PERSIL EMBROIDERIES PVT. LTD., MUMBAI V. PRINCIPAL COMMISSIONER OF INCOME TAX-RANGE 7, MUMBAI

ITA 3038/MUM/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2061 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 26-04-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income
• Section: 143(3); 115JB; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C ,MUMBAI BEFORE SHRI B.R.BASKARAN, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.3038/MUM/2016 FOR (ASSESSMENT YEAR : 2011-12 ) PERSIL EMBROIDERIES PVT. LTD. 425, KALINGANDAS UDYOG BHAVAN, CENTURY BAZAR LANE, PRABHADEVI MUMBAI-400025. PAN: AAACP4617K VS. PRINCIPAL COMMISSIONER OF INCOME-TAX-7, AAYAKAR BHAVAN, MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.K. LALKAKA (AR) REVENUE BY : SHRI SANJIV DUTT ( AR) DATE OF HEARING : 09.11.2016 DATE OF PRONOUNCEMENT : 11.11.2016 O R D E R PER PAWAN SINGH, JM: 1. THIS APPEAL U/S 253 OF THE INCOME-TAX ACT IS DIRECT ED BY ASSESSEE AGAINST THE LD. COMMISSIONER OF INCOME-TAX-7 (FOR SHORT THE CIT-7) , MUMBAI DATED 29.03.2016 FOR ASSESSMENT YEAR (AY) 2011-12. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED COMMISSIONER OF INCOME-TAX - 7 ERRED IN INITIATING PROCEEDINGS UNDER SECTION 263 OF THE INCOME-TAX ACT ALTHOUGH THE ASSESSMENT O RDER WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE RE VENUE FOR A SIMPLE REASON NO LOSS OF REVENUE WAS INVOLVED SINCE THE ASSESSMENT W AS COMPLETED UNDER SECTION 115JB OF THE INCOME-TAX ACT ON THE TOTAL IN COME ASSESSED UNDER SECTION 115JB AT RS. 1,34,08,297/- WHICH WAS MUCH MORE THAN THE BUSINESS LOSS OF RS. 62,81,769/- ASSESSABLE UNDER NORMAL PROVISIONS OF T HE ACT. 2. WITHOUT PREJUDICE TO ABOVE, THE LEARNED COMMISSI ONER OF INCOME-TAX ERRED IN HOLDING THAT THE APPELLANT IS NOT ENTITLED TO VA CANCY ALLOWANCE UNDER SECTION 23(L)(C) ALTHOUGH THE APPELLANT DULY FULFILLED THE CONDITIONS LAID DOWN IN SECTION 23(1)(C) OF THE INCOME-TAX ACT AND FURTHER BY GIVING CONSEQUENTIAL DIRECTIONS TO THE ASSESSING OFFICER CAUSING PREJUDI CE TO THE APPELLANT. 2 ITA NO. 3038/M/2016 PERSIL EMBROID ERIES PVT. LTD. 3. WITHOUT PREJUDICE TO ABOVE, THE LEARNED COMMISSI ONER OF INCOME-TAX ERRED IN HOLDING THAT WHILE COMPUTING TAXABLE INCOME, EXP ENSES INCURRED OF RS. 3,16,125/- ON PROPERTY KNOWN AS 'OBEROI WOODS' HELD AS STOCK-IN-TRADE SINCE A.Y. 2008-09 OUGHT NOT TO BE REDUCED WHILE ASSESSIN G INCOME UNDER THE HEAD 'INCOME FROM BUSINESS AND PROFESSION' AND GIVING CO NSEQUENTIAL DIRECTIONS TO THE ASSESSING OFFICER CAUSING PREJUDICE TO THE APPE LLANT. 4. WITHOUT PREJUDICE TO ABOVE, THE LEARNED COMMISSI ONER OF INCOME-TAX ERRED IN HOLDING THAT WHILE COMPUTING TAXABLE INCOME, INT EREST EXPENSES INCURRED OF RS. 5,94,851/- PAYABLE TO ICICI HOUSING LOAN OUGHT NOT TO BE REDUCED WHILE COMPUTING INCOME UNDER THE HEAD 'INCOME FROM BUSINE SS AND PROFESSION' AND GIVING CONSEQUENTIAL DIRECTIONS TO THE ASSESSING OF FICER CAUSING PREJUDICE TO THE APPELLANT. WITHOUT PREJUDICE TO ABOVE, EVEN IF THE INCOME IS A SSESSED UNDER THE HEAD 'INCOME FROM PROPERTY' THE SAID INTEREST IS A PERMISSIBLE DEDUCTION UNDER THE PROVISIONS OF SECTION 24(B) OF THE INCOME-TAX A CT. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED COMMISSIONER OF INCOME-TAX - 7 ERRED IN HOLDING THA T EXPLANATION 2 TO SECTION 263 AS INSERTED BY THE FINANCE ACT, 2015 WITH EFFEC T FROM 1 ST JUNE, 2015 IS CLARIFICATORY AND, THEREFORE, RETROSPECTIVE IN NATU RE. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE FILED ITS RETURN OF INCOME FOR RELEVANT AY ON 24.09.2011 DECLARING TOTAL INCOME OF RS. NIL. TH E ASSESSMENT U/S 143(3) OF THE ACT WAS COMPLETED ON 28.11.2013 DETERMINING THE TOT AL LOSS OF RS. 62,81,769/- AND INCOME U/S 115JB AT RS. 1,34,08,297/-. THE ASSESSME NT ORDER WAS REVISED BY PRINCIPAL COMMISSIONER OF INCOME-TAX (CIT) HOLDING THAT ASSESSING OFFICER (AO) FAILED TO CARRY OUT NECESSARY ENQUIRY WITHOUT EXAMI NING ALL ASPECT WHICH WERE REQUIRED TO LOOK INTO FOR ARRIVAL THE CORRECT TAXAB LE INCOME, THUS, THE ORDER OF AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. THE LD. CIT REVISED THE ORDER OF AO HOLDING AS UNDER: I) THE ASSESSEE HAS SHOWN RENTAL INCOME OF RS.8,97, 052/- FROM OBEROI ACCOMMODATION, GALA ETC. AND THE SAME WAS REDUCED W HILE COMPUTING INCOME FROM BUSINESS AND PROFESSION. THE ASSESEE HAD COMPU TED RS.60,082/- ON ACCOUNT OF INCOME FROM HOUSE PROPERTY. THE ASSESSEE HAS ALSO DEBITED AN AMOUNT OF RS.3,16,125/- ON ACCOUNT OF OBEROI WOODS ACCOMMODATION EXPENSES AND RS.5,94,851/- ON ACCOUNT OF INTEREST O N ICICI HOUSING LOAN IN THE PROFIT AND LOSS ACCOUNT. THE ABOVE SAID AMOUNTS SHOULD HAVE BEEN ADDED BACK WHILE COMPUTING INCOME FROM BUSINESS & PROFESS ION AS SUCH EXPENDITURE IS RELATED TO THE INCOME FROM HOUSE PROPERTY. II) ON FURTHER PERUSAL OF CASE RECORDS IT IS SEEN F ROM THE BALANCE SHEET THAT THE ASSESSEE HAD MADE INVESTMENTS IN KALPATRAU HOMES AC COMMODATION FOR AN AMOUNT OF RS.84,43,900/- AND IT WAS NOTICED THAT TH E ASSESSEE HAS NOT OFFERED RENTAL INCOME FROM THE SAID PREMISES. 3 ITA NO. 3038/M/2016 PERSIL EMBROID ERIES PVT. LTD. ACCORDINGLY, NOTICE U/S 263 DATED 21.03.2016 WAS IS SUED TO THE ASSESSEE. THE ASSESSEE CONTESTED THE REVISION PROCEEDINGS AND CON TENDED THAT ASSESSEE RECEIVED RENTAL INCOME FROM THREE PROPERTIES AS UNDER: A) GALA NO. 432-KALYANDAS UDYOG BHAVAN (OFFERED AS INCOME FROM HOUSE PROPERTY) RS. 1,65,000 B) GALA NO. 411- KALYANDAS UDYOG BHAVAN (OFFERED AS INCOME FROM HOUSE PROPERTY) RS. 2,10,600 C) RENT RECEIPT FROM GALAXO SMITHKLINE CONSUMER HEALTH CARE LTD. IN RESPECT OF LETTING OUT OBEROI WOODS ACCOMMODATION PROPERTY 5,21,452 TOTAL RS. 8,97,052 THE ASSESSEE IN ITS REPLY CONTENDED THAT ORDER IS N EITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE. IT WAS FURTHER CONTENDED T HAT THE RENT FROM OBEROI WOODS ACCOMMODATION PROPERTY OF RS. 5,21,451/- HAS NOT BE EN INCLUDED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS THIS PROPERTY IS HE LD AS STOCK-IN-TRADE IS INCLUDED IN THE HEAD OTHER INCOME IN SCHEDULE-J TO THE P& L A/C. THE EXPENSES INCURRED ON ACCOUNT OF OBEROI WOODS EXPENSES AND RS. 5,94,00 0/- BEING INTEREST TO ICICI HOME LOAN WAS CORRECTLY DEBITED TO THE P&L A/C. THE CONTENTION OF ASSESSEE WAS NOT ACCEPTED HOLDING THAT ASSESSEE HAS SHOWN OBEROI WOODS ACCOMMODATION PROPERTY AS STOCK-IN-TRADE UNDER SCHEDULE- K & N OF ITS BALANCE-SHEET. HOWEVER, IN THE COMPUTATION OF INCOME, THE ASSESSEE HAS REDUCED THE ENTIRE RENTAL INCOME OF RS. 8,90,572/- FOR SEPARATE CONSIDERATION AND RENTAL IN COME FROM GALA NO. 432 & 411 HAS BEEN OFFERED UNDER THE HEAD INCOME FROM HOUSE PROPERTY, THE RENTAL INCOME OF RS. 5,21,441/- FROM OBEROI WOODS ACCOMMODATION H AS NOT BEEN OFFERED EITHER AS BUSINESS INCOME OR INCOME FROM HOUSE PROPERTY . THUS, THE AO WAS DIRECTED TO BRING THE RENTAL INCOME OF RS. 5,21,451 /- TO TAX. WITH REGARD TO SECOND ISSUE, THE ASSESSEE CONTENDED THAT NO RENTAL INCOME HAS BEEN OFFERED IN THE PREMISES OF KALPATRAU HOME ACCOMMODATION AS PREMISES WERE VA CANT THROUGHOUT THE YEAR AND THE PROPERTY WAS LET OUT TO MEARSK INDIA LTD. F OR A PERIOD OF THREE YEARS FROM NOVEMBER 2006 TO OCTOBER 2009. DURING THE YEAR, A S UM OF RS. 5,000/- WHICH REMAINED UNRECOVERED FROM MEARSK INDIA LTD. HAD BEE N OFFERED AS INCOME FROM HOUSE PROPERTY. THE PROPERTY WAS ENTITLED FOR VACAN CY ALLOWANCE U/S 23(1)(C). THE LD. CIT ALSO OBSERVED THAT DURING THE REVISION PROC EEDING, THE PROPERTY HAS BEEN 4 ITA NO. 3038/M/2016 PERSIL EMBROID ERIES PVT. LTD. OCCUPIED (LET OUT) TO DIRECTOR OF THE ASSESSEE-COMP ANY. THUS, THE AO WAS DIRECTED TO VERIFY THE FACT ABOUT THE CLAIM OF VACANCY ALLOW ANCE U/S 23(1)(C) OF THE ACT. AGGRIEVED BY THE ORDER PASSED U/S 263 OF THE ACT, T HE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE (AR ) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR REVENUE AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. LD. AR OF ASSESSEE ARGUED THAT THE ASSES SMENT ORDER WAS PASSED BY AO U/S 143(3) OF THE ACT. THE ASSESSEE FILED RETURN OF INCOME AND INCOME WAS ASSESSED U/S 115JB OF THE ACT AS PER THE COMPUTATION PROVIDE D BY ASSESSEE (ACCEPTED BY AO) AT RS. 1,34,08,297/-. IT WAS FURTHER ARGUED THAT TH E ORDER PASSED BY AO WAS NOT AT ALL PREJUDICIAL TO THE INTEREST OF REVENUE. AS TWIN CONDITION OF SECTION 263 OF THE ACT ARE NOT SATISFIED. THUS, THE ORDER PASSED U/S 263 O F THE ACT IS LIABLE TO BE SET-ASIDE. ON THE OTHER HAND, LD. DR FOR REVENUE VEHEMENTLY SU PPORTED THE ORDER OF LD. CIT. LD. DR FOR REVENUE FURTHER INVITED OUR ATTENTION TO THE ORDER OF AO PASSED U/S 143(3) OF THE ACT AND POINTED OUT THAT THERE IS NO EXAMINATION OR DISCUSSION IN RESPECT OF THE VARIOUS HEADS OF THE INCOME CLAIMED BY ASSESSEE. THE ORDER PASSED BY AO IS CRYPTIC AND WITHOUT APPLICATION OF MIND WH ICH IS NOT ONLY ERRONEOUS BUT SUBSTANTIALLY PREJUDICIAL TO THE INTEREST OF REVENU E. THE ASSESSEE WAS CLAIMING OF SET OFF OF LOSSES WHICH WOULD BE REDUCED. 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF THE PAR TIES AND GONE THROUGH THE DECISION OF AUTHORITIES BELOW. WHILE HEARING OF THE APPEAL, THE ATTENTION OF LD. AR OF ASSESSEE WAS INVITED ON COMPUTATION OF INCOME FO R THE YEAR ENDED ON 31.03.2011, WHEREIN THE ASSESSEE HAS REDUCED THE EN TIRE RENT RECEIVED DURING THE YEAR. LD. AR FAIRLY CONCEDED THE MISTAKE IN THE COM PUTATION OF INCOME AND FURTHER ADMITTED THAT THE ASSESSMENT IS BASED ON THE COMPUT ATION OF INCOME WHICH IS ERRONEOUS. HOWEVER, LD. AR OF ASSESSEE ARGUED THAT THE ORDER IS CERTAINLY NOT PREJUDICIAL TO THE INTEREST OF REVENUE. WE HAVE FUR THER DRAWN THE ATTENTION OF LD. AR OF THE ASSESSEE TO THE LETTER DATED 02.05.2011 ( PAGE NO. 20 OF PB) WHICH WAS ISSUED BY ESTATE CONSULTANT CERTIFYING THAT FLAT NO . 61, KALPATARU ROYALE, SION, MUMBAI WAS LYING VACANT SINCE 2009. ON FURTHER ASKI NG, IF THIS DOCUMENT WAS FILED BEFORE THE AO, THE LD. AR OF THE ASSESSEE, FAIRLY C ONCEDED THAT IT WAS NOT FILED DURING THE ASSESSMENT PROCEEDINGS. WE MAY OBSERVE T HAT THIS LETTER IS NOT 5 ITA NO. 3038/M/2016 PERSIL EMBROID ERIES PVT. LTD. SUFFICIENT EVIDENCE TO PROVE THAT PROPERTY WAS LYIN G VACANT SINCE 2009 IN ABSENCE OF OTHER CORROBORATIVE EVIDENCE LIKE ELECTRICITY OR WA TER BILLS OF RELEVANT PERIOD. THUS, WE INSTEAD OF GOING MERIT AND DEMERIT ON ADMISSIBIL ITY OF THIS EVIDENCE ARE OF THE OPINION THAT EVEN THIS DOCUMENT REQUIRED VERIFICATI ON AT THE END OF AO. ON EXAMINATION ON COMPUTATION OF INCOME AND THE ORDER OF AO, WE FIND THAT THE ORDER PASSED BY LD. CIT FULFILLS THE TWIN CONDITION OF SE CTION 263 OF THE ACT I.E. THE ORDER PASSED BY AO WAS ERRONEOUS AS WELL AS CERTAINLY PRE JUDICIAL TO THE INTEREST OF REVENUE. THUS, WE DO NOT FIND ANY REASON TO INTERFE RE WITH THE ORDER OF LD. CIT, HENCE, THE APPEAL FILED BY ASSESSEE IS DISMISSED. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 11 TH NOVEMBER, 2016. SD/- SD/- (B.R.BASKARAN) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 11/11/2016 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/