M/s. India Housing., Kolkata V. J.C.I.T, Range-33, Kolkata., Kolkata

ITA 440/KOL/2013

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6468 (ITAT-KOLKATA)
• Duration Of Justice: 5 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 13-02-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 04-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MD USMAN
• Keywords: Business income; Depreciation; Opportunity of being heard; Principle of natural justice
• Section: 32

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA ( ) . . , !' . # . $% , & !' ) [BEFORE SHRI P.M. JAGTAP, AM & SHRI A. T. VARKEY, JM] I.T.A. NO. 440 /KOL/2013 ASSESSMENT YEAR: 2009 - 10 M/S INDIA HOUSING (PAN: AABFI 8377 B) VS. JCIT, RANGE-33, KOLKATA APPELLANT RESPONDENT I.T.A. NO. 775 /KOL/2013 ASSESSMENT YEAR: 2008-09 M/S INDIA HOUSING (PAN: AABFI 8377 B) VS. DCIT, CIRCLE-33, KOLKATA APPELLANT RESPONDENT DATE OF HEARING 06.02.2018 DATE OF PRONOUNCEMENT 01.05.2018 FOR THE APPELLANT SHRI J.P. KHAITAN, SR. ADVOCATE SHRI PRATYUSH JHUNJHUNWALA, ADVOCATE FOR THE RESPONDENT MD. USMAN, CIT(DR) ORDER PER SHRI A.T.VARKEY, JM FIRST WE TAKE UP IN I.T.A. NO. 440/KOL/2013 FOR ASS ESSMENT YEAR 2009-10 THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAIN ST THE ORDER OF THE LD. CIT(A)- 19, KOLKATA DATED 04.12.2012 FOR ASSESSMENT YEAR 20 09-10. 2 ITA NOS.440&775/KOL/2013 M/S INDIA HOUSING A.YRS. 2009-10 & 2008-09 2 2. AT THE OUTSET ITSELF THE LD. SENIOR COUNSEL, J.P . KHAITAN DID NOT PRESS GROUND NOS. 1, 2, 4 & 5 SO THE ONLY REMAINING EFFECTIVE GROUNDS OF APPEAL IS GROUND NO.3 WHICH IS ALTERNATE GROUNDS TO GROUND NO. 1 AND 2 WHICH IS RE PRODUCED AS UNDER: 3. THAT WITHOUT PREJUDICE TO THE CLAIM OF THE APPEL LANT WITH REFERENCE TO PROPERTY INCOME, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S AND CIRCUMSTANCES OF THE CASE IN TREATING THE INCOME AS BUSINESS INCOME AND CORRESPONDINGLY NOT ALLOWED DEPRECIATION ON THE CAPITALIZED ASSET, I.E. BUILDIN G BY HOLDING THE SAME TO BE IN THE NATURE OF STOCK-IN-TRADE. 3. THE BRIEF FACTS OF THE CASES ARE THAT THE ASSESS EE FIRM IS ENGAGED IN THE BUSINESS OF DEVELOPMENT OF ESTABLISHING COMPLEX AND PROVIDING S HOPS RENT IN LEASE IN THE PREVIOUS ASSESSMENT YEAR I.E. ASSESSMENT YEAR 2008-09 THE EN TIRE INCOME WHICH WAS DERIVED BY THE APPELLANT FROM THE LEASING OF MALL AS WELL AS S ALE OF SHOPS AND KIOSK IN THE MALL WAS SHOWN UNDER THE HEAD BUSINESS INCOME WHICH WAS ACCE PTED BY THE DEPARTMENT. HOWEVER, IN THE YEAR UNDER CONSIDERATION (ASSESSMEN T YEAR 2009-10). THE PARTNERS OF THE APPELLANT FIRM TAKING INTO CONSIDERATION THE DE CISION IN THE MARKET AND NON- AVAILABILITY OF CUSTOMERS DECIDED TO KEEP CERTAIN S HOPS WHICH COULD NOT BE SOLD AS A PART OF THEIR INVESTMENTS. CONSEQUENT THEREOF THE SHOPS WHICH HAVE NOT SOLD BUT WERE LEASED OUT WERE SHOWN AS INVESTMENT IN THE BALANCE SHEET O F THE APPELLANT FIRM AND CONSEQUENT THEREOF THE INCOME WHICH WAS RELATABLE TO THOSE SHO PS WERE TREATED AS INCOME UNDER THE HEAD INCOME FROM THE HOUSE PROPERTY. SINCE, THE UNS OLD SHOPS WERE CAPITALIZED AS INVESTMENT AND BECAME PART OF FIXED ASSET OF THE AP PELLANT AND TILL THE EARLIER YEARS THERE WERE BEING SHOWN AS PART OF CLOSING STOCK/WORK-IN-P ROGRESS. HOWEVER, THE AO DID NOT ALLOW THE CLAIM OF THE ASSESSEE TO TREAT THE INCOME FROM HOUSE PROPERTY AND HE HELD IT AS INCOME FROM BUSINESS. ALTERNATIVELY, THE ASSESSEE H AD PRAYED IF ITS INCOME IS TREATED AS BUSINESS INCOME THEN THE DEPRECIATION SHOULD BE ALL OWED WHICH WAS TURNED OUT BY THE AO SAYING THAT THE PROPERTIES WERE SHOWN AS STOCK- IN-TRADE. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO CONFI RMED THE VIEW OF THE AO THAT THE INCOME FROM MALL HAS TO BE ASSESSED AS INCOME FROM LETTING OUT OF THE PROPERTY UNDER THE HEAD BUSINESS INCOME. THE ALTERNATE PLEA OF TH E ASSESSEE IS THAT THE DEPRECIATION 3 ITA NOS.440&775/KOL/2013 M/S INDIA HOUSING A.YRS. 2009-10 & 2008-09 3 SHOULD BE GRANTED WAS TURNED DOWN ON THE VERY SAME PLEA THAT THE ASSESSEE HAD SHOWN OF THE MALL, SHOPS, KIOSK AS STOCK-IN-TRADE. AGGRIE VED, THE ASSESSEE IS BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. THE FACTS STATED ABOVE IS REPEATING FOR THE SAKE OF BREVITY. THE LD. SENIOR C OUNSEL TOOK UP TO PAGE 54 OF THE PAPER BOOK WHICH IS THE BALANCE SHEET AS ON 31.03,2009 WH EREIN WE NOTE THAT THE FIXED ASSETS IS TO THE TUNE OF RS. 795,043,298.58 AND DEPRECIATI ON IS GIVEN AS RS. 90,431,389.45. THE DETAILS WHICH IS GIVEN IN SCHEDULE NO. 3 WHICH IS F OUND IN PAGE 59 OF THE PAPER BOOK WHICH TALLIES OF THE AFORESAID FIGURES WE STATED. W E NOTE THAT THERE IS AN ADDITION DURING THE YEAR IN THE HEAD BUILDING TO THE TUNE OF RS. 75 9,634,058.58, THERE IS A NOTE APPENDED BELOW WHICH STATES WITH AN ADDITION DURING FINANCIA L YEAR 2008-09 IN BUILDING AMOUNT HAS BEEN TRANSFERRED FROM STOCK. IN THE LIGHT OF TH E AFORESAID FACT WE NOTE THAT THE ASSESSEE HAS TRANSFERRED FROM STOCK-IN-TRADE/INVENT ORY THE BUILDING TO THE FIXED ASSETS/BLOCKS OF ASSETS IN SUCH A SCENARIO, SINCE T HE INCOME OF LETTING OUT OF PROPERTIES IS TREATED AS INCOME FROM BUSINESS THE ASSESSEE IS ENT ITLED TO DEPRECIATION IN RESPECT OF USER OF THE ASSET AS PROVIDED U/S 32 OF THE ACT. HO WEVER, THE AUTHORITIES BELOW HAVE DENIED THE SAME ON THE GROUND THAT THE ASSESSEE HAS BEEN TREATING THE SAME AS STOCK-IN- TRADE OVER THE YEAR WHICH FACT HAS BEEN FOUNDED TO BE ERRONEOUSLY TAKEN NOTE BY BOTH THE AUTHORITIES. HOWEVER, IN THE INTEREST OF NATURA L JUSTICE WE ARE INCLINED TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND REMAND THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION TO VERIFY AS TO WHETHER IT HAS BEEN BROUG HT OUT FROM THE STOCK-IN-TRADE TO THE FIXED ASSETS AS RECORDED IN PAGE NO. 59 OF THE PAPE R BOOK IF THE ASSESSEE HAS BROUGHT THE BUILDING IN THE FIXED ASSET THEN DEPRECIATION HAS T O BE GRANTED AS PER SECTION 31 OF THE ACT. WITH AFORESAID OBSERVATION THE ASSESSEE IS REM ANDED BACK TO THE FILE OF THE AO. NEEDLESS TO SAY, THE ASSESSEE HAS TO BE GRANTED AN OPPORTUNITY OF BEING HEARD BEFORE THE ORDER IS PASSED. NOW WE TAKE UP IN I.T.A NO. 775/KOL/2013 FOR ASSESS MENT YEAR 2008-09 4 ITA NOS.440&775/KOL/2013 M/S INDIA HOUSING A.YRS. 2009-10 & 2008-09 4 6. THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGA INST THE ORDER OF LD. CIT(A)-19, KOLKATA DATED 22.02.2013 FOR ASSESSMENT YEAR 2008-0 9. 7. AT THE OUTSET, THE LD. SENIOR COUNSEL DREW OUR A TTENTION TO GROUND NO. 9 WHEREIN THE ASSESSEE HAS ASSAILED THE DECISION OF THE LD. CIT(A ) ON THE GROUNDS THAT THOUGH THE REMAND REPORT WAS CALLED FOR THE LD. CIT(A) DID NOT GIVE AN OPPORTUNITY TO THE ASSESSEE TO REBUT THE SAME WHICH IS IN VIOLATION OF NATURAL JUSTICE. WE NOTE THAT THE LD. CIT(A) HAS CALLED FOR THE REMAND REPORT AND HAVE NOT GIVEN ANY OPPORTUNITY TO THE ASSESSEE TO REBUT THE CONTENTS OF THE REMAND REPORT WHICH IS IN VIOLATION OF NATURAL JUSTICE. WE NOTE THAT THE LD. CIT(A) HAS NOT PASSED A SPEAKING ORDER WHILE PASSING THE ORDER. THEREFORE, WE ARE INCLINED TO SET ASIDE THE ORDER OF THE LD. C IT(A) AND REMAND THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION TO HIM THAT THE COPY OF REMAND REPORT MAY BE FURNISHED TO THE ASSESSEE AND THE ASSESSEE SHOULD B E GRANTED AN OPPORTUNITY TO REBUT THE SAME AND THE APPEAL TO BE DECIDED AFRESH AFTER HEAR ING THE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN I.T .A NO. 440/KOL/2013 FOR ASSESSMENT YEAR 2009-10 IS PARTLY ALLOWED FOR STATISTICAL PURP OSES AND THE APPEAL OF THE ASSESSEE IN I.T.A. NO. 775/KOL/2013 FOR ASSESSMENT YEAR 2008-09 IS ALLOWED FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE OPEN COURT ON 01.05.201 8 SD/- SD/- (P.M JAGTAP) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 1 ST MAY, 2018 SB, SR. PS 5 ITA NOS.440&775/KOL/2013 M/S INDIA HOUSING A.YRS. 2009-10 & 2008-09 5 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT M/S INDIA HOUSING, 2A, SAHARA INDIA SADAN, SHAKESPEARE SARANI, KOLKATA. 2 RESPONDENT I) JCIT, RANGE-33, KOLKATA & II) DCI T, CIRCLE-33, KOLKATA 3. THE CIT(A) KOLKATA. 4. 5. CIT KOLKATA DR, ITAT, KOLKATA. / TRUE COPY, BY ORDER, SR. PVT. SECRETARY