DCIT 24(3), MUMBAI V. GUNDECHA BUILDERS, MUMBAI

ITA 4475/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75587 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 19-11-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 03-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S D SHIRVASTAVA
• Keywords: Business income; Depreciation
• Section: 143(3); 80IB

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G , BENCH MUMBAI , BEFORE : SHRI R.C.SHARMA , A M AND SHRI SANJAY GARG , J M ITA NO. 4475 / MUM/20 1 1 ( ASSESSMENT YEAR : 2008 - 09 ) A CIT. 24(3) , MUMBAI VS. M/S GUNDECHA BUILDERS, 141, GUNDECHA HOUSE, JAWAHAR NAGAR, GOREGAON (W), MUMBAI - 400 062 PAN/GIR NO. : A A AFG 0848 E ( APPELLANT ) . . ( RESPONDENT ) /REVENUE BY : SHRI S.D.SHIRVASTAVA /ASSESSEE BY : SHRI VIMAL PUNMIYA DATE OF HEARING : 1 1 TH FEBRUARY , 201 4 DATE OF PRONOUNCEMENT : 19 TH FEBRUA RY , 201 4 O R D E R PER R.C.SHARMA ( A .M.) : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A), DATED 25 - 3 - 2011 , FOR THE ASSESSMENT YEAR 200 8 - 0 9 , IN THE MATTER OF ORDER PASSED UNDER SECTION 143(3) OF THE I.T. ACT, WHEREIN FOL LOWING GROUNDS HAVE BEEN TAKEN BY THE REVENUE : - 1. 'WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THE LEASE RENT INCOME OF RS.3,01,80,048/ - AS INCOME FROM HOUSE PROPERTY AS AGAINST BUSINESS INCOME H ELD BY THE A.O. BY IGNORING THE DECISION IN THE CASE OF INDIAN CITY PROPERTIES LTD. VS. CIT 55 ITR 262 (CAL) AND ALSO IGNORING THE FACT THAT THE PROPERTY WAS HELD AS INVESTMENT AND NOT AS TRADING ASSET.' 2. 'WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEDUCTION U/S 801 B (10) ON THE SALE PROCEEDS ITA NO. 4475 /20 1 1 2 OF THE STILT PARKING, IGNORING THE FACT THAT TILT PARKING IS NOT THE UNIT MENTIONED U/S 80 IB (10).' 3. 'WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING ADDITION OF SUPPRESSED VALUE OF CLOSIN G STOCK OF RS. 280,84,319/ - WITHOUT APPRECIATING THAT THE A. O . HAS RIGHTLY DERIVED THE VALUE OF UNSOLD CLOSING STOCK AS PER THE D ETAILS SUBMITTED BY THE ASSESSEE.' 4. 'WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING ADDITION OF RS.38,75,050/- ON ACCOUNT OF ALLOCATION OF COMMON EXPENDITURE TO POISAR PROJECT AND SAKINAKA 'O - PRO JECT BY IGNORING THE FACT THAT SAID EXPENSES WERE INCURRED BY THE ASSESSEE FIRM FOR RUNNING ITS COMMON OFFICE AND HENCE ATTRIBUTABLE TO ALL THE PROJECTS.' 5. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE A SSESSING OFFICER BE RESTORED. 2 . RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 3 . FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN DEVELOPMENT OF REAL ESTATE PROJECTS. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SHOWN LEASE INCOME OF RS.30,180,048/ - UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IT WAS EXPLAINED THAT THE ASSESSEE IS THE OWNER OF THE PROPERTIES, HENCE, RENTAL INCOME FROM THE LETTING OUT THE PROPERTY IN SAKINAKA ABC WINGS WERE OFFERED UNDER THE HEAD INCOME FROM HOUSE PROP ERTY. HOWEVER, THE AO TREATED THE SAME AS INCOME FROM BUSINESS AND DECLINED ASSESSEES CLAIM FOR DEDUCTION OF 30% ON ACCOUNT OF REPAIRS AND MAINTENANCE. 4 . BY THE IMPUGNED ORDER, THE CIT(A) ALLOWED ASSESSEES CLAIM OF INCOME UNDER THE HEAD INCOME FROM HOU SE PROPERTY AFTER HAVING THE FOLLOWING OBSERVATIONS : - 2.3 I HAVE GONE THOUGH THE CONTENTS OF THE IMPUGNED ASSESSMENT ORDER AS WELL AS ARGUMENTS & SUBMISSIONS OF LD. AUTHORIZED REPRESENTATIVE OF THE APPELLANT ALONG WITH MATERIAL ITA NO. 4475 /20 1 1 3 AVAILABLE ON RECORD. I FI ND THAT THE ASSESSING OFFICER, FACTS OF THE CASE AND SUBMISSIONS OF THE APPELLANT AND IN MY VIEW, ASSESSING OFFICER HAS NOT DOUBTED ABOUT THE OWNERSHIP OF THE LAND & BUILDING. SINCE THE ASSESSEE IS THE OWNER OF THE LAND & BUILDING AND ASSESSEE HAS BEEN EAR NING LEAVE & LICENSE INCOME IN THE PRECEDING YEARS ALSO AND IN THE PRECEDING YEARS, THIS INCOME HAS BEEN TREATED AS RENTAL INCOME. AND IN THIS CASE ALSO IT IS FOUND THAT THE MAIN INTENTION OF THE ASSESSEE WAS TO EARN RENTAL INCOME FROM THE LETTING OUT OF T HE HOUSE PROPERTY ONLY. I ALSO FIND THAT THE RELIANCE PLACED BY LD AUTHORIZED REPRESENTATIVE ON THE DECISION IN THE CASE OF SHAMBHU INVESTMENT (P) LTD. V. CIT (2003) 263 ITR 143 (SC) IS QUITE APPROPRIATE AND SQUARELY COVERS THE APPELLANT'S CASE IN THE FACT S AND CIRCUMSTANCES OF THE INSTANT CASE. HENCE THE ASSESSING OFFICER IS DIRECTED TO TREAT THE LEAVE & LICENSE RECEIPT OF RS. 3,01,80,048/ - AS INCOME FROM HOUSE PROPERTY AND GRANT 30% DEDUCTION ON THE SAME IN VIEW OF ABOVE DISCUSSION AS WELL AS TO MAINTAIN THE CONSISTENCY IN HIS OWN DECISIONS FROM THE PAST FROM WHERE NO MATERIAL CHANGE IS FOUND IN THIS YEAR IN THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE IN LINE WITH JUDICIAL DISCIPLINE. THUS, THE APPEAL IS ALLOWED ON THIS GROUND OF APPEAL. 5 . AGAINST THE ABOVE ORDER OF CIT(A), THE REVENUE IS IN FURTHER APPEAL BEFORE US. 6 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND FROM THE RECORD THAT THE ISSUE IS SQ UARELY COVERED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF SAMBHU INVESTMENT (P) LTD. VS. CIT (2003) 263 ITR 143 (SC) , WHEREIN THE HONBLE APEX COURT HAS HELD THAT WEHN MAIN INTENTION OF LETTING OUT THE PROPERTY OR ANY PORTION THEREOF IS TO EARN RENTAL INCOME, THE INCOME IS TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY AND WHERE THE INTENTIO N IS TO EXPLOIT THE IMMOVABLE PROPERTY BY WAY OF COMPLEX COMMERCIAL ACTIVITIES, THE INCOME SHOULD BE ASSESSEE AS INCOME FROM BUSINESS. APPLYING THIS PROPOSITION TO THE FACTS OF THE INSTANT CASE, WE FOUND THAT THE ASSESSEE HAS LET OUT THE PROPERTY TO EARN T HE RENTAL INCOME. ACCORDINGLY, WE DO NOT FIND ANY ITA NO. 4475 /20 1 1 4 INFIRMITY IN THE ORDER OF CIT(A) FOR TREATING THE LEASE INCOME AS INCOME FROM HOUSE PROPERTY. 7 . D URING THE COURSE OF ASSESSMENT, THE AO HAS DISALLOWED ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80IB(10). BY THE IMPUGNED ORDER, THE CIT(A) ALLOWED THE ASSESSEES CLAIM AFTER HAVING FOLLOWING OBSERVATIONS : - 3.3 I HAVE GONE THOUGH THE CONTENTS OF THE IMPUGNED ASSESSMENT ORDER AS WELL AS ARGUMENTS & SUBMISSIONS OF LD. AUTHORIZED REPRESENTATIVE OF THE APPELLAN T ALONG WITH MATERIAL AVAILABLE ON RECORD INCLUDING THE HON'BLE IT A T'S ORDERS IN APPELLANT'S OWN CASE (SUPRA). I FIND THAT PARKING IS PART & PARCEL OF THE HOUSING PROJECT THAT IS THE FIRST AND FOREMOST REQUIREMENT OF THE RESIDENTS OF THE RESIDENTIAL UNIT S. THEREFORE, IT CANNOT BE SAID THAT SALE PROCEEDS OF STILT PARKING IS OUTSIDE THE PURVIEW OF SEC. 80IB (10) OF THE I. T. ACT. THE PARKIN G S ARE IN BUILT AND APPROVED IN THE RESIDENTIAL STRUCTURE OF THE RESIDENTIAL BUILDING AND NO SUCH SEPARATE APPROVALS ARE TAKEN. THE PRINCIPLE DECIDED BY THE HON'BLE SPL. BENCH OF ITAT (PUNE) IN THE CASE OF BRAHMA ASSOCIATES VS JCIT ALSO SUPPORTS THE CASE OF THE APPELLANT THAT IF SOME PART OF THE FLAT IS USED FOR COMMERCIAL PURPOSE, THE CORRECT CHARACTER OF HOUSING PROJECT IS NOT VITIATED, ASSESSING OFFICER HAS NOT BROUGHT ON RECORD THAT WHICH PART OF EXPENDITURE CLAIMED TO HAVE BEEN INCURRED FOR PARKING IS BOGUS. HENCE, IN VIEW OF THE ABOVE SAID ARGUMENTS, CASE LAWS AND SUBMISSIONS OF THE APPELLANT ALONE, THE ASSESSING OFFI CER COULD BE DIRECTED TO ALLOW DEDUCTION TO THE APPELLANT U/S. 80 IB(10) ON SALE PROCEEDS OF STILT PARKING. HOWEVER, SINCE THE FINDINGS OF THE ASSESSING OFFICER & SUBMISSIONS OF THE APPELLANT ARE 100% IDENTICAL RELYING ON MY PREDECESSOR APPELLATE ORDER DTD. 1 8 /12/2009 FOR AY.2006 - 07 & OR DER DT. 30 / 03/2010 FOR AY.2007 - 08 IN APPELLANT'S OWN CASE, THE ASSESSING OFFICER IS DIRECTED TO ALLOW DEDUCTION ON STILT PARKING U/S 80IB(1 0) OF THE IT ACT. FOLLOWING RESPECTFULLY THE HON'BLE ITAT'S TWO DECISIONS FOR AY. 2005 - 06 & 2006 - 07 (SUPRA) IN APPELLANT'S OWN CASE TO MAINTAIN THE JUDICIAL DISCIPLINE. THUS APPEAL IS ALLOWED ON THIS GROUND TOO. 8 . WE HAVE CONSIDERED THE RIVAL CONTENTIONS. THE ISSUE OF DEDUCTION U/S.80IB(10) HAS BEEN DECIDED BY THE ITAT IN ASSESSEES OWN CASE IN ITS FAVOUR FOR THE ASSESSMENT YEARS 2005 - 06 & 2006 - 07 AS REFERRED BY THE CIT(A) IN HIS ORDER. LEARNED DR DID NOT OPPOSE THE SAID DECISION OF ITA NO. 4475 /20 1 1 5 THE ITAT IN ASSESSEES OWN CASE. IN THE IMMEDIATELY PRECEDING A.Y. 2007 - 08, THE TRIBUNAL HAS FOLLOWED THE D ECISION OF EARLIER YEARS HAVING SIMILAR FACTS. AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION ARE SAME, R ESPECTFULLY FOLLOWING THE SAME, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR ALLOWING CLAIM OF DEDUCTION UNDER SECTION 8 0IB(10). 9 . IN GROUND NO.3 , THE REVENUE IS AGGRIEVED FOR DELETING THE ADDITION OF SUPPRESSED VALUE OF CLOSING STOCK. 10 . ON PERUSAL OF THE RECORD, WE FOUND THAT THE AO HAS MADE ADDITION IN THE VALUATION OF CLOSING STOCK BY TAKING INDIRECT EXPENDITURE AS A PART OF COST OF CONSTRUCTION LIKE INTEREST EXPENSES, DEPRECIATION, BROKERAGE FOR LEASE ETC. ALL THESE EXPENSES ARE NOT PART OF COST OF CLOSING STOCK. THE CIT(A) HAS DELETED THE ADDITION AFTER HAVING THE FOLLOWING OBSERVATIONS : - 4.3 I HAVE GONE THOUGH THE CONTENTS OF THE IMPUGNED ASSESSMENT ORDER AS WELL AS ARGUMENTS & SUBMISSIONS OF LD. AUTHORIZED REPRESENTATIVE OF THE APPELLANT ALONG WITH MATERIAL AVAILABLE ON RECORD. I FIND THAT NO REASON IS GIVEN BY THE ASSESSING OFFICER FOR ADDING THE PRECEDING YEA RS' EXPENSES TO THE VALUE OF CLOSING STOCK WITHOUT UNDERSTANDING THE BUSINESS AND METHOD FOLLOWED BY THE ASSESSEE CONSISTENTLY FROM YEAR TO YEAR. ASSESSING OFFICER HAS SIMPLY TAKEN THE TOTAL OF THE EXPENSES FROM THE CHART SUBMITTED BY THE ASSESSEE WITHOUT KNOWING THE FACTS THAT IN THE PRECEDING YEARS, EXPENSES HAVE BEEN CHARGED TO THE CLOSING STOCK. HE HAS NOT POINTED OUT ANY PARTICULAR EXPENSES WHICH SHOULD HAVE CHARGED TO THE CLOSING STOCK AND NOT ADDED BY THE ASSESSEE TO CLOSING STOCK. ASSESSING OFFICER HAS NEITHER GIVEN REASON FOR NOT ACCEPTING METHOD OF VALUATION OF CLOSING STOCK NOR THE INSTANCE OF SUCH EXPENSES WHICH REMAINED TO BE CHARGED TO CLOSING STOCK. THE ASSESSIN G OFFICER HAS DRAWN CONCLUSION WHIMSICALLY, WITHOUT ANY COGENT REASONS TO SUBSTANTI ATE THE ALLEGATION OF SUPPRESSED CLOSING STOCK OF THE UNSOLD AREA OF THE PROJECT. HIS ADDITION IS NOT BASED ON ANY ADVERSE MATERIAL AS AN EVIDENCE IN HIS POSSESSION TO ITA NO. 4475 /20 1 1 6 SUBSTANTIATE HIS STAND BUT ON A MERE DOUBT OR A SUSPICION, WHICH CANNOT BE SUSTAINED IN LAW. HENCE, THE IMPUGNED ADDITION OF RS. 2,80,84,319/ - IS DELETED IN THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE. 11 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT THE AO HAS WRONGLY ADDED EXPENSES OF PREVIOUS YEAR TO THE VALUE OF CLOSING STOCK WITHOUT FINDING FAULT IN ASSESSEES METHOD OF VALUATION, WHICH WAS CONSISTENTLY FOLLOWED BY IT. THE AO HAS WRONGLY INCLUDED INDIRECT COST OF PROJECT WHICH IS NOT GOING TO FORM PART OF VALUE OF WORK IN PROGRESS. WHILE COMPUTING VALUE OF CLOSING STOCK THE A O HAS NOT POINTED OUT ANY PARTICULAR EXPENSES, WHICH SHOULD HAVE CHARGED TO CLOSING STOCK AND NOT ADDED BY THE ASSESSEE TO THE CLOSING STOCK. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDINGS OF CIT(A) RESULTING INTO DELETION OF ADDITION ON ACCOUNT OF VALUATION OF CLOSING STOCK. 12 . THE LAST GRIEVANCE OF THE REVENUE RELATES TO DELETION OF ADDITION OF R S. 38,75,050/ - ON ACCOUNT OF ALLOCATION OF COMMON EXPENDITURE TO POISAR PROJECT AND SAKINAKA D PROJECT. 13 . THE CIT(A) HAS DELETED THE A DDITION AFTER FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006 - 07. THE PRECISE OBSERVATIONS OF THE CIT(A) ARE AS UNDER : - 5.3 I HAVE GONE THOUGH THE CONTENTS OF THE IMPUGNED ASSESSMENT ORDER AS WELL AS ARGUMENTS & SU BMISSIONS OF LD. AUTHORIZED REPRESENTATIVE OF THE APPELLANT ALONG WITH MATERIAL AVAILABLE ON RECORD INCLUDING THE HON'BLE ITA TS ORDERS IN APPELLANT'S OWN CASE (SUPRA) I HAVE ALSO GONE THROUGH THE CHART FURNISHED BY THE APPELLANT IT I S CLEAR FROM THE DETAI LS OF EXPENSES FURNISHED THAT SEPARATE EXPENDITURE WAS DEBITED UNDER ALL HEADS OF POISER PROJECT AND THE ASSESSING OFFICER HAS ALSO NOT POINTED OUT A SINGLE INSTANCE IN HIS ORDER AS TO WHICH EXPENDITURE WAS TAXABLE INCOME. HE HAS WORKED SIMPLY ON PRESUMPT ION WITHOUT ITA NO. 4475 /20 1 1 7 BRINGING ANY EVIDENCE ON RECORD. ON THE OTHER HAND, THE APPELLANT HAS MAINTAINED SEPARATE BOOKS OF ACCOUNTS AND BANK ACCOUNT FOR THE POISER PROJECT WHEREIN NO DISCREPANCY WAS POINTED OUT BY THE ASSESSING OFFICER SO IN THE ABSENCE OF ANY CONCLUS IVE EVIDENCE AND INVESTIGATION DONE BY THE ASSESSING OFFICER AND IN VIEW OF THE SUBMISSIONS AND BY THE APPELLANT, I AM OF THE VIEW THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN ALLOCATING THE EXPENDITURE OF RS. 38,75,050/ - TO POISER PROJECT WHEREIN EXPEN DITURE OF RS. 17,26,112/ - WAS ALREADY DEBITED BY THE APPELLANT BEFORE MAKING RE - ALLOCATION OR DISALLOWANCE. ON PERUSAL OF PROFIT & LOSS ACCOUNT SUBMITTED REGARDING '0' WING OF SAKINAKA. ASSESSEE HAS DEBITED THE EXPENSES TO THE TUNE OF RS. 6,88,12,548/ - AND ALL THESE HAS BEEN ADDED TO THE CLOSING STOCK. THEREFORE, ADDITION OF RS. 81,37,369/ - MADE BY THE ASSESSING OFFICER TO 'D' WING OF SAKINAKA WITHOUT POINTING OUT ANY REASON IS NOT JUSTIFIABLE. THE ASSESSING OFFICER SHOULD HAVE POINTED OUT THE DEFECTS IN TH E BOOKS OF ACCOUNTS OF THE APPELLANT AND THE ITEMS OF EXPENDITURE WHICH WERE DIVERTED FOR REDUCING THE TAXABLE INCOME. INSTEAD OF THAT, THE ASSESSING OFFICER HAS SIMPLY MADE REALLOCATION OF EXPENSES OF THE PROJECT WHICH CANNOT BE APPROVED AND CONFIRMED IN THE ABSENCE OF ANY EVIDENCE. FURTHER RESPECTFULLY FOLLOWING THE DECISIONS IN APPE LLANT'S OWN CASE OF HON'BLE ITA T MUMBAI, G BENCH, ITA NO.2087/MUM/2010 FOR A.Y.2006 - 07 AND THE REASONING OF MY LD. PREDE CESSOR'S APPELLATE ORDER FOR A. Y.2007 - 08, THE ASSESSIN G OFFICER IS DIRECTED TO ALLOW DEDUCTION AS CLAIMED BY THE APPELLANT TO MAINTAIN THE JUDICIAL DISCIPLINE IN THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE AS DISCUSSED ABOVE. ACCORDINGLY THIS GROUND OF APPEAL IS ALSO ALLOWED. 1 4 . WE HAVE CONSIDERED RI VAL CONTENTIONS. AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION ARE PARI MATERIA TO THE FACTS AND CIRCUMSTANCES AS CONSIDERED AND DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE, WHICH HAS BEEN ELABORATELY REFERRED BY THE CIT(A) IN HIS I MPUGNED ORDER ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DELETING THE ADDITION MADE ON ACCOUNT OF ALLOCATION OF COMMON EXPENDITURE . 1 5 . IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED . ITA NO. 4475 /20 1 1 8 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19 TH FEB . 201 4 . 19 TH FEB,2014 SD/ - SD/ - ( ) ( SANJAY GARG ) ( ) ( R .C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 19 / 02/ 2014 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPEL LANT 2. / THE RESPONDENT. 3. / THE CIT(A) - X, MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//