Rohtas Infrastructure Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 1167/DEL/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5220 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 07-08-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 28-02-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T VASANTHAN
• Assessee Lawyers: J K RAI
• Keywords: Business income; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES SMC: NEW DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA.NO.1167/DEL./2017 ASSESSMENT YEAR 2012-2013 ROHTAS INFRASTRUCTURE P. LTD., FLAT NO.2, FIRST FLOOR, F-50B, MADHU VIHAR EXTENSION, PATPARGANJ, NEW DELHI-092 PAN AADCR8175K VS. THE INCOME TAX OFFICER, WARD- 21(4), C.R. BUILDING, INDRAPRASHTHA MARG, NEW DELHI 110 002. (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI J.K. RAI, C.A. FOR REVENUE : SHRI T. VASANTHAN, SR. D.R. DATE OF HEARING : 07.08.2017 DATE OF PRONOUNCEMENT : 16.08.2017 ORDER THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(A)-16, NEW DELHI, DATED 15.12.2016 FOR A.Y. 2012- 2013. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT ASSESSEE IS A PRIVATE LIMITED COMPANY, FILED RETURN OF INCOME OF RS.2,72,74 0. THE CASE WAS SELECTED FOR SCRUTINY. IT HAS BEEN SUBMITTED THAT ASSESS EE COMPANY WAS FORMED WITH THE OBJECT OF ENGAGING IN THE BUSINESS OF REAL ESTATE. DURING THE YEAR NO BUSINESS ACTIVITIES WERE CONDUCTED AS IN EARLIER YEARS. DURING THE YEAR, ASSESSEE COMPANY HAS SHOWN RENTAL INCOME FROM LETTING OF ITS BUILDING TO FIVE TENANTS AS PER COP IES OF THE LEASE AGREEMENT FILED AND PLACED ON RECORD. 2.1. THE ASSESSEE COMPANY HAS SHOWN RENTAL INCOME O F RS.12,94,800 WHICH WAS SHOWN AS BUSINESS INCOME AND EXPENSES WERE ADJUSTED AGAINST THIS RENTAL INCOME. THE ASSESSEE WAS ASKED TO 2 ITA.NO.1167/DEL./2017 ROHTAS INFRASTRUCTURE P. LTD., NEW DELHI. EXPLAIN AS TO WHY RENTAL INCOME RECEIVED FROM LETTING OUT PROPERTY SHOULD NOT BE ASSESSED AS INCOME FROM HOUSE PROPERTY . THE ASSESSEE REGARDING TREATMENT OF RENTAL INCOME FROM LETTING OUT COMM ERCIAL ASSET AS INCOME FROM HOUSE PROPERTY, IT MAY BE STATED THAT TH E SAID RENTAL INCOME IS INCOME FROM BUSINESS AS DECLARED BY THE AS SESSEE IN THE RETURN AND AS EXPLAINED. HOWEVER, THE PROPOSAL OF THE A.O. TO TREAT THE SAID INCOME AS INCOME FROM HOUSE PROPERTY IS ACCEPTA BLE TO ASSESSEE, IF THE CORPORATE EXPENSES INCURRED FOR RUNNING THE COM PANY ARE ALLOWED AS DEDUCTION AGAINST THE INCOME FROM HOUSE PRO PERTY. 2.2. THE A.O. DID NOT ACCEPT THE CONTENTION OF THE ASSES SEE. HE NOTED THAT THE PROPOSAL TO TREAT THE SAID INCOME AS INCOME FROM HOUSE PROPERTY IS ACCEPTABLE TO THE ASSESSEE BUT ON THE OTHER H AND, IT HAS SET ITS OWN CONDITION STATING THAT EXPENSES REQUIRED TO BE INC URRED FOR RUNNING THE COMPANY SHOULD BE ALLOWED. AS NO BUSINES S WAS CONDUCTED DURING THE YEAR IN QUESTION, CLAIM OF BUSINE SS EXPENSES DO NOT ARISE AND THEREFORE, CLAIM OF EXPENSES AGAINST BUS INESS INCOME WERE NOT ALLOWED. THE A.O. REFERRED TO SECTION 22 OF T HE I.T. ACT AND VARIOUS AUTHORITIES AND HELD THAT RENTAL INCOME OF RS.1 2,92,800 RECEIVED BY THE ASSESSEE FROM ITS LET OUT PROPERTY IS A SSESSED AS INCOME FROM HOUSE PROPERTY. NO OTHER EXPENSES SHALL BE ALLOWED EXCEPT WHICH ARE ALLOWABLE DEDUCTION UNDER SECTION 24 OF THE I.T. ACT. THE A.O. ACCORDINGLY TREATED THE RENTAL INCOME AS INCO ME FROM HOUSE PROPERTY AND BY REDUCING HOUSE TAX PAID AND DEDUCTION UNDER SECTION 24 OF THE I.T. ACT, COMPUTED THE INCOME FROM HOUSE PROP ERTY AT RS.7,52,442. 3. THE ASSESSMENT ORDER WAS CHALLENGED BEFORE THE CI T(A). THE ASSESSEE FILED VARIOUS SUBMISSIONS BEFORE LD. C IT(A) IN WHICH IT WAS BRIEFLY EXPLAINED THAT ASSESSEE IS A PRIVATE LIMI TED COMPANY 3 ITA.NO.1167/DEL./2017 ROHTAS INFRASTRUCTURE P. LTD., NEW DELHI. MAINLY IN THE BUSINESS OF REAL ESTATE ACTIVITIES AS ITS OBJECTIVES. DURING THE RELEVANT ASSESSMENT YEAR THE COMPANY HOLDS PROPERTIE S AS STOCK- IN-TRADE IN BALANCE SHEET SO THE COMPANY HAS LET OUT THES E PROPERTIES AND EARNED RENTAL INCOME ON THE SAME. THE RENTAL INCOM E EARNED HAS BEEN TREATED AS BUSINESS INCOME OF THE ASSESSEE COMPA NY. THE ASSESSEE INCURRED SEVERAL EXPENSES WHICH ARE ALLOWA BLE. THE COMPANY IS IN THE BUSINESS OF REAL ESTATE DURING THE RELEVANT ASSESSMENT YEAR, IT WAS IN THE POSSESSION OF STOCK-IN-TRADE OF REAL ESTATE INVENTORY I.E., SHOPS, HOUSES ETC., THE LD. CIT(A) NOTED THAT THE ASSES SEE RAISED THESE ADDITIONAL FACTS AND HAS NOT EXPLAINED WHY THESE FACTS W ERE NOT PLACED BEFORE A.O. DESPITE PROVIDING OPPORTUNITY, ASSESSEE DID NOT PRODUCE ANY EVIDENCE/DOCUMENTS IN THIS REGARD. THEREFORE, THE CONTENTION OF THE ASSESSEE WAS REJECTED. 3.1. THE ASSESSEE FURTHER SIMILARLY EXPLAINED THAT CO MPANY HAS ACQUIRED REAL ESTATE ASSET IN PAST WITH AN OBJECTIVE OF RE-SALE AND SAME HAS BEEN SHOWN AS PART OF THE INVENTORY IN THE BOOKS O F THE COMPANY. THE COMPANY WAS NOT ABLE TO RE-SALE ANY OF THE INVENTO RY DUE TO ADVERSE MARKET SCENARIO IN REAL ESTATE BUSINESS. THE ASSESSEE HAD DECIDED TO LET OUT THE INVENTORY SO HELD TO EARN REVENUE. THOUGH THE COMPANY HAS NOT EARNED ANY BUSINESS REVENUE IN EARLI ER YEAR BUT IT HAS EARNED BUSINESS INCOME IN FOLLOWING YEAR OF 201 3-2014. A.O. FAILED TO APPRECIATE THAT EXPENSES WERE INCURRED BY THE ASSESSEE COMPANY FOR RUNNING OF THE BUSINESS. THE ASSESSEE FI LED THE BALANCE SHEET IN SUPPORT OF THE ABOVE CONTENTION. THE LD. CIT(A ) HOWEVER, DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND DISMISSED THE APPEAL OF ASSESSEE. HIS FINDINGS AT PAGES 7 AND 8 OF THE APPELL ATE ORDER ARE REPRODUCED AS UNDER : 4 ITA.NO.1167/DEL./2017 ROHTAS INFRASTRUCTURE P. LTD., NEW DELHI. I HAVE CONSIDERED ' ALL FACTS AND CIRCUMSTANCES OF THE CASE. IT IS AN ADMITTED FACT THAT THE COMPANY SINCE ITS INCEPTION IN THE FY 2007-08 HAS NOT ENTERED INTO ANY BUSINESS TRANSACTION APART FROM ACQUIRING FEW PROPERTIES IN THE SAME YEAR . RIGHT FROM THE BEGINNING THE PROPERTIES WERE RENTED OUT . THE INTENTION OF THE COMPANY IS APPARENT FROM ITS CONDUCT IN THE YEARS TO FOLLOW . THE ARGUMENT OF THE COMPANY THAT IT DID NOT ENTER INTO ANY BUSINESS TRANSACTION DUE TO DEPRESSED REAL ESTATE MARKET IS REJECTED. IT MUST B E BORNE IN MIND THAT THE A PPE L L A N T P URC HASED THOSE PROPERTIES IN THE SAME STATE O F THE R EA L ESTATE MARKET . THEREAFTER F OR YEARS T HE A PP EL LANT CONTINUED TO REN T OU T T H O SE PR O PE RTI ES. THEREFORE THE CONDUCT O F TH E A PP E LL A N T COM PANY LEAVES NO DOUBT I N MY M I N D T HAT I T NE V E R I N T E N D E D TO CONDUCT BUSINESS IN R EA L ES TATE . I T WAS JUST AN INVESTMEN T TO EARN TH E I NCOM E FROM HO USE PROPERTY. THEREFORE , THE ACTION OF T H E AO TREATING THE INCOME FR OM HO USE P R OPER T Y IS CONF I RMED. SIMILARLY A S TH E A PP EL L A N T NEVE R HAD ANY INTENTION TO CONDUC T B U SINESS , THE E X P ENSES CLAIMED TO H A VE BEEN I NCURR E D F OR BUSINESS ACTIVITY ARE DISALLOWED B Y THE AO . HERE TOO , THE ACTION OF T HE AO IS CO N F I R ME D. I N THE RESULT , THE APPEAL O F THE ASSESSEE IS DISMISSED. 4. I HAVE HEARD LEARNED REPRESENTATIVES OF BOTH THE P ARTIES AND PERUSED THE FINDINGS OF THE AUTHORITIES BELOW. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT AS PER SECTION 71 OF THE I.T. ACT, THE LOSSES FROM THE BUSINESS CAN BE SET-OFF AGAINST TH E GAINS FROM THE HOUSE PROPERTY. IN THE GROUNDS OF APPEAL, ASSESSEE S EEK LEAVE TO 5 ITA.NO.1167/DEL./2017 ROHTAS INFRASTRUCTURE P. LTD., NEW DELHI. PRODUCE ADDITIONAL EVIDENCE BUT NO ADDITIONAL EVIDENCE HAVE BEEN PRODUCED BEFORE THE TRIBUNAL. 5. ON THE OTHER HAND, LD. D.R. RELIED UPON THE ORDE RS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ISSUE OF SET-O FF AS PER SECTION 71 OF THE I.T. ACT WAS NOT RAISED BEFORE THE AUTH ORITIES BELOW AND THIS ISSUE IS NOT ARISING OUT OF THE IMPUGNED ORDER S. THEREFORE, THE SAME CANNOT BE ENTERTAINED. 6. I HAVE CONSIDERED THE RIVAL CONTENTIONS. IT IS NOT I N DISPUTE THAT ASSESSEE COMPANY WAS FORMED WITH THE OBJECT OF ENG AGING IN BUSINESS OF REAL ESTATE. IT IS ALSO NOT IN DISPUTE THAT DU RING THE YEAR, NO BUSINESS ACTIVITY WAS CONDUCTED AS IN EARLIER YEAR S. ASSESSEE HAS SHOWN RENTAL INCOME FROM LETTING OUT SOME OF ITS PROPERTI ES AS PER LEASE AGREEMENT. THE ASSESSEE ALSO INCURRED CERTAIN E XPENSES WHICH HE CLAIMED AS DEDUCTION AGAINST THE RENTAL INCOME. WHE N SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE AS TO WHY THE RENTAL INCOME RECEIVED FROM LETTING OUT THE PROPERTY SHOULD NOT BE ASSESSED AS INCOME FROM HOUSE PROPERTY, THE ASSESSEE ACCEPTED THE PROPOSAL OF THE A.O. HOWEVER, SUBMITTED THAT THE CORPORATE EXPENSES MAY BE AL LOWED AS DEDUCTION AGAINST THE INCOME FROM HOUSE PROPERTY. IT IS THUS ADMITTED BY THE ASSESSEE BEFORE A.O. THAT RENTAL INCOME MAY BE TR EATED AS INCOME FROM HOUSE PROPERTY. THE ASSESSEE DID NOT OB JECT TO THE PROPOSED NOTICE OF THE A.O. TO TREAT THE RENTAL INCOME AS INCOME FROM HOUSE PROPERTY AND NO MATERIAL OR DETAILS HAVE BEEN S UBMITTED BEFORE A.O. AS TO HOW THE RENTAL INCOME WAS BUSINESS INCOME O F THE ASSESSEE. IT IS WELL SETTLED LAW THAT NO APPEAL LIES ON AGREED ADD ITIONS. I RELY UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF JIVATLAL PURPAPOSHI 65 ITR 261, DECISION OF KERALA HIGH COUR T IN THE CASE OF VAMA DAVAN BHANU 330 ITR 559 AND DECISION OF P & H HIGH COURT IN 6 ITA.NO.1167/DEL./2017 ROHTAS INFRASTRUCTURE P. LTD., NEW DELHI. THE CASE OF BANTA SINGH & KARTAR SINGH 135 ITR 239. AP ART FROM IT, IT IS AN ADMITTED FACT THAT NO BUSINESS ACTIVITIES WERE CON DUCTED IN ASSESSMENT YEAR UNDER APPEAL. THEREFORE, ASSESSEE F AILED TO PROVE THAT EXPENSES WERE LAID OUT AND INCURRED WHOLLY AND EX CLUSIVELY FOR THE PURPOSE OF BUSINESS. THEREFORE, NO DEDUCTION/EXPEN DITURE COULD BE ALLOWED AGAINST THE RENTAL INCOME. THUS, THE ASSESSEE FAILED TO PROVE BEFORE A.O. THAT IT HAS EARNED ANY BUSINESS INCOME. W HATEVER NEW PLEA WERE TAKEN BEFORE LD. CIT(A) THEY HAVE NOT BEEN S UBSTANTIATED THROUGH ANY EVIDENCE OR MATERIAL ON RECORD. HOW THE A SSESSEE HAS GIVEN TREATMENT TO THE RENTED PROPERTY IN THE BOOKS OF A CCOUNT IN EARLIER YEAR IS NOT RELEVANT BECAUSE THE ASSESSEE WAS NOT DOING ANY BUSINESS ACTIVITIES IN EARLIER YEARS AS WELL. SINCE TH E ASSESSEE FAILED TO SATISFY THE AUTHORITIES BELOW THAT ASSESSEE WAS CONDUCTIN G ANY BUSINESS ACTIVITY IN EARLIER YEAR AS WELL AS IN ASSE SSMENT YEAR UNDER APPEAL THEREFORE, THERE IS NO QUESTION OF ASSESSEE EAR NING ANY BUSINESS INCOME AS SUCH. THE LD. CIT(A) IN HIS FIND ING HAS NOTED THAT ASSESSEE PURCHASED THE RENTED PROPERTIES IN THE SAME S TATE OF REAL ESTATE MARKET AND RENTED OUT SINCE BEGINNING WHICH HA VE NOT BEEN REBUTTED BY THE ASSESSEE. THE ASSESSEE HAS NO INTENTION TO CONDUCT ANY BUSINESS ACTIVITY. THE FINDING OF FACT RECORDED B Y THE LD. CIT(A) AGAINST THE ASSESSEE HAVE NOT BEEN REBUTTED THROUGH ANY EVIDENCE OR MATERIAL ON RECORD. THEREFORE, ASSESSEE IS NOT ABLE TO POINT OUT ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) IN REJECTING THE CLAIM OF DEDUCTION OF THE EXPENDITURE. LEARNED COUNSEL FOR THE A SSESSEE LASTLY STATED THAT THE LOSS FROM THE BUSINESS CAN BE SET OFF AGAI NST GAINS FROM HOUSE PROPERTY AS PER SECTION 71 OF THE I.T. ACT. HOWEVER, NO DETAILS HAVE BEEN FURNISHED ON RECORD IN RESPECT OF TH IS GROUND AND FURTHER THIS GROUND WAS NOT RAISED BEFORE THE AUTHORITIE S BELOW. THIS ISSUE IS ALSO NOT ARISING OUT OF THE IMPUGNED ORDER. T HEREFORE, MERELY 7 ITA.NO.1167/DEL./2017 ROHTAS INFRASTRUCTURE P. LTD., NEW DELHI. RAISING A PLEA WITHOUT BRINGING ANY MATERIAL ON RECOR D, CANNOT BE ENTERTAINED AT THIS STAGE. IN VIEW OF THE ABOVE DISCUSSI ON, I DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDERS OF THE AU THORITIES BELOW. I CONFIRM THE SAME AND DISMISS THE APPEAL OF ASSESSEE. 7. IN THE RESULT, APPEAL OF ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DELHI, DATED 16 TH AUGUST, 2017 VBP/- COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT(A) CONCERNED 4. CIT CONCERNED 5. D.R. ITAT SMC BENCH 6. GUARD FILE // ASST. REGISTRAR // ITAT : DELHI BENCHES : DELHI.