M/s Aman Dhaba, Kurukshetra V. ITO, Kurukshetra

ITA 687/CHANDI/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9735 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: misc
• Appeal Filed On: 02-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Capital asset; Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA NO. 687/CHD/2016 ASSESSMENT YEAR: 2011-12 M/S AMAN DHABHA, VS THE ITO, VILLAGE KALYANA, WARD 2, G.T. ROAD, KURUKSHETRA, SHAHABAD MARKANDA, DISTT. KURUKSHETRA. PAN: AAJFA4645E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SING H RESPONDENT BY : SHRI S.K.MITTAL DATE OF HEARING : 21.07.2016 DATE OF PRONOUNCEMENT : 26.07.2016 O R D E R THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS)-1 GURGAON DATED 07.03 .2016 FOR ASSESSMENT YEAR 2011-12 CHALLENGING THE ADDITIO N OF RS. 12 LACS ON ACCOUNT OF NON-DECLARATION OF RENTAL INCOME IN THE HANDS OF THE ASSESSEE FIRM. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT DURING TH E COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER NOTED THAT ASSESSEE HAS NOT DISCLOSED RENTAL INCOME RECEIVED FROM RENTING OUT OF SHOW-ROOM TO AMAN CREA TIONS WHICH WAS SHOWN IN IMMEDIATELY PRECEDING YEAR. THE 2 ASSESSING OFFICER NOTED THAT THE ASSESSEE FIRM IS R UN BY TWO PERSONS NAMELY SHRI SANJEEV KUMAR AND SHRI PANK AJ YADAV. OUT OF THE LAND OCCUPIED BY ASSESSEE, IT HA S LET OUT A HALL FOR SHOW-ROOM TO M/S AMAN CREATIONS FOR MONTHLY RENT OF RS. 1 LAC WHICH IS RUN BY SMT. MANJ U YADAV, W/O SHRI SANJEEV YADAV AND SMT. SONIA YADAV W/O SHRI PANKAJ YADAV. THE ASSESSING OFFICER DID N OT ACCEPT CONTENTION OF THE ASSESSEE. THE ASSESSING OFFICER NOTED THAT IN THE SCHEDULE OF FIXED ASSETS FOR THE YEAR ENDING 31.03.2011, IN THE BUILDING HEAD RS. 4,50,000/- HAS BEEN SHOWN UNDER THE TOTAL SALE AND DEPRECIATION ON BUILDING CLAIMED ACCORDINGLY, AFTER DEDUCTING THE ABOVESAID AMOUNT. WHEN IT WAS CONFRONTED TO THE ASSESSEE, WAS DIRECTED THE ASSESS EE TO PRODUCE COPY OF THE SALE DEED, ASSESSEE HAS COME WI TH A VERSION THAT THERE IS AN ENTRY OF RS. 4,50,000/- IN DEPRECIATION ACCOUNT WHICH WAS BY MISTAKE WRITTEN A S SALE. IT WAS FURTHER STATED THAT ACTUALLY IT IS BOOK ENTRY AND NO SALE HAS OCCURRED AS THERE IS NO SALE DEED OF THE LAND BECAUSE THE LAND IS ALREADY IN THE NAME OF BOTH THE PARTNERS. IT IS WELL SETTLED PROPOSITION THAT WITHOUT REGISTERED DOCUMENT, TRANSFER OF PROPERTY I S NOT VALID AND NOT SUSTAINABLE IN LAW. THEREFORE, SIMPL Y BOOK ENTRY IS NOT VALID. 3. THE ASSESSING OFFICER DID NOT ACCEPT CONTENTION OF THE ASSESSEE AND HELD THAT LAND IN THE NAME OF PART NERS HAS BEEN GIVEN TO THE FIRM AS CAPITAL CONTRIBUTION. THE 3 ASSESSING OFFICER ALSO NOTED THAT ASSESSEE HAS NOT EXPLAINED AS TO WHY RENTAL INCOME WAS NOT SHOWN WHI CH WAS ALREADY SHOWN IN PRECEDING ASSESSMENT YEAR IN T HE HANDS OF THE FIRM. THE ASSESSING OFFICER, ACCORDIN GLY, MADE ADDITION OF RS. 12 LACS IN THE HA NDS OF THE A SSESSEE FIRM. 4. THE ASSESSEE CHALLENGED THE ADDITION BEFORE LD. CIT(APPEALS) AND WRITTEN SUBMISSION OF THE ASSESSEE IS REPRODUCED IN WHICH IT IS EXPLAINED THAT RENTAL PRO PERTY IS JOINTLY HELD BY SHRI SANJEEV YADAV AND SHRI PANK AJ YADAV IN THEIR OWNERSHIP WHICH WAS PURCHASED ON 10.11.1998 THROUGH REGISTERED SALE DEED. LATER ON, BOTH THESE PERSONS FORMED A PARTNERSHIP FIRM IN THE NAME AND STYLE OF M/S AMAN DHABHA. THE LAND WAS TRANSFERRED TO THE FIRM BY WAY OF CONTRIBUTION BUT THE LEGAL TITLE OF THE PROPERTY WAS NOT TRANSFERRED IN THE NAME OF THE ASSESSEE FIRM. 5. DURING ASSESSMENT YEAR UNDER APPEAL, CONSTRUCTED SHOW ROOM AND SOME SHOPS BELONGING TO THE DHABHA WERE EXCLUDED FROM THE BOOKS OF THE ASSESSEE BY MAK ING THE CORRESPONDING ENTRIES BY DEBITING THE CAPITAL ACCOUNT OF PARTNERS. FURTHER, THEY WITHDREW MONEY FROM THEIR CAPITAL ACCOUNT FOR COMPLETION OF SHOWROOM/SHOPS AND RENTED TO TENANTS. THE RENTAL INCOME IS SHOWN BY BOTH THE CO-OWNERS IN T HEIR 4 INDIVIDUAL RETURN OF INCOME BEING OWNERS AS PER SEC TION 22 OF THE INCOME TAX ACT. IT WAS, THEREFORE, SUBMI TTED THAT WHEN RENTAL INCOME IS ALREADY SHOWN BY BOTH TH E PARTNERS IN THEIR INDIVIDUAL RETURNS, THEREFORE, NO FURTHER ADDITION SHOULD BE MADE. THE LD. CIT(APPEA LS), HOWEVER, DID NOT ACCEPT CONTENTION OF THE ASSESSEE AND BY APPLYING PROVISIONS OF SECTION 45(3) READ WITH SECTION 2(27) OF THE ACT DISMISSED THE APPEAL OF TH E ASSESSEE. 6. AFTER CONSIDERING RIVAL SUBMISSIONS, I AM OF THE VIEW ADDITION IS NOT JUSTIFIED IN THE HANDS OF THE ASSESSEE FIRM. IT IS NOT IN DISPUTE THAT THE RENTE D PROPERTY WAS PURCHASED BY BOTH THE PARTNERS IN EQUA L SHARES THROUGH REGISTERED SALE DEED DATED 10.11.199 8. THUS, BOTH SHRI SANJEEV YADAV AND SHRI PANKAJ YADAV BECOME JOINT OWNERS OF THE PROPERTY IN QUESTION. B OTH THE OWNERS OF THE PROPERTY LATER ON CONSTITUTED THE PARTNERSHIP FIRM ON 01.04.2002. THERE IS NO EVIDEN CE ON RECORD TO PROVE THAT BOTH THE PARTNERS HAVE TRANSFERRED THE OWNERSHIP RIGHT TO THE ASSESSEE FIR M. ACCORDING TO SECTION 22 OF THE INCOME TAX ACT, THE INCOME FROM HOUSE PROPERTY COULD BE CHARGED TO TAX IN RESPECT OF ANNUAL VALUE OF THE PROPERTY OF WHICH TH E ASSESSEE IS OWNER. NO EVIDENCE HAS BEEN BROUGHT ON RECORD TO PROVE THAT ASSESSEE FIRM IS OWNER OF THE PROPERTY SO AS TO CHARGE RENTAL INCOME TO THE TAX. ACCORDING TO SECTION 2(47)(VI) AS REFERRED TO BY LD . DR, 5 ANY TRANSACTION BY WAY OF ANY AGREEMENT OR ARRANGEM ENT WHICH HAS EFFECT OF TRANSFER, COULD BE CONSIDERED A S TRANSFER BUT NO AGREEMENT OR ARRANGEMENT HAVE BEE N BROUGHT ON RECORD TO PROVE SUCH FACT OF TRANSFER OF ANY CAPITAL ASSET BY THE PARTNERS TO THE ASSESSEE FIRM. THE LD. DR ALSO REFERRED TO SECTION 45(3) OF THE ACT WH ICH PERTAINS TO CAPITAL GAIN ARISING FROM THE TRANSFER OF CAPITAL ASSET BY PERSON TO FIRM BUT AT ANY POINT OF TIME, REVENUE NEVER CHARGED ANY CAPITAL GAINS, EITHER IN THE HANDS OF THE ASSESSEE FIRM OR THE PARTNERS. EVEN T HE RENTED PROPERTY IS NOT TAKEN AS STOCK-IN-TRADE IN T HE ASSESSEE FIRM. THE LD. COUNSEL FOR THE ASSESSEE RE FERRED TO PB-38 TO 43 WHICH ARE THE COPIES OF ACKNOWLEDGEM ENT OF RETURN OF INCOME FILED BY SHRI SANJEEV KUMAR YAD AV AND SHRI PANKAJ KUMAR IN THEIR INDIVIDUAL CASES IN WHICH THEY HAVE SHOWN RENTAL INCOME IN EQUAL SHARES AND ACCORDING TO LD. COUNSEL FOR THE ASSESSEE, THEI R RETURNED INCOME HAVE BEEN ACCEPTED UNDER SECTION 143(1) OF THE ACT AND REVENUE DID NOT DISPUTE THE R ENTAL INCOME IN THEIR INDIVIDUAL HANDS IN EQUAL SHARES. 6(I) THE LD. COUNSEL FOR THE ASSESSEE ALSO REFERRED TO PB-80 WHICH IS ASSESSMENT ORDER IN THE CASE OF THE ASSESSEE FIRM FOR SUBSEQUENT ASSESSMENT YEAR 2013-1 4 UNDER SECTION 143(3) DATED 29.02.2016 IN WHICH SIMI LAR ISSUE WAS CONSIDERED BY THE ASSESSING OFFICER FOR N OT SHOWING RENTAL INCOME AND THE ASSESSING OFFICER, AF TER 6 CONSIDERING EXPLANATION OF THE ASSESSEE FIRM, DID N OT MAKE ANY ADDITION OF RENTAL INCOME IN THE HANDS OF THE ASSESSEE FIRM. THE LD. COUNSEL FOR THE ASSESSEE, THEREFORE, RIGHTLY CONTENDED THAT MERELY BECAUSE IN EARLIER YEAR, RENTAL INCOME WAS WRONGLY SHOWN IN TH E HANDS OF THE ASSESSEE FIRM, WOULD NOT PROVE THAT TH E RENTAL INCOME IS SUBJECTED TO TAX IN THE HANDS OF T HE ASSESSEE FIRM. THE LD. COUNSEL FOR THE ASSESSEE, THEREFORE, RIGHTLY CONTENDED THAT WHEN REVENUE DEPARTMENT, IN SUBSEQUENT YEAR ACCEPTED THAT RENTAL INCOME DOES NOT BELONG TO THE ASSESSEE FIRM, THE RU LE OF CONSISTENCY SHOULD BE FOLLOWED BY REVENUE DEPARTMEN T AND RENTAL INCOME SHOULD NOT BE CHARGED IN THE HAND S OF THE ASSESSEE FIRM IN ASSESSMENT YEAR UNDER APPEAL A S WELL. 7. HON'BLE SUPREME COURT IN THE CASE OF ITO VS CH. ATCHAIAH 218 ITR 239 HELD THAT RIGHT PERSON SHOULD BE TAXED EVEN IF WRONG PERSON PAID THE TAX. 8. CONSIDERING THE ABOVE DISCUSSION, AND THE FACT THAT INDIVIDUAL CO-OWNERS OF THE PROPERTY HAVE SHOW N THEIR RENTAL INCOME IN THEIR INDIVIDUAL CASES AND I N THE SUBSEQUENT YEAR, THE REVENUE DEPARTMENT DID NOT MAK E ANY ADDITION IN THE HANDS OF THE ASSESSEE FIRM, WOU LD CLEARLY PROVE THAT ADDITION IS WHOLLY UNJUSTIFIED. I, ACCORDINGLY, SET ASIDE THE ORDERS OF AUTHORITIES BE LOW 7 AND DELETE THE ADDITION OF RS. 12 LACS IN THE HANDS OF THE ASSESSEE FIRM. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DATED: 26 TH JULY, 2016. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT/CHD