KASHMITA PROPERTIES PVT. LTD., MUMBAI V. ITO 12(3)(2), MUMBAI

ITA 3434/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 5797 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 22-05-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SMITA VERMALD
• Assessee Lawyers: AJAY GOSALIA LD
• Keywords: Rejection of books of accounts; Business income; Business expenditure; Source of fund
• Section: 13

Judgement Text

ITA NO. 3434 /MUM/201 9 KASHMITA PROPERTIES PVT.LTD. A SSESSMENT YEAR: 20 12 - 13 1 - IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , , BEFORE HONBLE SHRI AMARJIT SINGH, JM AND HONB LE SHRI MANOJ KUMAR AGGARWAL, AM (HEARING THROUGH VIDEO CONFERENCING MODE) ./ I.T.A. NO . 3434/MUM/2019 ( / ASSESSMENT YEAR: 2012 - 13 ) KASHMITA PROPERTIES PVT.LTD. GROUND FLOOR, 288, VIJAY RAJ 9 TH ROAD, KHAR (W) MUMBAI - 400 052 / VS. INCOME TAX OFFICER - 12(3 )( 2 ) ROOM NO.147 A, 1 ST FLOOR AAYKAR BHAVAN, M.K. ROAD MUMBAI - 400 020 ./ ./ PAN/GIR NO. AAACK - 8122 - C ( / APPELLANT ) : ( / RESPONDENT ) ASSESSEE BY : SHRI AJAY GOSALIA - LD. AR REVENUE BY : MS. SMITA VERMA LD. SR. DR / DATE OF HEARING : 06/07/2021 / DATE OF PRONOUNCEMENT : 13/09/2021 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR (AY) 2012 - 13 ARISES OUT OF ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 21, MUMBAI [CIT(A)] IN THE MATTER OF ASSESSMENT FRAMED BY LD. ASSESSING OFFICER (AO) U/S 25/03/2015. THOUGH THE ASSESSEE HAS RAISED MULTIPLE GROUNDS OF APPEAL, HOWEVER, IN SUM & SUBSTA NCE, THE ASSESSEE IS AGGRIEVED BY DISALLOWANCE OF BUSINESS EXPENSES AS WELL AS BY THE FACT THAT INTEREST ON BANK FIXED DEPOSITS HAS BEEN ASSESSED AS INCOME FROM ITA NO. 3434 /MUM/201 9 KASHMITA PROPERTIES PVT.LTD. A SSESSMENT YEAR: 20 12 - 13 2 OTHER SOURCES . THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE IS STATED TO BE ENGAGED IN BROK ERAGE BUSINESS. 2. HAVING HEARD RIVAL SU BMISSIONS AND UPON PERUS AL OF RELEVANT MATERIAL ON RECORD , O UR ADJUDICATION TO THE SUBJECT MATTER OF APPEAL WOULD BE AS GIVEN IN SUCCEEDING PARAGRAPHS. ASSESSMENT PROCEEDINGS 3.1 THE ASSESSEE EARNED BROKERAGE INCOME OF RS.4.48 LACS, OTHER INCOME OF RS.14 LACS AND INTEREST ON BANK DEPOSITS FOR RS.24.56 LACS. THE ASSESSEE CLAIMED BUSINESS EXPENSES OF RS.40.77 LACS. THE MAJOR EXPENSES HAVE BEEN TABULATED IN PARA - 4 OF THE ASSESSMENT ORDER. THE SE WERE IN THE NATURE OF SALA RY EXPENSES, OFFICE R ENT, TELEPHONE, REPAIR, MOTOR CAR, A DVERTISEMENT AND OFFICE MAINTENANCE EXPENSES ETC . T HE ASSESSEE REFLECTED LOSSES FROM BROKERAGE BUSINESS AS SHOWN IN EARLIER YEARS. 3.2 UPON PERUSAL OF ADVERTISEMENT BILLS, IT WAS SEEN THAT THE ADVER TISEMENT WAS PLACED BY A PERSON NAMELY ASHISH MEHTA PURPORTEDLY FOR SALE OF PROPERTY. HOWEVER, SHRI ASHISH MEHTA WAS NOT THE EMPLOYEE OF THE ASSESSEE. IT WAS SUBMITTED THAT THE ADVERTISEMENT WERE PLACED ON BEHALF OF THE CLIENTS AND EXPENSES WERE INCURRED B Y THE ASSESSEE. HOWEVER, NO BROKERAGE WAS RECEIVED AGAINST THE ADVERTISEMENT. THE SAME LED LD. AO TO BELIEVE THAT NON - BUSINESS EXPENSES WERE BEING BOOKED BY THE ASSESSEE. 3.3 FURTHER, THE PREMISES FROM WHERE THE ASSESSEE WAS OPERATING, WAS A RENTED PREMIS ES. THREE OTHER CONCERNS INCLUDING PROPRIETARY CONCERNS (M/S KASHMITA CORPORATION AND M/S KIDS CONCEPT) OF THE DIRECTORS WERE ALSO BEING OPERATED FROM THE SAID PREMISES. THOUGH THERE WERE 7 EMPLOYEES WORKING FOR THE ASSESSEE, HOWEVER, THEY CONFIRMED THAT A LL OF ITA NO. 3434 /MUM/201 9 KASHMITA PROPERTIES PVT.LTD. A SSESSMENT YEAR: 20 12 - 13 3 THEM WERE WORKING FOR ALL THE THREE CONCERNS. M/S KASHMITA CORPORATION WAS ALSO ENGAGED IN SIMILAR BROKERAGE BUSINESS BUT NO EXPENSES WERE BOOKED IN THAT CONCERN. ON THE BASIS OF ABOVE OBSERVATIONS, IT WAS CONCLUDED BY LD. AO THAT THE ASSESSEE WAS C LAIMING EXPENSES AND SETTING OFF THE SAME AGAINST INTEREST RECEIPTS. THE REPAIRS & RENOVATION EXPENSES WERE INCURRED FOR ENTIRE BUSINESS PREMISES AND BOOKED BY ASSESSEE THOUGH 4 CONCERNS WERE RUNNING FROM THE SAID PREMISES. 3.4 FINALLY, THE BOOKS WERE REJE CTED. THE EXPENSES TO THE EXTENT OF BROKERAGE INCOME OF RS.18.48 LACS EARNED BY THE ASSESSEE WERE ALLOWED. THE INTEREST ON FIXED DEPOSITS WAS TO BE TREATED AS INCOME FROM OTHER SOURCES . THE REMAINING BUSINESS EXPENSES OF RS.22.28 LACS W ERE DISALLOWED. AP PELLATE PROCEEDINGS 4.1 DURING APPELLATE PROCEEDINGS, THE ASSESSEE SUBMITTED THAT IT HAD PERMITTED OTHER 3 CONCERNS TO USE THIS ADDRESS ONLY FOR CORRESPONDENCE PURPOSES. THE LEVEL OF EXPENSES IN CURRED BY THE ASSESSEE W AS IN LINE WITH EXPENSES INCURRED IN E ARLIER YEARS. THE ASSESSEE OBJECTED TO REJECTION OF BOOKS OF ACCOUNT. THE ATTENTION WAS DRAWN TO THE FACT THAT ONE OF THE ENTITY DID NOT CARRY OUT ANY BUSI NESS ACTIVITY DURING THE YEAR WHEREAS THE OTHER TWO CONCERNS HAD THEIR OWN RESPECTIVE S TAFF. IT WAS F URTHER SUBMITTED THAT THE ENTIRE PREMISES WAS USED ONLY BY THE ASSESSEE HIMSELF AND THE EX PENSES WERE INCURRED BY THE ASSESSEE FOR ITS OWN BU SINESS PURPOSES. THE ASSESSEE A LSO ASSAILED THE OTHER CONCLUSION DRAWN BY LD. AO. 4.2 HOWEVER, LD. CIT(A ) HELD THAT INCOME AND EXPEN DITURE DID NOT REFLECT CORRECT AND TRUE PICTURE OF PROFIT EARNED BY THE ASSESSEE AND THE BOOKS WERE NOT RELIABLE. THE REFORE, THE BOOKS WERE RIGHTLY REJECTED. THE ITA NO. 3434 /MUM/201 9 KASHMITA PROPERTIES PVT.LTD. A SSESSMENT YEAR: 20 12 - 13 4 LD. CIT(A) ALSO UPHELD THE ACTION OF LD.AO IN ASSESSING THE INTEREST INCOME A S INCOME FROM OTHER SOURC ES IN TERMS OF THE DECISION OF H ON BLE A PEX COURT IN TUTICORIN ALKALI CHEMICALS & FERTILISERS LTD. ( 227 ITR 172 ) WHEREIN IT WAS HELD THAT WHERE THE ASSESSEE H A D SURPLUS FUNDS WHICH WERE INVESTED, THE SAME WOULD BE ASSESSED AS INC OME FROM OTHER SOURCES. FURTHER, LD. AO HAD ESTABLISHED THAT THE ASSESSEE CARRIED OUT BUSINESS OF SISTER CONCERNS FROM ONE PREMISES ONLY AND THEREFORE, THE LD. AO WAS JUSTIFIED IN DISALLOWING THE EXPENDITURE. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BE FORE US. OUR FINDINGS AND ADJUDICATION 5. SO FAR AS THE REJECTION OF BOOKS OF ACCOUNTS IS CONCERNED , WE FIND THAT LD.AO HAS NOT DISTURBED THE REVENUE EARNED BY THE ASSESSEE AND HE HAS ONLY DISALLOWED EXPENDITURE OF RS.22.28 LACS WHICH IS THE MAIN GRIEVANC E OF THE ASSESSEE. THE OTHER GRIEVANCE IS THAT INTEREST INCOME HAS BEEN ASSESSED AS INCOME FROM OTHER SOURCES . THE LD. AR HAS PLACED BEFORE US A CHART TO CONTROVERT THE FINDINGS AND CONCLUSIONS DRAWN BY LOWER AUTHORITIES WHICH WE HAVE DULY CONSIDERED . WE HAVE ALSO GONE THROUGH WRITTEN SUBMISSIONS FILED BY THE ASSESSEE BEFORE US. THE PERUSAL OF FINANCIAL STATEMENTS WOULD SHOW THAT THE ASSESSEE HAS RESERVE S OF MORE THAN RS.418.94 LACS WHICH IS THE MAIN SOURCE OF FUNDING FOR THE ASSESSEE . THE FIXED DEPOSITS HAVE PRIMARILY BEEN FUNDED OU T OF ACCUMULATED RESERVES AND SURPLUS. AS NOTED IN THE ASSESSMENT ORDER FOR AY 2010 - 11, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF ESTATE DEVELOPMENT AND ESTATE BOOKING. THE EARNING OF INTEREST WAS NOT THE MAIN OBJECTIVE OF TH E ASSESSEE. THE ASSESSEE HAS SUBMITTED THAT INTEREST ON FDR WAS ASSESSED AS BUSINESS INCOME IN ASSESSMENT ORDER FOR AY 2010 - 11. HOWEVER, THE PRINCIPLE OF RES - JUDICATA IS NOT APPLICABLE TO ITA NO. 3434 /MUM/201 9 KASHMITA PROPERTIES PVT.LTD. A SSESSMENT YEAR: 20 12 - 13 5 INCOME TAX PROCEEDINGS. ANOTHER ARGUMENT IS THAT THE ASSESSEE HAS NO T MADE ANY INVESTMENT BUT THE ASSESSEE HAS SIMPLY SELECTED ONE OF THE PRODUCTS OFFERED BY THE BANK. FURTHER, THE FIXED DEPOSITS WERE SHOWN UNDER THE HEAD CURRENT ASSETS. HOWEVER, IN THE BACKDROP OF THE FACT THAT DEPOSITS WERE FUNDED OU T OF RESERVES AND EAR NING OF INTEREST WAS NOT THE MAIN OBJECTIVE OF THE ASSESSEE, ALL THESE ARGUMENTS DO NOT CONVINCE US TO ACCEPT THE PLEA THAT THE INTEREST ON FIXED DEPOSITS WAS TO BE ASSESSED AS BUSINESS INCOME . THE SAME, IN OUR CONSIDERED OPINION, HAS RIGHTLY BEEN ASSESS ED AS I NCOME FROM OTHER SOURCES AND THE RATIO OF CASE LAWS AS RELIED UPON BY LD. CIT(A) IN THE IMP UGNED ORDER WERE APPLICABLE TO THE FACT OF THE CASE. FURT H E R, THIS IN TEREST INCOME IS NET OF IN TEREST DEBITED BY THE BANK AND THEREFORE, NO F URTHER DEDUCTIO N WOULD BE AVAILABLE TO THE ASSESSEE AGAINST THE SAME. IN NUTSHELL, INTEREST ON FDR HAS RIGHTLY BEEN ASSESSED ON NET BASIS UNDER THE HEAD INCOME FROM OTHER SOURCES . 6. REGARDING DEDUCTION OF BUSI NESS EXPENDITURE, WE ARE OF THE CONSIDERED OPINION THAT DED UCTION WOULD BE AVAILABLE TO THE ASSESSEE AS PER THE PROVISIONS OF THE ACT I RRESPE CTIVE OF THE FACT WHETHER ANY REVENUES WERE GENERATED DURING THE YEAR OR NOT. THE ONLY REQUIREMENT IS THAT THE EXPENDITURE SHOULD HAVE BEEN LAID DOWN WHOLLY AND EXCLUSIVELY F OR THE BUSI NESS PURPOSES. I T COULD BE SEEN THAT THE ASSESS E E HAS CLAIMED BUSINESS EXPENDITURE OF RS.40.77 LACS DURING THE YEAR. AS PER COMPARATIVE TABLE ON RECORD, THESE EXPENDITURE ARE IN LINE WITH THE EXPENDITURE CLAIMED IN EARLIER YEARS. FURTHER, ONE OF THE ENTITIES I.E. M/S EXCELE ON PRIVATE LIMITED HAS NOT CARRIED OUT ANY BUSINESS DURING THE YEAR. M/S KIDS CONCEPT WAS OPERATING FROM OTHER ADDRESS AND IT HAS CLAIMED SEPARATE EXPENDITURE ON ACCOUNT OF SALARIES, LABOUR, SECURITIES ETC. AND THUS MAINTAINING SEPARATE BOOKS OF ACCOUNTS. SIMILARLY, THE THIRD ITA NO. 3434 /MUM/201 9 KASHMITA PROPERTIES PVT.LTD. A SSESSMENT YEAR: 20 12 - 13 6 ENTITY I.E. M/S KASHMITA CORPORATION HAS CLAIMED SEPARATE SALARIES , TELEPHONE, ELECTRICITY AND OTHER EXPENDITURE IN ITS FINANCIAL STATEMENTS WHICH WOULD SHOW THAT THIS ENTITY WAS ALSO MAINTAINING SEPARATE B OOKS AND BOOKING ITS OWN EXPENDITURE. THEREFORE, THE CONCLUSION OF LD. AO IS NOT BASED ON SOUND REASONING. SO FAR AS THE REPAIR AND RENOVATION EXPENDITURE OF RS.9.96 LACS IS CONCERNED, THE SAME IS IN THE NATURE OF PAYMENT FOR CARPENTRY WORK, LABOUR CHARGES , PAINTING CHARGES, POP WORK CHARGES, ELECTRICAL FITTINGS, TILING FLOORING ETC. WHICH ARE OF ROUTINE IN NATURE. THE BENEFIT MAY BE ENDURING IN NATURE BUT THE NATURE OF EXPENDITURE WAS REVENUE SINCE NO NEW ASSET CAME INTO EXISTENCE. THEREFORE, WE ARE INCLIN ED TO HOLD THAT BUSINESS EXPENDITURE OF RS.40.77 LACS AS CLAIMED BY THE ASSESSEE W OULD BE ALLOWABLE BUSINESS EXPENDITURE. WE ORDER SO. THE LD. AO IS DIRECTED TO RE - COMPUTE THE INCOME IN TERMS OF OUR ABOVE ORDER. 7. RESULTANTLY, GROUND NOS.1 & 3 STAND ALLOW ED. GROUND NO.2 HAS NOT BEEN PRESSED. GROUND NO.4 STAND DISMISSED. 8. THE APPEAL STAND PARTLY ALLOWED IN TERMS OF OUR ABOVE ORDER. O RDER PR ONOUNCED ON 13 TH SEPTEMBER, 2021. SD/ - SD/ - ( AMARJIT SINGH ) (MANOJ KUMAR A GGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 13/09/2021 SR.PS, DHANANJAY ITA NO. 3434 /MUM/201 9 KASHMITA PROPERTIES PVT.LTD. A SSESSMENT YEAR: 20 12 - 13 7 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLA NT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRA R) , / ITAT, MUMBAI .