AXIS IMPEX, MUMBAI V. D.C.I.T. RG. 14(2), MUMBAI

ITA 4309/MUM/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1993 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 05-10-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 22-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A RAMACHANDRAN
• Keywords: Business income; Depreciation; Opportunity of being heard; Principle of natural justice; Additional evidence

Judgement Text

A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 4309 /MUM/2012 ( / ASSESSMENT YEAR : 2005-06) M/S AXIS IMPEX, SHOP NO. 4, 83-85, DADY SHETH AGIARY LANE, MUMBAI -400002. / V. DY. COMMISSIONER OF INCOME TAX RANGE 1492), EARNESH HOUSE, 3 RD FLOOR, NARIMAN POINT, MUMBAI 400020. ./ PAN : AAGFA2650N ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY NONE REVENUE BY : SHRI A. RAMACHANDRAN / DATE OF HEARING : 5-10-2016 / DATE OF PRONOUNCEMENT : 16-11-2016 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE, BEING ITA NO. 4309/MUM/2012, IS DIRECTED AGAINST THE APPELLATE ORDER DATED 27 TH APRIL, 2012 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 25, MUMBAI (H EREINAFTER CALLED THE CIT(A)), FOR THE ASSESSMENT YEAR 2005-06, THE APPE LLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) ARISING FROM THE PENALTY ORDER D ATED 30 TH MARCH, 2011 PASSED BY THE LEARNED ASSESSING OFFICER (HEREINAFTE R CALLED THE AO) U/S 271(1)(C) OF THE INCOME-TAX ACT,1961 (HEREINAFTER C ALLED THE ACT). ITA 4309/MUM/2012 2 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THE MEMO OF APPEAL FILED WITH THE INCOME-TAX APPELLATE TRIBUNAL, MUMBA I (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE L EARNED C.I.T.(APPEALS) ERRED IN CONFIRMING PENALTY LEVIED BY THE ASSESSING OFFICER U/S.271 (1 )(C). 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LE ARNED C.I.T.(APPEALS) HAS ERRED IN PASSING THE ORDER CONFI RMING THE PENALTY WITHOUT DEALING WITH/DISPOSING OFF THE APPELLANT'S APP LICATION FOR ADMISSION OF FRESH EVIDENCE U/RULE 46A. HE FURTHER E RRED IN TURNING A BLIND EYE TO FACTS AND DOCUMENTS ON RECORD. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND EXPORT OF HOUSEHOLD PLA STIC AND STAINLESS STEEL ARTICLES. THE ASSESSEE OWNED IMMOVABLE PROPERTIES CONSISTING OF SEVERAL GALAS. DURING THE ASSESSMENT PROCEEDINGS, THE A.O. OBSERVED THAT THE ASSESSEE HAD LET OUT GALA NO. 1 TO 6 TO FOUR PERSON S AT A MONTHLY AMOUNT OF RS. 6000/-. THE ASSESSEE HAS ACCEPTED INTEREST FREE DEPOSIT OF RS. 12 LACS FROM THE FOUR PERSONS. THESE FOUR PERSONS LET OUT THESE GALAS WITHIN A WEEK TO M/S ANMOL INTERNATIONAL @ RS. 30,000/- PER MONTH . THE A.O. OBSERVED THAT THE ASSESSEE HAD DISCLOSED THE RENTAL INCOME A T RS. 72,000/- PER ANNUM I.E. RS. 6000/- PER MONTH AND ALSO CLAIMED DEPRECIA TION ON THE VALUE OF THESE LET OUT GALAS. THE A.O. AFTER EXAMINING THE FACTS OF THE CASE HELD THAT THE ASSESSEE HAD SUPPRESSED THE RENTAL INCOME AND ALSO DID NOT DISCLOSE THE SAME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. TH E A.O. TOOK THE VALUE OF THE RENT AT THE RATE OF RS. 30,000/- PER MONTH I.E. THE RENT PAID BY M/S ANMOL INTERNATIONAL TO FOUR TENANTS OF THE ASSESSEE AND B ROUGHT THE SAME TO TAX ITA 4309/MUM/2012 3 UNDER THE HEAD INCOME FROM HOUSE PROPERTY . THE A O ALSO DISALLOWED DEPRECIATION ON THESE LET-OUT GALAS AS THE INCOME W AS ASSESSED TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY IN QUANTUM AS SESSMENT PROCEDINGS, AND THESE ADDITIONS WERE CONFIRMED BY THE LD.CIT(A) IN QUANTUM PROCEEDINGS. THE A.O. THEREAFTER LEVIED THE PENALTY OF RS. 1,50, 981/- I.E. MINIMUM PENALTY @ 100% OF THE TAX SOUGHT TO BE U/S 271(1)(C) OF TH E ACT VIDE PENALTY ORDER DATED 30 TH MARCH, 2011 ON THE GROUNDS THAT THE ASSESSEE HAS F AILED TO PROVE THE TRUE NATURE OF INCOME ON LETTING OUT OF THE PRO PERTY AS BUSINESS INCOME BEFORE THE AO AS WELL IN APPELLATE PROCEEDINGS BEFO RE THE LEARNED CIT(A) IN QUANTUM PROCEEDINGS. THE FINDINGS OF THE AO TREATIN G THE SAME AS INCOME FROM HOUSE PROPERTY AND PROPORTIONATE DISALLOWANCE OF DEPRECIATION ON BUILDING WERE CONFIRMED BY LEARNED CIT(A) AND HENCE IT WAS HELD BY THE AO THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME AND ALSO FURNISHED IN-ACCURATE PARTICULARS OF INCOME BY CHANGING THE H EAD OF INCOME .DURING THE COURSE OF PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT BEFORE THE AO, THE ASSESSEE DID NOT GIVE ANY REPLY TO SHOW CAUSE NOTIC ES ISSUED BY THE AO. BEFORE THE LEARNED CIT(A) , THE ASSESSEE PROTESTED THE LEVY OF PENALTY BY THE A.O. AND SUBMITTED THAT THE ASSESSEE OWNED A SELF C ONTAINED INDUSTRIAL BUILDING CONTAINING 19 GALAS. GALA NO. 1 TO 6 WERE USED BY M/S ANMOL INTERNATIONAL WHICH IS CARRYING OUT LABOUR JOBS FOR THE ASSESSEE ON AN EXCLUSIVE BASIS. THE GALA NOS. 1 TO 6 WERE LICENSED BY THE ASSESSEE TO FOUR LADIES WHO ARE THE MOTHER AND AUNT OF THE PARTNERS OF ANMOL INTERNATIONAL AND RECEIVED A COMPENSATION OF RS.6000/- PER MONTH AND A DEPOSIT OF RS.12 LACS WAS ALSO RECEIVED . THE ASSESSEE DISCLOSED THE COMPENSATION OF RS.72,000/- AS BUSINESS INCOME. THE A.O ASSESSED AN AMOUNT OF RS.2.52 LACS UNDER THE HEAD INCOME FROM HOUSE PROPERTY BY TREATI NG THE MARKET VALUE OF THE PROPERTY @ RS 30000/- PER MONTH LESS 30% STANDA RD DEDUCTION U/S 24(A) OF THE ACT , BEING THE AMOUNT CHARGED BY ASSESSEE LICENSEES FROM M/S ANMOL INTERNATIONAL. THE ASSESSEE FURTHER SUBMITTED THAT THE LABOUR CHARGES OF RS.32,07,310/- WAS PAID BY THE ASSESSEE TO M/S ANMO L INTERNATIONAL WHICH ITA 4309/MUM/2012 4 HAVE ALSO BEEN ALLOWED AS DEDUCTION BY THE AO . THE SAID 6 GALAS HAVE BEEN MADE FOR THE USE OF ANMOL INTERNATIONAL OUT OF COMM ERCIAL EXPEDIENCY, AS THE SAID ANMOL INTERNATIONAL WAS RENDERING LABOUR JOB W ORK FOR THE ASSESSEE ON EXCLUSIVE BASIS . IT WAS SUBMITTED THAT IN THESE CI RCUMSTANCES THESE 6 GALAS WERE USED FOR THE PURPOSES OF BUSINESS OF THE ASSES SEE AND AS SUCH DEPRECIATION WAS ALLOWABLE IN RESPECT OF THE SAME A ND SINCE SECTION 22 OF THE ACT EXCLUDES PREMISES OCCUPIED FOR THE PURPOSE OF B USINESS BY THE ASSESSEE AND HENCE IT CANNOT BE BROUGHT TO TAX UNDER THE HEA D INCOME FROM HOUSE PROPERTY. IT WAS FURTHER SUBMITTED THAT IF AN ASSE SSEE OWNS AN INDUSTRY AND THE WORKERS USE THE PREMISES BELONGING TO THE SAID ASSESSEE AS THEIR LIVING QUARTERS WITH OR WITHOUT CHARGING ANY RENT, THE PRE MISES CAN CERTAINLY BE SAID TO BE USED FOR THE PURPOSES OF BUSINESS. IT WAS FUR THER CONTENDED THAT THE SAID 6 GALAS WERE NOT LICENSED DIRECTLY TO M/S ANMO L INTERNATIONAL SHOULD NOT MAKE ANY DIFFERENCE TO THE MATTER. THE LADIES TO WH OM THE SAID 6 GALAS LEASED OUT WERE THE MOTHER AND AUNT OF THE PARTNERS OF M/S ANMOL INTERNATIONAL. IT WAS SUBMITTED THAT THE ASSESSEE CONSIDERED IT SAFE TO GIVE LICENSE TO INDIVIDUALS RATHER THAN A PARTNERSHIP FIRM WHOSE PA RTNERS MAY BE SUBJECT TO CHANGE. THE ASSESSEE SUBMITTED THAT THE FACT REMAIN S THAT THE SAID GALAS WERE USED BY ANMOL INTERNATIONAL WHO WERE CARRYING OUT L ABOUR JOB FOR THE ASSESSEE ON EXCLUSIVE BASIS. THUS, IT WAS SUBMITTED THAT THE ASSESSEE RIGHTLY BROUGHT TO TAX RS. 72,000/- RENT RECEIVED BY THE AS SESSEE FROM THE FOUR LADIES UNDER THE HEAD PROFIT AND GAINS FROM BUSINESS OR P ROFESSION AND CLAIMED DEPRECIATION ON INDUSTRIAL GALAS AS THE ASSESSEE H AS USED THE SAID PREMISES FOR ITS BUSINESS THROUGH ANMOL INTERNATIONAL WHO WE RE CARRYING OUT LABOUR JOB FOR THE ASSESSEE ON EXCLUSIVE BASIS. THUS, IT W AS ALSO SUBMITTED THAT DISALLOWANCE OF DEPRECIATION IS NOT JUSTIFIED SINCE 6 GALAS WERE USED FOR THE PURPOSES OF ASSESSEES BUSINESS. THUS THE ASSESSEE ARGUED THAT NO PENALTY U/S 271(1)(C) OF THE ACT CAN BE LEVIED ON THE ADDIT IONS MADE BY THE A.O. THE LD. CIT(A) REJECTED THE CONTENTION OF THE ASSESSEE BY HOLDING THAT IT WAS A SHAM AND COLOURABLE TRANSACTION. THE ASSESSEE HAS LET OUT THE GALAS FOR RS. ITA 4309/MUM/2012 5 6,000/- PER MONTH TO FOUR DIFFERENT LADIES ON 13 TH APRIL, 2004 AND WITHIN A WEEK I.E. ON 20 TH APRIL, 2004 THESE GALAS WERE LET OUT BY THESE LADI ES TO M/S ANMOL INTERNATIONAL FOR A RENT OF RS. 30,000/- PER MONTH, HENCE, IT WAS A SHAM AND COLORABLE DEVICE ADOPTED BY THE ASSESSEE T O SUPPRESS THE REAL RENT AND THUS THE ASSESSEE EVADED THE TAXABLE INCOME LIA BLE TO BE TAXED. THE LEARNED CIT(A) HELD THAT THE LEAVE AND LICESNE AGRE EMENT IS ENTERED INTO WITH FOUR DIFFERENT LADIES AT DIFFERENT AMOUNTS OF RENT AND ACCEPTING DIFFERENT DEPOSITS AND HENCE CERTAINLY THE ASSESSEE HAS NOT U SED SIX GALAS IN THE INDUSTRIAL BUILDING FOR THE PURPOSES OF ITS BUSINES S. THE NATURE AND CHARACTER OF RECEIPT IN THE HANDS OF THE ASSESSEE IS THAT OF INCOME FROM HOUSE PROPERTY AND THE DECISION OF THE AO IN TREATING AS INCOME FR OM HOUSE PROPERTY WAS UPHELD AND THE ACTION OF THE AO OF DETERMINING THE ANNUAL LETTABLE VALUE U/S 22 OF THE ACT AT THE RATE AT WHICH THE FOUR LADIES LET OUT PREMISES TO ANMOL INTERNATIONAL WAS UPHELD BY LEARNED CIT(A). THE DEP RECIATION DISALLOWANCE WAS ALSO UPHELD BASED ON FACT SITUATION OF THE CASE . THE LD. CIT(A) ACCORDINGLY DISMISSED THE APPEAL OF THE ASSESSEE AN D UPHELD THE PENALTY LEVIED BY THE AO U/S 271(1)(C) OF THE ACT. 4. AGGRIEVED BY THE APPELLATE ORDER OF THE LD. CIT( A) CONFIRMING THE PENALTY U/S 271(1)(C) OF THE ACT, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING BEFORE US, NONE APPEARED ON BEHALF OF THE ASSESSEE. THEREFORE, WE PROCEED TO DISPOSE OF THE A PPEAL AFTER HEARING THE LEARNED D.R. 5. THE LD. DR. RELIED UPON THE ORDERS OF AUTHORITIE S BELOW. 6. WE HAVE HEARD THE LD. D.R. AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE OBSERVED THAT THE GROUND RAISED BY THE ASSESSEE THAT THE LD. CIT(A) HAS NOT FOLLOWED THE RULE 46A OF THE INCOME- TAX RULES, 1962 WITH ITA 4309/MUM/2012 6 RESPECT TO THE ADMISSION OF THE ADDITIONAL EVIDENCE S WHILE DISPOSING OF THE APPEAL OF THE ASSESSEE. THE ASSESSEE HAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT THE AO HAS PASSED AN EX-PARTE ORDER IN AN HURR Y AND LEVIED PENALTY U/S 271(1)(C) OF THE ACT WITHOUT AFFORDING THE ASSESSEE SUFFICIENT OPPORTUNITY OF BEING HEARD. THE ASSESSEE SUBMITTED THAT THE ASSESS EE HAS FURNISHED THE FOLLOWING ADDITIONAL EVIDENCES BEFORE THE LEARNED C IT(A), WHICH WAS CLAIMED TO BE SUBMITTED BEFORE THE LD. CIT(A) FOR THE FIRST TI ME:- BANK STATEMENT OF M/S ANMOL INTERNATIONAL, WHICH IS PLACED AT PAPER BOOK PAGE NO. 60. THE ABOVE SAID DOCUMENT HAS NOT BEEN CONSIDERED BY THE LD. CIT(A) ALONG WITH THE OTHER EVIDENCES WHICH WERE FILED FOR THE F IRST TIME BEFORE THE LD. CIT(A) AS PLACED IN PAPER BOOK FILED WITH THE LEARN ED CIT(A) PAGE 33-82 (PLACED IN FILE). IN OUR CONSIDERED VIEW, THE ADDIT IONAL EVIDENCES AND OTHER EVIDENCES FILED BY THE ASSESSEE BEFORE THE LD. CIT( A) NEEDS TO BE CONSIDERED FOR ADJUDICATION OF THE ISSUE ON MERITS . AS SUCH END OF JUSTICE WILL BE MET IF WE SET ASIDE AND RESTORE THIS ISSUE BACK TO THE FILE O F THE LD. CIT(A) FOR DE NOVO DETERMINATION OF THE ISSUE ON MERITS AFTER CONSIDER ING THE EVIDENCES AND EXPLANATION FILED BY THE ASSESSEE. THE ASSESSEE MA Y BE GIVEN ADEQUATE OPPORTUNITY OF BEING HEARD IN ACCORDANCE WITH PRINC IPLES OF NATURAL JUSTICE IN ACCORDANCE WITH LAW. THE ASSESSEE IS ALSO DIRECTED TO CO-OPERATE WITH THE AUTHORITIES BELOW AND APPEAR BEFORE THE LD. CIT(A) WITH ALL THE EVIDENCES AND EXPLANATION TO ENABLE THE LEARNED CIT(A) TO DISPOSE OF THE APPEAL ON THE MERITS. THE LEARNED CIT(A) IS DIRECTED TO ADMIT EVI DENCES AND EXPLANATIONS WHICH THE ASSESSEE MAY RELY UPON IN ITS DEFENSE AND ADJUDICATE THE APPEAL ON MERITS AFTER CONSIDERING THE EVIDENCES AND EXPLANAT ION OF THE ASSESSEE ON MERITS. WE ORDER ACCORDINGLY. ITA 4309/MUM/2012 7 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO. 5134/MUM/2014 FOR THE ASSESSMENT YEAR 2007-08 IS AL LOWED FOR STATISTICAL PURPOSES AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH NOVEMBER, 2016. # $% &' 16-11-2016 ( ) SD/- SD/- (MAHAVIR SINGH) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 16-11-2016 [ .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI A BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI