SHILPAN PRAVINCHANDRA PATEL, MUMBAI V. DCIT 8(1), MUMBAI

ITA 582/MUM/2012

• Counselvise Citation: 58219914 RSA 2012
• Duration Of Justice: 3 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 22-01-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 30-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: JITENDRA SINGH
• Keywords: Business income; Rule of consistency

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - E BENCH , !' , ! BEFORE S/SH.JOGINDER SINGH, JUDICIAL MEM BER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.582/MUM/2012, # # # # $ $ $ $ / ASSESSMENT YEAR-2008-09 SHILPAN PRAVINCHANDRA PATEL, 303-A, SUMAN APARTMENT, LOKHANDWALA COMPLEX, ANDHERI(WEST), MUMBAI-400053 PAN: AGAPP4652K # VS. DCIT 8(1), 2ND FLOOR, AAYAKAR BHAVAN, MUMBAI-400020 ( %& / ASSESSEE) ( '(%& / RESPONDENT) #)* #)* #)* #)* + + + + ! !! ! /ASSESSEE BY :SHRI JITENDRA SINGH , + ! / REVENUE BY :SHRI NEIL PHILIP # # # # , ,, , *- *- *- *- / DATE OF HEARING : 12-02-2015 .$ , *- / DATE OF PRONOUNCEMENT : 04-03-2015 # # # # , 1961 , ,, , 254 )1 ( ! !! ! * * * ** ** * !/ !/ !/ !/ ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, A.M. ! !' ! # : CHALLENGING THE ORDER DT.11.11.2011OF THE CIT(A)-16 ,MUMBAI,ASSESSING OFFICER (AO) HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1.ON THE BASIS OF THE FACTS AND CIRCUMSTANCES OF T HE CASE THE LD. COMMISSIONER OF INCOME TAX (APPEAL) (CIT (A)) HAS ERRED IN TREATING THE INCOME RECEIVED BY THE APPELLANT PARTLY AS BUSINESS INCOME AND PARTLY AS INCOME FROM HOUSE PROPERTY WIT HOUT APPRECIATING THE ACTUAL FACTS OF THE CASE,THE CLAIM OF THE APPELLANT AND INCORRECT INTER PRETATION OF THE LAW AND HEREBY DENYING JUSTICE TO THE APPELLANT. 2.FURTHER THE LD (CIT (A)) HAS ERRED IN TREATING AD VANCE FEES OF RS. 3 LAKHS RECEIVED AS RENT FOR THE YEAR UNDER REVIEW AND TAXING IT UNDER THE HEAD INCO ME FROM HOUSE PROPERTY AND WRONGLY UPHOLDING THE FINDING OF THE AO THAT THE APPELLANT HAS CLAIM CREDIT FOR TDS WITHOUT OFFERING THE INCOME TO TAX. 3.THE CIT (A) HAS ERRED IN DISALLOWING LEGITIMATE EXPENSES INCURRED BY THE APPELLANT FOR THE PURPOSE OF HIS BUSINESS WITHOUT APPRECIATING THE ACTUAL FAC TS OF THE CASE. 4.THE APPELLANT CRAVES LEAVE TO ADD, ALTER, MODIFY, DELETE ANY OF THE GROUNDS OF APPEAL. ASSESSEE,AN INDIVIDUAL,FILED HIS RETURN OF INCOME O N 31.03.2010 DECLARING TOTAL INCOME OF RS 86,49,894./-.ASSESSING OFFICER (AO) FINALISED THE A SSESSMENT U/S.143 (3)OF THE ACT,ON 15.15.2010, DETERMINING THE TOTAL INCOME AT RS.88,76,850-/. 2. FIRST EFFECTIVE GROUND OF APPEAL IS ABOUT TREATING THE INCOME RECEIVED BY THE APPELLANT PARTLY AS BUSINESS INCOME AND PARTLY AS INCOME FROM HOUSE PRO PERTY.DURING THE COURSE OF ASSESSMENT PROCEEDINGS,THE AO OBSERVED THAT THE ASSESSEE HAD RECEIVED RENT OF RS. 3 LAKHS FROM ACE MOVIE COMPANY(AMC)FOR THE PERIOD 01.04.2007TO31.03.2008,T HAT HE HAD NOT OFFERED IT FOR TAXATION.THE AO ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE SAME SHOULD NOT BE TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY.IN REPLY,HE STATED THAT HE HAD RECEIVED ADVANCE OF RS.3 LAKHS FROM AMC FOR PROVIDING BUNGLOW ALONG WITH FURNITURE & FIXTUR ES FOR SHOOTING FOR THE PERIOD APRIL,2008 ONWARDS,THAT AMC HAD DEDUCTED TDS ON PAYMENT BASIS, THAT THE SHOOTING FEES FROM BUNGLOW WOULD BE OFFERED FOR TAXATION AND CREDIT FOR TDS WO ULD BE TAKEN IN THE SUBSEQUENT YEAR.THE AO HELD THAT FROM THETDS CERTIFICATE IT WAS SEEN THAT THE ASSESSEE RECEIVED THE RENT OF RS.3 LAKHS FROM AMC FOR THE PERIOD 01.04.2007 TO 31.03.2008,THAT TH E ASSESSEE HAD ALSO CLAIMED CREDIT FOR TDS OF ON RENT OF RS.3 LAKHS IN THE YEAR UNDER CONSIDERATION. THE AO TREATED THE RENT INCOME RECEIVED FROM ITA/582/MUM/12/AY.-2008-09 SPPATEL 2 AMC AS INCOME FROM HOUSE PROPERTY AND TAXED THE SAM E DURING THE YEAR UNDER CONSIDERATION, 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM THE ASSESSEE SUBMITTED TH AT HE WAS ENGAGED IN THE BUSINESS OF PROVIDING BUNGLOW ALONG WITH FURNITURE & FIXTURES A ND OTHER SERVICE ON PER DAY BASIS,THAT DURING THE YEAR UNDER REVIEW,HE RECEIVED RS.5,56,90 0/-TOWARDS SHOOTING FEES WHICH WAS SHOWN UNDER THE HEAD INCOME FROM BUSINESS,THAT HE H AD FURTHER RECEIVED ADVANCE SHOOTING FEES FROM AMC OF RS.3LAKHS,THAT AMC HAD TAKEN THE BUNLGO W FOR PERIOD APRIL 2008 ONWARDS ON WHICH THE PAYER RIGHTLY DEDUCTED TDS AS PER THE PRO VISIONS OF THE ACT,THAT HE HAD REFLECTED THE SAID AMOUNT AS ADVANCE RECEIVED IN HIS ACCOUNT AND HAD NOT CLAIMED THE TAX DEDUCTED AT SOURCE IN HIS COMPUTATION OF INCOME FOR DETERMINING THE TAX L IABILITY,THAT THE AO HAD WRONGLY ADDED THE SAME AS DESPITE THE FACT THAT COPIES OF A CCOUNTS WERE PRODUCED & THE FACTS WERE EXPLAINED TO HIM IN WRITING,THAT THE AO HAD WRONGLY ADDED THE SAME UNDER THE HEAD INCOME FROM HOUSE PROPERTY INSTEAD OF BUSINESS INCOME,THAT NO CREDIT HAD BEEN CLAIMED FOR TDS AND INCOME HAD BEEN OFFERED FOR TAX IN THE SUBSEQUENT Y EAR I.E. AY. 2009-2010 AND CREDIT FOR TDS WAS TAKEN,THAT HE HAD PROVIDED BUNGLOW TO AMC ALONG WITH FURNITURE, FIXTURE WHICH IS PARTLY IN FROM OF VEYMINOR FILM SETS SECURITY ARRANGEMENT,PRO VISION FOR ELECTRICITY WITH FACILITIES FOR GENERATOR BREAK UP AND OTHER ROUTINE SERVICES.HE FU RTHER ARGUED THAT IT WAS BASICALLY THE BUSINESS OF THE ASSESSEE WHICH HAD BEEN WRONGLY ASSESSED AS INCOME FROM HOUSE PROPERTY.HE RELIED UPON THE CASES OF SHREE NIRMAL COMMERCIAL LTD.(193ITR694 ) AND SHRI LAXMI MILLS LTD. (20ITR451). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ND THE ASSESSMENT ORDER,THE FAA HELD THAT SEC.22 AND 23 OF THE ACT PRESCRIBED THE SCHEME OF T AXATION OF INCOME FROM PROPERTY,THAT ASSESSIBILITY OF INCOME FROM HOUSE PROPERTY IN THE HANDS OF THE OWNER OF THE PROPERTY WAS ASSESSED NOT ON ACCRUAL BASIS OR RECEIPT BASIS BUT WAS ASSESSABLE AS NOTIONAL INCOME AGAINST WHICH AD HOC DEDUCTIONS WERE ALLOWED IRRESPECTIVE O F THE ACTUAL EXPENDITURE INCURRED FOR EARNING THE SAID INCOME.HE REFERRED TO THE CASE OF SHAMBHU INVESTMENT(P.)LTD.(263ITR 431) AND HELD THAT THE CRITERIA FOR CHARGING ANNUAL VALUE TO TAX WAS THE OWNERSHIP OF THE PROPERTY COUPLED WITH ITS INHERENT CAPACITY OF BEING LET,THAT CHARGE WAS LEVIED ON THE OWNER OF THE HOUSE PROPERTY AND IT WAS IMMATERIAL WHETHER THE OWNER WAS IN POSS ESSION AND ENJOYMENT OF THE PROPERTY OR HAD LET IT OUT ON RENT TO A THIRD PERSON,THAT BASIS FOR ASSESSING TAX UNDER THE HEAD INCOME FROM PROPERTY WAS THE OWNERSHIP OF THE PROPERTY AND NOT NECESSARI LY THE ACTUAL REALISATION OF INCOME, THAT THE ASSESSEE HAD EARNED THE INCOME SIMPLY BY USE OF THE PROPERTY, THAT NO COMPLEX COMMERCIAL ACTIVITY WAS UNDERTAKEN BY THE ASSESSEE,THAT THE IN COME EARNED BY THE ASSESSEE WAS BY THE EXPLOITATION OF THE PROPERTY SIMPLICITER,THAT THE A O WAS CORRECT IN CHARGING THE INCOME FROM HOUSE PROPERTY AND NOT UNDER THE HEAD INCOME FROM B USINESS, THAT THE ASSESSEE HAD SHOWN IT AS AN ADVANCE HAS NOTHING TO DO WITH THE C HARGEABILITY OF THE INCOME, THAT THE RENT PERTAINED TO THE PERIOD RELEVANT TO THE ASSESSMENT YEAR AND THE ASSESSEE HAD ALSO CLAIMED CREDIT OF TDS AMOUNTING TO RS.46,350/-,THAT THE AO WAS CORREC T IN ASSESSING THE INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY,THAT THE ARGUMENTS OF TH E ASSESSEE THAT THE INCOME WAS SHOWN IN THE NEXT ASSESSMENT YEAR HAD NO BEARING AS THE INCO ME PERTAINED TO THE YEAR UNDER CONSIDERATION ON ACCRUAL BASIS.HE UPHELD THE ORDER OF THE AO. 4 .BEFORE US,AUTHORISED REPRESENTATIVE(AR)ADVANCED TH E SAME ARGUMENTS THAT HE HAD ARGUED BEFORE THE FAA AND STATED THAT THE ASSESSEE WAS IN BUSINESS OF PROVIDING BUNGLOW ALONG WITH FURNITURE,FIXTURE SECURITY ARRANGEMENT,P ROVISION FOR ELECTRICITY WITH FACILITIES FOR GENERATOR BREAK UP AND OTHER ROUTINE SERVICES,THAT HE HAD RECEIVED INCOME FROM SAID BUSINESS ACTIVITIES DURING THE YEAR UNDER APPEAL,THAT THE AS SESSEE HAD RECEIVED ADVANCE FROM AMC THAT WAS FOR NEXT AY.,THAT THE ASSESSEE HAD TAKEN CREDIT OF TDS IN THE NEXT AY.DEPARTMENTAL REPRESENTATIVE(DR)SUPPORTED THE ORDER OF THE FAA. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT IN ITA/582/MUM/12/AY.-2008-09 SPPATEL 3 THE EARLIER AY.THE AO,WHILE COMPLETING THE ASSESSME NT ORDER U/S.143(3)OF THE ACT,HAD TREATED THE RENTAL INCOME OF THE BUNGLOW AS BUSINES S INCOME,THAT DURING THE YEAR UNDER APPEAL HE CHANGED THE HEAD OF INCOME FROM INCOME FR OM BUSINESS TO HOUSE PROPERTY INCOME.THE AO OR THE FAA HAS NOWHERE MENTIONED THE REASON WHICH COULD THROW LIGHT ON THE CHANGED CIRCUMSTANCES.IT IS A FACT THAT RULE OF RES JUDICATA IS NOT APPLICABLE IN TAX MATTERS,BUT AT THE SAME TIME RULE OF CONSISTENCY IS ALSO ONE OF THE RECOGNISED PRINCIPLES OF TAXATION JURISPRUDENCE.IF THE SAME SET OF FACT EXIT S AND THERE IS NO CHANGE IN OTHER CIR - CUMSTANCES,THEN AO IS NOT ALLOWED TO DIFFER FROM TH E STAND TAKEN EARLIER.DEFINITELY,HE IS ENTITLED TO DECIDE THE ISSUE IN A DIFFERENT MANNER IN SUBSEQUENT YEAR,BUT THEN HE HAS TO MENTION THE REASON FOR CHANGING HIS OPINION.AS STAT ED EARLIER THERE IS NOTHING IN THE ORDER THAT COULD JUSTIFY THE CHANGING OF HEADS.THE ASSESS EE WAS LETTING OUT A BUNGLOW WITH FURNITURE AND FIXTURE FOR SHOOTING PURPOSES.DURING THE YEAR UNDER CONSIDERATION ALSO HE HAD INCOME FROM SHOOTING.IN THESE CIRCUMSTANCES,WE ARE OF THE OPINION THAT THERE WAS NO JUSTIFICATION TO ASSESS THE INCOME UNDER THE HEAD H OUSE PROPERTY. NOW,COMING TO THE QUESTION OF TAXABILITY OF ADVANCE RECEIVED,WE FIND THAT THERE IS DIFFERENCE BETWEEN THE AO AND THE ASSESSEE ABOUT TH E YEAR IN WHICH AMOUNT IN QUESTION SHOULD ASSESSED.AS PER THE AO AND THE FAA THE ASSES SEE HAD TAKEN CREDIT OF TDS FOR THE YEAR UNDER APPEAL,SO,IT SHOULD BE TAXED ACCORDINGLY .FROM THE DOCUMENTS PRODUCED BY THE ASSESSEE IT IS CLEAR THAT HE HAD TAKEN THE CREDIT O F THE ADVANCE IN NEXT ASSESSMENT YEAR AND HAD SHOWN THE INCOME ALSO IN THE NEXT YEAR.IN THESE CIR CUMSTANCES,WE ARE OF THE OPINION THAT THE ASSESSEE HAD RIGHTLY SHOWN THE ADVANCE RECEIVED BY HIM IN NEXT AY. GOAS.NO.1 & 2 ARE DECIDED IN FAVOUR OF THE ASSESSEE . 6. NEXT EFFECTIVE GROUND OF APPEAL(GOA-3)IS ABOUT DISA LLOWING EXPENSES INCURRED BY THE ASSESSEE.DURING THE COURSE OF ASSESSMENT PROCEEDING S,THE AO OBSERVED THAT THE ASSESSEE HAD EARNED BUSINESS INCOME OF RS.5,56,900/- AGAINST WHICH HE HAD CLAIMED VARIOUS EXPENSES TOTALING TO RS.2,68,987/-,THAT THE EXPENSES INCLUDE D TELEPHONE EXPENSES(RS.35,565/-) AND MAINTE - NANCE EXPENSES(RS.45,105/-).THE AO DISALLOWED 20% O F THESE EXPENSES FOR WANT OF EVIDENCE AND ACCORDINGLY ADDED BACK AN AMOUNT OF RS.16,134/- TO THE TOTAL INCOME OF THE ASSESSEE. 7. THE ASSESSEE,DURING THE COURSE OF THE APPELLATE PRO CEEDINGS,SUBMITTED THAT THE EXPENSES OF TELEPHONE HAD BEEN WRONGLY STATED AT 35,565/- AS AG AINST 25,565/- CLAIMED BY THE ASSESSEE,THAT ALL THE EXPENSES WERE FOR THE PURPOSE OF BUSINESS ONLY, THAT THE ASSESSEE WAS DIRECTOR OF ARROW COATED LTD.,THAT TELEPHONE FACILITIES WERE PROVIDED TO HIM BY HIS EMPLOYER THAT THE MAINTENANCE COST RS.45,105/-WERE FOR THE UPKEEP OF THE BUNGLOW AND WERE SPENT FOR BASIC UPKEEP OF THE PREMISES,THAT THE EXPENSES WERE NOT EVEN 10% OF THE REVENUE GENERATED.AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,THE FAA HELD THAT THAT THE ASSESSEE HAS SHOWN A BUNGLOW INCOME WHICH WAS PRIMARILY THE INCOME EARNED BY HIM FROM T HE EXPLOITATION OF THE BUILDING PER SE AS WAS HELD IN THE EARLIER GROUNDS,THAT HE HAD RECEIVE D ADVANCES WHICH THE AO HAD SUBJECTED TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY,THAT THE SAID INCOME HAD BEEN EARNED BY HIM FROM THE SAME BUILDING,THAT AO CHOOSES NOT TO TAX T HIS INCOME AS INCOME FROM HOUSE PROPERTY,THAT IF THE EARLIER STAND OF THE AO WAS CO RRECT THEN THE DISPUTED INCOME SHOULD ALSO BE TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY,THA T THE CLAIM OF THE EXPENSES MADE BY THE ASSESSEE IN RESPECT OF THE TELEPHONE EXPENSES THE M AINTENANCE EXPENSES ETC. WERE NOT ALLOWABLE AGAINST THE INCOME FORM HOUSE PROPERTY.HE DIRECTED THE AO TO TAX AS THIS INCOME AS INCOME FROM HOUSE PROPERTY AND ALLOW THE EXEMPTION AVAILAB LE TO THE APPELLANT UNDER SECTION 24(B) OF THE ACT AND NO OTHER DEDUCTION IN RESPECT OF THE EXPENSES CLAIMED BY THE ASSESSEE. 8. BEFORE US,THE AR ARGUED THAT THE ASSESSEE WAS CARRY ING OUT BUSINESS OF LETTING OUT BUNGLOW FOR ITA/582/MUM/12/AY.-2008-09 SPPATEL 4 SHOOTING,THAT EXPENSES INCURRED WHOLLY AND EXCLUSIV ELY FOR THE BUSINESS,THAT THE AO HAD DISALLOWED THE LEGITIMATE EXPENDITURE WITHOUT ANY R EASON,THAT EXPENDITURE UNDER THE HEAD TELEPHONE EXPENSES WAS NOT RS.35,565/-.DR SUPPORTED THE ORDER OF THE FAA. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS.WHILE DECIDING THE GROUND NO.1 WE HAVE HELD THAT THE INCOME OF THE ASSESSEE HAS TO BE ASSESSED UNDER THE HEAD BUSINESS INCOME.THEREFORE,EXPENSES INCURRED BY HIM HAVE TO BE ALLOWED FOR DETERMINING HIS TAX LIABILITY.THE AO HAD NOT GIVEN ANY REASON FOR MAKING THE DISALLOWANCE AND MADE AN ADHO C DISALLOWANCE.WE ARE OF THE OPINION THAT DISALLOWANCE WAS NOT JUSITIFIED.GROUND NO.3 IS DECI DED IN FAVOUR OF THE ASSESSEE. AS A RESULT, APPEAL FILED BY T HE ASSESSEE STANDS ALLOWED. 0*1 #)* 3 4 , 5 , * 6 . ORDER PRONOUNCED IN THE OPEN COURT ON 4TH,M ARCH,2015. !/ , .$ ! 7 8# 4 EKPZ EKPZ EKPZ EKPZ ] 25 , 9 SD/- SD/- ( /JOGINDER SINGH) ( !' / RAJENDRA) / JUDICIAL MEMBER ! ! ! ! / ACCOUNTANT MEMBER / MUMBAI, 8# /DATE: 04.03.2015 SK !/ !/ !/ !/ , ,, , '*: '*: '*: '*: ;!:$* ;!:$* ;!:$* ;!:$* / COPY OF THE ORDER FORWARDED TO : 1. / %& 2. RESPONDENT / '(%& 3. THE CONCERNED CIT(A)/ < = , 4. THE CONCERNED CIT / < = 5. DR E BENCH, ITAT, MUMBAI / :> '*# , . . . 6. GUARD FILE/ 0 (:* '* //TRUE COPY// !/# / BY ORDER, ? / DY./ASST. REGISTRAR , /ITAT, MUMBAI