HFCL Kongsung Telecom Ltd., New Delhi V. ITO, New Delhi

ITA 1373/DEL/2011

• Counselvise Citation: 137320114 RSA 2011
• Duration Of Justice: 3 year(s) 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 03-03-2015
• Assessment Year: 2001-2002
• Appeal Filed On: 17-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJNA
• Keywords: Business income
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI KUL BHARAT : JUDICIAL MEMBER ITA NO. 1373/DEL/2011 A.Y. 2001-02 HFCL KONGSUNG TELECOM LTD. VS. INCOME-TAX OFFICER, 8, COMMERCIAL COMPLEX, WARD 12(4), NEW DELHI. MASJID MOTH, GREATER KAILASH-II, NEW DELHI-110048. PAN: AAACH 2449 H ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI M.P. RASTOGI ADV. RESPONDENT BY : SHRI P. DAM KANUNJNA SR. DR DATE OF HEARING : 03-03-2015 DATE OF ORDER : 13-03-2015. O R D E R PER S.V. MEHROTRA, A.M:- THIS APPEAL, PREFERRED BY THE ASSESSEE, IS DIRECTE D AGAINST THE ORDER DATED 28-12-2010, PASSED BY THE CIT(APPEALS)-X, NE W DELHI IN APPEAL NO. 133/09-10, RELATING TO A.Y. 2001-02. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE WHO IS ONE OF THE GROUP COMPANIES OF HIMACHAL FUTURISTIC COMMUNICATIONS LT D., IN THE RELEVANT ASSESSMENT YEAR, WAS ENGAGED IN THE BUSINESS OF M ANUFACTURING OF TELECOM EQUIPMENTS. IT HAD FILED ITS RETURN OF INCOME DECLA RING LOSS OF RS. 5,63,460/-. 2 ITA NO. 1373/DEL/2011 DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE CO MPANY DID NOT SHOW ANY RECEIPT FROM ITS MANUFACTURING ACTIVITIES. THE ASSE SSMENT WAS COMPLETED AT A NET LOSS OF RS. 1,16,08,586/-, INTER ALIA, AFTER MA KING FOLLOWING ADDITIONS/ DISALLOWANCES: (I) RENTAL INCOME OF RS. 16,33,125/- RETURNED AS BUSINE SS INCOME BY ASSESSEE, WAS TREATED AS INCOME FROM HOUSE PROPERTY . (II) ADDITION OF RS. 20,61,090/- U/S 68 REJECTING THE AS SESSEES CLAIM OF IMPUGNED AMOUNT BEING ADVANCE FROM CUSTOMERS. 3. LD. CIT(A) HAD PARTLY ALLOWED THE ASSESSEES APP EAL. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US AND HAS TAKEN F OLLOWING GROUNDS OF APPEAL: 1. THAT THE LD. CIT (A) ERRED IN LAW BY ALLOWING T HE ASSESSING OFFICER'S TREATMENT OF RENTAL INCOME AS ' INCOME FROM HOUSE PROPERTY' INSTEAD OF ASSESSING THE SAME AS BU SINESS INCOME. 2. THE LD. CIT(A) ERRED IN ALLOWING THE ADDITION OF RS.47,4591- BY THE ASSESSING OFFICER, AS DIFFERENCE BETWEEN THE 'PROVISIONS FOR EXCISE DUTY ON FINISHED GOODS AND T HE ACTUAL AMOUNT PAID. 3. THE LD. CIT(A) ERRED IN ALLOWING THE DISALLOWANC E OF SALES TAX PENALTY OF RS.L,6801- BY THE ASSESSING OF FICER. 4. THAT THE LD. CIT(A) ERRED IN ALLOWING THE ADDITI ONS MADE BY THE ASSESSING OFFICER BY INVOKING PROVISIONS OF SECTION 68 AND ADDING BACK AN AMOUNT OF RS.20,61,0901- BY THE ASSESSING OFFICER. THE ABOVE SAID AMOUNT WAS GENUINE RECEIPT AS ADVANCE FROM M/S AEGIS INDIA CATV SYSTEMS PVT. LTD. AGAINST THEIR PURCHASE ORDER AND THEREFORE OF 7EV'ENUE NATURE AND NOT SUBJECT MATTER OF SECTION 68 OF THE IT. ACT, 1961 WHICH WAS OFFERED FOR TAX IN THE A.Y. 2003-04 AS BUSINESS RECEIPT BEING L IABILITY OF REVENUE NATURE, NO LONGER PAYABLE. 3 ITA NO. 1373/DEL/2011 4. AT THE TIME OF HEARING GROUND NOS. 2 & 3 WERE NO T PRESSED. ACCORDINGLY, THE SAME STANDS DISMISSED. 5. BRIEF FACTS APROPOS GROUND NO. 1 ARE THAT ASSESS EE HAD EARNED RENTAL INCOME OF RS. 16,33,125/- AND HAD RETURNED THE SAME AS BUSINESS INCOME. THE AO ASSESSED THE INCOME UNDER THE HEAD INCOME FR OM HOUSE PROPERTY, INTER ALIA, OBSERVING THAT IT IS THE SETTLED LEGAL POSITION THAT IF ANY INCOME IS ASSESSABLE UNDER THE SPECIFIC HEAD, THEN IT IS TO B E ASSESSED UNDER THAT HEAD EVEN THOUGH SUCH INCOME MAY ALSO FALL UNDER THE OTH ER HEAD. 6. HE POINTED OUT THAT THE ASSESSEE IS THE ABSOLUTE OWNER OF THE PREMISES 286, UDYOG VIHAR, PHASE-II AND OTHER FITMENTS AND F IXTURES THEREIN. THE COMPANY WAS INCORPORATED ON 6-2-1995 AND HAS PUT TH E PROPERTY ON RENT SINCE 1-10-1997. HE, THEREFORE, CONCLUDED THAT THE RENT WAS RECEIVED IN EXERCISE OF THE PROPERTY RIGHTS OF ASSESSEE. LD. CI T(A) CONFIRMED THE AOS ACTION, INTER ALIA, OBSERVING THAT T HE ISSUE IS NO MORE RES INTEGRA IN VIEW OF FOLLOWING DECISIONS: - UNITED COMMERCIAL BANK V. CIT (1957) 32 ITR 688 (SC ); - SCINDIA POTTERIES VS. CIT (2002) 253 ITR 168 (DEL.) ; - SHAMBHU INVESTMENTS PVT. LTD. VS. CIT (2003) 263 IT R 143 (SC); 7. LD. COUNSEL FOR THE ASSESSEE REFERRED TO THE DEC ISION OF HONBLE SUPREME COURT IN THE CASE OF SULTAN BROTHERS PVT. L TD. VS. CIT 51 ITR 353 AND SUBMITTED THAT IF THE INCOME IS NOT ASSESSABLE AS BUSINESS INCOME THEN IT SHOULD BE ASSESSED AS INCOME FROM OTHER SOURCES AS THE ASSESSEE HAD LET OUT THE BUILDING WHICH WAS A COMMERCIAL ASSET. 4 ITA NO. 1373/DEL/2011 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAV E PERUSED THE RECORD OF THE CASE. THE ASSESSEE WAS THE ABSOLUTE OWNER OF THE PROPERTY AND, THEREFORE, THE RENT REALIZED FROM THE EXPLOITATION OF PROPERTY RIGHTS WAS TAXABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. WE FIND OURSELVES IN AGREEMENT WITH LD. CIT(A) THAT IN VIEW OF VARIOUS D ECISIONS NOTED BY HIM IN HIS ORDER, THIS ISSUE IS NO MORE RES INTEGRA. AS FA R AS THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF SULTAN BROTHERS PVT. LTD. (SUPRA) IS CONCERNED, THE SAID DECISION IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE BECAUSE IN THAT CASE THERE WAS COMPOSITE LETTING OF BUILDING F ITTED WITH FURNITURE AND FIXTURES FOR THE PURPOSE OF PAYING RENT AS A HOTEL. THE FACTS IN THE PRESENT CASE ARE ENTIRELY DIFFERENT AND, THEREFORE, THE DEC ISION IN THE CASE OF SULTAN BROTHERS PVT. LTD. (SUPRA) IS NOT APPLICABLE. IN TH E RESULT, THIS GROUND IS DISMISSED. 9. BRIEF FACTS APROPOS GROUND NO. 4 ARE THAT DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAD CLAIMED TO HAVE REC EIVED ADVANCE OF RS. 20,61,090/- FROM M/S AEGIS INDIA CATV SYSTEMS PVT. LTD. , C-12, SECTOR 20, NOIDA (UP). THE AO ISSUED SUMMONS U/S 131. THE INSPECTOR INFORMED, AFTER LOCAL INQUIRY, THAT THE COMPANY WAS NEVER IN EXISTENCE AT THE GIVEN ADDRESS. THE AO FURTHER OBSERVED THAT THE COMPANY W AS NOT FILING ANY INCOME TAX RETURN. THE AO BROUGHT THIS FACT TO THE KNOWLEDGE OF ASSESSEE AND ASKED TO PRODUCE M/S AEGIS INDIA CATV SYSTEMS P VT. LTD. ALONG WITH CONFIRMED COPY OF ACCOUNT. SINCE ASSESSEE DID NOT P RODUCE ANY PERSON ON BEHALF OF THE SAID COMPANY NOR FILED ANY CONFIRMATI ON, HE MADE ADDITION OF RS. 20,61,090/-. 5 ITA NO. 1373/DEL/2011 10. LD. CIT(A) CONFIRMED THE ACTION OF AO, INTER AL IA, OBSERVING THAT ASSESSEE HAD NOT MADE EFFORTS TO PRODUCE THE PARTY AND HAD NOT EVEN FILED ANY CONFIRMATION LETTER FROM THE PARTY OR ITS BANK STATEMENT OR INCOME-TAX ASSESSMENT, DETAIL OF PAN ETC. 11. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASS ESSEE WAS A PAGER MANUFACTURER AND BECAUSE OF OBSOLESCENCE OF THE SAID TECHNOLOGY HAD GONE INTO LOSSES. HE REFERRED TO PAGE 28 OF PB WHEREIN T HE PURCHASE ORDER RAISED BY M/S AEGIS INDIA CATV SYSTEMS PVT. LTD. IS CONTA INED. HE POINTED OUT THAT IN PURSUANCE OF THIS PURCHASE ORDER, ASSESSEE HAD RECEIVED THE ADVANCE. 12. LD. COUNSEL FURTHER REFERRED TO PAGE 66, WHEREI N THE INQUIRIES REGARDING M/S AEGIS INDIA CATV SYSTEMS PVT. LTD. FR OM REGISTRAR OF COMPANIES ARE CONTAINED, IN WHICH THE COMPANYS STA TUS HAS BEEN SHOWN AS STRIKE OFF. LD. COUNSEL FURTHER REFERRED TO THE N OTICE FORMING PART OF THE ACCOUNTS FOR FY ENDING 31-3-2003, WHEREIN AUDITORS HAD OBSERVED THAT ADVANCE RECEIVED FROM CUSTOMERS AMOUNTING TO RS. 1, 28,50,131.94 HAD BEEN WRITTEN BACK. THUS, HE SUBMITTED THAT IN AY 2003-04 ASSESSEE HAD OFFERED THIS AMOUNT FOR TAXATION. DETAILS OF THE SAME ARE C ONTAINED AT PAGE 51 OF THE PB. 13. LD. COUNSEL FURTHER SUBMITTED THAT THERE IS LOS S IN BOTH THE YEARS I.E. 2001-02 AND AY 2003-04, THEREFORE, THERE WAS NO IMP ACT ON TAXATION AND, THEREFORE, IT IS IMMATERIAL IN WHICH YEAR INCOME WA S TAXED. HE RELIED ON THE RATIO OF DECISIONS IN THE CASES OF: - MAFATLAL INDUSTRIES P. LTD. 358 ITR 295 (SC); - CIT VS. EXCEL INDUSTRIES LTD. 174 TAXMAN 147(DEL.); AND 6 ITA NO. 1373/DEL/2011 - CIT VS. RAM PISTONS & RINGS LTD. - CIT VS. EXCEL INDUSTRIES LTD. 33 ITR 681. 14. LD. DR RELIED ON THE ORDER OF LD. CIT(A). 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE RECORD OF THE CASE. LD. COUNSEL HAS REFERRED TO PAGE 28 OF TH E PB, WHEREIN THE PURCHASE ORDER IS CONTAINED AND THE SAME IS DATED 7-7-1999 FOR RS. 1,30,00,000/-. IN THE ASSESSMENT ORDER THE AO OBSERVED THAT DURING TH E YEAR UNDER CONSIDERATION THE COMPANY DID NOT SHOW ANY RECEIPT FROM ITS MANUFACTURING ACTIVITY. THEREFORE, IT IS NOT CLEAR AS TO HOW THE ASSESSEE COULD ASK FOR ADVANCE. THE ASSESSEE DID NOT FILE ANY CONFIRMATION LETTER FROM THE PARTY OR ITS BANK STATEMENT OR INCOME-TAX RETURN DETAILS, P AN ETC. LD. CIT(A) HAS OBSERVED THAT ON PERUSAL OF THE RELEVANT ALLEGED AC COUNT OF THE SAID PARTY, IT WAS SEEN THAT THE AMOUNTS HAD BEEN RECEIVED BY THE ASSESSEE THROUGHOUT THE YEAR BEGINNING FROM APRIL 2000 UP TO FEBRUARY 2001. HE HAS OBSERVED THAT IF IT WAS ADVANCE AGAINST SALES THEN ONE FAILS TO UNDERSTAND AS TO WHY DISPATCH OF GOODS WERE NOT MADE DURING THE YEAR, MO RE SO, WHEN THE ASSESSEE ITSELF HAD GOT ITS STOCK DE-BONDED FOR DO MESTIC SALES. WE FIND OURSELVES IN AGREEMENT WITH THE FINDINGS OF LD. CIT (A) ON THIS ISSUE. LD. CIT(A) HAS RIGHTLY REFERRED TO THE DECISION OF HON BLE DELHI HIGH COURT IN THE CASE OF HACIENDRA FARMS (P) LTD. VS. CIT 328 IT R 1 (DEL.), WHEREIN IT HAS BEEN HELD THAT IF CUSTOMERS ADVANCE WAS NOT PR OVED BY ASSESSEE BY EITHER PRODUCING THE PARTY OR PROVING WITH SUFFICIE NT EVIDENCE, THEN THE SAME CAN BE ADDED U/S 68. THE SECOND CONTENTION ADVANCED BY LD. COUNSEL IS THAT SINCE ASSESSEE HAD OFFERED THE AMOUNT IN AY 2003-04 , THEREFORE, THIS SHOULD NOT BE INCLUDED IN AY 2001-02. IN THIS REGARD WE FI ND THAT THE DECISION 7 ITA NO. 1373/DEL/2011 RELIED BY LD. COUNSEL WERE RENDERED IN THE CONTEXT OF ACCRUAL OF INCOME AND THE SAME HAVE NO APPLICATION TO THE PRESENT CASE. W E, THEREFORE, CONFIRM THE FINDING OF LD. CIT(A). GROUND IS DISMISSED. 16. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 13-03-2015. SD/- SD/- (KUL BHARAT ) ( S.V. MEHROTRA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 13-03-2015. MP: C OPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR