Ishwar Builders Pvt Ltd, New Delhi V. DCIT Circle-12(2), New Delhi

ITA 3387/DEL/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 2262 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2015-2016
• Appeal Filed On: 18-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S. N. MEENA
• Keywords: Depreciation

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI C BEN CH, NEW DELHI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND MS. SUCHITRA KAMBLE, JUDICIAL M EMBER ITA NO. 3387/DEL/2019 [A.Y 2015-16] M/S ISHWAR BUILDERS PVT. LTD VS. THE DY. C.I.T B 26-27, COMMUNITY CENTRE CIRCLE 12(2) JANAKPURI, NEW DELHI NEW DELHI PAN: AABCI 5607 F (APPLICANT) ( RESPONDENT) ASSESSEE BY : SHRI I.P. BAN SAL, ADV SHRI VIVEK BANSAL, ADV DEPARTMENT BY : SHRI S.N. MEENA, SR. DR DATE OF HEARING : 03.12.2019 DATE OF PRONOUNCEMENT : 04.12.2019 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] - 4, NEW DELHI DATED 15.02.2019 PERTAINING TO ASSESSMENT YEAR 2015-16. 2 2. GROUND NO. 1 IS GENERAL IN NATURE AND NEEDS NO S EPARATE ADJUDICATION. 3. GROUND NO. 2 RELATES TO THE ADDITION OF RS. 63.3 6 LAKHS ADDED BY THE ASSESSING OFFICER AS RENTAL INCOME BY ADDING SE CURITY DEPOSIT. 4. GROUND NO. 3 RELATES TO THE DISALLOWANCE OF RS. 65,22,615/- ON ACCOUNT OF DEPRECIATION AND INTEREST ON CAPITAL. 5. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE FILED ITS RETURN OF INCOME ON 23.09.2015 DECLARING TOTAL LOSS OF RS. 20,61,555/-. RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER C ASS AND ACCORDINGLY, STATUTORY NOTICES WERE ISSUED AND SERV ED UPON THE ASSESSEE. 6. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEED INGS AND ON PERUSAL OF THE AUDIT REPORT AND FINANCIAL NOTES, TH E ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS DECLARED RENTAL INCOME ONLY FOR SIX MONTHS AND HAS NOT DECLARED RENTAL INCOME FOR THE BALANCE SIX MONTHS. THE ASSESSEE WAS ASKED TO JUSTIFY ITS STAND. 3 7. IN ITS REPLY, THE ASSESSEE REFERRED TO CLAUSE 26 OF THE AUDIT REPORT AND POINTED OUT THAT THE TENANTS M/S MICRONU TRIENT INITIATIVE AND M/S MICRONUTRIENT INITIATIVE INDIAS LIAISON OF FICE DID NOT PAY RENT TO THE COMPANY FOR SIX MONTHS AND FILED A SUIT FOR RECOVERY OF THE SECURITY DEPOSIT WITHOUT GIVING POSSESSION OF THE P ROPERTY. IT WAS ALSO POINTED OUT THAT THE APPELLANT COMPANY HAS ALSO ISS UED NOTICE FOR NON PAYMENT OF RENT TO THE SAID TENANTS. IT WAS EXPLAI NED THAT SINCE THE MATTER IS SUBJUDICE, NO PROVISION FOR RENT FOR SIX MONTHS HAS BEEN MADE. 8. AFTER CONSIDERING THE REPLY OF THE ASSESSEE, THE ASSESSING OFFICER ONCE AGAIN SOUGHT EXPLANATION ASKING THE ASSESSEE T O EXPLAIN AS TO WHY THE SECURITY AMOUNT OF RS. 63.36 LAKHS SHOULD NOT B E ADDED TOWARDS THE BALANCE RENT. 9. IN ITS REPLY, THE ASSESSEE STATED THAT THE SECUR ITY DEPOSIT CANNOT BE ADJUSTED AGAINST UNREALISED RENT AS THERE IS NO CLAUSE IN THE LEASE DEED WHEREBY SECURITY DEPOSIT CAN BE ADJUSTED AGAIN ST THE UNREALISED RENT. 4 10. THIS REPLY OF THE ASSESSEE DID NOT FIND ANY FAV OUR WITH THE ASSESSING OFFICER WHO WAS OF THE FIRM BELIEF THAT T HE SECURITY DEPOSIT SHOULD HAVE BEEN ADJUSTED TOWARDS UNREALISED RENT A ND REFERRING TO THE RELEVANT CLAUSES OF LEASE AGREEMENT, THE ASSESSING OFFICER ADDED A SUM OF RS. 63.36 LAKHS. 11. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. 12. BEFORE US, THE LD. AR BROUGHT TO OUR NOTICE THE DECISION OF THE HON'BLE HIGH COURT OF DELHI IN ASSESSEES OWN CASE IN CS(COMM) 75/2016 IA 1588/2016 AND POINTED OUT THAT THE HON'B LE HIGH COURT, VIDE ORDER DATED 06.04.2016 DECREED IN FAVOUR OF TH E ASSESSEE AND AGAINST THE TENANT WITH THE DIRECTION THAT THE PROP ERTY SHOULD BE HANDED OVER TO THE ASSESSEE. 13. IT IS THE SAY OF THE LD. COUNSEL FOR THE ASSESS EE THAT IT WAS NOT POSSIBLE FOR THE ASSESSEE TO ADJUST THE SECURITY DE POSIT AS THE LITIGATION WAS PENDING BEFORE THE HON'BLE HIGH COURT AND FURTH ER, THE SECURITY DEPOSIT WAS NOT ADJUSTABLE AGAINST THE UNREALIZED R ENT AS THE TENANTS ALSO FILED SUIT FOR RECOVERY OF SECURITY DEPOSIT. THE LD. COUNSEL FOR THE 5 ASSESSEE FURTHER POINTED OUT THAT IN ASSESSMENT YEA R 2016-17, WHEN THE LITIGATION WAS FINALLY DECIDED BY THE HON'BLE H IGH COURT OF DELHI, THE ASSESSEE HAS RETURNED RS. 63.36 LAKHS AS ITS IN COME AND, THEREFORE, THERE IS NO REVENUE LEAKAGE. 14. PER CONTRA, THE LD. DR SUPPORTED THE FINDINGS O F THE ASSESSING OFFICER AND READ THE RELEVANT PART OF THE ASSESSMEN T. 15. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUT HORITIES BELOW AND HAVE ALSO GONE THROUGH THE DECISIONS OF THE HON 'BLE HIGH COURT OF DELHI IN LITIGATION BETWEEN THE ASSESSEE AND ITS TE NANTS. IT IS TRUE THAT THE SECURITY DEPOSIT COULD NOT HAVE BEEN ADJUSTED A GAINST THE UNREALISED RENT. THERE IS NO DISPUTE THAT THE RENT FOR SIX MONTHS RECEIVED BY THE ASSESSEE HAS BEEN PROPERLY DISCLOSE D IN ITS RETURN OF INCOME. THE TENANTS STOPPED PAYING RENT FROM OCTOB ER 2014 AND THE DISPUTE WENT TO THE HON'BLE HIGH COURT OF DELHI. 16. WE ARE OF THE CONSIDERED OPINION THAT SINCE THE TENANTS HAVE FILED SUIT BEFORE THE HON'BLE HIGH COURT FOR RECOVE RY OF SECURITY DEPOSIT, THEN THE ASSESSEE COULD NOT HAVE ADJUSTED THE SECURITY DEPOSIT TOWARDS IT UNREALISED RENT. WE FURTHER FIND THAT IN A.Y 2016-17, THE 6 ASSESSEE HAS INCLUDED RS. 63.36 LAKHS IN IT PROFIT AND LOSS ACCOUNT AFTER THE DECISION OF THE HON'BLE HIGH COURT OF DELHI. I N OUR CONSIDERED OPINION, THE ACTION OF THE ASSESSING OFFICER IS NOT ACCEPTABLE AND SINCE THE LD. CIT(A) HAS UPHELD THE ACTION OF THE ASSESSI NG OFFICER, BOTH THE LOWER AUTHORITIES HAVE ERRED IN MAKING THE ADDITION AND SUSTAINING THE ADDITION. CONSIDERING THE FACTS OF THE CASE IN TOT ALITY, ADDITION OF RS. 63.36 LAKHS IS UNWARRANTED AND DESERVES TO BE DELET ED. ACCORDINGLY, GROUND NO. 2 IS ALLOWED. 17. GROUND NO. 3 RELATES TO THE DISALLOWANCE OF DEP RECIATION ON CAR AMOUNTING TO RS. 45.31 LAKHS AND INTEREST ON CAR LO AN AMOUNTING TO RS. 19.91 LAKHS. 18. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT TH ESE AMOUNTS HAVE BEEN DISALLOWED BY THE ASSESSING OFFICER SOLELY ON THE GROUND THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE D ID NOT CARRY OUT ANY BUSINESS ACTIVITY. THE DISALLOWANCE WAS CONFIRMED BY THE LD. CIT(A). 19. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE STA TED THAT IT IS INCORRECT TO SAY THAT THE ASSESSEE DID NOT CARRY OU T ANY BUSINESS ACTIVITY DURING THE YEAR UNDER CONSIDERATION. THE LD. COUNSEL FOR THE 7 ASSESSEE POINTED OUT THAT THE ASSESSEE COMPANY IS E NGAGED IN THE BUSINESS OF CONSTRUCTION, DEVELOPMENT OF LAND ETC A ND DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE DID INVEST IN AGR ICULTURAL LAND AT CHANDAN HOLA, DELHI. IT IS THE SAY OF THE LD. COUN SEL FOR THE ASSESSEE THAT THERE BEING A LULL IN THE BUSINESS, IT CANNOT BE SAID THAT THE ASSESSEE HAD NO INTENTION TO CARRY ON BUSINESS AND IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS CLOSED OUT ITS BU SINESS ACTIVITIES. 20. THE LD. DR SUPPORTED THE FINDINGS OF THE ASSESS ING OFFICER. IT IS THE SAY OF THE LD. DR THAT THE ASSESSING OFFICER HA S CONSIDERED ALL THE ISSUES RAISED BY THE COUNSEL AND, THEREFORE, THERE IS NO ERROR OR INFIRMITY IN THE FINDINGS OF THE ASSESSING OFFICER AND THE LD. CIT(A). 21. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE O RDERS OF THE AUTHORITIES BELOW. IN OUR CONSIDERED OPINION, DEPRE CIATION HAS BEEN CLAIMED BY THE ASSESSEE ON THE WRITTEN DOWN VALUE O F THE ASSET WHICH MEANS THAT IN EARLIER YEARS, THE ASSET WAS USED FOR THE PURPOSES OF BUSINESS. NOWHERE THE ASSESSING OFFICER HAS BROUGH T ANY MATERIAL EVIDENCE ON RECORD TO SUGGEST THAT THERE IS A CLOSU RE OF BUSINESS ACTIVITIES. ON THE CONTRARY, WE FIND THAT IN FURTH ERANCE OF ITS BUSINESS 8 ACTIVITIES, THE ASSESSEE HAS FURTHER ADVANCED RS. 6 5 LAKHS TOWARDS LAND AT CHANDAN HOLA, DELHI WHICH MEANS THAT THE ASSESSE E WAS, IN FACT, CARRYING OUT BUSINESS ACTIVITIES DURING THE YEAR UN DER CONSIDERATION. 22. THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF CAPITAL BUS SERVICE 123 ITR 404 HAS HELD THAT THE ONLY CONDITION FOR AL LOWABILITY OF DEPRECIATION IS THAT THE BUSINESS SHOULD NOT HAVE B EEN CLOSED OUT ONCE FOR ALL AND THAT THE ASSESSEE SHOULD DEMONSTRATE TH AT HOPES OF THE BUSINESS BEING REVIVED ARE ALIVE AND REAL. 23. IN LIGHT OF THE DECISIONS OF THE HON'BLE HIGH C OURT AS MENTIONED ELSEWHERE, THE ASSESSEE WAS IN FACT, ENGAGED IN FUR THERANCE OF ITS BUSINESS ACTIVITIES AND, THEREFORE, IT CANNOT BE SA ID THAT THE ASSESSEE HAS CLOSED DOWN ITS BUSINESS ONCE FOR ALL. THEREFO RE, THE ASSESSEE IS ELIGIBLE FOR CLAIM OF DEPRECIATION. 24. SIMILARLY, INTEREST ON CAR IS ALSO COMING FROM EARLIER YEARS AS THE MONEY WAS BORROWED IN EARLIER YEARS. THEREFORE, IN OUR HUMBLE OPINION, THERE CANNOT BE ANY DISALLOWANCE FOR WANT OF ANY BUSINESS ACTIVITY AS THE ASSESSEE WAS VERY MUCH ENGAGED IN I TS BUSINESS 9 ACTIVITIES. THE ASSESSING OFFICER IS ACCORDINGLY D IRECTED TO DELETE THE ADDITION OF RS. 65,22,615/-. ACCORDINGLY, GROUND N O. 3 IS ALLOWED. 25. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO. 3387/DEL/2019 IS ALLOWED THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 03.1 2.2019. SD/- SD/- [ SUCHITRA KAMBLE ] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 03 RD DECEMBER, 2019 VL/ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI 10 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 RE GISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER