Abhaya Kashmira, CHENNAI V. ACIT Non Corporate Circle 1(1), CHENNAI

CO 5/CHNY/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9593 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 1 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 27-11-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 25-01-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K MOHAMED MUSTAFA
• Assessee Lawyers: J PRABHAKAR
• Keywords: Business income; Additional evidence; Condonation of delay
• Section: 14A; 54

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , , ' BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER /. I.T.A. NO. 2542/CHNY/2017 & CO NO: 5/CHNY/2018 / ASSESSMENT YEAR : 2012-13 THE ASSISTANT COMMISSIONER OF INCOME TAX, NON- CORPORATE CIRCLE -1(1), FORMERLY KNOWN AS BUSINESS CIRCLE -1, CHENNAI 600 034. VS. S MT. ABHAYA KASHMIRA, NO. 6 & 7, RAMGIRIEXTN., TARAMANI, VELACHERY LINK ROAD, CHENNAI 600 042. [PAN: AIXPK 0809J] ( / APPELLANT) ( #$& /RESPONDENT/CROSS OBJECTOR ) /. I.T.A. NO. 225/CHNY/2018 / ASSESSMENT YEAR : 2012-13 S MT. ABHAYA KASHMIRA, NO. 6 & 7, RAMGIRIEXTN., TARAMANI, VELACHERY LINK ROAD, CHENNAI 600 042. [PAN: AIXPK 0809J] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, NON- CORPORATE CIRCLE -1(1), FORMERLY KNOWN AS BUSINESS CIRCLE -1, CHENNAI 600 034. ( / APPELLANT) ( #$& /RESPONDENT ) REVENUE BY : SHRI. K. MOHAMED MUSTAFA, JCIT ASSESSEE BY : SHRI. J. PRABHAKAR, CA . /DATE OF HEARING : 19.11.2018 . /DATE OF PRONOUNCEMENT : 27.11.2018 :-2-: ITA NO.225/CHNY/2018 & 2542/CHNY/2017 & CO NO. 5/CHNY/2018 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE REVENUE FILED APPEAL AGAINST THE ORDER OF COMM ISSIONER OF INCOME TAX (APPEALS)-2, CHENNAI IN ITA NO. 62/CIT(A )-12/15-16 DATED 31.07.2017 FOR ASSESSMENT YEAR2012-13, ON WHICH THE ASSESSEE FILED THE CO. LATER ON, THE ASSESSEE ALSO FILED AN APPEA L IN ITA NO. 225/CHNY/2018 AGAINST THE SAME APPEAL ORDER WITH A CONDONATION PETITION. SINCE, ALL THE APPEALS ARE INTER LINKED, THEY ARE TAKEN UP TOGETHER AND DECIDED AS UNDER. 2. SMT. ABHAYA KASHMIRA, THE ASSESSEE, IS RUNNING A BUSINESS OF LUXURY SERVICED APARTMENTS IN THE NAME OF VELOCITY AT PLOT NO. 6,7,8 &9 RAMGIRI EXTENSION, TARAMANI LINK ROAD AT VELACHE RY. THE ASSESSEE ADMITTED THE RENTS RECEIVED FROM SIX ROOMS SITUAT ED IN ONE FLOOR AS AN INCOME FROM HOUSE PROPERTY AND THE RENTAL RECEIPTS FROM THE REMAINING ROOMS AS AN INCOME FROM BUSINESS RECEIPTS. WHILE M AKING THE ASSESSMENT, THE ASSESSING OFFICER AFTER EXAMINING A LL THE ASPECTS HELD THAT THE ASSESSEE HAD NO INTENTION TO INVEST HER L ONG TERM CAPITAL GAINS, WHICH AROSE ON 06.10.2006 IN PURCHASE OR ACQUISITIO N OF RESIDENTIAL HOUSE, EVEN BEFORE INVESTING THE SALE CONSIDERATIO N IN THE CAPITAL GAINS :-3-: ITA NO.225/CHNY/2018 & 2542/CHNY/2017 & CO NO. 5/CHNY/2018 ACCOUNTS SCHEME ON 28.7.2007, THE ASSESSEE HAD AN I NTENTION TO CONSTRUCT THE SERVICED APARTMENTS AND SOUGHT PLAN PERMISSION FROM CMDA AS EARLY AS IN APRIL 2007 ETC., AND HENCE HE W ITHDREW THE DEDUCTION CLAIMED U/S. 54 FOR ASSESSMENT YEAR 2007- 08 AND THEREAFTER TAKING ALL OTHER FACTORS INTO CONSIDERATION, HE ASS ESSED THE INCOME RECEIVED FROM THE APARTMENTS UNDER THE HEAD BUSINE SS, THEREFORE, ADDED BACK THE DEDUCTION CLAIMED U/S. 24A ON ONE PO RTION. FURTHER, HE FOUND FROM THE BALANCE SHEET THAT THE ASSESSEE HA S SHOWN THE OUTSTANDING CREDIT BALANCE OF RS. 76,62,674/- TO M/ S. DOSHI AND COMPANY BUILDERS. SINCE, THE ASSESSEE HAS NOT FUR NISHED CONFIRMATION FROM THE CREDITOR, HE ADDED RS. 76,62,674/-. THE A O FOUND THAT THE ASSESSEE MADE INVESTMENTS IN SHARES BUT DID NOT COM PUTE DISALLOWANCE U/S. 14A, THOUGH INTEREST IS DEBITED TO P&L ACCOUNT . AFTER CONSIDERING, THE ASSESSEES REPLY, INVOKING SECTION 14A R.W.R. 8D(II) & (III), THE AO DISALLOWED RS. 4,25,702/-. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). WITH REGARD TO THE ADDITION OF RS. 76,62,674/-, THE LD. CIT(A) CALLED FOR A REMAND REPORT FROM THE AO B ASED ON WHICH SHE DELETED THIS ADDITION. HOWEVER, CONFIRMED THE OTHE R TWO ISSUES. 3. AGGRIEVED AGAINST THE DELETION OF RS. 76,62,674/ -, THE REVENUE FILED AN APPEAL IN ITA NO. 2542/CHNY/2017, ON WHICH THE ASSESSEE FILED :-4-: ITA NO.225/CHNY/2018 & 2542/CHNY/2017 & CO NO. 5/CHNY/2018 A CO IN CO NO. 5/CHNY/2018. HOWEVER, LATER ON, THE ASSESSEE FILED AN APPEAL AGAINST THE ORDER OF THE CIT(A) IN ITA NO. 225/CHNY/2018 AGAINST THE OTHER TWO ISSUES WITH A CONDONATION PET ITION FOR THE DELAY IN FILING THE APPEAL FOR 89 DAYS. 4. THE ASSESSEE FILED CO WITH THE FOLLOWING GROUNDS OF APPEAL: 2. THE ASSESSING OFFICER IS NOT JUSTIFIED IN RAISI NG OBJECTION TO DELETION OF RS.76.62 LAKHS IN THEIR APPEAL FILED AF TER CONFIRMING THE FACTUAL DETAILS IN HIS REMAND REPORT AND HAVING ACCEPTED TH E SAME TO BE IN ORDER. 3. THE ASSESSING OFFICER HAS NO CREDENCE TO QUESTIO N THE WISDOM OF THE CIT (A) TO ALLOW THE APPEAL ON THE ISSUE OF OUTSTANDING LIABILITY SHOWN AT RS.76.62 LAKHS AND THE ALLEGED UNEXPLAINED SUM OF RS.73.3 LAKHS WHEN HIS REMAND REPORT CLEARLY SPELLS OUT THE BREAKUP OF THE AMOUNTS AS WELL AS THE SOURCE THEREFORE AND DULY CO NFIRMED BY THE CREDITOR WHICH WAS EXAMINED BY THE ASSESSING OFFICE R TO CONCLUDE THE FACTS AND VERACITY THEREOF AND THEREAFTER FURNISH T HE CLEAR REMAND REPORT ON THIS ISSUE. 5. ON THE REVENUES APPEAL, THE LD. DR SUBMITTED TH AT THE LD. CIT(A) FAILED TO APPRECIATE THAT IN THE REMAND REPO RT, THE AO HAD HELD THAT THE CONFIRMATION OF THE OUTSTANDING LIABILITY IS PROVED TO THE EXTENT OF 3.36 LAKHS ONLY AS AGAINST THE TOTAL ADDITION OF RS. 76.62 LAKHS. THUS, THE LD. CIT(A) ERRED IN DELETING THE BALANCE OF RS. 73.3 LAKHS OF OUTSTANDING LIABILITY WITHOUT FURTHER EVIDENCE AND HELD THAT THE SAME WAS GENUINE. THE LD. DR INVITED OUR ATTENTION TO T HE PAPER BOOK, WHEREIN A COPY OF LETTER ISSUED BY DOSHI & COMPANY DATED 31.03.2012 :-5-: ITA NO.225/CHNY/2018 & 2542/CHNY/2017 & CO NO. 5/CHNY/2018 IS KEPT IN PAGE NO. 9 AND SUBMITTED THAT THE BALANC E RECEIVABLE AS ON 31.03.2012 IS SHOWN AT RS. 3,26,364/- ONLY. THUS, IN THE REMAND REPORT, THE AO INDICATED THAT THE CLAIM OF THE ASSE SSEE IS SUPPORTED TO THIS EXTENT ONLY. HOWEVER, THE LD. CIT(A) MISTOOK IT AS IF THE ENTIRE SUM I.E., 76,62,674/- WAS IN ORDER AND DELETED THE BALA NCE SUM WITHOUT DUE EXAMINATION. 6. PER CONTRA, THE LD. AR INVITED OUR ATTENTION TO THE SAME MATERIAL AND SUBMITTED THAT THE ESTIMATED COST OF VELOCITY P ROJECT WAS RS. 345,62,674/- AND THE FINAL COST OF VELOCITY PROJECT WAS RS. 312,26,364/- TOWARDS WHICH RS. 309,00,000/- WAS PAID FROM 20.01. 2018 TO 21.03.2012 AND THE BALANCE RECEIVABLE AS ON 31.03.2 012 WAS RS3,26,364/-, WHICH WAS CONSIDERED BY THE ASSESSING OFFICER AND DULY ADMITTED IN THE REMAND REPORT. THEREFORE, THE LD. CIT(A) HAS CORRECTLY DELETED THE ADDITION. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE R ELEVANT PORTION OF THE REMAND REPORT IS EXTRACTED AS UNDER: ISSUE :1 IN THE ORIGINAL ASSESSMENT ORDER OUTSTANDING CREDIT BALANCE OF RS 76,62,674 TO M/S DOSHI& CO WAS TREATED AS NON EXIST ING LIABILITY AS THE ASSESSEE COULD NOT PRODUCE CONFIRMATION LETTER FROM M/S DOSHI& CO. :-6-: ITA NO.225/CHNY/2018 & 2542/CHNY/2017 & CO NO. 5/CHNY/2018 ASSESSEE HAS SUBMITTED LETTER FROM M/S DOSHI& CO AS ADDITIONAL EVIDENCE AND THE SAME HAS BEEN ADMITTED UNDER RULE 46A BY THE HONBLE APPELLATE COMMISSIONER. PERUSAL OF THE NEWLY FURNISHED EVIDENCE REVEALS THA T THE TOTAL OUTSTANDING LIABILITY TOWARDS M/S DOSHI& CO WAS RS 3,26,364 ONLY NOT RS 76,62,674 AS CLAIMED BY THE ASSESSEE DURING THE ASS ESSMENT STAGE. THE CREDITOR PARTY TOO HAS CONFIRMED THE SAME THROUGH H IS LETTER DATED 31103/2012.THE OUTSTANDING LIABILITY OF RS 76,62,67 4 BREAK UP AS SUPPORTED BY THE NEW EVIDENCE WORKS OUT TO AMOUNT PAID BY ASSESSEES FATHER: 40,00,000 DIFFERENCE IN ESTIMATE AND FINAL VALUE OF PROJECT : 33,36,310 LIABILITY TOWARDS M/S DOSHI& CO: 3,26,364 TOTAL: 76,62,674 THUS THE CLAIM OF THE ASSESSEE AS SUPPORTED BY THE NEWLY ADMITTED EVIDENCE IS FOUND TO BE IN ORDER. 8. FROM THE ABOVE, IT IS CLEAR THAT THE LD. CIT(A) HAS NOT FURNISHED A COPY OF REMAND REPORT TO THE ASSESSEE. FURTHER, TH ERE IS AN APPARENT CONFUSION ON THE GENUINENESS OF TOTAL OUTSTANDING L IABILITY AS ON 31.03.2012 OF RS. 76,62,674/-. THE REVENUE STATES THAT THE AO HAS ACCEPTED THE LIABILITY TO THE EXTENT OF RS. 3,26,36 4/- AS IS CONFIRMED IN THE LETTER CLAIMED TO HAVE BEEN ISSUED BY M/S. DOSH I & COMPANY AND FOR THE BALANCE SUM OF RS. 73,36,310/- COMPRISING THE AMOUNT PAID BY ASSESSEES FATHER AT RS. 40,00,000/- AND THE DIFFER ENCE IN ESTIMATE AND FINAL VALUE OF THE PROJECT OF RS. 33,36,310/-, TOTA LLING AT RS. 73,36,310/- THE GENUINENESS HAS NOT BEEN EXAMINED BY THE AO. F ROM THE MATERIAL BEFORE US, IT IS NOT CLEAR AS TO ON WHAT BASIS THE TOTAL OUTSTANDING OF RS. :-7-: ITA NO.225/CHNY/2018 & 2542/CHNY/2017 & CO NO. 5/CHNY/2018 76,62,674/- WAS ARRIVED AT AND ON WHAT BASIS THE ES TIMATED COST, THE FINAL COST OF VELOCITY PROJECT ETC SHOWN IN THE LE TTER ISSUED BY M/S. DOSHI & COMPANY WAS ARRIVED , HOW IT WAS REFLECTED IN THE AUDITED ACCOUNTS OF THE ASSESSEE AS ON 31.3.2012 ETC., HOW AND WHAT BASIS IT WAS RECONCILED, VERIFIED ETC IS NOT CLEAR. 9. IN THE FACTS AND CIRCUMSTANCES, WE DEEM IT FIT T O REMIT THIS ISSUE BACK TO THE AO FOR FRESH EXAMINATION. THE ASSESSEE SHALL LAY RELEVANT MATERIALS IN SUPPORT OF ITS CONTENTION BEFORE THE A O AND COMPLY WITH THE REQUIREMENTS OF THE AO IN ACCORDANCE WITH LAW. THE AO IS FREE TO CONDUCT APPROPRIATE ENQUIRY AS DEEMED FIT, BUT HE SHALL FURNISH ADEQUATE OPPORTUNITY TO THE ASSESSSEE ON THE MATER IAL ETC TO BE USED AGAINST IT AND DECIDE THE MATTER IN ACCORDANCE WIT H LAW. THE REVENUES APPEAL IS TREATED AS ALLOWED FOR STATISTI CAL PURPOSES AND THE CO IS TREATED AS DISMISSED. 10. NOW LET US TAKE THE APPEAL IN ITA NO. 225/CHNY/ 2017. THE ASSESSEE PLEADED CONDONATION OF DELAY IN FILING THE APPEAL FOR 89 DAYS STATING THAT THE ORDER CONSEQUENT TO THE APPELLATE ORDER WAS PASSED DATED 05.09.2017 RAISING A DEMAND OF RS. 38,200/-, THE ASSESSEE FELT THAT THE TAX PAYMENT WAS MEAGRE AND HENCE NO FURTHE R APPEAL BE :-8-: ITA NO.225/CHNY/2018 & 2542/CHNY/2017 & CO NO. 5/CHNY/2018 PREFERRED. WHEN THE DEPARTMENT FILED FURTHER APPEA L AGAINST THE ORDER OF THE CIT(A) IN ITA NO. 2542/CHNY/2017 AND ITS COP Y WAS SERVED ON HER ON 05.01.2018, SHE TOOK UP THE MATTER WITH HER TAX CONSULTANT, WHO ADVISED HER TO FILE APPEAL ON THESE ISSUES. ON REC EIPT OF EXPERT OPINION, REALISING HER LEGAL RIGHTS AS WELL AS TO ESCAPE THE CONSEQUENTIAL PENALTY ETC., SHE FILED THIS APPEAL. SINCE, THE DELAY IN F ILING THE APPEAL IS NOT WANTON AND IN THE INTERESTS OF JUSTICE ETC, IT IS S UBMITTED THAT THE DELAY MAY BE CONDONED. 11. WE HEARD THE RIVAL CONTENTIONS AND IN THE INTER ESTS OF JUSTICE, WE CONDONE THE DELAY. 12. THE LD. AR SUBMITTED THAT THE LD. CIT(A) ERRED IN CONCLUDING THE INCOME FROM HOUSE PROPERTY AS INCOME FROM BUSINESS BASED UPON THE ASSESSEES SETTLING THE ADDITION MADE U/S. 54 IN TH E ASSESSMENT FOR ASSESSMENT YEAR 2007-08 UNDER DIRECT TAXES DISPUTE RESOLUTION SCHEME, 2016. THE CIT(A) HAS NOT JUSTIFIED IN TREA TING THE RECEIPTS FROM ONE FLOOR OF THE IMPUGNED PROPERTY AS BUSINESS INCOME WHEN NO SERVICE TAX WAS LEVIED OR COLLECTED AS OPPOSED TO S ERVICE APARTMENT BUSINESS DONE QUA OTHER FLOORS. THE LD. CIT(A) IS NOT JUSTIFIED IN CONDONING THE ASSESSMENT MADE UNDER THE HEAD HOUSE PROPERTY BY :-9-: ITA NO.225/CHNY/2018 & 2542/CHNY/2017 & CO NO. 5/CHNY/2018 RESORTING TO SUBTERFUGE OF SECTION 292B WHICH DOES NOT CONDONE THE LEGAL EFFECT OF TREATING THE INCOME FROM HOUSE PROP ERTY SANS SERVICE TAX LEVY. 13. WITH REGARD TO THE DISALLOWANCE SUSTAINED U/S. 14A, THE AR SUBMITTED THAT THE INVESTMENTS IN SHARES OF M/S. SH ASUN PHARMACEUTICALS PVT. LTD. IS A STRATEGIC INVESTMENT MADE LONG BEFORE.SINCE THE YEAR 2008, THE TOTAL INVESTMENT IN GROUP COMPANIES ARE SHOWN AT RS. 39,30,000/-. WHILE, THE BALANCE 2 0,000 RECEIPTS INVESTMENTS IN SHARES OF UNLISTED COMPANIES. NO FRE SH INVESTMENTS DURING THE RELEVANT PREVIOUS YEAR EITHER OUT OF OWN FUNDS OR BORROWED CAPITAL. THE INITIAL INVESTMENTS IN SHARES WERE MA DE OUT OF INTERNAL ACCRUAL AND NOT OUT OF BORROWED FUNDS AND NO EXPEND ITURE WAS INCURRED IN CONNECTION WITH EARNING THE DIVIDEND INCOME. TH E FINANCIAL CHARGES DEBITED IN THE BOOKS OF ACCOUNTS PERTAINS TO TERM L OAN AND OVERDRAFT FACILITY FOR MEETING THE WORKING CAPITAL REQUIREMEN T ETC AND HENCE, THE LD. CIT(A) ERRED IN SUSTAINING THE DISALLOWANCE MAD E U/S. 14A R.W.R. 8D. 14. PER CONTRA, THE LD. DR SUBMITTED THAT THE ASSES SEE WITH HER FATHER HAD SUBMITTED A PLAN TO CMDA FOR CONSTRUCTIO N OF SERVICES APARTMENTS IN APRIL 2007 ITSELF MUCH BEFORE THE DEP OSITS MADE IN CAPITAL :-10-: ITA NO.225/CHNY/2018 & 2542/CHNY/2017 & CO NO. 5/CHNY/2018 GAINS ACCOUNTS SCHEME WHICH INDICATED THE INTENTION TO CONSTRUCT THE SERVICED APARTMENTS AND NOT A RESIDENTIAL HOUSE. SHE PURCHASED FSI AT A COST OF RS. 34.63 LAKHS AND QUOTED EXTENSIVELY F ROM THE ORDER OF THE LD. CIT(A) INCLUDING THE FACT THAT THE ASSESSEE SETTLED THE ADDITION MADE U/S. 54 IN THE ASSESSMENT FOR ASSESSMENT YEAR 2007-08 UNDER DIRECT TAXES DISPUTE RESOLUTION SCHEME, 2016 WHICH ALSO CLEARLY ESTABLISHES THE FACT THAT THE INVESTMENT IN THE IM PUGNED PROPERTY IS OF COMMERCIAL NATURE ETC AND SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 15. WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE RELEVANT MATERIALS. WE FIND THAT THE AO HAS NOT EXAMINED AS TO WHETHER THERE IS COMMONALITY OR DIFFERENCE IN THE NATURE OF THE ROOM S, SERVICES, PERIODICITY OF RENT , THE CHARGES , IF ANY, CHARGED FOR OTHER FACILITIES ETC FROM THE TENANTS FROM THE PORTIONS FROM WHICH INCOM E IS ADMITTED UNDER THE HEAD HOUSE PROPERTY VIS-A-VIS THE PERSO NS IN SERVICES APARTMENTS FROM WHICH INCOME IS ADMITTED UNDER THE HEAD BUSINESS ETC FROM THE CONTEMPORANEOUS MATERIAL. IN THE FACT S AND CIRCUMSTANCES, WE DEEM IT FIT TO REMIT THIS ISSUE B ACK TO THE AO FOR PROPER APPRECIATION OF FACTS AND DECIDE THE ISSUE I N ACCORDANCE WITH LAW. :-11-: ITA NO.225/CHNY/2018 & 2542/CHNY/2017 & CO NO. 5/CHNY/2018 16. WITH REGARD TO THE DISALLOWANCE U/S. 14A R.W.R. 8D, SINCE, THE IMPUGNED INVESTMENTS WERE CLAIMED TO HAVE BEEN MADE LONG BEFORE FROM INTERNAL ACCRUAL AND THE ASSESSEE CLAIMED TO H AVE NOT INCURRED ANY EXPENDITURE OUT OF BORROWINGS ETC, WE DEEM IT FIT T O REMIT THIS ISSUE BACK TO THE AO FOR DUE EXAMINATION ON THE FACTS AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW. IN THE RESULT, THE ASSESSEES APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 17. IN THE RESULT, THE REVENUES APPEAL IN ITA NO. 2542/CHNY/2017 AND THE ASSESSEES APPEAL IN ITA NO. 225/CHNY/2018 ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES AND THE ASSESSEES CO IN CO NO. 05/CHNY/2018 IS DISMISSED. ORDER PRONOUNCED ON TUESDAY, THE 27 TH DAY OF NOVEMBER, 2018 AT CHENNAI. SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) /ACCOUNTANT MEMBER /CHENNAI, 3 /DATED: 27 TH NOVEMBER, 2018 JPV .#4565 /COPY TO: 1. &/ APPELLANT 2. #$& /RESPONDENT 3. 8 ) (/CIT(A) 4. 8 /CIT 5. 5# /DR 6. : /GF