PRIME DEVELOPERS, MUMBAI V. CIT-12, MUMBAI

ITA 4231/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8823 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 30-08-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 24-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: JAYESH DESAI
• Keywords: Business income; Opportunity of being heard
• Section: 143(3); 263

Judgement Text

1 ITA NO.4231/MUM/2011 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER & SHRI P.M.JAGTAP, ACCOUNTANT MEMBER. I.T.A. NO. 4231/MUM/2011 ASSESSMENT YEAR : 2004-05. PRIME DEVELOPERS, COMMISSIONER OF INCOME-TAX-12, HARIOM CHAMBERS, 7 TH FLOOR, VS. MUMBAI. B-16, VEERA INDS. ESTATE, OFF LINK ROAD, ANDHERI N(W), MUMBAI 400053. PAN AAAFP7898P APPELLANT. RESPONDENT. APPELLANT BY : SHRI JAYESH DESAI. RESPONDENT BY : SHRI RAJARSHI DWIVEDY. DATE OF HEARING : 30-08-2012 DATE OF PRONOUNCEMENT : 26-9-2012. O R D E R PER P.M. JAGTAP, A.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE LEARNED C.I.T.-12, MUMBAI DATED 18 TH MARCH, 2011 PASSED U/S 263. 2. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHI P FIRM WHICH IS ENGAGED IN THE BUSINESS OF BUILDER AND DEVELOPER. IN THE YEAR UNDE R CONSIDERATION, NO HOUSING PROJECT WAS UNDERTAKEN BY THE ASSESSEE. HOWEVER, TH E TERRACE OF A BUILDING COMPLETED AND SOLD IN THE EARLIER YEAR WAS GIVEN ON RENT TO M/S HUTCHISON MAX TELECOM & BHARTI CELLULAR LTD. FOR INSTALLING THEIR ANTENNA AND THE RENT RECEIVED FROM THEM AMOUNTING TO RS.6,04,688/- WAS OFFERED TO TAX UNDER THE HEAD INCOME 2 ITA NO.4231/MUM/2011 FROM HOUSE PROPERTY AFTER CLAIMING DEDUCTION AT TH E RATE OF 30% U/S 24(A). OTHER EXPENSES INCURRED UNDER THE VARIOUS HEADS SUCH AS T ELEPHONE, ELECTRICITY, PRINTING & STATIONERY, PROFESSIONAL CHARGES ETC. AMOUNTING T O RS.2,23,249/- WERE CLAIMED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PR OFESSION RESULTING LOSS UNDER THE HEAD AND AFTER SETTING OFF OF THE SAID LOSS AG AINST THE INCOME FROM HOUSE PROPERTY, TOTAL INCOME OF RS.200,030/- WAS DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME FILED FOR THE YEAR UNDER CONSIDERATION ON 17 -07-2006. IN THE ASSESSMENT COMPLETED U/S 143(3) BY AN ORDER DATED 22-12-2008, THE AO ACCEPTED THE INCOME OF RS.4,23,282/- DECLARED BY THE ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. HE, HOWEVER, DID NOT ALLOW THE LOSS OF R S.2,23,249/- CLAIMED BY THE ASSESSEE UNDER THE HEAD PROFITS & GAINS OF BUSINES S OR PROFESSION HOLDING THAT IN THE ABSENCE OF ANY BUSINESS RECEIPTS, THE ASSESSEE COULD NOT BE SAID TO HAVE CARRIED ON ANY BUSINESS ACTIVITY IN THE YEAR UNDER CONSIDER ATION. ACCORDINGLY, THE ASSESSMENT WAS COMPLETED BY THE AO U/S 143(3) ON A TOTAL INCOME OF RS.4,23,282/-. 3. THE RECORDS OF THE ASSESSMENT IN THE CASE OF THE ASSESSEE CAME TO BE EXAMINED BY THE LEARNED CIT AND ON SUCH EXAMINATIO N, HE WAS OF THE OPINION THAT THE ASSESSMENT ORDER PASSED BY THE AO U/S 143(3) IN THE CASE OF THE ASSESSEE WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE INASMUCH AS DEDUCTION CLAIMED BY THE ASSESSEE U/S 24(A) WAS WRONGLY ALLOW ED BY ASSESSING THE RENTAL INCOME RECEIVED BY THE ASSESSEE FROM M/S HUTCHISON MAX TELECOM & BHARTI CELLULAR LTD. FOR THE TERRACE SPACE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. ACCORDING TO THE LEARNED CIT, THE ASSESSEE WAS NOT THE OWNER OF THE TERRACE AND THE RENTAL INCOME RECEIVED BY IT FOR THE TERRACE, THER EFORE, WAS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES AND NOT UNDER THE HEAD INCOME FROM HOUSE PROPERTY. HE, THEREFORE, ISSUED A NOTICE U/S 263 RE QUIRING THE ASSESSEE TO SHOW 3 ITA NO.4231/MUM/2011 CAUSE AS TO WHY THE ORDER PASSED BY THE AO U/S 143( 3) SHOULD NOT BE REVISED AND DEDUCTION ALLOWED U/S 24(A) SHOULD NOT BE DISALLOWE D. IN REPLY, IT WAS CONTENDED ON BEHALF OF THE ASSESSEE THAT IT WAS THE OWNER OF THE TERRACE AND THE RENTAL INCOME FROM THE SAID TERRACE WAS RIGHTLY CONSIDERED BY THE AO AS INCOME FROM HOUSE PROPERTY. IT WAS CONTENDED THAT THE ASSESSEE HAD RETAINED TOP FLOOR OF THE BUILDING CONSTRUCTED BY IT ALONG WITH THE TERRACE AND SINCE IT WAS HAVING POSSESSION OF THE SAID TERRACE, THE ASSESSEE WAS THE DEEMED OWNER OF THE SAID TERRACE. IT WAS CONTENDED THAT DEDUCTION CLAIMED BY THE ASSESSEE U/ S 24(A) THUS WAS RIGHTLY ALLOWED BY THE AO IN THE ASSESSMENT COMPLETED U/S 143(3) AND THERE WAS NO ERROR IN THE SAID ORDER WARRANTING ANY REVISION U/S 263. 4. THE LEARNED CIT DID NOT FIND MERIT IN THE SUBMIS SIONS MADE ON BEHALF OF THE ASSESSEE BEFORE HIM. ACCORDING TO HIM, THE ASSESSEE HAVING ALREADY SOLD SIX FLOORS OF THE BUILDING CONSTRUCTED, IT COULD NOT BE TREATE D AS A SOLE OWNER OF THE TERRACE WHICH REPRESENTED A COMMON SPACE MEANT FOR THE BENE FIT OF ALL THE OCCUPANTS OF THE BUILDING. HE HELD THAT NO DOCUMENTARY EVIDENCE WAS ALSO FILED BY THE ASSESSEE TO SUBSTANTIATE ITS CLAIM THAT IT WAS THE SOLE OWNE R OF THE TERRACE SPACE. HE HELD THAT IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE PRODUCED BY THE ASSESSEE, THE LATTER COULD NOT BE TREATED AS OWNER OF THE TERRACE SPACE AND THE RENTAL INCOME RECEIVED FOR TERRACE WAS CHARGEABLE TO TAX IN ITS HANDS UNDE R THE HEAD INCOME FROM OTHER SOURCES AND NOT UNDER THE HEAD INCOME FROM HOUSE PROPERTY. HE HELD THAT THE ASSESSEE, THEREFORE, WAS NOT ENTITLED TO CLAIM DEDU CTION U/S 24(A) AND THERE WAS AN ERROR IN THE ORDER OF THE AO PASSED U/S 143(3) ALLO WING THE CLAIM OF THE ASSESSEE FOR THE SAID DEDUCTION. ACCORDINGLY, HE SET ASIDE T HE ORDER PASSED BY THE AO U/S 143(3) WITH A DIRECTION TO THE AO TO MODIFY THE SAM E AFTER CONSIDERING THE RENTAL INCOME OF TERRACE AS INCOME FROM OTHER SOURCES. AGG RIEVED BY THE SAME, THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBU NAL. 4 ITA NO.4231/MUM/2011 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. ALTHOUGH THE LEARNED COUNSEL FO R THE ASSESSEE HAS MADE AN ATTEMPT TO CHALLENGE THE IMPUGNED ORDER PASSED BY T HE LEARNED CIT U/S 263 BY CONTENDING THAT THE SAME IS BASED ON OWNERSHIP ISSU E WHICH WAS NOT RAISED IN THE NOTICE ISSUED U/S 263, WE FIND FROM THE PERUSAL OF NOTICE ISSUED BY THE LEARNED CIT U/S 263 (COPY AT PAGE NO. 1 OF THE PAPER BOOK) THAT THE ISSUE RELATING TO HEAD OF INCOME UNDER WHICH RENT IS CHARGEABLE TO TAX WAS SP ECIFICALLY RAISED BY THE LEARNED CIT IN THE CONTEXT OF CLAIM OF THE ASSESSEE FOR DED UCTION U/S 24(A) WHICH ACCORDING TO HIM WAS ERRONEOUSLY ACCEPTED BY THE AO. THE ORDE R OF THE AO THUS WAS HELD TO BE ERRONEOUS AND PREJUDICE TO THE INTEREST OF THE R EVENUE BY THE LEARNED CIT ON THE ISSUE OF DEDUCTION U/S 24(A) WRONGLY ALLOWED BY THE AO WHICH ULTIMATELY HAS FORMED THE BASIS OF THE IMPUGNED ORDER PASSED BY H IM U/S 263. IN OUR OPINION, IT, THEREFORE, CANNOT BE SAID THAT THE IMPUGNED ORDER U /S 263 HAS BEEN PASSED BY THE LEARNED CIT ON THE GROUND WHICH IS DIFFERENT FROM T HE ONE GIVEN IN THE NOTICE ISSUED U/S 263. FOR THE PURPOSE OF DEDUCTION U/S 24 (A), OWNERSHIP ISSUE IS RELEVANT INASMUCH AS ONLY WHEN THE ASSESSEE IS THE OWNER OF THE HOUSE PROPERTY, THE RENTAL INCOME FROM THE SAID PROPERTY IS CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND THE DEDUCTION U/S 24(A) IS ALLO WABLE. IN THE PRESENT CASE, THE ASSESSEE HAS FAILED TO ESTABLISH ON EVIDENCE BEFOR E THE LEARNED CIT DURING THE COURSE OF PROCEEDINGS U/S 263 THAT IT IS THE OWNER OF THE TERRACE OF THE BUILDING WHICH FETCHED THE RENTAL INCOME AND THE LEARNED CIT , IN OUR OPINION, THEREFORE, WAS RIGHT IN HOLDING THAT THE RENTAL INCOME WAS CHA RGEABLE TO TAX IN THE HANDS OF THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOUR CES AND IT WAS NOT ENTITLED FOR DEDUCTION U/S 24(A) AS ERRONEOUSLY ALLOWED BY THE A O IN THE ASSESSMENT COMPLETED U/S 143(3). EVEN BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH ON EVIDENCE THAT THE ASSESSEE IS THE S OLE OWNER OF THE TERRACE WHICH NORMALLY IS MEANT FOR THE COMMON BENEFIT OF ALL THE OCCUPANTS OF THE BUILDING. HE 5 ITA NO.4231/MUM/2011 HAS MERELY CONTENDED THAT THE ASSESSEE BEING OWNER OF ONE OF THE SIX FLOORS OF THE BUILDING, CAN BE TREATED AS 1/6 TH OWNER OF THE COMMON TERRACE. IN THIS REGARD, WE FIND THAT THE LEARNED CIT BY HIS IMPUGNED ORDER HAS DIRECTED THE AO TO CONSIDER THE RENTAL INCOME FROM TERRACE AS INCOME FROM OTHER SOURCES AND MODIFY THE ASSESSMENT ORDER ACCORDINGLY AFTER DUE VERIFICATION AND AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASS ESSEE, THEREFORE, IS FREE TO ESTABLISH ITS CLAIM OF OWNERSHIP OF THE TERRACE ATL EAST TO THE EXTENT OF 1/6 TH BY ADDUCING THE RELEVANT EVIDENCE WHICH THE AO IS DIRE CTED TO CONSIDER. SUBJECT TO THIS DIRECTION, THE IMPUGNED ORDER PASSED BY THE LE ARNED CIT U/S 263 IS UPHELD AS THE ASSESSMENT ORDER PASSED BY THE AO WAS RIGHTLY H ELD TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE BY THE S AID ORDER INASMUCH AS THE DEDUCTION CLAIMED BY THE ASSESSEE U/S 24(A) WAS ERR ONEOUSLY ALLOWED THEREIN. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED ON THIS 26 TH DAY OF SEPT. , 2012. SD/- SD/- (I.P. BANSAL) (P.M. JAGTAP) JUDICIAL MEMBER ACCO UNTANT MEMBER MUMBAI, DATED: 26 TH SEPT., 2012. 6 ITA NO.4231/MUM/2011 COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, C-BENCH. (TRUE COPY) BY ORD ER ASSTT. REGI STRAR, ITAT, MUMBAI BENCHES, MUMB AI. WAKODE