ITAT DELHI BENCH ‘B’
Delhi Industries & Enterprises
Versus
Assistant Commissioner of Income-tax, Circle 30(1), New Delhi
IT Appeal Nos. 1464, 1465, 1534, 1535 & 2303 (Delhi) of 2010
[ASSESSMENT YEARS 2002-03 TO 2005-06]
OCTOBER 31, 2011
ORDER
Rajpal Yadav, Judicial Member
In this Bunch of five appeals, four are directed at the instance of assessee against the separate orders of Learned CIT(Appeals) dated 29.1.2010, 29.1.2010, 12.3.2010, 15.3.2010 passed in assessment years 2002-03 to 2005-06 respectively, whereas in assessment year 2005-06, revenue is in cross appeal. The assessment orders were passed in all these assessment years on 27.12.2007 under sec. 143(3) read with section 147 of the Income-tax Act, 1961. Common questions of facts and law are involved in all the appeals, therefore, we heard them together and deem it appropriate to dispose of them by this common order.
2. The first common issue raised by the assessee in all the assessment years is that Learned CIT(Appeals) has erred in upholding the reopening of assessment. Since the common facts are involved, therefore, for the facility of reference, we would take facts from assessment year 2002-03, however, if we find any variation of facts in any assessment year which required specific reference for the just decision of appeals then we would refer those facts from those assessment years.
3. The brief facts in assessment year 2002-03 are that assessee has filed a return of income on 30.7.2002 declaring an income of Rs. 12,23,340. This return was processed under sec. 143(1)(a) on 25.2.2003 on retuned income. Assessing Officer, thereafter passed an order under sec. 154 read with section 143(1) on 31.3.2003 and determined the taxable income of assessee at Rs. 79,89,490 after disallowing property tax of Rs. 61,00,190. He also disallowed interest on borrowed capital at Rs. 24,96,015. Dissatisfied with this adjustment, assessee carried the matter in appeal before the learned CIT(Appeals). Learned CIT(Appeals) decided the appeal on 14.8.2003 and Assessing Officer gave the effect to Learned CIT(Appeals)’s order on 27.2.2004. He recomputed the income of the assessee at Rs. 12,63,018. The assessee again moved an application under sec. 154. It claimed that advance rent of March 2001 amounting to Rs. 1,75,500 has been assessed in assessment year 2001-02 and, therefore, it cannot be considered again in 2002-03. In assessment year 2001-02, an assessment order was passed under sec. 143(3) of the Act. Learned Assessing Officer ultimately determined the income of assessee at Rs. 10,87,520.
4. Assessing Officer had issued notice under section 148 on 28.3.2007 after recording the reasons for reopening of the case. This notice was served in all the assessment years. Assessee filed a letter on 30.4.2007, in all the four assessment years, stating therein, that the return originally filed be treated as return filed under sec. 148 of the Act. There is no variation of facts in assessment year 2003-04 except that the proceedings under section 154 of the Act was not taken by the Assessing Officer.
5. In assessment year 2004-05, the assessee has filed the return on 29.10.2004 declaring an income of Rs. 51,40,790. A notice under sec. 143(2) of the Act was issued on 17.1.2005. Assessing Officer has passed an assessment order under sec. 143(3) on Ist of August 2005. He accepted the income declared by the assessee. The notice under sec. 148 of the Act was issued on 28.3.2007. Similarly, in assessment year 2005-06, assessee filed the return on 27.7.2005 declaring an income of Rs.78,81,880. It was processed under sec. 143(1) on 23rd September 2005. A notice under sec. 143(2) was issued upon the assessee and an assessment under sec. 143(3) was passed on 27.1.2006 and rest of the facts are identical to other years.
6. Assessing Officer has recorded separate reasons for re-opening of assessment in all these four years. The reasons for assessment years 2002-03 and 2003-04 are identical whereas the reasons for assessment years 2004-05 and 2005-06 are identical. Since both the parties have advanced multi-fold arguments on this issue and relied upon a large number of case laws for buttressing their contentions, therefore, we deem it appropriate to take note of the reasons recorded by the Assessing Officer which read as under:
Assessment Years 2002-03 & 2003-04:
Reasons for belief better that income has escaped assessment in the case of M/s. Delhi Industries & Enterprises for A.Y.2002-03
Return of income was, filed on 30.07.2002 declaring income of Rs. 12,23,340/- which was processed u/s 143(1) on 28.02.2003 on returned income. The assessee’s only source of income is rental income.
On going through the inspection report of Hon’ble CIT-X and the assessment records, I am satisfied that the income chargeable to tax has escaped assessment for the AY.2002-03 as per the reasons given below:-
“That during the A.Y. 2002-03, the assessee firm was sanctioned loan of Rs. 4 Crores by Vyshya Bank Ltd. on 12-05-2001 for the purpose of construction of commercial Complex/repayment of existing loan with Canera Bank. The building was completed in the F.Y. 2000-01 and the firm started getting rent in the F.Y. 2000-01 relevant to the A.Y .2001-02. The borrowed funds were not used for the purpose of construction as there was no addition to the commercial complex during the year, except repayment of outstanding loan of Rs. 1.66 Cr. payable to Canara Bank. The assessee has claimed deduction u/s 24 on account of interest for current year at Rs. 53.61,464/- which has been allowed. Since Vyshya Bank Ltd. duly certified that the loan of Rs.4 Cr. is being sanctioned for the purpose of construction of commercial complex/repayment of existing loan with Canara Bank and the Interest payable on that loan for the period is Rs. 53,61,484/- whereas the assessee has used only 1.66 Cr. out of loan of Rs. 4 Cr., on which deduction u/s 24 is claimed but the deduction u/s 24 should be restricted to the amount of interest attributable to repayment of loan of Canara Bank only. Thus deduction u/s 24 in respect on interest on a sum of Rs. 2.34 Cr. which was not utilized for the construction/repayment of loan is not allowable.
Besides this the income has also escaped assessment in respect of income earned on the balance borrowed funds utilized for the activities not disclosed by the assessee firm as the assessee has not shown any income except income from house property”.
Therefore, I have reasons to believe that the income above Rs. 1,00,000 as discussed above has escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the assessment Year 2002-03. Therefore, proceedings u/s 147 are initiated by issue of notice u/s 148 of the I.T. Act for the A.Y. 2002-03.
Issue notice u/s 148 for A. Y. 2002-03.
Sd/-
(Madhu B. Dhawan)
Asstt. Commissioner of Income-tax
Circle 30(1), New Delhi”
Reasons for belief that income has escaped assessment in the case of M/s. Delhi Industries & Enterprises for A.Y. 2004-05
Return of income was filed on 29.10.2004 declaring income of Rs. 51,40,790 which was processed u/s. 143(1). Subsequently the assessment was completed u/s. 143(3) on 1.8.2005 on returned income of Rs. 51,40,790. The assessee’s only source of income is rental income.
On going through the inspection report of the Hon’ble CIT-X and the assessment for the A.Y. 2004-05 as per the reasons given below:-
“That the assessee firm was reconstituted on 02.09.2003 with the new partners as under:
