ISLAND STAR MALL DEVELOPERS PVT. LTD, MUMBAI V. COMMISSIONER OF INCOME TAX (APPEALS) NFAC, MUMBAI

ITA 2163/MUM/2021

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 4480 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-07-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 25-11-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; TDS; Set aside
• Section: 154; 143(3); 250; 246A; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, AM AND MS. KAVITHA RAJAGOPAL, JM ITA No. 2163/Mum/2021 (Assessment Year 2014-15) Island Sta r Ma l l De ve loper s Pri vate Lim i ted Mar ket c it y resou rc es P vt. Ltd. Ground F loor, R. R. Hos ier y Bld g, Shree La xm i W oollen Mi ll s Estate, Mum bai-400 011 Vs. Commissioner of Income-tax (Appeals), NFAC, Delhi Circle 6(1)(2), 5 th Floor, R. No. 506, Aaykar Bhavan, Mumbai (Appellant) (Respondent) PAN No.AABCI4988F Assessee by : Shri Vijay Mehta, AR Revenue by : Mr. Sanjay V. Deshmukh, DR Date of hearing: 21.06.2022 Date of pronouncement : 22.07.2022 O R D E R PER PRASHANT MAHARISHI, AM: 01. This appeal is filed by the assessee against the order passed by the National Faceless Appeal Centre, Delhi [the learned CIT (A)] for A.Y. 2014-15 on 11 th October, 20201, by which the ld CIT {A}has dismissed the appeal of the assessee filed against the order u/s 154 of the Act passed by the Dy. Commissioner of Income Tax, Central Circle 6(3)(1), Mumbai [ld AO ] holding that appeal is delayed and no condonation application is filed. Page | 2 ITA No. 2163/Mum/2021 Island Star Mall Developers Pvt. Ltd; A.Y. 14-15 02. Assessee has raised following grounds of appeal:- “1. On the facts and in the circumstances of the case and in law, the Hon'ble CIT(A) has erred in passing order u/s 250 of the Act, merely on the ground that the matter is time barred as there is delay in filing appeal u/s 246A of the Act and thereby dismissing the grounds raised by the appellant against the order u/s 154 of the Act without considering the fact that the order was served on 28.02.2019 and the appellant had filed the appeal within thirty days i.e. on 28.03.2019 as duly prescribed and covered under Section 249(2)(c) of the Act. Thus, the contention of the Hon'ble CIT(A) that there was delay in filing of appeal and the same is not condoned is invalid and bad in law and requires to be quashed. 2. Without prejudice to Ground No. 1 and based on the facts and in the circumstances of the case and in law, the Ld. AO has erred in passing a rectification order by relying on the assessment order dated 16.11.2016 wherein rental income was assessed as Income from Business instead of Income from House Property. Thus, the disallowance of construction interest pre of Rs.14,50,41,337 is bad in law and should be deleted. 3. Without prejudice to Ground No. 1 & 2 and based on the facts and in the circumstances of the case and in law, the Ld. AO has failed to allow capitalization of the amount of pre-construction interest of Rs.14,50,41,337 in the cost of the portion Page | 3 ITA No. 2163/Mum/2021 Island Star Mall Developers Pvt. Ltd; A.Y. 14-15 of the building from which rental income is earned. The appellant prays that capitalization of pre construction interest granted to the appellant. 4. Without prejudice to Ground No. 1 & 2 and based on the facts and in the circumstances of the case and in law, the Ld. AO has failed to allow depreciation on the amount of capitalization of pre construction interest to the cost of the portion of the building from which rental income is earned. Appellant prays that depreciation on capitalization of pre-construction interest should be granted to the appellant. 5. Without prejudice to Ground No. 1, on the facts and in the circumstances of the case and in law, the Ld. AO failed to allow credit of TDS of Rs.10,22,766 despite the same being claimed in the return of income of the appellant. The appellant prays that such short credit shall be granted to the appellant.” 03. The fact of the case shows that the assessee is a Private Limited Company engaged in development of commercial, retail and entertainment complex. It is also engaged in business of rental of space and providing various services in the commercial complex. It filed its return of income on 29 September 2014 at a loss of ₹15,87,48,854/-, which was revised on 25 March 2016. The case of the assessee was picked up for scrutiny and assessment under Section 143(3) of the Income-tax Act, 1961 Page | 4 ITA No. 2163/Mum/2021 Island Star Mall Developers Pvt. Ltd; A.Y. 14-15 (the Act) was passed on 16 November 2016 at the income of ₹6,47,70,490/-. 04. The assessee is engaged in letting out of space of the mall and providing various services. Assessee has following revenue streams:- i. Income from simple leases of ₹76,42,14,256/- was offered for taxation under the head income from house property. ii. Income from services amounting to ₹43,50,82,378/- was offered for taxation under the head business income. 05. During the course of assessment proceedings, the learned Assessing Officer was of the view that the composite rent income of both the streams should be taxed under the head income from business and profession. Assessee objected to the same by submitting the agreement and stating that the assessee is the owner by title and actual possession of the construction of the plot. All the costs are capitalized and the asset was put to use during the year of transferring it to fixed assets account from capital work in progress but Assessee did not claim any depreciation on the same. Therefore, it offered the same as income from house property under Section 22 of the Act. Assessee also on its own disallowed proportionate expenditure, which is related to house property income. The common Page | 5 ITA No. 2163/Mum/2021 Island Star Mall Developers Pvt. Ltd; A.Y. 14-15 maintenance services charges earned by the assessee were offered as business income. 06. The learned Assessing Officer held that assessee has initiation of carrying on complex commercial activity of setting up a mall fitted with various amenities and its entire activity is carried out in an organized manner who earned profit by the commercial venture. Accordingly, he taxed the entire rental income as business income. He also did not grant deduction of expenditure, which was disallowed by the assessee against the income from house property. 07. Further, on 15 December 2017, the learned Assessing Officer also issued notice under Section 154 of the Act proposing disallowance of interest expenditure and property tax. The assessee objected to it on several counts. The learned Assessing Officer after perusal of the submission passed rectification order disallowing standard deduction at the rate of 30% amounting to ₹22,08,33,914/- and pre construction interest cost of ₹14,50,41,337/-. The ld AO passed order u/s 154 of the Act on 9/2/2018 holding that above is the mistake apparent from record. Assessee, aggrieved by that order filed an appeal before the learned Commissioner of Income tax (Appeals). 08. The learned CIT (A) noted that order under Section 154 of the Act was passed on 9 th February, 2018 by Page | 6 ITA No. 2163/Mum/2021 Island Star Mall Developers Pvt. Ltd; A.Y. 14-15 the learned Assessing Officer through ITBA portal but assessee has filed appeal electronically only on 28 th March, 2019, therefore, there was a delay of 384 days in filing of the appeal. It further noted that in form no. 35 at column no. 14, where it is required to be mentioned that whether there is any delay in filing of the appeal of the assessee, assessee has mentioned ‘No’. The learned CIT (A) noted that assessee has not submitted any reason for the delay during the appellate proceedings, and therefore, delay was not condoned and the appeal of the assessee was dismissed as time barred by the order dated 11 October 2021. Therefore, assessee is aggrieved and has preferred this appeal. 09. We have heard the rival contentions and perused the orders of the lower authorities. The only grievance of the assessee is that the learned CIT (A) has held that the appeal filed by the assessee is delayed by 384 days. We find that, in this case the order under Section 154 of the act was passed by the Dy. Commissioner of Income Tax, Central Circle 6(3)(1), Mumbai on 9 th February, 2018. This order was passed on ITBA. The order resulted into a demand of ₹3,06,68,870/-. The computation sheet was available on the ITBA. The tax and computation sheet showed that there is an order under Section 154 of the Act according to which the demand has arisen. The assessee therefore, on 28 th February, 2019 wrote a letter to the Dy. Commissioner of Page | 7 ITA No. 2163/Mum/2021 Island Star Mall Developers Pvt. Ltd; A.Y. 14-15 Income Tax, 6(3)(1), Mumbai, submitting that there is a online demand outstanding is shown by way of income tax and computation sheet on account of action under Section 154 of the Act. However, no order under Section 154 of the Act is available with the assessee and therefore, assessee requested the learned Assessing Officer to provide a copy of the said order consequent to which the aforesaid demand has arisen. On 28 February 2019, assessee was provided with a copy of the order dated 9 February 2018 passed under Section 154 of the Act. On receipt of this order assessee filed appeal before LD CIT [A] on 28 March 2019. At the time of filing of appeal , in form no. 35 in column no. 2(c) date of service of notice of demand for order was stated to be 28 February 2019. In the same form in column no. 2,(b) date of the order was stated to be on 9 February 2018. As the appeal was filed by the assessee on 28 March 2018 in form no. 35 at column no. 14, assessee mentioned that there is no delay in filing of appeal. 010. According to the provision of Section 249(2)of the Act, the appeal to the learned CIT (A) shall be presented within 30 days from the date of service of the notice of demand relating to the assessment order. As claimed by assessee that order under Section 154 of the Act was not available on ITBA but only the tax computation sheet is available. Such order was made available to the assessee only on 28 Page | 8 ITA No. 2163/Mum/2021 Island Star Mall Developers Pvt. Ltd; A.Y. 14-15 February 2019 and therefore, according to the assessee the appeal is field within time provided under Section 249(2) of the Act. 011. The learned CIT (A) perused column no. 14 of form no. 35 but did not peruse the column 2(b) and (c) of the same form. Merely, based on column no. 14 of form no. 35 the appeal of assessee was considered as delayed by taking the date of the order as 9 February 2018. There was dispute that the order was passed on 9 February 2018 but received by assessee on 28 February 2019. Appeal is required to be filed within 30 days from the date of receipt of order. Therefore, appeal as claimed by the assessee is filed in time and therefore, learned CIT (A) should have perused the various columns filed in form no. 35, which is stated to be true to the best of the information of the director of the company. 012. The LD CIT [A] looked at the date of order i.e. 9/02/2018 , noted that appeal is filed on 28/03/2019 , in column where it is mentioned that there is no delay in filing appeal, held that appeal is delayed by 384 days , no condonation request is filed, hence, dismissed appeal. 013. The learned CIT (A) should have at least given an opportunity to the assessee of clarifying the above facts stated when mobile number and email address of the assessee are provided at column no. 17 of form no. 35. If one looks at the stand of the Page | 9 ITA No. 2163/Mum/2021 Island Star Mall Developers Pvt. Ltd; A.Y. 14-15 assessee, appeal is not delayed. Therefore, according to us, the learned CIT (A) could not have held without giving an opportunity of clarifying about the timely filing of the appeal that appeal is delayed and dismissing the appeal of the assessee holding that it is filed late. 014. In view of this, we set aside this appeal back to the file of the learned CIT (A) to first examine, a. What is the mode and delay of the service of the order u/s 154 to the assessee and whether such service is in accordance with the law or not. b. Whether there was any deal in filing of the appeal or not for the reasons stated above and then decide about the condonation of the same. c. If it is found that appeal is really delayed, assessee must be given an opportunity to explain whether such delay was for sufficient cause or not. In the event , assessee submits such an explanation, to consider it in accordance with law. d. If the appeal of the assessee is found to have been filed in time and in accordance with law, the appeal of the assessee should be decided on the merits of the case in accordance with the law. Page | 10 ITA No. 2163/Mum/2021 Island Star Mall Developers Pvt. Ltd; A.Y. 14-15 e. If it is found that appeal is really delayed, assessee must be given an opportunity to explain whether such delay was for sufficient cause or not. In the event , assessee submits such an explanation, to consider it in accordance with law. 015. Accordingly, ground no. 1 of the appeal is allowed. 016. Other grounds of appeal are not required to be adjudicating in view of our above decision in Ground no 1. 017. In the Result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 22.07.2022. Sd/- Sd/- (KAVITHA RAJAGOPAL) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 22.07.2022 Sudip Sarkar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, True Copy// Page | 11 ITA No. 2163/Mum/2021 Island Star Mall Developers Pvt. Ltd; A.Y. 14-15 Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai