DCIT (OSD) 2(3), MUMBAI V. NRB BEARINGS LTD, MUMBAI

ITA 191/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3287 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 06-01-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 07-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RANDHIR GUPTA
• Assessee Lawyers: MAYUR R MAKADIA
• Keywords: Business expenditure
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI R.C. SHARMA(AM) AND SHRI SANDEEP GOSAIN (JM) ITA NO. 191/MUM/2014 ASSESSMENT YEAR: 2007-08 DCIT (OSD) 2 (3) VS. NRB BEARINGS LTD. R.NO. 552, AAYAKAR BHAVAN DHANNUR, 15 SIR, P.M. RD. FORT M.K. ROAD, MUMBAI- 400001 MUMBAI -400020 PAN NO. AAACN3479P (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI. MAYUR R. MAKADIA REVENUE BY : SHRI. RANDHIR GUPTA DATE OF HEARING : 27/07/201 6 DATE OF PRONOUNCEMENT : 09/09/2016 O R D ER PER SANDEEP GOSAIN, JM : THIS APPEAL BY REVENUE IS ARISING OUT OF THE ORDER OF LD. CIT(A)-5, MUMBAI IN APPEAL NO. IT-45/12-13/54/13-14, DT. 30/10/201. ASSESSMENT WAS FRAMED BY ITO, MUMBAI FOR THE AY 2007-08, VIDE HIS ORDER DT. 29/12/2009 UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER TH E ACT). 2. IN THIS REVENUE HAS RAISED THE FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE PENALTY U/S. 271(1)(C) OF THE IT ACT OF RS. 16,04,400/-, IN RESPECT OF ADDITION OF ANNUAL LETTING VALUE (ALV), WITHOUT APPRECIATING THAT BY OFFERING ALV NOT IN CONFORMITY WITH PROVISIONS OF S ECTION 23(1) OF THE IT ACT, 1961, 2 THE ASSESSEE HAD INDEED FILED INACCURATE PARTICULAR S OF ITS INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE IT ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE PENALTY U/S. 271(1)(C) OF THE IT ACT OF RS. 16,04,400/-, IN RESPECT OF ADDITION OF ANNUAL LETTING VALUE (ALV), WITHOUT APPRECIATING THAT THE EXPLANATION FURNISHED BY THE ASSESSEE THAT THE SECU RITY DEPOSIT WAS UTILIZED FOR REPAYING LOANS AND THEREBY REDUCING INTEREST COSTS, WHICH WOULD HAVE OTHERWISE BEEN AN ALLOWABLE BUSINESS EXPENDITURE, WAS NOT BON AFIDE AS THE DECISION TO REPLAY BUSINESS LOANS WAS DICTATED BY BUSINESS EXPE DIENCY AND HAD NOTHING TO DO WITH DETERMINATION OF ITS HOUSE PROPERTY INCOME. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE PENALTY U/S. 271(1)(C) OF THE IT ACT, WITHOUT APPRECIATING THAT FOR LEVYING PENALTY U/S. 271(1)( C) OF THE IT ACT MENS-REA WAS NOT APPLICABLE IN VIEW OF EXPLANATION 1 TO THE SECT ION 271(1)(C) OF THE IT ACT, 1961. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI LED ITS RETURN OF INCOME ON 30/10/2007 DECLARING INCOME OF RS. 54,55,17,803/-. THE INCOME WAS DETERMINING UNDER SECTION 143(3) AT RS. 61,43,30,998/- AFTER MA KING CERTAIN ADDITIONS. ONE OF THE ADDITION MADE WAS ENHANCEMENT IN ANNUAL LETTING VALUE (ALV) AT RS. 53,48,000/- IN THE ASSESSMENT ORDER. THE ASSESSEE WENT IN APPEAL BEFORE FIRST APPELLATE AUTHORITY CIT(A) WHO HAD DISMISSED THE AP PEAL AND UPHELD THE ORDER OF AO. SUBSEQUENTLY PENALTY PROCEEDING WERE INITIAT ED AND AFTER SEEKING REPLY OF THE ASSESSEE, PENALTY ORDER UNDER SECTION 271(1) (C) OF THE ACT, 1961 WAS PASSED BY THE AO AGAINST THE ASSESSEE BY IMPOSING PENALTY OF RS. 16,04,400/-. AGAINST THE ORDER OF IMPOSING OF PENALTY THE ASSESS EE PREFERRED APPEAL BEFORE THE LD. CIT(A) AND THE LD. CIT AFTER CONSIDERING TH E CASE OF BOTH THE PARTIES HAD DELETED THE ENTIRE PENALTY. 3 4. AGGRIEVED BY THE ORDER OF LD. CIT(A) THE REVENUE HAS PREFERRED APPEAL BEFORE US ON THE GROUND MENTIONED HEREIN ABOVE. 5. AT THE VERY OUTSET LD. AR SUBMITTED BEFORE US TH AT THE PENALTY PROCEEDINGS WERE INITIATED ON ACCOUNT OF ADDITION O F ALV. HOWEVER IN THE QUANTUM APPEAL FILED BY THE ASSESSEE, THE HON'BLE I TAT, MUMBAI G BENCH IN I.T. ACT NO. 672/MUM/2011 AND ITA NO. 1982/MUM/2011 FOR AY 2007-08 HAD RESTORED THE MATTER TO THE AO TO DETERMINE THE ALV AS PER THE GUIDELINES PROPOSED AS LAID DOWN BY THE JURISDICTIONAL HIGH CO URT. IN THIS RESPECT OUR ATTENTION WAS DRAWN TOWARDS PARA 9 OF THE ORDER PAS SED BY HON'BLE ITAT WHICH IS REPRODUCED HEREIN BELOW: 9. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND ON P ERUSAL OF THE IMOPUGNED ORDERS WE FIND THAT THE AO AS WELL AS CIT(A) HAVE DR AWN ADVERSE INFERENCE FOR ENHANCING THE ALV, MAINLY NO THE GROUND THAT, FIRST LY, THE ASSESSEE HAS TAKEN INTEREST FREE DEPOSIT FROM THE TENANTS AND IF SUCH DEPOSITS WOULD NOT HAVE BEEN TAKEN, THEN THE RENTAL VALUE WOULD HAVE BEEN MORE; AND SECONDLY, THE MARKET RATE AT WHICH THE FLAT WAS RENTED TO M/S FUTURA POL YESTER LTD. WAS MUCH HIGHER THAN THE RENT RECEIVED FROM ASSESSEE FROM ITS OTHER TENANTS I.E. CENTURION BANK AND JOHNSON &JOHNSON. NOW THE JURISDICTIONAL HIGH C OURT HAS DISCUSSED SIMILAR KIND OF CASES IN DETAIL IN CASE OF TIP TOP TYPOGRAP HY AND HAVE LAID DOWN VERY DETAILED PROPOSITION ON THE DETERMINATION OF ALV. T HE HON'BLE HIGH COURT HAVE ACCEPTED THE CONTENTION OF THE ASSESSEE THAT, MUNI CIPAL VALUATION RATE FOR DETERMINING THE ALV IS ALSO AN ACCEPTED METHOD OF V ALUATION, WHICH ON THE FACTS AND CIRCUMSTANCES OF THE CASE CAN BE APPLIED. THEY HAVE EVEN DISCUSSED WHETHER, ANY ADVERSE EFFECT HAS TO BE DRAWN IN THE CASES WHERE INTEREST FREE DEPOSITS HAVE BEEN ACCEPTED. THUS, IN WAKE OF THE S AID JUDGMENT OF HON'BLE BOMBAY HIGH COURT WE ARE OF THE OPINION THAT THE MA TTER SHOULD BE RESTORED BACK TO THE FILE OF THE AO TO DETERMINE THE ALV AS P ER THE GUIDELINES PROPOSED AND LAID DOWN BY THE JURISDICTIONAL HIGH COURT AND AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE TO EXPLAIN ITS CASE. ACCORDINGLY, GROU ND NO. 2 IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 6. ON THE OTHER HAND LD. DR ADMITTED THE SAID LEGAL FACTUAL POSITION. 7. CONSIDERING THE AFOREMENTIONED PREPOSITION WE HO LD THAT WHEN ONCE THE ISSUE OF DETERMINING THE ALV HAS ALREADY BEEN RESTO RED BACK TO THE FILED OF AO, 4 THEREFORE PENALTY PROCEEDING ON THE BASIS OF ORIGIN AL ASSESSMENT ORDER IS NOT SUSTAINABLE AND THEREFORE WE SET ASIDE THE SAME HOW EVER WHILE SETTING ASIDE THE SAME WE ALSO RESTORE THIS CASE BACK TO THE FILE OF AO TO PASS APPROPRIATE ORDER AFRESH AFTER DETERMINING THE ISSUE OF ALV. TH EREFORE THIS GROUND OF APPEAL IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOS ES. 8. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 09/0 9/2016. SD/- SD/- (R.C. SHARMA) (SANDEEP GOSAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED: 09/09/2016. AG (ON TOUR) / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. !' # / GUARD FILE. / BY ORDER, $ //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI