Shri Prakashbhai Haribhai Ahir, Surat V. The Income Tax Officer, Ward-1(3), Surat

ITA 497/SRT/2018

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 2092 (ITAT-SURAT)
• Duration Of Justice: 3 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 14-02-2022
• Assessment Year: 2009-2010
• Appeal Filed On: 15-07-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANUPAMA SINGLA
• Assessee Lawyers: ASHWIN K. PAREKHA
• Keywords: Business income; Depreciation; Difference of opinion; Change of opinion; TDS
• Section: 147; 148; 143(3); 133(6); 150(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No.497/SRT/2018 (AY 2009-10) (Hearing in Virtual Court) Shri Prakashbhai Haribhai Ahir, 23, Ashish Society, B/h.Navyug College, Rander Road, Surat. PAN: ABFPA 9237 R Vs The Income Tax Officer, Ward-1(3)(8), Surat. Appellant Respondent Assessee by Shri Ashwin K. Parekha – CA Revenue by Mrs. Anupama Singla – Sr.DR Date of hearing 15/02/2022 Date of pronouncement 09/05/2022 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by Assessee is directed against the order of ld.Commissioner of Income Tax(Appeals)-2, Surat dated 11.05.2018for Assessment Year (AY) 2009-10. The Assessee raised the following grounds of appeal: “1. The Learned CIT(A) has grievously erred in law and on facts in reopening the assessment u/s. 147 after the expiry of 4 years by issue of Notice u/s. 148 on 31.03.2016 after the last date of 31.03.2014 as the original assessment order u/s. 143(3) was passed on 15.12.2011. The Assessment Order should be held as time barred. 2. The Learned CIT(A) has grievously erred in law and on facts in reopening the assessment u/s. 147 by invoking the issues already considered and allowed in original Assessment Order u/s. 143(3) and thereby re-opening the assessment as a change of opinion. The assessment should therefore, be quashed. 3. The learned CIT(A) has grievously erred in law and on facts in confirming the addition of Rs. 1,86,257/- by considering the income from letting out the property as business income instead of income from house property. The learned ITA No.497/SRT/2018/ (AY 2009-10) Shri PrakashbhaiHaribhaiAhir, Surat. 2 Assessing Officer has erred in law in disallowing deduction u/s. 23 at 30% of rent receipt. The addition of Rs.1,86,257/- should therefore be deleted. 4. The learned CIT(A) has grievously erred in law and on facts in confirming the addition of Rs. 2,20,970/- by disallowing depreciation of 2 cars without appreciating the facts that the cars were used by staff and investment is shown in personal Balance Sheet of earlier years. The depreciation of Rs. 2,20,970/- should be allowed. The appellant reserves the right to add, alter, modify, amend o withdraw any of the grounds of appeal before hearing.” 2. At the outset of hearing, the ld. Authorised Representative (ld.AR) of the Assessee submits that he is not pressing the Ground No.1 and 2. Considering the submission of ld.AR of the assessee, the Ground No.1 and 2 are treated as dismissed as not pressed. 3. Brief facts of the case qua the remaining grounds of appeal are during the scrutiny assessment, the assessing officer (AO) noted that the assessee in computation of income has shown rental income of Rs.6,20,856/- and claimed deduction under section 24(a) of the Act of Rs.1,86,257/-. The AO on perusal of record noticed that in fact the assessee has received commission of Rs.65,20,856/- from Dhru Motors. The Dhru Motors also made TDS of Rs.63,948/-. The assessee has not offered the said commission in the computation of income. On confronting the issued the assessee contended that he had let out a premise situated at Adajan to Dhru Motors Private Limited on rent. The AO in order to verify the claim of assessee, issued notice under section 133(6) of the Act to the Dhru Motors asking ITA No.497/SRT/2018/ (AY 2009-10) Shri PrakashbhaiHaribhaiAhir, Surat. 3 them to provide agreement along with other details. In response to notice under section 133(6) of the Act, Dhru Motors furnished the agreement with assessee. On perusal of agreement, the AO found that it is a Joint Venture agreement for rendering services/facilities to Dhru Motors. Dhru Motors agreed for carrying business jointly with assessee in immovable property situated at FP/182 near Panna Tower, Adajan, Surat. As per Clause 6 of agreement, Dhru Motors is required to pay to assessee Rs.51,738/- or 5.5% of total turnover whichever is higher on a monthly basis as a commission for carrying such business in the said premises. On the basis of aforesaid fact and evidence gathered by the AO, noted the fact that Dhru Motors has made TDS under section 194H of the Act on payment of commission. The income so received by assessee was treated as ‘business income’ instead of ‘income from House Property’. 4. On further perusal of Audit Report and Computation of Income, the AO noted that the assessee claimed depreciation of Rs. 2.20 Lakhs on Motor Cars, however no Motor Car appeared in the balance sheet. The assessee was issued show cause notice vide why such depreciation of Rs.2,20,970/- should not be disallowed and added to the income of assessee. The assessee in his reply stated that car is shown in the personal balance sheet. The Motor Car is used by his Staff/Employee for the purpose of business of ITA No.497/SRT/2018/ (AY 2009-10) Shri PrakashbhaiHaribhaiAhir, Surat. 4 petrol Pump. The explanation furnished by assessee was not accepted by the AO and held that depreciation of personal asset is not allowable expenditure. 5. Aggrieved by the additions, the assessee filed appeal before the ld.CIT(A). Before the ld.CIT(A), the assessee made similar submission as made before the AO. On the treatment of rental income as business income, the assessee also stated that in AY 2008-09 and from AY 2011-12 to 2014-15 the AO accepted similar income as rental income. The ld CIT(A) after considering the submissions of assessee directed the assessee to furnish such rent agreement. The ld CIT(A) recorded that no such rent agreement was furnished by the assessee. The ld CIT(A) concurred with the finding of the AO by holding that principles of res-judicata is not applicable in the income tax proceedings. The ld CIT(A) also passed direction under section 150(1) to the AO to take appropriate remedial action in earlier years. On the disallowance of depreciation the ld CIT(A) held that the contention of the assessee is misplaced as no cars are appearing in the balance sheet of the business concern of the assessee and the asset are used for the purpose of business, therefore, no depreciation can be allowed. Further aggrieved, the assessee has filed present appeal before this Tribunal. 6. We have heard the submissions of the ld AR for the assessee and the learned departmental representative (DR) for the revenue. Ground No. 3 ITA No.497/SRT/2018/ (AY 2009-10) Shri PrakashbhaiHaribhaiAhir, Surat. 5 relates to treating the ‘rental income’ as ‘business income’. The ld AR for the assessee submits that the assessee has simply let out the workshop to Dhru Motors Private Limited. The assessee has received total rent of Rs.6,20,856/- at a monthly rent of Rs. 51,738/-. Dhru Motors Ltd debited this rent as commission/ brokerage in their books of accounts. The assessee has shown rent receipt under the head ‘income from house property’ and claimed deduction under section 24(a) of the Act. The copy of bank pass book showing regular monthly rent at the rate of Rs. 51,738/-, is filed on record. The ld AR for the assessee further submitted that similar receipt was accepted by the assessing officer as income from house property in AY 2008-09 and in AY 2010-11 to 2015-16. To support his submissions the ld AR for the assessee relied on the following decisions;  ACIT Vs S.N. Damani India Pvt Ltd ( ITA No. 3324/ Chny/2019 dated 30.11.2021),  P.C. Combine Pvt Ltd Vs ITO ( ITA No. 1631/Kol/2012 & 1710/Kol/2012 dated 30.04.2015). 7. On the other hand the ld DR for the revenue supported the order of ld CIT(A). The ld DR for the revenue further submits that during assessment proceedings the assessing officer investigated the facts and issued notice under section 133(6) to Dhru Motors Private Limited, the alleged tenant of the assessee. Dhru Motors Pvt Limited filed its reply and also furnished copy of Joint Venture agreement with the assessee. The relevant clauses of the ITA No.497/SRT/2018/ (AY 2009-10) Shri PrakashbhaiHaribhaiAhir, Surat. 6 said Joint Venture agreement are extracted by assessing officer in his order. As the conditions of the Joint Venture agreement Dhru Motors paid commission income and deducted tax under section 194H. Thus, the income earned by the assessee on account of business activities as per the Joint Venture agreement. The assessee availed the set off of TDS made by Dhru Motors. The assessee also claimed deduction under section 24(a)of the Act. The assessee has intentionally and deliberately concealed the Joint Venture agreement form the taxing authorities. The ld DR for the revenue parayed t dismiss this ground of appeal. 8. We have considered the rival submissions of the parties and have gone through the orders of the lower authorities carefully. The AO treated the rental income shown by assessee as ‘business income’ on the basis of information and the copy of Joint venture agreement furnished by Dhru Motors. Dhru Motors in reply to the notice under section 133(6) contended that they are making payment of commissions in pursuance of Joint Venture agreement and deducted tax at source under section 194H. The ld CIT(A) affirmed the action of assessing officer and also held that the Joint venture agreement cannot be treated as rent agreement. The contention of the assessee that similar receipt was accepted as income from ‘house property’ by assessing officer in previous and subsequent assessment year was also not ITA No.497/SRT/2018/ (AY 2009-10) Shri PrakashbhaiHaribhaiAhir, Surat. 7 accepted by ld CIT(A) and directed the assessing officer under section 150(1) to take remedial action on the deduction under section 24(a) in those earlier assessment years. We find that the assessee has not disputed the existence of joint venture. The ld AR for the assessee vehemently submitted that the assessee has shown the receipt from letting out the workshop as income from house property and that it was accepted by the assessing officer. We find that the assessee has filed on record, the copy of income tax return for AY 2008-09 and for AY 2010-11 with copy of computation of income. No assessment order under section 143(3) for those assessment years was filed by the assessee, there may be possibility that the return of income for those two years was not completed under section 143(3) and the return was processed under section 143(1). Thus, there is no express order of assessing officer in accepting the receipt of letting out as income from house property. We further find that the ld CIT(A) has already directed to take appropriate action under section 150(1). The order/ direction under section 150(1) is not challenged by the assessee in the present appeal. The ratio of case laws relied by the ld AR for the assessee is also not helpful to the assessee. In ACIT Vs S.N Damani Infra Pvt Ltd (supra) the assessee let out ware house on rent, the assessing officer treated the said receipt as income from ‘ business and profession’ on first appeal the ld CITA) the income was ITA No.497/SRT/2018/ (AY 2009-10) Shri PrakashbhaiHaribhaiAhir, Surat. 8 treated as ‘income from house property’ and on further appeal before Tribunal the order of ld CIT(A) was upheld. The Tribunal held that the ware house was let out simply on leave and licence basis. However, in the present case the assessee has entered in to Joint Venture agreement and received minimum assured payment of Rs. 51,738/ pm. Further in case of PC Combine Vs ITO (supra) the assessee merely received rent from simply letting out of the premises, which was treated as business income, the ld CIT(A) allowed the same as income from house property. However, in the present case the assessee specifically entered into agreement for sharing the profit of business carried out in the premises by Dhru Motors and ensured 5.5% of profit or Rs. 51,738/- whichever is higher. So none of the case laws relied by the ld AR is helpful to the assessee. Thus, we affirms the order of ld CIT(A). In the result, the ground No. 3 of the appeal is dismissed. 9. In the result, ground No.3 of the appeal is dismissed. 10. Ground No.4 relates to disallowance of depreciation on two motor cars. The ld AR for the assessee submits that the assessing officer disallowed the depreciation on two cars without verifying the individual balance sheet of the assessee. The assessing officer simply disallowed the depreciation on the balance sheet of business concern of assessee of Petrol Pump (Om Krishna ITA No.497/SRT/2018/ (AY 2009-10) Shri PrakashbhaiHaribhaiAhir, Surat. 9 Petroleum). The cars are used by the staff members of the Petrol Pump and the assessee is eligible for depreciation. 11. On the other hand the ld DR for the revenue supported the order of the lower authorities. The ld DR for the revenue submits that the assessee is already using one car for the purpose of his business and claimed depreciation thereon. The depreciation claimed on two additional cars is not available as these two cars are not used for the purpose of his business. No evidence for use of two cars for the purpose of business is filed by the assessee. If the asset is not used for the purpose of business no depreciation is allowable. 12. We have considered the rival submissions of the parties and have gone through the orders of the lower authorities carefully. During the assessment the assessing officer noted that asset (two Cars) on which depreciation is claimed was not shown in the balance sheet of the assessee. Accordingly, the assessing officer disallowed the depreciation on such asset. Before ld CIT(A) as well as before us, the ld AR for the assessee submitted that the asset ( cars) are shown in the individual balance sheet of the assessee. We do not find any merit in the submissions of the assessee that the assessee is eligible for depreciation on asset without including the asset in the block of asset used for the purpose of business. Even otherwise no evidence is filed ITA No.497/SRT/2018/ (AY 2009-10) Shri PrakashbhaiHaribhaiAhir, Surat. 10 by the assessee that said asset (cars) were used by the staff for the purpose of business except making simply self serving statement. Hence, we do not find merit in the submissions of the ld AR for the assessee. In the result, the ground No. 4 of the appeal is also dismissed. 13. In the result, the appeal if the assessee is dismissed. Order announced on 09 th May 2022 in the open court and result was also placed on the notice board. Sd/- Sd/-/- (Dr. ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 09/05/2022 Self *Ranjan Copy to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR 6. Guard File By order / / TRUE COPY / / Sr.Pvt. Secretary, ITAT, Surat