Sunita Sanjay Kedia, Gurgaon V. ITO, Ward-4(3), Gurgaon

ITA 1937/DEL/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 7810 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 20-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P S THUING ALENG
• Keywords: Depreciation; Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : SMC : NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.1937/DEL/2018 ASSESSMENT YEAR: 2013-14 SUNITA SANJAY KEDIA, B-404, CENTRAL PARK, SECTOR-42, GURGAON. PAN: ABIPK6266D VS. ITO, WARD-4(3), GURGAON. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJESH JAIN, ADVOCATE REVENUE BY : SHRI P.S. THUINGALENG, SR.DR DATE OF HEARING : 12.12.2018 DATE OF PRONOUNCEMENT : 26.12.2018 ORDER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 26 TH DECEMBER, 2017 OF THE CIT(A)-I, GURGAON, RELATING TO ASSESSME NT YEAR 2013-14. 2. THE GROUNDS OF APPEAL 1,5 AND 6 BEING GENERAL IN NATURE ARE DISMISSED. GROUNDS OF APPEAL NOS. 2 AND 3 READ AS UNDER:- 2. THAT THE LD.CIT(APPEAL) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING THE ADDITION MADE BY THE ASSESSING OFFICER AT RS.1,99,6 09/- AS DEEMED RENTAL INCOME FROM A VACANT PROPERTY. 3. THAT THE LD.CIT(APPEAL) HAS ERRED ON FACTS AND I N LAW IN NOT APPRECIATING THE FACT THAT THE ASSESSEE HAS NOT RECEIVED ANY REN T IN THE ENTIRE YEAR AND THEREFORE AS PER SECTION 23(1) (C) OF THE ACT, THE ANNUAL VALUE SHOULD BE CONSIDERED AS NIL. ITA NO.1937/DEL/2018 2 3. THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE AS SESSEE IS AN INDIVIDUAL AND DERIVES INCOME FROM BUSINESS OF GARMENTS AND EXPORT OF GARM ENTS. HE FILED HIS RETURN OF INCOME ON 29.11.2014 DECLARING TOTAL INCOME OF RS.3 3,28,630/-. THE ASSESSING OFFICER, DURING THE COURSE OF ASSESSMENT PROCEEDING S OBSERVED THAT THE ASSESSEE OWNS TWO HOUSE PROPERTIES. DURING THE YEAR UNDER CONSID ERATION, THE ASSESSEE WAS USING ONE PROPERTY FOR SELF OCCUPATION AND HAS CLAIMED LOSS O F RS.5,56,391/- FROM THE SECOND HOUSE PROPERTY AT K-505, 5 TH FLOOR, BLOCK-K, GESCO, CENTRAL PARK, SECTOR-42, GU RGAON, ON ACCOUNT OF INTEREST PAID ON HOME LOAN TAKEN. SI NCE THE ASSESSEE HAS NOT DECLARED ANY RENTAL INCOME FROM THIS PROPERTY, THE ASSESSING OFFICER ASKED HIM TO EXPLAIN THE SAME. THE ASSESSEE SUBMITTED THAT THE PROPERTY WAS VACANT THROUGHOUT THE YEAR AND, THEREFORE, HE DID NOT HAVE ANY RENTAL INCOME FROM T HE SAME. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION GIVE N BY THE ASSESSEE. HE OBSERVED THAT THE ASSESSEE HAS DECLARED NAV OF RS.10,80,000/- OF THIS PROPERTY DURING F.Y. 2011-12 RELATING TO ASSESSMENT YEAR 2012-13. CONSIDERING T HE LAST YEARS RENTAL VALUE, I.E., ANNUAL LETABLE VALUE AS DECLARED BY THE ASSESSEE, T HE ASSESSING OFFICER CONSIDERED THE NAV OF THE PROPERTY FOR THE CURRENT YEAR AT RS.10,8 0,000/-. AFTER ALLOWING STATUTORY DEDUCTION U/S 24 AND INTEREST ON HOME LOAN OF RS.5, 56,391/-, THE ASSESSING OFFICER MADE ADDITION OF RS.1,99,609/- TO THE TOTAL INCOME. 3.1 BEFORE CIT(A), THE ASSESSEE STRONGLY CHALLENGED THE ORDER OF THE ASSESSING OFFICER IN MAKING THE ADDITION. IT WAS SUBMITTED T HAT THE VACANCY ALLOWANCE WAS NOT ALLOWED BY THE ASSESSING OFFICER WHICH OUGHT TO HAV E BEEN ALLOWED SINCE THE PROPERTY WAS NOT LET OUT THROUGHOUT THE YEAR. HOWEVER, THE LD. CIT(A), UPHELD THE ACTION OF THE ITA NO.1937/DEL/2018 3 ASSESSING OFFICER ON THE GROUND THAT ALTHOUGH THE P ROPERTY REMAINED VACANT DURING THE YEAR FOR THE WHOLE OF THE YEAR, HOWEVER, THE ASSESS ING OFFICER WAS FULLY JUSTIFIED IN ADDING THE NET ANNUAL VALUE BASED ON THE LAST YEAR S RENTAL VALUE OF RS.10,80,000/-. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL BEFORE THE TRIBUNAL. 4. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CHALLE NGED THE ORDER OF THE CIT(A) UPHOLDING THE ADDITION MADE BY THE ASSESSING OFFICE R. HE SUBMITTED THAT THE LD.CIT(A) DID NOT CONSIDER THE PROVISION OF SECTION 23(1)(C) WHICH READS AS UNDER:- 23. (1) FOR THE PURPOSES OF SECTION 22 , THE ANNUAL VALUE OF ANY PROPERTY SHALL BE DEEMED TO BE ( A ) THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY B E EXPECTED TO LET FROM YEAR TO YEAR; OR ( B ) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THER EOF IS IN EXCESS OF THE SUM REFERRED TO IN CLAUSE ( A ), THE AMOUNT SO RECEIVED OR RECEIVABLE; OR ( C ) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND WAS VACANT DURING THE WHOLE OR ANY PART OF THE PREVIOUS YEAR AND OWING TO SUCH VACANCY THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THER EOF IS LESS THAN THE SUM REFERRED TO IN CLAUSE ( A ), THE AMOUNT SO RECEIVED OR RECEIVABLE : 5. HE SUBMITTED THAT IT IS AN ADMITTED FACT THAT TH E PROPERTY IN QUESTION WAS NOT LET OUT DURING THE YEAR DUE TO NON-AVAILABILITY OF SUIT ABLE TENANT. NO OTHER BENEFIT WAS DERIVED BY THE ASSESSEE FROM THIS PROPERTY DURING T HE YEAR UNDER CONSIDERATION. RELYING ON THE DECISION OF THE DELHI BENCH OF THE T RIBUNAL IN THE CASE OF ACIT VS. DR. PRABHA SANGHI (2013) 139 ITD 504 AND VARIOUS OTHER DECISIONS, HE SUBMITTED THAT THE ADDITION MADE BY THE ASSESSING OFFICER AND SUSTAINE D BY THE CIT(A) DESERVES TO BE DELETED. HE ALSO RELIED ON THE FOLLOWING DECISIONS :- ITA NO.1937/DEL/2018 4 (I) SAIF ALI KHAN PATAUDI VS. ACIT (2018) 53 CCH 486 (M UM. TRIB.); AND (II) SACHIN R. TENDULKAR VS. DCIT, ITA NO.3755/MUM/2016, ORDER DATED 10.08.2018. 6. THE LD. DR, ON THE OTHER HAND, HEAVILY RELIED ON THE ORDER OF THE ASSESSING OFFICER AND CIT(A). 7. I HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BO TH THE SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS AN ADMITTED FA CT THAT THE ASSESSEE IN THE INSTANT CASE HAS DECLARED LOSS OF RS.5,56,391/- IN RESPECT OF TH E SECOND PROPERTY BEING INTEREST PAID ON THE HOME LOAN TAKEN. ALTHOUGH THIS PROPERTY WAS LET OUT DURING THE PRECEDING YEAR AT RS.10,80,000/- AND RS.5,10,000/- IN THE SUCCEEDI NG YEAR, HOWEVER, NO RENTAL INCOME HAS BEEN SHOWN FROM THIS PROPERTY ON THE GROUND THA T NO SUITABLE TENANT WAS AVAILABLE FOR THE CURRENT YEAR AND THE PROPERTY REMAINED VACA NT THROUGHOUT THE YEAR. I FIND THE ASSESSING OFFICER, ADOPTING THE NET ANNUAL VALUE OF THE PRECEDING YEAR AT RS.10,80,000/- MADE ADDITION OF RS.1,99,609/-, AFTE R ALLOWING STATUTORY DEDUCTION U/S 24 TOWARDS REPAIRS AND MAINTENANCE AND THE INTEREST PAID ON HOME LOAN. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE PROVISIONS OF SECTION 23(1)(C) OF THE IT ACT ARE CLEARLY APPLICABLE TO THE INSTANT CA SE, I FIND THE ORDER OF THE CIT(A) IS VERY CRYPTIC ONE WHERE HE HAS SUSTAINED THE ADDITIO N MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER:- 4.5 I HAVE CAREFULLY CONSIDERED THE APPELLANTS SU BMISSIONS. IT IS AN UNDISPUTED FACTS ON RECORD THAT THE PROPERTY UNDER QUESTION REMAINED VACANT DURING THE YEAR FOR WHOLE OF THE YEAR. IN THESE CI RCUMSTANCES THE ASSESSING ITA NO.1937/DEL/2018 5 OFFICER WAS FULLY JUSTIFIED IN ADDING THE NET ANNUA L VALUE BASED ON THE LAST YEARS RENTAL VALUE OF RS.10,80,000/- TO THE TOTAL INCOME OF THE APPELLANT. 8. FROM THE ABOVE, IT IS CLEAR THAT THE LD.CIT(A) H AS NOT AT ALL CONSIDERED THE PROVISIONS OF SECTION 23(1)(C) WHEN THE PROPERTY RE MAINED VACANT THROUGHOUT THE YEAR. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE A ND IN THE INTEREST OF JUSTICE, I DEEM IT PROPER TO RESTORE THIS ISSUE TO THE FILE OF THE CIT (A) WITH A DIRECTION TO PASS A SPEAKING ORDER IN THE LIGHT OF THE PROVISIONS OF SECTION 23( 1)(C) AND IN THE LIGHT OF THE VARIOUS DECISIONS CITED BEFORE HIM. NEEDLESS TO SAY, THE L D.CIT(A) SHALL DECIDE THE ISSUE AS PER FACT AND LAW, AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. I HOLD AND DIRECT ACCORDINGLY. THE GROUNDS RAISED BY THE ASSE SSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 9. GROUND OF APPEAL NO.4 READS AS UNDER:- 4. THAT THE LD.CIT(APPEAL) HAS ERRED ON FACTS AND IN LAW IN NOT ALLOWING THE ENTIRE EXPENSES AND RESTRICTING THE DISALLOWANCE T O RS.3,00,000/- ON AD HOC BASIS. 10. AFTER HEARING BOTH THE SIDES, I FIND THE ASSESS ING OFFICER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, OBSERVED THAT CERTAIN EXPEN SES DEBITED IN THE PROFIT & LOSS ACCOUNT APPEARS TO BE PERSONAL IN NATURE. AFTER DI SCUSSION, THE ASSESSEE AGREED FOR LUMPSUM DISALLOWANCE OF RS.4 LAKHS. THE ASSESSING OFFICER ACCORDINGLY, MADE ADDITION OF RS.4 LAKHS TO THE TOTAL INCOME OF THE A SSESSEE ON ACCOUNT OF UNVERIFIABLE INADMISSIBLE EXCESSIVE CLAIM OF THE ASSESSEE INCURR ED FOR NON-BUSINESS PURPOSES. THE DETAILS OF SUCH EXPENSES ARE AS UNDER:- ITA NO.1937/DEL/2018 6 DIWALI EXPENSES RS.78,107/- INTEREST ON CAR LOAN RS.1,05,901/- MACHINERY REPAIR RS.2,65,756/- OFFICE REPAIR & MAINTENANCE RS.38,330/- SALE PROMOTION RS.76,896/- TELEPHONE EXPENSES RS.1,02,568/- VEHICLE RUNNING EXPENSES RS.3,62,464/- DEPRECIATION ON CAR RS.1,18,895/- TOTAL RS.11,48,917/- 11. BEFORE CIT(A), THE ASSESSEE CHALLENGED THE SAME ON THE GROUND THAT THE ADDITION MADE BY THE ASSESSING OFFICER IS WITHOUT ANY BASIS. FURTHER, IN THE SUBSEQUENT YEAR, THE ASSESSING OFFICER HAS RESTRICTED SUCH DISALLOWA NCE TO 20%. HOWEVER, THE LD.CIT(A) GAVE PART RELIEF TO THE ASSESSEE BY OBSER VING AS UNDER:- 5.3 I HAVE CAREFULLY CONSIDERED THE APPELLANTS S UBMISSIONS. OUT OF THE EXPENSES DISALLOWED, IT IS SEEN FROM THE DETAILS TA BULATED PARA 5.1 ABOVE THAT THE EXPENSES ON ACCOUNT OF MACHINERY REPAIR AND OFFICE REPAIR ARE ONLY FOR THE PURPOSE OF BUSINESS AND HAVE NO PERSONAL ELEMENT. O UT OF THE REMAINING EXPENSES OF VEHICLE RUNNING, DEPRECIATION OF CAR TO THE PERSONAL USAGE CANNOT BE RULED OUT. IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, I DEEM IT FAIR AND REASONABLE TO RESTRICT THE DISALLOWANCE TO RS. 3,00 ,000/-. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 12. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE AS SESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 13. I FIND, AFTER CONSIDERING THE MACHINERY REPAIR AND OFFICE REPAIR EXPENSES AS NOT BEING PERSONAL IN NATURE, THE LD.CIT(A) RESTRICTED THE DISALLOWANCE TO RS.3 LAKH. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT IN THE SUBSEQUENT YEAR, THE ITA NO.1937/DEL/2018 7 ASSESSING OFFICER HAS RESTRICTED THE DISALLOWANCE T O 20% OF SUCH EXPENSES. CONSIDERING THE TOTALITY OF THE CASE, I AM OF THE C ONSIDERED OPINION THAT DISALLOWANCE OF RS.3 LAKHS APPEARS TO BE ON HIGHER SIDE. I, THE REFORE, RESTRICT THE DISALLOWANCE TO RS.2.5 LAKH. THE GROUND RAISED BY THE ASSESSEE IS PARTLY ALLOWED. 14. IN THE RESULT, THE APPEAL FILED BY THE AS SESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 2 6.12.2018. SD/- ( R.K. PANDA) ACCOUNTANT MEMFBE R DATED: 26 TH DECEMBER, 2018 DK COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASSTT. REGISTRAR, ITAT, NEW DELHI