Optrex Finexim Private Limited, Hyderabad, Hyderabad V. ITO, Ward-16(1), Hyderabad, Hyderabad

ITA 397/HYD/2017

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 5803 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 23-02-2021
• Assessment Year: 2012-2013
• Appeal Filed On: 07-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A V RAGHURAM
• Keywords: Business income; Depreciation; TDS
• Section: 80G; 201; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD (THROUGH VIDEO CONFERENCE) BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER I.T.A. NO. 397/HYD/2017 ASSESSMENT YEAR: 2012-13 M/S.OPTREX FINEXIM PRIVATE LIMITED, HYDERABAD [PAN: AAACO5544J] VS INCOME TAX OFFICER, WARD-16(1), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI A.V.RAGHURAM, AR FOR REVENUE : SHRI SUNIL KUMAR PANDEY, DR DATE OF HEARING : 23-02-2021 DATE OF PRONOUNCEMENT : 28-04-2021 O R D E R PER S.S.GODARA, J.M. : THIS ASSESSEES APPEAL FOR AY.2012-13 ARISES FROM TH E CIT(A)-4, HYDERABADS ORDER DATED 18-01-2017 PASSED IN CASE NO. 0206/ITO,W-16(1)/15-16/CIT(A)-4/HYD/2016-17, IN PROCEEDINGS U/S.143(3) OF THE INCOME TAX ACT, 1961 [I N SHORT, THE ACT]. HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. THE ASSESSEE HAS RAISED THE FOLLOWING SUBSTANTIVE GROUNDS IN THE INSTANT APPEAL: ITA NO. 397/HYD/2017 :- 2 -: 1.THE ORDER OF THE LEARNED CIT(A) CONFIRMING THE O RDER OF THE AO MAKING ADDITIONS IS NOT ONLY ERRONEOUS BOTH ON FACT S AND IN LAW BUT IS PERVERSE HAVING BEEN PASSED WITHOUT APPLICATION OF MIND TO THE FACTS. 2.THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITI ON OF RS.14,40,000 UNDER THE HEAD PROPERTY WITHOUT DEALING WITH THE SU BMISSIONS OF THE ASSESSEE IN A CRYPTIC MANNER. 3.THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE PROVISIONS OF SEC.23 DOES NOT PERMIT IN A CASE OF PROPERTY THAT WAS LET EARLIER AND NOT OCCUPIED LATER, TO ESTIMATE NOTIONAL INCOME AND THE REBY ERRED IN CONFIRMING THE ADDITION OF RS.14,40,000. 4.THE LEARNED CIT (A) ERRED IN DIRECTING THE AO TO ENHANCE THE INCOME BY TREATING THE LOSS CLAIMED OF RS.15,85,613 BEING CLAIM OF BUSINESS LOSS AS AGAINST THE GROUND OF THE ASSESSEE TO ALLOW ENTIRE LOSS AS AGAINST THE LOSS DETERMINED BY THE AO OF RS.4,844. 5.THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THER E IS NO PROVISION IN THE INCOME-TAX ACT FOR TREATING THE CLAIM OF EXPEND ITURE AS INCOME EXCEPT PROVISO TO SEC.69C WHICH RELATE TO EXPENDITU RE NOT RECORDED IN THE BOOKS AND THEREBY ERRED IN DIRECTING TO TREAT T HE CLAIM OF LOSS UNDER THE HEAD BUSINESS AS INCOME WITHOUT SUPPORT O F ANY LEGAL PROVISIONS. 6.THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE ASSESSEE IS ELIGIBLE FOR DEPRECIATION IN RESPECT OF THE VALUE OF BUILDIN G USED BY IT FOR BUSINESS AND ALSO FOR DEDUCTION OF MUNICIPAL TAXES TO THE EXTENT OF THE BUILDING USED BY IT AND THEREBY ERRED IN NOT CONSID ERING THE GROUND OF THE ASSESSEE FOR DIRECTING TO ALLOW THE LOSS CLAIME D UNDER THE HEAD BUSINESS. 7.THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITI ON OF RS.2,96,51,889 MADE U/S.68 IN SPITE OF NOTING THE F ACT THAT THE SAME WAS NOT RECEIVED DURING THE PREVIOUS YEAR BUT IT WA S ONLY THROUGH A JOURNAL ENTRY THE BALANCES IN SHARE APPLICATION MON EY IS TRANSFERRED TO UNSECURED LOANS AND FAILING TO APPRECIATE THE LE GAL POSITION THAT SEC.68 COULD BE APPLIED ONLY IF THERE IS A DIRECT C REDIT IN THE PREVIOUS YEAR AND FURTHER THAT SUCH CREDIT WHICH APPEARED IN EARLIER YEARS WAS NEVER QUESTIONED AND ADDED. 8. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING. 3. WE ADVERT TO THE FIRST ISSUE OF INCOME FROM HOUSE PROPERTY ADDITION OF RS.14,40,000/- DISCUSSED IN THE CIT(A)S ORDER AS UNDER: ITA NO. 397/HYD/2017 :- 3 -: 5.THE GROUND NO.2 IS WITH REGARD TO DETERMINING NO TIONAL INCOME ON THE PORTION OF BUILDING OCCUPIED BY THE APPELLANT F OR BUSINESS PURPOSES AT RS.14,40,000/-. 5.1 WITH REGARD TO ABOVE GROUND, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED AS UNDE R: AS SEEN FROM THE SUBMISSIONS OF THE ASSESSEE, THE P ROPERTY IS OF THREE FLOORS AND A PORTION OF SECOND FLOOR IS GIVEN ON RE NT AND THE BALANCE IS OCCUPIED BY THE ASSESSEE COMPANY. THE TOTAL CONSTRU CTED AREA OF THE PREMISES IF 18,000 SFT. THIS INFERS THAT EACH FLOOR IS 6,000 SFT. AS THE ASSESSEE OCCUPIED THE PORTION OF THE SECOND FLOOR A ND ALSO AS NO DETAILS AREA OF THE LET OUT PORTION IS SUBMITTED BY THE ASSESSEE, IT IS ASSUMED THAT THE PORTION LET OUT IS HALF OF THE SEC OND FLOOR I.E., 3000 SFT. IN RESPECT OF BALANCE PORTION, THE ANNUAL VALUE CAN NOT BE TAKEN AT NIL IN VIEW OF THE PROVISIONS OF SEC.23 (1)(C) O F THE I.T.ACT AND ON APPLICATION OF THE RATIO LAID OUT BY THE HON'BLE AP HIGH COURT IN THE CASE OF VIVEK JAIN VS. ACIT REPORTED IN 337 ITR 74. IN VIEW OF THE ABOVE, THE ANNUAL VALUE OF THE PROPERTY IS ARRIVED U/S.23(1)(A) OF THE I.T.ACT. TOTAL AREA OF THE PREMISES : 18000 SFT. 50% OF THE AREA OF 2ND FLOOR : 3000 SFT. (TAKEN AS OCCUPIED BY ASSESSEE) AREA ON WHICH ANNUAL VALUE IS TO BE DETERMINED : 1 5000 SFT. 50% OF THE AREA OF 2ND FLOOR : 3000 SFT. (TAKEN AS LET OUT AS DECLARED BY ASSESSEE) ANNUAL LET OUT VALUE OF 3000 SFT AS DECLARED BY ASS ESSEE: RS.3,60,000 ANNUAL LET OUT VALUE OF 12000 SFT WHICH IS NOT DECL ARED BY THE ASSESSEE (36000013000X12000)= RS. 14,40,000 ACCORDINGLY, THE ANNUAL VALUE OF THE REMAINING TWO FLOORS IS TAKEN AS RS.14,40,000/- AND THE SAME IS ADDED UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. FURTHER, THE ASSESSEE DEBITED AN AMOUNT OF RS. 6,93 ,195/- TOWARDS MUNICIPAL TAXES. HOWEVER, THE EXPENSES TOWA RDS MUNICIPAL TAXES IS ALLOWABLE ONLY FROM THE INCOME DERIVED FRO M THE HOUSE PROPERTY AND AS PART OF 2ND FLOOR I.E., 3000 STT, I S OCCUPIED BY THE ASSESSEE ON WHICH THIS EXPENSES IF NOT ALLOWABLE, T HE ALLOWABLE EXPENDITURE TOWARDS MUNICIPAL TAX ON AREA OF 15000 SFT, WORKS OUT TO RS. 5,77,662/-. ITA NO. 397/HYD/2017 :- 4 -: AS PER 26AS, THE ASSESSEE DERIVED TOTAL RECEIPTS OF RS. 3,90,000/- FROM THE TENANT, CYBERPARK DEVELOPMENT & CONSTRUCTION LIMITED AND THE TAX DEDUCTION IS RS. 39,000/-. THE ASSESSEE CLAIMED THE ENTIRE AMOUNT OF TDS IN THE RETURN OF INCOME. A CCORDINGLY, THE RENTAL INCOME FROM THE TENANT IS ADOPTED AT RS.3,90 ,000/- AS AGAINST RS.3,60,000/- DECLARED BY THE ASSESSEE. 5.2 DURING THE COURSE OF APPEAL PROCEEDINGS, THE AR OF THE APPELLANT WITH REGARD TO ABOVE GROUND SUBMITTED AS UNDER: THE AO MADE THIS ADDITION ON THE GROUND THAT THE AP PELLANT HAS NOT ADMITTED INCOME ON THE VACANT PORTION, BY RELYING O N A DECISION OF THE A.P. HIGH COURT IN THE CASE OF VIVEK JAIN VS. ACIT. IT IS UNFORTUNATE THE AO IS UNAWARE THAT THE SAID DECISION RELATE TO THE A. Y. 2002-03 WHEN THERE WAS PROVISIONS FOR CLAIMING VACANCY ALLO WANCE AS INCOME WAS ESTIMATED ON NOTIONAL BASIS EVEN ON SELF OCCUPI ED PROPERTY. AS PER THE PRESENT PROVISIONS OF SECTION 23, THERE IS NO PROVISION ALLOWING ANY VACANCY ALLOWANCE. ON THE OTHER HAND THE CLAUSE (C) IS VERY CLEAR TO THE EFFECT THAT THE RENT RECEIVED OR RECEIVABLE. IT ALSO REFERS TO CLAUSE (A) WHICH PROPOSES TO ESTIMATE THE ALV STATI NG THAT IT SHOULD BE AS PER CLAUSE (C) I.E., RECEIVED OR RECEIVABLE T HEREBY MEANING '0' IF IT '0'. THE APPELLANT SUBMIT THAT THE PREMISES IS IN F ACT OCCUPIED FOR ITS BUSINESS PURPOSE ONLY AND IT WAS LET OUT IN THE EAR LIER YEARS WHOSE DETAILS ARE SUBMITTED AND ARE ENCLOSED. THE KIND AT TENTION OF THE HON'BLE CIT(A) IS DRAWN TO THE ANNEXURE WHERE IN TH E DETAILS OF LETTING OUT IS GIVEN. IT WOULD BE SEEN THAT DURING THE F.Y. 2010-11 ITSELF THERE WAS NO TENANT AND OCCUPIED BY THE APPELLANT. IN 201 1-12 FINANCIAL YEAR ONLY A PORTION OF GROUND FLOOR IS LET OUT TO A REAL ESTATE COMPANY AND PART OF GROUND FLOOR AND TERRACE IS LET OUT FOR ERECTING ANTENNA TO ANOTHER TELECOM INFRASTRUCTURE COMPANY. THE APPELLA NT THEREFORE SUBMIT THAT THE ACTION OF THE AO IN ESTIMATING RENT ON THE BASIS OF A DECISION WHICH IS NOT IN ACCORDANCE WITH THE PROVIS IONS FOR THE RELEVANT ASSESSMENT YEAR MAY BE DIRECTED TO BE DELE TED. 5.3. AFTER CAREFULLY CONSIDERING THE ASSESSMENT ORD ER AND SUBMISSIONS OF THE APPELLANT, THE SUBMISSIONS OF TH E APPELLANT ARE NOT ACCEPTED AND INCOME TO BE TAXED UNDER HOUSE PRO PERTY. THEREFORE, THE ADDITION MADE UNDER HOUSE PROPERTY C ONFIRMED. 4. WE HAVE HEARD RIVAL CONTENTIONS AGAINST AND IN SUP PORT OF THE CORRECTNESS OF THE IMPUGNED RENTAL INCOME ADDITIO N OF RS.14,40,000/-. IT EMERGES FROM A PERUSAL OF A CASE FILE THAT THERE IS NO CLARITY EVEN ABOUT THE AREA LET-OUT AT THE AS SESSEES ITA NO. 397/HYD/2017 :- 5 -: BEHEST ON THE SPECIFIED PORTION OF THE SECOND FLOOR SI NCE BOTH THE LEARNED LOWER AUTHORITIES HAVE ADOPTED TOTAL CONSTRU CTED AREA AS 18,000 SQ. FT. HAVING THREE FLOORS ADMEASURIN G 6,000 SQ. FT., OF EACH FLOOR. THE ASSESSEE HAS ALSO NOT FI LED THE BREAK- UP OF THE CONSTRUCTED AREA AS PER THE SANCTIONED MUNIC IPAL PLAN AS WELL THE RENTED PORTION IN OTHER WORDS. WE THERE FORE ARE OF THE OPINION THAT THE INSTANT ISSUE REQUIRES AFRESH ADJUDICATION AT THE CIT(A)S LEVEL. WE ORDER ACCORDIN GLY. THE ASSESSEE IS DIRECTED TO PLACE ON RECORD THE EXACT MEAS UREMENT OF THE RENTED PROPERTY VIZ-A-VIZ THE ENTIRE CONSTRUCTED AREA AS PER THE SANCTIONED BUILDING PLAN FROM THE MUNICIPAL AU THORITY; IF ANY TO BE SUBJECTED TO FURTHER FACTUAL VERIFICATION AS PER LAW WITHIN THREE EFFECTIVE OPPORTUNITIES OF HEARING. WE FU RTHER GRANT LIBERTY TO THE ASSESSEE TO RAISE ALL FACTUAL/LEG AL ARGUMENTS IN CONSEQUENTIAL PROCEEDINGS. 5. NEXT IS THE SECOND ISSUE INVOLVING LOSS OF RS.15,8 5,613/- DISCUSSED IN THE CIT(A)S ORDER AS UNDER: 6.3 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORD ER AND SUBMISSIONS OF THE APPELLANT. AS PER THE ASSESSMENT ORDER AT PARA 8, IT WAS OBSERVED BY THE AO THAT THERE IS NO BUSINESS PROFITS OF THE APPELLANT AND NO INCOME WAS DERIVED FROM THE BUSINE SS AND SO THE DEPRECIATION CALCULATED NOT TO BE ALLOWED BUT FINAL LY THIS ASPECT WAS IGNORED BY THE ASSESSING OFFICER. IN COMPUTATION OF TOTAL INCOME BY THE APPELLANT, THE APPELLANT HA-S SHOWN INCOME FROM HOUSE PROPERTY LOSS AT RS.3,33,195/- AND BUSINESS INCOME LOSS AT R S.12,52,418/-. THIS INCLUDES PROFIT AND LOSS ACCOUNT LOSS OF RS.21 ,99,838/- FOR WHICH MUNICIPAL TAX AND DEPRECIATION WAS ADDED AND REDUCED DEPRECIATION AS PER I.T.ACT AND RENT INCLUDED OF RS .3,60,000/- AND NET EFFECT ARRIVED AT TOTAL LOSS OF RS.15,85,613/-. THEREFORE, THE DEPRECIATION CLAIMED AT RS.17,44,761/- NOT TO BE AL LOWED AND ADDED BACK TO THE TOTAL INCOME. WHILE DOING THE COMPUTATI ON OF INCOME, THE ASSESSING OFFICER TAKEN HOUSE PROPERTY INCOME AND A DDED INCOME FROM LEASE, INCOME FROM INTEREST AND UNEXPLAINED CR EDIT U/S 68 AND AFTER GIVING CREDIT FOR LOSS AND DEDUCTION U/S 80G AND ASSESSED THE ITA NO. 397/HYD/2017 :- 6 -: TOTAL INCOME AT RS.3,05,41,409/-. BUT ACTUALLY WHEN ONCE THE HOUSE PROPERTY INCOME IS CALCULATED, WHEN THERE IS NO BUS INESS INCOME, THE LOSS RETURNED OF RS.15,85,613/- ALSO NOT TO BE ALLO WED AND ADDED BACK TO THE TOTAL INCOME, WHICH THE ASSESSING OFFIC ER IGNORED. THEREFORE, EVEN THOUGH IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS DISCUSSED ABOUT DEPRECIATION BUT FINALLY THE TO TAL LOSS WAS NOT ADDED BACK BY THE ASSESSING OFFICER. THEREFORE, SIN CE THERE IS NO BUSINESS INCOME, HENCE THE BUSINESS LOSS ARRIVED AT BY THE APPELLANT AT RS.15,85,613/- TO BE TREATED AS INCOME. HENCE, THE TOTAL INCOME IS ENHANCED TO THE EXTENT OF RS.15,85,613/-. 6. IT PRIMA-FACIE EMERGES FROM A PERUSAL OF A CASE FILE THAT THE ASSESSING OFFICERS ASSESSMENT ORDER DT.31-03-2015 HAD DISALLOWED THE ASSESSEES LOSS TO THE TUNE OF RS.4,844/ - ONLY AS AGAINST THE CIT(A)S FINDINGS PRIMA-FACIE ENHANCING IT TO RS.15,85,613/-. THERE IS FURTHER NO MATERIAL IN THE CASE FILE SUGGEST THAT THE ASSESSEE HAD BEEN EVER ISSUED ANY SHOW CAUSE NOTICE TO THIS EFFECT IN THE LOWER APPELLATE PROC EEDINGS. WE THEREFORE ARE OF THE OPINION THAT THE INSTANT SECOND IS SUE ALSO REQUIRES CIT(A)S AFRESH ADJUDICATION AS PER L AW IN THE VERY TERMS AS REGARDS IN THE FIRST AND FOREMOST ISSUE DECIDE D IN PRECEDING PARAGRAPHS. WE ORDER ACCORDINGLY. 7. LASTLY COMES SECTION 68 UN-EXPLAINED CASH CREDITS I SSUE OF RS.2,96,51,889/-. THE ASSESSEES ONLY CASE IS T HAT THE SAME DOES NOT PERTAIN TO THE RELEVANT PREVIOUS YEAR WHICH COU LD TRIGGER SECTION 68 AS PER HON'BLE BOMBAY HIGH COURT ( GOA BENCH)S RECENT DECISION IN IVANSINGH VS. ACIT, DT.14 -02-2020 HOLDING THAT THE CLINCHING STATUTORY EXPRESSION PREVIOUS YEAR IMPLIES THE PREVIOUS YEAR ISSUE ONLY THAN ANY OTHER Y EAR. 7.1. LEARNED DEPARTMENTAL REPRESENTATIVE FAILS TO DISPUTE THAT THIS CLINCHING ISSUE HAS NOWHERE BEEN CONSIDERED IN THE ITA NO. 397/HYD/2017 :- 7 -: CIT(A)S DETAILED DISCUSSION. AND ALSO THAT THE IMPUGNE D ADDITION HAS BEEN TREATED AS UN-SECURED LOANS AS WE LL. 7.2. WE THUS FOLLOW THE VERY COURSE OF ACTION QUA THE INSTANT LAST ISSUE AS WELL. WE DIRECT THE CIT(A) TO DECIDE THE PRESENT ISSUE AFRESH IN THE VERY TERMS. 8. THIS ASSESSEES APPEAL IS TREATED AS ALLOWED FOR S TATISTICAL PURPOSES IN ABOVE TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH APRIL, 2021 SD/- SD/- (LAXMI PRASAD SAHU) (S.S.G ODARA) ACCOUNTANT MEMBER JUDICIAL MEM BER HYDERABAD, DATED: 28-04-2021 TNMM ITA NO. 397/HYD/2017 :- 8 -: COPY TO : 1.M/S.OPTREX FINEXIM PRIVATE LIMITED, C/O. K.VASANT KUMAR, A.V.RAGHU RAM, P.VINOD & M.NEELIMA DEVI, ADVOCATES, 610, BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD. 2.THE INCOME TAX OFFICER, WARD-16(1), HYDERABAD. 3.CIT(APPEALS)-4, HYDERABAD. 4.PR.CIT-4, HYDERABAD. 5.D.R. ITAT, HYDERABAD. 6.GUARD FILE.