PRIME DEVELOPERS, MUMBAI V. ITO WD 12(1)(3), MUMBAI

ITA 147/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87849 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-01-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 21-01-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 07-01-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PARMANAND
• Assessee Lawyers: JAYESH DESAI
• Keywords: Business income; Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUM BAI , , BEFORE SHRI SANJAY ARORA, AM AND SHRI AMIT SHUKLA, JM ./ I.T.A. NO. 147/MUM/2011 ( / ASSESSMENT YEAR: 2006-07) PRIME DEVELOPERS HARIOM CHAMBERS, 7 TH FLOOR, B-16, VEERA INDUSTRIAL ESTATE, LINK ROAD, ANDHERI (W), MUMBAI-400 053 / VS. ITO-WARD 12(1)(3), AAYKAR BHAVAN, 1 ST FLOOR, MUMBAI ! ./' ./PAN/GIR NO. AAAFP 7898 P ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) !# & ' / APPELLANT BY : SHRI JAYESH DESAI $%!# & ' / RESPONDENT BY : SHRI PARMANAND () * & + / DATE OF HEARING : 19.11.2014 ,-. & + / DATE OF PRONOUNCEMENT : 05.01.2015 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-23, MUMBAI (CIT(A) FOR SH ORT) DATED 22.04.2010, DISMISSING THE ASSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S .143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A. Y.) 2006-07 VIDE ORDER DATED 22.12.2008. 2 ITA NO.147/MUM/2011 (A.Y. 2006-07) PRIME DEVELOPERS VS. ITO 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E, AN INDIVIDUAL, OFFERED A SUM OF RS.2,00,030/-, COMPRISING RENT AND DIVIDEND, PER HI S RETURN OF INCOME FOR THE RELEVANT YEAR, FILED ON 17.07.2006. THE ASSESSEE WAS OBSERVE D DURING THE COURSE OF ASSESSMENT PROCEEDINGS TO HAVE CLAIMED EXPENSES UNDER THE ACCO UNT HEADS OF TELEPHONE, ELECTRICITY, LEGAL AND PROFESSIONAL, SOCIETY MAINTENANCE, PRINTI NG AND STATIONERY, DEPRECIATION, ETC., AMOUNTING TO RS.2,23,249/-, AGAINST THE GROSS INCOM E OF RS.6,04,688/- AND RS.13,511/- BY WAY OF RENT AND DIVIDEND RESPECTIVELY, THROUGH ITS PROFIT AND LOSS ACCOUNT FOR THE YEAR. THE SAME WAS IN VIEW OF THE ASSESSING OFFICER (A.O. ) NOT PERMISSIBLE; THE ASSESSEE HAVING IN FACT ALSO CLAIMED STATUTORY ALLOWANCE U/S . 24(A) @ 30% OF THE GROSS RENT IN COMPUTING THE ANNUAL VALUE OF THE HOUSE PROPERTY FR OM WHICH RENT WAS RECEIVED. INCOME WAS ACCORDINGLY ASSESSED U/S.22 AT RS.4,23,282/-, I.E., AS INCOME FROM HOUSE PROPERTY, ALLOWING DEDUCTION U/S.24(A) ON THE RENTAL INCOME O F RS.6.05 LACS. THE SAME STOOD CONFIRMED IN APPEAL BY THE LD. CIT(A). ADVERTING TO THE DECISION BY THE APEX COURT IN THE CASE OF ESCORTS LTD. VS. UNION OF INDIA [1993] 199 ITR 43 (SC), HE HELD THAT THE INCOME ARISING TO THE ASSESSEE, FROM WHATEVER SOURCE, HAS TO BE NECESSARILY COMPUTED UNDER THE DIFFERENT HEADS OF INCOME AS SPECIFIED U/S.14 OF TH E ACT. THE ASSESSEE WAS CONDUCTING THE SAME ACTIVITY AS IN THE PAST, WHICH THOUGH, I.E., A S PER THE DECISION IN THE CASE OF SHAMBHU INVESTMENT (P.) LTD. VS. CIT [2003] 263 ITR 143 (SC), CAME TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. NO DEDUCTION OF ANY EXPENDITURE, AS BEING CLAIMED, WAS ALLOWABLE IN COMPUTING THE SAME. AGGRIEVED, THE ASSESSEE IS IN SECOND APPEAL. 3. BEFORE US, PLACING THE REVISED ASSESSMENT ORDER U/S.143(3) R/W S. 263 OF THE ACT DATED 08.11.2011 ON RECORD, IT WAS CONTENDED FOR AN D ON BEHALF OF THE ASSESSEE THAT THE RENT INCOME ASSESSED AS INCOME FROM HOUSE PROPERTY , HAS SINCE BEEN REVIEWED U/S.263 OF THE ACT, ASSESSING THE SAME AS INCOME FROM OTHE R SOURCES. THOUGH THE ASSESSEE HAD NOT APPEALED THERE-AGAINST, SO THAT THE AMENDMENT T O THE ASSESSMENT HAD BECOME FINAL, THE SAME DID NOT DETRACT FROM OR UNDERMINE THE ASSE SSEES CASE, I.E., AS BEING AGITATED PER ITS INSTANT APPEAL, IN ANY MANNER. THIS IS FOR THE REASON THAT THE IMPUGNED EXPENDITURE STANDS CLAIMED BY THE ASSESSEE NOT IN COMPUTING THE INCOME FROM HOUSE PROPERTY (U/S.22) 3 ITA NO.147/MUM/2011 (A.Y. 2006-07) PRIME DEVELOPERS VS. ITO OR THE INCOME FROM OTHER SOURCES (U/S.56), AS IT NO W OR FINALLY STANDS ASSESSED, BUT THE INCOME ASSESSABLE U/S.28. THERE BEING NO RECEIPT FR OM ITS BUSINESS, THE ENTIRE EXPENDITURE WOULD RESULT IN A BUSINESS LOSS TO THE SAME EXTENT, I.E., RS.2,23,249/-. THE SAME IS, IN TERMS OF SECTION 71, ELIGIBLE FOR SET OFF AGAINST T HE INCOME ASSESSABLE U/S.56. FURTHER, RELIANCE WAS PLACED BY THE LD. AUTHORIZED REPRESENT ATIVE (AR), THE ASSESSEES COUNSEL, ON A HOST OF DECISIONS TO THE EFFECT THAT A TEMPORARY SUSPENSION OF BUSINESS WOULD NOT LEAD TO THE INFERENCE OF CLOSURE OF BUSINESS, SO THAT WHERE IT IS IN A DORMANT STATE, AWAITING PROPER MARKET CONDITIONS TO DEVELOP, REGULAR EXPENDITURE I NCURRED CAN ONLY BE SAID TO HAVE BEEN INCURRED IN THE COURSE OF BUSINESS. THE REVENUES CASE, AS PROJECTED BY THE LD. DEPARTM ENTAL REPRESENTATIVE (DR), WAS THAT THERE IS NOTHING ON RECORD TO SUGGEST THAT BUSINESS HAD BEEN CARRIED OUT EITHER OVERTLY OR COVERTLY. IT COULD NOT UNDER THE CIRCUMS TANCES BE AT ALL SAID THAT BUSINESS WAS CARRIED OUT IN ANY MANNER AT ANY TIME DURING THE YE AR. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. OUR FIRST OBSERVATION IN THE MATTER IS THAT THERE I S NOTHING ON RECORD TO SHOW THAT THE ASSESSMENT AS MADE SUBSEQUENTLY, I.E., VIDE ASS ESSMENT ORDER DATED 08.11.2011 (SUPRA), HAS BECOME FINAL; THE ASSESSEE NOT CONTEST ING THE SAME. THE SAME, HOWEVER, WOULD ONLY IMPACT THE HEAD OF INCOME UNDER THE LEAS E RENTAL INCOME FROM THE TERRACE OF THE BUILDING WOULD STAND TO BE ASSESSED, I.E., U/S. 22 OR SEC. 56, AND NO MORE. THE SUBJECT MATTER OF THE INSTANT APPEAL, HOWEVER, IS WHETHER T HE ASSESSEE IS ENTITLED TO DEDUCTION IN RESPECT OF THE IMPUGNED EXPENDITURE IN COMPUTING HI S BUSINESS INCOME, I.E., AS BUSINESS LOSS, AGAINST HIS INCOME ASSESSABLE UNDER OTHER HEA D/S OF INCOME. THERE IS, ACCORDINGLY, NO MERGER ON THIS ISSUE, AND WE MAY PROCEED TO DECI DE THE ASSESSEES APPEAL ON MERITS. QUA MERITS, WE OBSERVE NO DISPUTE IN PRINCIPLE. THE REC EIPT OF INCOME IS NOT A CRITERION OR CONDITION FOR DECIDING AS TO WHETHER T HE ASSESSEE HAS CARRIED OUT ANY BUSINESS DURING THE YEAR, A PURELY FACTUAL MATTER. THE MATT ER, THUS, IS PURELY FACTUAL, AND WOULD THEREFORE STAND TO BE DECIDED ON THE BASIS OF FINDI NGS OF FACT. WE FIND NO SUCH FINDING BY EITHER OF THE AUTHORITIES BELOW NOR ANY MATERIAL ON RECORD THAT COULD LEAD TO SUCH AN 4 ITA NO.147/MUM/2011 (A.Y. 2006-07) PRIME DEVELOPERS VS. ITO INFERENCE, I.E., EXHIBIT THAT ANY BUSINESS WAS CARR IED OUT DURING THE RELEVANT PREVIOUS YEAR. TRUE, AN ASSESSEE MAY NOT HAVE ANYTHING TANGIBLE, I .E., IN THE FORM OF RESULTS, TO SHOW, BUT WHAT IS THERE, ONE MAY ASK, TO SHOW OF ANY EFFORTS TO GENERATE BUSINESS, OR THAT ANY BUSINESS ACTIVITY WAS INDEED CARRIED OUT DURING THE YEAR. THE ASSESSEE MAY, FOR EXAMPLE, HAVE BID, WHICH HAD THOUGH FAILED, OR ENTERED INTO SOME AGREEMENT FOR PURCHASE OR DEVELOPMENT OF LAND; GOT SOME PLANS APPROVED OR MAD E APPLICATIONS FOR THE SAME, ETC. THE ASSESSEE HAS NO STAFF, IN THE ABSENCE OF WHICH IT IS DIFFICULT TO CONTEMPLATE ANY EFFECTIVE WORK, MUCH LESS STEPS FOR REVIVAL OF THE BUSINESS BEING TAKEN, WHICH WOULD RATHER INVOLVE AND REQUIRE GREATER EFFORT. IF TELEP HONE, FOR INSTANCE, WAS USED FOR ITS PURPOSES, TO WHOM AND FOR WHAT PURPOSE THE CALLS WE RE MADE? THERE IS NOTHING TO SHOW IF THE ASSESSEE HAD SUFFICIENT FUNDS FOR BUSINESS, THO UGH WERE IN THE ABSENCE OF ANY AVENUES FOR UTILIZATION PARKED IN LIQUID INSTRUMENTS. MEREL Y BECAUSE SOME BUSINESS ACTIVITY HAD BEEN CARRIED OUT IN THE PAST, OR MAY HAVE BEEN CARR IED OUT IN FUTURE, WOULD BE NO REASON FOR INFERRING BUSINESS ACTIVITY DURING THE RELEVANT YEAR. RATHER, IN-AS-MUCH AS THE EFFORTS FOR REVIVAL IS A CONTINUOUS PROCESS, THERE WOULD BE A CONTINUUM OF PAST EFFORTS, AND NOT NECESSARILY FRESH ATTEMPTS TOWARD THE SAME, THAT CO ULD SHOW OF THE BUSINESS BEING AFLOAT. FURTHER, AS A READING OF THE ASSESSMENT ORDER DATED 08.11.2011 SHOWS, THE ASSESSEE HAD BUILT A BUILDING CONSISTING OF SEVEN FLOORS. WHILE SIX FLOORS WERE SOLD, THE SEVENTH (TOP) FLOOR WAS RETAINED BY HIM, CONVERTING IT INTO OFFIC E PREMISES. IT STANDS NOT EVEN CLARIFIED AS TO WHEN THE BUILDING WAS CONSTRUCTED AND SOLD. T HE ONLY ACTIVITY IS OF LEASE RENTAL FOR THE TERRACE, WHICH COULD NOT BY ITSELF BE SAID TO B E A BUILDING OR HOUSE PROPERTY AND, FURTHER, COULD ONLY BE CONSIDERED AS CO-OWNED BY AL L THE SEVEN CO-OWNERS OF THE BUILDING, RATHER THAN SOLELY BY THE ASSESSEE, SO THAT THE SAI D INCOME WAS TREATED AS INCOME FROM OTHER SOURCES. THE ASSESSEES WHOLE CASE IS SANS ANY EVIDENCE AND PRESUMPTUOUS. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, IN O UR CLEAR VIEW, THE ASSESSEE HAS BEEN CLEARLY UNABLE TO SHOW THAT ANY BUSINESS ACTIV ITY HAD BEEN CARRIED OUT, OR EVEN THE CAPACITY OR WHEREWITHAL THEREFOR AND, ACCORDINGLY, IS NOT ENTITLED FOR DEDUCTION OF ANY EXPENDITURE ON THE PREMISE THAT IT STANDS INCURRED FOR A BUSINESS PURPOSE, WHICH PURPOSE, WHERE SO, WOULD RATHER ITSELF EXHIBIT THE CARRYING ON OF THE BUSINESS. THE QUESTION OF 5 ITA NO.147/MUM/2011 (A.Y. 2006-07) PRIME DEVELOPERS VS. ITO HAVING INCURRED A LOSS THEREIN, AND OF IT BEING, TH EREFORE, LIABLE FOR SET OFF AGAINST INCOME ARISING UNDER OTHER HEAD OF INCOME, DOES NOT ARISE. WE DECIDE ACCORDINGLY. 5. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSE D /. 0 (1 2/ & / & 34 ORDER PRONOUNCED IN THE OPEN COURT ON JANUARY 05, 2 015 SD/- SD/- (AMIT SHUKLA) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER 5* MUMBAI; 6( DATED : 05.01.2015 ).(../ ROSHANI , SR. PS !' # $%&' (!'% / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. 9): ; $(<1 , + <1. , 5* / DR, ITAT, MUMBAI 6. ; >2 ? * / GUARD FILE !' / BY ORDER, )/* + (DY./ASSTT. REGISTRAR) , 5* / ITAT, MUMBAI