SOHAL ENGINEERING WORKS, MUMBAI V. ACIT CIR 23(1), MUMBAI

ITA 4635/MUM/2010

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6367 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 1999-2000
• Appeal Filed On: 03-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Keywords: Recovery proceedings; Validity of assessment
• Section: 147; 148; 144

Judgement Text

1 ITA 4634 TO 38/M/10, M/S SOHAL ENGG. WORKS IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER ITA NO. 4634 TO 4638/MUM/2010 ASSESSMENT YEARS 1997-98, 1999-2000, 2000-01, 2001- 02 & 2002-03 M/S SOHAL ENGINEERING WORKS, 19, SOHAL VITHAL NAGAR CHS, JVPD SCHEME 11 TH ROAD, VILE PARLE (WEST), MUMBAI . PAN AA2FS4501P VS. ACIT CIRCLE 23(1), MITAL COURT, NARIMAN POINT, MUMBAI 21. APPELLANT RESPONDENT APPELLANT BY NONE RESPONDENT BY SHRI SURENDRA KUMAR ORDER THESE FIVE APPEALS FILED BY THE ASSESSEE AGAINST FIVE SEPARATE ORDERS PASSED BY THE LD. CIT(A) ALL DATED 12.03.2010 FOR A.YS. 1997-98 A ND 1999-2000 TO 2002-03 INVOLVE COMMON ISSUES AND THE SAME THEREFORE HAVE BEEN HEAR D TOGETHER AND ARE BEING DISPOSED OF BY THIS COMPOSITE ORDER FOR THE SAKE OF CONVENIE NCE. 2. THE ASSESSEE IN THE PRESENT CASE IS A PARTN ERSHIP FIRM WHICH HAD DISCONTINUED ITS BUSINESS FROM A.Y. 1992-93. DURING THE COURSE OF S OME RECOVERY PROCEEDINGS, IT WAS NOTICED BY THE A.O. THAT THE ASSESSEE WAS IN RECEIP T OF SOME RENTAL INCOME DURING THE YEARS UNDER CONSIDERATION. SINCE NO RETURNS OF INC OME FOR THE SAID YEARS WERE FILED BY THE ASSESSEE DISCLOSING THE RENTAL INCOME, NOTICES U/S 148 WERE ISSUED BY THE A.O. IN RESPONSE TO THE SAID NOTICES, RETURNS WERE FILED BY THE ASSESSEE FOR ALL THE FIVE YEARS UNDER CONSIDERATION DECLARING TOTAL INCOME OF ` 1,71,990/- IN EACH YEAR. A LETTER WAS ALSO FILED BY THE ASSESSEE IN THE OFFICE OF THE A.O. ON 07.06. 2004 STATING THAT THE SAID RETURNS WERE BEING FILED OUT OF ABUNDANT PRECAUTION SINCE THE CO URT RECEIVER APPOINTED IN THE YEAR 2 ITA 4634 TO 38/M/10, M/S SOHAL ENGG. WORKS 1992 WAS REQUIRED TO ACTUALLY FILE THE RETURNS OF I NCOME AS REPRESENTATIVE ASSESSEE AS PER THE PROVISIONS OF SECTION 161 R.W.S. 160. IT WAS M ENTIONED IN THE SAID LETTER THAT THE RENTAL INCOME WAS BEING RECEIVED BY THE COURT RECEIVER AND THE INVESTMENT MADE IN FDS FROM SURPLUS FUNDS WAS ALSO LYING IN THE POSSESSION OF C OURT RECEIVER APPOINTED BY THE HONBLE BOMBAY HIGH COURT. ON RECEIPT OF THE SAID LETTER FROM THE ASSESSEE, THE A.O. SENT A LETTER TO THE COURT RECEIVER ON 6.1.2005 CAL LING UPON THE LATER TO FILE THE RETURNS OF INCOME AS REPRESENTATIVE ASSESSEE U/S 160 & 161 OF THE ACT. IN RESPONSE TO THE SAID LETTER RECEIVED FROM A.O., A LETTER DATED 7.2.2005 WAS SEN T BY THE COURT RECEIVER TO THE A.O. POINTING OUT THAT THEY HAD BEEN DISCHARGED FROM THE DUTIES AS COURT RECEIVER BY THE HONBLE HIGH COURT. ON RECEIPT OF THE SAID LETTER, THE A.O. REQUIRED THE ASSESSEE TO FURNISH THE RELEVANT DETAILS FOR THE PURPOSE OF COM PLETING ITS ASSESSMENTS FOR THE YEARS UNDER CONSIDERATION AND SINCE THERE WAS NO COMPLIAN CE ON THE PART OF THE ASSESSEE IN THIS REGARD, THE A.O. PROCEEDED TO COMPLETE THE ASSESSME NTS FOR THE YEARS UNDER CONSIDERATION TO THE BEST OF HIS JUDGMENT U/S 144 R.W.S. 147 DETE RMINING THE TOTAL INCOME OF THE ASSESSEE AS UNDER: A.Y. 1997-98 SL NO. PARTICULARS AMOUNT ( ` ) 1 INCOME FROM HOUSE PROPERTY 3,07,558 2 INCOME FROM OTHER SOURCES(INTEREST FROM FDS) 1,01 ,220 TOTAL 4,08,778 A.Y. 1999-2000 SL NO. PARTICULARS AMOUNT ( ` ) 1 INCOME FROM HOUSE PROPERTY 2,29,500 2 INCOME FROM OTHER SOURCES(INTEREST FROM FDS) 1,37 ,328 TOTAL 3,66,828 A.Y. 2000-01 SL NO. PARTICULARS AMOUNT ( `) 1 INCOME FROM HOUSE PROPERTY 2,29,500 2 INCOME FROM OTHER SOURCES(INTEREST FROM FDS) 1,66 ,500 TOTAL 3,96,000 3 ITA 4634 TO 38/M/10, M/S SOHAL ENGG. WORKS A.Y. 2001-02 SL NO. PARTICULARS AMOUNT ( ` ) 1 INCOME FROM HOUSE PROPERTY 2,29,500 2 INCOME FROM OTHER SOURCES(INTEREST FROM FDS) 1,95 ,500 TOTAL 4,25,000 A.Y. 2002-03 SL NO. PARTICULARS AMOUNT ( ` ) 1 INCOME FROM HOUSE PROPERTY 2,29,500 2 INCOME FROM OTHER SOURCES(INTEREST FROM FDS) 2,24 ,500 TOTAL 4,54,000 3. AGAINST THE ORDERS PASSED BY THE A.O. U/S 144 R. W.S. 147 FOR ALL THE FIVE YEARS UNDER CONSIDERATION, APPEALS WERE PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(A) CHALLENGING THEREIN MAINLY THE VALIDITY OF THE SAID ASSESSMENTS ON THE GROUND THAT THE SAME SHOULD HAVE BEEN MADE IN THE NAME OF COURT REC EIVER AS THE REPRESENTATIVE ASSESSEE. DURING THE COURSE OF APPELLATE PROCEEDIN GS BEFORE THE LD. CIT(A), THE FOLLOWING SUBMISSIONS WERE FILED ON BEHALF OF THE ASSESSEE. THE APPELLANTS BUSINESS IS DISCONTINUED AND THE FI RM IS DISSOLVED AND THE COURT RECEIVER IS APPOINTED AS PER THE ORDER OF THE HONB LE HIGH COURT PASSED IN SUIT NO. 2608 OF 1992. THE COPY OF THE SAID ORDER OF THE HIG H COURT IS ATTACHED FOR YOUR PERUSAL AND READY REFERENCE. AT THE TIME OF DISSOLUTION OF THE FIRM, THE APPELLA NT HAD CERTAIN PREMISES WHICH WAS GIVEN ON RENT TO ALLAHABAD BANK, CENTRAL WAREHOUSIN G CORPORATION, ETC. SINCE THE COURT RECEIVER WAS APPOINTED ALL THE ACCOUNTS COLLE CTIONS WHICH IS NORMALLY 6% OF THE COLLECTION, MUNICIPAL TAXES ETC. WERE CARRIED OUT B Y HIM. HE APPELLANT ALSO DEFAULTED IN PAYMENT OF DUES TO T HE BANK FOR WHICH THE INDIAN BANK HAD FILED A SUIT IN DEBT RECOVERY TRIBUNAL FOR RECO VERY OF THEIR DUES. THE HONBLE DRT HAD ALSO PASSED THE ORDER FOR ATTAC HMENT OF ALL THE PROPERTIES OF THE FIRM . IN THE YEAR 2003, THE HIGH COURTS RECEIVER CONTINUED TO REMAIN LIABLE FOR ALL THE ACCOUNTS, COLLECTION AND DISBURSEMENT IN RESPECT OF THE PROPERTIES OF THE FIRM SINCE 1992. 4 ITA 4634 TO 38/M/10, M/S SOHAL ENGG. WORKS IN RESPONSE TO THE NOTICE U/S 148, THE APPELLANT RE QUESTED THE LD. ASSESSING OFFICER TO TREAT THE COURT RECEIVER AS THE REPRESENTATIVE ASSE SSEE AS PER SECTION 160 OF THE INCOME TAX ACT, `1961 WHICH WAS REJECTED. IN VIEW OF THE ABOVE FACTS, THE LD. ASSESSING OFFIC ER HAS ERRED IN REJECTING THE APPELLANTS REQUESTS FOR TREATING THE COURT RECEIVE R AS THE REPRESENTATIVE ASSESSEE EVEN THOUGH ACCEPTING FOR ARGUMENTS SAKE WITHOUT ADMITTI NG SINCE 2003 THE BANK RECEIVE IS APPOINTED THE COURT RECEIVER CONTINUES TO BE LIABLE FOR ALL THE ACCOUNTS FOR THE PERIOD 1992 TO 2003 WHICH INCLUDE PERIOD UNDER APPEAL. SINCE THE SAID ORDER OF THE LD. ASSESSING OFFICER R EJECTING THE REQUEST FOR TREATING THE COURT RECEIVER AS THE REPRESENTATIVE ASSESSEE IS UN JUST AND UNFAIR THE SAME BE SET ASIDE. WITHOUT PREJUDICE TO THE GENERALITY OF THE CONTENTI ONS RAISED HEREINABOVE IN PARA 1 AND 2 THE APPELLANT FURTHER RESPECTFULLY SUBMITS THAT A. THE LD. ASSESSING OFFICER HAS ERRED IN NOT ALLOWING THE DEDUCTION OF MUNICIPAL TAXES, WHICH WAS DISBURSED BY THE COURT RECEIVER. B. SIMILARLY THE LD. ASSESSING OFFICER HAS ALSO ERRED IN NOT ALLOWING THE DEDUCTION OF COLLECTION CHARGES OF THE COURT RECEIVER WHICH IS N ORMALLY 6% OF COLLECTION. SINCE DOCUMENTARY PROOF OF THE MUNICIPAL TAXES AND COLLECTION CHARGES IS AVAILABLE WITH COURT RECEIVER, THE SAID DISALLOWANCE OF MUNIC IPAL TAXES AND COLLECTION CHARGES BE DELETED. SINCE ALL THE ACCOUNTS ARE WITH THE COURT RECEIVER, ALTERNATIVELY THE APPELLANT REQUEST FOR SOME TIME TO GET THE ACCOUNTS FROM THE COURT RE CEIVER IF THE APPELLANTS REQUEST FOR TREATING THE COURT RECEIVER AS THE REPRESENTATIVE A SSESSEE IS REJECTED FOR WHICH THE APPELLANT HAS ALREADY FILED A LETTER DATED 5.12.08 THE COPY OF WHICH IS ALSO ATTACHED. 4. THE LD. CIT(A) DID NOT FIND THE ABOVE SUBMISSION S MADE ON BEHALF OF THE ASSESSEE TO BE ACCEPTABLE IN THE ABSENCE OF ANY COPY OF ORDE R OF THE HONBLE HIGH COURT FILED BY THE ASSESSEE SHOWING THAT THE COURT RECEIVER HAD AC TUALLY BEEN APPOINTED IN THE YEAR 1990. HE ALSO FOUND THAT EVEN THE COPY OF REPORT O F THE COURT RECEIVER FILED BY THE ASSESSEE DID NOT MENTION ABOUT THE DIRECTION GIVEN BY THE COURT MAKING THE COURT RECEIVER LIABLE TO FILE THE INCOME TAX RETURNS ON B EHALF OF THE ASSESSEE. THE ASSESSEE ALSO COULD NOT PRODUCE ANY EVIDENCE BEFORE THE LD. CIT(A ) IN SUPPORT OF ITS SUBMISSIONS FILED IN WRITING DESPITE SUFFICIENT OPPORTUNITIES AFFORDE D BY THE LATER AND IN THE ABSENCE OF THE SAME, THE LD. CIT(A) PROCEEDED TO UPHOLD THE ASSESS MENTS MADE BY THE A.O. U/S 144 R.W.S.147 FOR ALL THE YEARS UNDER CONSIDERATION DIS MISSING THE APPEALS FILED BY THE ASSESSEE BEFORE HIM FOR THE SAID YEARS. AGGRIEVED BY THE OR DERS OF THE LD. CIT(A), THE ASSESSEE HAS PREFERRED THESE APPEALS BEFORE THE TRIBUNAL. 5 ITA 4634 TO 38/M/10, M/S SOHAL ENGG. WORKS 5. AT THE TIME OF HEARING FIXED BEFORE ME ON 19.10. 10, A LETTER WAS FILED BY SUNIL VANKAWALA & ASSOCIATES, CHARTERED ACCOUNTANTS, SEEK ING ADJOURNMENT ON BEHALF OF THE ASSESSEE ON THE GROUND THAT IT WOULD NOT BE POSSIBL E TO ATTEND THE SAID HEARING DUE TO UNAVOIDABLE CIRCUMSTANCES. THE LETTER OF AUTHORITY , IF ANY, ISSUED BY THE ASSESSEE IN FAVOUR OF THE SAID CHARTERED ACCOUNTANTS, HOWEVER, WAS NOT AVAILABLE ON RECORD. MOREOVER, NO SPECIFIC REASON WAS ADVANCED FOR SEEKI NG ADJOURNMENT IN THE LETTER STATED TO BE FILED ON BEHALF OF THE ASSESSEE. HOWEVER, IN OR DER TO GIVE ONE MORE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD, THE HEARING FIXED ON 19.10 .10 WAS ADJOURNED BY ME TO 20.10.2010. HOWEVER, NOBODY HAS APPEARED ON BEHALF OF THE ASSESSEE EVEN AT THE TIME OF HEARING FIXED ON 20.10.2010. THESE APPEALS OF THE ASSESSEE, THEREFORE, ARE BEING DISPOSED OF EX PARTE ON MERITS AFTER HEARING THE ARGUMENTS O F THE LEARNED D.R. AND PERUSING THE RELEVANT MATERIAL ON RECORD. 6. IT IS OBSERVED THAT IN THE PRELIMINARY COMMON IS SUE RAISED BY THE ASSESSEE IN THESE APPEALS, THE VALIDITY OF ASSESSMENTS MADE BY THE A. O. U/S 144 R.W.S. 147 HAS BEEN CHALLENGED BY THE ASSESSEE ON THE GROUND THAT THE S AME SHOULD HAVE BEEN MADE IN THE NAME OF COURT RECEIVER AS REPRESENTATIVE ASSESSEE U /S 160 R.W.S. 161 AND NOT DIRECTLY IN THE NAME OF THE ASSESSEE. IT IS, HOWEVER, OBSERVED THAT THE PROVISIONS OF SECTION 166 ARE VERY CLEAR IN THIS REGARD ACCORDING TO WHICH NOTHIN G IN SECTION 160 OR SECTION 161 CAN PREVENT THE DIRECT ASSESSMENT OF THE PERSON ON WHOS E BEHALF OR FOR WHOSE BENEFIT INCOME THEREIN REFERRED TO IS RECEIVABLE. AS PER THE PROV ISIONS OF SECTION 166, A DIRECT ASSESSMENT OF THE ASSESSEE IN RESPECT OF RENTAL INCOME AND INC OME FROM INTEREST ON FDS THUS WAS PERMISSIBLE. IN MY OPINION, THERE WAS THUS NO INFI RMITY MUCH LESS ANY LEGAL INFIRMITY IN THE DIRECT ASSESSMENTS MADE BY THE A.O. OF THE ASSE SSEE IN RESPECT OF THE SAID INCOME FOR ALL THE FIVE YEARS UNDER CONSIDERATION. I THEREFOR E FIND NO MERIT IN THE PRELIMINARY ISSUE RAISED BY THE ASSESSEE IN THESE APPEALS CHALLENGING THE VALIDITY OF ASSESSMENTS MADE BY THE A.O. AND DISMISS THE RELEVANT GROUNDS RAISING T HE SAID ISSUE. 6 ITA 4634 TO 38/M/10, M/S SOHAL ENGG. WORKS 7. AS REGARDS THE OTHER COMMON ISSUE RAISED BY THE ASSESSEE IN THESE APPEALS CHALLENGING THE DISALLOWANCE MADE BY THE A.O. AND C ONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF ITS CLAIM FOR DEDUCTION OF MUNICIPAL TAX ES AND COLLECTION CHARGES FROM THE INCOME FROM HOUSE PROPERTY, IT IS OBSERVED THAT THE SAID DISALLOWANCE WAS MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) DUE TO FAILURE ON THE PART OF THE ASSESSEE TO FILE ANY EVIDENCE OR PROOF OF PAYMENT OF MUNICIPAL TAXES AND COLLECTION CHARGES. AS SUBMITTED ON BEHALF OF THE ASSESSEE BEFORE THE A.O. AS WELL A S BEFORE THE LD. CIT(A) IN THIS REGARD, THE SAID EVIDENCE COULD NOT BE FILED AS THE SAME WA S IN THE POSSESSION OF COURT RECEIVER. KEEPING IN VIEW THIS SUBMISSION MADE ON BEHALF OF T HE ASSESSEE BEFORE THE AUTHORITIES BELOW AND HAVING REGARD TO ALL THE FACTS OF THE CAS E, I AM OF THE VIEW THAT ONE MORE OPPORTUNITY CAN JUSTIFIABLY BE GIVEN TO THE ASSESSE E TO PRODUCE THE SAID EVIDENCE. I THEREFORE RESTORE THIS ISSUE TO THE FILE OF THE A.O . FOR DECIDING THE SAME AFRESH AFTER GIVING THE ASSESSEE AN OPPORTUNITY TO PRODUCE THE EVIDENCE IN SUPPORT OF ITS CLAIM FOR DEDUCTION ON ACCOUNT OF MUNICIPAL TAXES AND COLLECTION CHARGE S. THE RELEVANT GROUNDS OF THE ASSESSEES APPEALS RELATING TO THIS ISSUE ARE ACCOR DINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 8. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE T REATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON 26 TH NOVEMBER, 2010. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER MUMBAI, DATED 26 TH NOVEMBER , 2010. RK 7 ITA 4634 TO 38/M/10, M/S SOHAL ENGG. WORKS COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) - 33 - MUMBAI 4. THE CIT- -23, MUMBAI 5. THE DR BENCH, SMC 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI 8 ITA 4634 TO 38/M/10, M/S SOHAL ENGG. WORKS DATE INITIALS 1. DRAFT DICTATED 23.11.10 SR.P.S./P.S. 2. DRAFT PLACED BEFORE AUTHOR 24.11.10 SR.P.S./P.S. 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER. - J.M./A.M. 4.DRAFT DISCUSSED/ APPROVED BY SECOND MEMBER. J.M./A.M. 5. APPROVED DRAFT COMES TO THE SR.P.S./P.S. SR.P.S./P.S. 6. KEPT FOR PRONOUNCEMENT ON SR.P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S. 8. DATE OF WHICH FILE GOES TO THE HEAD CLERK. 9. DATE OF DISPATCH OF ORDER.