M/s. Track Line Management Pvt. Ltd., Delhi V. Pr. CIT- 9, New Delhi

ITA 2365/DEL/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2956 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2012-2013
• Appeal Filed On: 20-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DLEHI BEFORE SHRI G.D. AGRAWAL, PRESIDENT AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER I.T.A. NO.2365/DEL/2017 ASSESSMENT YEAR: 2012-13 TRACK LINE MANAGEMENT P. LTD., VS PR. COMMISSIONER OF INCOME-TAX-9 19B, LIBERTY CINEMA, NEW DELHI. NEW ROHTAK ROAD, DELHI. (PAN: AAACA5150G) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI P.C. YADAV, ADVOCATE DEPARTMENT BY: SHRI S.S. RANA, CI T DR DATE OF HEARING: 28.02.2018 DATE OF PRONOUNCEMENT: 12.03.2018 ORDER PER K. NARASIMHA CHARY, JM THIS APPEAL OF THE ASSESSEE IS FILED AGAINST THE OR DER DATED 8 TH MARCH, 2017 OF THE PRINCIPAL COMMISSIONER OF INCOME-TAX -9, NEW DELHI {HEREINAFTER REFERRED TO AS( PCIT) PASSED U/S 263 OF THE INCOME-TAX ACT , 1961 (THE ACT). 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY IS EARNING RENTAL INCOME. DURING THE PREVIOUS YEAR RELEVANT TO ASSESS MENT YEAR 2012-13, THE ONLY SOURCE OF INCOME OF THE ASSESSEE IS FROM HOUSE PROP ERTY AND THEY HAVE FILED RETURN OF INCOME ON 9.9.2012 DECLARING A TOTAL INCO ME OF RS.12,67,588/- . LD. AO CALLED FOR THE DETAILS AND AFTER CONSIDERING THE MA TERIAL, ACCEPTED THE RETURNED INCOME. 3. HOWEVER, ON EXAMINATION OF THE RECORD, LD. PCIT NOTICED THAT THE ASSESSEE CLAIMED DEDUCTION OF A SUM OF RS.20,23,641/- IN RES PECT OF THE INTEREST PAYABLE U/S 24(B) OF THE ACT, BUT THE LEARNED AO HAS NOT OB TAINED AND PLACED ON RECORD ANY DETAILS OF DOCUMENTS ON THAT ASPECT. FURTHER, A CCORDING TO THE LD. PCIT COPIES OF THE LEDGER ACCOUNT OF UNSECURED LOANS FROM RELAT ED PARTIES DO NOT SHOW ANY CREDIT ENTRY OF ANY INTEREST AMOUNT TO THEIR ACCOUNTS . LD. PCIT DOUBTED THE ADMISSIBILITY OF CLAIM OF INTEREST AGAINST THE RENTA L INCOME AND ALSO RECORDED THAT IT WAS NOT CLEAR FROM THE RECORD WHETHER THE LOAN A MOUNT WAS UTILIZED FOR CARRYING ON CONSTRUCTION ON THE RELATED PROPERTY OR A DJACENT PROPERTY. 4. AFTER HEARING THE ASSESSEE, LD. PCIT REACHED A C ONCLUSION THAT THE ASSESSMENT FRAMED BY THE LD. AO IS ERRONEOUS AND PRE JUDICIAL TO THE INTEREST OF REVENUE INASMUCH AS THE LD. AO HAS NOT CALLED FOR A ND TAKEN ON RECORD ALL THE NECESSARY DETAILS, HAS NOT EVEN EXAMINED THE BANK S TATEMENT OF THE ASSESSEE COMPANY TO SEE WHETHER THE INTEREST WAS PAID TO THE DIRECTORS OR WHETHER THE TDS WAS DEDUCTED ON THAT OR NOT, AND HAS NOT SOUGHT ANY DETAIL AS TO WHETHER THE LOANS WERE UTILIZED FOR THE PURPOSE OF CONSTRUCTION AT 3, ,KAPASHERA ESTATE, THE RENTED PROPERTY OR THE OTHER PROPERTY AT 3A, KAPASHER A ESTATE. 3 5. IT IS THE SUBMISSION OF THE LD. AR THAT IN THIS CASE THE ASSESSMENT ORDER CLEARLY SHOWS THAT THE ONLY INCOME OF THE ASSESSEE IS FROM THE HOUSE PROPERTY AND THE LD. AO CALLED FOR THE DETAILS FROM TIME TO TIME AND EXAMINED THE SAME. HE FURTHER SUBMITTED THAT THE IMPUGNED ORDER VIDE PARA GRAPH NO. 7 & 8 INDICATE THAT EVEN ACCORDING TO THE LD. PCIT, THIS IS NOT A CASE OF NO ENQUIRY BUT A CASE OF INADEQUATE ENQUIRY IN WHICH CASE REVISION U/S 263 IS NOT PERMISSIBLE. FURTHER, ACCORDING TO HIM, SUFFICIENT DOCUMENTARY EVIDENCE IS PRODUCED BEFORE THE AUTHORITIES BELOW AND WAS AVAILABLE TO THE LD. PCIT WHILE PASSING THE IMPUGNED ORDER, BUT WITHOUT CONSIDERING THE SAME LD. PCIT SE T ASIDE THE MATTER FOR DE NOVO FRAMING OF THE ASSESSMENT AND SUCH AN ACTION CANNOT BE SUSTAINED. 6. PER CONTRA, IT IS THE SUBMISSION OF THE LD. DR T HAT AFTER INSERTION OF EXPLANATION 2 IN SECTION 263 OF THE ACT BY FINANCE A CT, 2015 W.E.F. 1.6.2015, WHERE THE ASSESSMENT ORDER WAS PASSED WITHOUT MAKIN G ENQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE, SUCH AN ORDER SHALL BE DEEMED TO BE ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTEREST OF REV ENUE. SINCE THE IMPUGNED ORDER WAS PASSED ON 8.3.2017, THE AMENDED PROVISION IS AP PLICABLE TO THE FACTS OF THIS CASE. BASING ON THIS HE SUBMITTED THAT AO SHOULD H AVE SATISFIED HIMSELF WITH REFERENCE TO THE MATERIAL ON RECORD THAT THE LOAN A MOUNT WAS USED FOR THE CONSTRUCTION OF THE RENTED HOUSE AND THE REASON FOR NOT SHOWING THE INCOME FROM THE OTHER PROPERTY, BUT THE LD. AO DID NOT MAKE ANY E NQUIRIES OR VERIFICATION ON THIS ASPECT WHICH HAD A BEARING ON THE TAX LIABILIT Y OF THE ASSESSEE. FURTHER, THE LD. AO DID NOT MAKE ANY ENQUIRY IN RESPECT OF THE BAN K STATEMENT OF THE ASSESSEE COMPANY TO FIND OUT WHETHER THE INTEREST WAS PAID TO THE DIRECTORS AND IF SO, TDS WAS DEDUCTED OR NOT. 4 7. WE HAVE GONE THROUGH THE RECORD IN THE LIGHT OF THE SUBMISSIONS ON EITHER SIDE. WE ARE IN AGREEMENT WITH THE LD. DR THAT AFT ER INSERTION OF EXPLANATION 2 IN SECTION 263 OF THE ACT BY FINANCE ACT, 2015 W.E.F. 1 .6.2015, WHERE THE ASSESSMENT ORDER WAS PASSED WITHOUT MAKING ENQUIRIES OR VERIFI CATION WHICH SHOULD HAVE BEEN MADE, SUCH AN ORDER SHALL BE DEEMED TO BE ERRO NEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE, AND IN SUCH CIRCUMSTANCES, EXERCISE OF JURISDICTION BY THE LD. CIT UNDER SECTION 263 CANNOT BE FOUND FAULT WITH. HOWEVER, WHETHER THE ASSESSMENT ORDER WAS PASSED WI THOUT MAKING ENQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE IS A QUEST ION FACT, WHICH WE SHALL EXAMINE IN THE LIGHT OF THE RECORD AVAILABLE BEFORE US. 8. ACCORDING TO THE LD. AR THE PROPERTY IS ONE AND T HE SAME BUT ONLY FOR THE SAKE OF CONVENIENCE IT IS REFERRED TO AS NO.3 AND 3 A OF KAPASHERA. LD. AR SUBMITTED THAT VIDE LETTER DATED 8 FEBRUARY, 2017 TH E ASSESSEE EXPLAINED TO THE LD. CIT THAT ALL THE DOCUMENTS AND DETAILS SOUGHT BY THE LD. AO WERE FURNISHED BY THE ASSESSEE AND AFTER CONSIDERING THEM ONLY THE ASS ESSMENT ORDER WAS PASSED. ON A PERUSAL OF THE SAID LETTER AT PAGE NO 6 OF THE PAPER BOOK, WE FIND THAT VIDE COLUMN NO. 2 OF THE LETTER THEY HAVE SUBMITTED THAT AS PER THEIR ACCOUNTING PRACTICE THE INTEREST PAID IS NOT CREDITED TO THE L EDGER ACCOUNT OF THE CREDITORS AND THE AMOUNT IS DIRECTLY DEBITED TO INTEREST PAID ACCOUNT AND TDS DIRECTED IS CREDITED TO TDS PAYABLE ACCOUNT AND A PAYEE ACCOU NT ONLY CHECKS ARE MADE OUT FOR THE BALANCE PAYABLE AND ALL THESE ENTRIES ARE VE RIFIABLE FROM THE BANK STATEMENT OF ACCOUNT SUBMITTED BY THEM. IT IS ALSO STATED THEREIN THAT THEY HAVE ENCLOSED THE BANK STATEMENT FOR THE READY REFERENCE. IT IS FURTHER SUBMITTED THAT ALL RELEVANT DETAILS/EXPLANATIONS HAD BEEN PLACED B EFORE THE LD. ASSESSING OFFICER AND THAT THE PROPERTY BELONGING TO THE COMPANY AT KA PASHARA IS A SINGLE PROPERTY 5 WHICH HAS FOR THE CONVENIENCE BEEN DIVIDED BY THE AS SESSEE, THE INTEREST-FREE LOAN FROM M/S RELATIONSHIP PRIVATE LIMITED PERTAINS TO THE PORTION 3A, KAPASHARA ESTATE AND INTEREST-BEARING LOANS PERTAINS TO THE R ENTED PORTION 3, COMMERCIAL REAL ESTATE AND THE INTEREST THEREON HAS BEEN CORRE CTLY CLIMBED AND ALLOWED AGAINST THE INTEREST RECEIVED. IT IS FURTHER STATED IN THIS LETTER THAT THE PROPERTY HAD BEEN GIVEN TO MR SAMEER GUPTA, DIRECTOR OF THE COMPANY FOR HIS RESIDENCE WHO IN TURN HAS DECLARED IT IN HIS RETURN AND THERE WAS NO OCCASION FOR THE ASSESSEE TO RETURN THE ANNUAL VALUE. ASSESSEE FURTH ER STATED IN THIS LETTER THAT THIS WAS ALSO EXPLAINED TO THE LD. ASSESSING OFFICER DU RING THE COURSE OF DISCUSSION. 9. OUR ATTENTION IS DRAWN TO PAGE 77 OF THE PAPER B OOK WHICH IS A COPY OF RESOLUTION DATED 19.4.2004 UNDER WHICH THE ASSESSE E COMPANY RESOLVED TO ALLOT THE BUILDING AT 3 KAPASHERA TO MR. SAMEER GUPTA, A DIRECTOR FOR HIS RESIDENTIAL USE. PAGE NO.18 OF THE PAPER BOOK 12.7.17 IS THE R ETURN OF INCOME OF MR. SAMEER GUPTA, DIRECTOR OF THE ASSESSEE AND THE COMPUTATION OF INCOME AT PAGE NO.18A SHOWS THAT THE RENT FREE HOUSE PROVIDED BY THE ASSES SEE IS VALUED AS PERQUISITE AND WAS OFFERED TO TAX. THESE DOCUMENTS ARE AVAILA BLE ON RECORD, AND DISPEL THE OBSERVATION OF THE LD. PCIT THAT THE NON DECLARATIO N OF THE INCOME FROM THE OTHER PROPERTY IS PREJUDICIAL TO THE INTEREST OF THE REVEN UE. 10. NOW COMING TO THE ASPECT OF PAYMENT OF INTEREST TO THE DIRECTOR IS CONCERNED, PAGE NO.5 TO 11, 13 TO 19, 24-30 AND 34- 41 OF THE PAPER BOOK DATED 28.2.2018 ARE THE TDS RETURNS OF THE ASSESSEE FOR A LL THE QUARTERS OF THE RELEVANT YEARS AND PAGE NOS.12, 20 TO 23, 31 TO 33 AND 40 TO 45 ARE THE RECEIPTS OF THE BANK EVIDENCING THE PAYMENT OF TDS. ACCORDING TO TH E LD. AR IT WAS SUBMITTED BEFORE THE LD. CIT(A) THAT AS PER ACCOUNTING PRACTI CE THE INTEREST PAID IS NOT 6 CREDITED TO THE LEDGER ACCOUNT BUT WAS DIRECTLY DEBI TED TO THE INTEREST PAID ACCOUNT AND THE TDS DEDUCTED IS CREDITED TO THE TDS PAYABLE ACCOUNT. WHEN WE LOOK AT THIS SUBMISSION OF THE ASSESSEE, AS RECORDE D BY THE LD. PCIT VIDE PARAGRAPH NO.6(I) OF HIS ORDER AND IN THE LIGHT OF THE TDS ST ATEMENTS AND THE BANK RECEIPTS, IT DOES NOT LEAVE ANY DOUBT IN OUR MIND THAT THERE IS N O NON EXAMINATION OF BANK STATEMENT OF THE ASSESSEE FOR VERIFICATION OF PAYMEN T INTEREST TO THE DIRECTORS OR THAT IT IS PREJUDICIAL TO THE INTEREST OF THE REVEN UE. AS A MATTER OF FACT, ALL THESE DOCUMENTS ALONG WITH THE AUDIT REPORTS ARE AVAILABL E BEFORE THE AUTHORITIES BELOW. 11. IN VIEW OF THE ABOVE, WERE OF THE CONSIDERED O PINION THAT THERE WAS NO WANT OF ENQUIRIES ON THE PART OF THE LD. ASSESSING OFFICER AND AS A MATTER OF FACT ALL THE RELEVANT MATERIAL WAS SUBMITTED BEFORE THE LD. CIT ALSO. HOWEVER, WITHOUT ADVERTING TO THE CIRCUMSTANCES AND MATERIAL PLEADED BY THE ASSESSEE, LD. CIT HAS RECORDED A FINDING THAT THE LD. ASSESSING OFFICER H AS NOT CALLED FOR AND TAKEN ON RECORD ALL THE NECESSARY DETAILS OF THE LD. ASSESSIN G OFFICER HAS NOT EVEN EXAMINED THE BANK STATEMENTS OF THE ASSESSEE COMPANY TO SEE W HETHER THE INTEREST WAS PAID TO THE DIRECTORS OR WHETHER THE TEDIOUS WAS DI RECTED OR NOT. FURTHER, WHEN THE EXPLANATION WAS OFFERED BY THE ASSESSEE WIDE LET TER DATED 08/02/2017, LD. CIT RECORDED A FINDING THAT THE DETAILS AS TO WHETH ER THE LOANS WERE UTILIZED FOR THE PURPOSE OF CONSTRUCTION AT 3, KAPASHARA ESTATE THE RENTED PROPERTY OR THE OTHER PROPERTY. ALL THE DETAILS WERE AVAILABLE BEFOR E THE LD. CIT. IN THE CIRCUMSTANCES, WE FIND THAT THE EXERCISE OF REVISIO N PROCEEDINGS BY THE LD. CIT IS NOT JUSTIFIED. CONSEQUENTLY THE IMPUGNED ORDER IS LI ABLE TO BE QUASHED, AND WE ACCORDINGLY QUASH THE SAME. GROUNDS OF APPEAL ARE AL LOWED. 7 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS THE 12 TH DAY OF MARCH, 2018. SD/- SD/- (G.D. AGRAWAL) (K. NARASIMHA CHARY) PRESIDENT JUDICIAL MEMBER DATED: 12 TH MARCH, 2018 VJ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT BY ORDER ASSTT. REGISTRA R, ITAT