VIJAY GRIHNIRMAN P. LTD, MUMBAI V. DCIT CC 3(1), MUMBAI

ITA 2002/MUM/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4383 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 21-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJEEV GUBGOTRA
• Keywords: Deemed to accrue or arise in india

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NO. 2002/MUM/2017 (ASSESSMENT YEAR: 2012-13) M/S. VIJAY GRIHNIRAMN P. LTD. 201, MARINE CHAMBERS 43, NEW MARINE LINES MUMBAI 400020 VS. DCI T. CENTRAL CIRCLE - 3(1) MUMBAI PAN AAACV2806N APPELLANT RESPONDENT APPELLANT BY: SHRI MANI JAIN & SHRI PRATEEK JAIN RESPONDENT BY: SHRI RAJEEV GUBGOTRA DATE OF HEARING: 08.08.2018 DATE OF PRONOUNCEMENT: 31.10.2018 O R D E R PER SAKTIJIT DEY, JM AFORESAID APPEAL BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-51, MU MBAI DATED 02.12.2016 AND IT RELATES TO A.Y. 2012-13. 2. THERE IS A DELAY OF ONE DAY IN FILING THE APPEAL. A FTER CONSIDERING THE SUBMISSION OF THE LEARNED AUTHORISED REPRESENTATIVE WE ARE SATISFIED THAT THE DELAY IN FILING THE APPEAL IS DUE TO A REASONAB LE CAUSE. ACCORDINGLY, WE CONDONE THE DELAY OF ONE DAY AND ADMIT THE APPEAL F OR HEARING ON MERIT. 3. IN GROUND NO. 1 ASSESSEE HAS CHALLENGED THE ADDITI ON OF RS.5,29,269/- ON ACCOUNT OF ANNUAL LETTING VALUE OF UNSOLD FLATS HELD AS STOCK-IN-TRADE. 4. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE, A COMPAN Y, IS ENGAGED IN THE BUSINESS OF BUILDER AND DEVELOPER. FOR THE ASSE SSMENT YEAR (AY) UNDER DISPUTE THE ASSESSEE FILED ITS RETURN OF INCOME ON 28.09.2012 DECLARING ITA NO. 2002/MUM/2017 M/S. VIJAY GRIHNIRAMN P. LTD. 2 TOTAL INCOME OF RS.13,34,79,388/-. DURING THE ASSES SMENT PROCEEDINGS THE ASSESSING OFFICER(AO) WHILE VERIFYING THE BOOKS OF ACCOUNT OF THE ASSESSEE NOTICED THAT THE ASSESSEE HAS SHOWN CLOSING STOCK O F UNSOLD FLATS AMOUNTING TO RE.1,76,42,306/-. THEREFORE, HE CALLED UPON THE ASSESSEE TO EXPLAIN WHY THE ANNUAL LETTING VALUE OF THE UNSOLD FLATS SHOULD NOT BE CONSIDERED AS INCOME FROM HOUSE PROPERTY FOR THE YE AR UNDER CONSIDERATION. IN REPLY, IT WAS SUBMITTED BY THE AS SESSEE THAT SINCE THE ASSESSEE IS ENGAGED IN CONSTRUCTION AND BUILDING AC TIVITIES AND NOT IN THE BUSINESS OF LETTING OUT PROPERTY, THE FLATS ARE HEL D AS STOCK-IN-TRADE AND NOT AS INVESTMENT OR FIXED ASSETS. IT WAS SUBMITTED , ASSESSEE HAS NOT LET OUT THE UNSOLD FLATS DURING THE YEAR UNDER CONSIDER ATION. THEREFORE, NO NOTIONAL ADDITION CAN BE MADE BY WAY OF ANNUAL LETT ING VALUE OF UNSOLD FLATS. THE AO, HOWEVER, DID NOT FIND MERIT IN THE S UBMISSIONS OF THE ASSESSEE. RELYING UPON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL HOUSING FINANCE & LEASING CO. LTD. (2013) 354 ITR 180, HE PROCEEDED TO DETERMINE THE ANNUAL LETTING V ALUE OF THE UNSOLD FLATS AT RS.2,29,269/- BY APPLYING THE PROVISIONS OF SECT ION 23 OF THE INCOME TAX ACT, 1961 (HEREINAFTER 'THE ACT'). BEING AGGRIE VED OF SUCH ADDITION THE ASSESSEE PREFERRED APPEAL BEFORE THE COMMISSIONER ( APPEALS). HOWEVER, THE LEARNED COMMISSIONER (APPEALS) DID NOT FIND MERIT I N THE SUBMISSIONS OF THE ASSESSEE AND SUSTAINED THE ADDITION MADE BY THE AO. 5. THE LEARNED AUTHORISED REPRESENTATIVE REITERATING T HE STAND TAKEN BEFORE THE DEPARTMENTAL AUTHORITIES SUBMITTED, THE ASSESSEE HAS SHOWN THE UNSOLD FLATS AS INVENTORY AND NOT AS FIXED ASSETS. FURTHER, THE ASSESSEE HAS NOT LET OUT THE UNSOLD FLATS DURING THE RELEVANT PR EVIOUS YEAR. THEREFORE, NO NOTIONAL INCOME ON ACCOUNT OF ANNUAL LETTING VALUE CAN BE ADDED TO THE INCOME OF THE ASSESSEE. IN SUPPORT OF SUCH CONTENTI ON HE RELIED UPON THE FOLLOWING DECISIONS: - I) CIT VS. NEHA BUILDERS P. LTD. (2008) 296 ITR 661 (G UJ) II) C.R. DEVELOPMENTS P. LTD. ITA NO. 4277/MUM/2012 DAT ED 13.04.2015 ITA NO. 2002/MUM/2017 M/S. VIJAY GRIHNIRAMN P. LTD. 3 III) RUNWAL CONSTRUCTIONS VS. ACIT ITA NO. 5408/MUM/2016 DATED 22.02.2018 IV) ITO VS. ARIHANT ESTATES PVT. LTD ITA NO. 6037/MUM/2 016 DATED 27.06.2018. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPO N THE OBSERVATIONS OF THE LEARNED COMMISSIONER (APPEALS) AND THE AO. 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD. WE HAVE ALSO APPLIED OUR MIND TO THE DECIS IONS RELIED UPON. UNDISPUTEDLY, THE ASSESSEE IS IN THE BUSINESS OF DE VELOPER AND BUILDER. IT IS ALSO A FACT ON RECORD THAT AS ON 31.03.2012 THE ASS ESSEE HAS SHOWN UNSOLD FLATS VALUED AT RS.1,76,43,306/- AS STOCKIN-TRADE. IT IS THE CLAIM OF THE ASSESSEE THAT THE UNSOLD FLATS LYING AS STOCK-IN-TR ADE BEING PART OF THE INVENTORY AND NOT FIXED ASSET, THE ANNUAL LETTING V ALUE OF THE UNSOLD FLATS CANNOT BE DETERMINED AND ADDED AS HOUSE PROPERTY IN COME. IN THIS CONTEXT THE ASSESSEE HAS RELIED UPON CERTAIN JUDICIAL PRECE DENTS INCLUDING DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF NE HA BUILDERS P. LTD. (SUPRA). HOWEVER, THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SANE & DOSHI ENTERPRISES (2015) 377 ITR 165 HAS HEL D THAT ACCOUNTING TREATMENT GIVEN IN THE BOOKS OF ACCOUNT BY THE ASSE SSEE IS NOT CONCLUSIVE. THE HON'BLE JURISDICTIONAL HIGH COURT HAS FURTHER H ELD THAT THE UNSOLD PORTION OF THE PROPERTY LYING AS STOCK-IN-TRADE, IF LET OUT, THE INCOME DERIVED THERE FROM IS TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE HON'BLE SUPREME COURT IN THE CASE OF RAJ DADARKAR ASSOCIATES VS. ACIT (2017) 394 ITR 592, AFTER TAKIN G NOTE OF ITS OWN DECISIONS IN THE CASE OF CHENNAI PROPERTIES & INVES TMENTS LTD. VS. CIT (2015) 373 ITR 672 AS WELL AS RAYALA CORPORATION PV T. LTD. VS. ACIT (2016) 386 ITR 500 HAS ALSO UPHELD THE ASSESSMENT OF INCOM E DERIVED FROM LETTING OUT OF PROPERTIES UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IN OUR CONSIDERED VIEW, THE AFORESAID DECISIONS OF THE HON 'BLE SUPREME COURT AND HON'BLE JURISDICTIONAL HIGH COURT NEED TO BE EXAMIN ED WHILE CONSIDERING THE CLAIM OF THE ASSESSEE THAT THE UNSOLD FLATS HAV ING SHOWN AS INVENTORIES NO DEEMED INCOME ON ACCOUNT OF HOUSE PROPERTY CAN B E ASSESSED TO TAX. THE DISTINGUISHING FEATURE IN THE PRESENT CASE IS T HAT THE ASSESSEE HAS NOT ITA NO. 2002/MUM/2017 M/S. VIJAY GRIHNIRAMN P. LTD. 4 LET OUT THE UNSOLD FLATS IN THE RELEVANT PREVIOUS Y EAR AND NO RENTAL INCOME HAS BEEN DERIVED BY THE ASSESSEE. THEREFORE, IN THE LIGHT OF JUDICIAL PRECEDENTS REFERRED TO ABOVE IT NEEDS TO BE EXAMINE D WHETHER THE DEEMED ANNUAL LETTING VALUE CAN BE DETERMINED BY THE AO ON ACCOUNT OF THE UNSOLD FLATS. THERE IS ONE MORE ASPECT TO THE ISSUE. IN CA SE IT IS ULTIMATELY HELD THAT DEEMED ANNUAL LETTING VALUE OF UNSOLD FLATS HA VE TO BE DETERMINED, HOW IT HAS TO BE QUANTIFIED? AS CAN BE SEEN FROM TH E ASSESSMENT ORDER, THE AO HAS NOT PROVIDE THE BASIS ON WHICH HE HAS DETERM INED THE ANNUAL LETTING VALUE OF THE UNSOLD FLATS AT RS.5,29,269/-. THERE IS NOTHING ON RECORD TO SUGGEST THAT THE ANNUAL LETTING VALUE DET ERMINED BY THE AO IS AS PER THE MUNICIPAL RATEABLE VALUE OR MARKET RENT. TH US, THE ADDITION MADE BY THE AO TOWARDS HOUSE PROPERTY INCOME ON PURELY E STIMATE BASIS CANNOT BE SUSTAINED IN VIEW OF THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. TIP TOP TYPOGRAPHY 48 TAXMANN.C OM 191. THEREFORE, WE ARE INCLINED TO RESTORE THE ISSUES TO THE FILE O F THE AO FOR DECIDING AFRESH KEEPING IN VIEW THE RATIO LAID DOWN IN THE DECISION S REFERRED TO ABOVE AND ONLY AFTER EXTENDING A REASONABLE OPPORTUNITY OF BE ING HEARD TO THE ASSESSEE. THIS GROUND IS ALLOWED FOR STATISTICAL PU RPOSES. 8. GROUND NOS. 2, 3 & 4 RELATE TO ADHOC DISALLOWANCE M ADE ON ACCOUNT OF REPAIRS AND MAINTENANCE OF VEHICLES, TRAVELLING AND VARIOUS EXPENSES AND COMMUNICATION/TELEPHONE EXPENSES. BRIEFLY THE F ACTS ARE THAT DURING THE ASSESSMENT PROCEEDINGS THE AO, NOTICING THAT TH E ASSESSEE HAD CLAIMED DEDUCTION TOWARDS EXPENDITURE INCURRED UNDE R THE AFORESAID HEADS, CALLED FOR NECESSARY DETAILS. ON VERIFYING T HE DETAILS AND EVIDENCES FILED BY THE ASSESSEE THE AO FOUND THAT MAJORITY OF THE EXPENSES WERE INCURRED BY SELF-MADE VOUCHERS. THEREFORE, BEING OF THE VIEW THAT A PART OF THE EXPENSES INCURRED BY THE ASSESSEE CAN BE TOWARD S PERSONAL AND NON BUSINESS PURPOSES HE DISALLOWED 10% OUT OF THE EXPE NDITURE CLAIMED UNDER THE AFORESAID HEADS. THOUGH, THE ASSESSEE CHA LLENGED THE DISALLOWANCE MADE BY THE AO BEFORE THE FIRST APPELL ATE AUTHORITY, HOWEVER, NO RELIEF WAS GIVEN TO THE ASSESSEE. ITA NO. 2002/MUM/2017 M/S. VIJAY GRIHNIRAMN P. LTD. 5 9. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERIAL ON RECORD. AS CAN BE SEEN FROM THE ORDERS OF THE DEPARTMENTAL AUT HORITIES, THE ASSESSEE COULD NOT SUBSTANTIATE THE EXPENDITURE INCURRED THR OUGH PROPER DOCUMENTARY EVIDENCES. EVEN, BEFORE US ALSO THE ASS ESSEE HAS NOT PRODUCED ANY EVIDENCE TO CONTROVERT THE FINDINGS OF THE DEPARTMENTAL AUTHORITIES THAT PART OF THE EXPENDITURE INCURRED W AS NOT FOR PERSONAL OR NON BUSINESS PURPOSES. THAT BEING THE CASE, DISALLO WANCE MADE AT 10% OUT OF THE EXPENDITURE CLAIMED, IN OUR VIEW BEING R EASONABLE, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE DECISION OF THE DE PARTMENTAL AUTHORITIES ON THESE ISSUES. ACCORDINGLY GROUND NOS. 2, 3 & 4 ARE DISMISSED. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2018. S D / - SD/ - (MANOJ KUMAR AGGARWAL) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 31 ST OCTOBER, 2018 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -51, MUMBAI 4. THE CIT, CENTRAL-2, MUMBAI 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.