KALAVATI CONSTRUCTION P. LTD, MUMBAI V. ASST CIT 8(3)(OSD), MUMBAI

ITA 7748/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93291 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 22-07-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 16-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: KISHOR J DEVANI
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.7748/M/2011 ASSESSMENT YEAR: 2007-08 M/S. KALATI CONSTRUCTIONS PVT. LTD., 11, MEGHNA, JVPD SCHEME, VILE PARLE (W), MUMBAI 400 049. PAN: AACCK 0425A VS. ASST. CIT 8(3)(OSD), 707A, C-10, 7 TH FLOOR, PRATYAKSHA KAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (W), MUMBAI - 400051 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI KISHOR J. DEVANI, A.R. REVENUE BY : SHRI RAKESH RANJAN, D.R. DATE OF HEARING : 22.07.2015 DATE OF PRONOUNCEMENT : 22.07.2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 21.09.2011 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2007-08. 2. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUND OF A PPEAL: (1) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E THE ORDER OF THE LEARNED OFFICER IS BAD IN LAW. AND THE LEARNED COMMISSIONER OF APPE ALS WAS NOT JUSTIFIED IN DISALLOWING THE CLAIM EXPENSES ON THE GROUND THERE IS NO BUSINESS ACTIVITY ALL EXPENSES MENTIONED HEREUNDER MUST BE ALLOWED AS BUS INESS EXPENSES. SR NO. ADMINISTRATION EXPENSES AMT (RS.) 1. BANK CHARGES 1059.14 2. CLEANING EXPENSE 26000.00 3. DIGITAL SIGNATURE EXPENSE 10750.00 4. DIRECTORS REMUNERATION 1460000.00 ITA NO.7748/M/2011 M/S. KALATI CONSTRUCTIONS PVT. LTD. 2 5. ELECTRICITY EXPENSE 37410.00 6. ELECTRICAL EXPENSE 2421 7.00 7. INTEREST ON LOAN 463353.00 8. KEYMAN INSURANCE 240000.00 9. LIFT AND STAIRCASE 76000.00 10. MAINTENANCE FOR ICICI 300000.00 11. PROFESSIONAL FEES 15357.00 12. ROC FEES 5000.00 13. SECURITY EXPENSE 71000.00 14. TRANSPORT CHARGES 6592.00 15. WATER CHARGES 45475.00 16. PROVISION FOR INCOME TAX 2001065.00 2. THE COMMISSIONER OF APPEAL HAS ERRED BOTH IN FAC TS AND IN LAWS AND LOSS UNDER THE HEAD PROFITS OR GAINS FROM BUSINESS OR PR OFESSION MUST BE ALLOWED TO BE SET-OFF AGAINST INCOME FROM HOUSE PROPERTY TO DETER MINE TRUE INCOME OF ASSESSEE. 3. THE BRIEF FACTS RELEVANT TO THE ISSUE UNDER CONS IDERATION ARE THAT THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE A O) NOTED THAT THE ASSESSEE DURING THE YEAR HAD NOT CARRIED OUT ANY BUSINESS AC TIVITY. HE THEREFORE DISALLOWED THE VARIOUS EXPENSES CLAIMED BY THE ASSE SSEE. THE LD. CIT(A) ALSO CONFIRMED THE SAID FINDINGS OF THE AO. 4. BEFORE US, THE LD. A.R. OF THE ASSESSEE HAS SUBM ITTED THAT THE ASSESSEE IS IN THE BUSINESS OF CONSTRUCTION AND SALE OF THE PRO PERTY. THE LD. AR HAS FURTHER EXPLAINED FROM THE DOCUMENTS ON THE FILE THAT DURIN G THE YEAR, THE ASSESSEE HAD MADE CERTAIN PURCHASES OF RAW MATERIAL FOR CONSTRUC TION ACTIVITY AND SINCE FOR THE TIME BEING, THE BUILDING WAS LET OUT, THE SAME WAS CAPITALIZED IN THE BUILDING ACCOUNT/FIXED ASSETS AND THE SAME WOULD BE DEBITED TO THE P& L ACCOUNT WHEN THE BUILDING WILL BE SOLD. HE HAS FURT HER CONTENDED THAT IN THE SUBSEQUENT ASSESSMENT YEARS, THE CARRYING OUT OF BU SINESS ACTIVITY OF THE ASSESSEE HAS BEEN ACCEPTED BY THE AO. HE HAS BROUG HT OUR ATTENTION TO THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2008-09 PURSUA NT TO SCRUTINY ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, WHEREIN, THE AO HAS ITA NO.7748/M/2011 M/S. KALATI CONSTRUCTIONS PVT. LTD. 3 ACCEPTED THE CARRYING OF THE BUSINESS ACTIVITY AND HAS ASSESSED THE BUSINESS INCOME OF THE ASSESSEE. SIMILARLY, THE BUSINESS ACT IVITY OF THE ASSESSEE FOR A.Y. 2010-11 HAS BEEN ACCEPTED BY THE AO. 4.1 AFTER PERUSAL OF THE RECORD, WE FIND THAT THE C LAIM OF THE ASSESSEE OF CARRYING OUT BUSINESS ACTIVITY HAS BEEN ACCEPTED IN SUBSEQUENT ASSESSMENT YEARS. EVEN, IF WE PRESUME THAT NO BUSINESS ACTIVI TY WAS CARRIED OUT DURING THE YEAR, EVEN IN THAT STAGE, BECAUSE OF THE TEMPORARY LULL DUE TO CERTAIN CIRCUMSTANCES, THE CLAIM OF EXPENDITURE WHICH WAS N ECESSARY FOR THE CONTINUITY OF THE BUSINESS, CANNOT BE DISALLOWED. HOWEVER, WE FIND THAT THE AO HAS NOT APPLIED HIS MIND AS TO THE GENUINENESS OF THE EXPEN SES. HENCE, WE RESTORE THIS ISSUE TO THE AO FOR THE LIMITED PURPOSES OF THE VER IFICATION OF THE INCURRING OF EXPENSES FOR THE MAINTENANCE/SUSTENANCE OF THE BUSI NESS OR FOR CARRYING OUT BUSINESS ACTIVITY AND THEREAFTER TO ALLOW THE EXPEN SES FOUND ACTUALLY INCURRED BY THE ASSESSEE FOR THE SAID PURPOSE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TRE ATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 22.07.201 5. SD/- SD/- (G.S. PANNU) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 30.10.2015. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI ITA NO.7748/M/2011 M/S. KALATI CONSTRUCTIONS PVT. LTD. 4 THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.