Vishwa Realty Ltd., Ahmedabad V. The Income tax Officer,Ward-8(4), Ahmedabad

ITA 2889/AHD/2011

• Counselvise Citation: 288920514 RSA 2011
• Duration Of Justice: 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 30-08-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 21-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T SHANKAR
• Keywords: Opportunity of being heard; Principle of natural justice; Initiation of penalty proceedings

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH, AHMEDABAD BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER I.T.A. NO.2889 / AHD/2011 (ASSESSMENT YEAR 2008-09) VISHWA REALTY LTD., 210, SAKA II, OPP. OLD HIGH COURT, ASHRAM ROAD, AHMEDABAD VS. ITO, WARD 8(4), AHMEDABAD PAN/GIR NO. : AAFCS9548F (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI SUNIL TALATI, AR RESPONDENT BY: SHRI T. SHANKAR, SR. DR DATE OF HEARING: 30.08.2012 DATE OF PRONOUNCEMENT: 21.09.2012 O R D E R PER SHRI A. K. GARODIA, AM:- THIS IS ASSESSEES APPEAL DIRECTED AGAINST THE ORD ER OF LD. CIT(A) XIV, AHMEDABAD DATED 13.09.2011 FOR THE ASSESSMENT YEAR 2008-09. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. THE ID. CIT(A) HAS ERRED IN LAW AND ON TH E FACTS OF THE CASE IN CONFIRMING THE ACTION OF ID. AO TREATING BUSINES S INCOME AS INCOME FROM HOUSE PROPERTY. 2. ALTERNATIVELY AND WITHOUT PREJUDICE TO ABO VE, BOTH THE LOWER AUTHORITIES HAVE FAILED TO APPRECIATE THE FACT THAT EXPENDITURE INCURRED IS IN RESPECT OF THE BUSINESS OF THE APPEL LANT WHICH ARE LEGITIMATELY ALLOWABLE TO THE APPELLANT AND ACCORDI NGLY BOTH THE LOWER AUTHORITIES HAVE ERRED IN NOT ALLOWING SET-OF F OF BUSINESS LOSSES AGAINST THE ALLEGED HOUSE PROPERTY INCOME. 3. BOTH THE LOWER AUTHORITIES HAVE ERRED IN LA W AND ON FACTS IN PASSING THE ORDERS WITHOUT PROPERLY APPRECIATING TH E FACT AND THAT HE FURTHER ERRED IN GROSSLY IGNORING VARIOUS SUBMIS SIONS, EXPLANATIONS AND INFORMATION SUBMITTED BY THE APPEL LANT FROM TIME I.T.A.NO.2889 /AHD/2011 2 TO TIME WHICH OUGHT TO HAVE BEEN CONSIDERED BEFORE PASSING THE IMPUGNED ORDER. THIS ACTION OF BOTH THE AUTHORITIES IS IN CLEAR BREACH OF LAW AND PRINCIPLES OF NATURAL JUSTICE AND THEREFORE DESERVES TO BE QUASHED. 4 THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING ACTION OF THE ID. AO IN LEVYING INTER EST U/S 234B/COFTHE ACT. 5 THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN INITIATING PENALTY PROCEEDINGS U/S 271(L)(C) OF THE ACT. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, EDI T, DELETE, MODIFY OR CHANGE ALL OR ANY OF THE GROUNDS OF APPEAL AT TH E TIME OF OR BEFORE THE HEARING OF THE APPEAL. 2. BRIEF FACTS ARE NOTED BY THE A.O. IN THE ASSESSM ENT ORDER THAT THE ASSESSEE HAS RECEIVED RENTAL INCOME WHICH IS ASSESS ABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY BUT THE SAME HAS BEEN SHOWN BY THE ASSESSEE UNDER THE HEAD INCOME FROM BUSINESS AND P ROFESSION. THE A.O. ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE SAME SHOULD NOT BE TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. SUBMISSIONS WERE MADE BY THE ASSESSEE BEFORE THE A.O. BUT HE WAS NOT SATISFIED AND BY PLACING RELIANCE ON THE JUDGEMENT OF HONBLE APEX C OURT RENDERED IN THE CASE OF EAST INDIA HOUSING LAND DEVELOPMENT CORPORA TION LTD. VS CIT AS REPORTED IN 42 ITR 49 (S.C.) HE ASSESSED THE REN TAL INCOME UNDER THE HEAD INCOME FORM HOUSE PROPERTY AFTER ALLOWING VA RIOUS DEDUCTIONS U/S 24(A) & 24(B). BEING AGGRIEVED, THE ASSESSEE CARRI ED THE MATTER IN APPEAL BEFORE LD. CIT(A) BUT WITHOUT SUCCESS AND NOW, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 3. LD. A.R. REITERATED THE SAME ARGUMENTS WHICH WER E RAISED BY THE ASSESSEE BEFORE LD. CIT(A) REGARDING TAXABILITY OF RENTAL INCOME UNDER THE HEAD INCOME FROM BUSINESS INSTEAD OF INCOME FROM HOUSE PROPERTY. ONE MORE CONTENTION WAS RAISED THAT EVE N IF THE INCOME IS ASSESSED UNDER THE HEAD INCOME FORM HOUSE PROPERTY , IN ADDITION TO THE DEDUCTION ALLOWED BY THE A.O. U/S 24(A) AND (24(B), DEDUCTION SHOULD BE I.T.A.NO.2889 /AHD/2011 3 ALLOWED IN RESPECT OF VARIOUS EXPENSES INCURRED BY THE ASSESSEE IN RESPECT OF MAINTAINING THE COMPANY SUCH AS AUDIT FEE, STATI ONERY, PRINTING AND MISCELLANEOUS EXPENSES, PRELIMINARY EXPENSES, LEGAL AND PROFESSIONAL EXPENSES AND OTHER VARIOUS EXPENSE WHICH ARE GENERA LLY INCURRED FOR MAINTAINING A LIMITED COMPANY. HE ALSO SUBMITTED T HAT INCOME FROM MAINTENANCE CHARGES OF RS.79,805/- FOR PROVIDING VA RIOUS AMENITIES SHOULD AT LEAST BE ASSESSED AS INCOME FROM OTHER S OURCES IF NOT UNDER THE HEAD INCOME FROM BUSINESS AND DEDUCTION SHOULD BE ALLOWED ON THOSE EXPENDITURE WHICH WERE INCURRED FOR EARNING THIS IN COME ALONG WITH THE EXPENSES FOR MAINTAINING THE COMPANY. 4. LD. D.R. SUPPORTED THE ORDERS OF AUTHORITIES BEL OW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT THE A.O. HAS ASSESSED THE RENTAL INCOME OF RS. 16,72,940/- AS WELL AS OFFICE MAINTENANCE CHARGES OF RS.79,805/- UNDER THE HEAD INCOME FROM HOUSE PROPERTY. SO FAR AS THE RENTAL INCOME IS CO NCERNED, WE ARE OF THE CONSIDERED OPINION THAT THE SAME HAS BEEN RIGHTLY A SSESSED BY THE A.O. UNDER THE HEAD INCOME FORM HOUSE PROPERTY BUT REG ARDING THE INCOME FROM OFFICE MAINTENANCE CHARGES OF RS.79,805/-, WE FIND FORCE IN THE SUBMISSIONS OF THE LD. A.R. THAT THE SAME SHOULD BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. ON THIS ASPECT, WE ORDER ACCORDINGLY. THE A.O. IS DIRECTED TO ASSESS THE INCOME FROM OFFI CE MAINTENANCE CHARGES OF RS.79,805/- UNDER THE HEAD INCOME FORM OTHER SOURCES AND ACCORDINGLY, DEDUCTION ALLOWED BY THE A.O. U/S 24(A ) SHOULD BE MODIFIED. 6. REGARDING DEDUCTION TO BE ALLOWED IN RESPECT OF VARIOUS EXPENSES INCURRED BY THE ASSESSEE, WE FIND THAT THE P & L AC COUNT OF THE ASSESSEE FOR THE CURRENT YEAR IS AVAILABLE ON PAGE 48 OF THE PAPER BOOK AND THE DETAILS AS PER SCHEDULE I, J & K ARE AVAILABLE ON P AGE 52 OF THE PAPER I.T.A.NO.2889 /AHD/2011 4 BOOK. OUT OF VARIOUS EXPENSES INCURRED BY THE ASSE SSEE, AND CLAIMED BY THE ASSESSEE IN P & L ACCOUNT, WE FEEL THAT DEDUCTI ON HAS TO BE ALLOWED TO THE ASSESSEE IN RESPECT OF THOSE EXPENSES WHICH WER E INCURRED FOR EARNING MAINTENANCE CHARGES. IN ADDITION TO THIS, DEDUCTIO N SHOULD ALSO BE ALLOWED FOR THOSE EXPENSES WHICH ARE REQUIRED TO BE INCURRED FOR MAINTAINING A LIMITED COMPANY SUCH AS AUDIT FEE, PA RT OF OFFICE EXPENSES, TELEPHONE & TELEX EXPENSES, LEGAL AND PROFESSIONAL FEE, PRELIMINARY EXPENSES WRITTEN OFF ETC. WE, THEREFORE, FEEL THAT TO DECIDE THIS ASPECT AND TO QUANTIFY THE EXPENSES TO BE ALLOWED AS DEDUCTION , THE MATTER SHOULD GO BACK TO THE FILE OF THE A.O. AND HENCE, WE RESTORE THIS MATTER TO THE FILE OF THE A.O. FOR A FRESH DECISION IN THE LIGHT OF ABOVE DISCUSSION AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 7. GROUND NO.4 IS REGARDING INTEREST AND GROUND NO. 5 IS REGARDING INITIATION OF PENALTY PROCEEDINGS. GROUND NO.4 IS CONSEQUENTIAL AND GROUND NO.5 IS PREMATURE AND NEED NO ADJUDICATION A T THIS STAGE. 8. IN THE RESULT, APPEAL OF THE ASSESSEE STANDS PA RTLY ALLOWED FOR STATISTICAL PURPOSES IN THE TERMS INDICATED ABOVE. 9. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE M ENTIONED HEREINABOVE. SD./- SD./- (KUL BHARAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD I.T.A.NO.2889 /AHD/2011 5 1. DATE OF DICTATION 13/09/2012 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 17.09.2012.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S.18/9 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 21/09/2012 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.21/9/12 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 21/09/2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. .