Sai Spacecon India Pvt Ltd, Pune V. Deputy Commissioner of Income tax,

ITA 254/PUN/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1581 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 18-06-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 01-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAMRAT RAHI
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE , , , BEFORE SHRI ANIL CHATURVEDI, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO . 254 /P U N/201 7 / ASSESSMENT YEAR : 20 1 3 - 14 SAI SPACECON INDIA PVT. LTD., 11 TH FLOOR, SAI CAPITAL, SENAPATI BAPAT ROAD, PUNE 411016 PAN : AAPCS8607M ....... / APPELLANT / V/S. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 6, PUNE / RESPONDENT ASSESSEE BY : SHRI SUNIL GANOO REVENUE BY : SHRI SAMRAT RAHI / DATE OF HEARING : 18 - 06 - 2019 / DATE OF PRONOUNCEMENT : 03 - 0 9 - 2019 / ORDER PER VIKAS AWASTHY, JM : TH IS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 8, PUNE DATED 2 9 - 11 - 2016 FOR THE ASSESSMENT YEAR 20 1 3 - 14. 2 ITA NO .254/PUN/2017, A.Y. 2013 - 14 2. THE ASSESSEE IN APPEAL HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) ON TWO COUNTS : I . N OTIONAL RENTAL INCOME IN RESPECT OF UN SOLD FLATS HELD AS STOCK - IN - TRADE . II . AD HOC DISALLOWANCE OF RS.2,17,612/ - IN RESPECT OF DEPRECIATION ON VEHICLES, CONVEYANCE AND FUEL EXPENSES, ETC. 3. SHRI SUNIL GANOO APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS A BUILDER AND PROMOTE R. THE ASSESSEE IS HAVING 39 UNSOLD FLATS WHICH WERE HELD AS STOCK - IN - TRADE. IN SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER COMPUTED NOTIONAL RENT IN RESPECT OF AFORESAID FLATS AND MADE ADDITION OF RS.25,53,600/ - . THE LD. AR SUBMITTED THAT TH E PRAYER OF ASSESSEE IS LIMITED TO THE EXTENT THAT NOTIONAL ANNUAL RENTAL VALUE (ALV) DETERMINED BY THE ASSESSEE IS ON THE HIGHER SIDE. THE LD. AR SUBMITTED THAT THE POINTS WHICH NEED TO BE CONSIDERED BY THE ASSESSING OFFICER WHILE DETERMINING ALV OF UNSO LD FLATS ARE : I . THE PERIOD OF TENANCY IS UNCERTAIN BECAUSE THE LANDLORD MAY GET A CUSTOMER FOR SALE OF THE TENEMENT AT ANY TIME AND IN SUCH AN EVENTUALITY THE TENANT WILL BE OBLIGED TO VACATE THE PREMISES WITH IN A SHORT NOTICE. II . IN VIEW OF THE UNCERTAINTY OF THE PERIOD OF TENANCY, THE TENANT CANNOT MAKE FIXED FURNITURE AND FIXTURE OR EXPENSIVE AND ATTRACTIVE INTERIOR WHICH IS A COSTLY AFFAIR. CONSIDERING THE MODERN TRADE PRACTICES, THE COMMERCIAL ESTABLISHMENTS NEED COSTLY FURNITURE AND ATTRACTIVE INTERIOR. IN VIEW OF THESE RESTRICTIONS THE RENT EARNING CAPACITY OF THE UNIT BECOMES NEGLIGIBLE. 3 ITA NO .254/PUN/2017, A.Y. 2013 - 14 III . EVEN IF A TENEMENT IS GIVEN ON RENT FOR A SHORT DURATION SAY FOR THREE MONTHS, IT BECOMES A USED TENEMENT AND AFFECTS THE SALE VALUE OF THE SAME. THE LOSS IN SALE V ALUE ALSO NEEDS TO BE CONSIDERED. 3.1 THE LD. AR FURTHER CONTENDED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) IN THE CASE OF SHRI VISHNU PROMOTERS AND BUILDERS FOR ASSESSMENT YEAR 2014 - 15 DETERMINED ANNUAL RENTAL VALUE OF UNSOLD FLATS BY CONSIDERING TH E AFORESAID POINTS. THE SAME WAS ACCEPTED BY THE DEPARTMENT AS NO APPEAL WAS FILED BY THE DEPARTMENT AGAINST THE SAID ORDER OF COMMISSIONER OF INCOME TAX (APPEALS). 3.2 THE LD. AR FURTHER PLACED RELIANCE ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. M/S. BAJAJ BHAWAN OWNERS PREMISES CO - OP. SOC. LTD. IN INCOME TAX APPEAL NO. 3183 OF 2010 DECIDED ON 16 - 08 - 2011 TO CONTEND THAT THE TRIBUNAL HAS POWER TO DIRECT THE ASSESSING OFFICER TO ASSESS RENTAL INCOME. 3.3 IN RESPECT OF GROUND NO. 3 RAISED IN THE APPEAL, THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER HAS MADE AD HOC DISALLOWANCE OF RS.2,17,612/ - ON THE GROUND THAT PERSON AL U SE OF VEHICLES CANNOT BE RULED OUT. IN THE ABSENCE OF ANY COGENT EVIDENCE TO SHOW PERSON AL USE OF VEHICLES THE AD HOC DISALLOWANCE MADE BY THE ASSESSING OFFICER IS UNWARRANTED. TO FURTHER BUTTRESS HIS CONTENTIONS THE LD. AR PLACED RELIANCE ON DECISION IN THE CASE OF CHAND FRUIT COMPANY PVT. LTD. VS. JT. COMMISSIONER OF INCOME TAX IN ITA NO. 1393/PN/2013 FOR ASSESSMENT YEAR 2009 - 10 DECIDED ON 30 - 09 - 2016. THE LD. AR FURTHER CONTENDED THAT IN FIRST APPELLATE PROCEEDINGS THE 4 ITA NO .254/PUN/2017, A.Y. 2013 - 14 COMMISSIONER OF INCOME TAX (APP EALS) FAILED TO APPRECIATE THE CONTENTIONS OF ASSESSEE AND DISMISSED BOTH THE ISSUES RAISED IN THE PRESENT APPEAL. 4. ON THE OTHER HAND SHRI SAMRAT RAHI REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE IMPUGNED ORDER. THE LD. DR PRAYED FOR CONFIRMIN G THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) AND DISMISSING THE APPEAL OF ASSESSEE. 5. BOTH SIDES HEARD. ORDERS OF THE AUTHORITIES BELOW PERUSED. THE ASSESSEE IN APPEAL HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) I N CONFIRMING NOTIONAL ANNUAL RENTAL VALUE OF UNSOLD FLATS DETERMINED BY THE ASSESSING OFFICER. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE IS HAVING 39 UNSOLD FLATS. THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 23 OF THE ACT TO DETERMINE NOTION AL ANNUAL RENTAL VALUE OF UNSOLD FLATS HELD AS STOCK - IN - TRADE BY THE ASSESSEE. THE ASSESSING OFFICER ADOPTED F AIR R ENTAL V ALUE (FRV) OF EACH UNSOLD FLAT AT RS. 8,000/ - PER MONTH. IT IS NOT EMANATING FROM THE ASSESSMENT ORDERS AS TO HOW THE ASSESSING OFFIC ER HAS COME TO THE CONCLUSION THAT FAIR RENTAL VALUE OF RESIDENTIAL PREMISES IN THE AREA WAS DETERMINED AT RS.8,000/ - . THE ASSESSING OFFICER HAS NOT GIVEN ANY INSTANCES OF THE RENTAL IN THE AREA. THUS, THE ARBITRARINESS IN DETERMINING THE FAIR RENTAL VAL UE OF FLATS IS APPARENT WRIT LARGE. THERE ARE VARIOUS FACTORS THAT NEED TO BE CONSIDERED WHILE DETERMINING FRV VIZ. LOCATIONS OF THE BUILDING/FLATS, SIZE OF FLATS, PERIOD OF TENANCY, ETC. THOUGH, IT MAY NOT BE POSSIBLE TO MATCH EACH AND EVERY ASPECT , H OW EVER, WHILE DETERMINING THE FRV CLOSEST COMPARABLES SHOULD BE SELECTED. IN THE INSTANT CASE, WE OBSERVE THAT THE ASSESSING OFFICER HAS NOT MENTIONED AS TO FROM WHERE HE HAS GATHERED THAT THE RENT 5 ITA NO .254/PUN/2017, A.Y. 2013 - 14 OF RESIDENTIAL PREMISES FOR BALEWADI AREA WAS RANGING IN BE TWEEN RS.8,000/ - TO RS.10,000/ - DURING THAT PERIOD. THUS, WE ARE OF CONSIDERED VIEW THAT THIS ISSUE NEEDS REVISIT TO THE FILE OF ASSESSING OFFICER FOR FRESH DETERMINATION OF FRV. WE HOLD AND DIRECT A CCORDINGLY . THE GROUND NOS. 1 AND 2 ARE PARTLY ALLOWED FOR THE STATISTICAL PURPOSE. 6. IN GROUND NO. 3 OF THE APPEAL, THE ASSESSEE HAS ASSAILED AD HOC DISALLOWANCE OF RS.2,17,612/ - IN RESPECT OF DEPRECIATION ON VEHICLES, CONVEYANCE AND FUEL EXPENSES. THE ASSESSING OFFICER HAS MADE AD HOC DISALLOWANCE ON T HE PRESUMPTIONS THAT PERSONAL USE OF VEHICLES CANNOT BE RULED OUT. HENCE, FROM THE TOTAL CLAIM OF RS.21,76,120/ - 10% WAS DISALLOWED. 7. THE CO - ORDINATE BENCH OF TRIBUNAL IN THE CASE OF CHAND FRUIT COMPANY PVT. LTD. VS. JT. COMMISSIONER OF INCOME TAX (S UPRA) DELETED SIMILAR AD HOC DISALLOWANCE BY OBSERVING AS UNDER : 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS PURCHASED FRUITS FOR WHICH THE PAYMENT WAS MADE IN CASH. WE FIND T HAT THE SELLERS OF GOODS HAVE CONFIRMED ABOUT THE SUPPLY OF GOODS TO THE ASSESSEE AND THE PAYMENTS FOR SALE BEING RECEIVED BY THEM IN CASH. THE ASSESSING OFFICER HAS NOT BROUGHT OUT ANY INSTANCE OF PURCHASE TRANSACTIONS WHICH WERE NOT VERIFIABLE AND HAD ME RELY PROCEEDED TO DISALLOW THE EXPENSES ON AD - HOC BASIS. FURTHER, WE ARE OF THE VIEW THAT THE PAYMENT IN CASH FOR PURCHASE OF AGRICULTURAL COMMODITIES IS COVERED BY RULE 6DD(E) OF THE RULES AND IN SUCH A SITUATION MERELY BECAUSE THE CASH PAYMENTS HAVE BEEN MADE, NO DISALLOWANCE COULD BE MADE. WE ARE OF THE VIEW THAT IN THE AFORESAID FACTS AND WITHOUT BRINGING ANY MATERIAL ON RECORD OF THE PURCHASES BEING NOT VERIFIABLE, THE ASSESSING OFFICER COULD NOT HAVE RESORTED TO MAKE AN AD - HOC DISALLOWANCE. WE THEREFO RE SET - ASIDE DISALLOWANCE MADE BY ASSESSING OFFICER. THUS, THE GROUND NO.4 OF ASSESSEES APPEAL IS ALLOWED. 8. THE REVENUE HAS NOT BROUGHT BEFORE US ANY MATERIAL TO SHOW THAT THE VEHICLES WERE USED FOR THE PERSONAL USE OF DIRECTORS OR ANY EMPLOYEE OF 6 ITA NO .254/PUN/2017, A.Y. 2013 - 14 THE ASSESSEE COMPANY. HENCE, AD HOC DISALLOWANCE MADE BY ASSESSING OFFICER AND CONFIRMED BY THE COMMISSIONER OF INCOME TAX (APPEALS) IS UN - CALLED FOR. WE FIND MERIT IN THE CONTENTIONS OF THE ASSESSEE. ACCORDINGLY, GROUND NO. 3 RAISED IN THE APPEAL IS AL LOWED. 9. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED IN THE TERMS AFORESAID. ORDER PRONOUNCED ON TUESDAY, THE 03 RD DAY OF SEPTEMBER, 2019. SD/ - SD/ - ( / ANIL CHATURVEDI ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 03 RD SEPTEMBER, 2019 . RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 8, PUNE 4. THE PR. COMMISSIONER OF INCOME TAX - 3, PUNE 5 . , , , / DR, ITAT, A BENCH, PUNE. 6 . / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE