KAMALA BROTHERS, MUMBAI V. ITO 24(2)91), MUMBAI

ITA 7134/MUM/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0546 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 28-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R P MEENA
• Assessee Lawyers: DR K SHIVARAM
• Keywords: Reassessment proceedings
• Section: 143(3); 80HHC; 263; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NOS.7134 & 7135/M/2014 ASSESSMENT YEARS: 2008-09 & 2010-11 M/S. KAMALA BROTHERS, KUBER CHAMBER, CTS 141-A, NEXT TO COD, DUTT MANDIR ROAD, MALAD (EAST), MUMBAI 400 097 PAN: AAAFK4011D VS. COMMISSIONER OF INCOME TAX-24, C-13, ROOM NO.507, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI 400 051 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI DR. K. SHIVARAM, A.R. & MS. NEELAM JADHAV, A.R. REVENUE BY : SHRI R.P. MEENA, D.R. DATE OF HEARING : 28.12.2017 DATE OF PRONOUNCEMENT : 29.01.2018 O R D E R PER D.T. GARASIA , JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 10.10.2014 OF THE COMMISSIONER OF I NCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO ASSESSMENT YEAR 2008-09. 2. THE SHORT FACTS OF THE CASE ARE THAT ASSESSEE IS A BUILDER AND DEVELOPER. ON VERIFICATION OF THE ASSESSMENT RECOR D IT WAS OBSERVED THAT ASSESSEE HAS COMPLETED THE BUILDING PROJECT IN A.Y. 2008-09 AND ITA NOS.7134 & 7135/M/2014 M/S. KAMALA BROTHERS 2 SHOWING THE CLOSING STOCK AT RS.1,32,68,169/-. IN VIEW OF THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF CIT VS. ANSAL HOUSING FINANCE & LEASING CO. LTD. (2013) TAX MANN 143(DEL.) THE ALV OF THE UNSOLD FLATS IS TO BE TAXE D AS INCOME FROM HOUSE PROPERTY. THE FLATS CONSTRUCTED BY THE ASSES SEE WERE LYING UNSOLD. THEREFORE, THE ALV OF THE UNSOLD FLATS IS TO BE TAXED AS INCOME FROM HOUSE PROPERTY. BUT THE ASSESSING OFFI CER (HEREINAFTER REFERRED TO AS THE AO) HAS NOT TAXED ANY INCOME FRO M HOUSE PROPERTY FROM THE UNSOLD FLATS. IN THIS VIEW OF THIS, AOS ORDER WAS PREJUDICIAL TO THE INTEREST OF REVENUE AND SHOW CAU SE NOTICE UNDER SECTION 263 OF THE ACT WAS ISSUED AND ASSESSEE REPL IED AS UNDER: I) THE ASSESSEE HAS SHOWN/TREATED UNSOLD FLATS AS ON 31ST MARCH AS STOCK-IN-TRADE IN ITS FINANCIAL STATEMENT AND THE S AME IS DULY ACCEPTED BY THE ASSESSING OFFICER IN PAST ASSESSMENTS. II) TAXABILITY OF CLOSING STOCK OF UNSOLD FLATS UND ER THE HEAD 'INCOME FROM HOUSE PROPERTY' IS UNWARRANTED IN VIEW OF THE GUJARAT HIGH COURT'S DECISION IN THE CASE OF CIT VS. NEHA BUILDERS (P) L TD. (2008) 296 ITR 661 (GUJ.) III) THE ALLAHABAD HIGH COURT IN THE CASE OF LATE ( SMT.) NIRMALA SAHU VS. CIT, APPEAL NO.4853 OF 2007 DATED 19.12.2013 HELD T HAT WHEN UNSOLD UNITS IN THE STOCK-IN-TRADE WERE ALREADY TREATED AS BUSINESS ASS ETS, THEN THE RENTAL INCOME FROM UNSOLD UNIT IN COMPLEX IS TAXABLE UNDER THE HEAD 'INCOME FROM BUSINESS. IV) AS PER DECISION OF SUPREME COURT IN CIT VS. VEG ETABLE PRODUCTS LTD. (1973) 88 ITR 192 (SC) IF TWO REASONABLE CONSTRUCTI ONS OF A TAXING PROVISION ARE POSSIBLE, THAT CONSTRUCTION WHICH FAVOURS THE A SSESSEE MUST BE ADOPTED. 3. AFTER CONSIDERING THE REPLY THE COMMISSIONER HAS SET ASIDE THE ORDER OF AO AND DIRECTED TO VERIFY THE ISSUE IN DET AIL AND PASS THE FRESH ORDER. ITA NOS.7134 & 7135/M/2014 M/S. KAMALA BROTHERS 3 4. THE LD. A.R. SUBMITTED BEFORE US THAT THE ORDER PASSED BY THE AO WAS ERRONEOUS NOR PREJUDICIAL IN THE INTEREST OF REVENUE. HENCE, THE REVISION IS BAD IN LAW. ASSESSEE HAS SHOWN UNS OLD FLATS AS STOCK- IN-TRADE IN HIS BOOKS OF ACCOUNTS AS WELL AS IN AUD ITED REPORT. DURING THE ASSESSMENT PROCEEDING, THE AO HAS VERIFIED ABOU T THE DETAILS. WHILE COMPLETING THE REASSESSMENT PROCEEDINGS UNDER SECTION 143(3) R.W.S. 148 DEPARTMENT HAD ACCEPTED THE UNSOLD FLATS AS STOCK IN TRADE AND HELD THAT SAME IS PERTAINS TO INVENTORIES BY AP PLYING HIS MIND. THE AO HAS NOT DISCUSSED IN ASSESSMENT ORDER. THER EFORE, IT IS TO BE PRESUMED THAT AO HAS APPLIED HIS MIND. FOR THAT PR OPOSITION HE RELIED UPON THE DECISION OF CIT VS. FINE JEWELLERY (INDIA) LTD. (2015) 372 ITR 303 (BOM.) HC. THE LD. A.R. ALSO SUBMITTED THAT IN CASE OF CIT VS. NEHA BUILDERS (P) LTD. (2008) 296 ITR 661 ( GUJ.) WHEREIN IT HAS BEEN HELD THAT IF THE PROPERTY IS USED AS STOCK IN TRADE THEN SAID PROPERTY WOULD BECOME OR PARTAKE CHARACTER OF STOCK AND ANY INCOME DERIVED FROM STOCK WOULD BE INCOME FROM BUSINESS AND NOT INCOME FROM PROPERTY. THE LD. A.R. ALSO RELIED U PON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CHANNAI PRO PERTIES & INVESTMENTS LTD. VS. CIT (2015) 373 ITR 673 (SC) AN D SUBMITTED THAT IN TERMS OF MEMORANDUM OF ASSOCIATION MAIN OBJ ECT OF ASSESSEE- COMPANY WAS TO ACQUIRE PROPERTIES AND EARN INCOME B Y LETTING OUT SAME, SAID INCOME WAS TO BE BROUGHT TO TAX AS BUSIN ESS INCOME AND NOT AS INCOME FROM HOUSE PROPERTY. THE LD. A.R. SU BMITTED THAT THERE ARE TWO CONFLICTING JUDGMENTS OF DIFFERENT HI GH COURTS. IN VIEW OF THIS, THE JUDGMENT IN FAVOUR OF ASSESSEE SHOULD BE TAKEN I.E. CIT VS. VEGETABLE PRODUCTS LTD. (1973) 88 ITR 192 (SC). HE RELIED UON ITA NOS.7134 & 7135/M/2014 M/S. KAMALA BROTHERS 4 THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. RASHID EXPORTS INDUSTRIES (2016) 389 ITR 293 (ALL.) (HC) WHEREIN THE HIGH COURT HAS HELD THAT WHEN THERE IS A CONFLI CT DECISION OF HIGH COURTS, THE ORDER OF THE AO IS NOT ERRONEOUS AND RE VISION IS NOT BAD IN LAW. 5. THE LD. D.R. RELIED UPON THE ORDER OF THE LD. CI T(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. WE FIND THAT IN THIS CASE THE FACTS OF THE CASE ARE TH AT ASSESSEE IS A BUILDER AND DEVELOPER. ON VERIFICATION OF THE CLOSING STOC K IT WAS FOUND THAT ASSESSEE HAS SHOWN CLOSING STOCK OF UNSOLD FLATS AT RS.1,32,68,169/-. AS PER THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL HOUSING FINANCE & LEASING CO. LTD. (2 013) TAXMANN 143(DEL.) THE ALV OF THE UNSOLD FLATS IS TO BE TAXE D AS INCOME FROM HOUSE PROPERTY. FLATS CONSTRUCTED BY THE ASSESSEE WERE LYING UNSOLD . THEREFORE, ALV OF UNSOLD FLATS IS TO BE TAXED AS IN COME FROM HOUSE PROPERTY. THE HONBLE GUJARAT HIGH COURT IN THE CA SE OF CIT VS. NEHA BUILDERS (P) LTD. (2008) 296 ITR 661 (GUJ.) HA S TAKEN A VIEW THAT IF THE PROPERTY IS USED AS STOCK IN TRADE THEN SAID PROPERTY WOULD BECOME OR PARTAKE CHARACTER OF STOCK AND ANY INCOME DERIVED FROM STOCK WOULD BE INCOME FROM BUSINESS AND NOT INCO ME FROM PROPERTY. BUT AS PER THE DECISION OF HONBLE DELH I HIGH COURT THIS INCOME IS TO BE TAXED AS INCOME FROM HOUSE PROPERTY . THEREFORE, THERE IS A CONFLICT BETWEEN THE JUDGMENTS OF TWO HI GH COURTS. THEREFORE, SECTION 263 CAN BE INVOKED OR NOT FOR TH AT PROPOSITION ITA NOS.7134 & 7135/M/2014 M/S. KAMALA BROTHERS 5 THERE IS A DIRECT DECISION OF HONBLE ALLAHABAD HIG H COURT IN THE CASE OF CIT VS. RASHID EXPORTS INDUSTRIES (SUPRA) W HEREIN IT IS HELD AS UNDER: SECTION 263 OF THE INCOME-TAX ACT, 1961CANNOT BE I NVOKED UNLESS IT IS FOUND THAT THE ORDER IS ALSO PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE SUPREME COURT IN MALABAR INDUSTRIAL CO. LTD. V. CIT [2000] 243 ITR 83 (SC) HELD THAT THE PHRASE PREJUDICIAL TO THE INTERESTS OF REVENUE HAS TO BE READ IN CONJUNCTION WITH ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICE R AND THUS EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ERRONEOUS ORDER OF T HE ASSESSING OFFICER COULD NOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF T HE REVENUE. THE SUPREME COURT FURTHER HELD THAT WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME-TAX OFFICER HAS TAKEN ONE VIEW THE SAME CANNOT BE TREATED AS AN ERR ONEOUS ORDER WHICH IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE MERELY BECAUSE THE COMMISSIONER DOES NOT AGREE WITH THE ORDER UNLESS THE VIEW TAKEN BY THE INCOME-TAX OFFICER WAS NOT SUSTAINABLE IN LAW. HELD THAT THE ASSESSING OFFICER AFTER CONSIDERING T HE MATTER IN DETAIL HAD PASSED AN ASSESSMENT ORDER BY APPLYING HIS MIND. THE ASSES SING OFFICER HAD ALLOWED THE DEDUCTION UNDER SECTIONS 80HHC AND 80-IB OF THE ACT TO THE EXTENT OF THE AMOUNT OF PROFITS AND GAINS AS CONTEMPLATED UNDER S ECTION 80-IA(9) OF THE ACT. THE QUESTION AS TO WHETHER THE DEDUCTION UNDER SECT ION 80HHC WAS TO BE COMPUTED AFTER REDUCING THE DEDUCTION UNDER SECTION 80-IB OF THE ACT FROM THE PROFITS AND GAINS WAS A LEGAL CONSIDERATION. THE AS SESSING OFFICER GRANTED DEDUCTION UNDER SECTIONS 80HHC AND 80-IB OF THE ACT TAKING THE SAME FIGURE OF PROFITS. ON THE OTHER HAND, THE DEPARTMENT'S CASE W AS THAT THE DEDUCTION UNDER SECTION 80HHC OF THE ACT WAS REQUIRED TO BE COMPUTE D AFTER REDUCING THE AMOUNT OF DEDUCTION UNDER SECTION 80-IB OF THE ACT FROM PROFITS AND GAINS. ON THIS SCORE, THERE WAS A DIVERGENCE OF VIEWS TAKEN B Y DIFFERENT HIGH COURTS. HENCE, THE TRIBUNAL WAS JUSTIFIED IN SETTING ASIDE THE ORDER OF THE COMMISSIONER PASSED UNDER SECTION 263. 7. RESPECTFULLY FOLLOWING THE SAME, WE ARE OF THE V IEW THAT COMMISSIONER IS NOT JUSTIFIED IN INVOKING SECTION 2 63 IN THIS MATTER. 8. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.01.2018. SD/- SD/- (N.K. PRADHAN) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 29.01.2018. * KISHORE, SR. P.S. ITA NOS.7134 & 7135/M/2014 M/S. KAMALA BROTHERS 6 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.