Itxa/2233/2011 Of The Commissioner Of Income Tax - 6 Mumbai v. Gsrey Worldwide (India) Pvt. L Td

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.2233 OF 2011WITHINCOME TAX APPEAL NO.2234 OF 2011 The Commissioner of Income Tax-6..AppellantV/s.Grey Worldwide (India) Pvt. Ltd...Respondent. Mr. Suresh Kumar, for the Appellant in both the matters..Mr. Prakash Shah with Mr. Jas Sanghavi i/b. PDS Legal, for the Respondent in both the matters. P.C:- CORAM: J.P.DEVADHAR & M.S.SANKLECHA,JJ.DATE : 5[th] MARCH, 2013. In these Appeals by the Revenue for the Assessment Years 2000-01 and 2001-02 following common question has been raised for our consideration. Whether on the facts and in circumstances of the case and in law, the Tribunal is right in holding that there existed no reason to believe that income chargeable to tax has escaped assessment? 2As there are two appeals involving identical issues, for the sake of convenience, we refer to the facts as set out in Income Tax Appeal (i)The Respondent-Assessee filed its return of income for the Assessment Year 2000-01 declaring the total income of Rs.29.49 lakhs under Section 115JA of the Income Tax Act, 1961 (the said Act). The return of income was proceeded under Section 143(1) of the Act.Assessment Year 2000-01 declaring the total income of Rs.29.49 lakhs under Section 115JA of the Income Tax Act, 1961 (the said Act). The return of income was proceeded under Section 143(1) of the Act. (ii)On 31[st] January, 2006, a notice was issued under Section 148 of the said Act. The reasons recorded for re-opening of the Assessment Year 2000-01 are as under:-said Act. The reasons recorded for re-opening of the Assessment Year 2000-01 are as under:- “The return of income was filed on 29/11/2000 on a total income of Rs.29,49,150/- under Section 115JA. The same was processed on 22/12/2000. On perusal of the computation of income, it is seen that a sum of Rs.1,75,89,839/- being Lease Equalization Reserve is set off from the Net Profit. This amount, being a portion of a capital asset, should have been capitalized as the assessee is claiming depreciation on the leased assets. In view of the above facts, it is clear that income chargeable to tax to the extent of Rs.1,75,89,839/- has escaped assessment, as the assessee has not correctly furnished/ computed the income in accordance with the Act. Therefore, I have reason to believe that income to the above extent has escaped assessment. As more than 4 years have elapsed from the end of the relevant assessment year, the case being covered under Section 149(1)(b) r. w. s.151 of the I.T. Act, administrative approval for reopening the case u/s 148 may kindly be accorded.” 3It is pertinent to note that the Assessment for the Assessment Year 2000-01 was completed under Section 143(1) of the Act. The reasons for reopening of the Assessment as recorded was that sum of Rs.1.75 lakhs being the Lease Equalization Reserve was a capital asset and should have been capitalized by the Assessee as depreciation is being claimed on the leased assets. The Tribunal held that even when assessment has been computed under Section 143(1) of the Act, reopening can only take place when there is reason to believe that income chargeable to tax has escaped assessment by following the decision of this Court in the matter of Prashant S. Joshi v/s. ITO reported in 324 ITR 154. In the present case, the Tribunal concluded that there was no reason to believe that income had escaped assessment as the Lease Equalization Reserve was an item of debit or credit in the Profit and Loss Account prepared under the Companies Act, 1956 while filing the return of income for income-tax purposes, the assessee had not considered the Lease Equalization Reserve and had determined its income without taking into consideration the Lease Equalization Reserve. 4In this view of the factual finding that the Lease Equalization Reserve is not taken into consideration for the purposes of the Act, we see no reason to entertain the proposed question. 5Accordingly, appeal is dismissed with no order as to costs. (M.S.SANKLECHA,J.) (J.P.DEVADHAR,J.)