Dy. Commissioner of Income Tax, Lucknow V. M/s Motors Sales Ltd., Lucknow

ITA 132/LKW/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1772 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 21-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PINKI MAHAWAR
• Assessee Lawyers: DEVASHISH MEHROTRA
• Keywords: Business income; Principle of natural justice; Rule of consistency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B , LUCKNOW BEFORE SHRI. T.S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO. 132/LKW/2017 ASSESSMENT YEAR: 2012 - 13 DCIT RANGE - 4 LUCKNOW V. M/S MOTOR SALES LTD. 11, M.G. MARG LUCKNOW T AN /PAN : (APP ELL ANT) (RESPONDENT) APPELLANT BY: SMT. PINKI MAHAWAR, D.R. RESPONDENT BY: SHRI DEVASHISH MEHROTRA, ADVOCATE DATE OF HEARING: 21 08 201 8 DATE OF PRONOUNCEMENT: 31 08 201 8 O R D E R PER P ARTHA SARATHI CHAUDHURY , J.M : THIS APPEAL PREFERRED BY THE REVENUE EMANATES FROM THE ORDER OF THE LD. CIT(A) - II, LUCKNOW DATED 30/12/2016. 2 . FIRST GROUND OF THE REVENUE IS AS FOLLOWS: - 1 . THE COMMISSIONER OF INCOME - TAX (APPEAL), LUCKNOW HAS ERRED IN LAW AND ON FACTS OF THE CAS E BY T REATING THE INCOME OF RS. 1,20,18,255 / - AS INCOME FROM HOUSE PROPERTY INSTEAD OF BUSINESS INCOME WHEREAS THE PROPERTY LET - OUT WAS INCIDENTAL TO ITS BUSINESS ACTIVITIES. 3 . THE FACTS RELATING TO THIS GROUND ARE THAT THE ASSESSEE HAD LET OUT A PART OF ITS PROPER TY OWNED BY IT ON LEASE SINCE 2001. INCOME FROM LEASING OUT OF THE PROPERTY HAS BEEN SHOWN UNDER THE HEAD INCOME FROM HOUSE PROPERTY ALL ALONE AND HAS BEEN ASSESSED TO TAX AS SUCH. DURING ASSESSMENT PROCEEDINGS, IT WAS BROUGHT TO THE NOTICE OF THE ITA NO.132/LKW/2017 PAGE 2 OF 7 ASSE SSING OFFICER THAT THE PROPERTY , WHICH HAS BEEN LEASED OUT BY THE ASSESSEE , IS NOT ON TEMPORARY BASIS BUT INITIALLY PROPERTY WAS LEASED OUT FOR A PERIOD OF FIVE YEARS AND THEREAFTER LEASE IS BEING RENEWED FOR FURTHER PERIOD OF FIVE YEARS WHICH SIGNIFIES TH E INTENTION OF THE ASSESSEE THAT THE INCOME WHICH HAS BEEN DERIVED BY THE ASSESSEE WAS IN THE NATURE OF INCOME FROM LETTING OUT OF PROPERTY AND RENTAL IN NATURE, AS THE PROPERTY HAS BEEN LET OUT ON LONG TERM LEASE. IT IS NOT A CASE OF EXPLOITATION OF PROP ERTY FOR A TEMPORARY PERIOD. THE ASSESSING OFFICER ON THE RENTAL INCOME OF RS.1,20,18,255/ - RECEIVED BY THE ASSESSEE , WHICH WAS SHOWN AS INCOME FROM HOUSE PROPERTY, OBSERVED THAT ASSESSEE ALSO RECEIVED RENT FOR COMMON AREA AND MAINTENANCE CHARGES AND TREA TED RENTAL INCOME AS BUSINESS INCOME. 4 . BEFORE THE LD. CIT(A), ASSESSEE FILED DETAILED WRITTEN SUBMISSIONS WHICH ARE PLACED ON RECORD. CRUX OF THE SUBMISSIONS BEFORE THE LD. CIT(A) W AS THAT RENTAL INCOME HAS BEEN SHOWN AS INCOME FROM HOUSE PROPERTY SINCE LA ST TEN YEARS AND ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN EARLIER YEARS. LD. CIT(A) AFTER CONSIDERING THE FACTS OF THE CASE, ASSESSMENT ORDER AND THE SUBMISSIONS OF THE ASSESSEE, OBSERVED THAT ISSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE FOR ASSESSMENT YEARS 2008 - 09 AND 2009 - 10 BY ITAT LUCKNOW BENCH IN ASSESSEES OWN CASE IN ITA NO.272 & 273/LKW/2013, ORDER DATED 17/6/2015 AND THE RELEVANT PORTION IS AS UNDER: - HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT UNDISPUTEDLY THE PROPERTY HAS BEEN LET, OUT CONTINUOUSLY FOR THE LAST 10 YEARS AND THE RENTAL INCOME HAS BEEN SHOWN AS INCOME FROM HOUSE PROPERTY AND THE SAME HAS ALSO BEEN ASSESSED AS INCOME FROM HOUSE PROPERTY. THE REVENUE HAS NOT PLACED ANYTHING ON RECORD TO DEMOLISH THE FINDINGS OF THE LD. CIT(A). WE ARE, THEREFORE, OF THE VIEW THAT THOUGH EVERY ASSESSMENT YEAR IS AN INDEPENDENT ITA NO.132/LKW/2017 PAGE 3 OF 7 ASSESSMENT YEAR AND PRINCIPLE OF RESJUDICATA IS NOT APPLICABLE TO THE INCOME TAX PROCEEDINGS Y ET THE RULE OF CONSISTENCY MUST BE FOLLOWED UNLESS AND UNTIL CONTRARY FACTS ARE BROUGHT ON RECORD. IN THE LIGHT OF THESE FACTS, WE ARE OF THE VIEW THAT FOLLOWING THE TREATMENT GIVEN BY THE DEPARTMENT TO THE RENTAL INCOME IN THE PREVIOUS YEARS, THE RENTAL I NCOME IN THE INSTANT YEAR SHOULD ALSO BE ASSESSED AS INCOME FROM HOUSE PROPERTY. A PROPOS GROUND NO. 1, IT IS NOTICED THAT THE ASSESSEE HAS LET OUT A PORTION OF PROPERTY AT 11, M.G. MARG, LU CKNOW ON RENT AND RENTAL INCOME WAS OFFERED AS INCOME FROM HOUSE PR OPERTY BUT THE ASSESSING OFFICER HAS TREATED THE SAME AS BUSINESS INCOME, HAVING NOTED THAT THE PROPERTY HAS NOT BEEN LET OUT SINCE INCEPTION AND WDV OF THE PROPERTY HAS BEEN SHOWN AT NIL. IT HAS FURTHER OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE WAS PREVIOUSLY DOING BUSINESS AND HAD TEMPORARILY LET OUT THE PROPERTY IN 2001. ASSESSEE PREFERRED AN APPEAL BEFORE THE ID. CIT(A) WITH THE SUBMISSION THAT THE PORTION OF PROPERTY IS CONTINUOUSLY LET OUT ON RENT AND THE INTENTION OF THE ASSESSEE IS TO EARN RENTAL INCOME AND IN EARLIER YEARS ALSO RENTAL INCOME WAS TREATED TO BY THE INCOME FROM HOUSE PROPERTY. THE ID. CIT(A) HAS EXAMINED THE ISSUE IN THE LIGHT OF PAST ASSESSMENT AND WAS OF THE VIEW THAT THE PROPERTY WAS LET OUT ON RENT CONTINUOUSLY SINCE LAST WYEARS AND THE INCOME THERE FROM WAS ALWAYS SHOWN AS INCOME FROM HOUSE PROPERTY. RELYING UPON EARLIER YEARS' ORDERS, THE ID. CIT(A) HAS DIRECTED THE ASSESSING OFFICER TO ASSESS THE RENTAL INCOME AS INCOME FROM HOUSE PROPERTY. WE, THEREFORE, FIND NO INFIRM ITY IN THE ORDER OF THE ID. CIT(A) ON THIS ISSUE AND ACCORDINGLY WE CONFIRM THE SAME. 5 . AT THE TIME OF HEARING LD. A.R. OF THE ASSESSEE APPRISED THE BENCH THAT THIS ISSUE IS COVERED BY THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011 - 12. ASSESSEE HAS CONTENDED THAT I N THAT ASSESSMENT YEAR I.E. 2011 - 12 ALSO PROPERTY IN QUESTION WAS LET OUT AND IN ASSESSMENT YEAR 2007 - 08 ONWARDS THE DEPARTMENT ACCEPTED THE RENTAL INCOME AS INCOME ITA NO.132/LKW/2017 PAGE 4 OF 7 FROM HOUSE PROPERTY I.E. UN DER THE HEAD PROPERTY INCOME. THERE IS NO CHANGE IN THE CIRCUMSTANCES IN ASSESSMENT Y EAR 2011 - 12, HENCE THERE WAS NO JUSTIFICATION TO TREAT THE SAID INCOME AS BUSINESS INCOME. LD. CIT(A) TOO HAS ACCEPTED THE SUBMISSION S OF THE ASSESSEE AND RENTAL INCOME WAS CONSIDERED AS INCOME FROM HOUSE PROPERTY INSTEAD OF BUSINESS INCOME AND ALLOWED THE APPEAL VIDE ORDER DATED 28/8/2014. AGAINST THIS ORDER, REVENUE HA D PREFERRED AN APPEAL BEFORE THE HON'BLE HIGH COURT AND THE HON'BLE HIGH COURT AFTER EXAMINING THE MER ITS OF THE CASE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE WHILE HOLDING CATEGORICALLY THAT RENTAL INCOME RECEIVED BY THE ASSESSEE IN HIS HAND IS TO BE TREATED AS INCOME FROM HOUSE PROPERTY AND NOT AS BUSINESS INCOME. LD. A.R. OF THE ASSESSEE FURTHER STATED THAT EVEN IN ASSESSMENT YEAR 2012 - 13 ALSO FACTS AND CIRCUMSTANCES REMAINED UNCHANGED AND, THEREFORE, THE VIEW TAKEN BY THE JURISDICTIONAL HIGH COURT IS COVERED IN FAVOUR OF THE ASSESSEE. 6 . WE HAVE PERUSED THE CASE RECORDS, HEARD T HE RIVAL CONTENTIONS AND WE FIND THAT THE ISSUE IS SQUARELY EXAMINED AND DECIDED IN FAVOUR OF THE ASSESSEE BY THE HON'BLE JURISDICTIONAL HIGH COURT WHEREIN REVENUE S APPEAL HAS BEEN DISMISSED FOR ASSESSMENT YEAR 2011 - 12. UNDER SIMILAR FACTS AND CIRCUMSTAN CES , FOR THE RELEVANT YEAR I.E. 2012 - 13 WE FOLLOW THE ORDER OF THE JURISDICTIONAL HIGH COURT AND SUSTAIN THE RELIEF PROVIDED TO THE ASSESSEE BY THE LD. CIT(A). THIS GROUND OF THE REVENUE IS, THEREFORE, DISMISSED. 7 . NOW WE WOULD ADJUDICATE GROUNDS NO.2, 3 AN D 4 TOGETHER, WHICH ARE AS UNDER: - 2 . THE COMMISSIONER OF INCOME - TAX (APPEAL) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION OF RS. 5,01,371 / - MADE ON ACCOUNT OF WORKSHOP EXPENSES WITHOUT APPRECIATING THE FACT ITA NO.132/LKW/2017 PAGE 5 OF 7 THAT DESPITE PROVIDING OPPORTU NITIES TO THE ASSESSEE, IT FAILED TO PRODUCE PROPER BILLS/VOUCHERS FOR VERIFICATION. 3 . THE COMMISSIONER OF INCOME - TAX (APPEAL) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETI NG THE ADDITION OF RS.1,40,850/ - MADE ON ACCOUNT OF DISALLOWANCE OF TRAVELLING AND CONVEYANCE EXPENSES WITHOUT APPRECIATING THE FACT THAT T HE ASSESSEE FAILED TO JUSTIFY AND SUBSTANTIATE THE EXPENDITURE INCURRED UNDER THE HEAD. 4 . THE COMMISSIONER OF INCOME - TAX (APPEAL) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION OF RS.10,32,135 / - MADE ON ACCOUNT OF DISALLOWANCE OF MISCELLANEOUS EXPENSES IGNORING THE FACT THAT THE ASSESSEE COMPANY FAILED TO PRODUCE PROPER VOUCHERS AND JUSTIFICATION IN SUPPORT OF THE EXPENDITURE INCURRED. 8 . THESE GROUNDS RELATE TO ADDITION MADE BY TH E ASSESSING OFFICER BY WAY OF DISALLOWANCE OF RS.5,01,371/ - ; RS.1,40,850/ - AND RS.10,32,135/ - OUT OF EXPENSES CLAIMED UNDER VARIOUS HEADS. ASSESSING OFFICER ON EXAMINATION OF BOOKS OF ACCOUNT NOTICED THAT EXPENSES CLAIMED UNDER VARIOUS HEADS WERE NOT PRO P ERT Y VOUCHED AND WERE UNVERIFIABLE. THE EXPENSES WERE INCURRED IN CASH AND IN SEVERAL CASES NO VOUCHERS WERE PRODUCED. THE ASSESSING OFFICER UNDER THE HEAD WORKSHOP EXPENSES DISALLOWED 15% OF THE EXPENSES; UNDER THE HEAD TRAVELLING AND CONVEYANCE EXPENSE S, ASSESSING OFFICER DISALLOWED 10% OF THE TOTAL EXPENSES ; UNDER THE HEAD MISCELLANEOUS EXPENSES , ASSESSING OFFICER DISALLOWED 15% OF THE TOTAL EXPENSES. 9 . ASSESSEE BEFORE THE LD. CIT(A) FILED WRITTEN SUBMISSIONS WHICH ARE PLACED ON RECORD AND THEREIN STAT ED THAT ASSESSING OFFICER HAD MADE DISALLOWANCES ON SURMISES AND CONJECTURES. ASSESSING OFFICER HAS NOT SPECIFICALLY POINTED OUT THAT FOR WHICH EXPENSES VOUCHERS WERE NOT THERE AND SPECIFICALLY WHICH VOUCHERS WERE REQUIRED AND NO DETAILED ENQUIRY HAS BEEN CONDUCTED BY THE ASSESSING OFFICER AND , THEREFORE , ALL WERE AD - ITA NO.132/LKW/2017 PAGE 6 OF 7 HOC DISALLOWANCES. THE LD. A.R. OF THE ASSESSEE PLACED RELIANCE ON VARIOUS CASE LAWS WHICH ARE ON RECORD AS APPEARING IN THE ORDER OF THE LD. CIT(A). LD. CIT(A) AFTER CONSIDERING THE FACTS O F THE CASE, ASSESSMENT ORDER AND THE SUBMISSION OF THE ASSESSEE, HELD AS FOLLOWS: - 4(4) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES OF THE CASE. I FIND THAT NOTHING SPECIFIC HAS BEEN MENTIONED, BY THE AO WITH REGARD TO MISSING VOUCHERS, OR EXPENSES NOT FO UND TO BE VERIFIABLE. ASSESSING OFFICER HAS NOT POINTED OUT ANY SPECIFIC DEFECTS IN THE BOOKS/RECORDS. IF THE ASSESSING OFFICER IS NOT CONVINCED WITH A PARTICULAR NATURE OF 'EXPENSES, HE COULD HAVE MADE NECESSARY VERIFICATION BEFORE MAKING THE DISALLOWANCE , BUT T HE ASSESSING OFFICER HAS DISALLOWED THIS EXPENSE ON AD HOC BASIS, WHICH IS NOT PERMISSIBLE UNDER THE LAW. MOREOVER THE BOOKS OF ACCOUNTS HAVE BEEN DULY AUDITED; THE DETAILS WERE SUBMITTED BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS NOT I NVOKED SECTION 145(3) OF THE ACT AND HE HAS NOT REJECTED THE BOOKS OF ACCOUNT. RELIANCE IS PLACED ON THE JUDGEMENT OF HON'BLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. WOODWARD GOVERNOR PVT. LTD. (2009) 312 ITR 254 (SC). THERE IS NO PERSONAL USE OF CAR IN CASE OF THE COMPANY AS HELD BY HON'BLE GUJRAT HIGH COURT IN CASE OF SAYAJI IRON & ENGG. CO. VS. CIT IN 172 CTR 339. IN VIEW OF THE ABOVE THERE IS NO MERIT IN ESTIMATED DISALLOWANCES MADE BY THE ASSESSING OFFICER. UNDER THE CIRCUMSTANCES, AD - HOC DISALL OWANCE IS WITHOUT ANY BASIS. THE DISALLOWANCES OF RS.5,01,371/ - , RS.1,40,850/ - AND RS.10,32,135/ - MADE BY THE ASSESSING OFFICER ARE DELETED GIVING RELIEF TO THE APPELLANT. 10 . WE HAVE PERUSED THE CASE RECORDS, ANALYSED THE FACTS OF THE CASE AND ON A PERUSAL OF THE ASSESSMENT ORDER , WE FIND THAT THE ASSESSING OFFICER HAS SUMMARILY DECIDED THESE ISSUES AND MADE VARIOUS DISALLOWANCES AND ADDED TO THE INCOME OF THE ASSESSEE. ASSESSING OFFICER FAILED TO SUBSTANTIATE REASONS FOR SUCH DISALLOWANCES AND IF CERTAIN V OUCHERS WERE NOT PRODUCED OR HAVE BEEN PRODUCED INADEQUATELY, ASSESSING OFFICER SHOULD HAVE EXAMINED AND ENQUIRED REGARDING THESE ISSUES IN A TENTATIVE MANNER AND SHOULD HAVE COME OUT ITA NO.132/LKW/2017 PAGE 7 OF 7 WITH A SPEAKING ORDER. THESE DISALLOWANCES MAY PROTECT THE INTEREST OF THE REVENUE BUT IN THE ABSENCE OF A SPEAKING ORDER FROM THE ASSESSING OFFICER THIS IS NOT IN ACCORDANCE WITH THE PRINCIPLES OF NATURAL JUSTICE SO FAR AS ASSESSEE IS CONCERNED. WE, THEREFORE, FIND NO INFIRMITY IN THE FINDINGS OF THE LD. CIT(A) , WHO HAS COR RECTLY DECIDED THAT THE ISSUES RELATING TO THESE DISALLOWANCES WERE NO ADJUDICATED UPON OR EXAMINED PROPERLY BY THE ASSESSING OFFICER , WHICH ARE IN THE NATURE OF AD - HOC DISALLOWANCES , NOT PERMISSIBLE IN TAX LEGISLATION AND, THEREFORE, DELETED THEM. THIS R ELIEF PROVIDED TO THE ASSESSEE IS SUSTAINED. ACCORDINGLY, GROUNDS NO.2, 3 AND 4 OF THE APPEAL ARE DISMISSED. 11 . GROUND NO.5 IS GENERAL IN NATURE WHICH NEEDS NO ADJUDICATION. 12 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COU RT ON 31 / 0 8 / 201 8 . SD/ - SD/ - [ T.S. KAPOOR ] [PARTHA SARATHI CHAUDHURY ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 31 ST AUGUST , 201 8 JJ: 2108 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR