MOHAMED HUSSEIN HYDERALI NOORANI, MUMBAI V. ITO-WD-4(1), MUMBAI

ITA 2819/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8092 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 15-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Keywords: Opportunity of being heard
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 2819 /MUM/ 2016 ASSESSMENT YEAR: 2010 - 11 MOHAMED HUSSEIN HYDERALI NOORANI 3/302, D WING, ELCO RESIDENCY, HILL ROAD, BANDRA (W), MUMBAI - 400050 VS. ITO - 4(1) SCINDIA HOUSE, MUMBAI - 400008 PAN NO. ACVPN5212A APPELLANT RESPONDENT ASSESSEE BY : MR. VISHWAS MEHENDALE , AR REVENUE BY : MR. SUMAN KUMAR , DR DATE OF HEARING : 21/09/2017 DATE OF PRONOUNCEMENT : 15/12/2017 ORDER PER N.K. PRADHAN, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2010 - 11 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 57 , MUMBAI AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME TAX ACT 1961, (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER: 1. A. THE LEARNED COMMISSIONER OF INC OME - TAX (APPEALS) ERRED IN TREATING THE RENT AMOUNT ACCRUED AND RECEIVED IN THE NEXT ASSESSMENT YEAR, AS RENT INCOME OF CURRENT ASSESSMENT YEAR. THE CIT (APPEALS) AS WELL AS THE A.O. HAS FAILED TO APPRECIATE THE MOHAMED HUSSEIN HYDERALI NOORANI ITA NO. 2819/MUM/2016 2 FACT THAT THE RENT INCOME FROM SOLITAIRE PAR K PREMISES IS ACCRUED AND ACCOUNTED ON MONTH ON MONTH BASIS, THE RENT PERTAINING TO 7 DAYS OF RS.46,667/ - IS ACCRUED AND ACCOUNTED IN SUBSEQUENT ASSESSMENT YEAR. B. THE CIT (APPEALS) AS WELL AS THE A.O. HAS OVERLOOKED THE EVIDENCE PROVIDED AND ERRED IN DI SALLOWING MUNICIPAL TAX PAID OF RS.55,476/ - FOR THE SOLITAIRE PARK PREMISES. 2. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN ACCOUNTING UNREALIZED RENT AS INCOME OF ASSESSEE OF RS.4 , 80 , 126/ - IN RESPECT OF SHOP AT SHYAM VIHAR. THE CIT (APPEALS ) AS WELL AS THE A.O. HAS FAILED TO APPRECIATE THE CONFIRMATION PRODUCED FROM THE TENANT AND BANK STATEMENT SHOWING THE TOTAL RENT RECEIVED AND ACCOUNTED BY ASSESSEE AND ALSO AS CONFIRMED BY THE TENANT. 3. THE LEARNED COMMISSIONER OF INCOME - FAX (APPEALS) E RRED IN UPHOLDING THE DISALLOWANCE OF RS.150480/ - BEING MUNICIPAL TAXES PAID . THE CIT (APPEALS) AS WELL AS THE A.O. HAS FAILED TO APPRECIATE THE FACT AND EV IDENCE PRODUCED BEFORE THEM, THE ASSESSEE HAS PAID THE MUNICIPAL TAXES ALONG WITH OTHER CHARGES OF T HE SOCIETY AND THE SAME IS REFLECTING IN THE BANK STATEMENT. THE ASSESSEE HAS ERRONEOUSLY CLAIMED 75% MUNICIPAL TAXES OF RS.1 , 50 , 480/ - AGAINST 50% INCOME , THEREFORE , THE CLAIM BE ALLOWED TO THE EXTENT OF 50% I.E. RS.1 , 00 , 320/ - 4. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN COMPUTING THE SHORT TERM CAPITAL GAIN AT RS.67 , 670/ - . THE CIT(A) AND THE A.O. HAS IGNORED THE PROOF OF PAYMENT MADE TO BUILDER OF RS.95 , 261/ - (WHICH IS REFLECTING IN SALE AGREEMENT) AND RS.50 , 000/ - PAID AS BROKERAGE WHICH W ERE PRODUCED BEFORE THE A.O. AND CIT(A) AS WELL. 5. A. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN COMPUTING THE TOTAL FRANCHISE INCOME I.E. 100% IN TOTAL INCOME OF ASSESSEE THEREBY ADDING RS.16 , 50 , 000/ - TO TOTAL INCOME OF ASSESSEE. HOWEVER, THE ASSESSEE IS ONLY 75% OWNER IN FRANCHISE BUSINESS AND BALANCE 25% IS OWNED BY BILKIS NOORANI. BILKIS NOORANI HAS ALREADY CONSIDERED 25% FRANCHISE INCOME OF RS.16 , 50 , 000/ - WHILE COMPUTING HER TOTAL INCOME FOR A.Y.2010 - 11. B. THE CIT(A) HAS CONFIRMED TOTAL FRANCHISE INCOME RIGHTLY AT RS.66 , 00 , 000/ - , BUT OUT OF THIS 75% I.E. RS.49 , 50 , 000/ - , HAS ALREADY BEEN OFFERED TO TAX AND TH E BALANCE RS.16 , 50 , 000/ - BEING 25% FRANCHISE INCOME HAS BEEN DECLARED BY BILKIS NOORANI. MOHAMED HUSSEIN HYDERALI NOORANI ITA NO. 2819/MUM/2016 3 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE AY 2010 - 11 ON 26.09.2010 DECLARING TOTAL INCOME OF RS.85,71,990/ - . THE AO MADE THE FOLLOWING ADDITIONS. 3.1 THE ASSESSEE IS OWNER OF FLAT AT VASTU IN BANDRA WEST, WHICH WAS LET OUT FOR A MONTHLY RENT OF RS.2,00,000/ - PER MONTH EFFECTIVE FROM 25.10.2009 WHICH WORKED OUT TO RS.10,00,000/ - . THE AO HAS CONSIDERED RENT FOR SEVEN DAYS ON ACCRUAL BASIS AND ADDED RS.46,667/ - TO INCOME FROM HOUSE PROPERTY. THE AO ALSO DISALLOWED THE MUNICIPAL TAXES PAID OF RS.55,476 / - BECAUSE OF NON - SUBMISSION OF DOCUMENTARY EVIDENCE BY THE ASSESSEE. 3.2 THE ASSESSEE IS THE OWNER OF 70% SHARE IN SHOP AT SHYAM VIHAR, KHAR WEST. THE SAID SHOP WAS RENTED OUT FOR FIVE YEARS SINCE JANUARY 2007 TILL DECEMBER 2011 WITH ESCALATIO N CLAUSE. THE ASSESSEE WAS SUPPOSED TO RECEIVE RS.73,39,095/ - WITH ESCALATION CLAUSE BUT DID NOT RECEIVE THE SAME. THE PARTY DID NOT PAY THE INCREASED AMOUNT AS PER AGREEMENT, BUT KEPT PAYING THE RENT DECIDED AT THE TIME OF INCEPTION OF AGREEMENT PERIOD. T HE ASSESSEE ACTUALLY RECEIVED RS.68,58,969/ - AND DULY OFFERED TO TAX THE SAME AS PER THE COMPUTATION SUBMITTED. THE AO MADE AN ADDITION OF THE DIFFERENCE OF RS.4,80,126/ - . 3.3 THE ASSESSEE IS OWNER OF 50% SHARE IN OFFICE AT SOLITAIRE PARK, WHICH HIS LET OUT. THE AO DISALLOWED THE CLAIM OF THE ASSESSEE OF MUNICIPAL TAXES PAID OF RS.1,50,480/ - BECAUSE OF ABSENCE OF DOCUMENTARY EVIDENCE. MOHAMED HUSSEIN HYDERALI NOORANI ITA NO. 2819/MUM/2016 4 3.4 THE AO OBSERVED THAT DURING THE YEAR UNDER CONSIDERATION, VIDE AGREEMENT DATED 03.05.2009, THE ASSESSEE HAS SOLD FLAT NO. 501 IN THE BUILDING KNOWN AS INFINITY, MAZGAON, MUMBAI ALONG WITH SADIK H. NOORANI FOR A TOTAL CONSIDERATION OF RS.75,00,000/ - . THE SAID FLAT WAS PURCHASED BY THE ASSESSEE VIDE AGREEMENT DATED 27.10.2008 AT COST OF RS.70,00,000/ - . SINCE THE HOLDING PERIOD IS LESS THAN 36 MONTHS, THE AO TREATED THE SAME AS SHORT TERM CAPITAL GAINS. THE AO THUS ARRIVED AT A SHORT TERM CAPITAL GAIN S OF RS .67,670/ - . 3.5. THE AO ASSUMED THE FRANCHISE COMMISSION AT RS.96,00,000/ - AS AGAINST THE ACTUAL RECEIPT OF RS.4 9,50,000/ - . THE AO THEN MADE AN ADDITION OF THE DIFFERENCE OF RS.46,50,000/ - TO T HE TOTAL INCOME OF THE ASSESSEE. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS CONFIRMED THE ADDITION OF RS.46,667/ - MADE BY THE AO FOR RENT PERTAINING TO SEVEN DAYS. SHE HAS ALSO CONFIRMED THE DISALLOWANCE OF MUNICIPAL TAX PAID O F RS.55,476/ - FOR THE SOLITAIRE PARK PREMISES. SIMILARLY, THE DISALLOWANCE OF MUNICIPAL TAXES OF RS.1,50,480/ - HAS BEEN UPHELD. THE LD. CIT(A) CONFIRMED THE ADDITION OF RS. 4,80,126/ - MADE BY THE AO TOWARDS UNREALIZED RENT. SHE ALSO UPHELD THE SHORT TER M CAPITAL GAINS OF RS.67,670/ - COMPUTED BY THE AO. THE LD. CIT(A) HELD THAT THE ASSESSEE HAD AN INCOME OF RS.66,00,000/ - DURING THE YEAR AND SHOULD HAVE DECLARED IT AS SUCH MOHAMED HUSSEIN HYDERALI NOORANI ITA NO. 2819/MUM/2016 5 INSTEAD OF DECLAR ING RS.49,50,000/ - . THEREFORE, SHE UPHELD THE ADDITION OF RS.16,50,000/ - AND GAVE RELIEF OF RS.30,00,000/ - TO THE ASSESSEE. 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT THE AO HAS CONSIDERED RENT FOR FIVE DAYS ON ACCRUAL BASIS AND MADE AN AD DITION OF RS.46,667/ - TO INCOME FROM HOUSE PROPERTY. IT IS SUBMITTED BY HIM THAT THE PART PAYMENT FOR SEVEN DAYS WAS NEVER RECEIVED BY THE ASSESSEE. IT IS FURTHER SUBMITTED THAT THE MUNICIPAL TAXES PAID OF RS.55,476/ - WAS DISALLOWED IN SPITE OF SUBMISSIO N OF DOCUMENTARY EVIDENCE. THUS THE AO SHOULD NOT HAVE DENIED THE CLAIM OF PAYMENT OF MUNICIPAL TAXES BY THE ASSESSEE. REGARDING THE ADDITION OF RS.4,80,126/ - MADE BY THE AO, THE LD. COUNSEL SUBMITS THAT THE ASSESSEE WAS SUPPOSED TO RECEIVE RS.73,39,095/ - WITH ESCALATION CLAUSE BUT DID NOT RECEIVE THE SAME. THE PARTY DID NOT PAY THE INCREASED AMOUNT AS PER THE AGREEMENT, BUT KEPT PAYING THE RENT DECIDED AT THE TIME OF INCEPTION OF THE AGREEMENT. THE ASSESSEE ACTUALLY RECEIVED RS.68,58,969/ - AND DULY OFFERE D TO TAX THE SAME. THEREFORE, THE AO SHOULD NOT HAVE MADE AN ADDITION OF RS.4,80,126/ - . THE LD. COUNSEL SUBMITS THAT THE ASSESSEE ERRONEOUSLY CLAIMED 75% OF RS.2,00,640/ - I.E. RS.1,50,480/ - INSTEAD OF 50% (I.E. RS.1,00,320/ - ). THEREFORE, AT LEAST RS.1,00,320/ - BEING CLAIM TOWARDS MUNICIPAL TAXES PAID BE ALLOWED AND THE ADDITION BE DELETED. IT IS SUBMITTED BY HIM BOTH THE AO AND THE LD. CIT(A) IGNORE D THE PROOF OF PAYMENT MADE TO THE BUILDER OF RS.95,261/ - , WHICH IS REFLECTED MOHAMED HUSSEIN HYDERALI NOORANI ITA NO. 2819/MUM/2016 6 IN SALE AGREEMENT AND RS.50,000/ - PAID AS BROKERAGE. THUS IT IS SUBMITTED THAT THE SHORT TERM CAPITAL GAINS OF RS.67,670/ - MADE BY THE AO BE SET ASIDE. FINALLY IT IS SUBMITTED THAT AS THE BALANCE OF RS.16,50,000/ - BEING 25% FRANCHISE INCOME HAS BEEN DECLARED BY BILKIS NOORANI, THE ADDITION OF THE SAME AS HELD BY THE LD. CIT(A) IS NOT CALLED FOR. 6. ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. REGARDING THE ADDITION OF RS.46,667/ - MADE BY THE AO FOR SEVEN DAYS ON ACCRUAL BASIS, WE FIND THAT THE SAID PART PAYMENT WAS NOT RECEIVED BY THE ASSESSEE AT ALL. THEREFORE, WE DELETE THE ADDITION OF RS.46,667/ - MADE BY THE AO. COMING TO THE ADDITION OF R S.4,80,126/ - , WE FIND THAT THE ASSESSEE WAS SUPPOSED TO RECEIVE RS.73,39,095/ - WITH ESCALATION CLAUSE BUT DID NOT RECEIVE THE SAME. THE ASSESSEE ACTUALLY RECEIVED RS.68,58,969/ - . THE PARTY DID NOT PAY THE INCREASED AMOUNT AS PER THE AGREEMENT. IN VIEW OF T HE ABOVE, WE DELETE THE ADDITION OF RS.4,80,126/ - MADE BY THE AO. 7.1 REGARDING THE DISALLOWANCE OF MUNICIPAL TAXES OF RS.55,476/ - [GR. NO. 1 (B)] AND RS. 1,50,480/ - [GR. NO. 3] , WE ARE OF THE CONSIDERED VIEW THAT THESE REQUIRE VERIFICATION AT THE LEVEL OF THE AO. MOHAMED HUSSEIN HYDERALI NOORANI ITA NO. 2819/MUM/2016 7 ALSO THE FACT THAT RS.16,50,000/ - BEING 25% FRANCHISE INCOME HAS BEEN DECLARED BY BILKIS NOORANI [GR. NO. 5] IS REQUIRED TO BE VERIFIED AT THE LEVEL OF THE AO. ALSO THE CLAIM OF THE ASSESSEE OF PAYMENT MADE TO THE BUILDER OF RS.95,261/ - AND RS .50,000/ - AS BROKERAGE [GR. NO.4] IS REQUIRED TO BE VERIFIED AT THE LEVEL OF THE AO. 7.2 IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THE ISSUES DELINEATED AT PARA 7.1 HEREINBEFORE AND RESTORE THE MATTER TO THE FILE OF THE AO TO MAKE A FRESH ASSESSMENT AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE DIRECT THE ASSESSEE TO FILE THE RELEVANT DOCUMENTS/EVIDENCE BEFORE THE AO. 8. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15/12/2017. SD/ - SD/ - ( MAHAVIR SINGH ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 15/12/2017 RAHUL SHARMA, SR. P.S. 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// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI