MILAN PLAST PVT. LTD., MUMBAI V. D.C.I.T. 10(2)(2), MUMBAI

ITA 788/MUM/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1126 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 08-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K BEPARI
• Assessee Lawyers: VISHWAS V MAHANDALE

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'SMC' BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.788/MUM/2018 (ASSESSMENT YEAR:2009-10) M/S. MILAN PLAST PVT. LTD. B-16, NAND BHUVAN INDL. ESTATE MAHAKALII CROSS ROAD ANDHERI (E), MUMBAI 400093 VS. D C I T - 10(2)(2) ROOM NO. 147A AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 PAN AAACM3478M APPELLANT RESPONDENT APPELLANT BY: SHRI VISHWAS V. MAHANDALE RESPONDENT BY: SHRI S.K. BEPARI DATE OF HEARING: 26.09.2018 DATE OF PRONOUNCEMENT: 30.11.2018 O R D E R PER SAKTIJIT DEY, JM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-17, MUMBAI DAT ED 28.11.2017AND IT RELATES TO ASSESSMENT YEAR (A.Y.). 2009-10. 2. THE DISPUTE IN THE PRESENT APPEAL IS CONFINED TO TH E ADDITION OF NOTIONAL RENT AMOUNTING TO ` 3,96,627/-. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A CO MPANY, IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORTING HOUS EHOLD ITEMS. FOR A.Y. UNDER DISPUTE THE ASSESSEE FILED ITS RETURN OF INCO ME ON 10.08.2009 DECLARING TOTAL INCOME AT ` 41,36,474/-.DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER (AO) NOTICED THAT A RESIDENTI AL FLAT OWNED BY THE ASSESSEE, THOUGH WAS SHOWN TO HAVE BEEN GIVEN ON RE NT, HOWEVER, NO RENTAL INCOME WAS OFFERED BY THE ASSESSEE. THE AO, THEREFORE, CALLED UPON THE ASSESSEE TO EXPLAIN WHY THE ANNUAL LETTING VALU E OF THE PROPERTY SHOULD NOT BE DETERMINED AND TREATED AS INCOME UNDER THE H EAD HOUSE PROPERTY. AS ALLEGED BY THE AO, THE ASSESSEE DID NOT OFFER AN Y REASONABLE EXPLANATION ITA NO. 788/MUM/2018 M/S. MILAN PLAST PVT. LTD. 2 ON THE QUERY RAISED BY HIM. ACCORDINGLY, THE AO NOT ICING THAT IN THE BALANCE SHEET THE VALUE OF THE SUBJECT FLAT HAS BEE N SHOWN AT ` 66,66,008/- AS ON 31.03,2009, DETERMINED THE ANNUAL LETTING VAL UE @8.5% OF THE VALUE SHOWN IN THE BALANCE SHEET, WHICH WORKED OUT TO ` 5,66,611/-. THUS, THE AO TREATED THE SAID AMOUNT AS GROSS ANNUAL LETTING VALUE UNDER SECTION 23(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER 'THE ACT'). AFTER ALLOWING THE STATUTORY DEDUCTION UNDER SECTION 24 OF THE ACT THE AO DETERMINED THE NET INCOME UNDER THE HEAD HOUSE PROPERTY AT ` 3,96,627/- AND ADDED BACK TO THE INCOME OF THE ASSESSEE. BEING AGGRIEVED OF SUCH ADDITION THE ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED CIT(A) AND THER EAFTER BEFORE THE TRIBUNAL. 4. THE TRIBUNAL, WHILE DECIDING ASSESSEES APPEAL IN I TA NO. 7187/MUM/2013 VIDE ORDER DATED 09.11.2015 RESTORED THE ISSUE TO THE AO FOR FRESH ADJUDICATION. IN THE ASSESSMENT PROCEEDIN GS IN PURSUANCE TO THE DIRECTIONS OF THE TRIBUNAL THE AO CALLED UPON THE A SSESSEE TO PRODUCE DOCUMENTARY EVIDENCES TO DEMONSTRATE THAT THE RESID ENTIAL FLAT WAS USED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. AS OBSERVED BY THE AO, THE ASSESSEE DID NOT PRODUCE AN Y COGENT EVIDENCE TO PROVE THAT THE FLAT WAS WHOLLY AND EXCLUSIVELY USED FOR ITS BUSINESS OR THE PERQUISITE VALUE OF THE FLAT WAS OFFERED TO INCOME BY THE DIRECTOR WHO WAS PROVIDED THE FLAT TOWARDS RENT FREE ACCOMMODATION. ACCORDINGLY, HE REPEATED THE ADDITION ON ACCOUNT OF INCOME FROM HOU SE PROPERTY AS WAS MADE IN THE ORIGINAL ASSESSMENT ORDER. THE ASSESSEE CHALLENGED THE ADDITION BEFORE THE LEARNED CIT(A). HOWEVER, THE LE ARNED CIT(A) ALSO SUSTAINED THE ADDITION MADE BY THE AO WITH THE OBSE RVATION THAT THE ASSESSEE FAILED TO COMPLY WITH THE DIRECTIONS OF TH E TRIBUNAL. 5. THE LEARNED AUTHORISED REPRESENTATIVE (A.R.) SUBMIT TED, THE SUBJECT FLAT WAS PROVIDED TO THE DIRECTOR AS RENT FREE ACCO MMODATION BECAUSE THE HE WAS MONITORING THE ACTIVITIES OF THE FACTORY. HE SUBMITTED, DUE TO EFFECTIVE CONTROL AND DISCHARGE OF THE BUSINESS ACT IVITIES OF THE COMPANY THE RESIDENTIAL FLAT WAS PROVIDED TO THE DIRECTOR F OR ACCOMMODATION. THE LEARNED A.R. SUBMITTED, IN THE FIRST ROUND OF LITIG ATION THE TRIBUNAL HAS ITA NO. 788/MUM/2018 M/S. MILAN PLAST PVT. LTD. 3 GIVEN A CATEGORICAL FINDING THAT THE FLAT WAS USED FOR BUSINESS PURPOSE OF THE ASSESSEE, HENCE, NO ADDITION ON ACCOUNT OF NOTI ONAL RENT CAN BE MADE. IN SUPPORT OF HIS CONTENTION THE LEARNED A.R. RELIE D UPON THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS . NEW INDIA MARITIME AGENCIES (P.) LTD. (1994) 207 ITR 392. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE (D.R.) STRO NGLY RELYING UPON THE OBSERVATIONS OF THE DEPARTMENTAL AUTHORITI ES SUBMITTED, EVEN IN THE SECOND ROUND OF LITIGATION THE ASSESSEE COULD N OT PRODUCE ANY EVIDENCE TO CONCLUSIVELY PROVE THAT THE FLAT WAS USED FOR TH E PURPOSE OF ASSESSEES BUSINESS. HE SUBMITTED, THE ASSESSEE WAS NOT ABLE T O PRODUCE ANY AGREEMENT BETWEEN THE COMPANY AND THE DIRECTOR TOWA RDS RENT FREE ACCOMMODATION PROVIDED. HE SUBMITTED, THOUGH THE TR IBUNAL HAS DIRECTED THE ASSESSEE TO PRODUCE THE RESOLUTION OF THE BOARD , NO SUCH RESOLUTION WAS PRODUCED. HE SUBMITTED THAT THE ASSESSEE EVEN C OULD NOT PROVE THAT THE DIRECTOR HAS OFFERED THE PERQUISITE VALUE IN HI S RETURN OF INCOME. THUS, HE SUBMITTED, THE ORDER OF THE CIT(A) SHOULD BE UPH ELD. 7. I HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. UNDISPUTEDLY, THIS IS THE SECOND ROUND OF L ITIGATION BEFORE THE TRIBUNAL. ON THE EARLIER OCCASION WHEN THE ASSESSEE CHALLENGED THE ADDITION OF NOTIONAL RENT MADE ON ACCOUNT OF RENT F REE ACCOMMODATION PROVIDED TO THE DIRECTOR, THE TRIBUNAL IN THE ORDER REFERRED TO ABOVE, THOUGH HAD OBSERVED THAT IF THE RESIDENTIAL HOUSE IS USED FOR THE PURPOSE OF BUSINESS NO ADDITION ON ACCOUNT OF NOTIONAL RENT CA N BE BROUGHT TO TAX IN VIEW OF THE PROVISIONS CONTAINED UNDER SECTION 22 O F THE ACT,HOWEVER, THE TRIBUNAL HAS ALSO OBSERVED THAT THE ONUS IS ON THE ASSESSEE TO DEMONSTRATE THAT THE HOUSE WAS USED FOR THE PURPOSE OF ASSESSEES BUSINESS. THE TRIBUNAL, WHILE RESTORING THE ISSUE T O THE AO, ALSO COMMENTED THAT BY NOT DEDUCTING THE TAX AT SOURCE O N THE PERQUISITE VALUE OF RENT FREE ACCOMMODATION GIVEN TO THE DIRECTOR TH E ASSESSEE HAS NOT SUBSTANTIATED ITS CLAIM OF USE OF FLAT FOR THE PURP OSE OF BUSINESS. THE TRIBUNAL HAS ALSO OBSERVED THAT NO BOARD RESOLUTION TO THAT EFFECT WAS ALSO BROUGHT TO THEIR NOTICE. THUS, FROM THE AFORESAID F ACTS IT BECOMES CLEAR THAT ITA NO. 788/MUM/2018 M/S. MILAN PLAST PVT. LTD. 4 SINCE THE ASSESSEE COULD NOT DEMONSTRATE THAT THE R ENT FREE ACCOMMODATION PROVIDED TO THE DIRECTOR WAS USED FOR THE PURPOSE OF ASSESSEES BUSINESS, TO PROVE SUCH FACT THE ISSUE W AS RESTORED TO THE AO. FROM THE MATERIALS ON RECORD IT APPEARS THAT EVEN I N THE SUBSEQUENT PROCEEDINGS IN PURSUANCE TO THE DIRECTIONS OF THE T RIBUNAL THE ASSESSEE HAS FAILED TO DEMONSTRATE THAT THE PROPERTY WAS USE D WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ASSESSEES BUSINESS THROUGH AUTHENTIC DOCUMENTARY EVIDENCES. EXCEPT FURNISHING THE BOARD RESOLUTION BEFORE THE FIRST APPELLATE AUTHORITY IN THE SECOND ROUND OF LI TIGATION THE ASSESSEE HAS NOT FURNISHED ANY OTHER EVIDENCE TO CONCLUSIVELY PR OVE THAT THE PROPERTY WAS USED FOR THE PURPOSE OF ITS BUSINESS. THAT BEIN G THE CASE, IN MY CONSIDERED OPINION THE DEPARTMENTAL AUTHORITIES WER E JUSTIFIED IN DETERMINING THE ANNUAL LETTING VALUE OF THE PROPERT Y, SINCE, IT WAS NOT USED FOR THE PURPOSE OF ASSESSEES BUSINESS. HAVING HELD SO, IT IS NOW NECESSARY TO EXAMINE WHETHER THE ADDITION MADE BY THE AO ON A DHOC BASIS IS PROPER? AS COULD BE SEEN, ON THE BASIS OF THE VALUE OF THE PROPERTY SHOWN IN THE BALANCE SHEET, THE AO HAS DETERMINED THE ANNUAL LET TING VALUE AT 8.5% OF THE VALUE SHOWN. THIS, IN MY VIEW, IS NOT PERMISSIB LE AS PER THE RATIO LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT VS. TIP TOP TYPOGRAPHY 48 TAXMANN.COM 191. ACCORDINGLY, I R ESTORE THE ISSUE TO THE AO FOR DETERMINING THE ANNUAL LETTING VALUE OF THE RESIDENTIAL HOUSE BY APPLYING THE MUNICIPALRATEABLE VALUE AS PER THE RAT IO LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF TI P TOP TYPOGRAPHY (SUPRA). BEFORE DECIDING THE ISSUE THE AO MUST AFFO RD REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER, 2018. SD/ - (SAKTIJIT DEY) JUDICIALMEMBER MUMBAI, DATED: 30 TH NOVEMBER, 2018 ITA NO. 788/MUM/2018 M/S. MILAN PLAST PVT. LTD. 5 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -17, MUMBAI 4. THE PR.CIT- 10, MUMBAI 5. THE DR, SMC BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.