DCIT 9(3)(2), MUMBAI V. FREST INVESTMENT & LEASING COMPANY P.LTD, MUMBAI

ITA 2149/MUM/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0338 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 25-05-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 13-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARJU GARODIA
• Assessee Lawyers: HITESH M SHAH
• Keywords: Non passing of speaking order; Surrender of tenancy right
• Section: 143(3)

Judgement Text

, , , , INCOME-TAX APPELLATE TRIBUNAL -GBENCH MUMBAI , , , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND RAM LAL NEGI,JUDICIAL MEMBER ./I.T.A./2149/MUM/2015, /ASSESSMENT YEAR: 2010-11 DCIT-9(3)(2) ROOM NO.418, 4 TH FLR., AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. VS. M/S. FREST INVESTMENT & LEASING COMPANY PVT.LTD. VILLA ZINDA, ST. FRANCIS AVENUE SANTACRUZ-(W),MUMBAI-400 054. PAN:AAACF 0251 F ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: MS. ARJU GARODIA ASSESSEE BY: SHRI HITESH M. SHAH / DATE OF HEARING: 25.05.2017 / DATE OF PRONOUNCEMENT: 16.08.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER,DATED 02.12.2014,OF THE CIT(A )-16, MUMBAI THE ASSESSING OFFICER (AO)HAS FILED THE PRESENT APPEAL.ASSESSEE- COMPANY, ENGAGED IN THE BUSINESS AS CONTRACTORS, FILED ITS RETURN OF INCOME 15/10/2010,DECLARING TOT AL INCOME AT RS.2.35 CRORES. IT REVISED ITS RETURN ON 30/10/2010,DECLARING TOTAL INCOME AT RS.2 .34 CRORES AFTER CLAIMING DEDUCTION OF RS. 50 LAKHS U/S.54EC OF THE ACT.THE ASSESSMENT WAS COM PLETED,U/S. 143(3) OF THE ACT,ON 28/ 03/ 2013,AT RS.2.51 CRORES. 2. FIRST EFFECTIVE GROUND OF APPEAL(GS.OA-1&2)RELATES TO TREATMENT GIVEN TO COMPENSATION AMOUNT RECEIVED,ON SURRENDER OF TENANCY RIGHTS.DURI NG THE ASSESSMENT PROCEEDINGS,THE AO FOUND ASSESSEE HAD CLAIMED THAT IT HAD SURRENDERED TENANCY RIGHTS FOR RS.5 CRORES,THAT IT HAD MADE INVESTMENT OF RS. 50 LAKHS AS PER THE PROVISIO NS OF SECTION 54EC,THAT IT HAD CLAIMED EXPENDITURE TOWARDS PAYMENT MADE TO THE TENANTS (RS . 1.76 CRORES)AND AMOUNT PAID TO SOLICITORS(RS.38.60 LAKHS),THAT IT HAD CLAIMED LTCG OF RS.2.35 CRORES.HE DIRECTED THE ASSESSEE TO FURNISH THE DETAILS OF THE SURRENDER OF TENANCY RIGHTS TO DESCRIBE THE AREA OF PROPERTY FOR WHICH THE ASSESSEE WAS HOLDING THE TEN ANCY RIGHTS, COPY OF THE TENANCY AGREEMENT AND THE PROOF OF EXISTENCE OF RIGHTS OF T HE PARTIES TO WHOM RS.176.25 LAKHS WERE PAID.HE OBSERVED THAT THE LETTER DEPICTING THE SALE OF TENANCY RIGHTS WAS UNDATED.AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE,THE AO F URTHER DIRECTED IT TO SUBMIT ORIGINAL AGREEMENT SUBSTANTIATING THE FACT THAT ASSESSEE WAS IN POSSESSION OF THE SAID PROPERTY ALONG 2149/M/15 M/S. FREST INVESTMENT & LEASING CO. PVT.LTD. 2 WITH THE RENT RECEIVED/PAID AND THE NATURE OF THE R ECEIPT OF RS.5 CRORES.THE ASSESSEE FURNISHED THE REPLY ON 13/03/2013. AFTER CONSIDERING THE SAME ,THE AO OBSERVED THAT THE ASSESSEE HAD NEVER STATED IN THE ANNUAL ACCOUNTS ABOUT THE TENAN CY RIGHTS, THAT THE BOMBAY CATHOLIC CHS LTD. HAD NEVER ISSUED RENT RECEIPTS TO THE ASSESSEE FOR WHICH IT HAD CLAIMED TO BE A TENANT, THAT IT DID NOT HOLD ANY FORMAL TENANCY AGREEMENT,THAT T HE LETTER ADDRESSED TO THE ASSESSEE BY M/S. ROBIN HOMES DEVELOPERS PRIVATE LTD. NOWHERE STATED THAT FLAT/ROOMS WERE OCCUPIED BY THE ASSESSEE,THAT THE RENT RECEIPTS SUBMITTED DURING TH E PROCEEDINGS WERE IN THE NAMES OF THIRD PARTIES, THAT IT HAD FAILED TO SUBSTANTIATE THE JUS TIFICATION FOR MAKING PAYMENT OF RS.1.76 CRORES TO THE TENANTS, THAT THE PAYMENT MADE TO THE SOLICITORS DID NOT SPECIFY THAT IT RELATED TO THE BUSINESS TRANSACTIONS. FINALLY, HE HELD THAT TH E AMOUNT OF RS.5 CRORES RECEIVED BY THE ASSESSEE HAD TO BE TAX UNDER THE HEAD INCOME FROM O THER SOURCES WITHOUT ALLOWING THE DEDUCTIONS CLAIMED BY IT. 2.1. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA) AND MADE ELABORATE SUBMISS IONS BEFORE HIM. AFTER CONSIDERING THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE ASSESSE E, HE HELD THAT THE AO HAD NOT GIVEN ANY FINDING ON THE DOCUMENTS AND SUIT DECREED IN THE TE RMS OF COMPROMISE,THAT HE HAD PASSED THE ORDER WITHOUT APPLICATION OF MIND AND WITHOUT APPRE CIATION OF FACTS,THAT HE HAD NOT DONE ANY INDEPENDENT ENQUIRY TO PROVE THAT THE DOCUMENTS FIL ED BY THE ASSESSEE WERE NOT GENUINE AND RELIABLE EXCEPT DOUBTING THE GENUINENESS OF THE DOC UMENTS. AFTER THESE OBSERVATIONS,THE FAA HAS MADE SOME GENERAL COMMENTS AND HELD THAT THE AM OUNT OF SURRENDER OF TENANCY RIGHT BY THE AO WAS TAXABLE UNDER THE HEAD CAPITAL GAINS AND IT WAS ENTITLED TO CLAIM DEDUCTIONS AS MENTIONED IN THE RETURN OF INCOME. 2.2. DURING THE COURSE OF HEARING BEFORE US, THE DEPART MENTAL REPRESENTATIVE (DR) ARGUED THAT THE ASSESSEE HAD NOT PRODUCED TENANCY AGREEME NT, THAT THERE WAS NO FORMAL AGREEMENT, THAT THE FAA HAD NO GIVEN ANY FINDING ABOUT THE OWN ERSHIP OF TENANCY RIGHTS, THAT WITHOUT MAKING FURTHER ENQUIRIES HE HAD SUMMARILY REJECTED THE ORDER OF THE AO, THAT HIS ORDER WAS A NON SPEAKING ORDER.THE AUTHORISED REPRESENTATIVE(AR ) CONTENDED THAT THE ASSESSEE HAD MADE ALL DISCLOSURES BEFORE THE AO,THAT RENT RECEIPTS WE RE ALSO FURNISHED. 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE ASSESSEE HAD CLAIMED THAT IT HAD SOLD THE TENANCY R IGHTS DURING THE YEAR UNDER APPEAL FOR RS.5 CRORES, THAT IT HAD CLAIMED CERTAIN EXPENSES/DEDUCT IONS AGAINST THE SAID RECEIPTS, THAT IT HAD 2149/M/15 M/S. FREST INVESTMENT & LEASING CO. PVT.LTD. 3 CLAIMED THAT THE BALANCE AMOUNT HAD TO BE TAXED AS LTCG, THAT THE AO MADE ENQUIRIES ABOUT THE TRANSACTION AND FOUND THAT THE ASSESSEE HAD FIL ED UNDATED PAPER WITH REGARD TO OWNERSHIP OF THE TENANCY RIGHTS,THAT HE DISALLOWED THE CLAIM MADE BY THE AO CITING CERTAIN REASONS AND HELD THAT INCOME ARISING OUT OF THE TRANSACTION IN QUESTION WAS TO BE TAXED AS INCOME FROM OTHER SOURCES,THAT HE ALSO HELD THAT ASSESSEE WAS N OT ENTITLED TO CLAIMED ANY DEDUCTION/EXPENSES AGAINST THE RECEIPT, THAT THE FA A HAD OBSERVED THAT AO DID NOT CONSIDER CERTAIN DOCUMENTS AND HAD NOT MADE SUFFICIENT ENQUI RIES. 2.4. IN OUR OPINION, IF THE FAA WAS OF THE VIEW THAT THE AO HAD NOT MADE SUFFICIENT ENQUIRIES IT WAS HIS DUTY TO CALL FOR A REMAND REPORT OR TO M AKE RELEVANT ENQUIRIES ON HIS OWN.AS PER THE PROVISIONS OF THE ACT,THE FAA HAS GOT THE POWERS TO MAKE ENQUIRIES AT HIS LEVEL.BUT NEITHER DID HE CALL FOR REMAND REPORT NOR DID HE MAKE ENQUI RIES ON HIS OWN.IF HE WAS OF THE OPINION THAT DOCUMENTS PRODUCED BY THE ASSESSEE WERE CRUCIA L TO DECIDE THE ISSUE AND THAT THE AO HAD NOT MADE PROPER ENQUIRY,HE SHOULD NOT HAVE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE ORDER OF THE FAA IS NOT A REASONED AND SPEAKING ORD ER. IN OUR OPINION,THE ISSUE NEEDS FURTHER VERIFICATION AND INVESTIGATION. SO, IN THE INTEREST OF JUSTICE,WE ARE REMITTING BACK THE ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION. HE IS DI RECTED TO AFFORD A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE AND TO CONSIDER ALL THE DOC UMENTS PRODUCED BY THE ASSESSEE AND PASS A REASONED AND SPEAKING ORDER. FIRST EFFECTIVE GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE AO, IN PART. 3. SECOND GROUND OF APPEAL IS ABOUT DELETING DISALLOWA NCE OF RS.12.15 LAKHS MADE BY AO U/S. 40(A)(IA) OF THE ACT FOR NOT DEDUCTING TAX AT SOURC E ON INTEREST PAID TO CITI BANK FINANCIALS. DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT THE ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE ON ACCOUNT OF INTEREST PAID TO CITI FINANCI ALS,INVOKING THE PROVISIONS OF SECTION 194A(3)AND 197(1C) OF THE ACT. HE HELD THAT THE INT EREST AMOUNT PAID BY THE ASSESSEE WITHOUT DEDUCTING TAX HAD TO BE DISALLOWED. 3.1. IN THE APPELLATE PROCEEDINGS THE FAA RELIED UPON TH E CASE OF G.SHANKER (ITA/ 1832/ BANG/2013,DT.10/10/2014) AND HELD THAT THE RECIPIEN T HAD REFLECTED THE INTEREST EXPENDITURE, INCURRED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS I.E. IN THE BOOKS OF CITI FINANCIALS.FINALLY, HE ALLOWED THE APPEAL FILED BY THE ASSESSEE. 2149/M/15 M/S. FREST INVESTMENT & LEASING CO. PVT.LTD. 4 3.2. BEFORE US THE DR STATED THAT MATTER COULD BE DECIDE D ON MERITS. THE AR CONTENDED THAT THE RECIPIENT OF THE PAYMENT HAD PAID TAX ON THE DI SPUTED AMOUNT, THAT THE PAYMENT WAS TO NBFC. 3.3. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE ARE OF T HE OPINION THAT THE FAA HAD RIGHTLY DELETED THE ADDITION MADE BY THE AO. HIGHER JUDICIA L FORUMS ARE OF THE OPINION THAT IF THE RECIPIENTS OF THE PARTICULAR PAYMENT SHOW THE SAME IN ITS RETURN OF INCOME AND PAYS TAX THEN THE PAYER HAS NOT BE VISITED BY THE PROVISION OF SE CTION 40(A)(IA). THEREFORE, CONFIRMING THE ORDER OF THE FAA WE DECIDE THE SECOND GROUND OF APP EAL AGAINST THE A.O. AS A RESULT APPEAL FILED BY THE AO STANDS PARTLY AL LOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH AUGUST, 2017. 16 , 2017 SD/- SD/- ( / RAM LAL NEGI ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED :16.08 .2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR G BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.