DCIT, New Delhi V. M/s. Unity Buildwell Ltd., New Delhi

ITA 4966/DEL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4920 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2011-2012
• Appeal Filed On: 03-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRAVAN GOTRU
• Keywords: Business income; Rule of consistency
• Section: 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D : NEW DELHI) BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 4966/DEL/2015 ASSESSMENT YEAR: 2011-12 DCIT CIRCLE 27(1), VS. M/S UNITY BUILDWELL LTD., ROOM NO. 193, C.R. BUILDING, G-3, AGGARWAL CORPOR ATE NEW DELHI PLAZA, 23, RAJENDER PLACE, NEW DELHI 110 008 (PAN: AAACU1519R) (APPELLANT) (RESPONDENT) REVENUE BY : SH. SHRAVAN GOTRU, SR. DR ASSESSEE BY : SH. ARUN JAIN, CA ORDER PER H.S. SIDHU, JM:- THE REVENUE HAS FILED THE APPEAL AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS-I), NEW DELHI O N THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN HOLDING THE RENTAL INCOME OF RS. 1,05,26,484/- EARNED FROM THE PROPERTY HELD AS STOCK IN TRADE AS INCOME FROM HOUSE PROPERTY INSTEAD OF TREATING THE SAME AS INCOME FROM BUSINESS & PROFESSION. 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN IGNORING THE PRINCIPLES OF CONSISTENCY AND FACTS THAT THE ASSESSEE HAD SHOWN ITS LEASE RECEIPTS UNDER THE HEAD BUSINESS INCOME OVER THE YEARS. 3. THE ORDER OF LD. CIT(A) IS ERRONEOUS AND IS NOT TENABLE ON FACTS AND IN LAW. 4. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIGHT TO AMEND, MODIFY, ALTER OR ADD ANY GROUND(S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE FILED ITS RETURN OF INCOME ON 29.9.2011 DECLARING TOTAL INCOME OF RS . 3,34,83,800/- RELATING TO ASSESSMENT YEAR 2011-12. THE CASE OF TH E ASSESSSEE WAS SELECTED UNDER SCRUTINY AND ACCORDINGLY, A NOTICE D ATED 13.9.2012 U/S. 143(2) OF THE INCOME TAX ACT, 1961 (HEREINAFTE R REFERRED AS THE ACT) WAS ISSUED AND DULY SERVED UPON THE ASSESSEE. NOTICE U/S. 142(1) OF THE ACT ALONGWITH QUESTIONNAIRE WAS ALSO ISSUED AND DULY SERVED UPON THE ASSESSEE. IN COMPLIANCE THEREOF, TH E A.R. OF THE ASSESSEE ATTENDED THE PROCEEDINGS FROM TIME TO TIME AND FURNISHED THE DETAILS CALLED FOR, WHICH WERE SEEN, EXAMINED A ND VERIFIED AND ALSO THE BOOKS OF ACCOUNTS PRODUCED BY THE ASSESSEE WERE VERIFIED AND EXAMINED. THE ASSESSEE COMPANY IS ENGAGED IN T HE BUSINESS OF PROMOTION AND DEVELOPMENT OF DDA APPROVED COMMERCIA L COMPLEXES 3 DURING THE YEAR UNDER CONSIDERATION. THE BUSINESS O F THE ASSESSEE COMPANY IS TO DEVELOP COMMERCIAL PROJECTS WITHIN DE LHI. THE COMMERCIAL UNITS IN THE DEVELOPED PROJECTS ARE EITH ER SOLD OR GIVEN ON LEASE. AO OBSERVED THAT OVER THE YEARS ASSESSEE HAS SHOWN LEASE RECEIPTS FROM THE PROPERTIES GIVEN ON LEASE AS ITS BUSINESS INCOME. HOWEVER, DURING THE YEAR UNDER CONSIDERATION THE AS SESSEE COMPANY HAS DEVIATED FROM ACCOUNTING PRACTICE FOLLOWED AND HAS OFFERED ITS LEASE RECEIPTS UNDER THE HEAD OF 'INCOME FROM HOUSE PROPERTY'. THERE IS NO RENT CHANGE OF FACTS AND CIRCUMSTANCES IN THE CURRENT YEAR VIS-A-VIS THAT OF EARLIER YEARS. THE ASSESSEE IS SHOWING ALL FINISHED AND UNFINISHED UNITS UNDER STOCK IN TRADE/ WORK IN PROGRESS. ANY INCOME ARISING OUT IS STOCK IN TRADE IS NOTHING BUT THE BUSINESS INCOME OF THE ASSESSEE. THE ASSESSEE HAS CHANGED IT S ACCOUNTING PRACTICE WITH A SOLE OBJECTIVE TO REDUCE ITS TAX LI ABILITY AS THE ASSESSEE HAS CLAIMED DEDUCTION 4(A) OF THE INCOME T AX ACT, 1961 OUT OF THE INCOME FROM THE HOUSE PROPERTY. SINCE TH E ASSESSEE HAS SHOWN ITS LEASE RECEIPTS UNDER THE HEAD BUSINESS I NCOME OVER THE YEARS AND THE SAME HAS BEEN ACCEPTED BY DEPARTMENT, THE LEASE RECEIPTS OF RS. 1,05,26,484/- RECEIVED BY THE ASSES SEE IN THE YEAR UNDER CONSIDERATION IS TREATED AS BUSINESS INCOME O F THE ASSESSEE, AO OBSERVED THAT IDENTICAL ADDITION MADE IN THE PR EVIOUS ASSESSMENT YEAR 2010-11 AND IN FIRST APPEAL, THE SA ME WAS DELETED BY THE CIT(A)-III, NEW DELHI VIDE HIS APPELLATE ORD ER IN APPEAL NO. 200/11-12/CIT(A)-III DATED 16.08.2013. HOWEVER, THE DEPARTMENT 4 HAS FILED SECOND APPEAL IN THE INCOME TAX APPELLATE TRIBUNAL, NEW DELHI ON 2013 AGAINST THE SAID APPELLATE ORDER OF T HE CIT(A). THEREAFTER, THE AO MADE THE ADDITION OF RS. 1,05,26 ,484/- ON ACCOUNT OF LEASE RECEIPTS TREATED AS BUSINESS INCOM E AND ASSESSED THE INCOME OF THE ASSESSEE AT RS. 3,67,59,111/- VID E ORDER DATED 31.3.2014 PASSED U/S. 143(3) OF THE ACT. AGAINST TH E ASSESSMENT ORDER DATED 31.3.2014, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER DATED 27.5.2015 HAS DEL ETED THE ADDITION IN DISPUTE AND ALLOWED THE APPEAL OF THE ASSESSEE. 3. AGGRIEVED WITH THE LD. CIT(A)S ORDER DATED 27.5 .2015, REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 4. LD. DR RELIED UPON THE ORDER OF THE AO AND REI TERATED THE GROUNDS OF APPEAL RAISED IN THE APPEAL. 5. ON THE CONTRARY, LD. COUNSEL OF THE ASSESSEE HA S RELIED UPON THE ORDER OF THE LD. CIT(A) AND ALSO FILED A PAPE R BOOK CONTAINING PAGES 1 TO 74 IN WHICH HE HAS ATTACHED THE EXTRACTS OF THE SECTION 23(5) OF THE I.T. ACT INTRODUCED BY FINANCE BILL, 2 017; EXTRACTS OF CBDT CIRCULAR/ MEMORANDUM EXPLAINING SECTION 23(5) OF I.T. ACT INTRODUCED BY FINANCE ACT, 2017; EXTRACT OF SPEECH OF SH. ARUN JAITLEY, MINISTER OF FINANCE, INTRODUCING BUDGET 20 17-18; COPY OF JUDGMENT DATED 2.11.1960 OF THE HONBLE SUPREME CO URT OF INDIA IN THE CASE OF EAST INDIA HOUSING AND LAND DEVELO PMENT TRUST LTD. VS. CIT (42 ITR 49); JUDGEMENT DATED 17.5.2013 OF T HE HONBLE DELHI HIGH COURT IN THE CASE OF NEW DELHI HOTELS L TD. VS. ACIT (ITA 5 NO. 238-240/2013); JUDGEMENT DATED 18.2.2013 OF DEL HI HIGH COURT IN THE CASE OF CIT VS. DISCOVERY ESTATE PVT. LTD. ( 356 ITR 0159); JUDGEMENT DATED 25.3.2015 OF HONBLE DELHI HIGH CO URT IN THE CASE OF CIT VS. NIAGARA HOTELS & BUILDERS (P) LTD. (ITA NO. 43/2014); DETAIL FOR THE ASSESSMENT YEAR 2009-10 TO 2012-13 I N RESPECT OF DISPUTED ISSUES UNDER CONSIDERATION IN THE CASE OF THE ASSESSEE; DETAIL FOR THE ASSESSMENT YEAR 2009-10 TO 2012-13 I N RESPECT OF DISPUTED ISSUES UNDER CONSIDERATION IN THE CASE OF UNITY PROJECTS PVT. LTD. (SISTER CONCERN OF THE ASSESSEE); COPY OF THE CONSOLIDATED ORDER DATED 28.1.2016 OF ITAT IN THE ASSESSEE OWN CASE FO R THE AY 2009- 10 & 2010-11 IN APPEAL NO. 5736&5737/DEL/2013; COPY OF THE ORDERS OF CIT(A) IN THE ASSESSEE OWN CASE FOR THE AY 2009- 10, 2010-11 AND 2012-13 AND COPY OF ORDER DATED 4.11.2016 OF THE C IT(A) IN THE CASE OF UNITY PROJECTS PVT. LTD. (SISTER CONCERN OF THE ASSESSEE) FOR THE AY 2012-13 IN APPEAL NO. TR/164/16-17 AND STATE D THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASS ESSEE BY THE AFORESAID DECISIONS. HENCE, HE REQUESTED THAT BY F OLLOWING THE AFORESAID DECISIONS, THE ADDITION IN DISPUTE MAY BE DELETED AND APPEAL OF THE ASSESSEE MAY BE ALLOWED. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. WE HAVE GONE THROUGH THE ORDERS PASSED BY THE REVENUE AUTHORITIES AS WELL AS THE CONTENTION RAISED BY THE ASSESSEE IN TH E GROUNDS OF APPEAL AND ALSO PERUSED THE DECISIONS CITED BY THE LD. COUNSEL OF THE ASSESSEE ATTACHED WITH THE PAPER BOOK. WE FIND THA T AO WAS OF THE 6 VIEW THAT THE INCOME FROM LEASE RECEIPTS IS INCOME FROM HOUSE PROPERTY. WE FIND THAT LD. COUNSEL OF THE ASSESSEE HAS STATED THAT THE AO WAS NOT JUSTIFIED IN TREATING THE INCOME AS BUSINESS INCOME AS AGAINST INCOME FROM HOUSE PROPERTY, BECAUSE SIMILAR ISSUE HAS ALREADY BEEN DECIDED BY THE LD. CIT(A) IN AY 2009-1 0 & 2010-11 IN HIS FAVOUR AND THEREFORE, IT WAS A COVERED ISSUE. W E NOTE THAT LD. CIT(A) HAS ELABORATELY DISCUSSED THE ISSUE IN DISPU TE VIDE PARA NO. 5.2 TO 5.2.1 AT PAGE NO. 4 TO 6. THE RELEVANT PORT ION OF THE LD. CIT(A)S ORDER IS REPRODUCED AS UNDER:- 5.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND PERUSED THE ORDER PASSED BY THE AO AS WELL AS THE COPY OF THE APPELLATE ORDER PASSED BY THE LD. CIT(A)-III, NEW DELHI FOR AY 2009-10 AND 2010-11. I FIND THAT THE LD. CIT(A) VIDE HIS ORDER DATED 14.8.2013 FOR THE AY 2009-10 VIDE PARA NO. 10.4 OF HIS ORDER HAS GIVEN HIS FINDINGS AS UNDER:- '10.4 IT IS A TRITE LAW THAT EACH HEAD OF INCOME IS SEPARATE AND DISTINCT AND IF CERTAIN INCOME OF THE ASSESSEE FALLS UNDER A PARTICULAR HEAD, IT IS NOT POSSIBLE FOR THE ASSESSEE AS WELL AS BY THE REVENUE TO TAKE THE INCOME FROM ONE HEAD OF INCOME TO ANOTHER HEAD. 7 EVEN FOR REAL ESTATE BUSINESSMAN RENTAL INCOME FROM PROPERTY HELD AS STOCK IN TRADE IS ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY FROM THE PERIOD OF OWNERSHIP. IN MY HUMBLE VIEW, THERE IS NO RIDER IN THE CHAPTER IV(C) OR OTHER PROVISION OF THE INCOME TAX ACT WHICH PROVIDE DIFFERENT TAX TREATMENT TO RENTAL INCOME ON HOUSE PROPERTY OWNED BY THE ASSESSEE BUT KEPT AS STOCK IN TRADE (INVENTORY). THEREFORE, ALL KIND OF RENTAL INCOME EARNED ON HOUSE PROPERTY SHOULD BE ASSESSED. THEREFORE, ALL KIND OF RENTAL INCOME EARNED ON HOUSE PROPERTY SHOULD .BE ASSESSED UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. THEREFORE, RENTAL INCOME DECLARED BY THE APPELLANT UNDER THE HEAD INCOME FROM HOUSE PROPERTY WAS CORRECTLY DECLARED AND IT IS IN ACCORDANCE WITH THE PROVISION OF INCOME TAX ACT. 8 THE AFORESAID VIEW HAS BEEN UPHELD BY THE HON'BLE KOLKATA HIGH COURT IN THE CASE OF AZIMGANJ ESTATE PVT. LTD. VS. C.I. T. III [308 ITR 205J BY FOLLOWING THE JUDGMENT OF SUPREME COURT IN THE CASE EAST INDIA HOUSING AND LAND DEVELOPMENT TRUST LTD. VS CIT [24 ITR 49J AND SULTAN BROS (P) LTD. VS CIT (CS) 51 ITR 353. RELEVANT EXTRACT OF THE AFORESAID JUDGMENT IS REPRODUCED AS UNDER:- 'IN THE CASE BEFORE US, THE UNSOLD FLATS BEING HOUSE PROPERTY, PURE AND SIMPLE AND HAVING FALLEN UNDER THE HEAD, INCOME FROM HOUSE PROPERTY, AS PROVIDED IN SECTION 22 OF THE ACT, IN OUR OPINION, COMMISSIONER OF INCOME-TAX (APPEALS) RIGHTLY HELD THAT THE RENTAL INCOME OF SUCH PROPERTY SHOULD BE ASSESSED UNDER SECTION 22 OF THE ACT. WE CANNOT LOSE SIGHT OF THE FACT THAT UNDER THE ACT, THE 9 INCOME OF AN ASSESSEE . IS ONE AND VARIOUS SECTIONS OF THE ACT DIRECT THE MODES IN WHICH THE INCOME IS TO BE LEVIED. NO ONE OF THOSE SECTIONS CAN BE TREATED AS GENERAL OR SPECIFIC FOR THE PURPOSE OF ANYONE PARTICULAR SOURCE. OF INCOME; THEY ARE ALL SPECIFIC AND DEAL WITH VARIOUS HEADS IN WHICH AN ITEM OF INCOME, PROFITS AND MEANS OF AN ASSESSEE FALLS. THESE SECTIONS ARE MUTUALLY EXCLUSIVE AND WHERE AN ITEM OF INCOME FALLS SPECIFICALLY UNDER ONE HEAD, IT HAS TO BE CHARGED UNDER THAT HEAD AND NO OTHER. ' IN VIEW OF THE ABOVE DECISION WHOSE FACTS ARE SIMILAR TO THAT OF APPELLANT, IN MY OPINION RENTAL INCOME OF RS.62,46,373 AS EARNED BY THE APPELLANT IS ASSESSABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. IN COMING TO THE' ABOVE CONCLUSION I ALSO 10 RELY ON THE DECISION IN THE CASES OF S. SOHAN SINGH VS INCOME TAX OFFICER 16 ITRD 272 (DELHI TRIBUNAL), AND MATRU ASHISH CO-OPERATIVE HOUSING SOCIETY LTD. V. INCOME TAX OFFICER (2012) 27 TAXMANN.COM 169 (MUMBAI TRIB.). 10.4 AS REGARD, THE AO'S CONTENTION THAT IN EARLIER YEARS THE RENTAL INCOME WAS ASSESSED UNDER THE HEAD 'BUSINESS', IT IS STATED THAT PRINCIPAL OF 'ESTOPPELS AND RES-JUDICATA' ARE NOT APPLICABLE TO THE INCOME TAX PROCEEDING. THE APPELLANT ON BEING POINTED OUT THE CORRECT LEGAL POSITION ABOUT THE TAXABILITY OF RENTAL INCOME UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' HAS RIGHTLY DECLARED THE SAME IN CORRECT HEAD SINCE ASSESSMENT YEAR 2009-10. HENCE THE OBSERVATION OF THE AO HAS NO MERIT, THAT THE SOLE PURPOSE OF THE APPELLANT TO DECLARE THE RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY WAS TO CLAIM DEDUCTION @30% UNDER SECTION 24(A) OF INCOME TAX ACT AND TO REDUCE ITS TAX LIABILITY. CHANGE MADE BY THE APPELLANT IN THE TAX TREATMENT OF RENTAL INCOME IS IN ACCORDANCE WITH THE PROVISION OF THE INCOME TAX ACT 11 THEREFORE, THE AO IS DUTY BOUND TO ACCEPT THE SAME EVEN IF THERE IS A CHANGE IN TAX LIABILITY OF THE APPELLANT. HENCE, IN VIEW OF THE ABOVE THE RENTAL INCOME IN THE INSTANT CASE IS TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 5.2.1 SIMILAR VIEWS WERE HELD BY LD. CIT(A)-III IN HIS ORDER DATED 16.8.2013 FOR AY 2010-11. SINCE THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE THIS YEAR AND WITH A VIEW TO MAINTAIN THE CONSISTENCY, I AGREE WITH THE SUBMISSIONS OF THE APPELLANT THAT INCOME IS REQUIRED TO BE TREATED AS INCOME FROM HOUSE PROPERTY. ACCORDINGLY, THE AO IS DIRECTED TO TREAT THE INCOME AS HOUSE PROPERTY AND ALLOW THE DEDUCTION FOR PAYMENT OF HOUSE TAX OF RS. 1,67,660/-. THESE GROUNDS OF APPEAL ARE ALLOWED. 6.1 IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDE RED VIEW THAT BY FOLLOWING THE RULE OF CONSISTENCY FOR THE ASSESSMEN T YEAR 2009-10 & 2010-11, THE LD. CIT(A) IN THE PRESENT ASSESSMENT YEAR I.E. 2011- 12 HAS RIGHTLY DIRECTED THE AO TO TREAT THE INCOME AS HOUSE PROPERTY AND ALLOW THE DEDUCTION FOR PAYMENT OF HOUSE TAX, WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART. EVEN OTHERWISE, WE FURTHER NOTE THAT THE HONBLE HIGH COURT OF DELHI IN THE CASE OF NEW DELHI HOTELS LTD. VS. ACIT IN ITA NO. 238-240/2013 DATED 17.5.20 13 HAS HELD THAT RENTAL INCOME DERIVED FROM UNSOLD FLATS WHICH ARE SHOWN AS STOCK-IN-TRADE IN THE BOOKS OF THE ASSESSEE WOULD BE ASSESSED UNDER 12 THE HEAD INCOME FROM HOUSE PROPERTY AND NOT UNDER THE HEAD OF PROFITS AND GAINS FROM BUSINESS AND PROFESSION. WE FURTHER NOTE THAT THE HONBLE HIGH COURT OF DELHI HAD SIMILARLY HELD IN THE CASE OF CIT VS. DISCOVERY ESTATES PVT. LTD. (2013) 356 ITR 0159. 7. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES O F THE PRESENT CASE AND ALSO BY FOLLOWING THE RULE OF CONSISTENCY TAKEN BY THE LD. CIT(A) IN EARLIER ASSESSMENT YEARS I.E. 2009-10 & 2 010-11 AS WELL AS BY RESPECTFULLY FOLLOWING THE PRECEDENTS OF THE HONBLE HIGH COURT OF DELHI, AS AFORESAID, WE ARE OF THE CONSIDERED VI EW THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED BY THE AFORESAID DECISI ONS, HENCE, WE REJECT THE GROUND RAISED BY THE REVENUE BY AFFIRMIN G THE DECISION OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE. 8. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED ON 01-09-2017. SD/- SD/- (PRASHANT MAHARISHI) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 01-09-2017 SR BHATANGAR COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A), NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.