Harvansh Chawla, New Delhi V. ACIT, Circle-5, New Delhi

ITA 300/DEL/2020

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 0575 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2017-2018
• Appeal Filed On: 15-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Competent authority; Notional interest
• Section: 153C; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES C, NEW DELHI BEFORE MS. SUSHMA CHOWLA, VICE PRESIDENT DR. B. R. R. KUMAR, ACCOUNTANT MEMBER (E-COURT MODULE) ITA NO. 300/DEL/2020 : ASSTT. YEAR : 2017 -18 HARVANSH CHAWLA, C-17, NIZAMUDDIN EAST, NEW DELHI - 110014 VS ACIT, CIRCLE-5, NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. ADDPC7559G ASSESSEE BY : SH. ROHIT TIWARI, ADV. REVENUE BY : SH. ANUPAM KANT GARG, CIT DR DATE OF HE ARING: 27 . 0 5 .2020 DATE OF PRONOUNCEMENT: 03 .06 .2020 ORDER PER DR. B.R.R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER OF LD. CIT (A)-35, NEW DELHI DATED 09.12. 2019. 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESS EE: 1. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] IS WRONG, BAD IN LAW & VOID-AB-INITIO. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A)/AO GROSSLY ERRED IN HOLD ING THAT THE ASSESSMENT FOR THE YEAR UNDER CONSIDERATIO N NEED NOT BE BASED UPON SEIZED INCRIMINATING MATERIA L WHILE FRAMING THE ASSESSMENT U/S 153C OF THE INCOME TAX ACT, 1961 (THE ACT'). 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN CONFIRMING THE ITA NO. 300/DEL/2020 HARVANSH CHAWLA 2 IMPUGNED ASSESSMENT ORDER AND REJECTING THE OBJECTION OF APPELLANT THAT THE APPROVAL OF ADDL. C IT U/S 153BD OF THE ACT BEING MECHANICAL AND WITHOUT APPLICATION OF THE MIND. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN CONFIRMING THE ADDITION RS. 63.54,632/-BEING NOTIONAL INTEREST ON SECURITY DEPOSIT RECEIVED BY THE APPELLANT. 4.1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) AND AO FAILED TO APPRECIATE THAT THE APPELLANT HAS TAKEN A SECURITY DEPOSIT & NOT GIVEN THE SECURITY DEPOSIT IN WHICH H E OUGHT TO EARN INTEREST INCOME. 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN CONFIRMING THE ACTION OF THE LD. AO IN CHARGING INTEREST U/S 234A, 234B, 234C AND 234D OF THE ACT, THE SAME MAY BE CANCELLED. 6. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN CONFIRMING THE ACTION OF THE LD. AO IN INITIATING PENALTY PROCEEDI NG U/S 271AAB OF THE ACT, THE SAME MAY BE KINDLY BE CANCELLED. 3. AT THE OUTSET, THE LD. AR SUBMITTED THAT ONLY GR OUND NO. 4 WHICH IS A SUBSTANTIAL GROUND WOULD BE ARGUED AND O THER GROUNDS ARE NOT BEING PRESSED. 4. THE ASSESSEE OWNS A PROPERTY IN DLF, PHASE-II, G URGAON AGAINST WHICH HE HAS RECEIVED A SECURITY DEPOSIT OF RS.5,29,55,200/-FOR LEASING THE PREMISES. DURING TH E YEAR, THE NO RENT HAS BEEN OFFERED TO TAX AND ON ENQUIRY, IT WAS FOUND THAT THE SAID PROPERTY HAS BEEN SOLD FOR RS.2.75 CR ORES IN THE YEAR 2013-14, HENCE NO INCOME FROM RENTALS HAS BEE OFFERED. HOWEVER, THE ASSESSEE CONTINUED TO HOLD THE SECURIT Y DEPOSIT OF RS.5.29 CRORES. THE ASSESSING OFFICER HELD THAT SINCE THE ITA NO. 300/DEL/2020 HARVANSH CHAWLA 3 SECURITY DEPOSIT IS AN UNDERLYING ASSET AND AN INTE REST AMOUNT DEEMED TO HAVE DERIVED FROM SUCH SECURITY DEPOSIT O F RS.63,54,632/- HAS BEEN BROUGHT TO TAX UNDER THE HE AD INCOME FROM OTHER SOURCES. 5. THE LD. CIT (A) CONFIRMED THE ADDITION ON THE GR OUNDS THAT THE ASSESSEE IS BENEFITED BY WAY OF HAVING THE DEPOSIT STILL LYING WITH HIM. 6. AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE THE T RIBUNAL. 7. DURING THE HEARING BEFORE US, THE LD. AR VEHEMEN TLY ARGUED THAT THERE IS NO CONCEPT OF NOTIONAL INTERES T TO BE TAXED ON THE SECURITY DEPOSIT RECEIVED BY THE ASSESSEE AS PER THE PROVISIONS OF INCOME TAX ACT. RELYING ON THE JUDGME NT IN THE CASE OF GODHRA ELECTRICAL CO. LTD. VS CIT 225 ITR 7 46 (SC) AND HIGHWAYS CONSTRUCTIONS CO. PVT. LTD. VS CIT 199 ITR 702 (GAU), HE ARGUED THAT IN THE ABSENCE OF ANY REAL IN COME OR ACCRUAL OF INCOME, NOTIONAL INTEREST CANNOT BE BROU GHT TO TAX BEING A HYPOTHETICAL INCOME. IT WAS ARGUED THAT THE AMOUNT HAS BEEN CONTINUED TO BE SHOWN AS OUTSTANDING LIABI LITY IN THE ASSESSMENT YEAR 2017-18 AND SO AS FROM 2008-09. AS PER THE SECURITY DEPOSIT CLAUSE, THE DEPOSIT HAS BEEN GIVEN FOR A PERIOD OF 9 YEARS AND OWING TO THE LOCK-IN-PERIOD, THE AMO UNT HAS NOT BEEN RETURNED. HOWEVER, HE HAS NOT DISPUTED THE FAC T THAT THE SAID PROPERTY HAS BEEN SOLD ON 05.03.2013. 8. AGAINST THE ARGUMENTS OF THE LD. AR, SH. ANUPAM KANT, LD. DEPARTMENTAL REPRESENTATIVE ARGUED THAT THIS MA TTER HAS TO BE LOOKED IN THE OVERALL SCHEME OF THINGS AND REASO NS LEADING TO THE SEARCH & SEIZURE OPERATION CONDUCTED ON 07. 04.2016 AT ITA NO. 300/DEL/2020 HARVANSH CHAWLA 4 THE PREMISES OF THE ASSESSEE U/S 132 OF THE INCOME TAX ACT, 1961. HE ARGUED THAT THE LD. CIT (A) HAS RIGHTLY CO NFIRMED THE ADDITION OWING TO THE BENEFIT REAPED BY THE ASSESSE E ON ACCOUNT OF ENJOYMENT OF THE SECURITY DEPOSIT LYING WITH HIM EVEN AFTER THE SALE OF THE PREMISES OF DLF, PHASE-I I WHICH HAS BEEN LEASED OUT INITIALLY. IT WAS ARGUED THAT THE P REMISES OF THE ASSESSEE WAS LEASED OUT TO ONE ENTITY NAMELY, M /S. HHG GLOBAL PVT. LTD. AND RECEIVED INTEREST FREE DEPOSIT OF RS.5.29 CRORES. THE DIRECTORS OF THE COMPANY M/S HHG GLOBAL PVT. LTD., SH. D.S. RAWAT WHO SIGNED THE LEASE AGREEMENT HAS B EEN A OFFICE BOY OF THE ASSESSEE AS PER THE SUBMISSION OF THE ASSESSEE DATED 24.12.2018. THE OTHER PERSON SH. UTP AL DEKA WHO HAS BEEN SHOWN TO BE THE REPRESENTATIVE OF M/S HHG GLOBAL PVT. LTD. IS DRIVER IN KARINA AIRLINES INTER NATIONAL LTD. IT WAS ALSO ARGUED THAT THE CONFIRMATIONS SUBMITTED BY THE ASSESSEE THAT SH. K. LEELAWATI W/O LATE SH. K. KRIS HNAN IS THE OWNER OF KARINA AIRLINES INTERNATIONAL LTD. IS INCO RRECT AS THE OWNER IS SH. SANDEEP SINGHANIA AS PER THE INFORMATI ON RECEIVED FROM THE COMPETENT AUTHORITY OF SINGAPORE. HENCE, THE ENTIRE TRANSACTION IS A SHAM TRANSACTION AND THE AO HAS RIGHTLY BROUGHT THE AMOUNT TO TAXATION. TO A PERTIN ENT QUESTION ASKED BY THE BENCH AS TO THE FATE OF THE AMOUNT OF RS.5.29 CRORES RECEIVED AS ADVANCE AND ITS TREATMENT AS PER THE PROVISIONS OF INCOME TAX, THE LD. DR COULD NOT REPL Y. 9. HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERU SED THE MATERIAL AVAILABLE ON RECORD. 10. THE ISSUE BEFORE US IS WHETHER THE NOTIONAL INT EREST IS TAXABLE AS PER THE PROVISION OF INCOME TAX ACT OR N OT. THE ISSUE OF AS TO HOW TO TREAT THE SECURITY DEPOSIT AF TER THE ITA NO. 300/DEL/2020 HARVANSH CHAWLA 5 COMPLETION OF THE LOCK-IN-PERIOD IS NOT THE ISSUE B EFORE US. THE ASSESSING OFFICER HAS NOT BROUGHT ANYTHING ABOUT EA RNING OF THE INTEREST BY THE ASSESSEE WHICH HAS NOT BEEN OFF ERED TO TAX. THE ADDITION WAS ON THE SOLE PREMISE, THAT THE ASSE SSEE HAVING THE SECURITY DEPOSIT MUST HAVE EARNED THE INTEREST. IN ORDER TO TAX ANY AMOUNT, THE REVENUE HAS TO PROVE THAT THE A MOUNT AS INDEED BEEN EARNED BY THE ASSESSEE. ONLY THE INCOME S FALL UNDER THE DEEMED PROVISIONS WHICH HAVE BEEN EXPLICI TLY MENTIONED IN THE INCOME TAX ACT CAN ONLY BE BROUGHT TO TAX UNDER THE DEEMING PROVISION BUT NOT ANY OTHER NOTIO NAL OR HYPOTHETICAL INCOME NOT ENVISAGED BY THE ACT. HENCE , WE HEREBY DIRECT THAT THE ADDITION MADE BY THE ASSESSI NG OFFICER ON ACCOUNT OF NOTIONAL INCOME ON THE SECURITY DEPOS IT CANNOT BE HELD TO BE LEGALLY VALID. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 03/06/2020. SD/- SD/- (SUSHMA CHOWLA) (DR. B.R.R. KUMAR) VICE PRESIDENT ACCOUNTANT MEM BER DATED: 03/06/2020 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR