Sayali Residency, Sangli V. Income-tax Officer,

ITA 1906/PUN/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2629 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 21-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DHEERAJ KUMAR JAIN
• Keywords: Business income; Depreciation
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , !'# $ BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM % / ITA NO.1906/PN/2014 & ' ' / ASSESSMENT YEAR : 2008-09 SAYALI RESIDENCY, NEAR BELE CHAMBERS, VISHRAMBAG, SANGLI- 416 415 PAN NO.ACEFS 3370H . / APPELLANT V/S ITO, WARD-1(1), SANGLI . / RESPONDENT / ASSESSEE BY: SHRI C.H. NANIWADEKAR / REVENUE BY : SHRI DHEERAJ KUMAR JAIN ( / ORDER PER PRADIP KUMAR KEDIA, AM : THE AFORESAID CAPTIONED APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) KOLHAPUR, DATED 23-07-2014 RE LATING TO ASSESSMENT YEAR 2008-09 PASSED UNDER SECTION 144 R.W .S. 147 OF THE INCOME TAX ACT, 1961, (IN SHORT THE ACT). 2. BY WAY OF THE PRESENT APPEAL THE ASSESSEE HAS ASSA ILED THE ACTION OF THE CIT(A) IN SUSTAINING THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER (AO) U/S.144 R.W.S. 147 OF THE ACT WHE REBY THE ENTIRE GROSS RECEIPT DERIVED FROM THE BUSINESS OF THE ASSESSEE / DATE OF HEARING :17.02.2016 / DATE OF PRONOUNCEMENT: 26.02.2016 2 ITA NO.1906/PN/2014 HAS BEEN BROUGHT TO TAX WITHOUT GIVING ANY DEDUCTION TO WARDS EXPENSES VIZ: STAFF SALARY, BANK INTEREST, INSURANCE, DEPREC IATION ON THE ASSETS AND OTHER EXPENSES ETC. 3. BRIEF FACTS CONCERNING THE ISSUE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM CONSISTING OF 2 PARTNERS AND IS ENGAGED IN HOTEL AND LODGING BUSINESS UNDER THE NAME M/S. SAYALI RESIDENC Y AT KOLHAPUR. FROM THE ASSESSMENT ORDER, IT APPEARS THAT T HE ASSESSEE HAS NOT FILED ITS RETURN OF INCOME FOR THE A.Y. 2008-09. THE AO ISSUED VARIOUS NOTICES AND LETTERS FROM TIME TO TIM E AND FINALLY A SHOW CAUSE NOTICE DATED 05-03-2014 WAS ISSUED. THERE APPEARS TO BE NO COMPLIANCE ON BEHALF OF THE ASSESSEE IN RESPONSE TO THESE NOTICES AND LETTERS. THE ASSESSEE WAS ASKED TO FURNISH COMPLETE SET OF RETURNS ALONG WITH AUDIT REPORT AND ALL FINA NCIAL STATEMENTS AS ALSO COMPUTATION OF TOTAL INCOME. THE ASSE SSEE WAS ALSO REQUIRED TO FURNISH EXPLANATION FOR NON-FILING OF RETU RN OWING TO THE FACT THAT ASSESSEE HAD LODGING BUSINESS REC EIPTS OF RS.14,82,550/- AS WAS REVEALED DURING THE ASSESSMENT PROCEEDINGS OF SHRI MAHESH BASAPPA KARNI, ONE OF THE PART NER OF THE FIRM. THE ASSESSEE WAS ALSO ASKED TO EXPLAIN DEPRECIA TION CLAIMED OF RS.3,91,495/- WHILE IT HAS MEAGER FIXED ASSETS OF RS.4,48,700/- ONLY. VARIOUS OTHER DETAILS WERE ALSO CALLED FO R. HOWEVER, THE ASSESSEE FAILED TO PROVIDE THE RELEVANT INFORM ATIONS CALLED FOR. THE AO ACCORDINGLY DENIED VARIOUS EXPENSES CLA IMED AND TREATED THE ASSESSEE AS ASSOCIATION OF PERSON (AOP) AND TREATED THE ENTIRE GROSS RECEIPTS AS INCOME OF THE ASSESSEE. 4. IN THE APPEAL BEFORE THE CIT(A), THE ASSESSEE PLEADED THAT THE AO HAS ERRED IN NOT ALLOWING STATUTORY ALLOWANCES OF DEPRECIATION AND EXPENSES OF STAFF SALARY, BANK INTEREST, INS URANCE 3 ITA NO.1906/PN/2014 AND OTHER EXPENSES INCURRED IN PURSUIT OF HOTEL BUSINESS . IT WAS ARGUED ON BEHALF OF THE ASSESSEE THAT FROM THE REASONS RECORDED BY THE AO WHILE INVOKING SECTION 147 OF THE ACT, IT CAN B E OBSERVED THAT AO WAS IN POSSESSION OF THE MATERIAL SUCH AS FINANCIAL STATEMENTS, PURCHASE DEEDS ETC. REQUIRED FOR ASSESSMENT. HOWEVER, THE AO HAS WRONGLY ASSESSED THE GROSS RECEIPTS ITSELF AS INCOME BY IGNORING THE EXPENSES INCURRED BY THE ASSESSEE ALTOGETHER. THE ACTION OF THE AO IS THEREFORE T OTALLY ARBITRARY AND WITHOUT ANY LEGALLY SOUND BASIS. IT WAS SU BMITTED BY THE ASSESSEE BEFORE THE CIT(A) THAT THE AO WAS BOUN D TO ALLOW DEPRECIATION FROM THE GROSS RECEIPTS EVEN THOUGH THE SA ME IS NOT CLAIMED BY THE ASSESSEE. BUILDING WAS PURCHASED BY AVAILING LOAN FROM BANK FOR WHICH BANK STATEMENT WAS FILED BEFORE THE AO . INSPITE OF THIS, THE AO HAS NOT ALLOWED INTEREST ON THE LOA N. HOWEVER, THE CIT(A) DID NOT PAY HEED TO THE ARGUMENTS O F THE ASSESSEE AND CONFIRMED THE ACTION OF THE AO. 5. AGGRIEVED BY THE ORDERS OF THE AUTHORITIES BELOW THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LD. AUTHORISED REPRESENTATIVE ON BEHALF OF THE ASSE SSEE REITERATED THE SUBMISSIONS MADE BEFORE CIT(A) AND IN FURTH ERANCE PLEADED THAT IN THE INTEREST OF EQUITY AND JUSTICE, AN OPP ORTUNITY MAY BE GRANTED TO JUSTIFY THE CASE OF THE ASSESSEE. H E REFERRED TO THE ORDER OF THE AO AND SUBMITTED THAT IT IS APPARENT THAT REQUISITE APPLICATION OF MIND WHILE FRAMING THE ASSESSMENT ORD ER IS ABSENT. THE ORDER IS THEREFORE ARBITRARY AND ACCORD INGLY NOT SUSTAINABLE IN LAW. 4 ITA NO.1906/PN/2014 7. THE LD. DEPARTMENTAL REPRESENTATIVE ON BEHALF OF THE REVENUE ON THE OTHER HAND RELIED UPON THE ORDERS OF TH E AUTHORITIES BELOW. 8. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTHOR ITIES BELOW AND RIVAL CONTENTIONS. AT THE OUTSET, WE NOTE THAT THE ASSESSEE HAS REMAINED RECALCITRANT BEFORE THE AO AND HAS FAILED TO COMPLY WITH THE STATUTORY NOTICES. HOWEVER, IN THE SAME VAIN, WE NOTICE THAT THE AO HAS SIMPLY TAXED THE ENTIRE GROSS A MOUNT OF BUSINESS RECEIPT AS INCOME OF THE ASSESSEE WITHOUT GRANT ING ANY ALLOWANCE FOR ANY EXPENSES WHATSOEVER. NEEDLESS TO SAY, G ROSS RECEIPT IS NOT AN INCOME IN ORDINARY ECONOMIC SENSE. WE A LSO FIND GREAT WEIGHT IN THE PLEADINGS OF THE ASSESSEE BEFORE THE CIT(A) THAT THE AO WAS IN POSSESSION OF CERTAIN MATERIAL SUCH AS FINAN CIAL STATEMENTS, PURCHASE DEED ETC. REQUIRED FOR ASSESSMENT. THUS, THE DOCUMENTS WERE VALUABLE INPUTS WHICH OUGHT TO HAVE BEEN TAKEN INTO ACCOUNT BY THE AO INSTRUCTED UNDER LAW WHILE FRAMING THE ASSESSMENT ORDER. IT IS APPARENT ON THE FACE OF REC ORD THAT THE AO HAS FRAMED THE ASSESSMENT ORDER PERFUNCTORILY AND W ITHOUT APPLICATION OF MIND TO THE FACTS AND MATERIAL AVAILABLE ON REC ORD. IT IS TRUE THAT ONUS LIES ON THE ASSESSEE TO JUSTIFY TH E EXPENSES CLAIMED WHICH HAS NOT BEEN DISCHARGED BY THE ASSESSEE I N THE PRESENT CASE. HOWEVER, IN THE FIRST INSTANCE, THE AO CANN OT APPARENTLY COME TO A CONCLUSION OF BRINGING ENTIRE RECEIPT TO TAX, NON-APPEARANCE OF ASSESSEE NOTWITHSTANDING. IN THE TOTALITY OF TH E CIRCUMSTANCES, WE CONSIDER IT JUST AND EXPEDIENT THAT EN TIRE MATTER IS RE-EXAMINED AND ASSESSMENT ORDER IS FRAMED DENOVO IN ACCORDANCE WITH LAW AFTER GIVING PROPER OPPORTUNITY THE A SSESSEE IN THIS REGARD. THE ASSESSEE IS ACCORDINGLY IS GIVEN A FIN AL 5 ITA NO.1906/PN/2014 OPPORTUNITY TO ADDUCE EVIDENCES AND COMPLY WITH THE QU ERIES OF THE AO AS MAY BE RAISED IN THIS REGARD. IN TERMS OF TH E AFORESAID DIRECTION, THE MATTER IS SET ASIDE AND REMITTED BACK TO T HE FILE OF THE AO FOR DENOVO CONSIDERATION IN ACCORDANCE WITH LAW. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR ST ATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 26 TH DAY OF FEBRUARY, 2016. SD/- SD/- ( SUSHMA CHOWLA ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER IQ.KS PUNE ; ! DATED : 26 TH FEBRUARY, 2016. LRH'K ()*+,-,* / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A ), KOLHAPUR 4. 5. 6. THE CIT, KOLHAPUR #$% &&'(, * '(, / DR, ITAT, A PUNE; %+, - / GUARD FILE. (& / BY ORDER , // TRUE COPY // // # & //TRUPY // ./0 &1 '2 / SR. PRIVATE SECRETARY * '(, / ITAT, PUNE