OBEROI MOTORS, AMBALA CANTT V. ACIT, CENTRAL CIRCLE, KARNAL

ITA 3512/DEL/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 0156 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 11-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRAMITA M BISWAS
• Keywords: Business income; Deemed to accrue or arise in india; Set aside
• Section: 147; 68; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER & SHRI K.NARASIMHA CHARY, JUDICIAL MEMBER ITA NO.-3512/DEL/2018 (ASSESSMENT YEAR: 2012-13) OBEROI MOTORS, AMBALA CANTT. C/O RAJEEV GOEL & ASSOCIATES, 179, BANK ROAD, AMBALA CANT. VS. ACIT, CENTRAL CIRCLE, KARNAL PAN NO. AAAFO5401H APPELLANT RESPONDENT ASSESSEE BY SH. ROHIT GOEL, CA REVENUE BY MS. PRAMITA M. BISWAS, CIT/DR DATE OF HEARING: 05/07/2021 PRONOUNCEMENT ON 16 /07/2021 ORDER PER K. NARASIMHA CHARY, JM AGGRIEVED BY THE ORDER DATED 26/03/2018 PASSED BY T HE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2, GURGAON ('L D. CIT(A)')FOR THE ASSESSMENT YEAR 2012-13, OBEROI MOTORS (THE ASSESS EE) FILED THIS APPEAL. 2. BRIEF FACTS OF THE CASE NECESSARY FOR THE DISPOS AL OF THIS APPEAL ARE THAT THERE WAS A SURVEY OPERATION UNDER SECTION 133 A OF THE ACT AT THE RESIDENTIAL AS WELL AS THE BUSINESS PREMISES OF M/S SHAKTIMAN/KIRTIMANGROUP OF CASES ON 4/9/2012 AND 24 /9/2012. DURING 2 SUCH SURVEY, THE ASSESSEE OFFERED AN ADDITIONAL INC OME OF RS. 85,58,000/- IN THE ASSESSMENT YEAR 2012-13. HOWEVER, DURING THE ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2013-14, ATTAIN ING A DOUBT, LEARNED ASSESSING OFFICER CALLED FOR THE INCOME-TAX RETURN AND BALANCE SHEET FOR THE ASSESSMENT YEAR 2012-13 AND FOUND THAT THE ASSE SSEE HAD FILED THE INCOME TAX RETURN FOR ASSESSMENT YEAR 2012-13 DECLA RING A TOTAL INCOME OF RS. 65,42, 853/-AS AGAINST THE SURRENDERED INCOM E OF RS. 85, 58, 000/-, AFTER SETTING OFF THE BUSINESS LOSS AGAINST THE INC OME SURRENDERED DURING THE COURSE OF SURVEY, AND SUCH A SET OFF, ACCORDING TO THE LEARNED ASSESSING OFFICER, IS NOT ALLOWABLE. HE, THEREFORE, AFTER FOLLOWING THE PROCEDURE UNDER SECTION 147 OF THE INCOME TAX ACT, 1961 (THE ACT) DISALLOWED THE LOSSES WHICH WERE SET OFF BY THE ASS ESSEE AGAINST THE SURRENDERED AMOUNT. LEARNED ASSESSING OFFICER ALLOW ED THE SALARY TO PARTNERS TO THE TUNE OF RS. 1.5 LACS, ON THE GROUND THAT IN VIEW OF THE FACT THAT THE DISALLOWANCE OF THE SET OFF OF THE BUSINES S LOSSES WOULD RESULT IN THE BUSINESS LOSS OF RS. 16,74, 747/-BEFORE ALLOWIN G INTEREST AND SALARY TO THE PARTNERS AGAINST THE BUSINESS OF THE ASSESSEE F IRM. 3. ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) AND ARGUED THAT IN THE CASE OF PCIT VS. M/S KUSHI RAM AND SONS IT WAS HELD THAT THE SURRENDERED AMOUNT IS FROM BUSINESS INCOME AND THER EFORE, SET OFF OF THE BUSINESS LOSSES COULD BE ALLOWED OUT OF IT. LD. CIT(A) DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND HELD THAT THE SU RRENDERED AMOUNT IS DEEMED INCOME AND DOES NOT FALL UNDER ANY OF THE HE AD OF INCOME AND THEREFORE NO SET OFF OF BUSINESS LOSSES COULD BE AL LOWED. LD. CIT(A) CONSEQUENTLY DISMISSED THE GROUND RELATING TO THE A LLOWANCE OF THE PARTNERS SALARY ALSO. 3 4. ASSESSEE IS THEREFORE, BEFORE US IN THIS APPEAL CONTENDING THAT THE BUSINESS INCOME TO THE TUNE OF RS. 85, 58, 000/-SUR RENDERED BY THE ASSESSEE, WAS ALREADY RECORDED IN THE BOOKS OF ACCO UNTS AND THEREFORE IT WOULD BE UNREASONABLE TO TREAT THE SAME AS NOT FALL ING UNDER ANY OF THE HEAD OF INCOME, MORE PARTICULARLY IN VIEW OF THE DE CISION OF THE HONBLE APEX COURT IN THE CASE OF LUKHMICHANDBAIJNATH VS. C IT 35 ITR 416 (SC) WHEREIN IT WAS HELD THAT IN CASE AN AMOUNT IS FOUND CREDITED IN THE BOOKS OF ACCOUNTS OF THE BUSINESS, IT WOULD NOT BE UNREAS ONABLE TO TREAT THE SAME AS BUSINESS INCOME. LD. AR FURTHER SUBMITTED T HAT IN THE CASE OF THE SISTER CONCERN, NAMELY, KIRTIMAN CEMENT AND PACKAGI NG PRIVATE LIMITED, A COORDINATE BENCH OF THIS TRIBUNAL IN ITA NO. 2777 A ND 2778/DEL/2017 BY ORDER DATED 15/5/2018 FOR THE ASSESSMENT YEARS 2012 -13 AND 2013-14 ALLOWED THE BUSINESS LOSSES TO BE SET OFF AGAINST T HE SURRENDERED AMOUNT. HE FURTHER PLACED RELIANCE ON THE CBDT CIRCULAR NO. 11/2019 DATED 19/06/2019 WHEREIN THE BOARD HAD ACCEPTED THAT PRIO R TO 1/4/2017 SET OFF OF LOSSES SHALL BE ALLOWED AGAINST THE DEEMED I NCOME. HE ALSO PLACED RELIANCE ON THE DECISION OF A COORDINATE BENCH OF T HIS TRIBUNAL IN THE CASE OF ACE INFRACITY DEVELOPERS PRIVATE LIMITED IN ITA NO. 1087 /DEL/ 2018 ORDER DATED 5/3/2021. 5. LD. DR SUBMITTED THAT THE LEARNED ASSESSING OFFI CER PLACED RELIANCE ON THE DECISION OF THE HONBLE APEX COURT HIGH COURT IN THE CASE OF FAKIR MUHAMED HAJI HASAN VS. CIT 247 ITR 290 AND THE DELETION OF THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE O F M/S KIM PHARMA IN ITA NO. 106 OF 2011 DATED 27.04 2011. SHE FURTHER S UBMITTED THAT IN KUSHI RAM (SUPRA) IT WAS HELD THAT IT IS NOT NECESS ARY THAT THE SURRENDERED AMOUNT IS FROM BUSINESS INCOME. SHE THE REFORE SUBMITS THAT 4 THE ORDERS OF THE AUTHORITIES BELOW ARE JUSTIFIED A ND THE ASSESSEE CANNOT BE ALLOWED TO SET OFF THE BUSINESS LOSSES OUT OF TH E DEEMED INCOME. 6. WE HAVE GONE THROUGH THE RECORD IN THE LIGHT OF THE SUBMISSIONS MADE ON EITHER SIDE. THERE IS NO DISPUTE THAT FROM THE INCEPTION THE ASSESSEE HAD BEEN CONTENDING THAT FROM THE REGULAR BUSINESS OF THE ASSESSEE IN TRADING OF LML VESPA SCOOTERS, THE PROP ERTY BUSINESS INCOME WAS ALREADY RECORDED IN THE BOOKS OF THE ASSESSEE T O THE TUNE OF RS. 85, 58, 000/-AND AFTER ADJUSTING THE LOSSES TO THE TUNE OF RS. 20, 15, 147/- WHICH WERE ALSO RECORDED IN THE BOOKS BY THE TIME, THE NET INCOME OF RS. 65, 42, 853/-WAS ARRIVED AND THE SAME WAS MENTIONED IN THE RETURN OF INCOME. LD. CIT(A), AS A MATTER OF FACT OBSERVED TH AT THE ASSESSEE INTRODUCED THE CASH IN THE BOOKS OF ACCOUNTS IN THE NAME OF PROPERTY INCOME FROM PROPERTY DEALINGS. ACCORDING TO THE AUT HORITIES BELOW, HOWEVER, THE SURRENDERED AMOUNT IS ONLY A DEEMED IN COME AND NO SET OFF OF BUSINESS LOSSES IS ALLOWABLE OUT OF THEM. 7. AS RIGHTLY CONTENDED BY LD. AR, IN THE CASE OF LAKHMICHANDBAIJNATH (SUPRA) THE HONBLE APEX COURT HELD THAT IN CASE ANY AMOUNT IS FOUND CREDITED IN THE BOOKS OF ACCOUNTS O F THE BUSINESS, IT WOULD NOT BE UNREASONABLE TO TREAT THE SAME AS BUSI NESS INCOME. A COPY OF THE ORDER DATED 15/5/2018 IN THE CASE OF M/S KIR TIMANCEMENTS (SUPRA) IS PRODUCED BEFORE US AND A COORDINATE BENCH OF THI S TRIBUNAL AFTER CONSIDERING A CATENA OF CASE LAW HELD THAT SECTION 115BBE WAS AMENDED W.E.F. THE ASSESSMENT YEAR 2017-18 STATING THAT THE LOSS WILL NOT BE ALLOWED AGAINST THE INCOME ASSESSED UNDER SECTION 6 8 TO 69D OF THE ACT AND THEREFORE, FOR THE ASSESSMENT YEARS UNDER CONSI DERATION SUCH BUSINESS LOSSES COULD BE ALLOWED TO BE SET OFF. 5 8. WE HAVE ALSO GONE THROUGH THE CIRCULAR NO. 11/20 19 ISSUED BY THE CBDT WHEREIN IT IS CLEARLY STATED THAT THE AMENDMEN T INSERTING THE WORDS OR SET OFF OF ANY LOSS IS APPLICABLE WITH EFFECT FROM 1/4/2017 AND IN VIEW OF THE FACT THAT THERE WERE CONFLICTING VIEWS TAKEN BY THE ASSESSING OFFICERS IN THE ASSESSMENT YEARS PRIOR TO THE ASSES SMENT YEAR 2017-18, KEEPING THE LEGISLATIVE INTENT BEHIND THE AMENDMENT IN SECTION 115 BBE (2) WHILE THE FINANCE ACT, 2016 TO REMOVE ANY AMBIG UITY OF INTERPRETATION, THE BOARD WAS OF THE VIEW THAT SINC E THE TERM ARE SET OFF OF ANY LOSS WAS SPECIFICALLY INSERTED ONLY VIDE TH E FINANCE ACT, 2016 W.E.F. 1/4/2017, AN ASSESSEE IS ENTITLED TO CLAIM S ET OFF OF LOSS AGAINST INCOME DETERMINED UNDER SECTION 115 BV OF THE ACT T ILL THE ASSESSMENT YEAR 2016-17. 9. FROM THE ABOVE IT IS CLEAR THAT, IN VIEW OF THE FACT THAT THE ASSESSEE HAD ALREADY INTRODUCED THE TRANSACTIONS IN THEIR BO OKS OF ACCOUNTS IN THE NAME OF PROPERTY INCOME FROM PROPERTY DEALING, IT W OULD NOT BE REASONABLE TO SAY THAT SUCH INCOME DOES NOT FALL UN DER ANY OF THE HEAD OF INCOME OR THAT SUCH DEEMED INCOME DOES NOT ALLOW AN Y SET OFF OF BUSINESS LOSSES. WE ARE INCLINED TO ACCEPT THE CONT ENTION OF THE ASSESSEE THAT THE SURRENDERED INCOME, IN RESPECT OF WHICH TH E ENTRIES HAD ALREADY BEEN MADE IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE IN RELATION TO THE PROPERTY INCOME FROM PROPERTY DEALING, AMOUNT TO BU SINESS INCOME AND IT ALLOWS THE SET OFF OF THE BUSINESS LOSS TO THE T UNE OF RS. 20, 15, 147/-. WE, THEREFORE, DIRECT THE ASSESSING OFFICER TO DELE TE THE DISALLOWANCE OF THE SET OFF OF THE BUSINESS LOSS. 10. THE DISALLOWANCE OF RS. 1.5 LACS OUT OF SALARY PAID TO PARTNERS UNDER SECTION 40 (B) OF THE ACT HAS TO BE WORKED OU T KEEPING IN VIEW THE 6 CONSEQUENCES OF THE DELETING THE DISALLOWANCE OF TH E SET OFF OF THE BUSINESS LOSS. WE SET ASIDE THE IMPUGNED ORDER ON T HIS ASPECT, AND REMAND ISSUE TO THE FILE OF THE LEARNED ASSESSING O FFICER TO WORK OUT THE MAXIMUM ALLOWABLE SALARY TO PARTNERS. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D IN PART AND FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF JULY, 2021. SD/- SD/- (PRASHANT MAHARISHI) (K. NARSIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 16/07/2021