Kumar Builders, Pune V. Joint Commissioner of Income-tax,

ITA 1141/PUN/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5717 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 09-04-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 30-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S B PRASAD
• Keywords: Business income; Cost of acquisition; Assessment record
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 1141 /P U N/201 6 / ASSESSMENT YEAR : 20 11 - 12 KUMAR BUILDERS 10 TH FLOOR, KUMAR BUSINESS CENTER, OPP. CENTRAL MALL, BUND GARDEN ROAD, PUNE 411001 . / APPELLANT PAN: AA CFK1478L VS. THE JT . COMMISSIONER OF INCO ME TAX, RANGE - 4, PUNE . / RESPONDENT / APPELLANT BY : SHRI NIKHIL PATHAK / RESPONDENT BY : SHRI S.B. PRASAD, CIT / DATE OF HEARING : 09 . 0 4 .201 9 / DATE O F PRONOUNCEMENT: 14 . 0 5 .201 9 / ORDER PER SUSHMA CHOWLA, J M : THE APPEAL FILED BY ASSESSEE IS AGAINST ORDER OF CIT (A) , PUNE - 5 , PUNE, DATED 2 5 . 0 2 .201 6 RELATING TO ASSESSMENT YEAR 20 11 - 12 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - ON FACTS AND IN LAW - ITA NO. 1141 /P U N/20 1 6 KUMAR BUILDERS 2 1 . THE LEARNED CIT(A) ERRED IN TREATING THE RENTAL INCOME OF THE APPELLANT AS BUSINESS INCOME AND NOT AS INCOME FROM HOUSE PROPERTY THEREBY DENYING DEDUCTION U/S 24 OF THE I .T. ACT, 1961 AMOUNTING TO RS.2,97,882/ - . 2 . THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST EXPENDITURE OF RS.3,30,722/ - . 3 . THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.8,97,77,788/ - TO THE T OTAL INCOME NEGLECTING THE FACT THAT THE ADDITION RESULTED IN DOUBLE TAXATION OF THE SAME INCOME IN TWO DIFFERENT ENTITIES, ONE OF THEM BEING THE ASSESSEE ITSELF. 4 . FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE CI T(APPEALS) MAY BE VACATED AND THE ASSESSEE'S CLAIM MAY BE ALLOWED OR ANY SUITABLE DIRECTIONS MAY BE ISSUED. 3. THE GROUND OF APPEAL NO.1 RAISED BY ASSESSEE IS AGAINST ASSESSABILITY OF RENTAL INCOME RECEIVED BY ASSESSEE AS BUSINESS INCOME OR AS INCOME F ROM HOUSE PROPERTY. 4. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS PARTNERSHIP FIRM WHICH WAS ENGAGED IN THE BUSINESS OF DEVELOPING COMMERCIAL AND RESIDENTIAL PROJECTS IN PUNE AND MUMBAI. IT HAD LET OUT SOME OF ITS COMMERCIAL PROPERTIES AND EARN ED LEASE RENT INCOME FROM THE SAME. THE LETTING OUT OF UNSOLD UNITS OF PROJECT WERE DECLARED AS INCOME FROM HOUSE PROPERTY BY THE ASSESSEE. HOWEVER, THE ASSESSING OFFICER WAS OF THE VIEW THAT WHERE THE ASSESSEE WAS PRIMARILY ENGAGED IN THE BUSINESS OF CONSTRUCTION OF RESIDENTIAL / COMMERCIAL PROJECTS AND ITS RESALE AND THE PROPERTIES WHICH WERE UNSOLD STOCK OF PROJECT AND THE ASSESSEE WAS EARNING RENTAL INCOME SHOULD BE ASSESSED AS BUSINESS INCOME IN THE HANDS OF ASSESSEE. THE ASSESSING OFFICER APPLI ED THE SAID PROPOSITION ON THE BASIS OF ASSESSMENT ORDER FOR ASSESSMENT YEAR 2010 - 11. 5. THE CIT(A) UPHELD THE ORDER OF ASSESSING OFFICER, AGAINST WHICH THE ASSESSEE IS IN APPEAL VIDE GROUND OF APPEAL NO.1. ITA NO. 1141 /P U N/20 1 6 KUMAR BUILDERS 3 6. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE ISSUE STANDS COVERED BY THE ORDER OF HONBLE BOMBAY HIGH COURT IN CIT VS. SANE AND DOSHI ENTERPRISES (2015) 377 ITR 165 (BOM). 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF AUTHO RITIES BELOW. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE RAISED VIDE GROUND OF APPEAL NO.1 STANDS COVERED BY THE JURISDICTIONAL HIGH COURT IN CIT VS. SANE AND DOSHI ENTERPRISES (SUPRA ) . APPLYING THE SAID PARITY OF REASONING , WE HOLD THAT LEASE RENTAL INCOME RECEIVED BY ASSESSEE FROM UNSOLD FLATS IS ASSESSABLE AS INCOME FROM HOUSE PROPERTY , AGAINST WHICH THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION UNDER SECTION 24 OF THE ACT. THUS, GROUND OF APPEAL NO.1 IS ALLOWED. 9 . THE GROUND OF APPEAL NO.2 RAISED BY ASSESSEE IS NOT PRESSED AND HENCE, THE SAME IS DISMISSED AS NOT PRESSED. 1 0 . THE ISSUE IN GROUND OF APPEAL NO.3 IS AGAINST ADDITION OF 8,97,77,788/ - , AGAINST WHICH THE PLEA OF ASSESSEE IS THAT THE AFORESAID INCOME HAD RESULTED IN DOUBLE TAXATION OF THE SAME INCOME IN THE HANDS OF TWO DIFFERENT ENTITIES. 1 1 . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IN THIS REGARD POINTED O UT THAT THE ASSESSEE KUMAR BUILDERS WAS A PARTNERSHIP FIRM ; AND SHRI LALIT K. JAIN WAS SOLE PROPRIETOR OF CONCERN NAMED KUMAR BUILDER. HE FURTHER STATED THAT THE LAND IN SURVEY NOS.19 AND 20 WAS TRANSFERRED FOR 15.25 CRORES BY SHRI LALIT K. JAIN, WHICH WAS DISCLOSED IN HIS PROFIT AND LOSS ACCOUNT. HE ITA NO. 1141 /P U N/20 1 6 KUMAR BUILDERS 4 FURTHER POINTED OUT THAT PURCHASE COST OF 2.25 CRORES WAS DECLARED AS STOCK - IN - TRADE BY SHRI LALIT K. JAIN. OUR ATTENTION WAS DRAWN TO PAGE 98 OF PAPER BOOK IN THIS REGARD, WHEREIN 8.97 CRORES WAS THE NET BALANCE AFTER TAX. SHRI LALIT K. JAIN HAD DEBITED 8.97 CRORES TO PROFIT AND LOSS ACCOUNT. HE THEN, REFERRED TO COMPUTATION OF INCOME OF SHRI LALIT K. JAIN PLACED AT PAGE 85 OF PAPER BOOK, IN WHICH HE ADDED FOR 8.97 CRORES TO THE COMPUTATION OF IN COME AND TAXES WERE PAID ON THE AFORESAID 8.97 CRORES. HE THEN REFERRED TO ENTRIES AT PAGES 93 AND 96 OF PAPER BOOK, WHEREIN THIS AMOUNT WAS INADVERTENTLY TRANSFERRED AS PROFIT OF PARTNER. HE REFERRED TO PAGE 33 OF PAPER BOOK, WHEREIN THE PARTNERSHIP F IRM KUMAR BUILDERS I.E. ASSESSEE HAD INCLUDED 8.97 CRORES AS INCOME UNDER THE HEAD SHARE OF PROFIT. HOWEVER, AT PAGES 22 AND 24 OF PAPER BOOK, THE SAID AMOUNT WAS REDUCED IN THE COMPUTATION OF INCOME, SINCE SUM OF 8.97 CRORES WAS OFFERED IN THE HAND S OF SHRI LALIT K. JAIN. THEN, THIS ADDITION IN THE HANDS OF PARTNERSHIP FIRM WOULD AMOUNT TO DOUBLE TAXATION. 1 2 . AFTER HEARING THE PLEADINGS OF THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE, THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVE NUE WAS ASKED TO GET REPORT FROM THE ASSESSING OFFICER. ON THE NEXT DATE OF HEARING, THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE FURNISHED FACTUAL REPORT ON THE CLAIM MADE BY THE ASSESSEE OF DOUBLE TAXATION IN THE HANDS OF ASSESSEE FIRM AND IN DIVIDUAL. THE ASSESSING OFFICER ON VERIFICATION OF ASSESSMENT RECORDS REPORTED THAT IN THE COMPUTATION OF INCOME, THE ASSESSEE HAD DEBITED 8.97 CRORES AS SHARE OF PROFIT FROM BUSINESS. THE ASSESSEE FIRM HAD CLAIMED THAT IT HAD RECEIVED SUM OF 8.97 CRORES FROM SHRI LALIT K. JAIN. HOWEVER, THE ASSESSING OFFICER HAD ASSESSED THE SAID INCOME IN THE HANDS OF ASSESSEE ON THE GROUND THAT SHRI LALIT K. JAIN BEING AN INDIVIDUAL AND SOLE PROPRIETOR OF ITS CONCERN, ASSESSEE COULD NOT BE PARTNER OF SHRI LALIT K. JAIN; HENCE A MOUNT ITA NO. 1141 /P U N/20 1 6 KUMAR BUILDERS 5 COULD NOT BE SHARE OF PROFIT FROM BUSINESS. THE ASSESSING OFFICER VERIFIED THE INCOME TAX RETURN, BALANCE SHEET AND COMPUTATION OF INCOME OF SHRI LALIT K. JAIN FOR THE ASSESSMENT YEAR 2011 - 12 AND NOTED THAT THE LAND WAS SOLD BY KUMAR BUILDER, PROPRI ETARY CONCERN OF SHRI LALIT K. JAIN. FURTHER, SHRI LALIT K. JAIN IN THE RETURN OF INCOME HAD SHOWN GROSS RECEIPTS OF 15.60 CRORES, AGAINST THE SAME, HE HAD DEBITED AN AMOUNT OF 8.97 CRORES UNDER THE HEAD OTHER EXPENSES. THE ASSESSING OFFICER FURTHE R COMMENTED THAT PROFIT FROM SALE OF SAID LAND AMOUNTS TO 8.97 CRORES. HOWEVER, IN THE COMPUTATION OF INCOME, SHRI LALIT K. JAIN HAS ADDED BACK THE AMOUNT OF 8.97 CRORES UNDER HIS INCOME FROM BUSINESS / PROFESSION AND HAS PAID DUE TAXES ON THE SAID AM OUNT. THE SAID DECLARATION OF INCOME AND PAYMENT OF TAXES HAS BEEN VERIFIED FROM THE RECORD BY THE ASSESSING OFFICER AND HE HAS THUS, COMMENTED THUS, IT CAN BE SEEN THAT SUM OF 8,97,77,788/ - HAS BEEN TAXED IN THE HANDS OF SHRI LALIT K. JAIN AND THE REPO RT HAS BEEN FORWARDED TO THE COMMISSIONER OF INCOME TAX, ITAT, PUNE. THE COPY OF SAID REPORT IS FILED BEFORE US. 1 3 . THE ASSESSING OFFICER IN THE PRESENT CASE HAD ADDED 8.97 CRORES AS INCOME OF ASSESSEE REJECTING THE PLEA OF ASSESSEE THAT IT HAD RECE IVED SHARE OF PROFIT FROM KUMAR BUILDER. THE ASSESSING OFFICER HELD THAT SINCE KUMAR BUILDER WAS THE SOLE PROPRIETARY CONCERN OF SHRI LALIT K. JAIN, THERE WAS NO QUESTION OF ANY SHARE OR PROFIT BEING RECEIVED BY THE ASSESSEE AND HENCE, REVERSAL OF ENTRY B Y THE ASSESSEE IN COMPUTATION OF INCOME WAS NOT ACCEPTED AND THE ADDITION WAS MADE IN THE HANDS OF ASSESSEE. ON THE OTHER HAND, SUM OF 8.97 CRORES WAS ADDED IN THE HANDS OF SHRI LALIT K. JAIN . T HE TRANSACTION WHICH IS UNDER CONSIDERATION IS IDENTICAL O N THE BASIS OF WHICH INCOME HAS BEEN OFFERED IN THE HANDS OF SOLE PROPRIETOR SHRI LALIT K. JAIN TO THE EXTENT OF SAME AMOUNT I.E. 8.97 CRORES. THE ASSESSING OFFICER HAS ALSO REPORTED THAT SHRI LALIT K. JAIN ITA NO. 1141 /P U N/20 1 6 KUMAR BUILDERS 6 HAD OFFERED THAT INCOME AND PAID DUE TAXES TH EREON, WHICH IN TURN, HAS BEEN VERIFIED FROM THE SYSTEM. ONCE THE INCOME ARISING FROM A PARTICULAR TRANSACTION HAS BEEN ADDED IN THE HANDS OF ONE PERSON I.E. SHRI LALIT K. JAIN IN THE PRESENT CASE, THEN THERE IS NO MERIT IN MAKING THE SAME ADDITION ON ACC OUNT OF SAME TRANSACTION IN THE HANDS OF ANY OTHER PERSON. ACCORDINGLY, THERE IS NO MERIT IN THE ORDERS OF AUTHORITIES BELOW IN TAXING 8.97 CRORES IN THE HANDS OF ASSESSEE FIRM. NO DOUBT, THERE ARE CERTAIN ENTRIES IN THE BOOKS OF ACCOUNT OF ASSESSEE, B UT THE SAME DO NOT BELONG TO THE ASSESSEE AND MERELY ON THE BASIS OF BOOK ENTRIES, ADDITION CANNOT BE UPHELD, ESPECIALLY IN THE PRESENT SET OF FACTS WHERE THE ASSESSEE HIMSELF HAD IN THE COMPUTATION OF INCOME ULTIMATELY NOT OFFERED THE SAID INCOME IN ITS H ANDS. THUS, RELYING ON THE REPORT OF ASSESSING OFFICER, WHEREIN HE HAS VERIFIED THE RECORDS AND REPORTED THAT SUM OF 8.97 CRORES HAS BEEN ADDED IN THE HANDS OF ANOTHER PERSON I.E. SHRI LALIT K. JAIN, THEN THERE IS NO MERIT IN INCLUDING SUM OF 8.97 CRO RES ON THE BASIS OF SAME TRANSACTION IN THE HANDS OF ASSESSEE. ACCORDINGLY, WE REVERSE THE ORDERS OF AUTHORITIES BELOW IN THIS REGARD AND DIRECT THE ASSESSING OFFICER TO DELETE ADDITION OF 8.97 CRORES. THE GROUND OF APPEAL NO.3 RAISED BY ASSESSEE IS TH US, ALLOWED. 1 4 . IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 14 TH DAY OF MAY , 201 9 . SD/ - SD/ - (ANIL CHATURVEDI) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 14 TH MAY , 201 9 . GCVSR ITA NO. 1141 /P U N/20 1 6 KUMAR BUILDERS 7 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) , PUNE - 5, PUNE ; 4. THE PR. CIT , PUNE - 4 , PUNE ; 5. 6. , , / DR A , ITAT, PUNE ; / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE