THE ITO 18(3)(4), MUMBAI V. SHRI SOHEB KHURSHEED KHAN, MUMBAI

ITA 6737/MUM/2007

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7995 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 14-03-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 06-11-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANDEEP DHIYASR DR PER R K
• Keywords: Business income; Opportunity of being heard; Question of law

Judgement Text

1 ITA NO.6737/MUM/2007 IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI MUMBAI MUMBAI MUMBAI J JJ J BENCH BENCH BENCH BENCH MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI BEFORE BEFORE BEFORE BEFORE SHRI D MANMOHAN, VP & SHRI D MANMOHAN, VP & SHRI D MANMOHAN, VP & SHRI D MANMOHAN, VP & SHRI R K PANDA, AM SHRI R K PANDA, AM SHRI R K PANDA, AM SHRI R K PANDA, AM ITA NO. ITA NO. ITA NO. ITA NO. 6737/MUM/2007 6737/MUM/2007 6737/MUM/2007 6737/MUM/2007 (ASST YEAR (ASST YEAR (ASST YEAR (ASST YEAR 2004 2004 2004 2004- -- -05) 05) 05) 05) THE INCOME TAX OFFICER WARD 18(3)(4), MUMBAI VS SOHEB KHURSHEED KHAN OLD 405 FAIZ-E-KUTBI 375 K-3 NEW SANVILLIAN COMPOUND ATACH BAZAR, DHARVAI MUMBAI 400 017 ( (( (APPELLANT APPELLANT APPELLANT APPELLANT) )) ) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO. PAN NO. PAN NO. PAN NO.ABNPK9870E ABNPK9870E ABNPK9870E ABNPK9870E A SSESSEE BY - NONE REVENUE BY SHRI SANDEEP DHIYA/SR DR PER R K PANDA, AM PER R K PANDA, AM PER R K PANDA, AM PER R K PANDA, AM THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 8.8.2007 OF THE CIT(A)-XXVIII, MUMBAI RELATING TO A SSESSMENT YEAR 2004-05. 2 THIS CASE WAS GETTING ADJOURNED FROM TIME TO TIME SINCE 13.3.2009. IT WAS LAST FIXED FOR HEARING ON 4.1.2011 AND WAS ADJOURNE D TO 14.3.2011. HOWEVER, ON 14.3.2011 WHEN THE NAME OF THE ASSESSEE WAS CALLED NONE APPEARED ON BEHALF OF THE ASSESSEE NOR ANY ADJOURNMENT PETITION SEEKIN G ADJOURNMENT OF THE CASE WAS FILED. THEREFORE, THE CASE IS BEING DECIDED ON THE BASIS OF MATERIAL AVAILABLE ON RECORD AND AFTER HEARING THE LD DR. 2 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSE E ALONG WITH HIS TWO OTHER BROTHERS ENTERED INTO AN AGREEMENT WITH M/S PEPSI C OLA CO (NOW KNOWN AS M/S ARDHANA BEVERAGES AND FOOD CO PVT LTD) AND RECEIV ED CONTRACT CHARGES FOR LETTING OUT THEIR PROPERTY AND TOWARDS CLEANING TH EIR BOTTLES AND PROVIDING SECURITIES TO THEIR BELONGINGS, KEEPING WATCHMEN AN D GOOD SANITARY CONDITION ETC. THE ASSESSEE CLAIMED SUCH INCOME AS BUSINESS I NCOME, WHICH WAS TREATED 2 ITA NO.6737/MUM/2007 BY THE ASSESSING OFFICER AS RENTAL INCOME. THE ASSE SSING OFFICER FURTHER NOTED THAT BEFORE EXECUTION OF THE AGREEMENT DATED 1.7.20 01 AN AMOUNT OF RS. 10,20,000/- HAS BEEN RECEIVED AS ADVANCE OUT OF WHI CH ASSESSEES SHARE COMES TO RS. 3,40,000/-. HOWEVER, ENTIRE ADVANCE HAS BEEN CREDITED TO ASSESSEES BROTHER SHRI AKIL AND NO INTEREST INCOME HAS BEEN S HOWN BY THE ASSESSEE. 2.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE ASSESSING OFFICER ASKED THE ASSESSEE TO JUSTIFY THE VARIOUS EXPENSES CLAIME D IN THE P&L ACCOUNT FROM SUCH RENTAL INCOME, WHICH HAS BEEN CLAIMED BY THE A SSESSEE AS BUSINESS INCOME. IN ABSENCE OF ANY REPLY FROM THE ASSESSEE, THE ASSESSING OFFICER TREATED SUCH INCOME AS INCOME FROM HOUSE PROPERTY AND DIS ALLOWED THE VARIOUS EXPENSES. 2.2 IN APPEAL, THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE TREATING SUCH INCOME AS BUSINESS INCOME ON THE GROUND THAT THE AS SESSEE IS RENDERING SERVICES, WHICH INCLUDE DAILY PARKING OF COMPANY VE HICLES IN THE PREMISES AND THE SAFETY OF VEHICLE PARKED IN THE PREMISES. THE A SSESSEE HAS INCURRED HUGE EXPENSES, WHICH INCLUDES SALARY TO WATCHMAN RS. 2,4 0,000/- ; WAGES RS. 2,52,000/-; REPAIRS AND MAINTENANCE AMOUNTING TO RS. 2,62,170/- AND VARIOUS OTHER EXPENSES. ACCORDING TO THE CIT(A), THE INCOME FROM SUCH CONTRACT RECEIPT HAS TO BE ASSESSED AS BUSINESS INCOME AS TH E CONTRACTOR HAS ENTERED INTO AN AGREEMENT REGARDING THE AVAILING OF SERVICES OF THE ASSESSEE FOR SAFETY OF VEHICLE PARKED IN THE PREMISES AND OTHER SERVICE R ENDERED. THEREFORE, INCOME OF SERVICE CONTRACT IS ASSESSABLE AS INCOME FROM BUSIN ESS OR PROFESSION. 2.3 AS REGARDS ALLOWABILITY OF THE EXPENSES ARE CON CERNED, HE NOTED THAT THE VOUCHERS HAVE BEEN DESTROYED IN THE FLOOD ON 26.7.2 005 AND HAS BEEN REPORTED TO THE POLICE AND COPY OF SUCH FIR HAS BEEN PRODUCE D BEFORE THE ASSESSING OFFICER. ON THE BASIS OF THE ARGUMENTS ADVANCED BY THE ASSESSEE, THE CIT(A) 3 ITA NO.6737/MUM/2007 ESTIMATED THE INCOME FROM THE CONTRACT BUSINESS @ 2 0% OF THE TOTAL RECEIPT RECEIVED FROM M/S ARDHANA BEVERAGES FOODS LTD. AS R EASONABLE. HE, HOWEVER, TREATED THE AMOUNT RECEIVED FROM M/S ELBEE SERVICES LTD AMOUNTING TO RS. 60,480/- AS INCOME FROM HOUSE PROPERTY. 3 AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE REVE NUE IS IN APPEAL HERE BEFORE US WITH THE FOLLOWING GROUNDS: I) THE LD CIT(A) ERRED IN DIRECTING THE ASSESSING OFFI CER TO ACCEPT THE INCOME FROM BUSINESS AND PROFESSION AGAINST THE REN TAL INCOME ASSESSED ON THE GROUND THAT THE INCOME FROM CONTRAC T RECEIPT IS ASSESSED AS BUSINESS INCOME IGNORING THE FACT THAT A CONTRACTOR ENTERED INTO AN AGREEMENT WITH THE ASSESSEE TO AVAI L VARIOUS SERVICES OF THE ASSESSEE WITHOUT APPRECIATING THE F ACT THAT THE RENTAL INCOME WAS RIGHTLY ASSESSED AS INCOME FROM H OUSE PROPERTY BY THE ASSESSING OFFICER. II) THE CIT(A) IGNORED THE FACT THAT IN THE CASE OF ASE SSEES BROTHER SHRI SOHEL KHURESHEED KHAN (CO- OWNER) HE HAS UPHEL D THE ASSESSING OFFICERS DECISION OF ASSESSING THE SIMIL AR RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY VIDE OR DER NO.CIT(A)/XXVIII/18(3)(4)/IT-134/06-07, DATED 8.8.2 007 FOR ASSESSMENT YEAR 2004-05. III) THE ABOVE APPEAL IS PREFERRED IN THIS CASE, BECAUSE IT INVOLVES A SUBSTANTIAL QUESTION OF LAW WHICH WILL REPEATEDLY A RISE IN SIMILAR CASES AND HENCE THE APPEAL MAY BE CONSIDERED AS PER CLAUSE III OF THE CBDT INSTRUCTION 2/2005, DATED 24.10.2005 ON ME RITS UNHINDERED BY THE MONETARY LIMIT. IV) FOR THESE AND OTHER REASONS THAT MAY BE URGED AT TH E TIME OF HEARING, IT IS REQUESTED THAT THE ORDER OF THE CIT( A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 4 WE HAVE HEARD THE LD DR AND PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A). ADMITTEDLY, THE ASSESSEE A LONG WITH HIS TWO OTHER BROTHERS HAS ENTERED INTO AN AGREEMENT WITH M/S M/S PEPSI COLA CO., WHICH IS NOW KNOWN AS M/S ARDHANA BEVERAGES AND FOOD CO PVT LTD. AS PER THE GROUNDS RAISED BY THE REVENUE, IN THE CASE OF ONE OF THE OT HER CO-OWNER I.E. SHRI SOHEL KHURESHEED KHAN, THE CIT(A) HAS UPHELD THE ASSESSIN G OFFICERS DECISION OF 4 ITA NO.6737/MUM/2007 ASSESSING SIMILAR INCOME AS INCOME FROM HOUSE PR OPERTY. IT IS NOT KNOWN AS TO THE FATE OF THE OUTCOME OF SUCH ORDER BEFORE THE IT AT. ONCE THE CIT(A) HAS TAKEN A PARTICULAR VIEW IN THE CASE OF ONE OF THE CO-OWNE R, WE FAIL TO UNDERSTAND AS TO HOW HE HAS TAKEN ANOTHER VIEW IN CASE OF THE OTHER CO-OWNER FOR AN AGREEMENT WITH THE SAME PARTY AND FOR THE SAME PREMISES. WE , THEREFORE, DEEM IT PROPER TO RESTORE THIS ISSUE BACK TO THE FILE OF THE CIT(A ) FOR FRESH ADJUDICATION. WHILE DOING SO, HE SHALL KEEP IN MIND, THE ORDER PASSED B Y THE CIT(A) IN THE CASE OF OTHER CO-OWNER AND THE ORDER OF THE TRIBUNAL, IF AN Y, AGAINST SUCH ORDER OF THE CIT(A). NEEDLESS TO SAY, THE CIT(A) SHALL GIVE DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND DECIDE THE ISSUE AS PER LAW. WE HO LD AND DIRECT ACCORDINGLY. THE GROUNDS RAISED BY THE REVENUE ARE ACCORDINGLY A LLOWED FOR STATISTICAL PURPOSE. 5 IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON THE 23 RD , DAY OF MAR 2011. SD/- SD/- ( (( ( D MANMOHAN D MANMOHAN D MANMOHAN D MANMOHAN ) )) ) VICE PRESIDENT ( (( ( R K PANDA R K PANDA R K PANDA R K PANDA ) )) ) ACCOUNTANT MEMBER PLACE: MUMBAI : DATED: 23 MAR 2011 RAJ* 5 ITA NO.6737/MUM/2007 COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI