SETH PROPERTIES, MUMBAI V. JT CIT RG 12(1), MUMBAI

ITA 4733/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9689 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 14-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARJU GARODIA
• Assessee Lawyers: G S PIKALE
• Keywords: Business expenditure; Cost of acquisition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI N.K. PRADHAN , ACCOUNTANT MEMBER ITA NO . 4733 /MUM. /2016 ( ASSESSMENT YEAR : 2011 12 ) SETH PROPERTIES EMCA HOUSE, 2 ND FLOOR ROOM NO.208 289 SHAHID BHAGAT SINGH ROAD FORT, MUMBAI 400 001 PAN ABIFS2476F . APPELLANT V/S JT. COMMISSIONER OF INCOME TAX RANGE 12(1), MUMBAI . RESPONDENT ITA NO . 4554 /MUM./2016 ( ASSESSMENT YEAR : 2011 12 ) ASSTT. COMMISSIONER OF INCOME TAX RANGE 17(3), MUMBAI . APPELLANT V/S M/S. SETH PROPERTIES EMCA HOUSE, 2 ND FLOOR ROOM NO.208 289 SHAHID BHAGAT SINGH ROAD FORT, MUMBAI 400 001 PAN ABIFS2476F . RESPONDENT ASSESSE E BY : SHR I G.S. PIKALE REVENUE BY : MS. A RJU GARODIA DATE OF HEARING 07.03.2018 DATE OF ORDER 28.0 3 .20 18 2 M/S. SETH PROPERTIES O R D E R PER SAKTIJIT DEY, J.M. AFORESAID CROSS APPEALS ARISE OUT OF ORDER DATED 18 TH APRIL 2016, PASSED BY THE LEARNED COMMISSIONER (APPEALS) 28, MUMBAI, FOR THE ASSESSMENT YEAR 2011 12. ITA NO.4554/MUM./2016 REVENUES APPEAL 2 . THE REVENUE HAS RAISED FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER (APPEALS) ERRED IN DELETING THE ADDITION OF DEEMED RENT AMOUNTING TO ` 4,89,46,330, WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO PROVIDE THE INFORMATION ABOUT MONTHLY RENTAL INCOME OF ALL THE TENANTS COMPELLING THE ASSESSING OFFICER TO ADOPT THE MONTHLY RENTAL INCOME OF THE TENANTS RATIONALLY. 2. ON THE FACTS A ND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER (APPEALS) ERRED IN DELETING THE ADDITION OF ` 1,06,821, MADE BY THE ASSESSING OFFICER IN REWORKING OF CAPITAL GAINS BY RECALCULATING THE INDEXED COST OF ACQUISITION. 3 . BRIEF FACTS, APROPOS GROUND NO.1 ARE, THE ASSESSEE A PARTNERSHIP FIRM IS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 26 TH JULY 2011, DECLARING TOTAL INCOME OF ` 7,28,41,580. DURIN G THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE IS THE OWNER OF A BUILDING SITUATED AT C O N NAUGHT CIRCLE, NEW DELHI, WHICH HAS BEEN GIVEN ON RENT TO A NUMBER OF TENANTS. HE ALSO 3 M/S. SETH PROPERTIES NOTICED THAT THE ASSESSEE HAS ALSO OFFERED RENTAL INCOME OF ` 1,99,092 FROM THE SAID PROPERTY. FROM THE RECORDS OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2007 08 AND 2008 09, THE ASSESSING OFFICER FOUND THAT THE PROPERTY WAS GIVEN ON RENT TO HEMKUNT CHEMICALS PVT. LTD. FOR ` 733 PER MONTH WHO IN TURN SUB L ET IT TO BANK OF PUNJAB. HE AL SO NOTICED THAT T HERE WAS INTER SE DISPUTE BETWEEN THE ASSESSEE , HEMKUNT CHEMICALS PVT. LTD. AND BANK OF PUNJAB. HE FOUND THAT IN THE ASSESSMENT YEAR 2007 08 AND 2008 09, THE ASSESSING OFFICER ADOPTED THE MARKET VALUE OF RENTA L INCOME AT ` 1,56,420 AND EACH YEAR IT IS INCREASED BY 10%. HE FOUND THAT ON THAT BASIS THE ASSESSING OFFICER IN THE ASSESSMENT YEAR 2008 09 HAS ADOPTED MONTHLY RENTAL INCOME OF ` 24,894. TAKING THAT AS A BASIS, THE ASSESSING OFFICER WORKED OUT THE DEEMED RENTAL INCOME FOR THE IMPUGNED ASSESSMENT YEAR AT ` 7,01,22,420 AND AFTER ALLOWING STATUTORY DEDUCTION S DETERMINED THE NET TAXABLE INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY OF ` 4,89,46,330. THE ASSESSEE CHALLENGED THE AFORESAID ADDITION MADE BY THE ASSESSING OFFICER BEFORE THE LEARNED COMMISSIONER (APPEALS). 4 . THE LEARNED COMMISSIONER (APPEALS) HAVING FOUND THAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2003 04, 2004 05 TO 2006 07, THE TRIBUNAL HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DEEMED RENTAL INCOME , FOLLOWED THE SAME AND 4 M/S. SETH PROPERTIES DELETED THE ADDITION MADE BY THE ASSESSING OFFICER IN THE IMPUGNED ASSESSMENT YEAR AS WELL. 5 . WE HAVE HEARD RIVAL SUBMISSIONS A ND PERUSED MATERIAL AVAILABLE ON RECORD. THE LEARNED COUNSEL APPEARING FOR BOTH THE PARTIES HAVE AGREED BEFORE US THAT THE ISSUE IN DISPUTE STANDS DECIDED IN FAVOUR OF THE ASSESSEE BY THE DECISIONS OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR EARLIER ASSESSM ENT YEARS. ON A PERUSAL OF RECORD, IT IS SEEN THAT THE ISSUE RELATING TO DEEMED RENTAL INCOME IS A RECURRING DISPUTE BETWEEN THE PARTIES FROM ASSESSMENT YEAR 2003 04 ONWARDS . WHILE DECIDING ASSESSEES APPEAL FOR ASSESSMENT YEARS 2003 04, 2004 05 TO 2006 07 IN ITA NO.6701/MUM./2011 AND OTHERS DATED 4 TH MARCH 2015, THE TRIBUNAL DELETED THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DEEMED RENTAL INCOME. THE SAME VIEW WAS AGAIN REITERATED BY THE TRIBUNAL WHILE DECIDING THE ASSESSEES APPEAL FOR THE A SSESSMENT YEAR 2007 08 AND 2008 09 IN ITA NO.3063/MUM./2013 AND ITA NO.3064/ MUM./2013, DATED 7 TH SEPTEMBER 2016. THERE BEING NO MATERIAL DIFFERENCE IN FACT S BROUGHT TO OUR NOTICE, FOLLOWING THE CONSISTENT VIEW OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE UPHOLD THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) ON THIS ISSUE. THE GROUND RAISED IS DISMISSED. 5 M/S. SETH PROPERTIES 6 . IN GROUND NO.2, THE REVENUE HAS CHALLENGED THE DELETION OF ADDITION OF ` 1,06,821 ON ACCOUNT OF DIFFERENCE IN WORKING OF CAPITAL GAIN. 7 . BRIEFLY STATED THE FACTS ARE, IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER WHILE EXAMINING WORKING OF CAPITAL GAIN FURNISHED BY THE ASSESSEE FOUND THAT THE ASSESSEE HAS NOT TAKEN THE VALUE OF PROPERTIES AS PER THE GOVERNMENT APPROVED VALU ER BUT HAS ADOPTED MUCH HIGHER VALUE IN RESPECT OF THREE PROPERTIES. THEREFORE, ON THE BASIS OF VALUE DETERMINED BY THE GOVERNMENT APPROVED VALUER, THE ASSESSING OFFICER REDUCED THE INDEXED COST OF ACQUISITION BY ` 1,06,821 AND ADDED TO THE INCOME OF THE A SSESSEE. THE ASSESSEE CHALLENGED THE ADDITION BEFORE THE LEARNED COMMISSIONER (APPEALS). 8 . THE LEARNED COMMISSIONER (APPEALS) AFTER VERIFYING THE MATERIAL ON RECORD FOUND THAT IN RESPECT OF SOME PROPERTIES ASSESSEE HAS SHOWN THE VALUE LESSER THAN THE VALUE DETERMINED BY THE APPROVED VALUER , WHEREAS , IN FEW CASES, THE VALUE SHOWN THE ASSESSEE WAS MORE THAN THE VALUE DETERMINED BY THE GOVERNMENT APPROVED VALUER. HOWEVER, IF THE FACTS ARE SEEN IN TOTALITY IN RESPECT OF ALL THE PROPERTIES , IT WAS FOUND THAT THE VALUE ADOPTED BY THE ASSESSEE WAS AT A LOWER FIGURE THAN THE VALUE DETERMINED BY THE GOVERNMENT APPROVED VALUER. 6 M/S. SETH PROPERTIES KEEPING IN VIEW SUCH FACTS, THE LEARNED COMMISSIONER (APPEALS) HELD THAT THE ASSESSING OFFICER SHOULD NOT HAVE CONSIDERED ONLY FEW PROPERTIES I N RESPECT OF WHICH THE ASSESSEES VALUATION IS MORE THAN THE GOVERNMENT APPROVED VALUER. HE OBSERVED, IF THE ASSESSING OFFICER WANTED TO ADOPT THE VALUE DETERMINED BY THE GOVERNMENT VALUER THEN HE SHOULD HAVE ADOPTED SUCH VALUE IN RESPECT OF ALL PROPERTIES AND SHOULD NOT HAVE RESTRICTED ONLY TO THE PROPERTIES WHERE THE VALUE OF GOVERNMENT APPROVED VALUER WAS LESS THAN THE VALUE OF THE ASSESSEE. ACCORDINGLY, HE DELETED THE ADDITION OF ` 1,06,821. 9 . HAVING CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD, WE ARE OF THE VIEW THAT THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) ON THIS ISSUE IS FAIR AND REASONABLE. AS COULD BE SEEN FROM THE MATERIALS ON RECORD, THE ASSESSING OFFICER HAS ONLY CONSIDERED THE DIFFERENCE IN VALUE IN RESPECT OF THRE E PROPERTIES WHERE HE FOUND THE ASSESSEES VALUE TO BE MORE THAN THE VALUE OF THE GOVERNMENT APPROVED VALUER. HOWEVER, AS OBSERVED BY THE LEARNED COMMISSIONER (APPEALS) , IN RESPECT OF OTHER PROPERTIES, THE VALUE OF THE ASSESSEE IS LESS THAN THE VALUE DETER MINED BY THE GOVERNMENT APPROVED VALUER. THEREFORE, IF ASSESSEES VALUATION VIS A VIS VALUATION OF THE GOVERNMENT APPROVED VALUER IS CONSIDERED IN TOTALITY, THE ASSESSEES VALUE IN RESPECT OF PROPERTIES IS LESS THAN THE GOVERNMENT APPROVED VALUER. THE AFOR ESAID FACTUAL FINDING OF THE LEARNED 7 M/S. SETH PROPERTIES COMMISSIONER (APPEALS) REMAINS UNCONTROVERTED BEFORE US. THEREFORE, WE ARE NOT INCLINED TO INTERFERE WITH THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) ON THIS ISSUE. GROUND RAISED IS DISMISSED. 10 . IN THE RESULT, REVENU ES APPEAL IS DISMISSED. ITA NO.4 733 /MUM./2016 ASSESSEES APPEAL 11 . THE ONLY GROUND RAISED BY THE ASSESSEE IS IN RESPECT OF DISALLOWANCE OF EXPENDITURE INCURRED TOWARDS LEGAL AND PROFESSIONAL CHARGES AMOUNTING TO ` 2.41 LAKH. 12 . BRIEF FACTS ARE, DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICING THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF ` 2.41 LAKH ON ACCOUNT OF LEGAL AND PROFESSIONAL CHARGES CALLED UPON THE ASSESSEE TO JUSTIFY THE CLAIM OF DEDUCTION. IN RESP ONSE T O THE QUERY RAISED BY THE ASSESSING OFFICER, THE ASSESSEE FURNISHED NECESSARY DETAILS OF LEGAL AND PROFESSIONAL CHARGES AND SUBMITTED THAT SINCE THE EXPENDITURE WAS INCURRED TO PROTECT ASSESSEES RIGHT OVER THE PROPERTIES IT IS AN ALLOWABLE EXPENDITURE. T HE ASSESSING OFFICER, HOWEVER, DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE. THE ASSESSING OFFICER HELD THAT SINCE THE EXPENDITURE INCURRED WAS IN RELATION TO THE PROPERTY THE INCOME FROM WHICH IS ASSESSABLE UNDER THE HEAD HOUSE PROPERTY , THE PROF ESSIONAL AND LEGAL EXPENDITURE CLAIMED CANNOT BE ALLOWED. THE 8 M/S. SETH PROPERTIES ASSESSEE CHALLENGING THE DISALLOWANCE BEFORE THE FIRST APPELLATE AUTHORITY. 13 . THE LEARNED COMMISSIONER (APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, HOWEVER, SUSTAINED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 14 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE PROPERTY WAS TAKEN ON LEASE FROM THE GOVERNMENT. HE SUBMITTED, WHEN THE GOVERNMENT PROCEEDED TO CANCEL THE LEASE OF THE PROPERTY THE ASSESSEE HAD TO TAKE RECOURSE TO LEGAL PROCESS TO PROTECT ITS RIGHT OVER THE PROPERTY AND, THEREFORE, INCURRED THE EXPENDITURE. HE SUBMITTED, SINCE THE PROPERTY WAS UTILISED FOR BUSINESS PURPOSE AND PART OF IT WAS GIVEN ON RENT THE ASSESSEE IS ENTITLED TO CLAIM THE EXPENDITURE INCURRED AS BUSINESS EXPENDITURE. 15 . LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE DECISION OF THE FIRST APPELLATE AUTHORITY. 16 . WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED MATERIAL AVAILABLE ON RECORD. AS COULD BE SEEN, THE CLAIM OF BUSINESS EXPENDITURE ON ACCOUNT OF LEGAL AND PROFESSIONAL CHARGES WAS DISALLOWED SOLELY FOR THE REASON THAT INCOME FROM THE SAID PROPERTY IS ASSESSED U NDER THE HEAD INCOME FROM HOUSE PROPERTY. HOWEVER, IT HAS BEEN SUBMITTED BEFORE 9 M/S. SETH PROPERTIES US BY THE LEARNED AUTHORISED REPRESENTATIVE THAT ONLY A PART OF THE PROPERTY WAS LET OUT AND OTHER PART IS USED FOR BUSINESS PURPOSE. WE FIND THE AFORESAID FACTUAL ASPECT HAS N OT BEEN EXAMINED BY THE DEPARTMENTAL AUTHORITIES. THEREFORE, WE ARE INCLINED TO RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR VERIFYING ASSESSEES CLAIM THAT PART OF THE PROPERTY IS ALSO USED FOR BUSINESS. IF ASSESSEES CLAIM IS FOUND TO BE CO RRECT, THE EXPENDITURE INCURRED TOWARDS LEGAL AND PROFESSIONAL CHARGES SHOULD BE ALLOWED. GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 17 . IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 18 . TO SUM UP, REVENUES APPEAL IS DISMISSED AND ASSES SEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT O N 28.03.2018 SD/ - N.K. PRADHAN ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED : 28.03.2018 10 M/S. SETH PROPERTIES COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (DY./ASSTT. REGISTRAR) ITAT, MUMBAI .