The Commissioner Of Income Tax-5 v. M/S. Bidbhanjan Investment & Trading Company Pvt. Ltd

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL (LODG.) NO.1154 OF 2011 The Commissioner of Income Tax-5...Appellant.Vs.M/s. Bidbhanjan Investment &Trading Company Pvt. Ltd...Respondent. Mr. N.A. Kazi, for the Appellant. .... .... CORAM : J. P. DEVADHAR & A.R. JOSHI, JJ. P.C. th NOVEMBER, 2011. DATED : 15 1.Whether the ITAT was justified in quashing the reassessment order passed under Section 143(3) read with Section 147 of the Income Tax Act, 1961, is a question raised in this Appeal. 2.The assessment year involved herein is A.Y. 2000-01. In the assessment year in question, the assessee had sold its factory and treated the gains arising from the transfer of the capital asset as long term capital gain. After availing the indexed cost of acquisition, the assessee had worked out Long Term Capital Gain and the same was duly assessed under Section 143(3) of the Income Tax Act. Thereafter, by a notice issued under Section 148 of the Income Tax Act, 1961, the assessment was sought to be reopened by recording the following reasons : “During the period relevant the asstt. Year 2001-02, the assessee had paid Municipal taxes tax of Rs.13,355/-. This payment appears to be for the change of usage. It is understood that the property in question was a factory building and now it stands developed as shops and marriage hall consisting of 110 units, known as “Oshiwara Plaza”. Enquiries made at the locality and with Municipal office, it is understood that the assessee had developed the property known as “Oshiwara Plaza” which consists of 110 units. This property seems to have been sold during the period relevant to the A.Y. 2000-01. However, no details are furnished with the return of income for the A.Y. 2000-01 for the preceding or for the succeeding years.” 3.The assessee objected to reopening of the assessment on the ground that the assessee had closed its business activities since several years and that no business activity was carried on, save and except, holding the property which was sold during the Assessment Year in question. It was further contended that whatever expenses incurred for maintaining the said property, were added in the capital account i.e. the cost of the property. It was contended that the property sold by the assessee was a capital asset and, therefore, the income derived therefrom could not be assessed as business income. 4.The Assessing Officer rejected the contention of the assessee and passed the reassessment order by recording thus : “The assessee has been capitalizing various expenses over the years and enhancing the cost of this property. These include legal fees, security charges, bank charges, filing fees, audit fees, consultancy charges, professional charges, legal charges, water charges, Misc. expenses, Municipal Taxes among other things. It the property is held as an investment, none of the above expenses can be capitalized. Thus the very fact that these expenses are being capitalized and carried to the balance sheet reveals the assessee's intention in treating this property as a commercial asset to be developed subsequently and not an investment. Therefore, the income on sale of the property is being taxed under the head Profit and Gains of Business & Profession and consequently no indexation is being given.” 5.The CIT(A) as also the ITAT have set aside the reassessment order on the ground that the reasons recorded for reopening the assessment was that the property was developed as shops & marriage hall and then sold as a commercial asset whereas, no addition were made on that basis in the reassessment order and therefore the reassessment order cannot be sustained. 6.Since the addition made in the reassessment order are not based on the reasons recorded for reopening the assessment order but are based on a totally different ground, no fault can be found with the decision of the ITAT in setting aside the reassessment order. 5.The CIT(A) as also the ITAT have set aside the reassessment order on the ground that the reasons recorded for reopening the assessment was that the property was developed as shops & marriage hall and then sold as a commercial asset whereas, no addition were made on that basis in the reassessment order and therefore the reassessment order cannot be sustained. 6.Since the addition made in the reassessment order are not based on the reasons recorded for reopening the assessment order but are based on a totally different ground, no fault can be found with the decision of the ITAT in setting aside the reassessment order. 7.In the result, we see no reason to entertain the present Appeal. Accordingly, the Appeal is dismissed with no order as to costs. (A. R. JOSHI, J.) (J. P. DEVADHAR,J.)