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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI SANJAY ARORA, AM
O R D E R Per Sanjay Arora, A. M.: This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals)-29, Mumbai (‘CIT(A)’ for short) dated 19.09.2014, partly allowing the Assessee’s appeal contesting its assessment u/s.143(3) of the Income Tax Act, 1961 (‘the Act’ hereinafter) for the assessment year (A.Y.) 2004-05 vide order dated 15.12.2011.
(A.Y. 2004-05) Koli Samaj Co-op Hsg Sty Ltd. vs. ITO 2. The principal issue arising in this appeal, agitated per Ground I, is the validity in law of the assessment itself, being in pursuance to initiation of reassessment proceedings, admittedly after four years of the end of the relevant assessment year. The assessee’s objection is with regard to the reasons recorded for the reopening, reading as under: ‘Assessee is a co-operative housing society and assessed as Co-op. Society claiming deduction u/s.80P(2)(d) and 80P(c)(ii). While completing the assessment u/s.143(3) for A.Y. 2007-08, it is seen that the assessee is in receipt of income which is inclusive of recurring income such as income from community hall, shop rent and other service charges. The assessee is claiming deduction u/s. 80P, however it is not entitled to them. The said recurring income, i.e., income from community Hall, service charges and shop rent which are to be taxed under the head ‘Income from Other Sources’. Therefore, I have reason to believe that by doing so assessee has understated its income which is chargeable to tax, which had escaped for A.Y. 2004-05 within the meaning of section 147 of the I. T. Act.’ The same, it is contended, referred to what was observed and found by the Assessing Officer (A.O.) during the assessment proceedings for A.Y. 2007-08, and does not contain any reference to the current year, i.e., to its’ facts and figures. No new or tangible material has been brought on record by the Revenue to justify the formation of belief as to escapement of income. In its absence, it is only a case of change of opinion. The Revenue’s case, on the other hand, is that no assessment was made in the first instance; the assessee’s return being only processed u/s. 143(1), so that there was no examination of the return of income as filed for the A.O. to have formed any opinion. As regards the validity of the reasons recorded, the same clearly state of the assessee being regularly in receipt of the rental income, i.e., from year to year, and which the assessee considers as business income, claiming deduction u/s.80P thereon. There is, thus, a clear reference to the facts for the current year, being found to be same as for another year (A.Y. 2007-08), for which the Revenue had taken a clear and different view in the matter.
(A.Y. 2004-05) Koli Samaj Co-op Hsg Sty Ltd. vs. ITO 3. The parties have been heard, material on record perused. The issue concerns a jurisdictional aspect, and would therefore even otherwise have to be considered in preference to the other grounds in appeal. In my clear opinion, formed on a careful consideration of the matter, the assessee must fail. The reasons as recorded, in-as-much as they have to be necessarily read as such, clearly convey of there being escapement of income in-as-much as the assessee is treating the rental income from hiring the community hall, service charges, shop rent, etc., received on a regular basis, i.e., from year to year, as business income, only on which deduction u/s. 80-P, claimed for the current year as well, is exigible. The same could only be where the said facts obtain for the current year as well, i.e., as they do for A.Y. 2007-08. That is, upon comparing the facts for the said two years. The charge of non-reference to the facts of the current year is, thus, misplaced. The A.O. having observed certain facts for A.Y. 2007-08, which were found to exist for the current year as well, initiated reassessment proceedings for the current year in-as-much as he held a different view with regard to the assessment of income with reference to those facts. In fact, in-as-much as he states of the facts being recurring, the same only implies that they obtain from year to year, i.e., even for years other than the years under reference, being the current year and A.Y. 2007-08. It is not the assessee’s case of the facts being incorrectly recorded, in which case it would have, or ought to have, objected thereto before the A.O. himself in view of the decision by the Hon’ble Apex Court in GKN Driveshafts (India) Ltd. vs. ITO [2003] 259 ITR 19 (SC). Secondly, clearly, there is no change of opinion as no opinion was formed earlier, much less expressed. The return for the year having not been subject to verification, there was no examination thereof. The question of formation or expression of any opinion in relation thereto just does not arise. It is only where there has been, that further question of whether it represents a change of opinion or not, would arise. On the contrary, the A.O. holds the same view, qua the same set of facts (A.Y. 2004-05) Koli Samaj Co-op Hsg Sty Ltd. vs. ITO across different years, so that he holds a consistent view in the matter. The assessee, accordingly, fails on its Gd. I.
Ground II, claiming non-issuance of notice u/s. 143(2), was not pressed during hearing by the ld. counsel. In fact, he did so on being asked by the Bench as to the basis of the assessee’s claim in-as-much as the assessment order clearly states of notices, including u/s. 143(2), being issued and duly served on the assessee (refer para 1 of the assessment order). The ground is, accordingly, dismissed as not pressed.
Grounds III to V relate to the same set of facts, and are accordingly taken up together. The Revenue has taken the income by way of royalty on ice-cream (Rs.16,350/-), credited to the assessee’s P & L A/c, as income from other sources, as against business income by the assessee. Two, disallowed expenditure on purchase of ice-cream (Rs.43,909/-), as the assessee could not produce any vouchers to substantiate the same, i.e., the said purchase. The assessee contends that royalty only represents sale of ice-cream, and which therefore could not be without purchase thereof. On being asked as to how the purchase then exceed sales, which would normally be at a profit, so that the figures should rather result in some closing stock (of ice-cream), the ld. Authorized Representative (AR) would submit of it being not so in view of the item being perishable, so that the balance, equivalent to the closing stock which would have otherwise obtained, was lost. The assessee’s claim advanced before us for the first time, is unsubstantiated. There is, in fact, no reference to it (loss on trading in ice-cream) even in the notes to the accounts, or even by way of explanation in the assessment or the appellate proceedings. There is, in fact, nothing to show that the royalty on ice-cream represents sale thereof. Rather, why would the assessee purchase it when it has no arrangement for it storage? Leave aside excess purchase, i.e., in excess of that sold out, the very process of sale involves proper storage facilities in-as-much as it has to be maintained at a particular temperature.
(A.Y. 2004-05) Koli Samaj Co-op Hsg Sty Ltd. vs. ITO Why, the vehicle transferring it is itself suitably equipped for it to function as a delivery-van thereof? Then, again, the assessee has been unable to substantiate its claim of purchase with vouchers or bills, etc., which claim thus remains totally unsubstantiated. The income from sale of ice-cream at its premises, which occurs, as given to understand during hearing, when there is some occasion being celebrated by the parties hiring the community hall, has accordingly rightly been treated as royalty income, even as recorded in the assessee’s books and, further, rightly been considered as income from other sources. The assessee fails on its Grounds III to V.