VISHNUPRASAD S SHAH, MUMBAI V. I.T.O. 15(3)(1), MUMBAI

ITA 1745/MUM/2011

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1885 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 14-12-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 03-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N V NADKARNI
• Keywords: Business expenditure; Deemed to accrue or arise in india; Capital expenditure
• Section: 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL,MUMBAI BENCH F, MUMBAI BEFORE SHRI N.K.BILLAIYA, A M AND SHRI PAW AN SINGH, J M. ITA NO.1745/MUM/2011 ASSESSMENT YEAR: 2006-07 MR. VISHNUPRASAD S SHAH, FLAT NO.2, VATSAL BUILDING, 6 TH KHETWADI LANE, MUMBAI-400004. PAN: ACAPS6370F VS. ITO WARD 15(3)(1), 1 ST FLOOR, MATRU MANDIR, MUMBAI. (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : MR. N.V. NADKARNI (DR) DATE OF HEARING : 14.12.2015 DATE OF PRONOUNCEMENT : 16.12.2015 O R D E R PER PAWAN SINGH, JM: 1. THE PRESENT APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-26, MUMBAI DATED 20.12.2010 IN RESPECT OF ASSESSMENT YEAR (AY) 2006-07 ON THE FOLLOWING GROUNDS OF APPEAL: 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-26 HAS ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER BY ASSESSING THE INC OME OF THE APPELLANT AT RS.6,46,982/- INSTEAD OF RS.1,76,570/- AS DECLARED BY THE APPELLANT IN HIS RETURN OF INCOME. 2. THE LD. COMMISSIONER OF INCOME TAX (APPEALS)- 26 HAS ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER BY ASSESSING THE BUSINESS LOSS OF RS 553 BY DISALLOWING RS 2,63,729/- BEING EXPENDITURE INCURRE D BY THE APPELLANT TOWARDS BUSINESS ACTIVITIES. 3. THE LD. COMMISSIONER OF INCOME TAX (APPEALS)- 26 HAS ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER BY ASSESSING THE INCOME FROM HOUSE PROPERTY AT VATSAL BUILDING AT RS 1,79,242 BY TAKING RS 2,56,06 0/- (10%) AS DEEMED INCOME ON THE BOOK VALUE OF THE RESIDENTIAL HOUSE PROPERTY . 2 ITA NO. 1745/M/2011 MR. VISHNUPRASAD S SHAH 4. THE APPELLANT CRAVES LEAVE TO ADD, TO DELETE, TO AMEND AND TO MODIFY ANY GROUNDS OF APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE F ILED HIS RETURN OF INCOME ON 04.08.2006 DECLARING TOTAL INCOME FOR RS. 1,76,570/ - ALONG WITH COMPUTATION OF INCOME, PROFIT AND LOSS ACCOUNT, CAPITAL ACCOUNT AN D BALANCE SHEET. THE RETURN WAS PROCESSED U/S 143(1) OF THE I.T. ACT. AFTER SERVING STATUTORY NOTICE, THE ASSESSING OFFICER (AO) MADE AN ADDITION OF RS. 2,64282/- AS B USINESS EXPENDITURE AND RS. 1,79,424/- AS ADHOC ADDITION ON ACCOUNT OF INCOME F ROM HOUSE PROPERTY AND FURTHER DISALLOWED A SUM OF RS. 26,890/- AS LONG TERM CAPIT AL LOSS IN THE ASSESSMENT ORDER DATED 24.12.2008 , 3. AGAINST THE ORDER OF AO, AN APPEAL WAS FILED BEFORE THE CIT(A) FOR CHALLENGING THE ADDITIONS OF BUSINESS EXPENDITURE AND INCOME FROM H OUSE PROPERTY. THE LD. CIT(A) WHILE DISPOSING OF THE APPEAL OF THE ASSESSEE, CON FIRMED THE ADDITION OF BUSINESS EXPENDITURE EXCEPT OF RS. 553/- AND ALSO CONFIRMED/ SUSTAINED THE ADDITION OF INCOME FROM HOUSE PROPERTY IN ITS ORDER DATED 20.12.2010 A GAINST WHICH THE PRESENT APPEAL IS FILED BEFORE US. 4. NONE HAS APPEARED WHEN THE CASE WAS CALLED FOR HEAR ING DESPITE REPEATED CALLS. THE ASSESSEE WAS SERVED NOTICE ON 22.11.2013, FOR THE H EARING FIXED FOR 09.01.2014 AS BENCH WAS NOT FUNCTIONING ON THAT DAY. HENCE, A FUR THER NOTICE WAS DIRECTED TO BE ISSUED ON 17.08.2015 FOR FIXING THE DATE ON 14.12.2 015 FOR WHICH THE ASSESSEE WAS DULY SERVED WITH THE NOTICE THROUGH RPAD ON 18.11.2 015. DESPITE THE SERVICE OF NOTICE OF HEARING, NONE HAS APPEARED TODAY. 5. WE LEFT NO OPTION EXCEPT TO PROCED EX-PARTE AGAINST THE ASSESSEE AND TO HEAR THE LD. DEPARTMENT REPRESENTATIVE OF REVENUE. THE LD. DEP ARTMENTAL REPRESENTATIVE (DR) OF THE REVENUE, ARGUED AND SUPPORTED THE FINDING OF THE AUTHORITIES BELOW. 6. WE HAVE HEARD LD DR AND PERUSED THE MATERIAL AVAI LABLE ON RECORD, THE AO MADE THE ADDITION OF RS. 2,64,282/- ON THE BASIS AS THE ASSESSEE HAS SHOWN HUGE BUSINESS EXPENSES WHICH INCLUDES BY ELECTRICAL CHARGES, TELE PHONE/STATIONARY AND CONVEYANCE EXPENSES, OFFICE MAINTENANCE AND INSURANCE, BANK CH ARGES, PROFESSIONAL FEES AND COMPUTER EXPENSES AND WHILE MAKING THE ASSESSMENT, THE AO OBSERVED THAT THE ASSESSEE HAS NOT DERIVED ANY INCOME DURING THE FINA NCIAL YEAR AS STIPULATED IN SECTION 28 OF THE I.T. ACT, HENCE, THE EXPENDITURE IS NOT A LLOWABLE TO HIM WHILE COMPUTING INCOME FROM BUSINESS U/S 28 OF THE I.T. ACT AND THE BUSINESS LOSS WAS DETERMINED BY AO IS NOT ACCORDING TO THE PROVISIONS OF I.T. ACT. 3 ITA NO. 1745/M/2011 MR. VISHNUPRASAD S SHAH 7. THE CIT(A) WHILE DEALING WITH THIS GROUND IN PARA 6 OF ITS ORDER HAS ELABORATELY CONSIDERED AND AFTER APPRECIATING THE FACT GIVEN THE FINDING WHICH IS REPRODUCED HEREIN BELOW: 6.1 I HAVE CONSIDERED THE FINDING OF THE AO AND RI VAL SUBMISSION OF THE APPELLANT, CAREFULLY. I FIND THAT LD. AO HAS RIGHTL Y MENTIONED THAT IN PROFIT & LOSS A/C NO INCOME HAS BEEN SHOWN BY THE APPELLANT. ONLY IN COMPUTATION OF INCOME APPELLANT HAS SHOWN FOLLOWING INCOME INTEREST ON ICICI INFRASTRUCTURE BOND 3,281 INTEREST ON IDBI INFRASTRUCTURE BOND 1,716 INTEREST ON SBI BOND 54,666 INTEREST ON RURAL ELECTRIFICATION BOND 3,60,758 INTEREST ON NATIONAL HIGHWAY AUTHORITY BOND 41,321 UTI US-64 1,107 INTEREST ON INCOME TAX REFUND 516 INTEREST ON POST OFFICE MIS 36,000 BANK INTEREST 45,786 TOTAL RS.5,45,151/- 6.2 THE ABOVE FACTS REVEAL THAT APPELLANT WAS NOT A T ALL INVOLVED IN ANY DAY TO DAY BUSINESS ACTIVITIES OF FINANCIAL TRANSACTIONS R ELATED TO LOAN OR CREDIT OR ANY BUSINESS WHICH CAN BE PRESUMED TO BE BUSINESS ACTIV ITIES OF FINANCING LOANS AND EARNING OF INTEREST. OBVIOUSLY THERE IS NO SUCH ACTIVITIES AS HAS BEEN CLAIMED BY THE APPELLANT IN LETTER DATED 23.02.2008 OR 24.01.2008. IT IS VERY EVIDENT FROM THE PROFIT & LOSS A/C AND BALANCE SHEE T THAT SOME ACCUMULATED CAPITAL HAS BEEN INVESTED IN THE ABOVE BONDS WHICH GIVE INTEREST, MEANS NOTHING LIKE CARRYING ON BUSINESS OF SHORT TERM OR LONG TERM FINANCE TO THE VARIOUS PERSONS AS MENTIONED BY THE APPELLANT IN PA RA 4 OF LETTER DATED 28.11.2008 IS THERE, THEREFORE, THE FACT ITSELF PRO VE THE INCORRECTNESS OF THE CLAIM OF THE APPELLANT THAT HE WAS CARRYING OUT FIN ANCIAL BUSINESS. AS REGARDS, GENUINENESS OF CLAIM OF SUCH EXPENDITURE, IT WAS TH E RESPONSIBILITY OF THE APPELLANT TO PROVE THAT BY EARNING INTEREST FROM VA RIOUS INVESTMENTS, HE WAS TO REQUIRE SUCH OFFICE, EMPLOYEES, SHOPS, AIR-CONDI TIONERS AND COMPUTERS. IT IS VERY OBVIOUS THAT APPELLANT HAS FAILED TO CO-RELATE THE REQUIREMENT OF SUCH EXPENDITURE FOR EARNING OF SUCH INTEREST ON PURCHAS E OF BONDS THEREFORE IT IS VERY EVIDENT THAT MERELY FOR THE CLAIM OF VARIOUS P ERSONAL OR UNRELATED EXPENDITURE, APPELLANT HAS DEBITED THE EXPENDITURE OF COMPUTER, CAR, SHOPS, SALARIES, INSURANCE CHARGES, OFFICE MAINTENANCE, VE HICLE EXPENSES, MOBILE EXPENSES AND ELECTRICITY EXPENSES. OBVIOUSLY, NONE OF THE EXPENDITURE IS RELATED FOR EARNING OF ANY INTEREST ON ICICI, IDBI, SBI, RURAL ELECTRIFICATION BOND OR INCOME TAX REFUND OR BANK INTEREST, THEREFO RE, EXCEPT THE BANK CHARGE OF RS.553/- NONE OF THE EXPENDITURE IS FOUND TO BE RELATED WITH EARNING OF INTEREST AND IS ALLOWABLE EXPENDITURE, AS SUCH E XCEPT FOR RS.553/- REST OF THE EXPENDITURE CLAIMED AGAINST THE INTEREST INCOME IS CONFIRMED. 8. WE HAVE SEEN THE ORDER OF AO AS WELL AS THE ORDER P ASSED BY LD. CIT(A), THE ORDER OF CIT(A) IS WELL REASONED WHICH IS BASED ON THE PROPE R APPRECIATION OF THE FACT/CASE OF THE ASSESSEE AND DOES NOT REQUIRE ANY INTERFERENCE. 9. THE NEXT GROUND FOR OUR CONSIDERATION IS THE INCOME FROM HOUSE PROPERTY OF RS. 1,79,242/-. THE AO WHILE MAKING ASSESSMENT HAS OBSE RVED THAT THE ASSESSEE HAS THREE HOUSE PROPERTY I.E. TWO RESIDENTIAL HOUSE AT VATSAL BUILDING AND ONE VRINDHAVAN 4 ITA NO. 1745/M/2011 MR. VISHNUPRASAD S SHAH DHAM NIWAS AND THE ASSESSEE CONTENDED BEFORE THE AO THAT HE OWNED TWO RESIDENTIAL FLAT IN THE SAME BUILDING CALLED AS VATSAL BUILDING KHETWADI LANE AND BOTH HOUSE ARE 450 SQ. FT. EACH AND ARE USED FOR RESIDENTIAL PURPO SE BY HIM AND THIRD HOUSE AT VRINDAVAN DHAM IS AN ANCESTRAL PROPERTY, HOWEVER, N O DOCUMENT IN RESPECT OF VATSAL BUILDING WAS FILED BEFORE THE AO, THE AO CONSIDERED ONE OF THE FLAT AS VATSAL BUILDING ONLY A SELF-ACQUIRED PROPERTY AND ITS VALU E WAS CONSIDERED AT RS. NIL, HOWEVER THE SECOND PROPERTY AT VATSAL BUILDING WAS TREATED AS LET OUT PROPERTY WITHIN THE MEANING OF SECTION 23(4) OF THE I.T. ACT AND IT S ANNUAL RENTAL VALUE WAS CONSIDERED AS 10% OF ITS COST I.E. 2,56,060/- AND AFTER DEDUCT ING STANDARD DEDUCTION OF 30% OF ANNUAL VALUE INCOME FROM HOUSE PROPERTY WAS CALCULA TED AT RS. 1,79,242/-. 10. THE LD. CIT(A) WHILE DEALING WITH THE GROUND IN PAR A-9 OF ITS ORDER WHICH REPRODUCED HEREIN BELOW: I HAVE CONSIDERED THE FINDINGS OF THE LD. AO AND R IVAL SUBMISSION OF THE APPELLANT, CAREFULLY. IN FIND THAT THE APPELLANT HA D PURCHASED FLAT NO.1 IN VATSAL RESIDENTIAL APARTMENT, 6 TH KHETWADI LANE ON 28.01.1995 AND AS PER HIS CLAIM HE WAS RESIDING IN THIS FLAT. EARLIER, APPELL ANT WAS RESIDING IN LOVE BUILDING, 3RD FLOOR, FLAT/ROOM NO. 308, NIKHADBAR L ANE, DINKAR ROAD. HOWEVER, LATER ON, APPELLANT HAD ALSO PURCHASED FLA T NO. 5 OF 2ND FLOOR OF THE SAME APARTMENT AFTER 8 YEARS I.E. ON 19.04.2003. IT MEANS EVEN IN ABSENCE OF FLAT NO. 5 APPELLANT WAS HAVING SOP EITHER OF FLAT NO. 1 OR BUILDING/RESIDENTIAL UNIT OR BUNGALOW VIZ. VRINDAVA N DHAMNIWAS. WHEN APPELLANT WAS HAVING SOP, OBVIOUSLY, HE WAS TO SHOW RENTAL INCOME FROM SUCH OTHER RESIDENTIAL HOUSE. THE APPELLANT HAS MENTIONE D IN SUBMISSION DATED 28.11.2008 THAT RS.3,347/- SHOWN IN VRINDAVAN DHAMN IWAS WAS INCURRED FOR EXPENDITURE ON THIS ANCESTRAL PROPERTY AND NOT FOR ANY OWNERSHIP OF ANY HOUSE, IT DOES NOT APPEARS TO BE CORRECT REVELATION OF FAC T BECAUSE IF ANY SUCH EXPENDITURE IS INCURRED IN RESPECT OF ANY PROPERTY, IT CANNOT BE PART OF ASSETS SIDE OF BALANCE SHEET, BUT IT WOULD BE THE EXPENDIT URE, MAY BE CAPITAL EXPENDITURE AND IS TO BE DEBITED IN CAPITAL ACCOUNT . IT APPEARS THAT PREVARICATINGLY APPELLANT WANTS TO INTRODUCE VRINDA VAN HOUSE IN HIS BALANCE SHEET WITHOUT DISCLOSING THE FULL INVESTMENT AND WI THOUT CLARIFYING THE FURTHER DEVELOPMENT, FURTHER INVESTMENT AND DATE OF PURCHAS E OR ACQUISITION OF THIS PROPERTY. FURTHER, IT IS RELEVANT TO MENTION THAT W HEN THIS SORT OF EXPENDITURE WAS INCURRED, THERE COULD NOT BE ANY ASSETS IN THE NAME OF SUCH HOUSE. IT APPEARS THAT APPELLANT HAS CONCEALED FULL FACTS OF THE CASE AND DUE TO THAT HAS SUBMITTED SOME INFORMATION IN SUMMARY MANNER WITHOU T CLARIFYING AS TO WHO ARE THE OCCUPANTS OF SUCH VRINDAVAN DHAMNIWAS AND H OW THIS PROPERTY ITSELF IS NOT SOP. FURTHER, IT IS RELEVANT TO MENTION THAT FL AT NO. 1 OF VATSAL APARTMENT WAS PURCHASED ON 07.07.1994 WHICH WAS CONFIRMED, AS APPEARS FROM DEED OF CONFIRMATION, ON 28.01.1995 WHICH MEANS THIS WAS TH E ONLY SOP AND IF ANOTHER FLAT WAS PURCHASED AFTER 8 MONTHS WHICH COULD NOT B E REGARDED AS SOP FOR TAXATION PURPOSES. THEREFORE, IT IS VERY EVIDENT TH AT APPELLANT HAS GOT 2 MORE RESIDENTIAL HOUSE AS APPEARING IN BALANCE SHEET IND EPENDENTLY, HENCE APPELLANT CANNOT BE LET FREE FROM TAXATION. LD. AO HAS RIGHTL Y POINTED OUT OF NON DISCLOSURE OF INCOME FROM HOUSE PROPERTY AS APPELLA NT IS THE OWNER OF 3 HOUSE PROPERTY WHICH MAY INCLUDE ANCESTRAL PROPERTY. THE FINDING OF THE LD. AO IS FOUND TO BE ON SOUND FOOTING. APPELLANT HAS GOT APP ARENTLY 3 HOUSES, THEREFORE ONE IS TO BE TAKEN AS SOP AND IN RESPECT OF OTHER H OUSES HE IS VERY MUCH LIABLE 5 ITA NO. 1745/M/2011 MR. VISHNUPRASAD S SHAH FOR TAXATION AS INCOME FROM HOUSE PROPERTY. SINCE A PPELLANT HAS NOT DISCLOSED FULL FACTS, AO IS FOUND TO BE RIGHT TO DEEM 10% OF INVESTMENT RENTAL INCOME WHICH IS VERY REASONABLE RATHER ON LOWER SIDE BECAU SE THE HOUSE PROPERTY OF THE APPELLANT IS SITUATED IN SUCH A POSH LOCALITY WHERE ANY SUCH HOUSE PROPERTY CAN BE LET OUT MORE THAN DOUBLE, TRIPLE TIMES THAN DEEM ED Y THE ASSESSING OFFICER. THEREFORE, THE REASONABILITY OF SUCH ESTIMATION CAN NOT BE CHALLENGED ON THE BASIS OF ARGUMENTS ONLY. CONSIDERING THE FACTS OF T HE CASE AND GENERAL ARGUMENTS OF THE LD. AR, THE DEEMED INCOME U/S 22 R .W.S. 23 OF THE INCOME TAX ACT, 1961 AMOUNTING TO RS.2,56,0601- IS WORTH APPRO VAL. LD. AO HAS RIGHTLY ALLOWED THE STANDARD DEDUCTION U/S 24(A) TO THE EXT ENT OF RS.76,818/- THUS, THE TAXATION OF INCOME FROM HOUSE PROPERTY OF RS. L,79, 2421- IS CONFIRMED. 11. WE HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD AN D ALSO PERUSED THE ORDER OF AO AND LD. CIT(A), THE LD. CIT(A) HAS ELABORATELY GIVE N HIS FINDING AFTER DISCUSSION OF THE FACT BROUGHT BEFORE HIM AND GAVE HIS WELL-REASO NED FINDING WHICH DOES NOT REQUIRE ANY INTERFERENCE AT OUR END, HENCE THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DECEMBER 2015. SD/- SD/- (N.K.BILLAIYA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 16/12/2015 S.K.PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / (ASSTT.REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. !'# / GUARD FILE. $ //TRUE COPY/