MAINAK MASHRUWALL, MUMBAI V. ACIT 18(1), MUMBAI

ITA 1170/MUM/2011

• Counselvise Citation: 117019914 RSA 2011
• Duration Of Justice: 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 08-02-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: PHEROZE A DHANBHOORA
• Keywords: Deemed to accrue or arise in india
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI BEFORE SHRI R.K. PANDA (A.M.) ITA NO.1170/MUM/2011 ASSESSMENT YEAR : 2006-2007 MR. MAINAK MASHRUWALLA 502-B, LADY RATAN TOWER, DAINIK SHIVER MARG, MUMBAI-400 018 PAN NO. : AFJPM8289D THE ASSTT. COMMISSIONER OF INCOME TAX-18(1) PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI-400 012 (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI PHEROZE A. DHANBHOORA RESPONDENT BY : SHRI R. K. GUPTA O R D E R PER R.K. PANDA, A.M. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 23.11.2010 OF THE CIT(A)-29, MUMBAI RELATING TO AS SESSMENT YEAR 2006-07. 2. THE GROUNDS OF APPEAL NO. 1 & 2 FILED BY THE ASS ESSEE ARE AS UNDER : 1. THE CIT(A) ERRED IN CONFIRMING THE ADDITION OF ` .688/- TO THE TOTAL INCOME OF THE ASSESSEE AS THE ANNUAL LETTING VALUE OF THE PUNE FLAT ALTHOUGH THE SAME OUGHT TO BE TAKEN AS ` .NIL UNDER SECTION 23(1)(C) OF THE ACT. 2. THE CIT(A) ERRED IN CONFIRMING THE A.O.S ACTION OF STATING THAT THE APPELLANTS AUTHORISED REPRESENTATIVE AGREED TH AT THE ANNUAL VALUE SHOULD BE TAKEN AT ` .4,950/- FOR 12 MONTHS, WHEN NO SUCH STATEMENT OF AGREEMENT HAD BEEN MADE BY THE AUTHORI SSED REPRESENTATIVES OF THE APPELLANT. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE OWNED TWO HOUSE PROPERTIES I.E. ONE FLAT AT MUMBAI AND OTHER AT PUN E. THE AO NOTED THAT SINCE 2 THE ASSESSEE IS ENTITLED FOR EXEMPTION FOR ONE PROP ERTY AS SELF OCCUPIED PROPERTY, THEREFORE, THE OTHER PROPERTY SHOULD HAVE BEEN TAKEN FOR TAXATION, IN VIEW OF THE PROVISIONS OF SECTION 23 OF THE IT ACT. HE, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY NO INCOME FROM PROPER TY AT PUNE HAS BEEN OFFERED FOR TAXATION. IN RESPONSE TO THE SAME, IT W AS EXPLAINED THAT THE FLAT AT MUMBAI IS SELF OCCUPIED PROPERTY AND THOUGH THE PUN E PROPERTY IS USED FOR ASSESSEES RESIDENCE ONLY, AND THE SAME IS OFFERED FOR DEEMED INCOME FROM HOUSE PROPERTY. FROM THE ASSESSMENT ORDER IT IS SEE N THAT THE ASSESSEE HAS AGREED ANNUAL VALUE OF PROPERTY TO BE TAKEN AT ` .4,950/- FOR 12 MONTHS. THE AO CONSIDERED THE ANNUAL VALUE OF PROPERTY TO BE TA KEN AT ` .4,950/-. AFTER DEDUCTING MUNICIPAL TAXES PAID AT ` .3,967/- AND DEDUCTION U/S.24, HE DETERMINED THE INCOME FROM HOUSE PROPERTY AT ` .688/-. 4. BEFORE THE LEARNED CIT(APPEALS) IT WAS SUBMITTED THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S.23(1)(C) IN RESPECT OF TH IS PROPERTY. ACCORDING TO THIS SECTION WHERE THE PROPERTY IS LET AND VACANT FOR WH OLE OR ANY PART OF THE YEAR DEDUCTION FOR VACANCY PERIOD WILL BE ALLOWED. THE D ECISION OF THE TRIBUNAL IN THE CASE OF PREMSUDHA EXPORTS PVT. LTD. [2007] REPO RTED IN 295 ITR (AT) 341 (MUMBAI) WAS CITED AND IT WAS SUBMITTED THAT IT IS NOT NECESSARY TO PROVE THAT THE PROPERTY WAS LET DURING ANY TIME PRIOR TO RELEV ANT PREVIOUS YEAR. 5. HOWEVER, THE LEARNED CIT(APPEALS) WAS NOT SATISF IED WITH THE ARGUMENTS ADVANCED BY THE ASSESSEE AND UPHELD THE ACTION OF T HE AO BY HOLDING AS UNDER :- 3.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE, ARGUMENTS OF THE AO AND THE WRITTEN SUBMISSIONS OF THE AUTHORISE D REPRESENTATIVE OF THE APPELLANT. PROVISIONS OF SECT ION 23(1) WILL BE APPLICABLE IN A CASE WHERE THE APPELLANT HAS THE IN TENTION TO LET IT OUT. THERE SHOULD HAVE BEEN NECESSARY STEPS TO LET THE PROPERTY IN QUESTION. WITHOUT THESE EVIDENCE IT CANNOT BE SAID THAT THE PROPERTY WAS INTENDED TO BE LET AND WAS VACANT. THE RE IS NO EVIDENCE ON RECORD FILED BY THE APPELLANT TO PROVE EITHER IN THE EARLIER YEAR OR IN THIS YEAR THERE WAS ANY EFFORT T O LET THE PROPERTY OUT. THEREFORE, THE DEDUCTION U/S.23(1)(C) CANNOT B E ALLOWED. THE ACTION OF THE AO IS ACCORDING TO LAW AND IS UPHELD. 3 6. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON T HE DECISION OF THE TRIBUNAL IN THE CASE OF PREMSUDHA EXPORTS PVT. LTD. (SUPRA) AND THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF D LF OFFICE DEVELOPERS VS. ACIT REPORTED IN [2008] 23 SOT 19. 7. THE LEARNED DR ON THE OTHER HAND, RELIED ON THE ORDER OF THE LEARNED CIT(APPEALS). 8. AFTER HEARING BOTH THE SIDES, I DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(APPEALS). THERE IS NO DISPUTE TO TH E FACT THAT ASSESSEE IS THE OWNER OF TWO HOUSE PROPERTIES I.E. ONE AT MUMBAI AN D THE OTHER AT PUNE. ADMITTEDLY, THE MUMBAI PROPERTY IS SELF OCCUPIED P ROPERTY. SO FAR AS THE PUNE PROPERTY IS CONCERNED, ALTHOUGH THE SAME IS NO T BEING LET OUT BUT THE ASSESSEE HAS SUBMITTED BEFORE THE AO THAT THE SAME IS USED FOR RESIDENCE. SINCE THE FLAT WAS NEVER LET OUT, THE TWO DECISIONS CITED BEFORE ME CANNOT BE ACCEPTED. FURTHER THE CO-ORDINATE BENCHES OF THE TR IBUNAL ARE TAKING THE CONSISTENT VIEW THAT IN CASE THE ASSESSEE HAS MORE THAN ONE PROPERTY, THE MUNICIPAL RATEABLE VALUE SHOULD BE ADOPTED FOR THE PURPOSE OF DETERMINING THE ANNUAL LET OUT VALUE FOR THE SECOND PROPERTY. S INCE THE ASSESSEE IN THE INSTANT CASE HAS PROVIDED THE MUNICIPAL RATEABLE VA LUE TO THE AO, ON THE BASIS OF WHICH THE AO HAS DETERMINED THE ANNUAL VAL UE OF THE PROPERTY AND DETERMINED THE INCOME FROM HOUSE PROPERTY, WHICH HA S BEEN UPHELD BY THE LEARNED CIT(APPEALS). THEREFORE, I DO NOT FIND ANY MERIT IN THE GROUNDS RAISED BY THE ASSESSEE. ACCORDINGLY, THE GROUNDS ARE DISMI SSED. 9. GROUND NO.3 RAISED BY THE ASSESSEE READS AS UNDE R :- 3. THE CIT (A) ERRED IN CONFIRMING THE ADDITION OF ` .2,21,719/- ON ACCOUNT DISALLOWANCE OF VAT UNDER SECTION 43B OF TH E ACT MERELY BECAUSE THE ASSESSEE FOLLOWED CASH SYSTEM OF ACCOUN TING. 10. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE IS THE PROPRIETOR OF M/S. NIRMAAN WHICH IS ENGAGED IN THE BUSINESS OF CO NTRACTOR AND FOLLOWS THE CASH SYSTEM OF ACCOUNTING. DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, THE AO NOTED THAT THERE IS AN OUTSTANDING VAT LIABILITY OF ` .2,21,719/- SHOWN IN THE BALANCE SHEET. THE AO ASKED THE ASSESSEE TO EXP LAIN AS TO WHY THE VAT LIABILITY OF ` .2,21,719/- SHOULD NOT BE DISALLOWED, AS THE ASSESS EE FOLLOWS CASH 4 METHOD OF ACCOUNTING. IT WAS EXPLAINED BY THE ASSES SEE THAT ALTHOUGH THE ASSESSEE FOLLOWS CASH SYSTEM OF ACCOUNTING, BUT SIN CE THE AMOUNT HAS BEEN PAID BEFORE FILING OF THE RETURN OF INCOME, THE SAM E SHOULD BE ALLOWED AS DEDUCTION, IN VIEW OF THE DECISION OF THE TRIBUNAL IN THE CASE OF ATE (P) LTD. V. ACIT REPORTED IN [2004] 90 ITD 191. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND DISALLOWE D THE AMOUNT OF ` .2,21,791/-. HE HOWEVER, HELD THAT THE SAME IS TO B E ALLOWED IN ASSESSMENT YEAR 2007-08 AS THE PAYMENT HAS BEEN MADE DURING TH E FINANCIAL YEAR 2006- 07. 11. IN APPEAL, THE LEARNED CIT(APPEALS) UPHELD THE ACTION OF THE AO. 12. AGGRIEVED WITH SUCH ORDER OF THE LEARNED CIT(AP PEALS), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 13. I HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE SIDES AND PERUSED THE ORDERS OF THE AO & THE LEARNED CIT(APPE ALS) AND THE DECISION CITED BEFORE ME. THERE IS NO DISPUTE TO THE FACT TH AT ASSESSEE IS FOLLOWING CASH SYSTEM OF ACCOUNTING. IN A CASH SYSTEM OF ACCOUNTIN G ALL EXPENSES RELATING TO THE YEAR AND ACTUALLY PAID IN CASH BASIS ARE SUPPOS ED TO BE DEBITED. SIMILARLY THE ACTUAL INCOME RECEIVED DURING THE YEAR HAS TO B E CREDITED. SIMILARLY, THERE CANNOT BE ANY OUTSTANDING LIABILITY OR PRE-PAID AMO UNT FOR EXPENSES. THEREFORE, I FAIL TO UNDERSTAND AS TO HOW AND WHY T HE ASSESSEE HAS SHOWN VAT LIABILITY OF ` .2,21,719/- IN ITS BALANCE SHEET. THEREFORE, THE AC TION OF THE AO IN MAKING ADDITION WHICH HAS BEEN UPHELD BY THE LEARNED CIT(APPEALS), IN MY OPINION IS JUSTIFIED. THE DECISIONS OF THE TRIBU NAL CITED BEFORE ME ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE, SINCE THE FACTS IN THOSE CASES ARE DIFFERENT FROM THE FACTS OF THE INSTANT CASE. 14. IN THIS VIEW OF THE MATTER I DO NOT FIND ANY IN FIRMITY IN THE ORDER OF THE LEARNED CIT(APPEALS) IN UPHOLDING THE ADDITION. TH E GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY DISMISSED. 15. GROUND NO.4 & 5 RELATES TO LEVY OF INTEREST U/S .234B & 234C WHICH IS MANDATORY AND CONSEQUENTIAL IN NATURE. ACCORDINGLY, THESE GROUNDS ARE DISMISSED. 5 16. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON THIS 8 TH DAY OF APRIL, 2011. SD/- (R.K. PANDA) ACCOUNTANT MEMBER MUMBAI, DATED : 08/04/2011 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, SMC - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI