Sri.P.J. Antony, Muvattupuzha V. The ADCIT, Aluva

ITA 60/COCH/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7703 (ITAT-COCHIN)
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2016
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 07-09-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 10-02-2016
• Court: TRIBUNAL
• Department Lawyers: A DHANARAJ
• Keywords: Business income
• Section: 143(3)

Judgement Text

ITA NO./COCH/2016 1 , IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN . . , ., ! ! ! ! BEFORE S/SHRI B. P. JAIN, AM & GEORGE GEORGE K., JM ' ' ' ' ./ I.TA NO.60/COCH/2016 ( #$ % /ASSESSMENT YEAR : 2008-09) SHRI P.J. ANTONY, PARAYIL HOUSE, COLLEGE ROAD, MUVATTUPUZHA VS ADDL. COMMISSIONER OF INCOME- TAX, ALUVA RANGE, ALUVA. ( &' &' &' &' /ASSESSEE APPELLANT) ( ( (( ( ) ) ) ) &' &'&' &' /REVENUE -RESPONDENT) & . . ' ./PAN NO. ACFPA 1974N &' * + /ASSESSEE BY SHRI MATHEW JOSEPH, CA ( ) &' * + /REVENUE BY SHRI A. DHANARAJ, SR. DR ,- * ./ / DATE OF HEARING 07/09/2016 0 % * ./ /DATE OF PRONOUNCEMENT 08/09/2016 1 1 1 1 /ORDER PER B.P. JAIN, AM: THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER OF THE LD. CIT(A)-II, KOCHI VIDE ORDER DATED 16/11/2015 FOR THE ASSESSMENT YEAR 2008-09. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1 . THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS NOT GI VEN ENOUGH OPPORTUNITY TO THE ASSESSEE TO EXPLAIN THE FACTS OF THE CASE. THE APPEAL WAS ITA NO./COCH/2016 2 ORIGINALLY HEARD BY HIS PREDECESSOR AND ALL THE DOC UMENTS SUBMITTED AND EXPLANATIONS GIVEN WERE IGNORED BY THE CIT(APPEALS) . 2. THE FACT THAT THE RENT PAID WAS REASONABLE COMPA RED TO THE AREA AND THE PAYMENT WAS EFFECTED AFTER DEDUCTING TDS WAS IGNORE D BY THE CIT(APPEALS). 3. THE ASSESSEE HAD FILED DETAILS OF AGRICULTURAL I NCOME INCLUDING THE MUSTER ROLL AND ACCOUNTS WHICH WAS IGNORED BY THE CIT(APPE ALS). THE FACT THAT IN ALL THE SUBSEQUENT YEARS THE AGRICULTURAL INCOME WAS AL LOWED AFTER DETAILED SCRUTINY WAS ALSO IGNORED BY THE OFFICER. 4. THE DISALLOWANCE OF TURNOVER TAX LIABILITY OF E ARLIER YEARS CRYSTALLIZED DURING THE YEAR AMOUNTING TO RS.3,28,907/- WAS CONFIRMED B Y CIT(APPEALS) IGNORING THE FACTS OF THE CASE. 5. ANY OTHER GROUNDS THAT MAY BE ALLOWED AT THE TI ME OF HEARING. 3 . GROUND NOS. 1 & 5 ARE GENERAL IN NATURE AND THEREFO RE, DO NOT REQUIRE ANY ADJUDICATION. AS REGARDS GROUND NO. 2, THE BRIEF F ACTS OF THE CASE AS EMANATING FROM THE ORDER OF THE ASSESSING OFFICER ARE THAT TH E RENT PAYABLE TO THE WIFE OF THE ASSESSEE FOR THE BUILDING HAS BEEN INCREASED TO RS.3,60,000/- THIS YEAR. DURING THE EARLIER YEARS, IT WAS ONLY RS.1,20,000/-. THE T HREEFOLD INCREASE IN RENT IS WITHOUT ANY VALID REASON. THE ASSESSEE HAD NOT SUBSTANTIAT ED THIS HUGE INCREASE. THEREFORE, THE REASONABLE RENT OF RS.1,20,000/- AS IN LAST YEAR IS ALLOWED AND THE BALANCE AMOUNT OF RS.2,40,000/- WAS DISALLOWED AND ADDED BACK BY THE AO. ITA NO./COCH/2016 3 4. THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASS ESSING OFFICER. 5. THE LD. COUNSEL FOR THE ASSESSEE, SHRI MATHEW J OSEPH ARGUED THAT IN THE EARLIER YEARS, RENT WAS BEING PAID AT THE RATE OF R S.1,20,000/- FOR THE WHOLE OF THE YEAR WHEREAS IT HAS BEEN INCREASED TO RS.3,60,000/- IN THE IMPUGNED YEAR. TO THAT EFFECT, THE RENT AGREEMENT WAS PLACED BEFORE BOTH THE AUTHORITIES BE LOW AND IT WAS EXPLAINED THAT THE EARLIER RENT PAID WAS FAR BELOW THE MARKET RATE. THE TDS ON THE RENT WAS PAID IS NOT IN DISPUTE. THE ASSESSING OFFICER HAS NOT BROUGHT OUT ANY COMPARABLE FOR EXCESS RENT PAID TO THE RELATIVE, WIFE OF THE ASSESSEE. 6. THE LD. DR ON THE OTHER HAND RELIED UPON THE O RDERS OF BOTH THE AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT RENT IN THE EA RLIER YEARS WAS BEING PAID AT THE RATE OF RS.1,20,000/- PER ANNUM WHICH WAS INCREASED TO RS.3,60,000/- PER ANNUM ON WHICH TAX AT SOURCE HAS ALSO BEEN DEDUCTED. THE COPY OF THE RENT AGREEMENT HAS ALSO BEEN PLACED BEFORE BOTH THE AUTH ORITIES BELOW WHICH HAS NOT BEEN FOUND DEFECTIVE. THE ONLY OBJECTION RAISE D BY THE AUTHORITIES BELOW IS THAT RENT IS EXCESSIVE AND NONE OF THE AUTHORITIES BELOW HAS BROUGHT ON RECORD ANY COMPARABLE TO PROVE THEIR CLAIM. IN THE CIRCUM STANCES AND FACTS OF THE CASE, THE RENT OF RS.3,60,000/- PER ANNUM FOR THE R ENTED PREMISES IN THE HOTEL ITA NO./COCH/2016 4 HAVING 24 ROOMS, APPEARS TO BE REASONABLE IN THE AB SENCE OF ANY CONTROVERSIAL FACTS BROUGHT ON RECORD. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING THE ADDITION ON THIS COUNT AND ACCORDINGLY, THE ORDER OF THE LD. CIT(A) IS REVERSED ON THIS ISSUE. THUS GROUND N O. 2 IS ALLOWED. 8. AS REGARDS GROUND NO. 3 RELATING TO THE DISALL OWANCE OF AGRICULTURAL INCOME AMOUNTING TO RS. 15 LAKHS, THE FINDINGS OF THE ASSE SSING OFFICER ARE REPRODUCED HEREINBELOW: THUS THERE IS NO EVIDENCE FOR THE NET AGRICULTURAL INCOME TO THE TUNE OF RS.15 LAKHS. THOUGH ENOUGH OPPORTUNITY WAS PROVIDED TO A DDUCE EVIDENCE, THE ASSESSEE COULD NOT PRODUCE THE SAME. NO REASON HAS BEEN GIVEN FOR NOT PRODUCING THE SAME, THOUGH OTHER DETAILS ARE FURNIS HED FROM TIME TO TIME. IN THE CIRCUMSTANCES, THE ASSESSEE WILL BE DISABLED FR OM CREATING AND/OR PRODUCING ANY OTHER EVIDENCE BEFORE THE HON. CIT(AP PEALS) BY VIRTUE OF THE PROHIBITION IN RULE 46A(1). THE ATTEMPT TO SHOW THI S MAJOR INCOME AS AGRICULTURAL INCOME IS ONLY TO BRING OUT THE INCOME DERIVED BY THE ASSESSEE FROM UNDISCLOSED ACTIVITIES, PART OF WHICH HAS BEEN SUO-MOTO DECLARED BY HIM AT THE TIME OF FILING THE RETURN. THE ASPECT O F EXISTENCE OF AGRICULTURAL INCOME HAS NOT BEEN SUBJECTED TO VERIFICATION DURIN G THE EARLIER YEARS ALSO. IN THE CIRCUMSTANCES, AN ADDITION OF RS.15 LAKHS IS MA DE CONVERTING THE INCOME DECLARED AS AGRICULTURAL INCOME INTO INCOME FROM BU SINESS. 9. THE LD. CIT(A) CONFIRMED THE ACTION OF THE AS SESSING OFFICER . 10. IT WAS SUBMITTED BY THE LD. COUNSEL FOR THE AS SESSEE THAT THE ASSESSEE HAS 96 ACRES OF AGRICULTURAL LAND AT MARAYUR HAVING COFFEE , ARECANUT, COCONUT AND PEPPER AND THE AVERAGE INCOME FROM THIS ESTATE IS M ORE THAN RS.25 LAKHS WHICH ITA NO./COCH/2016 5 HAS BEEN ALLOWED CONSISTENTLY DURING THE EARLIER YE ARS AND SUBSEQUENT YEARS IN THE SCRUTINY ASSESSMENT. THE ASSESSING OFFICER HAS NOT CONSIDERED THE SUBMISSIONS OF THE ASSESSEE WHILE DISALLOWING THE AGRICULTURAL INCOME OF RS.15 LAKHS. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE MUSTER ROLL AND ACCOUNTS HAVE BEEN FILED BEFORE THE LD. CIT(A) WHO ALSO DID NOT CONSID ER THE SAME. THE DETAILS OF AGRICULTURAL INCOME RETURNED AND ALLOWED IN EARLIER AND SUBSEQUENT YEARS ARE GIVEN HEREINBELOW: A.Y. AG. INCOME RETURNED AG. INCOME ALLOWED ASST. DETAILS 2006-07 21,95,200 21,95,200 143(3) 2007-08 27,50,000 27,50,000 143(3) 2008-09 15,00,000 NIL 143(3) 2011-12 15,00,000 NIL 143(3) 2012-13 60,00,000 60,00,000 143(3) 2013-14 25,00,000 25,00,000 143(3) SINCE THE AGRICULTURAL INCOME FOR ALL THE ABOVE YEA RS HAS BEEN ALLOWED AFTER PROPER VERIFICATION OF THE RECORDS AND ACCOUNTS, IT WAS PRAYED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE CLAIM OF THE ASSE SSEE REGARDING THE AGRICULTURAL INCOME OF RS.15 LAKHS IS ALLOWED FOR T HIS YEAR ALSO. 11. THE LD. DR ON THE OTHER HAND RELIED UPON THE ORDERS OF BOTH THE AUTHORITIES BELOW. 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT RIGHT FROM THE ASSESSMENT YEAR 2006-07 TO THE ASSESSMENT YEAR 2013-14, THE ASSESSEE WAS IN POSSES SION OF THE AGRICULTURAL LAND ITA NO./COCH/2016 6 ON WHICH HE DERIVED INCOME OF DIFFERENT AMOUNTS AS STATED HEREINABOVE. FOR ALL THE SIX ASSESSMENT YEARS, I.E., 2006-07, 2007-0 8, 2008-09, 2011-12, 2012-13 AND 2013-14, THE ASSESSMENTS HAVE BEEN MADE U/S. 143(3) OF THE ACT AND IN THE FIVE ASSESSMENT YEARS AS STATED ABOVE, THE AGRICULTURAL INCOME HAS BEEN ACCEPTED IN THE SCRUTINY ASSESSMENT U/S. 143(3) OF THE ACT. IN THE ASSESSMENT YEAR 2006-07, THE AGRICULTURAL INCOME HAS BEEN ACCEPTED AT RS.21, 95,000/-, FOR THE ASSESSMENT YEAR 2007-08, THE AGRICULTURAL INCOME HAS BEEN ACCE PTED AT RS.27,50,000/- FOR THE ASSESSMENTS MADE U/S. 143(3) OF THE ACT. WHEREA S IN THE FOLLOWING YEAR, I.E., A.Y. 2011-12, IT HAS BEEN ACCEPTED AT RS.15,00,000/ - AND IN FURTHER YEARS, IT HAS BEEN ACCEPTED AS STATED EARLIER. THE ASSESSEE IS O WNING 96 ACRES OF AGRICULTURAL LAND WHICH IN FACT HAS BEEN ACCEPTED BY THE DEPARTM ENT IN THE SCRUTINY ASSESSMENT. DURING THE YEAR MUSTER ROLL AND ACCOUN TS HAVE BEEN SUBMITTED BEFORE THE LD. CIT(A) AND ACCORDINGLY, AGRICULTURAL INCOME WAS CLAIMED. NO REASONS HAVE BEEN REFERRED TO EITHER BY THE ASSESSI NG OFFICER OR BY THE LD. CIT(A) AS TO HOW THE SAID AGRICULTURAL INCOME HAS BECOME B USINESS INCOME, SINCE THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A) HAS TRE ATED THE AGRICULTURE INCOME OF RS.15 LAKHS AS BUSINESS INCOME WITH THE ALLEGATION THAT THE ASSESSEE HAS NOT SUBMITTED ANY EVIDENCE OF THE EXISTENCE OF AGRICULT URAL INCOME. EVEN IF THE ASSESSEE HAS NOT SUBMITTED ANY BILLS FOR THE CLAIM OF AGRICULTURAL INCOME, THE FACT THAT THE ASSESSEE IS OWNING AGRICULTURAL LAND WHICH FACT HAS BEEN ACCEPTED IN THE EARLIER AND THE FOLLOWING YEARS, THE ASSESSING OFFICER AND THE LD. CIT(A) SHOULD HAVE MADE THE ESTIMATION WHICH IN FACT HAS N OT BEEN DONE BY ANY OF ITA NO./COCH/2016 7 THE AUTHORITIES BELOW. THE ASSESSEE HAS DECLARED T HE SAID INCOME OF RS.15 LAKHS AS AGRICULTURAL INCOME WHICH APPEARS TO BE REASONAB LE AND THE DISALLOWANCE BY THE ASSESSING OFFICER OF THE SAID AGRICULTURAL I NCOME AND CONVERSION OF THE SAME TO THE BUSINESS INCOME IS AGAINST THE FACTS OF THE PRESENT CASE AND ACCORDINGLY, THE ORDERS OF THE ASSESSING OFFICER AN D THE LD. CIT(A) ARE REVERSED ON THIS ISSUE. THUS GROUND NO. 3 OF THE ASSESSEE IS ALLOWED. 13 . AS REGARDS GROUND NO. 4, THE BRIEF FACTS OF THE C ASE AS EMANATING FROM THE ORDER OF THE LD. CIT(A) ARE THAT IN HIS LETTER DA TED 21/12/2010 IT HAS BEEN STATED THAT AN AMOUNT OF RS.3,28,907/- HAS BEEN PAID BY TH E ASSESSEE TOWARDS INSTALLMENTS OF TURNOVER TAX FOR THE EARLIER YEARS. THIS SHOULD HAVE BEEN CLAIMED AS DEDUCTION FROM THE RELEVANT ASSESSMENT YEARS AND NOT FROM THE CURRENT YEARS INCOME, AS INCOME OF THE CURRENT YEAR IS TO BE COMP UTED AFTER ALLOWING ONLY THE EXPENDITURE INCURRED FOR EARNING THIS INCOME. THER EFORE THIS AMOUNT WAS DISALLOWED AND ADDED BACK BY AO. 14. THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASS ESSING OFFICER. 15. THE LD. DR RELIED UPON THE ORDERS OF BOTH THE AUTHORITIES BELOW. 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT THERE WAS AN I NSPECTION BY THE SALES TAX ITA NO./COCH/2016 8 DEPARTMENT WHO RAISED THE DEMAND OF TURNOVER TAX AM OUNTING TO RS.3,28,907/- ON THE ASSESSEE WHICH WAS ACTUALLY PAID DURING THE IMPUGNED YEAR. THE LIABILITY TO PAY THE SAID AMOUNT HAD CRYSTALLIZED DURING THE YEAR IS NOT IN DISPUTE AND THEREFORE, THE SAME BECOMES THE ALLOWABLE EXPENDITU RE DURING THE IMPUGNED YEAR. ACCORDINGLY, THE DISALLOWANCE MADE BY THE AS SESSING OFFICER AND CONFIRMED BY THE LD. CIT(A) IS REVERSED. THUS GROU ND NO. 4 OF THE ASSESSEE IS ALLOWED. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN I.T.A. NO.60/COCH/2016 IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 08-09-2016. SD/- SD/- ( . ) (GEORGE GEORGE K.) ( . . ) (B. P. JAIN) /JUDICIAL MEMBER /ACCOUNTANT MEMBER & /PLACE: /COCHIN 3 /DATED: 8 TH SEPTEMBER, 2016 GJ/ 1 * (.4 54%. /COPY TO: 1. &' / SHRI P.J. ANTONY, PARAYIL HOUSE, COLLEGE ROAD, MUVA TTUPUZHA. 2. () &' /THE ADDITIONAL COMMISSIONER OF INCOME-TAX, ALUVA R ANGE, ALUVA. 3. ,6 . ( )/THE COMMISSIONER OF INCOME-TAX(APPEALS)-II, KOCHI . ITA NO./COCH/2016 9 4. ,6 . /THE COMMISSIONER OF INCOME-TAX, KOCHI. 5. 478 (. , /THE DR/ITAT, COCHIN BENCH. 6. 8: ;- /GUARD FILE. 1, /BY ORDER < /ASSISTANT REGISTRAR - . =/ . > . =/ ., /I.T.A.T., COCHIN