Shri Prakash Vasantlal Golwala, Surat V. The ACIT.,Circle-5, Surat

ITA 558/AHD/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1690 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 10-05-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 04-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: M K PATEL
• Keywords: Opportunity of being heard; Deemed to accrue or arise in india
• Section: 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE SHRI SHAILENDRA YADAV, JM, & SHRI MANISH B ORAD, AM. ITA NO.558/AHD/2013 ASST. YEAR: 2009-10 SHRI PRAKASH V. GOLWALA, 6 TH FLOOR RIVER PALACE, OPP. OLD CIVIL COURTS, NANPURA, SURAT . VS. ACIT, CIRCLE-5, SURAT. APPELLANT RESPONDENT PAN ACLPG 5458R APPELLANT BY SHRI M. K. PATEL, AR RESPONDENT BY SHRI DILEEP KUMAR, SR.DR DATE OF HEARING: 10/5/2016 DATE OF PRONOUNCEMENT: 16/5/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A)- 1, SURAT, DATED 17.12.2012 VIDE APPEAL NO.CAS-1/TFR-5.61/96/1 2-13 AGAINST THE ORDER FRAMED U/S 143(3) OF THE I.T. ACT, 1961 ( IN SHORT THE ACT) FOR ASST. YEAR 2009-10 ON 21.11.2011 BY ACIT CIRCLE-5, SURAT. ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL :- 1. THAT ON FACTS AND IN LAW, THE LD. CIT(A) HAS GRI EVOUSLY ERRED IN CONFIRMING THE ADDITION OF RS.42,000/- MADE AS DEEM ED INCOME FROM HOUSE PROPERTY ON ESTIMATE BASIS ONLY. ITA NO.558/AHD/2013 ASST. YEAR 2009-10 2 2. THAT ON FACTS AND IN LAW, THE LD. CIT(A) HAS GRI EVOUSLY ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1,98,435/- OUT OF EXPENSES INCURRED WHOLLY AND EXCLUSIVELY FOR EARNING TAXABLE INCOME. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND ANY GROUND OF APPEAL. 2. BRIEFLY STATED FACTS AS CULLED OUT FROM THE RECO RDS ARE THAT ASSESSEE IS AN INDIVIDUAL EARNING INCOME FROM SALAR Y AS WELL AS COMMISSION. RETURN OF INCOME WAS FILED ON 27.9.2009 DECLARING TOTAL INCOME OF RS.18,06,031/-. THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT. NOTICE U/S 143(2) OF THE ACT WAS ISSUED ON 18.8.2010 FOLLOWED BY NOTICE U/S 142(1) DATED 13.01.2011. ASS ESSMENT WAS COMPLETED AT RS.20,46,466/- AFTER MAKING FOLLOWING TWO ADDITIONS :- 1) DEEMED INCOME FROM HOUSE PROPERTY AT RS. 42,000/- 2) DISALLOWANCE OUT OF COMMISSION EXPENSES AT RS.1, 98,435/- 3. AGGRIEVED ASSESSEE WENT IN APPEAL BEFORE LD. CIT (A) AND THE ADDITIONS MADE BY ASSESSING OFFICER WERE CONFIRMED AND APPEAL OF ASSESSEE WAS DISMISSED. 4. THEREAFTER ASSESSEE FILED APPEAL BEFORE THE TRIB UNAL AND VIDE ITS ORDER IN ITA NO.558/AHD/2013 DATED 11.10.2013 T HE CO-ORDINATE BENCH PARTLY ALLOWED THE ASSESSEES APPEAL AFTER CO NFIRMING THE ADDITION ON ACCOUNT OF DEEMED INCOME ON HOUSE PROPE RTY AT RS.42,000/- AND SCALED DOWN DISALLOWANCE OF COMMISS ION EXPENSES TO 50% OF RS.1,98,435/- DISALLOWED BY LD. ASSESSING OFFICER. THEREAFTER ASSESSEE MOVED A MISCELLANEOUS APPLICATI ON ON 9 TH ITA NO.558/AHD/2013 ASST. YEAR 2009-10 3 DECEMBER, 2013 OBJECTING THE ADDITION CONFIRMED FOR RS.42,000/- ON ACCOUNT OF DEEMED INCOME FROM HOUSE PROPERTY ON THE GROUND THAT CO-ORDINATE BENCH COMMITTED AN ERROR BY NOT FOLLOWI NG THE DECISION OF HON. GUJARAT HIGH COURT IN THE CASE OF CIT VS. RASI KLAL BALABHAI 119 ITR 303 (GUJ) IN FAVOUR OF ASSESSEE. CO-ORDINATE BE NCH ACCEPTED THE MISCELLANEOUS APPLICATION FILED BY THE ASSESSEE AND ORDERED TO RECALL THE ORDER DATED 11.10.2013 AND DIRECTED THE REGISTR Y TO FIX THE HEARING OF THE APPEAL SO THAT THE APPEAL CAN BE HEA RD ON MERITS. 5. IN SUPPORT OF ITS GROUND, LD. AR SUBMITTED THAT GROUND NO.2 RELATING TO DISALLOWANCE OF RS.1,98,435/- OUT OF CO MMISSION EXPENSES STANDS ALREADY DECIDED BY THE CO-ORDINATE BENCH VID E ITS ORDER IN ITA NO.558/AHD/2013 DATED 11.10.2013 THEREBY SUSTAINING THE DISALLOWANCE TO 50% OF RS.1,98,435/-. 6. LD. AR FURTHER SUBMITTED IN RELATION TO GROUND N O.1 RELATING TO ADDITION ON ACCOUNT OF DEEMED INCOME FROM HOUSE PRO PERTY I.E. RESIDENTIAL FLATS ON WHICH NOTIONAL INCOME OF RS.42 ,000/- HAS BEEN ASSESSED BY LD. ASSESSING OFFICER, LOCATED IN B-CLA SS HOUSING SOCIETY OF SURAT CITY MEASURING 695 SQ.FT. ONLY AND IS MAIN LY USED BY THE EMPLOYEES OF PARTNERSHIP FIRM OF WHICH ASSESSEE IS A PARTNER. LD. AR FURTHER SUBMITTED THAT EMPLOYEES ARE NOT STAYING IN THIS FLAT AT SURAT RATHER THEY ALL COME FROM BHARUCH, NAVSARI, BILLIMO RA ETC. AND ONLY ON THE OCCASION OF EXTRA WORK PRESSURE WHEN THESE EMPL OYEES ARE REQUIRED TO WORK TILL LATE NIGHT THEN IT BECOMES IM PRACTICABLE FOR THEM TO GO TO THEIR RESIDENCES AND COME BACK NEXT MORNIN G AND ONLY TO OVERCOME SUCH SITUATION AND TO PROVIDE COMFORT TO T HE EMPLOYEES SO ITA NO.558/AHD/2013 ASST. YEAR 2009-10 4 THAT THEIR WORKING EFFICIENCY KEEPS MAINTAINED, THE Y ARE ALLOWED TO STAY IN THE RESIDENTIAL FLAT AT SURAT AND, THEREFOR E, AS THE PROPERTY IS BEING USED FOR BUSINESS PURPOSES, NO NOTIONAL INCOM E AS DEEMED RENT SHOULD HAVE BEEN ASSESSED BY THE LD. ASSESSING OFFICER. 7. ON THE OTHER HAND, LD. DR SUPPORTED THE ORDERS O F LOWER AUTHORITIES. 8. FIRST WE TAKE GROUND NO.2 WHEREIN ASSESSEE IS AG GRIEVED BY THE ORDER OF LD. CIT(A) CONFIRMING THE COMMISSION EXPEN SES. WE FIND THAT THIS GROUND HAS BEEN ADJUDICATED AND DECIDED BY THE CO-ORDINATE BENCH VIDE ITS ORDER IN ITA NO.558/AHD/2013 DATED 1 1.10.2013 WHEREIN PART RELIEF HAS BEEN GIVEN TO THE ASSESSEE BY RESTRICTING THE DISALLOWANCE TO 50% OF RS.1,98,435/- BY OBSERVING A S UNDER :- 7. GROUND NO.2 IS REPRODUCED BELOW: THAT ON FACTS AND IN LAW, THE LEARNED CIT(A) HAS G RIEVOUSLY ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1,98,435/- OUT OF EXPENSES INCURRED WHOLLY AND EXCLUSIVELY FOR EARNING TAXABLE INCOME. 8. THE ASSESSEE HAS CLAIMED COMMISSION EXPENDITURE OF RS.2,83,479/- THE NATURE OF INCOME OF THE ASSESSEE IS FINANCIAL ADVI SOR IN THE FIELD OF MUTUAL FUND. THE ASSESSEE HAS EARNED COMMISSION INCOME IN RESPEC T OF INVESTMENTS MADE BY THE PARTIES. THE ASSESSEE HAS ALSO CLAIMED SALAR Y TO TWO EMPLOYEES AND THE AO HAS INQUIRED THE NATURE OF WORK FROM THOSE EMPLO YEES. THE AO HAS CONCLUDED THAT MOST OF THE EXPENDITURE WAS NOT RELA TED TO THE BUSINESS OF THE ASSESSEE, THEREFORE, ONLY 30% OF THE EXPENDITURE WA S ALLOWED AND 70% OF THE EXPENDITURE WAS DISALLOWED. IN THE RESULT, AN ADDIT ION OF RS.1,98,435/- WAS MADE WHICH WAS CONFIRMED BY LEARNED CIT(A). ITA NO.558/AHD/2013 ASST. YEAR 2009-10 5 9. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES A ND AFTER CONSIDERING HISTORY OF THE CASE, WE HAVE NOTED THAT MERELY AN ESTIMATE WAS APPLIED BY THE AO. IT APPEARS THAT 70% OF THE EXPENDITURE WAS DISALLOWED BY THE AO WHICH APPEARED TO BE TOWARDS HIGHER SIDE IN A SITUATION WHEN ONE E STIMATE IS TO BE PITTED AGAINST ANOTHER ESTIMATE; THAN IT IS REASONABLE TO ADOPT A FAIR ESTIMATE. CONSIDERING THE NATURE OF THE BUSINESS OF A TAX PAYER, WE THEREFORE DIRECT THAT 50% OF THE EXPENDITURE IS TO BE ALLOWED AND, THEREFORE, THE BA LANCE 50% SHALL BE DISALLOWED. IN THIS MANNER, THE ASSESSEE SHALL GET PART RELIEF IN RESPECT OF DISALLOWANCE MADE BY THE AO. RESULTANTLY, THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. AS THE CO-ORDINATE BENCH HAS ALREADY DECIDED THIS I SSUE AND THE MISC. APPLICATION FILED THEREAFTER RELATES TO GROUN D NO.1 ONLY AND IN THESE CIRCUMSTANCES THERE REMAINS NO REASON FOR US TO ADJUDICATE THIS ISSUE AND THEREFORE THIS GROUND BECOME INFRACTUOUS. 9. NOW WE TAKE UP GROUND NO.1 THROUGH WHICH ASSESSE E IS AGGRIEVED WITH THE ACTION OF LD. CIT(A) FOR CONFIRM ING THE ADDITION OF RS.42,000/- MADE AS DEEMED INCOME FROM HOUSE PROPER TY ON ESTIMATE BASIS. 10. FROM GOING THROUGH THE SUBMISSIONS MADE BY LD. AR WE UNDERSTAND THAT ASSESSEE HAS EARNED INCOME FROM CAP ITAL INVESTMENT, REMUNERATION AND SHARE OF PROFIT/LOSS F ROM PARTNERSHIP FIRM AND ALSO IN POSSESSION OF 5 PROPERTIES OUT OF WHICH ONE IS USED FOR RESIDENCE FOR SELF-OCCUPATION AND THREE PROPERT IES ARE MEANT FOR USE OF BUSINESS PURPOSE BY THE PARTNERSHIP FIRM. OU T OF THESE THREE PROPERTIES SHOWN TO BE USED FOR BUSINESS PURPOSES M ENTIONED AT PAGE 3 OF THE PAPER BOOK, LD. ASSESSING OFFICER HAS ACCEPTED THE ITA NO.558/AHD/2013 ASST. YEAR 2009-10 6 CLAIM IN RESPECT OF TWO PROPERTIES LOCATED IN NANPU RA AREA OF SURAT BUT DID NOT ACCEPT THE CLAIM IN RESPECT OF ONE RESI DENTIAL FLAT SITUATED AT B-203, SRINIDHI CO-OP. SOCIETY LTD. THE REASON F OR NOT ACCEPTING THE BUSINESS USE OF IMPUGNED FLAT WAS BASED ON THE REPORT OF THE INSPECTOR OF I.T. DEPARTMENT WHICH STATED THAT THE PROPERTY HAS NOT BEEN IN ANY USE IN THE RELEVANT YEAR. WE FURTHER OB SERVE THAT LD. AR HAS REPEATEDLY PRESSED THAT THE IMPUGNED FLAT IS BE ING TEMPORARILY USED FOR THE RESIDENCE OF THE STAFF OF PARTNERSHIP FIRM AND CERTAINLY CANNOT BE USED FOR THE RESIDENCE OF ASSESSEE HIMSEL F AS THE FLAT IS SITUATED IN A B-CLASS SOCIETY AND VERY SMALL IN SIZ E. WE FURTHER FIND DURING THE COURSE OF HEARING LD. AR SUBMITTED THAT THE INSPECTOR HAS VISITED THE RESIDENTIAL FLAT WITHOUT PROVIDING ANY INFORMATION TO THE ASSESSEE AND IF ONE MORE OPPORTUNITY IS GIVEN THEN ASSESSEE WILL SATISFY THE INSPECTOR ABOUT THE FACT THAT THE IMPUG NED FLAT IS BEING USED BY THE EMPLOYEES FOR THEIR TEMPORARY STAY AT S URAT AND IS USED FOR BUSINESS AND LD. DR DID NOT CONTROVERT TO THIS REQUEST MADE BY LD. AR. THEREFORE, WE ARE OF THE VIEW THAT LOOKING TO T HE FACTS AND CIRCUMSTANCES OF THE CASE AND THE FACT THAT LD. ASS ESSING OFFICER HAS HIMSELF ACCEPTED TWO PROPERTIES OWNED BY ASSESSEE F OR BEING USED FOR BUSINESS PURPOSES, ASSESSEE DESERVES ONE MORE C HANCE TO PROVE THE SAME. WE, THEREFORE, SET ASIDE THIS ISSUE TO TH E FILE OF ASSESSING OFFICER WITH THE INSTRUCTION TO DECIDE THE SAME AFT ER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE SO THAT HE CAN SATISFY THE ASSESSING OFFICER THAT THE IMPUGNED FLA T AT SURAT CITY (ON WHICH ADDITION ON ACCOUNT OF NOTIONAL RENTAL INCOME HAS BEEN MADE AT RS.42,000/-) IS USED FOR BUSINESS PURPOSE AND IF SATISFIED THEN ITA NO.558/AHD/2013 ASST. YEAR 2009-10 7 DELETE THE ADDITION OF RS.42,000/- BY PASSING A FRE SH ORDER TO THIS EFFECT. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH MAY, 2016 SD/- SD/- (SHAILENDRA YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 16/5/2016 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD ITA NO.558/AHD/2013 ASST. YEAR 2009-10 8 1. DATE OF DICTATION: 11/05/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 11/05/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK:1 6/5/16 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: