High Court Of Bombay
CIT- 21, Mumbai vs. Jaihind Co-Operative Housing Society Ltd.
Assessment Year : 1999-2000
Section : 254, 147
J.P. Devadhar And A.R. Joshi, JJ.
IT Appeal No. 2274 Of 2009
November 14, 2011
1. This appeal is filed by the revenue against the order of the ITAT dated 31/12/2007 in ITA No.150/Mum/2004 relating to AY 1999-2000. The grievance of the revenue is that as a result of the impugned order passed by the ITAT, the income chargeable to tax under the reassessment order becomes lesser than the income originally assessed which is contrary to the law laid down by the Apex Court.
2. The assessee is a plot owner society. In the assessment year in question, the assessee had received a sum of Rs. 12,98,742/- as TDR premium from its members. In the original return of income, the assessee had offered the TDR premium of Rs.12,98,742/- to tax and after deducting the expenditure incurred by it, computed the income chargeable to tax at Rs. 7,27,660/-. The said return of income was processed under Section 143(1) and accepted without any addition or disallowance.
3. Thereafter, by a notice issued under Section 148 of the Income Tax Act, 1961, the assessing officer called upon the assessee to show cause as to why the expenditure incurred for earning TDR premium should not be disallowed and accordingly called upon the assessee to file return of income. In response to the said notice, the assessee by its letter dated 19th December, 2002 replied as under;-
“Return of income for the Assessment year 1999-2000 is filed with Joint Commissioner of Income Tax, Special Range-10, Mumbai on 23rd December, 1999 vide Machine No.227. Xerox copies of Return of income, Computation of Income, Income & Expenditure and Balance Sheet as at 31st March, 1999 are enclosed for your ready reference. You can observe from the same that we have offered transfer fees received for taxation. Therefore, kindly treat Return of Income filed on 23-12-1999 as Return filed in response to Notice U/s.148 of the Income Tax Act, 1961. “
4. However, during the course of the reassessment proceedings, the assessee contended that the TDR amount was not taxable on principles of mutuality. The assessing officer rejected the contention of the assessee and further held that the expenses claimed were not related to the transfer fees and hence not allowable. Accordingly, the assessing officer computed the income chargeable to tax at Rs. 13,00,740/-.
5. Challenging the aforesaid order, the assessee filed an appeal before the CIT(A). The CIT(A) while affirming the reassessment order held that once the assessee voluntarily offered the TDR premium to tax, it was not open to the assessee to contend in the reassessment proceedings that the TDR premium was not taxable by applying the principles of mutuality. The CIT(A) further held that the assessee has not been able to prove that the expenditure was incurred for earning the taxable income and, therefore, expenditure claimed by the assessee was not allowable.
6. On further appeal filed by the assessee, the ITAT following its decision in the case of Ashok Co-operative Housing Society Ltd. in I.T.A. No.6894/M/02 dated 23/11/2005 held that TDR premium received by the assessee was not taxable on account of principles of mutuality. The ITAT, however, upheld the order of CIT(A) in disallowing the expenditure of Rs. 5,73,087/- as the same was not seriously contested by the assessee. Challenging the aforesaid order, the revenue has filed the present appeal.
7. The basic argument of the revenue is that the income assessed on reassessment cannot be less than the income originally assessed. In support of the above contention, reliance is placed on the decision of the Apex Court in the case of CIT v. Sun Engg. Works (P.) Ltd.  198 ITR 297/164 Taxman 442 (SC).
8. Mr. Irani, learned counsel appearing on behalf of the assessee fairly agreed with the above contention of the revenue. However, Mr. Irani submitted that in the reassessment proceedings it would be open to the assessee to put forward claims for deduction of the expenditure relatable to the TDR premium as held by the Apex Court in the case of Sun Engg. Works P. Ltd. (supra).
9. In the present case, it is not in dispute that the income assessed on reassessment after giving effect to the order of ITAT becomes less than the income originally assessed. As held by the Apex Court in the case of Sun Engg. Works P. Ltd. (supra), the object and purpose of the proceedings under Section 147 of the Act is for the benefit of the revenue and not for the benefit of the assessee and, therefore, in the reassessment proceedings, the assessee cannot be permitted to convert the reassessment proceedings as his appeal or revision in disguise. Since the decision of the ITAT is contrary to the aforesaid decision of the Apex Court, the impugned decision of the ITAT is quashed and set aside and the matter is restored to the file of the ITAT for fresh decision in accordance with law.
10. We make it clear that since the TDR premium amount received by the assessee has been voluntarily offered to tax, the question of considering the taxability of that amount by applying the principles of mutuality in the reassessment proceedings does not arise at all. It is only the expenditure claimed to have been incurred by the assessee which is disallowed in the reassessment order that has to be considered by the ITAT. All contentions of the parties are kept open.
11. The appeal is disposed off accordingly with no order as to costs.
[Citation : 349 ITR 537]