M/s. S.M. Enterprise, New Delhi V. DCIT, New Delhi

CO 194/DEL/2012

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8355 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 27 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 15-02-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 07-02-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 18-05-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K UPADHAYA
• Keywords: Reopening of assessment; Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH G GG G : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND SHRI SHRI SHRI SHRI I.C.SUDHIR I.C.SUDHIR I.C.SUDHIR I.C.SUDHIR, JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER ITA NO ITA NO ITA NO ITA NOS SS S. .. .1601/DEL/2012, 1602/DEL/2012 & 1603/DEL/2012 1601/DEL/2012, 1602/DEL/2012 & 1603/DEL/2012 1601/DEL/2012, 1602/DEL/2012 & 1603/DEL/2012 1601/DEL/2012, 1602/DEL/2012 & 1603/DEL/2012 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEARS SS S : : : : 2003 2003 2003 2003- -- -04, 2004 04, 2004 04, 2004 04, 2004- -- -05 & 2005 05 & 2005 05 & 2005 05 & 2005- -- -06 0606 06 DEPUTY C DEPUTY C DEPUTY C DEPUTY COMMISSIONER OF OMMISSIONER OF OMMISSIONER OF OMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -26(1), 26(1), 26(1), 26(1), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. VS. VS. VS. VS. M/S S.M.ENTERPRISES, M/S S.M.ENTERPRISES, M/S S.M.ENTERPRISES, M/S S.M.ENTERPRISES, F FF F- -- -121, MAIN MARKET, 121, MAIN MARKET, 121, MAIN MARKET, 121, MAIN MARKET, RAJOURI GARDEN, RAJOURI GARDEN, RAJOURI GARDEN, RAJOURI GARDEN, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 027. 110 027. 110 027. 110 027. PAN : AAWFS1588H. PAN : AAWFS1588H. PAN : AAWFS1588H. PAN : AAWFS1588H. (APPELLANT) (RESPONDENT) CROSS OBJECTION NOS.194/DEL/2012 & 420/DEL/2012 CROSS OBJECTION NOS.194/DEL/2012 & 420/DEL/2012 CROSS OBJECTION NOS.194/DEL/2012 & 420/DEL/2012 CROSS OBJECTION NOS.194/DEL/2012 & 420/DEL/2012 (IN ITA NOS.1 (IN ITA NOS.1 (IN ITA NOS.1 (IN ITA NOS.1601/DEL/2012 & 1602/DEL/2012) 601/DEL/2012 & 1602/DEL/2012) 601/DEL/2012 & 1602/DEL/2012) 601/DEL/2012 & 1602/DEL/2012) ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEARS SS S : : : : 2003 2003 2003 2003- -- -04 & 2004 04 & 2004 04 & 2004 04 & 2004- -- -05 0505 05 M/S S.M.ENTERPRISES, M/S S.M.ENTERPRISES, M/S S.M.ENTERPRISES, M/S S.M.ENTERPRISES, F FF F- -- -121, MAIN MARKET, 121, MAIN MARKET, 121, MAIN MARKET, 121, MAIN MARKET, RAJOURI GARDEN, RAJOURI GARDEN, RAJOURI GARDEN, RAJOURI GARDEN, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 027. 110 027. 110 027. 110 027. PAN : AAWFS1588H. PAN : AAWFS1588H. PAN : AAWFS1588H. PAN : AAWFS1588H. VS. VS. VS. VS. DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -26(1), 26(1), 26(1), 26(1), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI S.K.UPADHAYA, SR.DR ASSESSEE BY : SHRI G.S.GREWAL & MS. HARSIMRAN GREWAL, ADVOCATES. ORDER ORDER ORDER ORDER PER BENCH PER BENCH PER BENCH PER BENCH : :: : ITA NOS.1601 TO 1603/DEL/2012 : ITA NOS.1601 TO 1603/DEL/2012 : ITA NOS.1601 TO 1603/DEL/2012 : ITA NOS.1601 TO 1603/DEL/2012 :- -- - THESE APPEALS ARE FILED BY THE REVENUE AGAINST THE OR DER OF LEARNED CIT(A)-XXIV, NEW DELHI DATED 10 TH JANUARY, 2012 FOR THE AY 2003-04 TO 2005-06. ITA-1601/DEL/2012 & 4 OTHERS 2 2. THE ONLY COMMON GROUND RAISED IN ALL THESE APPEALS BY THE REVENUE READS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN DIRECTING THE AO TO TREAT THE COMMISSION INCOME RECEIVED BY THE ASSESSEE UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION AS AGAINST THE TREATMENT OF THE SAME AS INCOME FROM HOUSE PROPERTY BY THE AO. 3. AT THE TIME OF HEARING BEFORE US, AT THE OUTSET, I T WAS POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE TAX EFF ECT IN ALL THESE THREE YEARS IS BELOW ` 3 LAKHS AS UNDER:- ASSESSMENT YEAR DIFFERENCE IN TAX 2003-04 1,64,061 2004-05 2,30,550 2005-06 1,42,685 4. HE, THEREFORE, SUBMITTED THAT THE DEPARTMENTS APP EALS SHOULD NOT BE ADMITTED IN VIEW OF THE CBDTS INSTRUCTION NO. 3/2011 DATED 9 TH FEBRUARY, 2011. HOWEVER, WE FIND THAT IN ALL THE T HREE YEARS, COMMON ISSUE IS INVOLVED AND, THEREFORE, THE ISSUE IN DISPUTE HAS A CASCADING EFFECT. IN VIEW OF THE ABOVE, WE ADMIT THE REVENUE S APPEALS AND CONSIDER THE SAME ON MERITS. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MAT ERIAL PLACED BEFORE US. THE FACTS OF THE CASE ARE THAT DURING THE YEARS UNDER CONSIDERATION, THE ASSESSEE HAD ENTERED INTO A FRANCHISE AGREEMENT WITH M/S SANT ENTERPRISES FOR THE SALE OF VARIETY OF GA RMENTS. AS PER THE AGREEMENT, THE ASSESSEE IS ENTITLED TO 3% OF THE SALE S OR ` 1,90,000/- PER MONTH, WHICHEVER IS HIGHER. THE ASSESSI NG OFFICER ITA-1601/DEL/2012 & 4 OTHERS 3 CONSIDERED THE COMMISSION INCOME AS INCOME FROM HOUSE P ROPERTY AS AGAINST BUSINESS INCOME OFFERED BY THE ASSESSEE. THE ASSESSE E, AGGRIEVED WITH THE ASSESSMENT ORDER, FILED APPEAL BEFOR E THE LEARNED CIT(A) WHO ACCEPTED THE ASSESSEES CONTENTION AND HELD A S UNDER:- 4.6 I HAVE CAREFULLY GONE THROUGH THE CASE LAWS SUBMITTED BY THE APPELLANT IN SUPPORT OF ITS ARGUMENT S AND THE DOCUMENTS PLACED ON RECORD. I HAVE CAREFULLY PE RUSED THE ASSESSMENT ORDER IN GREAT DETAILS. I HAVE ALSO NOTED CAREFULLY THE STATEMENT GIVEN BEFORE ME BY SH. AMAN PREET SINGH, PARTNER OF M/S SANT ENTERPRISES. I AM OF THE O PINION THAT THE INSTANT CASE IS CLEARLY COVERED BY THE JUDGM ENT OF HONBLE DELHI HIGH COURT IN THE CASE OF FAITH REAL E STATE PVT.LTD. (SUPRA). THE PREMISES BELONGING TO THE APPEL LANT ARE COMMERCIAL PREMISES. THE APPELLANT HAS ENTERED IN TO A VALID FRANCHISEE AGREEMENT WITH THE FRANCHISEE PART NER M/S SANT ENTERPRISES. IN ACCORDANCE WITH THE FRANCHI SE AGREEMENT, THE PREMISES ARE UNDER THE CONTROL OF THE APPELLANT, WHO IS ALSO ENTRUSTED WITH THE JOB OF MAINT AINING THE PREMISES IN CLEAN AND HYGIENIC WORKING CONDITIONS. THE APPELLANT IS ALSO RESPONSIBLE FOR WATCH AND WARD O F THE PREMISES. AS IT EMERGES FROM THE STATEMENT OF SH. AMANPREET SINGH, THE AGREEMENT BETWEEN THE APPELLAN T AND M/S SANT ENTERPRISES WAS NEVER OF LANDLORD AND TENA NT AND WAS AN AGREEMENT BETWEEN A FRANCHISER AND FRANCHISEE. IT ALSO EMERGES THAT SUPERVISION OVER SALES PROCEEDS WAS MAINTAINED BY THE APPELLANT IN ACCORDANC E WITH THE TERMS OF FRANCHISE AGREEMENT. UNDER THESE CIRCUMSTANCES AND FACTS, THERE IS NO DOUBT IN MY MIND T HAT THE COMMISSION EARNED BY THE APPELLANT SHOULD BE BROUG HT TO TAX UNDER THE HEAD BUSINESS AND PROFESSION AND NOT UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF FAITH REAL ESTATE PVT.LTD. (SUPRA) IS RESPECTFULLY FOLLOWED. ACCORDINGLY, THE AO IS DIRECTED TO TAX THE COMMISSION INCOME OF THE APPELLANT UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION FOR ALL THE THREE YEARS UNDER APPEAL. WHILE DECIDING THE ABOVE ISSUE I HAVE ALSO TA KEN INTO CONSIDERATION THE AVERMENT OF THE APPELLANT WHO HAS SUBMITTED THAT THE DIFFERENCE IN TAXABLE INCOME IN A LL THE THREE YEARS WOULD BE MARGINAL, I.E. RS.5,552/- FOR A. Y. 2003-04, RS.86,650/- FOR A.Y. 2004-05 AND RS.2,87,250 /- FOR A.Y. 2005-06. ITA-1601/DEL/2012 & 4 OTHERS 4 6. AFTER CONSIDERING THE ARGUMENTS OF BOTH THE SIDES AN D THE FACTS OF THE CASE, WE DO NOT FIND ANY INFIRMITY IN THE ORD ER OF LEARNED CIT(A). THE ASSESSING OFFICER HAS ARRIVED AT THE CONCLUSION THAT THE CONSIDERATION PAID BY M/S SANT ENTERPRISES WAS FOR THE USE OF PREMISES BECAUSE NO SERVICES WERE PROVIDED BY THE ASSESSEE. THE AB OVE VIEW WAS ARRIVED AT BY THE ASSESSING OFFICER ON THE BASIS OF ST ATEMENT OF SHRI AMANPREET SINGH, PARTNER OF M/S SANT ENTERPRISES. BEFORE THE LEARNED CIT(A), IT WAS PLEADED BY THE ASSESSEE THAT THE STATEMENT OF SHRI AMANPREET SINGH WAS RECORDED BEHIND THE BACK O F THE ASSESSEE AND NO OPPORTUNITY TO CROSS-EXAMINE HIM WAS GIVEN. TH E LEARNED CIT(A), THEREFORE, DIRECTED THE ASSESSING OFFICER VIDE LETTER DATED 20 TH SEPTEMBER, 2011 TO REDRESS THE GRIEVANCE OF THE ASSESSEE BY AFFORDING HIM AN OPPORTUNITY TO CROSS-EXAMINE SHRI AMANPREET SI NGH. THE ASSESSING OFFICER, VIDE LETTER DATED 22 ND NOVEMBER, 2011, INFORMED THE LEARNED CIT(A) THAT HE COULD NOT TAKE NECESSARY ACTIO N DUE TO HIS PRE- OCCUPATION IN TIME BARRING CASES. THEREAFTER, THE LE ARNED CIT(A) HIMSELF SUMMONED SHRI AMANPREET SINGH, PARTNER OF M/S SANT ENTERPRISES AND RECORDED HIS STATEMENT. HE, AFTER CON SIDERING HIS STATEMENT AND ALL THE MATERIAL PLACED BEFORE HIM, AR RIVED AT THE CONCLUSION THAT THE FRANCHISE AGREEMENT WAS GENUINE AN D, THEREFORE, THE COMMISSION RECEIVED BY THE ASSESSEE IS TO BE ASSESSED AS IN COME FROM BUSINESS AND NOT AS INCOME FROM HOUSE PROPERTY. 7. WE FIND THAT ON THESE FACTS, THE DECISION OF HON'BL E JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. FAITH REAL ESTATE (P ) LTD. 173 TAXMAN 405 (DEL) WOULD BE SQUARELY APPLICABLE. IN T HAT CASE ALSO, THE ASSESSEE HAS GIVEN ITS PREMISES ON RENT TO ER LTD. THERE W AS AN AGREEMENT BETWEEN THE ASSESSEE AND ER LTD. TO THE EFFEC T THAT THE ASSESSEE WOULD RECEIVE 2% COMMISSION ON THE SALES MADE BY E R LTD. FOR THE USE OF PREMISES. THE ASSESSEE DISCLOSED THE INCOME AS BUSINESS INCOME. HOWEVER, THE ASSESSING OFFICER TREATED THE SAME AS ITA-1601/DEL/2012 & 4 OTHERS 5 INCOME FROM HOUSE PROPERTY. ON APPEAL, THE LEARNED CIT(A) ACCEPTED THE ASSESSEES CONTENTION WHICH WAS UPHELD BY THE ITAT. ON APPEAL BY THE REVENUE, THE HON'BLE JURISDICTIONAL HIGH COURT U PHELD THE FINDING OF THE LEARNED CIT(A) AND TRIBUNAL AND HELD AS UNDER:- 6. WE ARE OF THE OPINION THAT ESSENTIALLY A FINDING OF FACT HAS BEEN ARRIVED AT CONCURRENTLY BY BOTH THE CI T(A) AND THE TRIBUNAL THAT THE ARRANGEMENT WAS NOT A SHAM AND IT WAS NOT A MERE RENT AGREEMENT BUT IN FACT REQUIRE D INVOLVEMENT OF THE ASSESSEE IN THE MANAGEMENT OF THE STORE ALSO, THEREFORE, THE AMOUNT RECEIVED BY THE ASSESSE E CANNOT BE TREATED AS INCOME FROM HOUSE PROPERTY AND IT SHOULD BE TREATED AS BUSINESS INCOME. 8. THE ABOVE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT WOULD BE SQUARELY APPLICABLE TO THE FACTS OF THE ASSESSEES CASE B ECAUSE HERE ALSO, THE ASSESSEE HAD GIVEN THE PREMISES OWNED BY IT TO M /S SANT ENTERPRISES AND IS GETTING 3% COMMISSION ON THE SALES M ADE BY M/S SANT ENTERPRISES. BEFORE THE CIT(A), PARTNER OF M/S S ANT ENTERPRISES AFFIRMED THAT THE STAFF MEMBER OF THE ASSESSEE USED TO C HECK AND SUPERVISE DAILY SALES. THERE IS NO DOUBT ABOUT THE GENU INENESS OF THE FRANCHISE AGREEMENT BETWEEN THE ASSESSEE FIRM AND M/S SAN T ENTERPRISES. THEREFORE, THE LEARNED CIT(A) RIGHTLY F OLLOWED THE ABOVE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT AND HEL D THAT THE INCOME OF COMMISSION RECEIVED FROM M/S SANT ENTERPRISES IS TO BE ASSESSED AS BUSINESS INCOME. ACCORDINGLY, WE UPHOLD THE ORDER OF LEARNED CIT(A) AND DISMISS THE REVENUES APPEALS. C.O. NOS.194 & 420/DEL/2012 : C.O. NOS.194 & 420/DEL/2012 : C.O. NOS.194 & 420/DEL/2012 : C.O. NOS.194 & 420/DEL/2012 :- -- - 9. IN THE CROSS-OBJECTIONS, THE ASSESSEE HAS CHALLENGED TH E VALIDITY OF REOPENING OF ASSESSMENT. HOWEVER, AT THE TIME OF H EARING BEFORE US, THE LEARNED COUNSEL HAS STATED THAT IF THE ORDER OF LEARNED CIT(A) IS ITA-1601/DEL/2012 & 4 OTHERS 6 SUSTAINED ON MERITS, THE CROSS-OBJECTIONS MAY BE TREATED AS NOT PRESSED. 10. SINCE WE HAVE ALREADY UPHELD THE ORDER OF LEARN ED CIT(A), THE CROSS-OBJECTIONS OF THE ASSESSEE ARE TREATED AS NOT PRESSED AND DISMISSED AS SUCH. 11. IN THE RESULT, THE APPEALS OF THE REVENUE AS WELL AS THE CROSS- OBJECTIONS OF THE ASSESSEE ARE DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 15 TH FEBRUARY, 2013. SD/- SD/- ( (( (I.C.SUDHIR I.C.SUDHIR I.C.SUDHIR I.C.SUDHIR) )) ) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT DATED : 15.02.2013 VK. COPY FORWARDED TO: - 1. REVENUE : DEPUTY COMMISSI DEPUTY COMMISSI DEPUTY COMMISSI DEPUTY COMMISSIONER OF INCOME TAX, ONER OF INCOME TAX, ONER OF INCOME TAX, ONER OF INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -26(1), NEW DELHI. 26(1), NEW DELHI. 26(1), NEW DELHI. 26(1), NEW DELHI. 2. ASSESSEE : M/S S.M.ENTERPRISES, M/S S.M.ENTERPRISES, M/S S.M.ENTERPRISES, M/S S.M.ENTERPRISES, F FF F- -- -121, MAIN MARKET, RAJOURI GARDEN, 121, MAIN MARKET, RAJOURI GARDEN, 121, MAIN MARKET, RAJOURI GARDEN, 121, MAIN MARKET, RAJOURI GARDEN, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 027. 110 027. 110 027. 110 027. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR