M/s. Hospital Management Group Orthonova, New Delhi V. ITO, New Delhi

ITA 255/DEL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7501 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 20-07-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 13-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMRIT LAL
• Assessee Lawyers: DEEPAK OSTWAL
• Keywords: Principle of natural justice; Retrospective amendment; Wrong claim

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C: NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER, AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER ITA NO. 255/DEL /2014 ASSESSMENT YEAR: 2010-11 M/S HOSPITAL MANAGEMENT GROUP ORTHONOVA VS. T HE I.T.O C-5/29, SAFDARJUNG DEVELOPMENT AREA WARD -37(2) NEW DELHI NEW DELHI PAN : AAFFG 0992 G [APPELLANT] [RESPONDENT] DATE OF HEARING : 20.07.2016 DATE OF PRONOUNCEMENT : 04.08.2016 APPELLANT BY : SHRI DEEPAK OSTWA L, CA RESPONDENT BY : SHRI AMRIT LAL, SR. DR ORDER PER CHANDRA MOHAN GARG, JUDICIAL MEMBER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE CIT(A)-XXVIII, NEW DELHI, DATED 01/10/ 2013 FOR A.Y 2010-11 PASSED IN FIRST APPEAL NO. 143/2012-13. 2. THE EFFECTIVE GROUNDS RAISED BY THE ASSESSEE REA D AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE LD. CIT (A)-XXVIII, NEW DELHI HAS ERRED BOTH ON FACTS AND I N LAW IN UPHOLDING THE IMPUGNED ORDER PASSED BY THE RESPONDE NT ILLEGALLY, VIOLATIVE OF NATURAL JUSTICE, WITHOUT FA IR AND OBJECTIVE 2 ITA NO. 255/D EL/2014 2 APPLICATION OF MIND TO THE FACTS OF THE CASE AND TH E LAW APPLICABLE AND WITHOUT BEING GUIDED BY THE BINDING DECISIONS OF COURTS AND TRIBUNALS AND HENCE LIABLE TO BE SET ASI DE AND QUASHED AND DECLARED NON-EST IN LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E LD. CIT (A)- XXVIII, NEW DELHI HAS ERRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE IMPUGNED ORDER PASSED BY THE RESPONDE NT BY MAKING ILLEGAL ADDITIONS TO THE TUNE OF RS. 14,66,2 50/- OUT OF RENT PAID/CLAIMED BY THE APPELLANT AND LD. CIT (A) OUGHT TO HAVE BEEN SET ASIDE AND FAILURE TO DO SO HAS VITIATED TH E IMPUGNED ORDER, THEREFORE IMPUGNED ORDER LIABLE TO BE SET AS IDE AND QUASHED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE LD. CIT (A)- XXVIII, NEW DELHI HAS ERRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE IMPUGNED ORDER PASSED BY THE RESPONDE NT BY MAKING ILLEGAL ADDITIONS TO THE TUNE OF RS. 1,15,40 3/- OUT OR VEHICLE RUNNING AND MAINTENANCE EXPANSE AND TELEPHO NE EXPANSES CLAIMED BY THE APPELLANT ON THE BASIS OF P RESUMPTION OF BEING PERSONAL USE AND LD. CIT (A) OUGHT TO HAVE BEEN SET ASIDE AND FAILURE TO DO SO HAS VITIATED THE IMPUGNE D ORDER, THEREFORE IMPUGNED ORDER IS LIABLE TO BE SET ASIDE AND QUASHED. 4. AO HAS ERRED IN PASSING THE IMPUGNED ORDER WITH OUT ISSUING SHOW CAUSE NOTICE SPECIFICALLY PROPOSING TO MAKE ANY ADDITION NOR ANY EFFECTIVE OPPORTUNITY OF HEARING W AS PROVIDED TO THE APPELLANT AND LD. CIT (A) HAS ERRED IN UPHOL DING THE UNLAWFUL ACTION OF THE AO AND HENCE, THE IMPUGNED O RDER PASSED IN VIOLATION OF NATURAL JUSTICE IS LIABLE TO BE QUA SHED. 3 ITA NO. 255/D EL/2014 3 5. THE RESPONDENT IS ALSO WRONG IN RAISING ILLEGAL DEMANDS OF TAX, INTEREST AND PENALTIES MECHANICALLY AND PERVER SELY AND ALL THE DEMANDS AS WELL AS PENALTY NOTICE BE QUASHED. GROUND NOS. 1 AND 2 3. APROPOS THESE GROUNDS, WE HAVE HEARD THE RIVAL S UBMISSIONS AND HAVE CAREFULLY PERUSED THE RELEVANT MATERIAL ON REC ORD. THE LD. AR SUBMITTED THAT THE LD. CIT(A) HAS ERRED ON FACTS AN D IN LAW IN HOLDING THE ADDITION MADE BY THE A.O ILLEGALLY VIOLATIVE OF PRINCIPLES OF NATURAL JUSTICE, WITHOUT FAR AND OBJECTIVE APPLICAT ION OF MIND TO THE FACTS OF THE ISSUE AND LAW APPLICABLE AND WITHOUT B EING GUIDED BY THE BINDING DECISIONS OF COURTS AND TRIBUNAL HENCE THE SAME MAY BE SET ASIDE AND QUASHED IN TOTO. THE LD. AR VEHEMENTLY C ONTENDED THAT THE IMPUGNED ADDITION TO THE TUNE OF RS. 14.66.250/- OU T OF RENT PAID/CLAIMED BY THE ASSESSEE HAS BEEN MADE WITHOUT ANY BASIS, THUS THE SAME SHOULD HAVE BEEN SET ASIDE BY THE LD. CIT( A). THE LD. AR POINTED OUT THAT HE LD. CIT(A) NOTED THAT THE IMPUG NED AMOUNT OF RENT HAS INCREASED RETROSPECTIVELY AND PAID DURING THE YEAR AFTER DEDUCTING THE TDS AND THE ASSESSEE IS MAINTAINING I TS ACCOUNTS AS PER MERCANTILE SYSTEM OF ACCOUNTING. THEREFORE, THE LD . AR CONTENDED THAT THE RENT PAID IN PURSUANCE TO THE DEMAND OF AD DITIONAL RENT WAS MADE BY THE OWNER OF THE PROPERTY DURING THE YEAR W ITH RETROSPECTIVE EFFECT WAS PAID DURING THE YEAR AFTER TDS HAS TO BE ALLOWED IRRESPECTIVE OF THE FACT IT WAS RELATED TO PREVIOUS YEAR. 4 ITA NO. 255/D EL/2014 4 4. PER CONTRA, THE LD. COUNSEL OF THE REVENUE SUPPO RTED THE ACTION OF THE A.O AND CONTENDED THAT THE RENT EXPENSES CLA IMED BY THE ASSESSEE DOES NOT RELATE TO THE YEAR UNDER CONSIDER ATION, HENCE THE CLAIM WAS RIGHTLY REJECTED. 5. ON CAREFUL CONSIDERATION OF THE ABOVE, AT THE VE RY OUTSET, WE NOTE THAT THE IMPUGNED RENT AMOUNT WAS THE AMOUN T OF ADDITION RENT WHICH WAS ENHANCED AS PER LEASE DEED AT THE REQUEST OF THE OWNER OF THE PROPERTY DURING THE YEA R WITH RETROSPECTIVE EFFECT. THE ASSESSEE HAD NO OCCASION TO MAKE ANY PROVISION FOR THE SAME IN THE EARLIER A.Y AS THE EN HANCED PROVISIONS WAS INVOKED BY THE OWNER DURING THE FINA NCIAL YEAR UNDER CONSIDERATION WITH RETROSPECTIVE EFFECT. THE AO HAS NOT ALLEGED THAT HE CLAIM IS BOGUS OR PROPERTY WAS NOT USED FOR THE BUSINESS OF THE ASSESSEE. IT IS ALSO NOT A CASE OF THE AO THAT THE ASSESSEE MADE PAYMENT OUT OF AMBIT OF THE LEASE AGR EEMENT. MERELY BECAUSE THE RENT WAS ENHANCED WITH RETROSPEC TIVE EFFECT AS PER PROVISIONS OF THE LEASE DEED THE PART PERTAI NING TO EARLIER PERIOD CANNOT BE DISALLOWED. UNDER THE ABOVE NOTED OBSERVATIONS, WE DECLINE TO AGREE WITH THE CONCLUSI ON OF THE AUTHORITIES BELOW ON THIS ISSUE AND CONSEQUENTLY, W E HOLD THAT THE IMPUGNED ADDITION IS NOT SUSTAINABLE AND THUS W E DEMOLISH THE SAME. ACCORDINGLY, GROUND NOS. 1 AND 2 OF THE ASSESSEE ARE 5 ITA NO. 255/D EL/2014 5 ALLOWED AND THE AO IS DIRECTED TO ALLOW THE CLAIM O F THE ASSESSEE AND TO DELETE THE DISALLOWANCE. GROUND NOS. 3 AND 4 6. THE LD. AR APROPOS THESE GROUNDS CONTENDED THAT THE CIT(A) HAS ERRED IN LAW AND ON THE FACTS IN UPHOLDING THE BASELESS ADDITION MADE BY THE AO OUT OF VEHICLE RUNNING AND MAINTENANCE EXPENSES AND TELEPHONE EXPENSES CLAIMED BY THE ASSE SSEE ON THE PRESUMPTION OF PERSONAL USE. THE LD. AR POINTED OU T THAT THERE IS NO ALLEGATION OF BOGUS CLAIM AND THE PARTNERS OF THE FIRM HAVE SEPARATE CARS AND TELEPHONE FOR PERSONAL USE. THUS NO DISALLOWANCE CAN BE MADE. THE LD. DR REPLIED THAT THE ASSESSEE DID NOT PRODUCE LOG BOOK AND DETAILS OF CAR AND TEL EPHONE USE. HENCE THE AO WAS QUITE CORRECT IN MAKING DISALLOWAN CE OF 10% OF THE TOTAL CLAIM OF THE ASSESSEE IN THIS REGARD. 7. ON CAREFUL CONSIDERATION OF THE ABOVE, FROM THE ASSESSMENT ORDER, WE NOTE THAT THE AO ASKED THE ASSESSEE TO SU BMIT DETAILS OF CAR USE LOG BOOK AND DETAILS OF TELEPHONE AND TE LEX EXPENSES, BUT HE ASSESSEE FAILED TO SUBMIT THE SAME AND THE L D. AR FAIRLY ACCEPTED BEFORE THE AO THAT NO LOG BOOK AND DETAILS OF USE OF CAR, TELEPHONE AND TELEX HAVE BEEN MAINTAINED. THI S FAILURE PROMPTED THE AO TO MAKE DISALLOWANCE OF 10% OF THE TOTAL CLAIM 6 ITA NO. 255/D EL/2014 6 OF THE ASSESSEE. THE CIT(A) UPHELD THE DISALLOWANC E BY OBSERVED THAT THE DISALLOWANCE MADE BY THE AO IS VERY REASON ABLE. 8. BEFORE US, IT WAS VEHEMENTLY CONTENDED BY THE LD . AR THAT THE PARTNERS HAVE SEPARATE CARS AND TELEPHONE FOR P ERSONAL USE BUT THIS FACT WAS NOT BROUGHT TO THE NOTICE OF THE AO AND THE CIT(A) DURING THE PROCEEDINGS. NO DETAILS OF EVEN CAR AND TELEPHONES MAINTAINED BY THE PARTNERS FOR PERSONAL USE HAVE BEEN SUBMITTED NEITHER BEFORE THE AUTHORITIES BELOW NOR EVEN BEFORE THE TRIBUNAL. THUS, WE DECLINE TO ACCEPT TH E CONTENTION OF THE ASSESSEE BEING BASELESS AND DEVOID OF MERITS . ACCORDINGLY, GROUND NOS. 3 AND 4 OF THE ASSESSEE AR E DISALLOWED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS PARTLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 04.08. 2016. SD/- SD/- (S.V. MEHROTRA) (C.M. GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 04 TH AUGUST, 2016 VL/ 7 ITA NO. 255/D EL/2014 7 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI