Pravesh Kothari L/H of Sohanraj Khimraj Kothari , Hubli V. Joint Commissioner of Income Tax Range-3, Hubli

ITA 201/BANG/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6956 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 30-01-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: B R SUDHEENDRA
• Keywords: Capital asset; Deemed owner of house property; Depreciation; TDS; Set aside
• Section: 234B

Judgement Text

ITA N O .201(B)/2017 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES : B, BANGALORE BEFORE SHRI B.R.BASKARAN, ACCOUNTANT MEMBER AND SMT.BEENA PILLAI, JUDICAL MEMBER ITA NO.201(BANG)/2017 (ASSESSMENT YEAR : 2011 - 12) SHRI PRAVESH KOTHARI L/H OF SOHANRAJ KHIMRAJ KOTHARI, PROP: M/S K.S.KOTHARI, SANGHVI COMPLEX, NEW JAVALI SAAL, HUBLI - 580 020 PAN NO.AC ZPK8499E APPELLANT VS THE JOINT COMMISSIONER OF INCOME TAX, RANGE - 3, HUBLI RESPONDENT APPELLANT BY : SHRI B.R.SUDHEENDRA, ADVOCATE REVENUE BY : SHRI R.N.SIDDAPPAJI, ADDL.CIT DATE OF HEARING : 10 - 07 - 2019 DATE OF PRONOUNCEMENT : 31 - 07 - 2019 O R D E R PER BEENA PILLAI, JUDICIAL MEMBER : PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAINST ORDER DATED 30/11/16 PASSED BY LD. CIT (A), HUBLI FOR ASSESSMENT YEAR 2011 - 12 ON FOLLOWING GROUNDS OF APPEAL: 1. GENERAL: - THE ORDER PASSED BY THE LEARNED CIT(A), HUBLI TO THE EXTENT PREJUDICIAL TO THE APPELLANT IS BAD IN LAW AND LIABLE TO BE QUASHED. ITA N O .201(B)/2017 2 2. DISALLOWANCE OF PAYMENT OF ACCOUNTS WRITING CHARGES UNDER SECTION 40(A)(IA): 2.1 THE LEARNED ASSESSING OFFICER HAS ERRED IN DISALLOWING ACCOUNTS WRITING CHARGES PAID AMOUNT ING TO RS. 48,000 FOR NOT DEDUCTING TDS UNDER SECTION 194J AND THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE SAME. 2.2 THE LEARNED AO AND THE CIT(A) HAVE ERRED IN NOT APPRECIATING THAT THE IMPUGNED PAYMENT WAS MADE TO A PART TIME EMPLOYEE AND HENCE NOT LI ABLE FOR TDS. 2.3 EVEN OTHERWISE, THE PAYMENTS WERE NOT LIABLE FOR TDS UNDER SECTION 194J. 2.4 ON FACTS AND CIRCUMSTANCES OF THE CASE AND LAW APPLICABLE, IMPUGNED DISALLOWANCE OF RS. 48,000 SHOULD BE DELETED IN ENTIRETY. 2.5 WITHOUT PREJUDICE, THE DISALLOWANCE, IF ANY, SHOULD BE RESTRICTED TO 30% OF THE IMPUGNED PAYMENT. 3. ADDITION OF HUF INCOME: - THE LEARNED ASSESSING OFFICER HAS ERRED IN MAKING AN ADDITION OF RS. 5,68,846 WHICH WAS THE TOTAL INCOME OF THE K S KOTHARI HUF FOR THE AY 2011 - 12 AND THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LEARNED AO. 3.1 THE LEARNED AO AND THE CIT(A) HAVE ERRED IN MAKING THE ADDITION ON SURMISES AND CONJECTURE WITHOUT PROPERLY CONSIDERING THE FACTS OF THE CASE AND EXPLANATIONS GIVEN BY THE APPELLANT. 3.2 THE ENTIRE BASIS OF MAKING THE IMPUGNED ADDITION OF RS. 5,68,846 IS INCORRECT, BAD IN LAW AND LIABLE TO BE QUASHED. 3.3 ON FACTS AND CIRCUMSTANCES OF THE CASE AND LAW APPLICABLE, THE IMPUGNED ADDITION OF RS. 5,68,846 SHOULD BE DELETED IN ENTIRETY. 4. DIS ALLOWANCE OF RENT PAID AND DEPRECIATION CLAIMED IN RESPECT OF FLAT AT MUMBAI 4.1 THE LEARNED ASSESSING OFFICER HAS ERRED IN DISALLOWING RENT PAID IN RESPECT OF FLAT AT MUMBAI AMOUNTING TO RS. 96,000 AND DEPRECIATION CLAIMED IN RESPECT OF THE FLAT AT MUMBAI AMOUNTING TO RS. 49,208 AND THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LEARNED AO. THE ENTIRE BASIS OF MAKING THE IMPUGNED DISALLOWANCE OF RS. 96,000 AND RS.49,208 IS ITA N O .201(B)/2017 3 INCORRECT, BAD IN LAW AND LIABLE TO BE QUASHED. 4.3 ON FACTS AND CIRCUMSTANCES OF THE CASE AND LAW APPLICABLE, THE IMPUGNED DISALLOWANCES OF RS. 96,000 AND RS. 49,208 SHOULD BE DELETED IN ENTIRETY. 5.1 LEVY OF INTEREST : THE LD. AO HAS ERRED IN LEVYING INTEREST UNDER SECTION 234A, 234B AND 234C OF THE INCOME TAX ACT, 19 61. IN FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND LAW APPLICABLE, INTEREST UNDER SECTION 234A, 234B AND 234D IS NOT LEVIABLE. THE APPELLANT DENIES ITS LIABILITY TO PAY INTEREST UNDER SECTION 234B & 234A . 6. 6.1 PRAYER: - IN VIEW OF THE ABOVE AND OTH ER GROUNDS TO BE ADDUCED AT THE TIME OF HEARING, THE APPELLANT PRAYS THAT THE ORDER PASSED BY THE CIT(A) TO THE EXTENT PREJUDICIAL TO THE APPELLANT BE QUASHED OR IN THE ALTERNATIVE (I) (A) DISALLOWANCE OF ACCOUNTS WRITING CHARGES AMOUNTING TO RS. 48,000 BE DELETED IN THE ALTERNATIVE AND WITHOUT PREJUDICE (B) IMPUGNED DI SALLOWANCE BE RESTRICTED TO RS. 14,400 BEING 30% OF RS. 48,000 ONLY (II) ADDITION OF HUF INCOME OF RS. 5,68,846 BE DELETED; (III) DISALLOWANCE OF RENT PAID AND DEPRECIATION CLAIMED IN RESPECT OF FLAT AT MUMBAI AMOUNTING TO RS. 96,000 AND RS. 49,208 BE DELETED. (IV) INTEREST LEVIED UNDER SECTION 234A BE DELETED; (V) INTEREST LEVIED UNDER SECTION 234B BE DELETED; (VI) INTEREST LEVIED UNDER SECTION 234D BE DELETED. THE APPELLANT PRAYS ACCORDINGLY . BR IEF FACTS OF THE CASE ARE AS UNDER: 2 . A SSESSEE FILED ITS RETURN OF INCOME ON 03/10/11 DECLARING TOTAL INCOME OF RS.21,79,790/ - . THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 14 2 ( 2 ) ALONG WITH NOTICE UNDER SECTION 142 (1) AND QUESTIONNAIRE WAS ISSUED TO ASSESSEE. AS THE CASE WAS SUBSEQUENTLY TRANSFERRED TO HUBLI, A ITA N O .201(B)/2017 4 FRESH NOTICE WAS AGAIN ISSUED TO ASSESSEE. REPRESENTATIVES OF ASSESSEE APPEARED BEFORE LD.AO AND UP FILED REQUISITE DET AILS. 2 .1 ON PERUSAL OF TH E DETAILS FILED BY ASSESSEE LD. AO MADE FOLLOWING ADDITIONS IN THE HANDS OF ASSESSEE: DISALLOWANCE UNDER SECTION 40 A (IA) - RS. 48,000/ - ADDITION OF HUF INCOME - RS.5,68,846/ - DISALLOWANCE OF RENT - RS. 96,000/ - DEPRECIATION DISALLOWED - RS. 49,208/ - 3. AGGRIEVED BY ADDITIONS MADE, ASSESSEE PREFE RRED APPEAL BEFORE LD.CIT (A) WHO UPHELD THE SAME. 4. AGGRIEVED BY ADDITIONS MADE BY LD.CIT (A) , ASSESSEE IS IN APPEAL BEFORE US NOW. 4 .1 . GROUND NO.1 IS GENERAL IN NATURE AND THEREFORE DO NOT REQUIRE ADJUDICATION. 4.3. GROUND NO. 2 IS IN RESPECT OF DISALLOWANCE MADE UNDER SECTION 40 A (IA) OF THE ACT. IT HAS BEEN SUBMITTED BY LD.AR THAT ASSESSEE DEBITED SUM OF RS.48,000/ - TOWARDS ACCOUNT WRITING CHARGES. LD.AO OBSERVED THAT NO TDS WAS DEDUCTED AGAINST SAID SUM, AND SO HELD THAT THERE IS VIOLATION OF SECTION 40 A (AI) OF THE ACT. ASSESSEE SUBMITTED THAT ACCOUN TANT TO WHOM PAYMENT WAS MADE WAS PART - TIME EMPLOYEE AND THERE WAS NO LIABILITY TO DEDUCT ANY TDS. IT WAS SUBMITTED THAT ASSESSEE G AVE DETAILS OF ACCOUNTS TO THE PERSON WHO THEN FEEDS THEM INTO COMPUTER. LD.CIT (A) REJECTED ASSESSEE SUBMISSIONS , AS THE SAM E WAS NOT SUBSTANTIATED WITH ANY EVIDENCES. AT THE TIME OF HEARING BEFORE US , LD.AR SUBMITTED LEDGER ACCOUNTS WHICH WERE NOT PRODUCED ITA N O .201(B)/2017 5 BEFORE LD.AO. ACCORDINGLY , IT HAS BEEN SUBMITTED THAT IT MAY BE REMITTED BACK TO LD. AO FOR VERIFICATION OF DETAILS. EVEN LD. CIT (A) CONFIRMED ADDITION MADE BY LD.AO IN THE ABSENCE OF DETAILS. 4.4 . LD.DR PLACED RELIANCE UPON VIEW TAKEN BY LD.CIT (A) IN CONFIRMING ADDITION. 4.5. WE HAVE PERUSED SUBMISSIO NS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. IT HAS BEEN SUBMITTED BY LD.AR THAT PF AND ESI WAS NOT APPLICABLE TO ESTABLISHMENT OF ASSESSEE AND PAYMENT MADE TO ACCOUNTANT WAS BELOW PROFESSIONAL TAX LIMITS HENCE PROFESSIONAL TAX WAS ALSO NOT DEDUCTED. LOWER AUTHORITIES DISALLOWED AS ASSESSEE DID NOT PROD UCE ANY EVIDENCE IN RESPECT OF THE ACCOUNTANT BEING A PART TIMER. IN OUR VIEW, SECTION 194 J IS APPLICABLE TO PROFESSIONAL . AS THE PERSON WAS SIMPLY FEEDING DETAILS IN COMPUTER, HE CANNOT BE CONSIDERED AS A PROFESSIONAL, AND THEREFORE IN OUR CONSIDERED OPI NION, SECTION 194 J IS NOT APPLICABLE TO PRESENT FACTS. FURTHERE THERE DO NOT EXIST ANY EMPLOYEE EMPLOYER RELATIONSHIP BETWEEN ASSESSEE AND THE PERSON FOR ANY OTHER PROVISIONS TO BE APPLICABLE. WE DIRECT LD.AO TO DELETE THE ADDITION MADE U/S.40 A (IA) OF T HE ACT. ACCORDINGLY, THIS GROUND RAISED BY ASSESSEE STANDS ALLOWED. 5 . GROUND NO. 3 IS IN RESPECT OF ADDITION OF HUF INCOME IN THE HANDS OF ASSESSEE. 5.1. LD.AR SUBMITTED THAT ASSESSEE CARRIES ON PROPRIETARY BUSINESS AND ALSO HAS SIMILAR BUSINESS IN STATUS OF S.KOTHARI HUF. LD.AO COMPUTED PROFITS EARNED BY HUF IN THE HANDS OF ITA N O .201(B)/2017 6 ASSESSEE HOLDING IT TO BE ONE AND THE SAME BUSINESS. LD. AR SUBMITTED THAT , HUF IS ALSO CARRYING ON SAME BUSINESS AS TRADER IN TEXTILES AT MUMBAI . LD.AO MADE ADDITION TO THE EXTENT OF PROFIT EARNED BY HUF IN THE HANDS OF ASSESSEE AS BOTH ARE MANAGED BY ASSESSEE. 5.2. LD.DR ON THE OT HER HAND SUBMITTED THAT BOTH PROPRIETARY AS WELL AS HUF CONCERN S HAVE COMMON ADDRESS AT HUBLI AND ASSESSEE CREATED AN I MPRESSION THAT HUF IS CARRYING OUT ITS ACTIVITIES FROM MUMBAI. HE PLACED RELIANCE UPON OBSERVATION BY LD.AO IN RESPECT OF TOTAL DEBT BALANCE APPEARING IN HUF ACCOUNT AS WELL AS THE PROPRIETARY CONCERN MANAGED BY ASSESSEE BEING THE SAME. HE SUBMITTED THAT L D.AO THEREFORE RIGHTLY HELD IT TO BE SAME BUSINESS CARRIED OUT BY ASSESSEE. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. 5.3. REVENUE ALLEGES THAT ASSESSEE HAS CREATED HUF CONCERN TO REDUCE TAX LIABILITY IN THE HANDS OF ASSESSEE . THERE IS NOTHING ON RECORD TO ESTABLISH THAT WHAT IS THE SEPARATE BUSINESS CARRIED OUT BY ASSESSEE IN THE NAME OF HUF THOUGH MAY BE HAVING COMMON ADDRESS . ASSESSEE SOMEHOW MISREPRESENTED IT BY SAYING THAT THE HUF CONCERN IS CARRYI NG OUT ITS BUSINESS FROM MUMBAI WHICH IS FACTUALLY INCORRECT. 5.4. FOR CLUBBING, THERE HAS TO BE COMMON MANAGEMENT, INTERGLACING OR INTERLOCKING OF FUNDS. LD.AO HAS NOT GIVEN PROPER FINDING IN RESPECT OF THESE, BEFORE CLUBBING THE INCOME OF HUF IN THE HAN DS OF ASSESSEE. WE THEREFORE SET ASIDE THE ISSUE TO LD.AO FOR VERIFYING THE SAME. ASSESSEE SHOULD FILE ALL RELEVANT DETAIS TO PROVE CONTRARY. IN THE EVENT THERE ARE ITA N O .201(B)/2017 7 SUFFICIENT MATERIALS TO ESTABLISH THAT BOTH ARE INDEPENDENT BUSINESS, THOUGH WORKING HAVING COMMON ADDRESS. LD.AO SHALL GIVE PROPER OPPORTUNITY TO ASSESSEE AS PER LAW. ACCORDINGLY, THIS GROUND RAISED BY ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 6. GROUND NO. 4 IS IN RESPECT OF RENT PAID AND DEPRECIATION CLAIMED IN RESPECT OF FLAT AT MUMBAI. 6.1. LD.AR SUBMITTED THAT FLAT WAS USED AS A TEMPORARY HALTING PLACE BY ASSESSEE SON TO CARRY OUT THE BUSINESS IN MUMBAI HE SUBMITTED THAT ASSESSEE PAID RENT TO HIS SON AND ALSO TREATED IT IS A CAPITAL ASSETS SHOWN IN THE BOOKS OF ACCOUNTS DEPRECIATION IS CLAIMED IN RESPECT OF THE SAME. 6.2. ON THE CONTRARY, LD. DR SUBMITTED THAT ASSESSING OFFICER HAS ANALYSE THIS ISSUE IN DETAIL AND HAS COME TO CONCLUSION THAT ASSESSEE HAS CLAIMED IT IS BUSINESS ASSET INSOFAR AS 50% OF THE PROPERTY IS CONCERNED AND FOR THE REMAINING 50% OF THE PROPERTY HAS BEEN DECLARED BY HIS SON. HE THUS SUPPORTED THE VIEWS OF AUTHORITIES BELOW. WE HAVE PERUSED SUBMISSION ADVANCED BY BOTH SIDES IN LIG HT OF RECORDS PLACED BEFORE US. 6.4. IT IS OBSERVED BY LD.AO THAT FLAT IS JOINTLY OWN ED BY ASSESSEE AND THE SUN. LD. AO CATEGORICALLY RECORDED THAT SAME FLAT HAS BEEN PARTLY SO SHOWN AS BUSINESS ASSET AND PARTLY SHOWN AS INCOME FROM HOUSE PROPERTY FETCHING RENT BY ASSESSEE AND HIS SON RESPECTIVELY . LD.AO ALSO CATEGORICALLY OBSERVED THAT ASSESSEE IS FOUND TO BE OCCUPYING MORE THAN ONE PROPERTY AND THEREFORE ANNUAL VALUE OF THE PROPERTIES TO BE TREATED AS DEEMED LET OUT AS PER SECTION 23 (4) (B) OF THE A CT , ITA N O .201(B)/2017 8 WH ICH HAS BEEN RIGHTLY TAX IN THE HANDS OF ASSESSEE. WE DO NOT FIND ANY INFIRMITY IN THE VIEW ADOPTED BY AUTHORITIES BELOW AND THE SAME IS UPHELD. ACCORDINGLY THIS GROUND RAISED BY ASSESSEE STANDS DISMISSED. 7. GROUND NO. 5 IS IN RESPECT OF LEVY OF INTERES T WHICH IS CONSEQUENTIAL IN NATURE THEREFORE DO NOT REQUIRE ANY ADJUDICATION. 8. GROUND NO.6 IS ALSO GENERAL IN NATURE. IN THE RESULT APPEAL FILED BY ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 - 07 - 2019 SD/ - SD/ - (B.R.BASKARAN) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL M EMBER DATED: THE 31 ST JULY, 2019. *AM COPY OF THE ORDER FORWARDED TO: 1.APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5. DR 6. ITO (TDS) 7.GUARD FILE BY ORDER ASST.REGISTRAR ITA N O .201(B)/2017 9 ITA N O .201(B)/2017 10