DCIT 22(3), NAVI MUMBAI V. GULAM HUSSAIN ABDUL KARIM KHATRI, NAVI MUMBAI

ITA 7041/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2422 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 16-11-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 03-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DR P DANIEL
• Keywords: Business income
• Section: 143(3)

Judgement Text

SHRI GULAM HUSSAIN ABDUL KARIM KHATRI ITA NO. 7041 /MUM/20 1 3 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G , MUMBAI , , BEFORE SHRI AMIT SHUKLA , JUDICIAL MEMBER AND SHRI RAMIT KOCHAR , ACCOUNTAN T MEMBER ITA NO. : 7 041 /MUM/20 1 3 ( ASSESSMENT YEAR: 20 1 0 - 11 ) DY. COMMISSIONER OF INCOME TAX - 28(1)/28(2), 3 RD FLOOR TOWER NO. 6, VASHI RAILWAY STATION COMPLEX, VASHI, NAVI MUMBAI - 400 703 VS SHRI GULAM HUSSAIN ABDUL KARIM KHATRI , E, F & G BLOCK, NAVI MUMBAI SPORTS COMPLEX, SECTOR - 4, VASHI, NAVI MUMBAI - 400 703 .: PAN: A AJPK 7809 C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ABANI KANTA NAYAK RESPONDENT BY : DR. P DANIEL /DATE OF HEARING : 16 - 11 - 201 5 / DATE OF PRONOUNCEMENT : 16 - 11 - 201 5 ORDER , . . : PER AMIT SHUKLA, J M : THE AFORESAID APPEAL HA S BEEN FILED BY THE REVENUE AGAINST IMPUGNED ORDER DATED 0 2 .09 .2013 PASSED BY CIT(A) - 3 3 , MUMBAI IN RELATION TO QUANTUM PR OCEEDINGS PASSED U/S 143(3) FOR THE ASSESSMENT YEAR 20 1 0 - 11 . IN ITS APPEAL, T HE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION IN RESPECT OF ADMINISTRATIVE EXPENSES WITHOUT APPRECIATING THE FACT THAT DURING THE YEAR UNDER CONSIDERATION THE PROPRIETARY CONCERN M/S G K KHATRI & CO. DID NOT CONDUCT ANY BUSINESS ACTIVITY AND DERIVED ONLY RENTAL INCOME RECEIVED FROM THE OFFICE / BUNGLOW OWNED AND CL AIMED DEDUCTION U/S 24 OF THE ACT. 2) THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED. SHRI GULAM HUSSAIN ABDUL KARIM KHATRI ITA NO. 7041 /MUM/20 1 3 2 2. BRIEF FACTS OF THE CASE ARE THAT, THE ASSESSEE IS AN INDIVIDUAL AND PROPRIETOR OF T WO FIRMS NAMELY , M/S G K KHATRI & CO., WHICH IS ENGAGED IN THE CONSTRUCTION BUSINESS AND M/S G H KHATRI, WHICH IS ENGAGED IN PROVIDING COLD STORAGE SERVICES. DURING THE YEAR, THE PROPRIETARY FIRM , M/S G H KHATRI & CO. HAD NOT DONE ANY BUSINESS ACTIVITY BUT HAS MOSTLY DERIVED INCOME FROM RENT F ROM THE OFFICE / FLAT OWNED. THE AO NOTED THAT, EXCEPT FOR THE INTEREST INCOME FROM DEPOSITS, THE OTHER INCOME DEBITED TO THE PROFIT AND LOSS ACCOUNT ARE THE SUNDRY CREDITORS AND BALANCE WRITTEN OFF AMOUNTING TO RS. 1,20,97,877/ - WHICH IS MERELY A BOOK ENTRY. HE NOTED THAT, THE ASSESSEE HAS TREATED THE RENT RECEIVED AS INCOME FROM HOUSE PROPERTY AND ALSO CLAIMED STATUTORY DEDUCTION OF 30% FROM RENTAL INCOME. BESIDES THIS, VARIOUS EXPENSES WERE DEBITED TO THE PROFIT AN D LOSS ACCOUNT AMOUNTING TO RS. 39,57,019/ - INCLUDING THE INTEREST PAID TO THE BANK AMOUNTING TO RS. 17,18,361/ - . THE SAID EXPENSES WERE ALSO CLAIMED AGAINST THE SAID BUSINESS ACTIVITY. THE AO HELD THAT ADMINISTRATIVE EXPENSES OF RS. 22,24,226/ - CANNOT BE ALLOWED. THE LD. CIT(A) NOTED THAT, ASSESSEE HAD SHOWN BUSINESS INCOME FROM PROPRIETARY CONCERN IN THE FOLLOWING MANNER : - NET PROFIT AS PER PROFIT & LOSS A/C - M/S G H KHATRI & CO. RS. 1,20,52,120 NET PROFIT AS PER PROFIT & LOSS A/C - M/S GHK COLD STORAG E RS. 31,61,930 FURTHER HE HELD THAT, ONCE THE AO ACCEPTED THE COMPUTATION OF BUSINESS INCOME AND AUDITORS HAVE CERTIFIED THE SAME U/S 44AB, SUCH A DISALLOWANCE EXPENSES CANNOT BE MADE. 3. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE IMPUGNED ORDER AND MATERIAL PLACED ON RECORD, WE FIND THAT ASSESSEE HAS SHOWN INCOME FROM BUSINESS FROM BOTH THE PROPRIETARY CONCERNS AS NOTED BY THE LD. CIT(A). ONCE THE ASSESSEE HAS BEEN CARRYING OUT THE BUSINESS AND THERE IS TEMPORARY LULL IN THE CONSTRUCTION A CTIVITY DURING THE YEAR THAT DOES NOT MEAN THAT ADMINISTRATIVE EXPENSES HAVE TO BE DISALLOWED. ON THE PERUSAL OF THE ASSESSEES COMPUTATION OF INCOME, IT IS SEEN THAT OUT OF THE SHRI GULAM HUSSAIN ABDUL KARIM KHATRI ITA NO. 7041 /MUM/20 1 3 3 TOTAL BUSINESS PROFIT AGGREGATING TO RS. 18,52,14,050/ - THE ASSESSEE HAS RED UCED RENT RECEIVED OF RS. 40,65,620/ - AND A NET BUSINESS INCOME OF RS. 1,11,48,450/ - HAS BEEN SHOWN . THUS, WHEN THE ASSESSEE HAD SHOWN SUBSTANTIAL BUSINESS PROFIT THEN ADMINISTRATIVE EXPENSES CANNOT BE DISALLOWED. 4. ACCORDINGLY, THE ORDER OF THE CIT(A ) DELETING THE SAID DISALLOWANCE IS AFFIRMED AND GROUND RAISED BY THE REVENUE IS DISMISSED. 5. IN THE RESULT, APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH NOVEMBER , 2015. SD/ - SD/ - ( ) ( ) (RAMIT KOCHAR ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUD ICIAL MEMBER MUMBAI, DATE: 1 6 TH NOVEMBER , 2015 / COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3) THE CIT (A) - 3 3 , MUMBAI. 4 ) THE CIT 22 , MUMBAI. 5 ) , , / THE D.R. G BENCH, MUMBAI. 6 ) \ COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS