SUJEER PROPERTIES, MUMBAI v. ITO 13(2)3), MUMBAI

ITA 2385/MUM/2010 | 2002-2003
Pronouncement Date: 28-01-2011 | Result: Allowed

Appeal Details

RSA Number 238519914 RSA 2010
Bench Mumbai
Appeal Number ITA 2385/MUM/2010
Duration Of Justice 10 month(s) 2 day(s)
Appellant SUJEER PROPERTIES, MUMBAI
Respondent ITO 13(2)3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 28-01-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted SMC
Tribunal Order Date 28-01-2011
Date Of Final Hearing 29-12-2010
Next Hearing Date 29-12-2010
Assessment Year 2002-2003
Appeal Filed On 26-03-2010
Judgment Text
I.T.A NO.2385 / MUM/2010 SUJEER PROPERTIES 1 IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH MUMBAI. [ BEFORE SHRI PRAMOD KUMAR ACCOUNTANT MEMBER ] I.T.A NO.2385 / MUM/2010 ASSESSMENT YEAR: 2002-03 SUJEER PROPERTIES(AOP) .. APPELLANT A-207/208 BHAVESHWAR ARCADE OPP. SHREYAS CINEMA LBS MARG GHATKOPAR (W) KUMBAI-86 PA NO.AADFS 2752 A VS INCOME TAX OFFICER WARD 13(2)(3) . RESPONDEN T MUMBAI. APPEARANCES: N.B.GANDHI FOR THE APPELLANT MALTHI SRIDHARAN FOR THE RESPONDENT O R D E R 1. BY WAY OF THIS APPEAL THE ASSESSEE HAS CHALLENG ED CORRECTNESS OF CIT(A)S ORDER DATED 11 TH FEBRUARY 2010 FOR THE ASSESSMENT YEAR 2002-03 IN TER ALIA ON THE GROUND THAT VERY INITIATION OF REASSESSMENT PROCEED INGS ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE WAS UNSUSTAINABLE IN LAW . I WILL TAKE UP THE VALIDITY OF REASSESSMENT PROCEEDINGS FIRST . 2. THE ASSESSEE BEFORE ME IS AN ASSOCIATION OF PERS ONS (AOP) CONSISTING OF FIVE PERSONS CO-OWNING A PROPERTY. THE RETURN OF INCOME WAS FILED ON 26 TH JULY 2002 I.T.A NO.2385 / MUM/2010 SUJEER PROPERTIES 2 DISCLOSING NIL INCOME AND CLAIMING THAT INCOME IS TO BE ASSESSED IN THE HANDS OF THE RESPECTIVE CO-OWNERS OF THE BUILDING AS SHARE OF EA CH CO-OWNER IS PREDETERMINED. THE RETURN OF INCOME WAS PROCESSED UNDER SECTION 14 3(1) AND ACCEPTED AS SUCH. HOWEVER SUBSEQUENTLY THE ASSESSING OFFICER CAME T O KNOW THAT THE ASSESSEE HAS NOT PAID MUNICIPAL TAXES FOR THE FINANCIAL YEARS 20 00-01 TO 2005-06 EVEN AS THE ASSESSEE HAS CLAIMED DEDUCTIONS IN COMPUTATION OF HOUSE PROPERTY IN RESPECT OF THE SAME. IT WAS FOR THIS REASON THAT THE ASSESSMENT OF THE ASSESSEE WAS REOPENED. IN APPEAL ALSO THE REASSESSMENT PROCEEDINGS THOUGH C HALLENGED FOR DIFFERENT REASONS THAT THE REASONS BEFORE ME WERE UPHELD. THE ASSESS EE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE ME. 3. I HAVE HEARD THE RIVAL CONTENTIONS PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE A PPLICABLE LEGAL POSITION. 4. LEARNED COUNSEL HAS AN INTERESTING ARGUMENT TO S UPPORT HIS CASE. HE SUBMITS THAT THERE IS NO INCOME IN THE HANDS OF THE AOP WHI CH HAS ESCAPED ASSESSMENT AND THAT THE PROPERTY INCOME TO BE TAXED IN THE HANDS O F THE CO-OWNERS IS NOT DEPENDENT ON QUANTIFICATION OF THE SAME IN THE CASE OF THE AO P. HE POINTS OUT THAT IN TERMS OF THE PROVISIONS OF SECTION 26 WHERE PROPERTY CONS ISTING OF BUILDINGS OR BUILDINGS AND LANDS APPURTENANT THERETO IS OWNED BY TWO OR MO RE PERSONS AND THEIR RESPECTIVE SHARES ARE DEFINITE AND ASCERTAINABLE S UCH PERSONS SHALL NOT IN RESPECT OF SUCH PROPERTY BE ASSESSED AS AN ASSOCIATION OF PERS ONS BUT THE SHARE OF EACH SUCH PERSON IN THE INCOME FROM THE PROPERTY AS COMPUTED IN ACCORDANCE WITH SECTIONS 22 TO 25 SHALL BE INCLUDED IN HIS TOTAL INCOME. AS A RESULT ACCORDING TO THE LEARNED COUNSEL QUANTIFICATION OF INCOME IN THE HANDS OF T HE AOP IS NOT A CONDITION PRECEDENT TO THE INCOME BEING TAXED IN THE HANDS OF THE CO-OWNER. THE ENTIRE EXERCISE OF FILING OF THE RETURN OF INCOME OF THE A OP FOR THIS REASON IS AN ENTIRELY INFRUCTUOUS EXERCISE AND IT HAS NO INCOME TAX IMPLI CATIONS AT ALL. THERE CANNOT BE ANY QUESTION OF ANY ESCAPEMENT OF INCOME IN THE COU RSE OF SUCH AN INFRUCTUOUS EXERCISE. WHEN LEARNED DEPARTMENTAL REPRESENTATIVE WAS QUESTIONED ON THIS ARGUMENT SHE COULD NOT DEMONSTRATE AS TO HOW QUANT IFICATION OF INCOME IN THE I.T.A NO.2385 / MUM/2010 SUJEER PROPERTIES 3 HANDS OF THE AOP WILL HAVE ANY LEGAL BEARING ON THE ASSESSMENT OF INCOME IN TERMS OF THE PROVISIONS OF SECTION 26 IN THE HANDS OF TH E CO-OWNERS. SHE HOWEVER AS SOME OTHER DEFENCE FOR THE IMPUGNED REASSESSMENT. SHE CONTENDS THAT AS HELD BY HONBLE SUPREME COURT IN THE CASE OF CIT VS SUN ENG G WORKS PVT LTD 198 ITR 297(SC) A CLAIM WHICH HAS NOT BEEN RAISED IN THE O RIGINAL ASSESSMENT CANNOT BE MADE IN THE REASSESSMENT PROCEEDINGS EITHER. SINCE THE ASSESSEE DID NOT TAKE UP THIS PLEA OF NON TAXABILITY WHILE FILING THE ORIGINAL RE TURN AS ALSO WHEN FILING RETURN IN RESPONSE TO REASSESSMENT NOTICE SHE CANNOT TAKE UP THE PLEA BEFORE THE TRIBUNAL ALSO. IT IS ALSO CONTENDED THAT THE PLEA AS HAS BEE N RAISED NOW GIVES A COMPLETELY NEW TWIST TO ASSESSEES CASE AND IT HAS BEEN RAISED BEFORE THE TRIBUNAL FOR THE FIRST TIME. IT IS FURTHER SUBMITTED THAT QUASHING THE RE ASSESSMENT PROCEEDINGS AT THIS STAGE WILL RESULT IN A SITUATION THAT THERE WILL BE NO BASIS FOR CHARGING THE RESPECTIVE SHARE OF CO-OWNERS IN THEIR RESPECTIVE HANDS. LEAR NED DEPARTMENTAL REPRESENTATIVE ALSO PRAYS THAT IN THE EVENT OF MY HOLDING THAT ASS ESSMENT IN THE HANDS OF THE AOP WAS INFRUCTUOUS AND WITH A VIEW TO SAFEGUARD THE LE GITIMATE INTERESTS OF THE REVENUE I SHOULD ALSO GIVE A DIRECTION FOR REOPEN ING THE ASSESSMENTS OF CO-OWNERS AS CONTEMPLATED UNDER SECTION 150 OF THE ACT. ON M ERITS IT IS ARGUED THAT THE VERY INSERTION OF EXPLANATION TO SECTION 26 SHOWS THAT T HE INCOME IS TO DETERMINED FIRST IN THE HANDS OF THE AOP AND THEN BENEFIT UNDER S ECTION 23(2) IS TO BE GIVEN FOR INDIVIDUAL SHARE OF INCOME OF THE CO-OWNER. IT IS S UBMITTED THAT IF ONLY ONE COMPUTATION IN THE HANDS OF THE CO-OWNER WAS CONTEM PLATED THERE WAS NO NEED OF EXPLANATION TO SECTION 26. A REFERENCE IS ALSO MAD E TO HONBLE DELHI HIGH COURTS JUDGMENT IN THE CASE OF CIT VS SHYAM SUNDER ( 122 I TR 541) IN SUPPORT OF THIS PROPOSITION. IN THE LIGHT OF THESE ARGUMENTS LEAR NED DEPARTMENTAL REPRESENTATIVE URGES US TO UPHOLD THE REASSESSMENT PROCEEDINGS AND DECLINE TO INTERFERE IN THE MATTER. 5. LET ME FIRST TAKE THE PRELIMINARY OBJECTION OF T HE LEARNED DEPARTMENTAL REPRESENTATIVE. NO DOUBT THE PLEA THAT NO INCOME HA S ESCAPED ASSESSMENT FOR THE REASON THAT THE HOUSE PROPERTY INCOME COULD NOT BE TAXED AS AN AOP INCOME ANYWAY HAS BEEN TAKEN UP FOR THE FIRST TIME BEFORE ME BUT THEN IT IS A PURELY LEGAL I.T.A NO.2385 / MUM/2010 SUJEER PROPERTIES 4 ISSUE WHICH DOES NOT REQUIRE ANY FURTHER INVESTIGA TION OF FACTS IN SUPPORT OF ASSESSEES GRIEVANCE AND THERE IS NO BAR ON MY DEAL ING WITH ANY LEGAL PLEA AS LONG AS IT DOES NOT WARRANT EXAMINATION OF NEW FACTS AND AS LONG AS I HAVE HEARD THE OTHER PARTY ON THE SAME. NONE OF THESE CONDITIONS ARE VIO LATED ON THE FACTS OF THE PRESENT CASE. 6. SECTION 26 OF THE INCOME TAX ACT WHICH I WOULD LIKE TO REPRODUCE AT THIS STAGE PROVIDES AS FOLLOWS: PROPERTY OWNED BY CO-OWNERS. 26. WHERE PROPERTY CONSISTING OF BUILDINGS OR BUILD INGS AND LANDS APPURTENANT THERETO IS OWNED BY TWO OR MORE PERSONS AND THEIR RESPECTIVE SHARES ARE DEFINITE AND ASCERTAINABLE SUCH PERSONS SHALL NOT IN RESPECT OF SUCH PROPERTY BE ASSESSED AS AN ASSOCIATION OF PERS ONS BUT THE SHARE OF EACH SUCH PERSON IN THE INCOME FROM THE PROPERTY AS COMP UTED IN ACCORDANCE WITH SECTIONS 22 TO 25 SHALL BE INCLUDED IN HIS TOT AL INCOME. [ EXPLANATION. FOR THE PURPOSES OF THIS SECTION IN APPLYING THE PROVISIONS OF SUB-SECTION (2) OF SECTION 23 FOR COMPUTING THE SHA RE OF EACH SUCH PERSON AS IS REFERRED TO IN THIS SECTION SUCH SHARE SHALL BE COMPUTED AS IF EACH SUCH PERSON IS INDIVIDUALLY ENTITLED TO THE RELIEF PROVI DED IN THAT SUB-SECTION.] 7. I SEE MERIT IN THE ARGUMENT THAT WHEN THE VERY A CT OF FILING OF INCOME TAX RETURN IN THE HANDS OF THE AOP IN THE CASE OF CO-O WNERSHIP OF HOUSE PROPERTIES HAS NO INCOME TAX IMPLICATIONS BECAUSE ASSESSMENT OF A OP OR NO ASSESSMENT OF AOP INCOME OF THE CO-OWNERS OF A HOUSE PROPERTY IS TO T AXED IN ACCORDANCE WITH THE SCHEME OF SECTION 22 TO 25 AND ON THE BASIS OF FICT ION ENVISAGED IN EXPLANATION TO SECTION 26 WHICH PROVIDES THAT FOR THE PURPOSE OF C OMPUTATION OF INCOME FROM HOUSE PROPERTY UNDER SECTION 26 IN APPLYING THE P ROVISIONS OF SUB-SECTION (2) OF SECTION 23 FOR COMPUTING THE SHARE OF EACH SUCH PER SON AS IS REFERRED TO IN THIS SECTION SUCH SHARE SHALL BE COMPUTED AS IF EACH S UCH PERSON IS INDIVIDUALLY ENTITLED I.T.A NO.2385 / MUM/2010 SUJEER PROPERTIES 5 TO THE RELIEF PROVIDED IN THAT SUB-SECTION. SO FA R AS INCOME FROM HOUSE PROPERTY IS CONCERNED THE SCHEME OF THE ACT DOES NOT ENVISAGE THAT ANNUAL VALUE OF THE CO- OWNED PROPERTY UPON BEING DETERMINED IN THE ASSESS MENT OF THE AOP IS TO BE DIVIDED AMONGST THE CO-OWNERS IN THE PRE-DETERMINED RATIO. IN OTHER WORDS QUANTIFICATION OF ANNUAL VALUE OF THE CO-OWNED PROP ERTY IN THE COURSE OF ASSESSMENT OF AOP CONSISTING OF CO-OWNERS IS NOT A CONDITION P RECEDENT FOR TAXABILITY OF INDIVIDUAL SHARE OF SUCH INCOME IN THE HANDS OF THE CO-OWNERS. NO DOUBT AS NOTED BY HONBLE DELHI HIGH COURT IN SHYAM SUNDERS CASE (SUPRA) THE COMPUTATION OF INCOME FROM HOUSE PROPERTY IN THE HANDS OF THE CO-O WNER INVOLVES TWO STEPS FIRST THAT ANNUAL VALUE OF THE PROPERTY IS TO BE DETERMIN ED AS A SINGLE UNIT; AND SECOND THAT ANNUAL VALUE SO DETERMINED IS TO BE APPORTIONE D IN THE RATIO OF OWNERSHIP. HOWEVER BOTH OF THESE STEPS ARE TO BE TAKEN IN THE ASSESSMENT OF THE CO-OWNER AND IN ANY EVENT JUST BECAUSE TWO STEPS ARE TO BE TAKE N IN COMPUTATION OF INCOME IT DOES NOT MEAN THAT THESE STEPS ARE TO BE TAKEN IN T WO DIFFERENT ASSESSMENT UNITS; THERE IS A DIFFERENCE IN THE MANNER OF COMPUTATION OF INCOME AND ASSESSMENT OF INCOME. THERE IS NO SUPPORT FOR THE PROPOSITION THA T ANNUAL VALUE OF THE PROPERTY IS TO BE DETERMINED IN THE COURSE OF THE ASSESSMENT OF THE AOP ITSELF. QUITE TO THE CONTRARY AS THIS VERY JUDICIAL PRECEDENT NOTES S ECTION 26LAYS DOWN THAT WHEN THE SAME (PROPERTY) IS OWNED BY SEVERAL CO-OWNERS WHO HAVE DEFINITE AND ASCERTAINABLE SHARES THEY ARE NOT TO BE ASSESSED A S AN AOP. I THEREFORE REJECT THE CONTENTION OF THE DEPARTMENTAL REPRESENTATIVE THAT THE ASSESSMENT OF AOP ON THE FACTS OF THIS CASE HAS IMPLICATIONS ON ASSESSMENT OF CO-OWNERS SHARE OF ANNUAL VALUE. 8. LEARNED DEPARTMENTAL REPRESENTATIVES REQUEST FO R DIRECTION UNDER SECTION 150 IS ALSO DEVOID OF LEGALLY SUSTAINABLE MERITS. S ECTION 150 (1) PROVIDES THAT NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 149 THE NOTICE UNDER SECTION 148 MAY BE ISSUED AT ANY TIME FOR THE PURPOSE OF MAKING AN ASSESSMENT OR REASSESSMENT OR RECOMPUTATION IN CONSEQUENCE OF OR TO GIVE EFFEC T TO ANY FINDING OR DIRECTION CONTAINED IN AN ORDER PASSED BY ANY AUTHORITY IN AN Y PROCEEDING UNDER THIS ACT BY WAY OF APPEAL REFERENCE OR REVISION OR BY A COURT IN ANY PROCEEDING UNDER ANY OTHER I.T.A NO.2385 / MUM/2010 SUJEER PROPERTIES 6 LAW . SECTION 150 DOES NOT ENABLE OR REQUIRE AN APPELLATE AUTHORITY TO GIVE ANY DIRECTIONS FOR REOPENING OF ASSESSMENT BUT IT DEAL S WITH A SITUATION IN WHICH A REASSESSMENT IS TO BE INITIATED TO GIVE EFFECT TO F INDINGS OR DIRECTIONS OF THE APPELLATE AUTHORITY OR THE COURT. THAT IS A CALL TO BE TAKEN BY THE ASSESSING OFFICER AND NOT BY ME. HAVING SAID THAT LET ME ALSO ADD THAT IN TERMS OF HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF RAJINDER NATH VS. CIT (12 0 ITR 12) AN APPELLATE AUTHORITYS POWERS TO GIVE FINDINGS OR DIRECTIONS ARE NOT UNFET TERED SO AS TO GIVE ANY SUCH FINDINGS OR DIRECTIONS AS APPELLATE AUTHORITY DEEMS DESIRABLE ON THE FACTS OF THE CASE BUT IN THEIR LORDSHIPS CONSIDERED OPINION AN AP PELLATE AUTHORITY CAN GIVE ONLY SUCH FINDINGS OR DIRECTIONS AS ARE NECESSARY FOR DI SPOSAL OF AN APPEAL. AS I UNDERSTAND SCHEME OF THE INCOME TAX ACT AS VISU ALIZED BY HONBLE SUPREME COURT IN RAJINDER NATHS CASE (SUPRA) DOES NOT PERMIT CO NSIDERATIONS OF SAFEGUARDING THE INTERESTS OF REVENUE TO HAVE A ROLE TO PLAY IN MY G IVING SUCH FINDINGS OR DIRECTIONS. TO THE EXTENT SAFEGUARDING OF THESE INTERESTS IS NO T IMPLICIT IN THE SCHEME OF THE INCOME TAX ACT IT IS NOT FOR ME TO SUPPLEMENT THE SAME EITHER. I AM NOT THEREFORE INCLINED TO CONSIDER THE PLEA OF THE LEARNED DEPART MENTAL REPRESENTATIVE THAT WITH A VIEW TO SAFEGUARD THE INTERESTS OF THE REVENUE I MUST GIVE A FINDING SO AS TO ENABLE THE ASSESSING OFFICER TO REOPEN THE ASSESSMENTS OF CO-OWNERS. I HAVE GIVEN SUCH FINDINGS AS IN MY CONSIDERED VIEW ARE NECESSARY T O ADJUDICATE ON THIS APPEAL. WHETHER THESE FINDINGS NECESSITATE OR JUSTIFY REOPE NING OF ASSESSMENTS OF CO- OWNERS THAT IS FOR THE ASSESSING OFFICER TO EXAMIN E. 9. COMING TO THE ARGUMENT OF THE LEARNED DEPARTMENT AL REPRESENTATIVE THAT INCOME FROM HOUSE PROPERTY IS FIRST TO BE DETERMINE D IN THE HANDS OF THE AOP AND THEN SHARE OF CO-OWNERS IS TO BE ALLOCATED IN MY V IEW THIS ARGUMENT IS ALSO CONTRARY TO THE CLEAR LEGAL POSITION. IN MY CONSIDERED VIEW IT IS NOT A CONDITION PRECEDENT FOR BRINGING TO TAX HOUSE PROPERTY INCOME IN THE CASES OF CO-OWNERS THAT FIRST HOUSE PROPERTY INCOME FOR DETERMINED IN THE HANDS OF THE AOP AND THEN THE SAME IS APPORTIONED TO THE CO-OWNERS IN PREDETERMINED RATIO . DESPITE MY SPECIFIC REQUISITION TO POINT OUT LEGAL PROVISIONS WHICH SUP PORT THIS APPROACH LEARNED DEPARTMENTAL REPRESENTATIVE COULD NOT POINT OUT ANY THING IN THE STATUTE. IN MY I.T.A NO.2385 / MUM/2010 SUJEER PROPERTIES 7 CONSIDERED OPINION THEREFORE THE VERY EXERCISE OF ASCERTAINMENT OF CO-OWNED HOUSE PROPERTY INCOME WITH PREDETERMINED SHARES IN THE HANDS OF THE AOP IS WHOLLY ACADEMIC AND INFRUCTUOUS IN THE FACE OF THE SPECIFIC PROVISIONS OF SECTION 26 OF THE ACT. NO INCOME CAN BE SAID TO HAVE ESCAPED IN THE COURSE OF SUCH AN ACADEMIC AND INFRUCTUOUS EXERCISE. ESCAPEMENT OF INCOME MAY AT BEST BE SAID TO HAVE TAKEN PLACE IN THE HANDS OF THE CO-OWNERS BUT RIGHT NOW I AM NOT IN SEISIN OF INCOME OF THE CO-OWNERS AND THAT ASPECT OF THE MATTER WILL HAVE NO BEARING ON ADJUDICATION OF THIS APPEAL. IN THIS VIEW OF THE MATTER THE VERY INITI ATION OF REASSESSMENT PROCEEDINGS IN THE HANDS OF THE AOP OF CO-OWNERS I.E. ASSESSEE BE FORE ME IN THIS APPEAL IS UNSUSTAINABLE IN LAW. 10. FOR THE REASONS SET OUT ABOVE AS BEING OF THE CONSIDERED VIEW THAT THERE WAS NO INCOME ESCAPING ASSESSMENT IN THE HANDS OF THE A SSESSEE BEFORE ME I QUASH THE REASSESSMENT PROCEEDINGS IMPUGNED IN THIS APPEAL. A S THE REASSESSMENT ITSELF IS QUASHED FOR WANT OF VALID REASONS OF REOPENING THE ASSESSMENT ALL OTHER ISSUES RAISED IN THIS APPEAL WHETHER ON THE QUESTION OF V ALIDITY OF ISSUANCE OF NOTICE BEYOND PERMISSIBLE TIME LIMIT OR ON THE QUESTION OF MERITS OF ADDITIONS MADE DURING THE COURSE OF SUCH REASSESSMENT ARE RENDERED ACADE MIC AND DO NOT CALL FOR ANY ADJUDICATION AT THIS STAGE. 11. IN THE RESULT THE APPEAL IS ALLOWED IN THE TER MS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON 28 TH JANUARY 2011 SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) MUMBAI DATED 28 TH JANUARY 2011 I.T.A NO.2385 / MUM/2010 SUJEER PROPERTIES 8 I.T.A NO.2385 / MUM/2010 SUJEER PROPERTIES 9