DEW DROP PROPERTIES,MUMBAI V. JOINT COMMISSIONER OF INCOME TAX, GURUGRAM

ITA 2123/MUM/2025

AI Insights

Dew Drop Properties, a firm engaged in buying, selling, leasing, and developing properties, appealed against the order of the ld. ADDL/JCIT (A)-2 GURUGRAM, which affirmed the disallowance of Rs. 12,00,000 remuneration to partners. The disallowance was initially made by the Assessing Officer, who treated the profit on the sale of a shop as short-term capital gain instead of business profit. The Tribunal found that there was insufficient documentary evidence to substantiate the assessee's claim that the profits were business profits and not short-term capital gains. Consequently, the matter was remitted back to the Assessing Officer for further verification.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 793416 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 26-03-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Opportunity of being heard
• Section: 143(3); 40(b)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH MUMBAI BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 2123/MUM/2025 Assessment Year: 2013-14 Dew Drop Properties 1302 Ocean View, Pali Hill Union Park Khar West, Mumbai – 400052 (PAN: AAGFD2892R) Vs. Joint Commissioner of Income Tax Gurgaon, Haryana - 122016 (assessee) (Respondent) Present for: Assessee : Shri Surinder Singh Sabharwal, AR Revenue : Shri Annavaran Kosuri, Sr. DR Date of Hearing : 22.07.2025 Date of Pronouncement : 22.09.2025 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal filed by assessee is against the order of ld. ADDL/JCIT (A)-2 GURUGRAM vide order No. ITBA/APL/S/250/2024- 25/1073925397(1), dated 03/03/2025 passed against the assessment order by CIRCLE 22(1), Mumbai, u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 18/03/2016 for Assessment Year 2013-14. 2. Grounds taken by the assessee are reproduced as under: 1. The ld. A.O.has grossly erred in disallowing Rs. 12,00,000 remuneration to partners which was admissible u/s. 40(b) of Income Tax Act Printed from counselvise.com 2 ITA No.2123/Mum/2025 Dew Drop Properties AY 2013-14 2. Your appellant prays for allowing the remuneration u/s. 40(b) of Income Tax Act. 3. Brief facts of the case are that assessee is a firm and it filed its return of income on 05.08.2013 reporting total income at Rs.4,43,15,390/-. Assessee is engaged in the business of buying, selling, leasing and development of properties. It is also running a resort. It derived income from house properties, business, capital gain and income from other sources. In the profit and loss account, assessee included profit on sale of shop at Rs.26,15,420/- and calculated net profit at Rs.4,34,525/-, after salary to partners for Rs.12,00,000/-. Ld. Assessing Officer treated the profit on sale of shop as short term capital gain instead of business profit reported by the assessee. He thus, recomputed the total income of the assessee whereby the net profit in the profit and loss account should be Rs.(-)21,80,895. He thus, disallowed the salary to partners of Rs.12 lakhs and completed the assessment at total assessed income of Rs.4,55,15,390/-. 3.1. In the first appellate proceedings, assessee made its submissions. According to the ld. CIT(A) he could not produce documentary evidence in support of the contention that the profits earned on sale of shop were the business profits and not short term capital gain as characterised by the ld. Assessing Officer. Thus, in absence of documentary evidences, ld. CIT(A) affirmed the stance taken by the ld. Assessing Officer and dismissed the appeal of the assessee. 4. Before us, ld. Counsel for the assessee reiterated the fact and submitted that two properties which were purchased and sold, profits therefrom were shown in the profit and loss account along with other business income. Assessee submitted a tabular detail to demonstrate Printed from counselvise.com 3 ITA No.2123/Mum/2025 Dew Drop Properties AY 2013-14 that since Assessment Year 2009-10 up to Assessment Year 2024-25, it has been filing its return reporting the income under the head business income and made a claim that the profits earned on sale of shops was business profit and not short term capital gain. 5. We have perused the records and the orders of the authorities below. The tabulated details furnished by the ld. Counsel is reproduced below: 5.1. Apart from the above tabulated detail, there is nothing on record to establish factually the contention made by the assessee that the profit earned by the assessee on sale of shop is a business profit. The Printed from counselvise.com 4 ITA No.2123/Mum/2025 Dew Drop Properties AY 2013-14 financial statements, records of inventory, both opening and the closing balances as well as details of other business profits need to be verified from the corroborative documentary evidences before accepting the contentions made by the assessee. Accordingly, in the interest of justice and fair play, we find it appropriate to remit the matter back to the file of ld. Assessing Officer to ascertain the factual position as to the claim of assessee that the profit earned by it on sale of two shops represents business profits, so as to allow the claim of salary to partners which has been disallowed. Needless to say, assessee be given reasonable opportunity of being heard to substantiate the claim by furnishing relevant documentary evidences. Accordingly, grounds raised by the assessee are allowed for statistical purposes. 6. In the result, appeal of the assessee is allowed for statistical purposes. Order is pronounced in the open court on 22 September, 2025 Sd/- Sd/- (Sandeep Gosain) (Girish Agrawal) Judicial Member Accountant Member Dated: 22 September, 2025 MP, Sr.P.S. Copy to : 1. The assessee 2. The Respondent 3. DR, ITAT, Mumbai 4. 5. Guard File CIT(A) BY ORDER, (Dy./Asstt.Registrar) ITAT, Mumbai Printed from counselvise.com "