M/s. Agache Associates Ltd., New Delhi V. ITO, New Delhi

ITA 4367/DEL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7364 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 05-06-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 11-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: FARHAT KHAN
• Keywords: Business income; Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC-3 NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER I.T.A .NO.-436 7/DEL/2014 (ASSESSMENT YEAR-20 11-12) AGACHE ASSOCIATES LTD., C/O-S.P.JAIN & ASSOCIATES, U-17 (LGF), GREEN PARK EXT., NEW DELHI-110016. PAN-AAACA9911H (APPELLANT) VS ITO, COMPANY WARD-1(2), NEW DELHI. (RESPONDENT) APPELLANT BY NONE RESPONDENT BY SH. FARHAT KHAN, SR.DR ORDER THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A SSAILING THE CORRECTNESS OF THE ORDER DATED 08.05.2014 OF CIT(A)-IV, NEW DELHI PERT AINING TO 2011-12 ASSESSMENT YEAR ON THE FOLLOWING GROUNDS:- 1. THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ORD ER OF THE AO IN MAKING THE ASSESSMENT AT THE INCOME OF RS. 49,58,270 AS AGAINS T THE RETURNED INCOME OF RS. 6,07,510. 2. THE LD CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF THE LD. AO IN TREATING THE SERVICES CHARGES RECEIVED BY THE APPELLANT FOR WAREHOUSES AMOUNTING TO RS.71,61,086 UNDER THE HEAD 'INCOME FROM HOUSE PROP ERTY' INSTEAD OF 'INCOME FROM BUSINESS OR PROFESSION' WHEREAS THE SA ME HAS BEEN ASSESSED AS BUSINESS INCOME IN EARLIER YEARS ALSO. 3. THE LD CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF THE LD. AO IN NOT APPRECIATING THAT THE MAIN OBJECTS OF THE APPELLANT COMPANY IS TO PROVIDE THE SERVICES OF WAREHOUSES AND GO DOWNS. 4. THE LD CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF THE LD. AO IN NOT ALLOWING THE EXPENSES AS PER THE PROFIT AND LOSS AC COUNT. DATE OF HEARING 21 .06.2016 DATE OF PRONOUNCEMENT 19 .0 8 .2016 I.T.A .NO.-4367/DEL/2014 PAGE 2 OF 4 5. THE LD CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF THE LD. AO IN TREATING THE INTEREST INCOME OF RS. 69,283 AS INCOME FROM OT HER SOURCES AS AGAINST THE SAME BEEN DECLARED AS INCOME FROM BUSINESS. 6. THE ORDER OF THE CIT(A) IS AGAINST LAW AND FACTS OF THE CASE. 7. THE APPELLANT CRAVES THE RIGHT TO ADD, AMEND OR WITHDRAW ANY GROUNDS OF APPEAL AT THE TIME OF HEARING. 2. NO ONE WAS PRESENT ON BEHALF OF THE ASSESSEE AT THE TIME OF HEARING AS NOTICE SENT BY THE REGISTRY HAS COME BACK UNSERVED. HOWEVER, C ONSIDERING THE MATERIAL AVAILABLE ON RECORD IT WAS CONSIDERED APPROPRIATE TO PROCEED WIT H THE PRESENT APPEAL EX-PARTE QUA THE ASSESSEE APPELLANT ON MERIT AFTER HEARING THE LD. S R.DR. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE ASSESSEE COMPANY IN THE YEAR U NDER CONSIDERATION WAS ENGAGED IN PROVIDING WAREHOUSING FACILITIES AND HAD RECEIVED R ENTAL INCOME THEREFROM. THE AO REQUIRED THE ASSESSEE TO EXPLAIN WHY THE BUSINESS I NCOME SHOULD NOT BE TREATED AS RENTAL INCOME. THE ASSESSEE ON FACTS IS FOUND TO HAVE AFF ORDED THE FOLLOWING EXPLANATION DATED 21.11.2010 AS UNDER:- 'THE ABOVE MENTIONED CASE HAS BEEN ADJOURNED FOR TO DAY AND YOUR GOODSELF HAS ASKED US TO SHOW CAUSE WHY THE INCOME FROM WARE HOUSES DISCLOSED IN INCOME TAX RETURN AS BUSINESS INCOME BY THE ASSESSE E SHOULD NOT BE TREATED AS INCOME FROM HOUSE PROPERTY. AS DESIRED BY YOUR G OODSELF WE HEREBY SUBMIT AS FOLLOWS: 1. THE ASSESSEE IS A LIMITED COMPANY AND OWNS PROPE RTY AT KOLKATA IN WHICH THERE AS ABOUT 30 GODOWNS AND COMPANY PROVIDE S THE SERVICES OF WAREHOUSES TO THE USERS AND ALSO PROVIDE THE SER VICES OF MAINTENANCE ON ACCOUNT OF SECURITY, CLEANING ETC. T O THE USERS IN RETURN TO WHICH THEY ARE CHARGING THE SERVICE CHARG E WHICH IS SHOWN AS INCOME. 2. IN ORDER TO CARRY ON THE ABOVE BUSINESS THE AS SESSEE COMPANY HAS ENROLLED REGULAR STAFF WHOSE PF IS DEDUCTED AND ALL COMPLIANCES ARE MADE BESIDES THIS CONTRACTUAL STAFF IS AL HIRED FOR PROVIDING THE SECURITY AND ALSO TO CARRY OUT THE REGULAR REPAIR AND MAINTE NANCE. THE ASSESSEE IS MAINTAINING REGULAR BOOKS OF ACCOUNT WH ICH ARE DULY AUDITED AND INCOME TAX RETURN ARE FILED YEAR AFTER YEAR WHICH HAVE ALSO BEEN ACCEPTED EVERY YEAR. 3. THE ASSESSEE IS NOT CHARGING RENT BUT SERVICES CHARGES FOR PROVIDING THE FACILITY OF STORAGE AND OTHER DEVICES THERETO. THE FACT OF PROVIDING THE SERVICES IS ALSO EVIDENT FROM FILING OF THE SERVICE TAX RETURN AND ALSO FROM THE FACT THAT THE ASSESSEE HAS REGULAR EMPLOYEES WHO HAVE BEEN EMPLOYED AND PAID SALARIES AFTER DEDU CTION OF THEIR PF I.T.A .NO.-4367/DEL/2014 PAGE 3 OF 4 ETC. WHICH IS FURTHER EVIDENT FROM THE BOOKS OF ACC OUNT AND AUDITED BALANCE SHEET. 4. FOR THE ASSESSEE IT IS AN ACTIVE INCOME AND NO T A PASSIVE INCOME. ONE OF THE CONDITIONS FOR ANY INCOME TO FALL UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' IS THAT SUCH INCOME SHOULD BE A PASSIVE INCOME I.E. INCOME EARNED WITHOUT ACTIVE INVOLVEMENT OF TH E OWNER WHEREAS IN THE PRESENT CASE IT IS AN ACTIVE INCOME AS THE ASSE SSEE COMPANY HAS EMPLOYED NUMBER OF THE EMPLOYEES THROUGH WHOM SERVI CES ARE PROVIDED AND INCOME IS EARNED. 5. THE NATURE OF THE INCOME ALSO DEPENDS ON THE I NTENTION OF THE TAXPAYER AND IS TO EARN INCOME AS BUSINESS INCOME O F THE SERVICES RENDERED THAN THE SAME HAS BEEN TAKEN AS BUSINESS A ND CANNOT BE TREATED AS AN INCOME FROM HOUSE PROPERTY. THERE ARE A NUMBER OF PRONOUNCEMENTS ON THE ISSUE WHICH SUPPORT THE CONTE NTION OF THE ASSESSEE. 6. THE EVIDENCE OF THE PAYMENT OF MUNICIPAL TAXES HAS ALREADY BEEN FILED BEFORE YOUR GOODSELF VIDE OUR LETTER DATED 22 .10.2013 7. IN ORDER TO SUBSTANTIATE OUR ABOVE SUBMISSIONS WE WOULD LIKE TO RELY ON THE FOLLOWING JUDGMENT PASSED BY THE TRIBUN ALS, HIGH COURTS AND THE SUPREME COURT OF INDIA. 2.1. IN SUPPORT OF THE CLAIM, VARIOUS DECISIONS OF COURTS AND TRIBUNAL WERE RELIED UPON. HOWEVER THE AO NOT CONVINCED WITH THE EXPLANATION OFFERED HELD THAT INCOME WAS TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY AND NOT AS I NCOME FROM BUSINESS. RELIANCE WAS ALSO PLACED ON THE VIEW TAKEN BY THE AO IN 2008-09 AY, THE LD. SR. DR WAS REQUIRED TO POINT OUT ANY FINDING RECORDED IN THE IMPUGNED ORD ER, AS HEREIN ALSO THE SAID AUTHORITY HAS PROCEEDED ON A DISCUSSION ON THE LEGAL ISSUE WI THOUT MARSHALLING THE FACTS FIRST. IT IS FURTHER SEEN THAT EVEN IN THE ASSESSMENT ORDER, NO INDEPENDENT FINDING OF THE AO IS FOUND RECORDED. SINCE AS PER THE GROUND RAISED, A R EFERENCE IS MADE TO THE POSITION ON THE ISSUE IN EARLIER YEARS. THE LD.SR.DR ON QUERY WAS ALSO UNABLE TO ADDRESS THE POSITION AS IT HAS NEITHER BEEN ADDRESSED BY THE AO NOR BY THE CIT (A). ACCORDINGLY, IN THE ABSENCE OF ANY DISCUSSION ON FACTS ON THE PAST HISTORY OF THE ASSESSEE ON THE ISSUE, IT IS CONSIDERED APPROPRIATE TO RESTORE THE ISSUE BACK TO THE AO FOR FIRST ADDRESSING THE FACTS. IN THE FACTS OF THE PRESENT CASE IT IS NECESSARY TO CONSIDER THE ARTICLES AND MEMORANDUM OF I.T.A .NO.-4367/DEL/2014 PAGE 4 OF 4 ASSOCIATION OF THE SPECIFIC ASSESSEE COMPANY AND TH E PAST HISTORY ON THE ISSUE AS WITHOUT ADDRESSING THE FACTS THE JUDGEMENTS CANNOT BE OF A NY HELP. A DECISION CAN BE SAID TO BE APPLICABLE TO A CASE ONLY IF FACTS HAVE BEEN MARSHA LED. IN THE ABSENCE OF ANY DISCUSSION ON MATERIAL FACTS, THE ISSUE IS RESTORED BACK TO TH E AO WITH THE DIRECTION TO PASS A SPEAKING ORDER IN ACCORDANCE WITH LAW AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. 3. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 19 TH AUGUST 2016. SD/- (DIVA SINGH) JUDIC IAL MEMBER *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR, ITAT NEW DELHI