Surendra Babu Gudapati, Hyderabad V. Income Tax Officer, (International Taxation)-1, Hyderabad

ITA 233/Hyd/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4741 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 07-05-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 20-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH PADUCHURI
• Assessee Lawyers: MANOJ KUMAR DAGA
• Section: 142(1); 143(1); 201; 143(2); 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A ', HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN , ACCOUNTANT MEMBER ITA NO. 233 HYD/201 9 ASSESSMENT YEAR: 20 14 - 15 SURENDRA BABU GUDAPATI , HYDERABAD. PAN A HXPG 7295D VS. INCOME - TAX OFFICER , INTERNATIONAL TAXATION 1, HYDERABAD A PPELLANT RESPONDENT ASSESSEE BY: S H RI MANOJ KUMAR DAGA REVENUE BY: S HRI DINESH PA D UCHURI DATE OF HEARING: 0 7 / 0 5 / 201 9 DATE OF PRONOUNCEMENT: 27 / 0 5 /201 9 O R D E R PER S. RIFAUR RAHMAN , AM: T H IS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A) 10 , HYDERABAD, DATED, 24 /0 9 /201 8 FOR AY 20 14 - 15 . 2. ON PERUSAL OF RECORD, THERE WAS A DELAY OF 75 DAYS IN FILING THIS APPEAL BEFORE US. TO THIS EFFECT, THE ASSESSEE FILED AN AFFIDAVIT WHEREIN IT WAS AFFIRMED THAT HIS COUNSEL WAS MISPLACED THE APPEAL PAPERS, DUE TO WHICH, THERE WAS DELAY AND REQUESTED TO CON DONE THE SAME AS THE DELAY WAS NEITHER DELIBERATE NOR INTENTIONAL. AS THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE FOR NOT FILING THE APPEAL WITHIN THE STIPULATED TIME, WE CONDONE THE DELAY AND ADMIT THE SAME FOR HEARING AND ADJUDICATION. 3 . BRIEF FACTS OF THE CASE ARE, THE ASSESSEE, A NON - RESIDENT INDIVIDUAL, FILED HIS RETURN OF INCOME FOR THE AY 20 14 - 15 ON I.T.A. NO. 233 /HYD/1 9 S URENDRA BABU GUDAPATI, HYD. 2 30 / 07 /20 14 DECLARING INCOME OF RS. 7,36,680/ - , WHICH WAS PROCESSED U/S 143(1) OF THE INCOME - TAX ACT, 1961 (IN SHORT THE ACT). SUBSEQUEN TLY, THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND ACCORDINGLY, NOTICES U/S 143(2) AND 142(1) OF THE ACT WAS ISSUED TO THE ASSESSEE. IN RESPONSE TO THE SAID NOTICES, THE AR OF THE ASSESSEE FURNISHED THE REQUIRED INFORMATION. 3 .1 . THE AO OBSERVED THA T T HE CASE WA S SELECTED F OR SCRUTINY TO VERIFY THE LARGE DECREASE IN ANNUAL I E TTABLE VALUE OF HOUSE PROPERTY. HOWEVER ON VERIFICATION OF THE RETURN OF INCOME FOR ASSESSMENT YEAR 2014 - 15 AND ASSESSMENT YEAR 20 13 - 1 4, AO NOTICED THAT THE ASSESSEE HAS OFFERED INCOME FROM HOUSE PROPERTY TO THE TUN E OF RS. 11,17,600/ - FOR A.Y. 2014 - 15 WHEREAS FOR THE AY. 2013 - 14, THE ASSESSEE HAS OFFERED RS.22,52,2 1 6/ - . ON VERIFICATION, AO NOTICED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS NOT OFFERED RENTAL INCOME FROM THE PROPERTY AT H.NO. 1 - 98/A/K/2, KRUTHIKA LAYOUT, MADHAPUR, HYDERABAD. 3 .2 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A. O ASKED THE ASSESSEE TO FURNISH THE EXPLANATION FOR THE LARGE DECREASE IN RENTAL INCOME DURING T HE YEAR UNDER CONSIDERATION. IN RESPONSE, THE ASSESSEE SUBMITTED THAT THE ASSESSEE MADE SOME FAMILY ARRANGEMENTS WITH HIS FATHER, HENCE HE HAS AGREED TO TRANSFER HIS RENTAL INCOME TO HIS FATHER, RECEIVED FROM THE ABOVE PROPERTY. 3 .3 THE AO REJECTED THE SUBMISSIONS OF THE ASSESSEE FOR THE FOLLOWING REASONS: A. AS PER THE PROVISIONS OF SECTION 60 OF THE INCOME TAX ACT, 196 1 , WHICH STATES THAT 'ALL INCOME ARISING TO ANY PERSO N BY VIRTUE OF A TRANSFER WHETHER REVOCABLE OR NOT I.T.A. NO. 233 /HYD/1 9 S URENDRA BABU GUDAPATI, HYD. 3 AND WHETHER EFFECTED BEFORE O R AFTER THE COMMENCEMENT OF THIS ACT SHALL, WHERE THERE IS NO TRANSFER OF THE ASSETS FROM WHICH THE INCOME ARISES, BE CHARGEABLE TO INCOME - TA X AS THE INCOME OF THE TRANSFEROR AND SHALL BE INCLUDED IN HIS TOTAL INCOME. ' THEREFORE, THE RENTAL INCOME WHICH W AS TRANSFERRED WITHOUT THE TRANSFER OF PROPERTY FROM WHERE THE RENTS WERE ARRIVED, IS TAXABLE ONLY IN THE HANDS OF THE ASSESSEE. B. THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE FOR TRANSFER OF RIGHTS FROM THE PROPERTY TO HIS FATHER, WHICH IS MANDATE AS PER SECTION 2(47) OF THE INCOME TAX ACT, 1961. HENCE AS THERE IS NO TRANSFER OF THE PROPERTY, ASSESSE E HIMSELF IS THE OWNER OF THE PROPERTY, HENCE HE IS LIABLE TO TAX FOR THE RECEIPTS OF RENTAL INCOME. 3 .4 FURTHER, AO OBSERVED THAT A S SEEN FROM THE RETURN OF INCO M E FOR A.Y. 2014 - 15 OF SHRI G. RAVINDRA BABU, ASSESSEE'S BROTHER, WHO IS THE CO - OWNER OF THE SAID PROPERTY AND EQUAL BENEFICIARY IN THE RENTAL INCOME RECEIVED FROM THE PROPERTY, THAT THE ASSESSEE'S SHARE IN THE RENTAL INCOME RECEIVED FROM THE SAID P ROPERTY, DURING THE RELEVANT YEAR WAS RS.8,78,5 00 / - , RS.5,27,100 / - AND RS.4,92,275/ - . FURTHER , HE OBSERVED THAT THE SAME RECEIPTS ARE REFLECTING IN ASSESSEE'S FATHER RETURN OF INCOME FOR THE ASSESSMENT YEAR 2014 - 15. HENCE THE UNOFFERED RENTAL INCOME TOTAL LING TO RS 1 8,97,875/ - AGAINST ASSESSEES SHARE IN THE PROPERTY AT KRUTHIKA LAYOUT IS BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE AS THE ACTUAL OWNER OF THE MENTIONED PROPERTY IS ASSESSEE HIMSELF. ACCORDINGLY, THE AO RECOMPUTED THE INCOME FROM HOUSE PROP ERTY AS UNDER: RENTS RECEIVED AS PER RETURN RS. 11,17,600 ADD: RENTS RECEIVED AS DISCUSSED ABOVE RS. 18,97,875 RS. 30,15,475 LESS: MUNICIPAL TAXES RS. 1,00,325 RS. 29,15,150 LESS: STANDARD DEDUCTION U/S 24(A) @ 30%RS. 8,74,545 ------------------ RS. 20,45,605 I.T.A. NO. 233 /HYD/1 9 S URENDRA BABU GUDAPATI, HYD. 4 4 . AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) AND THE CIT(A) CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER: 7. IN THE COURSE OF THE APPEAL PROCEEDINGS, THE APPELLANT FURNISHED SUBMISSIONS VIDE LETTER DT. 27.08.2018. AFTER CONSIDERING THE SUBMISSIONS, IT IS SEEN THAT THE AO WAS JUSTIFIED IN TAXING THE RELEVANT SUM IN THE HANDS OF THE APPELLANT. ON FACTS, THE PROV ISIONS OF SECTION 60 ARE APPLICABLE. THERE IS NO EVIDENCE TO SUGGEST TRANSFER OF RIGHTS IN PROPERTY TO THE FATHER OF THE APPELLANT. THE APPELLANT CONTINUES TO BE THE OWNER OF THE PROPERTY. EVEN AS PER CLAUSE 5, OF THE FAMILY ARRANGEMENT DT. 25.12.2012, IT IS CLEAR THAT THE FAMILY ARRANGEMENT SHALL NOT BE CONSTRUED AS TRANSFERRING OF TITLE IN FAVOUR OF THE SECOND PARTY UNDER ANY CIRCUMSTANCES. ACCORDINGLY, IT IS HELD THAT THE ADDITION MADE IS JUSTIFIED AND THE GROUNDS OF APPEAL NO. 2 & 3 ARE DISMISSED. 5 . AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF LD. CIT(A) IS CONTRARY TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION MADE BY THE AO. 3. THE LD. CIT(A) WITHOUT PROPER APPRECIATION OF FACTS AND APPLICATION OF LAW ERRED IN HOLDING THAT RENTAL INCOME FROM THE PROPERTY OWNED BY THE APPELLANT WAS RECEIVED BY HIS FATHER GUDAPATI VIJAYA RAMA RAO IN A FAMILY ARRANGEMENT AND DISCLOSED IN HIS FATHERS INCOME TAX RETURN, IS TAXABLE AS INCOME OF THE APPELLANT. 4. THE LD. CIT(A) ERRED IN APPLYING PROVISIONS OF SECTION 80 OF THE ACT. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY OF THE ABOVE GROUNDS BEFORE OR IN COURSE OF HEARING OF THIS APPEAL. 6 . LD. AR SUBMITTED THAT THE FACTS OF THE CASE THAT ASSESSEE HAS MADE FAMILY ARRANGEMENT, AS PER WHICH, THE RENT FR O M THE PROPERTY IS ASSIGNED TO ASSESSEES FATHER, WHO HAS DECLARED THE SAME IN HIS RETURN OF INCOME. THIS FACT WAS ALSO CON FIRMED BY BOTH AO & CIT(A). HE SUBMITTED THAT AO/CIT(A) HAS APPLIED SECTION 60 TO BRING THE RENTAL INCOME TO TAX. THE I.T.A. NO. 233 /HYD/1 9 S URENDRA BABU GUDAPATI, HYD. 5 SECTION 63 CONNOTES BROADER MEANING TO THE TERM ARRANGEMENT, IT DOES INCLUDE FAMILY ARRANGEMENTS. HE PRAYED AND SUBMITTED THAT THE RENTA L INCOME WAS ALREADY BROUGHT TO TAX IN THE HANDS OF ASSESSEES FATHER, THE SAME INCOME CANNOT BE BROUGHT TO TAX IN ASSESSEES HANDS ALSO. 7 . LD. DR RELIED ON THE ORDERS OF AO AND CIT(A). 8 . CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL O N RECORD. IT IS FACT THAT ASSESSEE WAS RECEIVING RENT FROM THE IMPUGNED PROPERTIES AND FROM THIS YEAR ONWARDS, HE MADE AN ARRANGEMENT TO TRANSFER THE RENTAL INCOME TO HIS FATHER. ACCORDINGLY, ASSESSEE HAS NOT DECLARED THE RENTAL INCOME IN HIS RETURN OF INC OME, BUT, AT THE SAME TIME, ASSESSEES FATHER HAS DECLARED THE RENTAL INCOME IN HIS RETURN OF INCOME. 8 .1 NOW, AO BROUGHT TO TAX THE SAME RENTAL INCOME TO TAX IN ASSESSEES HANDS AS THE OWNERSHIP OF THE PROPERTY IS NOT TRANSFERRED, REMAIN WITH THE ASSESSEE AND, ACCORDINGLY INVOKED SECTION 60. IN THIS CASE, THE ASSESSEE AS WELL AS ASSESSEES FATHER ARE IN THE SAME TAX BRACKET I.E. CHARGEABLE TO TAX @ 30%. ACTUALLY, THERE IS NO GAIN TO EITHER PARTIES T O AVOID TAX. WE NOTICE THAT FOR THE PURPOSE OF SECTION 60 - 62, THE DEFINITION OF TRANSFER IS GIVEN IN SECTION 63. THE RELEVANT WORD FOR THIS CASE IS THE ARRANGEMENT, AS CLAIMED BY THE ASSESSEE THAT IT IS FAMILY ARRANGEMENT. THE WORD ARRANGEMENT WAS APTL Y EXPLAINED BY HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF S.P. JAISWAL VS. CIT [1981] 130 ITR 643, THE WORD ARRANGEMENT HAS NOT USED AS A TERM OF APT, BUT HAS BEEN USED IN THE BUSINESS SENSE. ASSESSEE MADE FAMILY ARRANGEMENT TO TRANSFER THE REN T TO HIS FATHER WITHOUT TRANSFER OF THE TITLE. ASSESSEE ALSO DEMONSTRATED THE ARRANGEMENT BY I.T.A. NO. 233 /HYD/1 9 S URENDRA BABU GUDAPATI, HYD. 6 DECLARING THE INCOME IN THE RETURN OF INCOME OF THE ASSESSEES FATHER. IT CLEARLY INDICATES THAT THE ARRANGEMENT WAS GENUINE AND PROPER. THE REVENUE ALSO ACCEPTED THE RENTAL INCOME DECLARED BY ASSESSEES FATHER AND TREATED HIM ACCORDINGLY, AT THE SAME TIME, INVOKES SECTION 60 TO BRING THE SAME INCOME TO TAX AGAIN IN THE HANDS OF THE TITLE OWNER I.E. ASSESSEE. IT IS ACCEPTED PRINCIPLE THAT THE SAME INCOME CANNOT BE T AXED TWICE, PARTICULARLY, WHEN THERE IS NO LOSS TO THE REVENUE WHETHER IT IS DECLARED IN THE HANDS OF THE ASSESSEE OR ASSESSEES FATHER. WHEN THERE IS NO LOSS TO THE REVENUE, THE SAME SOURCE OF INCOME CANNOT BE TAXED AGAIN. THEREFORE, THE GROUNDS RAISED BY THE ASSESSEE IS ALLOWED. 9 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 27 TH MAY , 201 9. SD/ - ( P. MADHAVI DEVI ) JUDICIAL MEMBER SD/ - ( S. RIFAUR RAHMAN ) ACCOUNTANT MEMBER HYDERABAD, DATED 27 TH MAY , 201 9. KV COPY FORWARDED TO: 1. SURENDRA BABU GUDAPATI, PLOT NO. 1292/A, H.NO. 8 - 2 - 293/82/A, ROAD NO. 65, JUBILEE HILLS, HYDERABAD 500 0 33 2 . IT O , INTERNATIONAL TAXATION 1, HYDERABAD 3 . CIT (A) - 10 , HYDERABAD 4. CIT (IT & TP), HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE