Surabhi Shelters Private Limited, Hyderabad V. ACIT, Central Circle-1, Hyderabad

ITA 555/HYD/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7667 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 14-07-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 19-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Assessee Lawyers: S RAMA RAO
• Keywords: Business income; Depreciation; Search and seizure
• Section: 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 553/HYD/2013 A.Y. 2007-08 ITA NO. 554/HYD/2013 A.Y. 2008-09 ITA NO. 555/HYD/2013 A.Y. 2009-10 M/S. SURABHI SHELTERS PVT. LTD., HYDERABAD PAN: AABCA7400J VS. THE ASST. CIT CENTRAL CIRCLE-1 HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SRI S. RAMA RAO RESPONDENT BY: SRI P. SOMASEKHAR REDDY DATE OF HEARING: 1 4 .07.2014 DATE OF PRONOUNCEMENT: 16 .0 9 .2014 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THE ABOVE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE COMMON ORDER OF THE CIT(A)-I, HYDERABAD DATED 21.01.2013 FOR A.YS. 2007-08 TO 2009-10. SIN CE ISSUES INVOLVED IN THESE APPEALS ARE COMMON, THEY A RE CLUBBED AND HEARD TOGETHER AND ARE DISPOSED OF BY T HIS COMMON ORDER. 2. FACTS OF THE CASE ARE THAT A SEARCH AND SEIZURE OPERATION WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE-COMPANY ON 17.9.2008. SUBSEQUENTLY, A NOT ICE U/S. 153A OF INCOME-TAX ACT, 1961 DATED 12.10.2009 WAS ISSUED. IN RESPONSE, THE ASSESSEE FILED A LETTER D ATED 2 ITA NOS. 553-555 /HYD/2013 M/S. SURABHI SHELTERS PVT. LTD. ======================== 26.11.2009 STATING THAT ITS RETURN OF INCOME FILED EARLIER ON 26.10.2007 DECLARING AN INCOME OF RS. 22,33,150 FOR A.Y. 2007-08 SHOULD BE TREATED AS THAT FILED IN RES PONSE TO NOTICE U/S. 153A. 3. FOR THE A.Y. 2008-09, THE ASSESSEE DID NOT FILE RETURN OF INCOME WITHIN THE DUE DATE. IN RESPONSE TO THE NOTICE ISSUED U/S. 153A IT FILED RETURN OF INCOME D ECLARING INCOME OF RS. 2,77,030. FOR A.Y. 2009-10, THE ASSE SSEE FILED ITS RETURN OF INCOME ON 27.9.2009 DECLARING A LOSS OF RS. 37,19,395. 4. THE COMMON GROUND FOR ALL THE THREE ASSESSMENT YEARS RAISED BEFORE THE CIT(A) WAS THAT THE AO ERRE D IN DETERMINING INCOME FROM BUSINESS BY ESTIMATING THE NET PROFIT AT 10% OF THE WORK-IN-PROGRESS AND FURTHER E RRED IN ARRIVING AT THE NET PROFIT OF RS. 14,47,075 FOR A.Y . 2007- 08, RS. 5,97,259 FOR A.Y. 2008-09 AND RS. 19,39,013 FOR A.Y. 2009-10. 5. THE SECOND COMMON GROUND WAS THAT THE ASSESSING OFFICER ERRED IN NOT ALLOWING ANY ADMINIS TRATIVE AND FINANCIAL CHARGES AND DEPRECIATION WHILE ARRIVI NG AT SUCH NET PROFIT. 6. THE NEXT GROUND WAS THAT THE AO ERRED IN ADDING INCOME FROM OTHER SOURCES AT RS. 8,33,673 FOR 2007- 08, RS. 25,39,366 FOR A.Y. 2008-09 AND RS. 10,65,025 FO R A.Y. 2009-10. 7. AS REGARDS THE GROUND RELATING TO ESTIMATION OF NET PROFIT FROM THE ASSESSMENT ORDER IT IS SEEN THAT TH E APPELLANT IS A COMPANY ENGAGED IN THE BUSINESS OF R EAL 3 ITA NOS. 553-555 /HYD/2013 M/S. SURABHI SHELTERS PVT. LTD. ======================== ESTATE AND CONSTRUCTION OF RESIDENTIAL AND COMMERCI AL UNITS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT THE APPELLANT HAD BEEN CAPITALIZIN G THE WORK IN PROGRESS (WIP). IN THE ASSESSMENT YEAR 2007 -08, IT HAD OFFERED INCOME ON ADVANCES RECEIVED @ 10%. T HE NOTIONAL PROFIT HAD BEEN ADDED TO WORK IN PROGRESS AND CARRIED OVER TO THE NEXT YEAR. ONLY IN THE YEAR OF COMPLETION OF PROJECT, THE SALE CONSIDERATION WAS B EING SHOWN AS INCOME, THE EXPENDITURE DEBITED BEING THE RELATED WORK IN PROGRESS, AND THE DIFFERENCE BEING THE PROM. TILL THE PROJECT WAS UNDER CONSTRUCTION, THE WORK IN PROGRESS AND ADMINISTRATIVE EXPENSES WERE BEING ADD ED UP AND TAKEN TO THE BALANCE SHEET AS CLOSING WORK I N PROGRESS. IT WAS NOTICED FROM THE RETURNS OF INCOME THAT THE APPELLANT HAD CONSTANTLY ADOPTED SUCH METHOD FR OM THE ASSESSMENT YEAR 2003-04 TO 2007-08. THE WORK IN PROGRESS, NOTIONAL PROFIT AND OTHER INCOME WERE ALL SUMMED UP AND CAPITALIZED AND ON THE INCOME FROM NOTIONAL PROFIT AND OTHER INCOME WAS BEING OFFERED FOR TAXATION. 8. AS AGAINST THE CONSISTENT METHOD OF ACCOUNTING FOLLOWED OVER THE YEARS, IN THE ASSESSMENT YEAR 200 8-09, THE APPELLANT HAD NOT ONLY CAPITALIZED THE ADMINIST RATIVE EXPENSES BUT HAD ALSO CLAIMED IT AS A DEDUCTION IN THE PROFIT AND LOSS A/C. THE ASSESSING OFFICER REASONED THAT IF THE METHOD BY THE APPELLANT IN THE EARLIER YEARS WA S TO BE FOLLOWED, THEN THE ENTIRE WORK IN PROGRESS OF RS. 34,11,520 AND ADMINISTRATIVE EXPENDITURE OF RS. 25,61,065, TOTALLING RS. 59,72,588, WAS REQUIRED TO BE CAPITALIZED, LEAVING THE OTHER INCOME OF RS. 25,39, 368/- AS FULLY TAXABLE, WITHOUT ANY DEDUCTION. OTHERWISE, HE 4 ITA NOS. 553-555 /HYD/2013 M/S. SURABHI SHELTERS PVT. LTD. ======================== OPINED THAT THE ASSESSING OFFICER OUGHT TO HAVE OFF ERED THE WORK IN PROGRESS DURING THE YEAR UNDER CONSIDER ATION AS INCOME, SO AS TO BE ELIGIBLE FOR DEDUCTION ON AC COUNT OF ADMINISTRATIVE EXPENDITURE. 9. LIKEWISE, FOR THE ASSESSMENT YEAR 2009-10, THE APPELLANT HAD NOT ONLY CAPITALIZED THE ADMINISTRATI VE EXPENSES BUT HAD CLAIMED THOSE AS DEDUCTION IN THE PROFIT AND, LOSS A/C. HOWEVER, FOLLOWING THE METHOD BEING FOLLOWED IN EARLIER YEARS, THE ENTIRE WORK IN PROGR ESS OF RS. 1,53,12,728 AND ADMINISTRATIVE EXPENDITURE OF RS. 53,42,233 TOTALLING RS. 2,06,54,961 WAS REQUIRED TO BE CAPITALIZED, WHICH WOULD HAVE LEFT THE OTHER INCOME OF RS. 13,44,726, AS FULLY TAXABLE. OTHERWISE, THE ENTIRE WORK IN PROGRESS DURING THE YEAR SHOULD HAVE BEEN OFFERED I N THE YEAR AS INCOME, ENTITLING THE ASSESSEE FOR DEDUCTIO N OF ADMINISTRATIVE EXPENDITURE. 10. THE ASSESSING OFFICER NOTICED UP TO ASSESSMENT YEAR 2007-08, THE APPELLANT HAD BEEN CONSTANTLY SHO WING EITHER PROFIT ON ADVANCES RECEIVED OR ON COMPLETION OF PROJECT. FOR THE ASSESSMENT YEAR 2007-08, EVEN THOU GH THERE WERE ADVANCES, IT HAD NOT OFFERED ANY NOTIONA L PROFIT. HE FOUND THAT IT WAS NOT CLEAR FROM RECORDS WHETHER THE SAID AMOUNTS HAD BEEN TAKEN INTO SALES OR NOT. HOWEVER, THE SAME WAS NOT IN TUNE WITH THE MET HOD ADOPTED BY THE APPELLANT OVER THE YEARS. ON THE OTH ER HAND, IN THE SUBSEQUENT YEARS, THE APPELLANT HAD SU FFERED LOSSES DUE TO DEBITING ADMINISTRATIVE EXPENDITURE T O THE PROFIT AND LOSS A/C, WHEREAS IT WAS CAPITALIZING TH OSE IN THE EARLIER YEARS. THEREFORE, THE ASSESSING OFFICER CONCLUDED THAT THE CHANGE IN METHOD WAS APPARENTLY WITH 5 ITA NOS. 553-555 /HYD/2013 M/S. SURABHI SHELTERS PVT. LTD. ======================== A VIEW TO OFF SET THE INCOME DECLARED U/S. 132(4) O F THE ACT AND THE ASSESSEE HAD CLEVERLY CONCEALED THE DECLARA TION. HE ALSO NOTICED THAT THE RETURNS UP TO THE ASSESSME NT YEARS 2007-08 WERE FILED PRIOR TO SEARCH WHILE THAT FOR THE ASSESSMENT YEAR 2008-09 WAS FILED ON 15-10-2009, AF TER A DELAY OF 1 YEAR. ACCORDINGLY, THE PURPOSE FOR THE CHANGE WAS APPARENT, PRE-MEDITATED AND WAS WITH A VIEW TO OFF SET THE DECLARATION. THEREFORE, HE PROCEEDED TO COM PUTE THE INCOME WITHOUT ALLOWING ANY DEDUCTION FOR ADMINISTRATIVE AND OTHER CHARGES. 11. IT WAS NOTICED THAT IN THE ASSESSMENT YEAR 2007- 08, THE APPELLANT HAD OFFERED INCOME ON ESTIMATE BA SIS ON THE ADVANCES RECEIVED. THE NOTIONAL PROFIT @ 10% HA D BEEN ADDED TO WORK IN PROGRESS AND CAPITALIZED. WHE N ACTUAL SALES WERE BEING MADE, THE WORK IN PROGRESS WAS BEING REDUCED AND EXCESS SALE, IF MADE, WAS BEING O FFERED TO TAXATION. ON A CONSIDERATION OF THE CONTENTIONS, HOWEVER, THE ASSESSING OFFICER FOUND THAT THIS METH OD SUFFERS FROM THE DEFECTS AS IT IS UNCERTAIN. HE FEL T THAT IT IS NOT CERTAIN WHETHER THE APPELLANT WILL RECEIVE ADVA NCE DURING THE YEAR. BESIDES, IT IS ALSO NOT 'CERTAIN A S TO WHEN THE ACTUAL SALE DEED WILL BE REGISTERED. ACCORDINGL Y, HE OPINED THAT THE METHOD OF OFFERING INCOME ON ADVANC ES OR SALE WILL NOT YIELD A CONSISTENT RESULT AND THE ONL Y CERTAINTY WAS THE WORK IN PROGRESS. HE FELT THAT AN Y BUILDER WILL KEEP ON CONSTRUCTING, IRRESPECTIVE OF ADVANCES OR SALES, WHEREAS THE WORK IN PROGRESS INDEED CONTA INS POTENTIAL PROFIT ELEMENT. ACCORDINGLY, WORKING OUT A NOTIONAL PROFIT ON WORK IN PROGRESS ONLY CAN GIVE A CONSISTENT RESULT AS COMPARED TO NOTIONAL PROFIT ON 6 ITA NOS. 553-555 /HYD/2013 M/S. SURABHI SHELTERS PVT. LTD. ======================== ADVANCES. BESIDES, IT WILL YIELD PROFIT EVERY YEAR UNLIKE IN ANY OTHER YEAR. 12. SINCE THE ASSESSEE WAS ADOPTING 10% RATE ON ADVANCES, THE ASSESSING OFFICER ADOPTED THE SAME RA TE OF 10% AS REASONABLE PROFIT OF THE WORK IN PROGRESS (INCLUSIVE OF ADMINISTRATIVE EXPENDITURE) AND WORKE D OUT THE PROFIT FOR THE THREE YEARS AS UNDER: A.Y. WIP AMOUNT ADVANCE OFFERED PROFIT OFFERED REQUIRED PROFIT (10% OF WIP) DIFFERENCE IN PROFIT 2007-08 14470749 2004000 0 1447075 1447075 2008-09 5972585 0 0 597259 597259 2009-10 19390126 0 0 1939013 1939013 13. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER COMPLETED THE ASSESSMENT BY ADOPTING THE PROFIT @ 1 0% ON THE AMOUNT OF WORK IN PROGRESS DURING THE YEAR, INCLUDING ADMINISTRATIVE EXPENSES. HE NOTICED THAT THE APPELLANT HAD COMPLETED SOME PROJECTS IN THE ASSESS MENT YEAR 2007-08 AND HAD OFFERED SALES BY DEBITING THE COST OF WORKS SOLD. THEREFORE, PROFITS ON THE COMPLETED VEN TURES WERE SEPARATELY BROUGHT TO TAX IN THE ASSESSMENT YE AR 2007-08. IN THE ASSESSMENT YEARS 2008-09 AND 2009-1 0, HOWEVER, ONLY 10% OF WORK IN PROGRESS WAS BROUGHT T O TAX IN RESPECT OF THE ONGOING PROJECTS AS ESTIMATED INC OME. 14. BEFORE THE CIT(A), AS REGARDS THE GROUND RELATING T O ESTIMATION OF PROFITS @ 10% OF WORK IN PROGRESS, TH E LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE RE WAS NO DISPUTE WITH REGARD TO THE EXPENDITURE INCURRED. HOWEVER, HE CONTENDED THAT SUCH ADDITION SHOULD NOT HAVE BEEN MADE. IT WAS AVERRED THAT THE APPELLANT H AD TWO PROJECTS ON HAND VIZ., SURABHI SHRADHA AND EDEN 7 ITA NOS. 553-555 /HYD/2013 M/S. SURABHI SHELTERS PVT. LTD. ======================== BAGH. BOTH THE PROJECTS WERE COMPLETED AND SOLD DUR ING THE YEAR THE APPELLANT ADMITTED ALL INCOME OF RS. 9 ,90,585 BY CONSIDERING THE SALE CONSIDERATION OF RS. 6,78,0 8,928 AND THEREAFTER REDUCING THERE FROM THE WORK IN PROG RESS AS AT THE BEGINNING OF THE PREVIOUS YEAR AND THE EXPENDITURE INCURRED DURING THE YEAR. HE SUBMITTED THAT THE PROFIT SO ADMITTED WAS ACCEPTED BY THE ASSESSIN G OFFICER. THE ABOVE SAID PROJECTS WERE IN PROGRESS F ROM THE FINANCIAL YEAR 2004-05 AND INITIALLY, THE APPELLANT WAS OFFERING INCOME ON ADVANCES RECEIVED WHICH WAS ACCE PTED BY THE ASSESSING OFFICER. THEREFORE, A DIFFERENT ME THOD SHOULD NOT HAVE BEEN ADOPTED DURING THE YEAR, PARTICULARLY IN VIEW OF THE FACT THAT THE PROJECTS WERE CLOSED. HE AVERRED THAT THE ASSESSING OFFICER COULD NOT HAVE ESTIMATED PROFIT @ 10%, BESIDES ASSESSING THE INCOME FOR THE ENTIRE PROJECT. 15. IT WAS FURTHER SUBMITTED THAT IN ADDITION TO THE ABOVE, THE APPELLANT HAD COMMENCED TWO PROJECTS AT VENKATGIRI AND MADHAPUR AND INCURRED EXPENDITURE OF RS. 10,86,321 WHICH WAS BEING CARRIED FORWARD TO THE NE XT YEAR AS WORK IN PROGRESS. NO ADVANCES WERE RECEIVED DURING THE YEAR AND THE ASSESSING OFFICER ALSO DID NOT ESTIMATE ANY PROFIT DURING THE YEAR. 16. WITH REGARD TO THE ASSESSMENT YEAR 2008-09, THE ID . AUTHORISED REPRESENTATIVE SUBMITTED THAT IN TH IS YEAR, THE APPELLANT HAD THREE PROJECTS ON HAND, VENKATAGI RI, MADHAPUR AND KAVURI HILLS, THE TOTAL WORK IN PROGRE SS AT THE CLOSE OF THE YEAR BEING RS. 44,97,641/-, WHILE THE OPENING WORK IN PROGRESS WAS RS. 10,86,021/-. HE AVERRED THAT OTHER EXPENSES LIKE ADMINISTRATIVE EXP ENSES 8 ITA NOS. 553-555 /HYD/2013 M/S. SURABHI SHELTERS PVT. LTD. ======================== ETC COULD NOT HAVE BEEN CONSIDERED FOR ARRIVING AT THE WORK IN PROGRESS. HE CONTENDED THAT THERE WAS NO PROGRESS IN VENKATAGIRI PROJECT. ON THE OTHER HAND, THE MADHAPUR AND KAVURI HILLS PROJECT WERE TAKEN ON DEVELOPMENT. HOWEVER, THE APPELLANT COULD NOT EXECU TE ANY AGREEMENTS AND DID NOT RECEIVE ANY ADVANCES FOR SALE OF FLATS. HE SUBMITTED THAT THE APPELLANT HAS BEEN ADOPTING A CONSISTENT METHOD OF ARRIVING AT THE PRO FIT ON RECEIPT OF ADVANCES WHICH WAS ACCEPTED FOR THE ASSESSMENT YEAR 2005-06 AND 2006-07 AND EVEN FOR TH E ASSESSMENT YEAR 2007-08 IN RESPECT OF THE TWO PROJE CTS. THEREFORE DEVIATION FROM THE EARLIER METHOD WAS NOT JUSTIFIED. 17. THE CIT(A) HELD AS UNDER: 'I HAVE GONE THROUGH THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE APPELLANT. THE SUBMISSION OF THE ID. AUTHORISED REPRESENTATIVE OF THE APPELLANT ITSELF SHOWS THAT THE APPELLANT HAS NOT DISPUTED THE METHOD OF ESTIMATING @ 10% ON WORK IN PROGRESS. AS REGARDS THE COMPLETED PROJECTS, THE ASSESSING OFFICER ONLY ADDED RS. 9,90,586 ON THIS ACCOUNT IN THE ASSESSMENT YEAR 2007-08, AS WAS ADMITTED BY THE APPELLANT ITSELF. BESIDES, AN ADDITION OF RS. 14,47,075 HAS BEEN MADE, BEING 10% OF WORK IN PROGRESS OF RS. 1,44,70,749. ACCORDINGLY, NO INFIRMITY CAN BE SAID TO EXIT IN THE COMPUTATION OF SUCH PROFITS. AS REGARDS ASSESSMENT YEARS 2008-09 AND 2009-10, THE APPELLANT HAS NOT DISPUTED THE WORK IN PROGRESS ADOPTED BY THE ASSESSING OFFICER AND IN VIEW OF THE CONSISTENT ACCOUNTING POLICY FOLLOWED BY THE ASSESSEE, 10% THEREOF HAS BEEN BROUGHT TO TAX DURING THE YEAR. FINDING NO INFIRMITY IN THE ACTION OF THE ASSESSING OFFICER, THEREFORE, THE ADDITIONS MADE ARE UPHELD AND THE GROUND RAISED IN THIS REGARD IS DECIDED AGAINST THE APPELLANT IN ALL THE YEARS. ' 9 ITA NOS. 553-555 /HYD/2013 M/S. SURABHI SHELTERS PVT. LTD. ======================== 18. THE LEARNED DR SUPPORTED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A). 19. THE LEARNED AR SUBMITTED THAT THE ASSESSEE HAS BEEN ADOPTING A CONSISTENT METHOD OF ARRIVING AT TH E PROFIT ON RECEIPT OF ADVANCES. THE AO HAD ACCEPTED SUCH METHOD FOR A.YS. 2005-06, 2006-07 AND EVEN FOR A.Y. 2007-08. HE DID NOT RESORT TO ANY ESTIMATION. IN SUCH CIRCUMSTANCES, IT WAS SUBMITTED THAT DEVIATION FROM EARLIER METHOD ADOPTED IS NOT JUSTIFIED. 20. WE HAVE HEARD BOTH THE PARTIES. WE FIND FROM THE ASSESSMENT ORDER THAT THE ASSESSEE HAS BEEN ESTIMAT ING PROFIT WITH REFERENCE TO THE ADVANCES RECEIVED. THE PROFIT IS WORKED OUT ON THE ADVANCES BUT WHILE SHOWING THE SAME IN PROFIT AND LOSS A/C. IT WAS WRONGLY MENTION ED AS NOTIONAL PROFIT ON WORK-IN-PROGRESS. HOWEVER, THE ASSESSING OFFICER CORRECTLY MENTIONED IN THE ASSESS MENT ORDER THAT THE PROFIT WAS ESTIMATED AT 10% OF ADVAN CES AND FOR A.YS. 2003-04 TO 2006-07, THE ESTIMATION WA S ACCEPTED BY THE ASSESSING OFFICER WHILE COMPLETING ASSESSMENT U/S. 153A OF THE ACT. HENCE WE SET ASID E THIS ISSUE TO THE ASSESSING OFFICER TO RECTIFY THE MISTA KE OF TAKING 10% OF WORK-IN-PROGRESS INSTEAD OF 10% OF ADVANCES KEEPING IN MIND THAT THE METHOD OF ACCOUNT ING FOLLOWED SHOULD BE CONSISTENT AS IN EARLIER YEARS. THE ASSESSEE SHALL BE GIVEN AN OPPORTUNITY TO REPRESENT ITS CASE. 21. FOR THE A.Y. 2007-08, THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THE CIT(A) OUGHT TO HAVE AL LOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF ADMINIST RATIVE AND FINANCIAL CHARGES AND DEPRECIATION ALLOWABLE. WE FIND 10 ITA NOS. 553-555 /HYD/2013 M/S. SURABHI SHELTERS PVT. LTD. ======================== THAT THE ASSESSING OFFICER HAS ADDED ONLY RS. 9,90, 586 FOR A.Y. 2007-08 AS WAS ADMITTED BY THE ASSESSEE ITSELF . HENCE THIS GROUND OF APPEAL IS DISMISSED. 22. WITH RESPECT TO ASSESSMENT YEAR 2008-09, THE ASSESSING OFFICER MADE A SEPARATE ADDITION OF RS. 25,39,366 UNDER THE HEAD 'INCOME FROM OTHER SOURCES '. IT WAS SUBMITTED BEFORE THE CIT(A) THAT THE ASSESSEE H AD ADMITTED LOSS OF RS. 7,53,354 FROM BUSINESS AND ASS ESSEE HAD CONSIDERED CERTAIN ITEMS AS INCOME FROM OTHER SOURCES TOTALLING TO RS. 25,39,366 INCLUDING DIVIDE ND ON CHITS OF RS. 6,11,260, MISCELLANEOUS RECOVERIES OF RS. 22,556 AND INCOME OFFERED U/S. 132 OF RS. 15 LAKHS. IT WAS SUBMITTED THAT THESE THREE ITEMS FORM PART OF T HE INCOME FROM BUSINESS AND, THEREFORE, BUSINESS INCOM E SHOULD HAVE BEEN ARRIVED AT RS. 13,91,819. IT WAS F URTHER SUBMITTED THAT THE RENT RECEIVED OF RS. 3,10,000 SH OULD HAVE BEEN ASSESSED SEPARATELY AS INCOME FROM HOUSE PROPERTY AFTER ALLOWING 30% STANDARD DEDUCTION U/S. 24. IT WAS ALSO SUBMITTED THAT PROFIT ON SALE OF OFFICE PREMISES OF RS. 36,913 SHOULD HAVE BEEN ASSESSED SEPARATELY AS INCOME FROM CAPITAL GAINS AND NOT INCOME FROM OTHER SOURCES. FURTHER IT WAS ALSO SUBMITTED THAT THE IN TEREST EARNED ON RS. 58,364 SHOULD ALSO TO BE CONSIDERED A S BUSINESS INCOME. 23. FOR A.Y. 2009-10 IT WAS SUBMITTED THAT THE INCOME FROM OTHER SOURCES ARRIVED AT BY THE ASSESSING OFFI CER INCLUDED RS. 6,78,980 BEING CHIT DIVIDEND INCOME. IT WAS SUBMITTED THAT IT SHOULD HAVE BEEN CONSIDERED AS IN COME FROM BUSINESS AND NOT INCOME FROM OTHER SOURCES. I T WAS SUBMITTED THAT EVEN DIVIDEND ON BIRLA SUN LIFE MUTU AL 11 ITA NOS. 553-555 /HYD/2013 M/S. SURABHI SHELTERS PVT. LTD. ======================== FUND OF RS. 64,215 WAS INCLUDED WHICH WAS ACTUALLY EXEMPT FROM TAX. THE CIT(A) HELD AS FOLLOWS: '08.0 I HAVE GONE THROUGH THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE APPELLANT. IT IS SEEN THAT THE INCOME OF RS. 6, 11 ,260 WAS DIVIDEND ON CHITS AND THEREFORE, BEING DIVIDEND INCOME, THE SAME WAS RIGHTLY TAKEN AS INCOME FROM OTHER SOURCES. AS REGARDS THE INCOME OFFERED OF RS. 15 LAKHS, IT IS CLEAR THAT IN THE LIGHT OF THE DECISION OF HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF KIM PHAR M A (P) LTD V S. COMMISSIONER OF INCOME-TAX (ITA N O . 1 06/2011) (0& M ), SUCH SURRENDERED 'INCOME HAS TO BE INCOME FROM OTHER SOURCES ONLY. AS REGARDS MISCELLANEOUS RECOVERIES, THE APPELLANT HAS NOT BEEN ABLE TO EXPLAIN THAT THOSE WERE RECOVERIES FROM THE REGULAR BUSINESS OF THE APPELLANT ITSELF. ACCORDINGLY, NO INFIRMITY CAN BE SAID TO EXIST IN THE TREATMENT OF THE ABOVE AMOUNTS AS INCOME FROM OTHER SOURCES. SO FAR AS THE INCOME FROM 'RENT' OF RS. 3,10,000, PROFIT ON SALE OF OFFICE PREMISES OF RS. 36,913 AND INTEREST EARNED OF RS. 58,364 ARE CONCERNED, THE APPELLANT HAD ITSELF ADMITTED THOSE AS INCOME FROM OTHER SOURCES ON THE BASIS OF ITS PRIVATE KNOWLEDGE REGARDING THE NATURE OF SUCH INCOME. EVEN IN THE COURSE OF THESE PROCEEDINGS, NOTHING HAS BEEN SUBMITTED TO ESTABLISH THE CONTENTION THAT THE RENT RECEIVED WAS IN THE NATURE OF INCOME FROM HOUSE PROPERTY, SO AS TO GET DEDUCTION U / S. 24. LIKEWISE, IT HAS NOT BEEN SUBSTANTIATED THAT THE INTEREST EARNED WAS PART OF THE BUSINESS INCOME ITSELF. ACCORDINGLY, FINDING NO INFIRMITY IN THE TREATMENT OF ENTIRE AMOUNT OF RS. 25,39,366/- AS INCOME FROM OTHER SOURCES, THE GROUND RAISED IN THIS REGA R D IS DECIDED AGAINST THE APPELLANT. FOR SIMILAR REASONS, THE TREATMENT OF INCOME OF RS. 1 0,65,025 AS INCOME FROM OTHER SOURCES IN THE ASSESSMENT YEAR 2009-10 IS ALSO UPHELD AND THE GROUNDS RAISED IN THIS REGARD ARE DECIDED AGAINST THE APPELLANT.' 24. WE HAVE HEARD BOTH THE PARTIES. THE CIT(A) HAS POINTED OUT WITH RESPECT TO INCOME FROM RENT THAT N OTHING 12 ITA NOS. 553-555 /HYD/2013 M/S. SURABHI SHELTERS PVT. LTD. ======================== HAS BEEN SUBMITTED TO ESTABLISH THAT IT IS IN THE N ATURE OF INCOME FROM HOUSE PROPERTY SO AS TO GET DEDUCTION U /S. 24. SIMILARLY WITH RESPECT TO MISCELLANEOUS RECOVE RIES THE ASSESSEE'S EXPLANATION THAT THEY WERE FROM REGULAR BUSINESS HAS NOT BEEN SUBSTANTIATED. FURTHER, INTE REST EARNED BEING PART OF THE BUSINESS INCOME IS ALSO NO T ESTABLISHED. HENCE WE REMIT THE ISSUE TO THE FILE OF THE ASSESSING OFFICER TO GIVE ONE MORE OPPORTUNITY TO T HE ASSESSEE TO PRESENT ITS CASE, AND DECIDE THE ISSUE THEREUPON. 25. HOWEVER, WITH RESPECT TO DIVIDEND ON CHITS, WE CONFIRM ORDER OF THE CIT(A) IN TAKING THE SAME AS I NCOME FROM OTHER SOURCES AND WITH RESPECT TO THE INCOME O F RS. 15 LAKHS WE CONFIRM ORDER OF THE CIT(A) THAT THE SA ME BEING SURRENDERED INCOME HAS TO BE TREATED AS INCOM E FROM OTHER SOURCES ONLY. THE ASSESSING OFFICER IS DIRECTED TO RE-WORK THE RELIEF ACCORDINGLY. 26. THE GROUND RAISED BY THE ASSESSEE WITH RESPECT TO DETERMINATION OF SHORT TERM CAPITAL GAIN IN THE A.Y S. 2007-08 AND 2008-09 IS BEING SET ASIDE TO THE FILE OF THE AO WHO SHALL RE-WORK THE SAME AFTER CONSIDERING THE ADDITIONS/DISALLOWANCES SUSTAINED BY US IN THESE AP PEALS. 27. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 16 TH SEPTEMBER, 2014 SD/ - (B. RAMAKOTAIAH) ACCOUNTANT MEMBER SD/ - (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER HYDERABAD, DATED THE 16 TH SEPTEMBER, 2014 TPRAO 13 ITA NOS. 553-555 /HYD/2013 M/S. SURABHI SHELTERS PVT. LTD. ======================== COPY TO: 1. M/S. SURABHI SHEL TERS PVT. LTD., C/O. SRI S. RAMA RAO, ADVOCATE, SHRIYA'S ELEGANCE, H. NO. 3-6-643, S T. NO. 9, HIMAYATNAGAR, HYDERABAD-500 029. 2. THE ASST. CIT, CENTRAL CIRCLE - 1, HYDERABAD. 3. THE CIT(A) - I, HYDERABAD. 4. THE CIT (CENTRAL) , HYDERABAD. 5. THE DR, A - BENCH, ITAT, HYDERABAD.