Shyama Ballav Mohaptra, Bhubaneswar V. ITO, Bhubaneswar

ITA 216/CTK/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0795 (ITAT-CUTTACK)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 15-02-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 28-05-2010
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: P R MOHANTYM K KARNA ARS
• Keywords: Business income; Depreciation
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , S HRI K.S.S.PRASAD RAO , JUDICIAL MEMBER / I.T.A.NO. 216 /CTK/2010 / I.T.A.NO. 24 7 /CTK/2010 SHYAMA BALLAV MOHAPATRA, PROP. M/S.RAJDHANI GAS,A/103,NAYAPALLY, BHUBANESWAR PAN: ABKPM 8235 C .. APPELLANT - VERSUS - INCOME - TAX OFFICER, WARD 23(1), BHUBANESWAR. .. RESPONDENT I NCOME - TAX OFFICER, WARD 23(1), BHUBANESWAR. .. APPELLANT - VERSUS - SHYAMA BALLAV MOHAPATRA, PR OP. M/S.RAJDHANI GAS,A/103,NAYAPALLY, BHUBANESWAR PAN: ABKPM 8235 C .. RESPONDENT FOR THE ASSESSEE - SHRI P.R.MOHANTY/M.K.KARNA, ARS FOR THE DEPARTMENT : SHRI S.C.MOHANTY, DR / ORDER . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER. THESE TWO APPEALS FOR THE ASSESSMENT YEARS 2006 - 07 ARE BY THE ASSESSEE AS WELL AS THE REVENUE, WHICH WE PROPOSE TO TAKE UP TOGETHER FOR THE SAKE OF CONVENIENCE AND BREVITY. 2. THE REVENUE HAS RAISED SEVERAL GROUNDS WITH RESPECT TO ADDITIONS AND DISALLOWANCES MADE BY THE ASSESSING OFFICER UNDER THE PROVISIONS OF SECTION 143(3) WHICH HAVE BEEN DELETED BY THE LEARNED CIT(A) INDICATING THAT THE LEARNED CIT(A) TOOK COGNIZANCE OF CER TAIN EVIDENCES AND FACTS IN VIOLATION TO RULE 46A OF THE INCOME - TAX RULES,1962. ON THE OTHER HAND, THE ASSESSEE HAS FILED THE APPEAL SUPPORTING THE ORDER OF THE LEARNED CIT(A) WHICH INTER ALIA I.T.A.NO. 216 AND 247/CTK/2010 (CROSS APPEALS) 2 HAS RAISED A CRUCIAL ISSUE OF BRINGING TO TAX INCOME FROM HOUSE PROPERTY BY SEGREGATING THE BUSINESS INCOME VIS - A - VIS FROM THE VERY PROPERTY WHICH THE BASIS FOR ADDITION AND DELETION W AS CONSIDERED BY THE AO AND HELD IN FAVOUR OF THE ASSESSEE APPELLANT BEFORE HIM. 3. THE BRIEF FACTS, AS HAVE BEEN BROUGHT ON RECORD, A RE THAT THE ASSESSEE BEING A PHYSICALLY HANDICAPPED INDIVIDUAL WAS DECLARING INCOME FROM GAS AGENCY WAS ALSO ALLOTTED A COMMERCIAL PLOT OF LAND ON LEASE BY THE GOVERNMENT UNDER PHYSICALLY HANDICAPPED QUOTA WHEN HE CONSTRUCTED A SHOPPING COMPLEX O N THE SAID PLOT AND LET OUT THE SHOPS AND OTHER AREAS FOR CONDUCTING THE BUSINESS OF MANAGING THE PURPORTED SHOPPING COMPLEX ALONG WITH HIS BUSINESS OF HIRING OUT VANS USED IN HIS DISTRIBUTION OF GAS UTILIZED FOR THE PURPOSE GAS DISTRIBUTORSHIP. THE ASSESSING OFFICE R REQUIRED THE ASSESSEE TO FURNISH THE DETAILS OF CAPITAL ACCOUNT, BANK ACCOUNTS, INVESTMENT ON MUTUAL FUNDS ETC., WHICH HE DECLINED TO ACCEPT AS GENUINE BY BRINGING TO TAX THE SAME IN A VERY BRIEF ORDER TAXING THE AMOUNT OF CAPITAL INTRODUCED IN THE IMPUG NED ASSESSMENT YEAR AT RS.24,11,191. DIFFERENCE IN MUTUAL FUND INVESTMENTS AMOUNTING TO RS.3,50,000 AND BALANCE IN SAVINGS BANK ACCOUNT WHICH HE CONSIDERED AS NOT REFLECTED IN THE BALANCE SHEET BEING A PERSONAL SAVINGS BANK ACCOUNT BEARING NO.2695 HAVING R S.2,92,891 BALANCE AS ON 31.3.2006.HE ALSO DISALLOWED CERTAIN EXPENSES BEING MAINTENANCE OF MALL CLAIMED BY THE ASSESSEE IN HIS COMBINED PROFIT & LOSS ACCOUNT ALONG WITH HIRE CHARGES INCOME AND GAS DISTRIBUTORSHIP INCOME DULY AUDITED BY THE CHARTERED ACCOU NTANT UNDER THE PROVISIONS OF SECTION 44AB. AGGRIEVED, THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY, WHO CATEGORICALLY ACCEPTED THE CONTENTION OF THE ASSESSEE APPELLANT BEFORE HIM BY INDICATING THAT THE FINANCIAL STATEMENT ON THE BASIS OF WHI CH THE ASSESSING OFFICER TRIED TO COMPUTE UNDISCLOSED INCOME IN THE FORM OF CAPITAL INTRODUCED , DIFFERENCE IN I.T.A.NO. 216 AND 247/CTK/2010 (CROSS APPEALS) 3 MUTUAL FUND INVESTMENTS, NON - DISCLOSURE OF BANK BALANCE AND DISALLOWANCE OF MAINTENANCE EXPENSES WAS DISCLOSED AND AVAILABLE TO THE EXTENT THAT SUCH INTRODUCTION OF CAPITAL WAS CASH FLOW REQUIRED TO BE CLARIFIED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER INDICATING NET WITHDRAWAL FOR PERSONAL EXPENSES OF RS.6.99 LAKHS. THE LEARNED CIT(A) ALSO OBSERVED THE BANK ENTRIES INDICATE D THAT A LOAN HAD BEEN RECEIVED WHICH LOAN HAD BEEN INVESTED FOR THE TIME BEING IN MUTUAL FUNDS AS THE AMOUNT HAD BEEN RECEIVED IN HIS PERSONAL BANK ACCOUNT WAS TO BE UTLILISED FOR CONSTRUCTION OF THE BUILDING ONCE THE DOCUMENTATION OF PLOT OF LAND HAVING BEEN ALLOWED TO T HE ASSESSEE WAS TO BE UTILISED FOR CONSTRUCTION OF A SUPER STRUCTURE. THE LEARNED CIT(A) ALSO DELETED THE ADDITION ON ACCOUNT OF BALANCE IN THE SAVINGS BANK ACCOUNT INDICATING THAT THE DRAWINGS AND DEPOSITS IN THE SAME ACCOUNT WERE TO BE IDENTIFIED FOR THE BUSINESS AND NON - BUSINESS PURPOSES THEREFORE CLEARLY REQUIRED BIFURCATION OF THE BALANCE AS HELD BY THE ASSESSEE IN HIS INDIVIDUAL CAPACITY OF THE BALANCE SHEET AS SPECIFICALLY DRAWN FOR THE ASSESSEES BUSINESS IN THE NAME AND STYLE OF M/S.RAJDHANI GAS. 4 . HOWEVER, THE LEARNED CIT(A) PROCEEDED FURTHER TO ESTABLISH BY BRINGING ON RECORD CERTAIN JUDICIAL PRONOUNCEMENT THAT THE INCOME GENERATED BY THE ASSESSEE FROM THE MALL WHICH SHOPS HA D BEEN LEASED OUT TO RESPECTIVE TENANTS COULD ONLY BE TAXED AS INCOME FR OM HOUSE PROPERTY INSOFAR AS THE EXCESS AMOUNT RECEIVED ON ACCOUNT OF COMMON USE ELECTRICITY BILLS RAISED BY THE ASSESSEE REMAINED UNPAID TO THE EXTENT THAT THE SURPLUS WAS CONSIDERED TAXABLE BY THE LEARNED CIT(A) AS INCOME FROM OTHER SOURCES . THE LEARNE D CIT(A) , THEREFORE, COMPUTED THE INCOME FROM HOUSE PROPERTY ON RECEIPTS U/S.24 BY GIVING STATUTORY RELIEF OF 30% WITHOUT ESTABLISHING THE ANNUAL LETTING OUT VALUE , IF ANY , WHEN THE COMBINED RECEIPTS FROM THE TENANTS WAS TO BE CONSIDERED ON THE BASIS OF E LECTRICITY EXPENSES PAYABLE , DEPRECIATION I.T.A.NO. 216 AND 247/CTK/2010 (CROSS APPEALS) 4 CLAIMED ON THE SUPER STRUCTURE AND THE FACT THAT THE COMMON EXPENSES INCURRED FOR TWO BUSINESS ES NAMELY , GAS DISTRIBUTORSHIP AND MANAGING THE MALL WERE NOT SEPARATELY CONSIDERED BY THE LEARNED CIT(A) ON THE BASIS OF HIS REQUIREMENT OF CERTIFYING PROFIT/LOSS MADE FROM THE BUSINESS OF MAINTAINING THE MALL AND THE BUSINESS OF GAS DISTRIBUTION. THE ASSESSEE IS IN APPEAL ON THE LIMITED ISSUE OF ASSESSING THE INCOME FROM HOUSE PROPERTY AS AGAINST RENDERED TO TAX BY THE A SSESSEE AS BUSINESS INCOME. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AT LENGTH. THE ISSUE RAISED BY THE REVENUE IN THEIR APPEAL IS WITH RESPECT THE LEARNED CIT(A) ACCEPTING CERTAIN FACTS FOR INTERPRETATION IN FAVOUR OF THE ASSESSEE INSOFAR AS THE ASSESSING O FFICER HAD TRIED TO BRING TO TAX SPECIFIC ITEMS OF FRESH CAPITAL INTRODUCED, DIFFERENCE IN THE MUTUAL FUND INVESTMENT ,UNDISCLOSED SAVINGS BANK ACCOUNT BALANCE AND INTER ALIA DISALLOWANCE OF MAINTENANCE OF MALL EXPENSES. WE ALSO OBSERVE THAT THE LEARNED A SSESSING OFFICER HAS ACCEPTED THE LOSS FROM M/S.RAJDHANI GAS AS SHOWN IN THE COMBINED PROFIT & LOSS ACCOUNT BEFORE HIM WHICH CATEGORICALLY ESTABLISHES THE FACT THAT THE ASSESSING OFFICER ACCEPTED THE NATURE OF ASESSEES BUSINESS ACTIVITY OF MANAGING A MAL L ALONG WITH THE GAS DISTRIBUTORSHIP ALSO CONDUCTED FROM THE SAME PREMISES, WHEN THE INCOME OF HOUSE PROPERTY FOR A COMMERCIAL PLOT AS ALLOTTED TO THE ASSESSEE WAS SEPARATELY SHOWN. THE CONTENTION OF THE LEARNED DR, THEREFORE, THAT THE LEARNED CIT(A) ACCEP TING EVIDENCES IN VIOLATION OF RULE 46A DO ES NOT APPEAR TO HAVE BEEN PUT FORTH BEFORE US AS IT WAS A WRONG INTERPRETATION OF THE FINANCIAL STATEMENTS BY THE LEARNED ASSESSING OFFICER WHEN THE FACT OF OBTAINING A LOAN OBTAINED STOOD INVESTED IN THE MUTUAL F UND ACCOUNT AND THE ASSESSEE HAD KEPT THE NON - BUSINESS ASSETS AND LIABILITIES OUTSIDE THE PURVIEW OF THE FINANCIAL STATEMENT COULD NOT BE BURDEN ED WITH THE EXPLANATION THERETO BEING AN ASSESSEE OF MORE THAN TWENTY YEARS. WE HAVE PERUSED THE BALANCE I.T.A.NO. 216 AND 247/CTK/2010 (CROSS APPEALS) 5 SHEET A ND THE BANK ACCOUNT, WHICH WAS BEFORE THE ASSESSING OFFICER, THAT INDICATES THE TRANSFER OF FUNDS FROM THE SAVINGS BANK ACCOUNT TO THE BUSINESS AND VICE VERSA WHEN THE LOAN WAS OBTAINED WHICH WAS PART LY INVESTED IN MUTUAL FUNDS TO BE UTILISED FOR THE CONST RUCTION OF THE MALL APART FROM LOAN OBTAINED BY THE ASSESSEE FOR CONSTRUCTION OF MALL WHICH INTEREST HAS BEEN CONSIDERED BY THE LEARNED CIT(A) TO BE ALLOWABLE TO THE ASSESSEE U/S.24(B).WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSING OFFICER, THEREFORE, CO ULD NOT BE SAID TO HAVE CONSIDERED THE FACTS OF THE ASSESSEE IN ITS RIGHT PERCEPTIVE AS DISCLOSED WAS PROPERLY CLARIFIED BY THE LEARNED CIT(A) FOR DELETION THEREOF. THERE IS NO EXTRA MATERIAL AVAILABLE TO THE LEARNED CIT(A) FOR THE DELETION TO INVOKE TH E PROVISIONS OF RULE 46A AS HAS BEEN AGITATED BY THE REVENUE BEFORE US. MISS - INTERPRETATION OF FACTS STOOD CLARIFIED BY THE LEARNED CIT(A) CANNOT BE CONSIDERED AS A VIOLATION TO RULE 46A. THE APPEAL BY THE REVENUE IS , THEREFORE, BOUND TO BE DISMISSED. 6. HOWEVER, ON THE ISSUE AGITATED BY THE ASSESSEE BEFORE US REQUIRES DELIBERATION TO THE EXTENT THAT THE ASSESSEE HAD CHOSEN TO CONSTRUCT A MALL BY LETTING OUT CUSTOMIZED BUILT SHOP S BUT RETAINING THE MAJOR AREA FOR HIMSELF FOR MAINTENANCE WAS RIGHTLY RENDER ED FOR TAXATION AS BUSINESS INCOME. THE LEARNED CIT(A) DURING THE COURSE OF HEARING OF THE APPELLATE PROCEEDINGS CHOSE TO BIFURCATE THE INCOME GENERATED FROM THE GAS DISTRIBUTORSHIP BY HOLDING THAT THE AMOUNTS RECEIVED AS RENT WAS TO BE CONSIDERED UNDER TH E PROVISIONS OF INCOME FROM HOUSE PROPERTY. THE LEARNED CIT(A) ERRONEOUSLY ALLOWED THE WHOLE OF THE INTEREST PAID ON LOANS ETC., WHEN HE CHOSE TO SEGREGATE THE INCOME FROM GAS DISTRIBUTORSHIP WHICH ALONE WAS THE CRITERIA FOR THE ASSESSEE FOR OBTAINING LOAN FOR CONSTRUCTION OF STRUCTURE ON THE LAND FOR DISTRIBUTORSHIP BUSINESS, GODOWN AND STORE HOUSE. THE LEARNED COUNSEL FOR THE ASSESSEE REPEATEDLY RELIED ON THE FACT THAT IT WAS COMMERCIAL PLOT THAT I.T.A.NO. 216 AND 247/CTK/2010 (CROSS APPEALS) 6 HAD BEEN LEASED OUT TO THE ASSESSEE FOR EXPLOITING IN A BU SINESS VENTURE WAS NOWHERE SUBJECTED TO LEGAL MISUSE, THEREFORE, ONLY SUBSTANTIATES THE CLAIM THAT THE PART OF THE ASSESSEES BUSINESS OF MANAGING THE MALL FOR THE COMMON AREA, ELECTRICITY WAS PART AND PARCEL OF THE ASSESSEES BUSINESS AGAINST AEXPENSES OF GAS DISTRIBUTORSHIP WHERE THE ASSESSEE HAS OFFICE, GODOWN AND RENDERS BUSINESS OF MAINTAINING THE MALL. IN ANY CASE, THE ASSESSEE COULD NOT BE SAID TO HAVE LET OUT ITS OWN PREMISES TO HIMSELF TO BE TAXED UNDER THE PROVISIONS OF SECTION 24.THE LEARNED CIT (A) ALSO ERRED IN HOLDING THE ELECTRICITY BILLS PAYABLE AS INCOME OF THE ASSESSEE WHICH WAS STRICTLY GOVERNMENT PAYMENTS COULD NOT BE SOURCE OF INCOME OF THE ASSESSEE. THIS ONLY INDICATES THAT THE LEARNED CIT(A) HIMSELF WAS AWARE OF THE FACT THAT THE ELECT RICITY WAS PAID FOR ASSESSEES BUSINESS OF MAINTAINING THE COMMON AREA AND THE COMMON USE OF LIFT ETC., WAS FOR THE ASSESSEES BUSINESS. THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUPPORTED THIS CONTENTION COVERED BY ITAT, CUTTACK BENCH DECISION IN THE CASE OF ROYAL HOTEL PVT.LTD., WHO HAVE IN COURSE OF LETTING OUT THEIR PREMISES AS HOTEL RECEIVED RENT FROM SHOPS IS TO BE CONSIDERED AS BUSINESS INCOME WHEN ONE PARTICULAR ROOM GIVEN TO A BANK WAS SOUGHT TO BE CONSIDERED AS TAXABLE UNDER THE HEAD HOUSE PROPER T Y . THIS VIEW IS TO BE UPHELD BY US INSOFAR AS IT WAS NOT THE CASE OF THE ASSESSING OFFICER THAT THE MAINTENANCE OF MALL AREA AND EXPENSES INCURRED FOR ELECTRICITY AND SECURITY WERE TO BE BORNE BY THE TENANT IN COMMON WHEN THE ASSESSEE BEING THE OWNER OF T HE MALL WAS CLEARLY LIABLE TO INCUR SUCH EXPENSES WHEN HE HAD LEASED OUT CERTAIN PORTION OF THE MALL AGAINST RENT WHICH COULD NOT BE SUBJECTED TO SEPARATE ASSESSMENT AS COMPENSATION FOR LETTING OUT BEING A PURELY COMMERCIAL TRANSACTION GOVERNED BY THE PRIO RITY ALLOTMENT TO THE ASSESSEE AGAINST CERTAIN RULES AND REGULATIONS OF THE GOVERNMENT OF ORISSA. IT WOULD BE CONTRAVENING THE SANCTION BY THE I.T.A.NO. 216 AND 247/CTK/2010 (CROSS APPEALS) 7 GOVERNMENT OF ORISSA IF THE SAME WAS TO BE TAXED AS INCOME FROM HOUSE PROPERTY IS A MATTER OF RECORD AS SOUGHT TO BE CONSIDERED BY THE LEARNED CIT(A). WE DO NOT FIND ANY JUSTIFICATION IN THE LEARNED CIT(A)S CONTENTION OF SEPARATELY BRINGING AND COMPUTING INCOME FROM HOUSE PROPERTY WHEN THE FACTS AND FIGURES CLEARLY INDICATE THAT THE ASSESSEE WAS CLAIMING DEPRECIATIO N ON THE WHOLE OF THE SUPER STRUCTURE WITHOUT SEGREGATING THE LET OUT PORTION. ON THIS ISSUE , WE ARE INCLINED TO AGREE WITH THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE AND SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND RESTORE THAT OF THE ASSESSI NG OFFICER. HOWEVER, THE REVENUES APPEAL IS DISMISSED ON THE ADDITIONS AS MADE BY THE ASSESSIN G OFFICER AND CONSIDERED PROPERL Y BY THE LEARNED CIT(A) ON MERITS. 6. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS ALLOWED AND THAT OF THE REVENUE IS DISMISSED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 18 TH FEBRUARY, 2011 S D/ - S D/ - ( . . . ) , ( K.S.S.PRASAD RAO), JUDICIAL MEMBER ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DAT E: 18 TH FEBRUARY, 2011 ( ), ( H.K.PADHEE ), SENIOR.PRIVATE SECRETARY. I.T.A.NO. 216 AND 247/CTK/2010 (CROSS APPEALS) 8 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : SHYAMA BALLAV MOHAPATRA, PROP. M /S.RAJDHANI GAS,A/103,NAYAPALLY, BHUBANESWAR 2 / THE RESPONDENT: INCOME - TAX OFFICER, WARD 23(1), BHUBANESWAR. 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, [ ] SENIOR PRIVATE SECRETARY