2013 (2) TMI 475 - HC - Income Tax

Reassessment Income assessed on reassessment cannot be less than the income originally assessed - Assessee is a plot owner society,received a sum as the TDR premium from its members - In the original return of income, the assessee had offered the TDR premium to tax after deducting the expenditure incurred by it - Notice issued under section 148 to show cause as to why the expenditure incurred for earning the TDR premium should not be disallowed Held that - As decided in Sun Engineering Works P. Ltd 1992 (9) TMI 1 - SUPREME COURT 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 assesse be permitted to convert the reassessment proceedings as his appeal or revision in disguise - Since the decision of the Income-tax Appellate Tribunal is contrary to the aforesaid decision of the apex court, the impugned decision of the Income-tax Appellate Tribunal is quashed and set aside and the matter is restored to the file of the Income-tax Appellate Tribunal for fresh decision in accordance with law. 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 principle 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 Income-tax Appellate Tribunal Appeal disposed of accordingly

Summary

Issues:
1. Disallowance of expenditure incurred for earning TDR premium.
2. Taxability of TDR premium under the principle of mutuality.
3. Assessment of income on reassessment compared to the income originally assessed.
4. Validity of reassessment proceedings under section 147 of the Income-tax Act, 1961.

Analysis:
1. The case involves a dispute over the disallowance of expenditure incurred for earning a Transfer of Development Rights (TDR) premium by a plot owner society. The Assessing Officer disallowed the expenditure, leading to an increase in the income chargeable to tax.

2. The main contention revolves around the taxability of the TDR premium under the principle of mutuality. The assessee argued that the TDR premium should not be taxable based on this principle, while the Revenue disagreed, leading to conflicting decisions at different stages of the proceedings.

3. A crucial issue raised was the comparison of the income assessed on reassessment with the income originally assessed. The Revenue contended that the reassessed income cannot be less than the income originally assessed, citing the decision in CIT v. Sun Engineering Works P. Ltd. The court emphasized that reassessment proceedings are for the benefit of the Revenue, not the assessee.

4. The validity of the reassessment proceedings under section 147 of the Income-tax Act, 1961 was questioned. The court highlighted that the assessee cannot convert reassessment proceedings into an appeal or revision in disguise, as it is primarily for the benefit of the Revenue. The court quashed the decision of the Income-tax Appellate Tribunal and remanded the matter for fresh consideration.

5. Ultimately, the court clarified that since the TDR premium had been voluntarily offered to tax, the question of taxability under the principle of mutuality did not arise. The focus should be on the disallowed expenditure claimed by the assessee. The court left all contentions open and disposed of the appeal with no order as to costs.