M/s. Tera Estates Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 3130/DEL/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0572 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2006-2007
• Appeal Filed On: 18-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Keywords: Business income; Depreciation
• Section: 271(1)(c); 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI F BEN CH, NEW DELHI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND SHRI SUDHANSHU SRIVASTAVA, JUDI CIAL MEMBER ITA NO. 3130/DEL/2017 [A.Y 2006-07] M/S TERA ESTATES [PVT] LTD VS. THE DY .C.I .T 2802, TOP FLOOR, GNA BUILDING CENTRAL CIRC LE 25(1) NEW DELHI NEW DELHI PAN: AABCT 5729 R (APPLICANT) ( RESPONDENT) ASSESSEE BY : SHRI SHAILESH GUPTA, ADV DEPARTMENT BY : SHRI SURENDER PAL SR. DR DATE OF HEARING : 17.09.2019 DATE OF PRONOUNCEMENT : 17.09.2019 ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX [APPEALS] 13, NEW DELHI DATED 27.02.2017 PERTAINING TO ASSESSMENT YEAR 2006-07. 2 2. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE AS SESSEE IS THAT THE LD. CIT(A) ERRED IN SUSTAINING THE LEVY OF PENA LTY OF RS. 10,60,766/- IMPOSED U/S 271(1)(C) OF THE INCOME-TAX ACT, 1961 [ HEREINAFTER REFERRED TO AS 'THE ACT']. 3. ROOTS FOR LEVY OF PENALTY LIE IN THE ASSESSMENT ORDER DATED 12.12.2008 FRAMED U/S 143(3) OF THE ACT. 4. RETURNED INCOME OF RS. 35,96,266/- WAS ASSESSED AT RS. 69,96,800/-. THE BUSINESS LOSS OF RS. 34,00,538/- WAS NOT ALLOWED TO BE SET OFF AGAINST THE INCOME FROM HOUSE PROPERTY. 5. THE MATTER TRAVELLED UPTO THE TRIBUNAL AND THE T RIBUNAL IN ITA NO 1657/DEL/2014 DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. THE RELEVANT FINDINGS OF THE CO-ORDINATE B ENCH READ AS UNDER: WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTION AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. THE AS SESSEE COMPANY INCORPORATED AS THE MAIN OBJECT OF THE COMP ANY TO CARRY ON THE BUSINESS OF REAL ESTATE AGENTS AND DEA LERS THEREOF. IT HAS ALSO THE OBJECT OF HIRING OF THE RE AL ESTATE. DURING THE YEAR THAT APPELLANT COMPANY HAS FILED IT S RETURN OF 3 INCOME SHOWING INCOME FROM BUSINESS OF RS. (-) 3400 538/- AND SHOWN INCOME FROM RENTAL UNDER THE INCOME FROM HOUSE PROPERTY OF RS. 6996793/-. THEREBY, THE ASSESSEE HA S SHOWN THE NET TAXABLE INCOME OF RS. 3596254/- AFTER INTER HEAD ADJUSTMENT OF LOSS FROM BUSINESS AND INCOME FROM HO USE PROPERTY. THE LD ASSESSING OFFICER DISALLOWED THE C LAIM OF THE LOSS OF THE ASSESSEE OF RS. 3400538/- HOLDING T HAT ASSESSEE IS NOT CARRYING ON ANY BUSINESS AS THE ONL Y INCOME OF THE ASSESSEE IS RENTAL INCOME. ON LOOKING AT THE PR OFIT AND LOSS ACCOUNT OF THE ASSESSEE THE ASSESSEE HAS SHOWN RENTAL INCOME OF RS. 10262919/- WHICH IS SHOWN BY THE ASSE SSEE AS INCOME FROM HOUSE PROPERTY AS PER COMPUTATION OF TO TAL INCOME AT PAGE NO. 28 OF THE PAPER BOOK. HOWEVER, D URING THE YEAR ASSESSEE HAS ADDITION TO THE ALREADY EXISTING CLOSING STOCK OF INVENTORY OF RS. 2455024/- AND SHOWN THE I TEM IN THE STOCK IN TRADE. IN VIEW OF THIS, IT IS APPARENT THAT ASSESSEE IS CARRYING ON THE BUSINESS OF PURCHASE AN D SALE OF REAL ESTATE. IN ITS WRITTEN SUBMISSION ALSO IN PARA NO. 2 ASSESSEE HAS GIVEN THE BRIEF DESCRIPTION OF THE BUS INESS ACTIVITIES. THESE BUSINESS ACTIVITIES ARE ALSO SHOW N AT PAGE NO. 41 OF THE PAPER BOOK. THE OPENING STOCK OF THE REAL ESTATE WAS RS. 22886575/- AND ADDITION THERETO DURI NG THE YEAR WAS MADE OF RS. 2455024/- RESULTING INTO A CLO SING STOCK OF RS. 25341599/-. IN VIEW OF THIS, IT CANNOT BE SA ID THAT ASSESSEE IS NOT CARRYING ON BUSINESS OF REAL ESTATE . IT IS APPARENT THAT PAGE | 6 ASSESSEE HAS OFFERED INCOME FROM 4 HOUSE PROPERTY OF RS. 6996793/- WHICH IS ALSO ASSES SED AS SUCH BY THE LD ASSESSING OFFICER. THE ONLY DISPUTE IS THAT LOSS OF RS. 3400538/- INCURRED BY THE ASSESSEE, WHICH IS COMPUTED AS PER PAGE NO. 28 OF THE PAPER BOOK WHERE IN, DEPRECIATION ALLOWANCE OF RS. 1911447/- ALONG WITH CERTAIN OTHER EXPENSES HAS RESULTED INTO THIS LOSS BECAUSE THERE IS NO SALE OF THAT REAL ESTATE WHICH IS HELD BY THE ASSES SEE AS STOCK IN TRADE. THE LD CIT (A) HAS INCORRECTLY HELD THAT ASSESSEE IS NOT IN A BUSINESS OTHER THAN RENTAL INCOME FOR THE REASON THAT HE HAS SIMPLY IGNORED THE HOLDING OF HUGE INVENTORY HELD BY THE ASSESSEE OF RS. 2.28 CRORES SINCE LAST YEAR. IN VIEW OF THIS WE ARE OF THE OPINION THAT ASSESSEE IS CARRYING ON BUSINESS OVER AND ABOVE ITS RENTAL INCOME. IT IS NOT THE CAS E OF THE LD ASSESSING OFFICER THAT EXPENDITURE DEBITED BY THE A SSESSEE IS NOT VERIFIABLE BECAUSE THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE AUDITED. FURTHER, THE CLAIM OF THE DEP RECIATION IS ALSO RESULTING FROM OPENING WDV OF THE ASSETS. I N THE PAST YEARS, THE ASSESSEE HAS BEEN CLAIMING SUCH EXPENDIT URE AND DEPRECIATION. IT HAS BEEN STATED BEFORE US THAT SUC H COMPUTATION HAS NOT BEEN DISTURBED. IN VIEW OF THES E FACTS AND CIRCUMSTANCES WE DO NOT AGREE WITH THE FINDING OF THE LOWER AUTHORITIES IN REJECTING THE COMPUTATION OF T HE BUSINESS INCOME OF LOSS OF RS. 3400538/-. IN THE RESULT, WE ALLOW GROUND NO. 2 TO 4 OF THE APPEAL OF THE ASSESSEE REV ERSING THE FINDING OF THE LOWER AUTHORITIES. 5 6. SUBLATO FUNDAMENTO CADIT OPUS, MEANING THEREBY, THAT IN CASE THE FOUNDATION IS REMOVED, THE SUPER STRUCTURE FALL S. SINCE THE FOUNDATION [ASSESSMENT] HAS BEEN REMOVED, THE SUPER STRUCTURE I.E. PENALTY MUST FALL. ACCORDINGLY, THE PENALTY IS DIR ECTED TO BE DELETED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO. 3130/DEL/2017 IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 17.09. 2019. SD/- SD/- [SUDHANSHU SRIVASTAVA ] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 17 TH SEPTEMBER, 2019 VL/ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI 6 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P S/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER