ITO, New Delhi V. M/s Wingflow Constructions (P) Ltd., New Delhi

ITA 3474/DEL/2011

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6471 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 14-12-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 08-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: UMESH CHAND DUBEY SENIOR
• Assessee Lawyers: R K MEHRA
• Keywords: Business income; Rule of consistency
• Section: 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D : NEW DELHI) BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER AND SHRI N.K. CHOUDHRY, JUDICIAL MEMBER ITA NO.3474/DEL./2011 (ASSESSMENT YEAR : 2008-09) ITO, WARD 18 (3), VS. M/S. WINGFLOW CONSTRUCTION ( P) LTD., NEW DELHI. G 2, 43 A, MIDDLE CIRCLE, CONNAUGHT CIRCUS, NEW DELHI 110 001. (PAN : AAACW0016D) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.K. MEHRA, CA REVENUE BY : SHRI UMESH CHAND DUBEY, SENIOR DR DATE OF HEARING : 14.12.2016 DATE OF ORDER : 16.12.2016 O R D E R PER N.K. CHOUDHRY, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT (A)-XXI, NEW DELHI. 2. THE FOLLOWING GROUNDS OF APPEAL HAVE BEEN TAKEN BY THE ASSESSEE :- 1. THE LD. CIT (A) HAS ERRED IN FACTS AND IN LAW BY NOT UPHOLDING THE ACTION OF THE AO TREATING THE RENTAL RECEIPTS OF THE ASSESSEE FROM ITS PROPERTY AT G-2/43A, CONNAUGHT CI RCUS, NEW DELHI AS INCOME FROM HOUSE PROPERTY ON THE GROUND T HAT THERE WAS NO CHANGE IN FACTS FROM EARLIER YEARS WHERE THE REN TAL RECEIPTS FROM THE PROPERTY WAS TREATED AS BUSINESS INCOME IGNORIN G THAT :-. ITA NO.3474/DEL./2011 2 (I) THERE WAS AMPLE CHANGE IN THE FACTS OF THE CAS E DURING THE YEAR IN COMPARISON TO EARLIER YEARS. (II) DURING THE YEAR UNDER CONSIDERATION THE ASSESS EE HAS RENTED OUT NEW PREMISES COMPRISING THE TOTAL AREA OF GROUN D FLOOR AND BASEMENT OF G-2/43A, CONNAUGHT CIRCUS, NEW DELHI TO A NEW TENANT M/S BERCOS MELODY HOUSE. (III) THE MONTHLY RENT RECEIPT FROM M/S BERCOS MELO DY HOUSE ARE SUBSTANTIALLY HIGHER THAN FROM THE OTHER OLD TE NANT THE CENTRAL BANK OF INDIA WHICH CONTINUES TO BE A TENANT. (IV) A COMPARISON OF THE RENT AGREEMENTS BETWEEN TH E ASSESSEE COMPANY AND THE CENTRAL BANK OF INDIA AND BETWEEN T HE ASSESSEE COMPANY AND M/S BERCOS MELODY HOUSE ARE IN STARK CO NTRAST TO EACH OTHER AND THERE IS HARDLY ANY SIMILARITY BETWE EN THEM. (V) NO OTHER BUSINESS ACTIVITY HAS BEEN CARRIED OU T BY THE ASSESSEE DURING THE YEAR EXCEPT SALE OF A SHOP AND THE LETTING OUT OF PREMISES FROM WHICH RENTAL INCOME HAS BEEN EARNED. (VI) IN THE OVERALL CHANGE IN THE FACTS AND CIRCUM STANCES OF THE CASE IN COMPARISON TO EARLIER YEARS, THE RENTAL INC OME OF THE ASSESSEE DESERVES TO BE ASSESSED AS INCOME FROM HOU SE PROPERTY AND NOT AS INCOME FROM BUSINESS AS CLAIMED BY THE A SSESSEE. (VII) IN THE FACTS AND CIRCUMSTANCES OF THE CASE V ARIOUS EXPENSES CLAIMED BY THE ASSESSEE WHICH ARE APPARENTLY UNRELA TED TO THE RENTAL INCOME FORM HOUSE PROPERTY ARE NOT ALLOWABLE AND ONLY DEDUCTION U/S 24 OF THE I.T. ACT IS ALLOWABLE AFTER CORRECTLY TREATING IT AS INCOME FROM HOUSE PROPERTY. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI LED RETURN DECLARING LOSS OF RS.5,68,494/- ON 26.09.2008 AND T HE CASE WAS PROCESSED UNDER SECTION 143 (1) OF THE INCOME-TAX A CT, 1961 (FOR SHORT THE ACT). THE CASE OF THE ASSESSEE WAS SEL ECTED FOR SCRUTINY UNDER CASS AND NOTICE U/S 143 (2) WAS ISSUED ON 06. 08.2009 AND RELEVANT DETAILS/DOCUMENTS/EXPLANATIONS WERE CALLED U/S 142(1) DATED 19.04.2010. ACCORDINGLY, SHRI ARUN MALHOTRA, DIRECTOR OF THE ASSESSEE COMPANY AND SHRI SUBHASH SHARMA, CA/AR ATTENDED ITA NO.3474/DEL./2011 3 THE ASSESSMENT PROCEEDINGS AND FILED NECESSARY DETA ILS. THE AO OBSERVED THAT THE ASSESSEE HAS SHOWN RENTAL INCOME OF RS.37,08,640/- FROM LETTING OUT OF THE PROPERTY SIT UATED AT G - 2/43- A, MIDDLE CIRCLE, CONNUAGHT PLACE, NEW DELHI AS BUS INESS INCOME AND CLAIMED VARIOUS EXPENSES AGAINST THE SAME. THE SAID PROPERTY IS OWNED BY THE ASSESSEE COMPANY. AS PER THE PROVIS ION OF THE SECTION 22 OF THE ACT, RENTAL INCOME FROM THE SAID PROPERTY WAS TO BE CHARGED TO INCOME TAX UNDER THE HEAD INCOME FRO M HOUSE PROPERTY. THE AO OBSERVED THAT DEDUCTIONS FROM IN COME FROM HOUSE PROPERTY ARE TO BE ALLOWED AS PER THE PROVISI ON OF SECTION 24. MOREOVER, HE OBSERVED THAT THE ASSESSEE HAS NOT CAR RIED OUT ANY BUSINESS ACTIVITY DURING THE YEAR UNDER CONSIDERATI ON. THE AO DISALLOWED THE EXPENSES OF RS.48,82,4821- AS CLAIME D BY THE ASSESSEE COMPANY AGAINST RENTAL INCOME AND RENTAL I NCOME OF RS.37,08,6401- IS TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. ACCORDINGLY, THE AO ASSESSED THE INCOME OF THE ASSESSEE AT RS.33,48,240/- AS AGAINST RETURNED LOSS OF RS.5,68,494/- 4. FEELING AGGRIEVED OF THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE HAS PREFERRED THE FIRST APPEAL BEFORE THE LD. CIT (A) WHO DELETED THE ADDITION MADE BY THE AO. 5. LD. DR RELIED ON THE ORDER OF THE ASSESSING OFFI CER. ITA NO.3474/DEL./2011 4 6. LD. AR FOR THE ASSESSEE SUBMITTED THAT DURING TH E COURSE OF APPELLATE PROCEEDINGS, A DETAILED SUBMISSION WITH A CHART SHO WING THE TREATMENT OF THE INCOME FOR VARIOUS ASSESSMENTS WAS SUBMITTED WHICH CLEARLY SHOWS FROM ASSESSMENT YEAR 1989-90 ASSESSEE WAS SHOWING THE AB OVE INCOME AS 'BUSINESS INCOME' AND SAME WAS ASSESSED ALSO AS 'BUSINESS INC OME'. IT WAS FURTHER SUBMITTED THAT FROM ASSESSMENT YEAR 1997-98 TO ASSE SSMENT YEAR 2003-04 ASSESSEE WAS SHOWING IT AS 'INCOME FROM HOUSE PROPE RTY' BUT IT WAS ASSESSED AT 'BUSINESS INCOME' AND FURTHER FROM ASSESSMENT YEAR 2004-05 TO 2010-11 ASSESSEE HAS SHOWN IT AS 'BUSINESS INCOME', WHICH W AS ASSESSED AS 'BUSINESS INCOME' BY THE REVENUE TILL ASSESSMENT YEAR 2007-08 , HOWEVER, IN ASSESSMENT YEAR 2008-09 ASSESSEE HAS SHOWN IT AS 'BUSINESS INC OME' BUT REVENUE HAS ASSESSED IT AS 'INCOME FROM HOUSE PROPERTY'. HE SU BMITTED THAT IT CLEARLY SHOWS THAT FROM ASSESSMENT YEAR 1989-90 TO ASSESSME NT YEAR 2007 -08, DEPARTMENT HAS CONSISTENTLY ASSESSED THE ABOVE SAID INCOME AS 'BUSINESS INCOME'. HOWEVER, FOR ASSESSMENT YEAR 2008-09 IT HA S BEEN ASSESSED AS 'INCOME FROM HOUSE PROPERTY'. LD. AR FURTHER SUBMI TTED THAT IN THE ASSESSMENT ORDER, AO ALSO HAS NOT GIVEN THE COGENT FINDING AS TO WHY HE HAS ARRIVED AT THE CONCLUSION THAT ABOVE SAID INCOME SHOULD NOT BE TRE ATED AS 'BUSINESS INCOME' AND ARRIVED AT HIS FINDING IN A VERY ARBITRARY MANN ER, WITHOUT ANY COGENT REASON. HE FURTHER PLEADED THAT PRINCIPLE OF CONSIS TENCY HAS TO BE FOLLOWED AND FROM THE CHART SHOWN IN CIT (A) ORDER, IT IS ABSOLU TELY CLEAR THAT SINCE BEGINNING DEPARTMENT HAS ACCEPTED THE ABOVE SAID IN COME AS 'BUSINESS INCOME'. FURTHERMORE, HE HAS RELIED ON THE ORDER O F THE ITAT FOR ASSESSMENT YEAR 1998-99 WHEREIN ALSO RELYING ON THE RULE OF CO NSISTENCY, THE ACTION OF AO AND CIT(A) WAS UPHELD TREATING THE RENTAL INCOME O F THE ASSESSEE UNDER THE ITA NO.3474/DEL./2011 5 HEAD INCOME FROM BUSINESS OR PROFESSION. ACCORDI NGLY, HE PLEADED TO UPHOLD THE ORDER OF THE LD. CIT (A). 7. WE HAVE GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO RIVAL SUBMISSIONS OF THE PARTIES. IF WE CONSIDER T HE FACTUAL POSITION AS WELL AS CONTROVERSY OF THE INSTANT CASE WITH M/S. RAYALA CO RPORATION PVT. LTD. VS. ACIT IN CIVIL APPEAL NO.6437 OF 2016 JUDGMENT DATE D 11.08.2016 PASSED BY THE HONBLE APEX COURT WHILE REFERRING TO CHENNAI P ROPERTIES 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 C RUX IS REPRODUCED HEREIN BELOW :- 11. THE JUDGMENT RELIED UPON BY THE LEARNED COUNS EL APPEARING FOR THE ASSESSEE SQUARELY COVERS THE FACTS OF THE CASE INVO LVED IN THE APPEALS. THE BUSINESS OF THE COMPANY IS TO LEASE ITS PROPERTY AN D TO EARN RENT AND THEREFORE, THE INCOME SO EARNED SHOULD BE TREATED AS ITS BUSIN ESS INCOME. 12. IN VIEW OF THE LAW LAID DOWN BY THIS COURT IN THE CASE OF CHENNAI PROPERTIES (SUPRA) AND LOOKING AT THE FACTS OF THES E APPEALS, IN OUR OPINION, THE HIGH COURT WAS NOT CORRECT 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 SA KE OF BREVITY, CLARITY AND TO COME TO THE RIGHT CONCLUSION, 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 SUBMISSION WITH A CHART SHOWING THE TREATMENT OF THE INCOME FOR VARIOUS 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 INCO ME 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- ITA NO.3474/DEL./2011 6 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(1)(A) 18. 2006-07 720,415.00 -DO- -DO- INTIMATION U/S 143(1)(A) 19. 2007-08 -- -DO- -DO- -- 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 'B USINESS INCOME' AND SAME WAS ASSESSED ALSO AS 'BUSINESS INC OME'. FROM ASSESSMENT YEAR 1996-97 TO ASSESSMENT YEAR 2003-04 ASSESSEE WAS SHOWING IT AS 'INCOME FROM HOUSE PROPERTY' BUT IT W AS ASSESSED AT 'BUSINESS INCOME'. FROM ASSESSMENT YEAR 2004-05 TO ASSESSMENT YEAR 2010-11 ASSESSEE HAS SHOWN IT AS 'BUSINESS INC OME', WHICH WAS ASSESSED AS 'BUSINESS INCOME' BY THE DEPARTMENT TILL ASSESSMENT YEAR 2007-08, HOWEVER, IN ASSESSMENT YEA R 2008-09 ASSESSEE HAS SHOWN IT AS 'BUSINESS INCOME' BUT DEPA RTMENT HAS ASSESSED IT AS 'INCOME FROM HOUSE PROPERTY', THE YE AR IN WHICH APPEAL IS FOR ADJUDICATION. IN THIS REGARD IT IS FO UND THAT FROM ASSESSMENT YEAR 1989-90 TO ASSESSMENT YEAR 2007 -08 , DEPARTMENT HAS CONSISTENTLY ASSESSED THE ABOVE SAID INCOME AS 'BUSINESS INCOME'. HOWEVER, FOR ASSESSMENT YEAR 2008-09 IT HA S BEEN ITA NO.3474/DEL./2011 7 ASSESSED AS 'INCOME FROM HOUSE PROPERTY', IN THE BO DY OF ASSESSMENT ORDER AO 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 FIN DING IN A VERY ARBITRARY MANNER, WITHOUT ANY COGENT REASON, IN THI S REGARD PRINCIPLE OF CONSISTENCY HAS TO BE FOLLOWED AND FRO M THE CHART AS DISCUSSED ABOVE, IT IS ABSOLUTELY CLEAR THAT SINCE BEGINNING DEPARTMENT HAS ACCEPTED THE ABOVE SAID INCOME AS 'B USINESS INCOME', SO, FOR THIS ASSESSMENT YEAR WHY TREATMENT OF THE HEAD OF THE INCOME IS DIFFERENT, REQUIRES TO BE SUPPORTED B Y REASONED ORDER, WHICH HAS NOT BEEN DONE, FURTHERMORE, HON'BLE ITAT HAS ALSO HELD FOR ASSESSMENT YEAR 1998-99 RELYING ON THE RULE OF CONSISTENCY AND HAS ALSO UPHELD THE ACTION OF AO AND CIT(A) AND TRE ATED THE RENTAL INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION. SO, RELYING ON THE ABOVE DECISION OF THE HONBLE ITAT FOR THE ABOVE MENTIONED ASSESSMENT YEAR, IT IS HELD THAT ASSESSEES INCOME FROM RENTAL INCOME SHOULD BE ACCE PTED AS BUSINESS INCOME AND GROUND NO.1 AND 2 ARE DECIDED I N FAVOUR OF THE APPELLANT. IN VIEW OF THE ABOVE, WE ARE OF THE OPINION THAT TH E RULE OF CONSISTENCY SHOULD BE FOLLOWED AND THE CIT (A) IS J USTIFIED IN TREATING THE ASSESSEES INCOME AS BUSINESS INCOME. ACCORDINGLY, WE UPHOLD THE ORDER OF THE LD. CIT (A) AND DISMISS THE GROUNDS OF APPEAL. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 16 TH DAY OF DECEMBER, 2016. SD/- SD/- (J.S REDDY) (N.K. CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 16 TH DAY OF DECEMBER, 2016 TS ITA NO.3474/DEL./2011 8 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT-XXI, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.