Narayangarh Hotel & Gardens, Muktsar V. The Income Tax Office, Muktsar

ITA 406/ASR/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7815 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 19-06-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 29-07-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAHUL DHAWANLD
• Assessee Lawyers: ADITYA KUMAR LD CAS
• Keywords: Business income; Depreciation; Deemed to accrue or arise in india
• Section: 133A; 69

Judgement Text

IN THE INCOME TAX APPELLATE TR IBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH.T.S. KAPOOR, ACCOUNTANT MEMBER AND SH.N.K.CHOUDHRY, JUDICIAL MEMBER I.T.A. NO.406(ASR)/2015 ASSESSMENT YEAR: 2011-12 NARAYANGARH HOTEL & GARDENS MALOUT ROAD, MUKTSAR. PAN:AAHFN-8249F VS. INCOME TAX OFFICER, WARD-II(2), MUKTSAR (APPELLANT) (RESPONDENT) APPELLANT BY: SH. ASHWANI KUMAR & SH. ADITYA KUMAR, (LD. CAS.) RESPONDENT BY: SH. RAHUL DHAWAN (LD. DR) DATE OF HEARING:14.09.2017 DATE OF PRONOU NCEMENT:18.09.2017 ORDER PER N. K. CHOUDHRY (JM): THE INSTANT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE, ON FEELING AGGRIEVED AGAINST THE ORDER DATED 11.06.201 5, PASSED BY THE LD. CIT(A)-, BATHINDA, RELEVANT TO THE ASST. YEAR:201 1-12. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. (1) THAT LD. COMMISSIONER OF INCOME TAX(APPEALS) H AS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE INCOME SURREND ERED, AMOUNTING RS.20.00 LACS BY THE APPELLANT, DURING THE COURSE O F SURVEY OPERATIONS UNDER SECTION 133A OF THE INCOME TAX ACT , 1961 AT ITS BUSINESS PREMISES IS NOT A BUSINESS INCOME AND IS O UT OF THE PREVIEW OF ALL THE FIVE HEADS OF INCOME AS ENUMERAT ED UNDER SECTION 14 OF THE INCOME TAX ACT, 1961. (2) THAT WITHOUT PREJUDICE TO ABOVE GROUND OF AP PEAL, LD. COMMISSIONER OF INCOME TAX(APPEALS) HAS FURTHER ERR ED IN LAW AND ON FACTS IN HOLDING THAT THE CURRENT YEAR UN ABSORB ED BUSINESS LOSS COMPRISING OF DEPRECIATION CANNOT BE SET OFF AGAINS T THE INCOME SURRENDERED BY THE APPELLANT . IT A NO.406(ASR)/2015 AS ST. YEAR: 2011-12 2 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THAT THE ASSESSEE FIRM DERIVES INCOME FROM RUNNING A MARRIAGE PALACE BY THE NAME AND STYLE OF M/S NARAYAN HO TEL AND GARDEN, MALOUT ROAD, MUKTSAR AND SUBSEQUENT TO THE SURV EY IN THE BUSINESS PREMISES OF THE APPELLANT IN JANUARY, 2011 , THERE WAS A DISCLOSURE OF ADDITIONAL INCOME TO THE TUNE OF RS.20,00,000/-. IN ITS RETURN OF INCOME, THE APPELLANT DISCLOSED A NET PROFIT FROM BUSINESS AT RS.7,45,668/- AFTER ADJUSTIN G THE OTHERWISE BUSINESS LOSS OF RS.12,54,334/- FROM THE ADDITIO NAL INCOME DISCLOSED DURING THE SURVEY OPERATION. IN THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER, FOLLOWING THE DECISION OF THE HONBLE PUNJAB AND HARYAN A HIGH COURT IN THE CASE OF M/S KIM PHARMA (P) LIMITED VS. CI T, PANCHKULA AND OTHERS, TREATED THE ADDITIONAL INCOME DI SCLOSED DURING THE SURVEY OPERATION AS DEEMED INCOME U/S 69 OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) AND BROUG HT IT TO TAX WITHOUT ALLOWING THE SET OFF OF SUCH INCOME WITH TH E BUSINESS LOSS OF RS.12,54,334/-. IN ADDITION TO THE ABOVE, THE DECLARED BUSINESS LOSS OF RS.12,54,334/- WAS REDUCED BY AN AMOUNT OF RS.50,000/- AND RS.1,85,128/- ON ACCOUNT OF ESTIMATED DISALLOWANCE OF GENERAL EXPENSES AND DISALLOWANCE OF DEPRECIATION RESPECTIVELY. THE RESULTANT BUSINESS LOSS OF RS.10,19,206/- WAS ALLOWED TO BE CARRIED FORWARD. THE AFORESAID ASSESSMENT ENTAILED A TAX DEMAND OF RS.5,28,560/-. 4. ON FEELING AGGRIEVED AGAINST THE ORDER PASSED BY THE A SSESSING OFFICER, THE ASSESSEE PREFERRED THE FIRST APPEAL BEFORE T HE LD. CIT(A), WHO UPHELD THE ADDITION OF RS.20 LACS BY HOLDING THAT THE INCOME SURRENDERED, AMOUNTING TO RS.20 LACS BY THE APPELLANT, DURING THE COURSE OF SURVEY OPERATIONS UNDER SECTION 133A OF THE INCO ME TAX ACT, IT A NO.406(ASR)/2015 AS ST. YEAR: 2011-12 3 1961 AT ITS BUSINESS PREMISES IS NOT A BUSINESS INCOME AND IS O UT OF THE PREVIEW OF ALL THE FIVE HEADS OF INCOME AS ENUMERA TED UNDER SECTION 14 OF THE INCOME TAX ACT, 1961 AND FURTHER THE LD. CIT(A) HELD THAT CURRENT YEAR UN ABSORBED BUSINESS LOSS COMPRISIN G OF DEPRECIATION CANNOT BE SET OFF AGAINST THE INCOME SURREND ERED BY THE APPELLANT. 5. FEELING AGGRIEVED AGAINST THE ORDER PASSED BY THE L D. CIT(A), THE ASSESSEE PREFERRED THE APPEAL BEFORE US. 6. THE LD. DR RELIED UPON THE ORDER PASSED BY THE AUTHO RITIES BELOW. 7. THE LD. AR SUBMITTED THAT THE CO-ORDINATION BENCH OF AMRITSAR HAD ALREADY DEALT WITH THE SIMILAR AND IDENTICAL ISSU E IN THE CASE OF M/S J.B. RESORTS, FAZILKA VS. ITO, IN ITA NO.488(ASR)/2015. THE LD. AR ALSO RELIED UPON THE JUDGMENT PASSED BY THE APEX COURT IN THE CASE OF CIT VS. D.P SANDU BROS. CHEMBUR PVT. LTD. 8. WE HAVE GONE THROUGH WITH THE FACTS AND CIRCUMSTANCE S OF THE CASE, WE FEEL IT APPROPRIATE TO REPRODUCE THE CONCLUDIN G PART OF THE ORDER PASSED BY THE HONBLE ITAT, AMRITSAR BENCH, IN ITA NO.488(ASR)/2015 ON 19.05.2016 WHICH AS UNDER: 8 WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MATE RIAL AVAILABLE ON RECORD. APROPOS THE CONTENTION OF THE ID. DR THA T GAURISH STEELS P. LIMITED (SUPRA), IS PER INCURIAM KIM PHARMA P. LI MITED (SUPRA). THESE ARE ONE AT ONE WITH THE ID. DR. IN GAURISH STEELS P. L IMITED (SUPRA), THE IT A NO.406(ASR)/2015 AS ST. YEAR: 2011-12 4 TRIBUNAL HAS TAKEN NOTE OF THE FACT THAT IN KIM PH ARMA P. LIMITED (SUPRA), THE ONLY ISSUE WAS TAXABILITY OF THE CASH SURRENDER ED DURING THE COURSE OF SURVEY, WHICH WAS ALSO GIVEN IN GAURISH STEELS P. LIMITED (SUPRA). THE TRIBUNAL HELD THAT THE OTHER AMOUNT SURRENDERED, ON ACCOUNT F DISCREPANCY IN THE COST OF CONSTRUCTION, DISCREPANCY IN STOCK A ND DISCREPANCY IN ADVANCES AND RECEIVABLE, HAS TO BE CONSIDERED AS BU SINESS INCOME, WHEREAS THE CASH SURRENDERED WAS NOT TO BE SO CONSI DERED. IT HAS NOT BEEN SHOWN AS TO HOW THIS ACTION OF THE TRIBUNAL IN GAURISH STEELS P. LIMITED (SUPRA), IS AT VARIANCE WITH KIM PHARMA P . LTD. (SUPRA). ACCORDINGLY, THIS ARGUMENT OF THE ID. DR IS REJECTE D. 9. NOW COMING TO THE FACTS OF THE PRESENT CASE, IN THE SURVEY CONDUCTED, THE ASSESSEE OFFERED RS.10 LAKHS AS ADDITIONAL INCO ME. THE QUESTION AS TO WHETHER THIS CASH IS RELATABLE TO THE BUSINESS OF T HE ASSESSEE, IN ACCORDANCE WITH KIM PHARMA P. LIMITED (SUPRA) AND IF SO, WHETHER IT IS NOT A BUSINESS INCOME. THE SURVEY IN THIS CASE WAS CONDUCTED ON 24.01.2011. THE ASSESSEE MAINTAINS THAT ITS MARRIAG E PALACE WAS STARTED BEING LET OUT FROM 10.10.2010. A COPY OF THE LEDGER ACCOUNT CONTAINING THE BUILDING ACCOUNT HAS BEEN PLACED ON RECORD IN THE A SSESSMENT PROCEEDINGS. THE SAME HAS BEEN FILED BEFORE US ALSO . THIS IS ALSO FOR THE PERIOD FROM 01.04.2010 TO 31.03.2011. THE OPENING B ALANCE THEREOF STANDS AT RS.34,03,578/-. AS ON 24.01.2011, THE AMO UNT DEBITED ON ACCOUNT OF BUILDING IS RS.10,00,000/-. AS PER LEDGE R ACCOUNT, THE PALACE INCOME FOR THE PERIOD 01.04.2010 TO 31.03.2011 HAS BEEN SHOWN AT RS.4,65,000/-. NOW, THE AO ASSESSED THE AMOUNT OF R S.4,65,000/- AS BUSINESS INCOME. THIS INCLUDED THE RECEIPTS AMOUNTI NG TO RS.3,44,000/- FOR THE PERIOD FROM 10.10.2010 TO 16.01.2011, AS ACCOUN TED FOR IN THE PALACE INCOME OF THE ASSESSEE IN THE LEDGER. THIS INCOME H AS BEEN SHOWN ON ACCOUNT OF LETTING OUT OF THE MARRIAGE PALACE FOR T HE PERIOD FROM 10.10.2010 TO 16.01.2011. AS SUCH, AS RIGHTLY CONTENDED. THE A O HAS ACCEPTED THIS INCOME OF THE ASSESSEE AS BUSINESS INCOME. THE PROF IT & LOSS ACCOUNT OF THE ASSESSEE FOR THE PERIOD FROM 04.02.2011 TO 31.0 3.2011 SHOWN PALACE INCOME BY RS.4,65,000/-, THE DETAILS OF WHICH ARE, AS ABOVE. THEREFORE, THE GRIEVANCE OF THE ASSESSEE IN THIS REGARD IS CORRECT AND THE SAME IS ACCEPTED. 10. IN KEEPING WITH KIM PHARMA P. LIMITED (SUPRA ), AS RELIED ON IN GAURISH STEELS P. LIMITED (SUPRA), THIS INCOME HA S BEEN CONSIDERED AS THE ASSESSEES BUSINESS INCOME AND NOT AS DEEMED INCOME U/S 69A OF THE ACT. AS SUCH, THE BUSINESS LOSSES INCURRED BY THE ASSESS EE DURING THE YEAR CAN BE SET OFF AGAINST THE INCOME SURRENDERED. AS PER T HE REQUIREMENT OF SECTION 71 OF THE ACT, THE AO IS DIRECTED TO ACT AC CORDINGLY. THUS, GROUND NOS. 1 TO 3 ARE ACCEPTED. ON CONSIDERATION OF THE AFORESAID ORDER PASSED BY THE CO - ORDINATION BENCH AND ALSO INDEPENDENT APPLYING OUR MI ND TO THE FACTS AND CIRCUMSTANCES IN THE INSTANT CASE, AS IN THE INSTANT CA SE, THE BUSINESS OF THE ASSESSEE WAS ALREADY IN OPERATION THEREFORE , IT A NO.406(ASR)/2015 AS ST. YEAR: 2011-12 5 SURRENDERED AMOUNT OF RS.20 LACS HAS TO BE CONSIDERED AS F ROM THE BUSINESS ITSELF BECAUSE EVEN OTHERWISE THE REVENUE DEPARTM ENT HAS NOT COME FORWARD WITH ANY CONTRADICTORY EVIDENCE TO SHOW THAT THE ASSESSEE WAS HAVING INCOME FROM OTHER SOURCES AND ACCORDING TO JUDGMENT TITLED AS CIT VS. D.P SANDU BROS. CHEMBUR PVT . LTD. (SUPRA), IT IS NOT RES INTEGRA THAT IN THE SCHEME OF INCOME TAX ACT, INCOME CAN BE ASSESSED UNDER THE HEADS GIVEN IN SEC.14 AND WHATEVER DOES NOT FALL UNDER THESE HEADS CANNOT BE ASSESSED AND RESULTANTLY CURRENT YEAR UN ABSORBED BUSINESS LOSS COMPRISING ON DEPRECIATION CAN BE SET OFF AGAINST INCOME SURRENDERED BY THE APPELLANT. THEREFOR E, WE DO NOT HAVE ANY HESITATION TO SET ASIDE THE ORDER PASSED BY THE LD. CIT(A). 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STA NDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18.0 9.2017. SD/- SD/- (T. S. KAPOOR) (N.K.CHOUDHRY ) ACCOUNTANT MEMBER JUDICIA L MEMBER DATED:18.09.2017. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER