Wingflow Construction Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 3157/DEL/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3705 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 18-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SARAS KUMAR
• Assessee Lawyers: R K MEHRA
• Keywords: Business income; Depreciation; Business expenditure; Rule of consistency
• Section: 143(3); 234B; 143(1); 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SH. KULDIP SINGH, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER ITA NO. 3157/DEL/2017 : ASSTT. YEAR : 2010-11 WINGFLOW CONSTRUCTIONS PVT. LTD., G-2/43A, MIDDLE CIRCLE, CONNAUGHT PLACE, NEW DELHI-110001 VS INCOME TAX OFFICER, WARD-27(3), NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. A A ACW0016D ASSESSEE BY : SH. R. K. MEHRA, CA REVENUE BY : SH. SARAS KUMAR, SR. DR DATE OF HEARING: 23.01.2020 DATE OF PRONOUNCEMENT: 24.02.2020 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)-XXI, NEW DELHI DATED 10.03 .2014. 2. FOLLOWING THE GROUNDS HAVE BEEN RAISED BY THE AS SESSEE: 1.(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE PETITIONER COMPANYS CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND ON FACTS IN UPHOLDING TH E ASSESSMENT ORDER MADE BY THE LEARNED ASSESSING OFFICER, IN TRE ATING THE BUSINESS INCOME EARNED FROM LEASING OF PROPERTIES A S INCOME FROM HOUSE PROPERTY INSTEAD OF ASSESSING THE SAME TO TA X UNDER THE HEAD PROFITS & GAINS OF BUSINESS, THUS BREAKING T HE RULE OF CONSISTENCY AS WELL. (B)THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E PETITIONER COMPANYS CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND ON FACTS IN UPHOLDING TH E ASSESSMENT ORDER MADE BY THE LEARNED ASSESSING OFFICER, IN WRONGLY TREATING THE GROSS BUSINESS RECEIPTS OF RS. 10170434 AS THE ANNUAL VALUE OF THE PROPERTY (IES) AND ASSESSING TH E SAME AS INCOME FROM HOUSE PROPERTY. ITA NO. 3157/DEL/2017 WINGFLOW CONSTRUCTION PVT. LTD. 2 2. WITHOUT PREJUDICE TO THE AFORESAID GROUNDS OF AP PEAL, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FURTHE R ERRED IN LAW AND ON FACTS IN UPHOLDING THE ASSESSMENT ORDER OF T HE LEARNED ASSESSING OFFICER IN NOT ALLOWING DEDUCTION OF THE BUSINESS EXPENDITURES AGGREGATED TO RS.7911424 (SUBJECT TO A PPROPRIATE ADJUSTMENT OF CLAIM OF DEPRECIATION AS PER INCOME T AX) CLAIMED IN THE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31-0 3-2010, BY TAKING A DIFFERENT STAND IN THE ASSESSMENT YEAR IN APPEAL. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E PETITIONER COMPANYS CASE, THE LEARNED ASSESSING OFFICER, ERRE D IN LAW IN CHARGING INTEREST UNDER SECTION 234B OF THE INCOME TAX ACT, 1961. 3. BRIEF HISTORY OF THE CASE IS THAT, THE ASSESSEE RECEIVED INCOME FROM RENT AND DECLARED THE SAME UNDER THE HEAD PROFIT & GAINS OF BUSINESS AND PROFESSION INCOME UPTO ASSESSMENT YEAR 1996-97. THE ASSESSEE CHANGED THE HEAD OF INCOME IN ASSESSMENT YEAR 1997-98 AND C LAIMED RENTAL INCOME AS HOUSE PROPERTY INCOME WITH THE BENEFIT OF STATUTORY DEDUCTION AND ALSO BUSINESS INCOME ON THE SALE OF PROPERTY. 4. DURING THE ASSESSMENT YEAR 1998-99, THE ASSESSEE HAD CLAIMED BOTH THE RENTAL INCOME UNDER THE HEAD HOUSE PROPERT Y AND ALSO BUSINESS INCOME UNDER THE HEAD BUSINESS. THE ASSESSING OFFIC ER HAD TREATED THE ENTIRE INCOME AS BUSINESS INCOME. THE ORDER OF THE ASSESSING OFFICER WAS CONFIRMED BY THE LD. CIT(A) AND THE SAME WAS ALSO C ONFIRMED BY THE TRIBUNAL VIDE THE ORDER DATED 31.08.2004 IN ITA NO. 1615/DEL/2002. DURING THE ASSESSMENT YEARS 1996-97 TO 2003-04, THE ASSESSEE HAD SHOWN THE RENTAL INCOME AS WELL AS BUSINESS INCOME. BUT THE ASSESSING OFFICER TREATED THE ENTIRE INCOME AS BUSINESS INCOM E FROM ASSESSMENT YEARS 1996-97 TO 2003-04. DURING THE ASSESSMENT YEA RS 2004-05 TO 2010-11, THE ASSESSEE STARTED SHOWING THE RENTAL IN COME AS BUSINESS INCOME AND ALSO CLAIMED ALL THE BUSINESS EXPENSES A LTHOUGH THE INCOME WAS MAINLY FROM THE RENT ONLY. 5. DURING THE ASSESSMENT YEAR 2008-09, THE ASSESSEE HAD THE RENTAL INCOME ONLY BUT THE SAME WAS SHOWN AS BUSINESS INCO ME AND ALL TYPES OF ITA NO. 3157/DEL/2017 WINGFLOW CONSTRUCTION PVT. LTD. 3 BUSINESS EXPENSES WERE CLAIMED BY THE ASSESSEE. THE ASSESSING OFFICER HAD TAKEN UP THE CASE FOR SCRUTINY AND THE RENTAL I NCOME WAS TREATED AS HOUSE PROPERTY INCOME AND THE STATUTORY DEDUCTION @ 30% WAS ALLOWED AND CONSEQUENTLY ALL THE BUSINESS EXPENSES WERE DIS ALLOWED. THE ASSEESSEE HAD APPEALED AGAINST THE ORDER OF THE ASS ESSING OFFICER AND THE LD. CIT(A) HAD ALLOWED THE APPEAL OF THE ASSESSEE A ND THE INCOME OF THE ASSESSEE WAS TREATED AS BUSINESS INCOME AND CONSEQU ENTLY ALL THE EXPENSES WERE ALLOWED. 6. DURING THE ASSESSMENT YEAR 2009-10, THE ASSESSEE AGAIN CLAIMED THE HOUSE PROPERTY INCOME AS BUSINESS INCOME WITH A LL THE CLAIM OF THE BUSINESS EXPENSES ON THE INCOME OF THE ASSESSEE WHI CH WAS FROM RENTALS. THE RETURN OF THE ASSESSEE HAS BEEN ACCEPTED U/S 14 3(1) AND NO SCRUTINY ASSESSMENT HAS BEEN MADE BY THE ASSESSING OFFICER. 7. DURING THE ASSESSMENT YEAR 2010-11, THE ASSESSEE HAS THE RENTAL INCOME ONLY OF RS.1,01,70,436/- AND THE INCOME FROM THE OTHER SOURCES OF RS.72,283/- AND THE ASSESSEE HAS DECLARED THE RENTA L INCOME AS BUSINESS INCOME AND HAS CLAIMED THE VARIOUS GENERAL EXPENSES OF RS. 79,11,423/- AND HAS FILED THE RETURN INCOME OF RS. 25,72,334/-. THE CASE WAS TAKEN UP FOR SCRUTINY AND THE ASSESSING OFFICER HAS TREATED THE RENTAL INCOME AS INCOME FROM HOUSE PROPERTY AND HAS ALLOWED THE STAT UTORY DEDUCTION @ 30% AND CONSEQUENTLY THE CLAIM OF THE EXPENSES OF R S. 79,11,423/- HAS BEEN DISALLOWED. 8. THE ASSESSEE APPEALED AGAINST THE ORDER OF THE A SSESSING OFFICER BEFORE THE LD. CIT (A) AND THERE, IT WAS SUBMITTED THAT THE ASSESSEE EARLIER ASSESSED UNDER THE HEAD BUSINESS INCOME AND THE SAM E WAS CONFIRMED BY THE LD. CIT(A) AND BY THE TRIBUNAL FOR THE ASSESSME NT YEAR 1998-99. IT WAS SUBMITTED THAT THE ASSESSEE HAD CLAIMED THE REN TAL INCOME AS BUSINESS INCOME DURING THE ASSESSMENT YEAR 2008-09 AND THE ASSESSING ITA NO. 3157/DEL/2017 WINGFLOW CONSTRUCTION PVT. LTD. 4 OFFICER HAD ASSESSED THE RENTAL INCOME AS HOUSE PRO PERTY INCOME BUT THE LD. CIT(A) HAD ALLOWED THE APPEAL OF THE ASSESSEE A ND THE INCOME WAS ASSESSED AS BUSINESS INCOME. IT WAS SUBMITTED THAT THERE IS NO CHANGE IN THE FACTS OF THE CASE AND THE RENTAL INCOME SHOULD BE TREATED AS BUSINESS INCOME ONLY AND THE ASSESSING OFFICER IS NOT JUSTIF IED TO DISALLOW THE BUSINESS EXPENSES. 9. THE LD. CIT (A) HELD THAT SO FAR AS THE PRINCIPL E OF CONSISTENCY IS CONCERNED, THE SAME CANNOT BE APPLIED BLINDLY WHEN THE FACTS OF THE CASE ARE CLEAR AND THE MISTAKE OF THE EARLIER YEAR CANNO T BE ALLOWED TO BE PERPETUATED IN THE SUBSEQUENT YEAR IN THE NAME OF C ONSISTENCY. EVEN OTHERWISE EVERY ASSESSMENT YEAR IS AN INDEPENDENT A ND SEPARATE ASSESSMENT AND THE ASSESSMENT AND THE APPEAL HAS TO BE DECIDED ON THE BASIS OF GLARING FACTS WHICH ARE AVAILABLE ON RECOR D. THE LD. CIT (A) HELD THAT IN THE PRESENT CASE, THERE IS ABSOLUTELY NO DI SPUTE THAT THE INCOME OF THE ASSESSEE IS ONLY FROM RENT AND THE SAME IS REQU IRED TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 10. BEFORE US, DURING THE ARGUMENTS THE ORDER OF TH E TRIBUNAL FOR THE ASSESSMENT YEAR 2008-09 IN ITA NO. 3474/DEL/2011 HA S BEEN PRODUCED BEFORE US. THE RELEVANT PORTION OF THE SAID ORDER I S AS UNDER: 7. WE HAVE GONE THROUGH THE FACTS AND CIRCUMSTANCE S OF THE CASE AND ALSO RIVAL SUBMISSIONS OF THE PARTIES. IF WE CO NSIDER THE FACTUAL POSITION AS WELL AS CONTROVERSY OF THE INSTANT CASE WITH M/S. RAYALA CORPORATION PVT. LTD. VS. ACIT IN CIVIL APPEAL NO.6 437 OF 2016 JUDGMENT DATED 11.08.2016 PASSED BY THE HONBLE APE X COURT WHILE REFERRING TO CHENNAI PROPERTIES AND INVESTMENTS LTD . VS. CIT (2015) 373 ITR 673 (SC), THE SAME IS IDENTICAL AND SIMILAR TO THE CASE DECIDED BY THE APEX COURT. THE RELEVANT CRUX I S REPRODUCED HEREIN BELOW:- 11. THE JUDGMENT RELIED UPON BY THE LEARNED COUNSE L APPEARING FOR THE ASSESSEE SQUARELY COVERS THE FACTS OF THE CASE INVOLVED IN THE APPEALS. THE BUSINESS OF THE COMPANY IS TO LEASE IT S PROPERTY AND TO EARN RENT AND THEREFORE, THE INCOME SO EARNED SH OULD BE TREATED AS ITS BUSINESS INCOME. ITA NO. 3157/DEL/2017 WINGFLOW CONSTRUCTION PVT. LTD. 5 12. IN VIEW OF THE LAW LAID DOWN BY THIS COURT IN T HE CASE OF CHENNAI PROPERTIES (SUPRA) AND LOOKING AT THE FACTS OF THESE APPEALS, IN OUR OPINION, THE HIGH COURT WAS NOT COR RECT WHILE DECIDING THAT THE INCOME OF THE ASSESSEE SHOULD BE TREATED AS INCOME FROM HOUSE PROPERTY. EVEN OTHERWISE, IN OUR CONSIDERED VIEW, THE LD. CIT (A) HAS RIGHTLY UPHELD THE ASSESSEES INCOME AS BUSINESS INCOME AND FOR THE SAKE OF BREVITY, CLARITY AND TO COME TO THE RIGHT CONCLUSIO N, THE RELEVANT PART OF THE ORDER OF THE LD. CIT (A) IS REPRODUCED BELOW :- 3.1 DURING THE COURSE OF APPELLANT PROCEEDINGS THE LD. AR OF THE ASSESSEE ATTENDED AND SUBMITTED A DETAILED SUBMISSI ON WITH A CHART SHOWING THE TREATMENT OF THE INCOME FOR VARIO US ASSESSMENT YEARS AS UNDER: S. NO. ASSTT. YEAR INCOME INCOME SHOWN AS INCOME ASSESSED AS REMARKS 1. 1989-90 102,850.00 BUSINESS INCOME BUSINESS INCOME COPY OF RETURN & ORDER U/S 143(1) 2. 1990-91 3500.80 -DO- -DO- -DO- 3. 1991-92 2440.00 -DO- -DO- COPY OF RETURN ENCLOSED 4. 1992-93 22072.48 -DO- -DO- -DO- 5. 1993-94 5226.34 -DO- -DO- AFTER ADJUSTING LOSS OF (2441.98 + 22072.48) 6. 1994-95 14,147.71 -DO- -DO- COPY OF RETURN ENCLOSED 7. 1995-96 29,781.00 -DO- -DO- ORDER U/S 143(3) OF THE ACT 8. 1996-97 2915009.00 -DO- -DO- ORDER U/S 143(3) 9. 1997-98 402,530.00 HOUSE PROPERTY -DO- ORDER U/S 143(3) 10. 1998-99 178,353.00 -DO- -DO- ORDER U/S 143(3) 11. 1990-2000 452,160.00 -DO- -DO- ORDER U/S 143(3) 12. 2000-01 874,570.00 -DO- -DO- ORDER U/S 143(3) 13. 2001-02 52,690.00 -DO- -DO- ORDER U/S 143(3) 14. 2002-03 63,883.00 - DO- -DO- ORDER U/S 143(3) 15. 2003-04 125,620.00 -DO- -DO- ORDER U/S 143(3) 16. 2004-05 74,980.00 BUSINESS INCOME -DO- - 17. 2005-06 151,660.00 -DO- -DO- ORDER U/S 143(L)(A) 18. 2006-07 720,415.00 -DO- -DO- INTIMATION U/S 143(1)(A) 19. 2007-08 --- -DO- -DO- --- ITA NO. 3157/DEL/2017 WINGFLOW CONSTRUCTION PVT. LTD. 6 20. 2008-09 568,494.00 -DO- HOUSE PROPERTY ORDER U/S 143(3) 21. 2009-10 3552767.00 -DO- -DO- -- 22. 2010-11 2572234.00 -DO- -DO- FROM THE CHART IT IS ABSOLUTELY CLEAR THAT FROM ASS ESSMENT YEAR 1995-96 ASSESSEE WAS SHOWING THE ABOVE INCOME AS 'BUSINESS INCOME' AND SAME WAS ASSESSED ALSO AS 'BU SINESS INCOME'. FROM ASSESSMENT YEARS 1996-97 TO ASSESSMEN T YEAR 2003-04, THE ASSESSEE WAS SHOWING IT AS 'INCOME FRO M HOUSE PROPERTY' BUT IT WAS ASSESSED AT 'BUSINESS INCOME'. FROM ASSESSMENT YEARS 2004-05 TO ASSESSMENT YEAR 2010-11 , THE ASSESSEE HAS SHOWN IT AS 'BUSINESS INCOME', WHICH W AS ASSESSED AS 'BUSINESS INCOME' BY THE DEPARTMENT TIL L ASSESSMENT YEAR 2007-08, HOWEVER, IN ASSESSMENT YEA R 2008-09, THE ASSESSEE HAS SHOWN IT AS 'BUSINESS INC OME' BUT DEPARTMENT HAS ASSESSED IT AS 'INCOME FROM HOUSE PR OPERTY', THE YEAR IN WHICH APPEAL IS FOR ADJUDICATION. IN TH IS REGARD IT IS FOUND THAT FROM ASSESSMENT YEAR 1989-90 TO ASSESSME NT YEAR 2007-08, THE DEPARTMENT HAS CONSISTENTLY ASSESSING THE ABOVE SAID INCOME AS 'BUSINESS INCOME'. HOWEVER, FO R ASSESSMENT YEAR 2008-09, IT HAS BEEN ASSESSED AS 'I NCOME FROM HOUSE PROPERTY', IN THE BODY OF ASSESSMENT ORD ER ASSESSING OFFICER ALSO HAS NOT GIVEN THE FINDING AS TO WHY HE HAS ARRIVED AT THE CONCLUSION THAT ABOVE SAID INCOM E SHOULD NOT BE TREATED AS 'BUSINESS INCOME' AND ARRIVED AT HIS FINDING IN A VERY ARBITRARY MANNER, WITHOUT ANY COGENT REAS ON, IN THIS REGARD PRINCIPLE OF CONSISTENCY HAS TO BE FOLLOWED AND FROM THE CHART AS DISCUSSED ABOVE, IT IS ABSOLUTELY CLEA R THAT SINCE BEGINNING DEPARTMENT HAS ACCEPTED THE ABOVE SAID IN COME AS 'BUSINESS INCOME', SO, FOR THIS ASSESSMENT YEAR WHY TREATMENT OF THE HEAD OF THE INCOME IS DIFFERENT, R EQUIRES TO BE SUPPORTED BY REASONED ORDER, WHICH HAS NOT BEEN DONE, FURTHERMORE, ITAT HAS ALSO HELD FOR ASSESSMENT YEAR 1998-99 RELYING ON THE RULE OF CONSISTENCY AND HAS ALSO UPH ELD THE ACTION OF ASSESSING OFFICER AND LD. CIT(A) AND TREA TED THE RENTAL INCOME OF THE ASSESSEE UNDER THE HEAD INCOM E FROM BUSINESS OR PROFESSION. SO, RELYING ON THE ABOVE D ECISION OF THE ITAT FOR THE ABOVE MENTIONED ASSESSMENT YEAR, I T IS HELD THAT ASSESSEES INCOME FROM RENTAL INCOME SHOULD BE ACCEPTED AS BUSINESS INCOME AND GROUND NO.1 AND 2 A RE DECIDED IN FAVOUR OF THE ASSESSEE. IN VIEW OF THE ABOVE, WE ARE OF THE OPINION THAT TH E RULE OF CONSISTENCY SHOULD BE FOLLOWED AND THE LD. CIT (A) IS JUSTIFIED IN ITA NO. 3157/DEL/2017 WINGFLOW CONSTRUCTION PVT. LTD. 7 TREATING THE ASSESSEES INCOME AS BUSINESS INCOME. ACCORDINGLY, WE UPHOLD THE ORDER OF THE LD. CIT (A) AND DISMISS THE GROUNDS OF APPEAL. 11. SINCE, THE INCOME HAS BEEN ASSESSED FOR 22 YEAR S UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION IN THE ABSENCE OF ANY MATERIAL CHANGES IN THE INSTANT YEAR, WE HEREBY DIRECT THAT THE INCOME MAY BE ASSESSED UNDER THE HEAD PROFITS AND GAINS OF BUSIN ESS OR PROFESSION. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/02/2020. SD/- SD/- (KULDIP SINGH) (D R. B. R. R. KUMAR) JUDICIAL MEMBER ACCO UNTANT MEMBER DATED: 24/02/2020 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR