VULPECULA TRADING & INVESTMENTS CO. P. LTD, MUMBAI V. ITO 1(3)(4), MUMBAI

ITA 7526/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3517 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 17-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SOMANATH UKKALI
• Keywords: Opportunity of being heard
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER I.T.A. NO.7526/MUM/2014 (ASSESSMENT YEAR : 2011-12) VULPECULA TRADING & INVESTMENTS CO. PVT. LTD., LIBERTY BUILDING, 41-45, MARINE LINES, MUMBAI-400020 PAN: AAACV1209P VS. ITO 1(3)(4 ), AAYAKAR BHAVAN, NEW MARINE LINES, MUMBAI-400020. (APPELLANT) .. ( RESPONDENT) ASSESSEE BY SHRI RAJESH S. SHAH (AR) REVENUE BY SHRI SOMANATH UKKALI (DR) DATE OF HEARING : 21.06.2015 DATE OF PRONOUNCEMENT : 19.08.2016 O R D E R D.KARUNAKARA RAO, AM: 1. THIS IS APPEAL BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-2, MUMBAI DATED 27.08.2014. THE ASSESSEE RAISED SIX GR OUNDS AND THE SAME ARE FOUND TO BE ARGUMENTATIVE IN NATURE. ON GO ING THROUGH THE SAME, I FIND THE ISSUE RAISED IN THE GROUNDS RELATE S TO AN AMOUNT OF RS. 32,70,358/- BEING MUNICIPAL TAXES DEBITED IN THE P& L A/C. ASSESSEE IS 2 ITA NO.7526/M/ 2014 ALSO AGGRIEVED ABOUT THE ENHANCEMENT OF ASSESSMENT WITHOUT ISSUING OF STATUTORY NOTICE TO THE ASSESSEE. 2. THE BRIEFLY STATED RELEVANT FACTS ARE THAT THE ASSE SSEE HAS TAKEN A GROUND FLOOR PREMISES ON RENT FROM M/S LIBERTY CINE MA. THE ASSESSEE EARNS RENT FROM ARAB BANGLADESH BANK LTD. THE ASSES SEE CLAIMS THAT THE SAID PREMISES WAS BEING EXPLOITED FOR LIVE AND LICE NSE BUSINESS. DURING THE ASSESSMENT, THE AO NOTICED THAT THE CLAIM OF DE DUCTION WAS MADE BY THE ASSESSEE WITHOUT MAKING THE PAYMENT TO MUNICIPA L AUTHORITIES. CONSIDERING THE SAID AMOUNT CONSTITUTES UNPAID TAXE S, THE AO INVOKED SECTION 43B OF THE ACT. ON FINDING THAT THE ASSESSE E PAID ONLY A SUM OF RS. 9.5 LAKHS DURING THE YEAR, THE AO GRANTED RELIE F TO THAT EXTENT AND DISALLOWED THE BALANCE AMOUNT OF RS. 23,20,358/- (R S. 32,70,358 -9.5 LAKHS) U/S 43B OF THE ACT. 3. DURING THE FIRST APPELLATE PROCEEDINGS, THE ASSESSE E SUBMITTED THE WHOLE OF THE AMOUNT WAS PAID IN SUBSEQUENT AY (ON 2 6/28/07/2011 AND 24/09/2011) I.E. BEFORE FILING OF THE RETURN OF INC OME AND THEREFORE, THE CLAIM IS FULLY ALLOWABLE. THE CIT(A) CONSIDERED THE SAME AND REJECTED STATING THAT THE DEBIT OF A SUM OF RS. 32,70,358/- IS NOT ALLOWABLE AT ALL IN THE YEAR UNDER CONSIDERATION AND THEREFORE, HE HAS DISALLOWED ENTIRE SUM OF RS. 32,70,358/- WHICH HAS THE EFFECT OF ENHANCEM ENT BY RS. 9.5 LAKHS. 3 ITA NO.7526/M/ 2014 4. AGGRIEVED WITH THE ABOVE DECISION OF THE CIT(A), TH E ASSESSEE HAS FILED AN APPEAL BEFORE THE TRIBUNAL NAMELY SHRI RAJ ESH S. SHAH, LD. AR FOR THE ASSESSEE SUBMITTED THAT THE CIT(A) ERRED IN ENHANCING THE ASSESSMENT WITHOUT ISSUING PROPER NOTICE TO THE ASS ESSEE. HE ARGUED THAT MERE ORDERSHEET ENTRY DO NOT CONSTITUTE AN ISSUE OF NOTICES. FURTHER, WE MENTIONED THAT THE MUNICIPAL AUTHORITIES CREATED TH E DEMAND OF MUNICIPAL TAX VIDE LETTER DATED 16.03.2011 THAT FAL LS IN THE AY UNDER CONSIDERATION, THEREFORE, THE CLAIM OF THE ASSESSEE IS JUSTIFIED IN THE AY 2011-12. LD. AR CLAIMS THAT THE SAID SUM CONSTITUTE S AN ADDITIONAL RENT PAYABLE BY THE ASSESSEE ONLY IN CASE OF ADDITIONAL DEMAND, IF ANY RAISED BY THE MUNICIPAL AUTHORITIES. LD. AR OF THE ASSESSE E ALSO CRITICAL OF INVOKING OF THE PROVISIONS OF SECTION 43B OF THE AC T. 5. ON THE OTHER HAND, LD. DR FOR THE REVENUE RELIED HE AVILY ON THE ORDER OF THE AO AND THE CIT(A). HE SUBMITTED THAT S AID AMOUNT OF RS. 32,70,358/- IS NOT ALLOWABLE AT ALL AS THE SAME DOE S NOT CONSTITUTE EXPENDITURE IN THE HANDS OF THE ASSESSEE-TENANT. RE GARDING THE NOTICE, LD. DR FOR REVENUE MENTIONED THAT THE ISSUE INMATES FROM THE BOOKS OF ACCOUNTS OF THE ASSESSEE, THE ENHANCED INCOME OF RS . 9.5 LAKHS AS PART OF RS. 32,70,358/- WHICH IS DEBITED TO THE P&L A/C OF THE ASSESSEE. HE ALSO SUBMITTED THAT THERE IS NO CLARITY ON THE ACTU AL PAYERS OF THE MUNICIPAL TAXES. HE ALSO MENTIONED THAT THE MUNICIP AL TAXES ARE INCURRED 4 ITA NO.7526/M/ 2014 BY THE OWNER OF THE HOUSE AND NOT BY THE TENANT- TH E ASSESSEE. THERE IS NO CLARITY, IF THE AMOUNT OF TAX IS ACTUALLY PAID B Y THE ASSESSEE AGAINST THE ADDITIONAL RENT PAYABLE BY THE ASSESSEE TO THE LANDLORD. 6. I HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF REVENUE. IT IS A SETTLED PROPOSITION OF LAW THAT THE MUNICIPAL TAXES HAS TO BE PAID BY THE LANDLORD. IN THAT CASE, WHY THE SAID AMOUNT WAS DEB ITED IN THE P&L A/C OF THE ASSESSEE AND HOW IT BECOMES THE ASSESEES LI ABILITY. AS SUCH, THERE IS NO DISCUSSION IN THE ORDER, IF THE ADDITIONAL DE MAND OF MUNICIPAL TAX, IF ANY, IS THE LIABILITY OF THE ASSESSEE-TENANT. THE A O/ASSESSEE IS REQUIRED TO BRING IN THE RELEVANT CLAUSES FROM RENTAL DEED O N TO THE RECORDS. THE AO IS ALSO REQUIRED TO DELIBERATE ON WHAT IS WRONG WITH THE CLAIM OF THE ASSESSEE, IF IT IS THE ASSESSEES LIABILITIES ON RE NTAL DOCUMENT AND THE SAME IS DISCHARGED DUTIFULLY. REGARDING THE ENHANCE MENT, THERE IS NO DISCUSSION ABOUT THE ASSESSEE TAKING SUCH OBJECTION S BEFORE THE FIRST APPELLATE PROCEEDING. ASSESSEE CANNOT SIGN ON THE O RDER SHEET ON 20.08.2014, NOT INSISTING ON A NOTICE AND ENTERTAIN A CHANGE OF MIND NOW BEFORE US. THEREFORE, THE CIT(A) NEEDS TO DISCUSS T HE SAME IN HIS ORDER IN THE REMAND PROCEEDINGS NOW. THE CIT(A) IS ALSO R EQUIRED TO BRING OUT THE FACTS ON THE ALLEGATION OF MAKING ENHANCEMENT W ITHOUT ISSUING THE STATUTORY NOTICE. IN ANY CASE, IT IS THE SETTLED LE GAL PROPOSITION THAT IN CASES OF ENHANCEMENT OF THE ASSESSMENT, IF ANY, THE CIT(A) IS UNDER 5 ITA NO.7526/M/ 2014 STATUTORY OBLIGATION TO ISSUE THE NOTICE AS PER THE PROVISIONS OF THE ACT. HE NEED TO DEFEND THE ORDER-SHEET ENTRY ON 20.08.20 14 ON THIS ISSUE. 7. CONSIDERING THE ABOVE ABSENCE OF CLARITY ON FACTS, I AM OF THE OPINION THAT THE MATTER SHOULD BE REMANDED TO THE F ILE OF THE CIT(A) FOR FRESH CONSIDERATION AND THE SPEAKING ORDER ON THE I SSUES RAISED BY THE ASSESSEE IN THE GROUNDS AND THE DISCUSSION GIVEN IN PRECEDING PARAGRAPHS OF THIS ORDER. THE CIT(A) SHALL GRANT RE ASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 8. IN THE RESULT, GROUNDS RAISED BY THE ASSESSEE ARE A LLOWED FOR STATISTICAL PURPOSE. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19 TH DAY OF AUGUST, 2016. SD/- (D.KARUNAKARA RAO) ACCOUNTANT MEMBER MUMBAI, DATED: 19.08.2016 SHARWAN P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR SMC BENCH BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.