RATANHIRA ASSOCIATES, MUMBAI v. ACIT CIR 17(2), MUMBAI

ITA 1893/MUM/2009 | 2000-2001
Pronouncement Date: 31-05-2010 | Result: Allowed

Appeal Details

RSA Number 189319914 RSA 2009
Assessee PAN AAEFR3611C
Bench Mumbai
Appeal Number ITA 1893/MUM/2009
Duration Of Justice 1 year(s) 2 month(s) 5 day(s)
Appellant RATANHIRA ASSOCIATES, MUMBAI
Respondent ACIT CIR 17(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-05-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 31-05-2010
Date Of Final Hearing 29-03-2010
Next Hearing Date 29-03-2010
Assessment Year 2000-2001
Appeal Filed On 26-03-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI R.S. SYAL (AM) AND SMT. ASHA VIJAYARAG HAVAN (JM) ITA NOS. 1893 TO 1896/MUM/2009 ASSESSMENT YEARS-2000-01 TO 2003-04 M/S. RATANHIRA ASSOCIATES 194 NARENDRA STATION ROAD WADALA MUMBAI-400 031 PAN - AAEFR3611C VS. THE ACIT CIR 17(2) PIRAMAL CHAMBERS LALBAUG MUMBAI-400 012 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SATISH R. MODI RESPONDENT BY: SHRI LALCHAND O R D E R PER SMT. ASHA VIJAYARAGHAVAN (JM) ALL THESE APPEALS PREFERRED BY THE ASSESSEE IS DIR ECTED AGAINST THE ORDERS DT. 27.1.2009 PASSED BY THE LD. CIT(A)-XVII MUMBAI FOR THE ASSESSMENT YEARS 2000-01 TO 2003-04. SINCE THE ISSU ES ARE COMMON IN THESE APPEALS THESE WERE HEARD TOGETHER AND ARE BE ING DISPOSED OFF THROUGH THIS CONSOLIDATED ORDER. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A REGISTERED PARTNERSHIP FIRM. DURING THE PREVIOUS YEAR 1998-99 THE ASSESSEE HAD OBTAINED THE PREMISES AT FLAT NO. 9 BALDOTA BHAVAN 117 M.K. MARG CHURCHGATE MUMBAI-400 020 ON TENANCY BASIS FROM M/ S. BALDOTA BROTHERS AS PER THEIR LETTER DT. 1.5.1998 GRANTING TENANCY RIGHTS. THE ASSESSEE HAD PAID A SUM OF RS. 1.5 CRORES FOR TENAN CY RIGHT. AS THE ASSESSEE HAD PAID A SUM OF RS. 1.5 CRORES FOR TENAN CY RIGHT BEING IN THE NATURE OF INTANGIBLE ASSET AND A BUSINESS OR COMMER CIAL RIGHTS THE ASSESSEE CLAIMED DEPRECIATION ON WDV BASIS BY APPLY ING THE PROVISION OF SEC. 32(1) OF THE I.T. ACT 1961. THE OPENING WDV OF THIS BLOCK I.E. RATANHIRA ASSOCIATES 2 INTANGIBLE ASSET WAS RS. 55 37 110/- THE APPELLANT HAD MADE DEPRECIATION CLAIM OF RS. 13 84 278/- @ 25% AS APPL ICABLE RATE OF DEPRECIATION. THE SAME IS ALSO REFERRED IN CLAUSE 14(E) OF FORM 3CD OF TAX AUDIT REPORT. THE ASSESSEE EVEN AT THRESHOLD F AIRLY CONCEDED THAT HE HAS NO CASE ON MERITS WITH RESPECT TO THE CLAIM OF DEPRECIATION ON TENANCY RIGHTS AS THE DECISION OF THE MUMBAI HIGH C OURT IN THE CASE OF TECHNO SHARES & STOCK LTD. IS SQUARELY AGAINST HI M. ITA NO. 1893/M/09-ASSESSMENT YEAR 2000-01 3. THE ORIGINAL RETURN OF INCOME WAS FILED ON 31.10.2 000 U/S. 139(1) & SUBSEQUENTLY THE SAME WAS REVISED ON 29.11.2000 U.S. 139(4). NOTICE U/S. 148 DT. 28.3. 2007 WAS ISSUED ON 28.3.2007. 4. THE ASSESSEE BY LETTER DT. 3.4.2007 REQUESTED TO FURNISH REASONS FOR ISSUING NOTICE U/S. 148. THE REASONS WERE NOT FURNISHED AND ASSESSMENT WAS COMPLETED U/S. 143(3) R.W.S. 147 BY AO VIDE HIS ORDER DT. 24.12.2007. 5. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL U/S. 246A BEFORE THE LD. CIT(A) IN WHICH TWO MAIN GROUNDS RAISED ARE VIZ . ALLOWING OF INTEREST EXPENDITURE AS BUSINESS EXPENSES AND CLAIM OF DEPRE CIATION ON INTANGIBLE ASSETS. 6. THE LD. CIT(A) VIDE HIS ORDER DT. 27.1.2009 ALLO WED THE APPEAL OF THE APPELLATE FIRM IN RESPECT OF INTEREST EXPENDITU RE BUT CONFIRMED THE ADDITION IN RESPECT OF CLAIM OF DEPRECIATION ON INT ANGIBLE ASSET IGNORING THE LETTER DT. 27 TH JAN. 2009 FOR SETTING ASIDE ASSESSMENT. 7. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) ASSESSE E PREFERRED AN APPEAL BEFORE US. RATANHIRA ASSOCIATES 3 8. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE SHRI SATISH R. MODI SUBMITTED THAT THE ASSESSEE HAD DISCLOSED ALL MATER IAL FACTS FULLY AND TRULY AND FURNISHED FULL INFORMATION OF CLAIMS MADE AS PER ITS AUDITED FINANCIAL STATEMENT AND REPORTS MADE U/S. 44AB OF I .T. ACT. 9. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITT ED AS UNDER: THE CONDITION OF REASON TO BELIEVE INCOME HAD ESCAP ED ASSESSMENT FOR REOPENING OF ASSESSMENT IS NOT SATISFIED AS NO NEW MAT ERIAL IS BROUGHT ON RECORD NOR THERE WAS ANY CHANGE IN FACTS OF THE CAS E OF THE ASSESSEE. THE REASON TO BELIEVE THAT THE ASSESSEE HAD INCORRECTLY CL AIMED DEPRECIATION ON TENANCY RIGHTS AND INTEREST ON CAPITAL BORROWED IS BASED ON CHANGE OF OPINION OF SUCCESSOR AO BASED ON ASSESSMENT U/S. 143 (3) VIDE ORDER DT. 30 TH OCTOBER 2006 FOR A.Y. 2004-05. IT IS MERE CHANGE OF OPINION BY THE OFFICER ON THE SAME SET OF FACTS. 10. THE ASSESSEE HAS RAISED THE FOLLOWING ADDITIONA L GROUND. AS THE FULL DETAILS AND SUBMISSION WERE MADE BY TH E APPELLANT IN THE ORIGINAL RETURN AND COMPLETE INFOR MATION WAS AVAILABLE TO THE AO ISSUANCE OF NOTICE U/S. 148 AFT ER 4 YEARS FROM THE END OF ASSESSMENT YEAR IS BAD IN LAW AND THE ASSESSMENT U/S. 143(3) NEEDS TO BE SET ASIDE AS NUL L AND VOID. WITHOUT PREJUDICE TO ABOVE AS THE NOTICE IS ISSUED AFTER THE END OF FOUR YEARS FROM THE END OF ASSESSMENT YEAR A ND WITHOUT OBTAINING APPROVAL OF JOINT COMMISSIONER OF INCOME TAX AS IS EVIDENT FROM NOTICE U/S. 148 DT. 28 TH MARCH 2007 IT REQUIRES TO BE SET ASIDE AS IT DOES NOT FULFILLS TH E REQUIREME2NTS OF SEC. 151(2) OF THE I.T. ACT 1961. THE AO HAS ALSO ERRED IN NOT SETTING OFF DEPRECIAT ION LOSS OF RS. 18 75 000 & BUSINESS LOSS OF RS. 2 20 705/- BRO UGHT FORWARD FROM A.Y. 1999-2000 AGAINST THE INCOME FROM BUSINESS OR PROFESSION ASSESSED IN RESPECT OF A.Y. 2000=-1. RETURN OF INCOME FOR A.Y. 1999-2000 WAS DULY FILED U/S. 139(3) R.W.S. 139(1) ON 30 TH JUNE 1999 I.E. WITHIN DUE DATE RATANHIRA ASSOCIATES 4 AND DULY DISCLOSING THE LOSS BEING CARRIED FORWARD AND REVISED RETURN WAS FURNISHED U/S. 139(5) ON 16 TH JUNE 2000. 11. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE SHR I SATISH MODY SUBMITTED THAT THE ADDITIONAL GROUND IS A LEGAL GR OUND WHICH GOES TO THE VERY ROOT OF THE MATTER AND THEREFORE SHOULD BE ADMITTED. WE ADMIT THE ADDITIONAL GROUNDS RELYING ON THE DECISION IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS CIT IN WHICH IT HAS BEEN HELD AS UNDER: THE TRIBUNAL SHOULD NOT BE PREVENTED FROM CONSIDER ING QUESTIONS OF LAW ARISING IN ASSESSMENT PROCEEDINGS ALTHOUGH NOT RAISED EARLIER. THE VIEW THAT THE TRIBUNAL IS CONFINED ONLY TO ISSUES ARISING OUT OF THE APPEAL BEFORE THE COMM ISSIONER (APPEALS) IS TOO NARROW A VIEW TO TAKE OF THE POWER S OF THE TRIBUNAL. UNDOUBTEDLY THE TRIBUNAL HAS THE DISCRETION TO ALL OW OR NOT TO ALLOW A NEW GROUND TO BE RAISED. BUT WHERE THE TRI BUNAL IS ONLY REQUIRED TO CONSIDER THE QUESTION OF LAW ARISI NG FROM FACTS WHICH ARE ON RECORD IN THE ASSESSMENT PROCEEDINGS THERE IS NO REASON WHY SUCH A QUESTION SHOULD NOT BE ALLOWE D TO BE RAISED WHEN IT IS NECESSARY TO CONSIDER THAT QUEST ION IN ORDER TO CORRECTLY ASSESS THE TAX LIABILITY OF AN ASSESSE E. THE TRIBUNAL HAD JURISDICTION TO EXAMINE A QUESTIO N OF LAW WHICH AROSE FROM THE FACTS AS FOUND BY THE INCOME-T AX AUTHORITIES AND HAVING A BEARING ON THE TAX LIABILI TY OF THE ASSESSEE. 12. COMING TO THE NOTICE U/S. 148 ISSUED AFTER EXPI RY OF 4 YEARS THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CAS E OF THE ASSESSEE FALLS SQUARELY UNDER THE PROVISO TO SEC. 147 OF THE ACT. IN ORDER TO VALIDITY INITIATE THE PROCEEDINGS U/S. 147/148 OF THE I.T. A CT AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR IT IS NECESSARY THAT AO SHOULD IN THE FIRST INSTANCE HAVE REASON T O BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THE CONCERNED ASSESSMENT YEAR AND ALSO THAT THE INCOME CHARGEABLE TO TAX SHOULD HAVE RATANHIRA ASSOCIATES 5 ESCAPED ASSESSMENT BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECE SSARY FOR ASSESSMENT FOR THAT ASSESSMENT YEAR. THE AO SHOULD HAVE GIVEN CA TEGORICAL FINDING AS TO WHETHER BOTH THE REQUIREMENTS ARE ADEQUATELY MET BEFORE ISSUANCE OF NOTICE U/S. 148. FURTHER THE LD. COUNSEL FOR THE A SSESSEE SUBMITTED THAT REASONS MUST BE RECORDED PRIOR TO THE ISSUANCE OF NOTICE AND RELIED ON THE CASE OF RAJOO ENGINEERS LTD. VS DCIT 218 CTR (GUJ). 13. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMIT TED THAT IT IS OBLIGATORY ON THE PART OF THE AUTHORITY CONCERNED T O DISCLOSE AND COMMUNICATE REASONS FOR APPRECIATION AND PROPER DEF ENCE ATLEAST ON DEMAND BY THE ASSESSEE AFTER SUBMISSION OF RETURN I N COMPLIANCE OF THE NOTICE. 14. REGARDING THE FACT THAT THE AO HAS NOT TAKEN AN Y SANCTION FROM THE JOINT COMMISSIONER FOR ISSUANCE OF NOTICE THE COUNSEL SUBMITTED THAT SUB-SEC (2) TO SEC. 151 OF THE I.T.ACT 1961 W HICH READS AS UNDER: IN A CASE OTHER THAN A CASE FALLING UNDER SUB-SECT ION (1) NO NOTICE SHALL BE ISSUED UNDER SECTION 148 BY AN AO WHO IS BELOW THE RANK OF JOINT COMMISSIONER AFTER THE EXPIRY OF FO UR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS THE JOI NT COMMISSIONER IS SATISFIED ON THE REASONS RECORDED BY SUCH AO T HAT IT IS A FIT CASE FOR THE ISSUE OF SUCH NOTICE. 15. WE HEARD BOTH THE PARTIES. IN THE CASE OF REOP ENING BEYOND 4 YEARS THE AO MUST RECORD AS TO HOW THERE WAS A FAIL URE ON THE PART OF THE ASSESSEE TO DISCLOSE. THIS VIEW IS SUPPORTED BY TH E DECISION IN THE CASE OF HARYANA ACRYLIC MFG. CO. VS CIT 308 ITR 38 (DEL) AND IN THE CASE OF CIT VS A.V. THOMAS EXPORTS LTD. 296 ITR 603 (MAD). 16. FURTHER THE AO SHOULD HAVE SUBMITTED THE REASON S FOR REOPENING TO THE ASSESSEE AND SHOULD HAVE DEALT WITH HIS OBJE CTIONS. FAILURE TO DO RATANHIRA ASSOCIATES 6 SO MAKES THE ASSESSMENT ORDER DEFECTIVE. IN THE CA SE OF ALLANA COLD STORAGE LTD. VS ITO 287 ITR 01 IT HAS BEEN HELD AS FOLLOWS: THE LAW LAID DOWN BY THE SUPREME COURT IN GKN DRIV ESHAFTS (INDIA) LTD. VS ITO 259 ITR 19 IS THAT WHEN A NOTIC E U/S. 148 OF THE I.T. ACT 1961 IS ISSUED THE NOTICE IS EXPECTED TO FILE A RETURN AND IF HE SO DESIRES HE MAY SEEK REASONS FOR ISSUING THE N OTICE. THE SUPREME COURT HAS LAID DOWN THAT ON THE ASSESSEE SE EKING SUCH REASON THE AO IS BOUND TO FURNISH THE REASONS WIT HIN A REASONABLE TIME. THEREAFTER THE SUPREME COURT HAS ADDED THA T ON RECEIPT OF REASONS THE NOTICE IS ENTITLED TO FILE OBJECTIONS AND THE AO IS BOUND TO DISPOSE OF THEM BY PASSING A SPEAKING ORDER. THE LAW AS LAID DOWN BY THE SUPREME COURT IS BINDIN G ON THE COURT AS WELL AS ON THE AUTHORITIES FUNCTIONING UNDER THE STATUTE. IT IS HELD THAT WHEN AN ALTERNATIVE REMEDY IS RESOR TED TO THE WRIT JURISDICTION IS NOT TO BE EXERCISED BUT THAT IS A RULE OF SELF LIMITATION. THE ORDERS CHALLENGED IN THE PRESENT MATTER WERE CL EARLY AGAINST THE LAW LAID DOWN BY THE SUPREME COURT AND THEREFORE THE EXERCISE OF WRIT JURISDICTION WAS CALLED FOR. THE WHOLE IDEA I N LAYING DOWN THE LAW IN GKN DRIVESHAFTS (INDIA) LTD VS ITO 259 ITR 1 9 (SC) WAS TO GIVE AN OPPORTUNITY TO THE ASSESSEE TO KNOW AS TO W HAT IS THE DECISION ON HIS OBJECTIONS WHICH DECISION HAS ALSO TO BE ARRIVED AT AFTER GIVING AN OPPORTUNITY TO THE ASSESSEE. IN TH E PRESENT CASE THE ASSESSEE HAD BEEN DENIED THIS OPPORTUNITY. 17. FURTHER IT HAS BEEN HELD IN THE CASE OF ACIT VS M.P. EXPORT CORPN. LTD THAT WHILE DISMISSING THE APPEAL ON THE GROUND THAT THE REOPENING WAS DONE BY RECORDING REASONS AFTER FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR THE SATISFACTION OF THE C OMMISSIONER SHOULD HAVE BEEN OBTAINED BEFORE ISSUE OF NOTICE ON THE RE ASONS RECORDED BY AO AND SINCE NO SATISFACTION OF THE COMMISSIONER WAS P RODUCED DESPITE GIVING SEVERAL OPPORTUNITIES THE PROVISO TO SEC. 1 51 WAS NOT SATISFIED. . HENCE IT WAS HELD THAT THE REOPENING OF THE ASSESSM ENT WAS NOT VALID. 18. WE HEARD BOTH THE PARTIES. WE SET ASIDE THE ISS UE TO THE FILE OF THE AO TO EXAMINE WHETHER THE APPROVAL OF THE JCIT HA S BEEN OBTAINED FOR ISSUANCE OF NOTICE U/S. 148 AND FOR REDOING THE ASS ESSMENT. THE AO RATANHIRA ASSOCIATES 7 SHALL FURNISH THE REASON FOR REOPENING THE ASSESSME NT AND AFTER GIVING AN OPPORTUNITY TO THE ASSESSEE TO RAISE ITS OBJECTION THE AO SHALL DECIDE ON THE JURISDICTION TO REOPEN. 19. WITH RESPECT TO GROUND NO. 3 FOR A.Y. 2001-02 THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO HAS ERRED IN NOT SETTING OFF DEPRECIATING LOSS OF RS. 18 75 000/- AND BUSINESS L OSS OF RS. 2 20 705/- BROUGHT FORWARD FROM A.Y. 1999-2000 AGAINST THE INC OME FROM BUSINESS OR PROFESSION ASSESSED IN RESPECT OF A.Y. 2000-2001 . 20. WE DIRECT THE AO TO REWORK THE SET OFF OF DEPRE CIATION LOSS AND BUSINESS LOSS AFTER GIVING REASONABLE OPPORTUNITY T O THE ASSESSEE TO SUBMIT THE RELEVANT PARTICULARS OF THE SAME. 21. THE ADDITIONAL GROUNDS OF APPEAL FOR A.Y. 2001- 02 IS IDENTICAL TO THAT OF A.Y. 2000-01 WHICH HAS BEEN DEALT WITH IN T HE ABOVE PARAGRAPHS. 22. WITH RESPECT TO A.Y. 2002-03 AND 2003-04 THE R EOPENING HAS BEEN DONE WITHIN 4 YEARS AND THEREFORE THE PRIOR APPROVA L OF JCIT IS NOT A REQUIREMENT AS PER SEC. 151. FURTHER THE ISSUE OF CARRY FORWARD AND SET OFF OF DEPRECIATION LOSS DOES NOT ARISE IN THIS YEA R. HENCE ONLY THE FIRST ADDITIONAL GROUND OF APPEAL IS RELEVANT IN THESE YE ARS WHICH IS AS FOLLOWS: AS THE FULL DETAILS AND SUBMISSION WERE MADE BY TH E APPELLANT IN THE ORIGINAL RETURN AND COMPLETE INFOR MATION WAS AVAILABLE TO THE AO ISSUANCE OF NOTICE U/S. 148 AFT ER 4 YEARS FROM THE END OF ASSESSMENT YEAR IS BAD IN LAW AND THE ASSESSMENT U/S. 143(3) NEEDS TO BE SET ASIDE AS NUL L AND VOID. 23. WITH RESPECT TO ASSESSMENT YEAR 2003-04 THE LD . DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE AO. THE DR SUBMITTED THAT THE LETTER ADDRESSED BY THE ASSESSEE TO THE CIT DT. 27 .1.2009 IS ACTUALLY ON RATANHIRA ASSOCIATES 8 28.1.2009 AFTER THE COMMISSIONER HAS PASSED THE ORD ER ON 27.1.2009 AND THE ASSESSEE HAS TAMPERED WITH THE DATE OF THE LETTER. THEREFORE HE CONTENDED THAT THE ISSUE OF CHALLENGING THE REOPENI NG WAS NEVER TAKEN BEFORE THE LD. CIT(A). 24. WE HEARD BOTH THE PARTIES. THE ISSUE WITH REFE RENCE TO REOPENING HAS ALREADY BEEN DEALT IN A.Y. 2000-01 AND 2001-02. THEREFORE THE APPEALS FOR THE YEARS 2000-01 TO 2003-04 HAVE TO B E SET ASIDE AND THE MATTER REFERRED TO THE AO FOR REDOING THE ASSESSMEN T . THE AO SHALL FURNISH THE REASON FOR REOPENING AND ASSESSEE SHALL FURNISH ITS OBJECTIONS. THE AO WILL THEN DEAL WITH THEM AND DE CIDE ON HIS JURISDICTION TO REOPEN. 24. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 31 ST DAY OF MAY 2010 SD/- SD/- (R.S. SYAL) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED 31 ST MAY 2010 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR D BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR I.T.A.T MUMBAI RATANHIRA ASSOCIATES 9 DATE INITIALS 1 DRAFT DICTATED ON: 28.5.2010 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 28. 5 .2010 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: _________ ______ 9. DATE OF DISPATCH OF ORDER: _________ ______