipt in the hands of the appellant not liable to tax.
4. Each one of the above ground s of appeal is without prejudice to the other.”
ADDITIONAL GROUNDS OF APPEAL:- “1. For that on the facts and in the circumstances of the case, the CIT(A) was unjustified in upholding validity of the reassessment proceedings even though conditions prescribed in the first proviso to Sec. 147 of the Act were not fulfilled and in that view of the matter the proceedings u/s.147 / 148 were ab initio void.
2. For that on the facts and in the circumstances of the case, since the reason recorded u/s.148(2) it was nowhere recorded by the AO’s that there was failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment of the total income for the A.Y.2005-06. The CIT(A) ought to have held that initiation of reassessment proceedings u/s.147 was bad in law and in A.Y.2005-06 that view of the matter the CIT(A) ought to have cancelled the order u/s.147/143(3) of the Act.”
The brief facts of the case are that the assessee is an individual and the Chairman of the Company Bombay Dyeing & Mfg. Co. Ltd. and Britannia Industries Ltd. and also a director in many well known companies. The assessment of the assessee was completed u/s.143(3) of the Income Tax Act, 1961( in short “the Act”) on 31.12.2007 computing total income to the tune of Rs.31,77,09,780/-. The case was reopened u/s.147 of the Act by issuing notice u/s.148 of the Act dated 02.03.2011 on the following reasons:
An amount of Rs.30,07,25,000/- received from the Estate of Mr. E. F. Dinshaw and claimed as exempt from taxation. Out of Rs.30,07,25,000/-, assessee has shown a sum of Rs.3,07,25,000/- was received as interest on tax free bonds and RS.27,00,00,000/- was received from the sale of properties in the name of the assessee. However in respect of Rs.3,07,25,000/- nothing on the record show that the amount is eligible for exemption and deductible from Rs.30,07,25,000/-. It was also observed that the exemption on interest received on tax free bonds is available in the hands of the administrator of the Estate of E. F. Dinshaw and not in the hands of the assessee. A.Y.2005-06 The administrator distributed a total sum of Rs.50 cr to the assessee and to four other companies.
Thereafter the assessment was completed by adding the interest received on tax free on RBI bonds to the tune of Rs.3,07,25,000/-, the total income of assessee was computed to the Rs.6,89,17,640, thereafter the assessee was not satisfied on the said addition, therefore filed an appeal before CIT(A) who confirmed the said addition, therefore the assessee has filed an appeal before us.
ADDITIONAL GROUND:-
The assessee raised the additional ground challenging the assessment order u/s.147 / 148 of the Act. The learned representative of the assessee has argued that the additional grounds are purely legal in nature therefore in the said circumstances admission of additional grounds squarely comes within the ambit of ITAT’s powers as enumerated by the Hon’ble Supreme Court in its decision in the case of NTPC Vs. CIT (229 ITR 383). However, on the other hand the learned representative of the department has refuted the said contentions. Since the assessee has only raised legal issues of the order passed u/s.143(3) of the Act under challenge, therefore in view of the said circumstances we admit the additional ground. Under this issues the assessee has challenged the reopening of the case for the assessment year of 2005-06 which was beyond the four. A.Y.2005-06 The original assessment order for A.Y.2005-06 was passed u/s.143(3) of the Act and provision u/s.148 can only be validly initiated if and only if the Assessing Officer demonstrates in the recorded reasons that there was failure of assessee’s part to disclose truly and fully material facts necessary for assessment of the relevant assessment year. On appraisal of record it is quite clear that the assessment of the assessee was completed u/s. 143(3) of the Act on 31.12.2007 for the A.Y.2005- 06 computing total income to the tune of Rs.31,77,09,780/-. Subsequently the case was reopened u/s.148 of the Act dated 02.03.2011 by enumerating the reasons mentioned below:-
An amount of Rs.30,07,25,000/- received from the Estate of Mr. E. F. Dinshaw and claimed as exempt from taxation. Out of Rs.30,07,25,000/-, assessee has shown a sum of Rs.3,07,25,000/- was received as interest on tax free bonds and RS.27,00,00,000/- was received from the sale of properties in the name of the assessee. However in respect of Rs.3,07,25,000/- nothing on the record show that the amount is eligible for exemption and deductible from Rs.30,07,25,000/-. It was also observed that the exemption on interest received on tax free bonds is available in the hands of the administrator of the Estate of E. F. Dinshaw and not in the hands of the assessee. A.Y.2005-06 The administrator distributed a total sum of Rs.50 cr to the assessee and to four other companies.
In view of the above mentioned record it is quite clear that the notice u/s.148 of the Act dated 02.03.2011 was issued after expiry of 4 years from the end of the relevant A.Y.2004-05. Now it is to be seen whether the assessee is failure on his part to disclose truly and fully material facts necessary for assessment of the relevant assessment year. In brief the assessment was reopened on the ground of the receipt of interest to the tune of Rs.3,07,25,000/- accrued from tax free bonds. It is to be seen where these facts have been mentioned by the assessee in his earlier assessment or not. The computation of income for the A.Y.2005-06 filed along with original I.T. Returns u/s.139(1) of the Act lies at page 1 to 4 of the paper book, Personal Balance Sheet and Income and Expenditure Account filed with original return u/s.139(1) of the Act was lies at page nos. 5 to 6 of the paper book. This entry has also been reflected for the assessment order passed on 31.12.2007 lies at page 7 to 37 of the paper book. The Assessing Officer has also raised the query in this regard and the assessee has given the proper explanation before the Assessing Officer and thereafter, considering the same the earlier assessment order passed u/s.143(3) of the Act. There is no new material in the hands of the assessing authority. There is no lapse on the part of the A.Y.2005-06 assessee to disclose the material facts before the Assessing Authority at the time of assessment u/s.143(3) of the Act dated 31.12.2007.
In view of the said facts and circumstances, we are of the view that the assessment u/s.147 / 148 of the Act is not liable to be sustainable in the eyes of law. In this regard we find support of [2009] 120 ITD 374 (Delhi) in the ITAT Delhi bench in case of Moonbeam Finvest Lease Ltd. Vs. Income Tax Officer Ward 5(4) and ITAT, Indore Bench in for A.Y.2001-02 in case of ACIT 1(1) Vs. M/s. Rajendra Kumar Bhandari and ITAT, Delhi Bench in ITA No.2081/Del./2009 for A.Y.2000-01 in case of M/s. Star Finvest (P) Ltd. Vs. DCIT Circle 9(1) and in ITAT, Mumbai bench in ITA No.2910/M/13 for A.Y.2006-07 in case of Motilal R. Todi. Accordingly, we set aside the order passed in question.
ISSUE NO.1 – 4:-
While deciding the additional ground, the reopening u/s.148 of the Act has been ordered to be set aside therefore in the said circumstances there is no need to decide these issues as the same would be futile exercise and if decide the same would be academic in nature. Therefore there is no need to decide the same.
In the result, the appeal filed by the assessee is hereby allowed. A.Y.2005-06
Order pronounced in the open court on 10th August, 2016. (R.C.SHARMA) (AMARJIT SINGH) लेखा सद"य / ACCOUNTANT MEMBER "या"यक सद"य/JUDICIAL MEMBER मुंबई Mumbai; "दनांक Dated : 10th August, 2016 MP MP MP MP