MANEK LODGE PROPERTIES, MUMBAI V. ADDL CIT 17(2), MUMBAI

ITA 3130/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9989 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 04-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN LD
• Assessee Lawyers: NITESH JOSHI LD
• Keywords: Business income; Rule of consistency; Additional evidence
• Section: 143(3)

Judgement Text

ITA.NO.3130/MUM/2016 MANEK LODGE PROPERTIES ASSESSMENT YEAR 2011-12 IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI , , BEFORE SHRI MAHAVIR SINGH, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO. 3130/MUM/2016 ( / ASSESSMENT YEAR: 2011-12) MANEK LODGE PROPERTIES 13TH FLOOR PENINSULA BUSINESS PARK TOWER B SENAPATI BAPAT MARG LOWER PAREL(W) MUMBAI 400 013 / VS. A DDITIONAL COMMISSIONER OF INCOME-TAX 17(2) 2 ND FLOOR, AAYKAR BHAVAN M.K.ROAD MUMBAI-400 020 ./ ./PAN/GIR NO. AABTM-7555-P ( /APPELLANT ) : ( !' / RESPONDENT ) ASSESSEE BY : NITESH JOSHI, LD. AR REVENUE BY : M.C.OMI NINGSHEN, LD. DR / DATE OF HEARING : 19/02/2018 / DATE OF PRONOUNCEMENT : 28/02/2018 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2011-12 CONTEST THE ORDER OF LD. COMMISSIONER OF IN COME-TAX (APPEALS)-28 [CIT(A)], MUMBAI, APPEAL NO.CIT(A)-28/IT-140/ADDL.CIT- ITA.NO.3130/MUM/2016 MANEK LODGE PROPERTIES ASSESSMENT YEAR 2011-12 2 12(2)/2014-15 DATED 01/03/2016 BY RAISING THE FOLLOWING GROUNDS O F APPEAL: - (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, AND IN LAW, THE LEARNED CIT(APPEALS) ERRED IN CONFIRMING ADDITION OF GROSS ANNUAL VALUE OF RS.96,30,431/- OF THE PROPERTY VACANT DURING THE YE AR BASED ON MERE SURMISES AND CONJECTURES WITHOUT UNDERSTANDING THE FACT OF THE CASE. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED CIT(APPEALS) ERRED CONFIRMING COMPARABLE RENT AS FA IR RENT OF THE PROPERTY WITHOUT CONSIDERING THE NOTICE ISSUED BY MCGM FOR D EMOLITION OF AUTHORIZED INTERNAL STRUCTURE. (III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(APPEALS) ERRED IN NOT CONSIDERED THE MUNICIPAL RATABLE VALUE AS ANNUAL VALUE OF THE PROPERTY. (IV) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED CIT(APPEALS) ERRED IN NOT CONSIDERING BOARD CIRCULA R AND VARIOUS CASE LAWS RELIED UPON BY YOUR APPELLANT. (V) YOUR APPELLANTS CRAVE LEAVE TO ADD TO, ALTER OR AMEND THE AFORESAID GROUNDS OF APPEAL AS THEY MAY BE ADVISED FROM TIME TO TIME THE ASSESSE VIDE LETTER DATED 13/02/2018 HAS READ A DDITIONAL GROUNDS OF APPEAL WHICH READ AS FOLLOWS:- (VI) THAT THE INCOME EARNED FROM LEASING OF PROPERT Y BE TREATED AS BUSINESS INCOME AND NOT AS INCOME FROM HOUSE PROPERTY. SINCE THE SAME IS A LEGAL GROUND AND DO NOT REQUIRE APPRECIATION OF NEW FACTS, THE SAME IS TAKEN ON RECORD. 2.1 BRIEF FACTS ARE THAT THE ASSESSEE BEING RESIDENT ASSOCIATION OF PERSON EARNING INCOME FROM HOUSE PROPERTY HAS BEEN ASSESSED U/S 143(3) OF THE INCOME TAX ACT, 1961 FOR IMPUGNED AY BY LD. ADDITIONAL COMMISSIONER OF INCOME TAX-CIRCLE 17(2), MUMBAI [AO ] ON 24/03/2014 AT RS.171.09 LACS AFTER CERTAIN ADDITIONS AS AGAINS T RETURNED INCOME OF RS.92.48 LACS FILED BY THE ASSESSEE ON 26/07/2011. 2.2 DURING ASSESSMENT PROCEEDINGS, IT WAS NOTED THA T THE ASSESSEE WAS AN ASSOCIATION OF PERSON [AOP] CONSISTING OF 18 MEMBERS WHO WERE CO-OWNERS OF THE PROPERTY KNOWN AS MANEK LODGE SITUATED AT 33/85, N. ITA.NO.3130/MUM/2016 MANEK LODGE PROPERTIES ASSESSMENT YEAR 2011-12 3 S.PATKAR MARG, MUMBAI [PROPERTY] EACH HAVING UNDIVIDED SHARE THEREIN AS SPECIFIED IN THE AGREEMENT OF AOP DATED 20/08/2004. THE ASSESSEE EARNED RENTAL INCOME FROM THE SAID PROPERTY WHICH W AS OFFERED AS INCOME FROM HOUSE PROPERTY. THE ASSESSEE OWNED 6 FLOORS IN THE SAID PROPERTY OUT OF WHICH FLOORS NUMBERS 4 TO 6 WERE LE T OUT FOR WHOLE OF THE YEAR. FURTHER, THE ASSESSEE OWNED 3 UNITS ON EACH O F FLOOR NUMBERS 7 TO 9 OUT OF WHICH UNIT NO. 2 WAS LET OUT FOR PART OF T HE YEAR WHEREAS UNIT NOS. 1 & 2 REMAINED VACANT FOR WHOLE OF THE YEAR. T HE ASSESSEE, INTER- ALIA, POINTED OUT THAT THE VACANT AREA WAS USED BY THE A SSESSEE ITSELF AND FURTHER, THE SAID PORTIONS WERE SUBJECTED TO CE RTAIN NOTICES BY MCGM DATED 27/01/2011 AND THEREFORE, THE ASSESSEE COULD NOT FIND SUITABLE TENANTS FOR THE SAME DURING THE IMPUGNED A Y. HOWEVER, NOT CONVINCED, LD. AO OPINED THAT THE VACANT PORTIONS W ERE DEEMED TO BE LET OUT WITHIN THE MEANING OF SECTION 22, THE ANNUAL LE TTING VALUE OF WHICH WAS TAXABLE IN TERMS OF SECTION 23(1)(A) AND THE AS SESSEE WAS NOT ELIGIBLE TO CLAIM VACANCY ALLOWANCE U/S 23(1)(C) AG AINST THE SAME. THE TOTAL AREA OF THIS PORTION I.E. UNIT NO. 1 & 3 AGGR EGATED TO 3074.85 SQUARE FEETS, THE RENTAL VALUE OF WHICH HAS BEEN ES TIMATED BY LD. AO @261/- PER SQUARE FEET PER MONTH. ACCORDINGLY, THE SAME TRANSLATED INTO AN ADDITION OF RS.96,30,431/- AGAINST WHICH STATUTO RY STANDARD DEDUCTION OF 30% HAS BEEN ALLOWED TO THE ASSESSEE. 2.3 SO FAR AS UNIT NO. 2 ON FLOOR NUMBERS 7 TO 9 IS CONCERNED, THE LD. AO, SIMILARLY, OPINED THAT VACANCY ALLOWANCE WAS AL SO NOT AVAILABLE TO THE ASSESSEE AGAINST UNIT NO.2 WHICH WAS LET OUT ON LY FOR PART OF THE YEAR. HOWEVER, WE FIND THAT UPON FURTHER APPEAL, TH IS ADDITION HAS BEEN ITA.NO.3130/MUM/2016 MANEK LODGE PROPERTIES ASSESSMENT YEAR 2011-12 4 DELETED BY LD. FIRST APPELLATE AUTHORITY AND THE SA ME IS NOT THE SUBJECT MATTER OF THIS APPEAL. 3. AGGRIEVED AFORESAID, THE ASSESSEE CONTESTED THE SAME WITHOUT ANY SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 01/03/2016 WHERE LD. CIT(A) PLACING RELIANCE ON THE DECISION OF THIS TRIBUNAL RENDERED IN INDIRA S.JAIN [2012 21 TAXMANN.COM 471] HAS CONFIRMED THE STAND OF LD. AO. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BE FORE US. 4. SINCE THE ASSESSEE, VIDE ADDITIONAL GROUNDS OF A PPEAL, HAS RAISED A LEGAL PLEA THAT THE RENTAL INCOME EARNED BY THE A SSESSEE WAS ASSESSABLE AS BUSINESS INCOME IN TERMS OF THE RATIO OF JUDGMENT RENDERED BY HONBLE APEX COURT IN CHENNAI PROPERTIES & INVESTMENTS LIMITED VS. CIT [2015 373 ITR 673] FOLLOWED BY RAYALA CORPORATION PRIVATE LIMITED VS. ACIT [2016 386 ITR 500] , WE TAKE UP THE SAME FIRST. THE LD. AR HAS STRESSED THE POINT THE SINCE ASSESSE ES ONLY SOURCE OF INCOME WAS RENTAL INCOME AND ITS OBJECTIVE WAS TO E ARN RENTAL INCOME IN BUSINESS-LIKE MANNER AND THEREFORE, THE SAME WAS ASSESSABLE AS BUSINESS INCOME CONSIDERING THE RATIO OF CITED JUDGMENT. PER CONTRA, LD. DR VEHEMENTLY OPPOSED THE SAME ON THE GROUND THAT T HE ONLY OBJECTIVE OF THE AOP ASSESSEE WAS TO EARN RENTAL INCOME FROM THE PROPER TY WHICH HAS BEEN ACCEPTED OVER SEVERAL YEARS BY THE ASSESSE E AS WELL AS REVENUE AND THEREFORE, THE SAME WAS RIGHTLY ASSESSE D AS INCOME FROM HOUSE PROPERTY. 5. AFTER CAREFUL CONSIDERATION, WE FIND THAT THE AS SESSEE HAS BEEN CREATED BY AGREEMENT OF AOP DATED 20/08/2004 WITH THE OBJECTIVE OF EARNING RENTAL INCOME FROM CERTAIN PROPERTIES. THE ASSESSEE HAS, OVER THE PAST SEVERAL YEARS, DERIVED RENTAL INCOME FROM THE PROPERTIES AND ITA.NO.3130/MUM/2016 MANEK LODGE PROPERTIES ASSESSMENT YEAR 2011-12 5 OFFERED THE SAME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THIS STAND IS WELL ACCEPTED BY THE ASSESSEE AS WELL AS R EVENUE SINCE ITS INCEPTION, WHICH IS AN ADMITTED FACT. ALTHOUGH, WE ARE CONSCIOUS OF THE FACT THAT THE PRINCIPLES OF RES-JUDICATA DO NOT APPLY TO INCOME TAX PROCEEDINGS YET THERE BEING NO CHANGE IN FACTS OR C IRCUMSTANCES, THE REVENUE AS WELL AS ASSESSEE IS PRECLUDED FROM SHIFT ING STANDS WITHOUT ANY COGENT REASONS IN VIEW OF RULE OF CONSISTENCY. THIS IS WELL SUPPORTED BY THE OBSERVATION OF HONBLE APEX COURT RENDERED I N RADHASOAMI SATSANG VS. CIT [193 ITR 321] WHEREIN HONBLE COURT HAS OBSERVED AS UNDER:- STRICTLY SPEAKING, RES JUDICATA DOES NOT APPLY TO INCOME-TAX PROCEEDINGS. THOUGH, EACH ASSESSMENT YEAR BEING A U NIT, WHAT WAS DECIDED IN ONE YEAR MIGHT NOT APPLY IN THE FOLLOWIN G YEAR; WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND P ARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING TH E ORDER, IT WOULD NOT BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE C HANGED IN A SUBSEQUENT YEAR. THUS, IT CAN BE STATED THAT ALTHOUGH THE PRINCIPLE OF RES-JUDICATA DO NOT GENERALLY APPLY TO INCOME TAX PROCEEDINGS SINCE AN ASSESSMENT FOR A PARTICULAR YEAR IS FINAL AND CONCLUSIVE BETWEEN THE PARTIES ONLY IN RELATION TO THE ASSESSMENT FOR THAT YEAR AND IT IS NOT BINDI NG EITHER ON THE ASSESSEE OR THE DEPARTMENT IN A SUBSEQUENT YEAR. HO WEVER, IF THE EARLIER DECISION IS NOT ARBITRARY OR PERVERSE OR AD MITTED BY THE RESPECTIVE PARTIES, THEN THE PARTIES ARE NOT PERMITTED TO DEVI ATE FROM ITS EARLIER STAND. 6. SO FAR AS THE RELIANCE OF THE LD. AR ON THE JUDG MENT OF HONBLE COURT IN CHENNAI PROPERTIES & INVESTMENTS LIMITED VS. CIT [SUPRA] IS ITA.NO.3130/MUM/2016 MANEK LODGE PROPERTIES ASSESSMENT YEAR 2011-12 6 CONCERNED, WE FIND THAT IN THE CITED CASE THE ASSES SEE WAS A CORPORATE ENTITY WHICH WAS STRICTLY GOVERNED BY ITS MEMORANDUM & ARTICLES OF ASSOCIATION WHICH CONTAINED MULTIPLE OBJECTS TO BE PURSUED BY T HE CORPORATE ENTITY. UPON PERUSAL OF PARA-5 OF THE CIT ED JUDGMENT, WE FIND THAT THE MAIN OBJECT OF THE APPELLANT COMPANY WAS T O ACQUIRE AND HOLD THE PROPERTIES AND TO LET OUT THOSE PROPERTIES AS W ELL AS MAKE ADVANCES UPON THE SECURITY OF LANDS AND BUILDINGS OR OTHER P ROPERTIES OR ANY INTEREST THEREIN WHICH IS FACTUALLY DIFFERENT IN TH E PRESENT CASE. HERE, WE FIND THAT THE ASSESSEE IS NOTHING BUT ASSOCIATION O F CO-OWNERS OF CERTAIN PROPERTIES WHOSE ONLY OBJECTIVE IS TO DERIVE INCOME FROM LETTING OUT OF PROPERTY AND NOTHING MORE. IF THE CONTENTION OF LD. AR IS TO BE ACCEPTED, THEN EVERY ASSESSEE EXCLUSIVELY DERIVING RENTAL INC OME WOULD NECESSARILY BE ASSESSED UNDER BUSINESS HEAD AS AGAINST SPECIFIC HEAD OF INCOME FROM HOUSE PROPERTY. THEREFORE, ON FACTUAL MATRIX, WE ARE UNABLE TO CONVINCE OURSELVES WITH THE ARGUMENTS RAI SED BY LD. AR THAT THE STATED INCOME WAS ASSESSABLE AS BUSINESS INCOME. THEREFORE, THE ADDITIONAL GROUND RAISED BY THE ASSESSEE STANDS DIS MISSED. 7. SO FAR AS THE MERITS OF THE CASE ARE CONCERNED, LD. AR, DRAWING OUR ATTENTION TO THE DOCUMENTS PLACED IN THE PAPER-BOOK, PLEADED THAT THE UNITS IN QUESTION WERE RENTED BY THE ASSESSEE IN EA RLIER YEARS AND THE VACANCY ALLOWANCE ON THESE PORTIONS WAS AVAILABLE T O THE ASSESSEE IN TERMS OF STATUTORY PROVISIONS OF SECTION 23(1)(C). OUR ATTENTION IS FURTHER DRAWN TO THE APPLICATION DATED 13/02/2018 SEEKING A DMISSION OF ADDITIONAL EVIDENCES UNDER RULE 29 OF THE INCOME TA X (APPELLATE TRIBUNAL) RULES, 1963. PER CONTRA, LD. DR SUPPORTED THE STAND TAKEN BY THE LOWER AUTHORITIES. ITA.NO.3130/MUM/2016 MANEK LODGE PROPERTIES ASSESSMENT YEAR 2011-12 7 8. UPON CAREFUL PERUSAL OF THE SAME, THE BENCH FORM ED AN OPINION THAT THE FACTUAL MATRIX REQUIRES RE-APPRECIATION / RE-ADJUDICATION IN THE LIGHT OF VARIOUS SUBMISSIONS MADE BY THE ASSESSEE A S WELL AS IN TERMS OF ADDITIONAL EVIDENCES ADDUCED TO SUPPORT THE SAME. T HEREFORE, WITHOUT DELVING INTO THE MERITS OF THE CASE, THE MATTER STA NDS REMITTED BACK TO THE FILE OF LD. AO KEEPING ALL ISSUES OPEN WITH A DIREC TION TO THE ASSESSEE TO SUBSTANTIATE HIS CASE FAILING WHICH LD. AO SHALL BE AT LIBERTY TO DECIDE THE SAME AS PER LAW ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. 9. RESULTANTLY, THE ASSESSEES APPEAL STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH FEBRUARY, 2018 SD/- SD/- (MAHAVIR SINGH) ( MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 28. 02.2018 SR.PS:- THIRUMALESH / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT 3. * ( ) / THE CIT(A) 4. * / CIT CONCERNED 5. !$- , - , / DR, ITAT, MUMBAI 6. ./ / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI