H IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H, MUMBAI , ,, , BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO. : 7495/MUM/2011 (ASSESSMENT YEAR: 2005-06) HERCULES HOISTS LTD., BAJAJ BHAWAN, 2 ND FLOOR, 226, JAMNALAL BAJAJ MARG, NARIMAN POINT, MUMBAI -400 020 .: PAN: AAACH 2706 D VS THE ASSISTANT COMMISSIONER OF INCOME TAX RANGE 10(3), AAYAKAR BHAVAN, M KARVE ROAD, MUMBAI -400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI J D MISTRI RESPONDENT BY : SHRI LOVE KUMAR !' # $% /DATE OF HEARING : 07-01-2015 &'( # $% / DATE OF PRONOUNCEMENT : 06-02-2015 ORDER , , , , : :: : PER VIVEK VARMA, JM: INSTANT APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) 22, MUMBAI, DATED 13.09.2011, WHEREIN THE CIT(A) HAS SUSTAINED THE PENALTY OF RS. 4,36,215/- LEVIED BY THE AO U /S 271(1)(C) OF THE INCOME TAX ACT, 1961. 2. THE FACTS ARE THAT THE ASSESSEE PREMISES AT 226 B ALAJI BHAWAN, NARIMAN POINT, ADMEASURING 993 SQ. FEET WAS ON LEA SE TO IDBI PRINCIPAL ASSET MANAGEMENT COMPANY LTD., WHO VAC ATED THE PREMISES ON 23.04.2004. 3. WHILE EXPLAINING THE FACTUAL POSITION WITH REGARD TO OCCUPANCY OF THE PREMISES FROM 24.04.2004 TO 31.03.2005, IT HERCULES HOISTS LTD. ITA 7945/M/2012 2 WAS EARLIER STATED, THAT IN THAT PERIOD IT WAS IN OCCUPATIO N OF MR. SHAKAR BAJAJ, CHAIRMAN OF THE COMPANY AND MR. H.A. NEVAT IA, WHOLE TIME DIRECTOR OF THE COMPANY. THIS STATEMENT WAS REVISED VIDE NOTE DATED 17.12.2007 FILED AS A CORRIGENDUM TO THE LETTER SUBMITTING THE OCCUPANCY OF THE DEMISED PREMISES BY ITS CHAIRMAN AND WHOLE TIME DIRECTOR. ACCORDING TO THIS NOTE, BOTH THESE PERSONS WERE OCCUPYING ANOTHER PREMISES BELONGING TO A GROUP COMPANY M/S BARODA INDUSTRIES PVT. LTD. AND NOT THE DEMISED PREMISES. THE NOTE AS FURNISHED TO THE CIT(A) READS AS, 3.3 THE LEARNED ASSESSING OFFICER HAS ALSO STATED THAT ASSESSEE IN LETTER DATED 17.12.2007, HAS MENTIONED THAT SINCE THE PREMISES NOT LET OUT AFTER 23.03.200 4 AND WAS OCCUPIED BY WHOLE TIME DIRECTOR SHRI H A NEVATI A AND CHAIRMAN SHRI. SHEKHAR BAJAJ. ASSESSEE IN THE SAME LETTER HAS FURTHER SUBMITTED THAT SINCE THE PREMISES REMAINED VACANT FROM 23.04.2007 TILL 31.03.2004, NOTIONAL INCOME IS NOT TAXABLE IN VIEW OF THE PROVISIONS OF SECTION 23(1)(C) OF THE INCOME TAX AC T'. IT IS SUBMITTED THAT HHL APPELLANT IS THE OWNER OF OFFICE PREMISES ADMEASURING 966 SQ. FT. AREA IN BAJAJ BHAV AN, NARIMAN POINT, MUMBAI. THESE OWNED PREMISES HAD REMAINED VACANT W.E.F. 24TH APRIL, 2004 TILL 31ST M ARCH, 2005. THESE PREMISES WERE LEASED OUT BY HHL TO IDBI - PRINCIPAL ASSET MANAGEMENT COMPANY LIMITED FROM THE YEAR 1997 ONWARDS. ACCORDINGLY, HHL OCCUPIED ANOTHE R OFFICE PREMISES OF ABOUT 334 SQ. FT. AREA BELONGING TO BARODA INDUSTRIES PRIVATE LIMITED, A GROUP COMPANY. THESE PREMISES BELONGING TO BARODA INDUSTRIES PVT. LTD. WERE USED AND OCCUPIED BY THE WHOLE-TIME DIRECTOR S HRI. H. A. NEVATIA AND THE CHAIRMAN SHRI. SHEKHAR BAJAJ, FROM TIME TO TIME, FOR THE PURPOSES OF THE BUSINESS . THE EXPENSES INCURRED BY BARODA INDUSTRIES PVT. LTD. IN RESPECT OF VARIOUS UTILITIES MADE AVAILABLE TO THE APPELLANT WERE REIMBURSED BY THE APPELLANT TO BAROD A INDUSTRIES PVT. LTD. AND NO RENT WAS PAID PAYABLE F OR THE OCCUPATION OF SUCH PREMISES. IT IS TO BE NOTED THAT THE DEDUCTION FOR SUCH EXPENSES HAS BEEN ALLOWED BY THE LEARNED ASSESSING OFFICER. IT IS TO BE NOTED THAT IN THE NOTE FURNISHED VIDE L ETTER DATED 17.12.2007 - PAPERBOOK PAGE NO. 26 - 27, IT W AS STATED THAT THESE PREMISES WERE NOT LET OUT AFTER 23.04.2004 AND WERE OCCUPIED BY THE WHOLE-TIME DIRECTOR SHRI H. A. NEVATIA AND CHAIRMAN SHRI SHEKH AR BAJAJ. HOWEVER, THIS WAS AN ERRONEOUS STATEMENT AND REALIZING THE MISTAKE ANOTHER DETAILED NOTE WAS IMMEDIATELY SUBMITTED DURING THE COURSE OF ASSESSME NT PROCEEDINGS ITSELF VIDE LETTER DATED 20U DECEMBER, 2007 PAPERBOOK PAGE NO. 28 - 30. THIS NOTE, IT SEEMS HAS BEEN CONVENIENTLY IGNORED BY THE LEARNED ASSESSING OFFICER AT THE TIME OF ASSESSMENT. HERCULES HOISTS LTD. ITA 7945/M/2012 3 THE FACT REMAINS THAT THE PREMISES BELONGING TO HHL HAD REMAINED VACANT AND THE PREMISES BELONGING TO BAROD A INDUSTRIES PVT. LTD. WERE USED AND OCCUPIED BY THE WHOLE-TIME DIRECTORS SHRI. H. A. NEVATIA AND THE CHAIRMAN SHRI. SHEKHAR BAJAJ. ACCORDINGLY, IT IS RESPECTFULLY SUBMITTED THAT THE PROVISIONS OF SECTI ON 23(1)(C) ARE CLEARLY APPLICABLE ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW. 4. THIS FACT WAS IGNORED BY THE REVENUE AUTHORITIES IN QUANTUM PROCEEDINGS AS WELL. IN THE PROCEEDINGS BEFORE TH E ITAT IN QUANTUM, THE FACT WAS ONCE AGAIN AGITATED THAT ACTUALL Y THE PREMISES REMAINED VACANT FOR THE REST OF THE YEAR. ON TH IS SUBMISSION, THE ITAT HELD, 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE, THE PROPERTY IN QUESTION WAS NOT OCCUPIED BY THE WHOLE TIME DIRECTOR AND CHAIRMAN OF THE ASSESSEE COMPANY AND SINCE IT REMAINED VACANT AFTER 23-04-2004, THE PROVISIONS OF SECTION 23(1)(C) ARE CLEARLY APPLICAB LE. IN SUPPORT OF THIS CONTENTION, HE HAS RELIED ON THE DE CISION OF HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF VIVEK JAIN VS. ACIT 337 ITR 74 WHEREIN AFTER DISCUS SING THE REQUIREMENTS THAT ARE TO BE FULFILLED IN ORDER TO ATTRACT SECTION 23(1)(C), IT WAS HELD BY THE HONBLE ANDHRA PRADESH HIGH COURT THAT THE BENEFIT PROVIDED IN SEC TION 23(1)(C) HAS TO BE EXTENDED ONLY WHERE THE PROPERTY WAS LET OUT AND THE ACTUAL INCOME HAD FALLEN FROM WHAT IT WOULD HAVE BEEN HAD THE PROPERTY NOT REMAINED VACAN T. KEEPING IN VIEW THIS DECISION OF HONBLE ANDHRA PRA DESH HIGH COURT, WE FIND MERIT IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT IF THE PROPERTY WAS L ET OUT FOR THE PART OF THE YEAR AND THE SAME REMAINED VACA NT FOR THE REMAINING PART OF THAT EAR, THE BENEFIT PRO VIDED U/S 23(1)(C) IS AVAILABLE. IT IS, HOWEVER, OBSERVED THAT THE SAID BENEFIT WAS DENIED BY THE AO ON THE GROUND THA T THE PROPERTY HAD NOT REMAINED VACANT FOR THE REST O F THE PERIOD AS THE SAME WAS OCCUPIED BY THE WHOLE TIME DIRECTOR AND CHAIRMAN OF THE ASSESSEE COMPANY. BEFO RE THE LEARNED CIT(APPEALS), IT WAS SUBMITTED ON BEHAL F OF THE ASSESSEE THAT THIS POSITION WAS FACTUALLY INCOR RECT AND EVEN THE DEPRECIATION ON THE PROPERTY WAS WRONG LY CLAIMED BY THE ASSESSEE. IN THIS REGARD, THE LEARNE D CIT(APPEALS), HOWEVER, HAS NOT GIVEN ANY FINDING/CONCLUSION. WE, THEREFORE, RESTORE THIS MAT TER TO THE FILE OF THE AO FOR THE LIMITED PURPOSE OF VERIF YING THE CLAIM OF THE ASSESSEE THAT THE PROPERTY WAS NOT OCC UPIED BY ITS WHOLE TIME DIRECTOR AND CHAIRMAN AND IT HAS REMAINED VACANT AFTER 23-04-2004. IF THE CLAIM OF T HE ASSESSEE IS FOUND TO BE CORRECT ON VERIFICATION, TH E AO IS DIRECTED TO ALLOW THE BENEFIT TO THE ASSESSEE AVAIL ABLE U/S 23(1)(C). GROUND NO.1 OF THE ASSESSEES APPEAL IS ACCORDINGLY TREATED AS ALLOWED. HERCULES HOISTS LTD. ITA 7945/M/2012 4 5. THE DIRECTION AS GIVEN BY THE ITAT IS STILL UNCOMPLIED WITH. 6. HAVING HEARD THE CASE AT LENGTH AND ON GOING THROUG H THE RECORDS, WE ARE OF THE OPINION THAT SINCE THE ISSUE ON DETERMINATION OF FACTS IS STILL LYING PENDING BEFORE THE AO, A S PER THE DIRECTIONS OF THE CO-ORDINATE BENCH OF THE ITAT IN QU ANTUM PROCEEDINGS, THE INSTANT PROCEEDINGS ALSO DESERVES TO BE SET ASIDE BECAUSE THE ISSUE OF PENALTY CAN ONLY ARISE WHEN T HE FACTS ARE PRECIPITATED. 7. WE, THEREFORE, SET ASIDE THE ORDER OF CIT(A) AND RESTO RE THE PENALTY PROCEEDINGS TO THE FILE OF THE AO, WHO SHALL TAKE TH E DECISION FOR LEVY OR CANCELLING THE INITIATION OF PENALTY AFTER T HE ISSUE OF OCCUPANCY IS DECIDED ON FACTS. 8. IN THE RESULT, THE APPEAL AS FILED BY THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 06 TH FEBRUARY, 2015. SD/- SD/- (R C SHARMA) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 6 TH FEBRUARY, 2015 $/ COPY TO:- 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) THE CIT(A) -22, MUMBAI. 4) THE CIT-10, MUMBAI/CIT -10, MUMBAI. 5) *'+, $! H , , / THE D.R. H BENCH, MUMBAI. HERCULES HOISTS LTD. ITA 7945/M/2012 5 6) ,-. / COPY TO GUARD FILE. 01! / BY ORDER / / TRUE COPY / / 2 / 3 4 , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * *CHAVAN, SR.PS