ACIT CC 3(4) CEN RG 3, MUMBAI vs. SHIBANI S. BHOJWANI, MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद�य लेखा लेखा सद�य सद�य राजे�� सद�य राजे�� राजे�� केकेकेके अनुसार राजे�� अनुसार अनुसार PER RAJENDRA, AM- अनुसार Challenging the order dated 05.09.2014, of the CIT(A)-39, the Assessing Officer (A.O.) has filed the present appeal for the assessment year (A.Y.) 2008-09. Brief Facts: 2.There was a search and seizure action u/s.132 of the Act on 30.11.2010 at the residential/ business premises of the Samir Bhojwani Group and the assessee was also covered by the action.She filed her Return of Income,declaring total income at Rs. NIL.Earlier,she had filed the Return u/s.139(1)of the Act,on 29.09.2008 and the AO had çompleted the assessment u/s.143(3),determining her income at Rs.NIL. 2.1.During the assessment proceedings, completed u/s. 143(3) r.w.s. 153 of the Act the AO held that the assessee was engaged in letting out flats for license fee under Leave and License Agreement,that the license fee received was compsite,no bifurcation was given for rent charged for the building and that charged for furniture and fixture.He held that the income received by her should be assessed as ‘business income’.He further observed that the principle of res-judicata was not applicable to Income Tax proceedings, that revenue had the right to depart from its earlier stand, that there could not be a wide application of the Rule of consistency, that during the course of assessment, documents pertaining to leave and license agreement were seized. Finally, the AO held that the leave and licence income had to be brought to be taxed under the head income from house property, that the depreciation claimed on the said flats had to be disallowed.

7365/Mum/2014(Shibani.S.Bhojwani )

3.Aggrieved by the order of the AO the assessee preferred an appeal before the First Appellate Authority (FAA) and stated that AO was authorised to reassess the real income of the assessee for each AY falling within the assessment period, that the scope of assessment u/s. 153(3)(a) would arise in the case of completed assessments where seized material could lead to a prima facie inference of liability, that there was no mention in the assessment order of any material found during the search, leading to the inference that income by way of license fee was assessable under the head income from house property.The assessee referred to the cases of Al Cargo Global Logistics Ltd. (137ITD287), Pratibha Industries Ltd. (141 ITD151) and Gurinder Singh Bawa (ITA/2075/Mum/2010 dated 16.11.2012).

4.After considering the submission of the assessee and the cases referred to by it the FAA made a reference to the case of Canara Housing Development Co. (ITA No.38 of 2014, delivered by the Hon’ble Karnataka High Court). She also referred to the case of Murli Agro Products (ITA No.36 of 2009 dt.29.10.2010) delivered by the Hon'ble Bombay High Court and held that assessment completed before the date of search and that are attaining finality could be disturbed only if material is gathered in the course of proceedings u/s. 153A of the Act, that unearthing of new facts was sine qua no for disturbing the completed assessment, that in the case under consideration no material was seized during search proceedings. Finally,she allowed the appeal of the assessee.

5.During the course of hearing before us, the Departmental Representative (DR) stated that the matter could be decided on merits. The Authorised Representative (AR) relied upon the cases of Continental Warehousing Corpn. (Nhava Sheva) Ltd. (374ITR645), Kabul Chawla (380ITR573), Parag M. Sanghvi (63 taxmann.com118) etc.

6.We have heard the rival submissions and perused the materials before us. We find that no incriminating material was found during the course of search and seizure proceedings that could lead to the conclusion that income assessed under the head business income could be assessed under the head income from house property.In absence of incriminating /fresh material found during the action carried out under 132(1) of the Act, the AO is not authorised to disturb the findings of the earlier year if on the date of search assessments of earlier years have been completed.We are unable to endorse the view of the AO that Rule of consistency is not applicable to the Income tax proceedings. In our opinion a different stand can be taken by 7365/Mum/2014(Shibani.S.Bhojwani ) an AO about the tax liability of an assessee during the subsequent years only if he establishes that facts for that particular year were distinguishable from the facts of the earlier years.In absence of a categorical finding about the distinguishing fact the AO’s cannot take a new stand. 6.1.Here we would like to refer to the case of Continental Warehousing Corpn. (Nhava Sheva) Ltd.(supra)wherein the issue of availability/non availability of fresh material during search proceedings and resultant assessment proceedings have been dealt with.The Hon’ble Court has held as under: “If there was no incriminating material found during the search then the Tribunal was right in holding that the power under section 153A being not expected to be exercised routinely, should be exercised if the search revealed any incriminating material. If that was not found then in relation to the second phase of three years, there was no warrant for making an order within the meaning of this provision. “ From the above judgment of Hon'ble Jurisdictional High Court, it is clear that additions can be made to the income of the assessee, while passing the 153 orders if reliance is placed on incriminating seized material.In the case before us,nothing is on record to prove that additions made by the AO had the backing of the seized material. Therefore, in our opinion the order of the FAA does not suffer from any legal infirmity.Confirming her order,we decide the effective Ground of appeal against the AO.