ACIT, Central Circle-4, Hyderabad V. M/s.Sunder Steels Ltd, Secunderabad

ITA 796/HYD/2012

• Counselvise Citation: 79622514 RSA 2012
• Duration Of Justice: 1 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 22-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Search and seizure; Additional evidence
• Section: 143(3); 153A; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.795, 796, 797, 798, 799, 800/HYD/2012 ASSESSMENT YEARS 2004-05 TO 2009-2010. THE ACIT, CENTRAL CIRCLE-4 HYDERABAD VS. M/S. SUNDER STEELS LTD. SECUNDERABAD PAN AACCS8222K APPELLANT RESPONDENT REVENUE BY: MR. SOLGY JOSE T. KOTTARAM ASSESSEE BY: -NONE- DATE OF HEARING: 29.04.2014 DATE OF PRONOUNCEMENT: 29.04.2014 O R D E R PER B. RAMAKOTAIAH, AM: ALL THESE SIX APPEALS ARE ON SAME ISSUE AND REVENUE GROUNDS ARE ALSO SIMILAR IN ALL THE IMPUGNE D ASSESSMENT YEARS. HOWEVER, IN A.Y. 2005-06 THERE WA S AN ADDITIONAL GROUND ON A SEPARATE ISSUE. FOR THE SAKE OF CONVENIENCE, THE GROUNDS RAISED IN ITA.NO.795/HYD/2 012 FOR A.Y. 2004-05 ARE EXTRACTED AS UNDER : 2 . THE LD. CIT(A) OUGHT TO HAVE FURNISHED OPPORTUNIT Y TO THE A.O. BEFORE ADMITTING THE ADDITIONAL EVIDENCE SUBMITTED BY THE ASSESSEE UNDER RULE 46A OF THE I.T . RULES. 3. THE LD. CIT(A) OUGHT TO HAVE SUSTAINED THE TREAT MENT OF INCOME RECEIVABLE FROM LETTING OUT OF THE PROPERTY AS INCOME FROM OTHER SOURCES. 4. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT TH E ASSESSEE HAS BEEN RECEIVING LEASE RENT FOR SEVERAL YEARS FROM 2004-05 TO 2009-10. 2 ITA.NO.795 TO 800/HYD/2012 M/S.SUNDER STEELS LTD., SECUNDERABAD. 2. BRIEFLY STATED, ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF STEEL PRODUCT S SUCH AS STEEL BARS AND MS INGOTS. SEARCH AND SEIZURE PROCEE DINGS HAVE TAKEN PLACE ON 29.01.2009 ALONG WITH OTHER GROUP CA SES. CONSEQUENT TO THAT PROCEEDINGS UNDER SECTION 153A W ERE INITIATED AND ASSESSEE HAS FILED NIL INCOMES IN ALL THE YEARS. A.O. HAD GIVEN A NOTE THAT THERE WAS NO SEIZED MATE RIAL BUT HOWEVER, MADE ADDITIONS ON VARIOUS CLAIMS MADE BY T HE ASSESSEE IN THE RETURN. IN FACT, FOR A.Y. 2004-05 P ROCEEDINGS UNDER SECTION 147 WERE ALSO CONCLUDED BEFORE THE PR OCEEDINGS UNDER SECTION 153A WERE INITIATED. 2.1. THE MAIN ISSUE COMMON IN ALL THE YEARS IS WHE THER THE LEASE RENTAL INCOME RECEIVED BY THE ASSESSEE IS TO BE ASSESSED UNDER THE HEAD BUSINESS OR UNDER THE HEA D INCOME FROM OTHER SOURCES. ASSESSEE HAS LEASED OU T ITS SPONGE IRON UNIT TO M/S. SM INDUSTRIES VIDE LEASE D EED DATED 05.09.2003 AND AS PER THE SAID DEED THE LEASE WAS F OR A PERIOD OF 21 MONTHS FROM 01.04.2003 TO 31.12.2004, WITH TH E LEASE RENT OF RS.4,00,000/- PER MONTH UP TO 31.03.2004 AN D RS.5,60,000/- PER MONTH FROM 01.04.2004 TO 31.12.20 04. LATER THE LEASE SEEMS TO HAVE RENEWED. WHILE EXPLAI NING THE REASONS FOR LEASING THE SPONGE IRON UNIT, IT WAS EX PLAINED THAT COMPANY HAS BECOME SICK AND NET WORTH ERODED AND BA NK ACCOUNTS TURNED INTO NON-PERFORMING ASSETS (IN SHOR T NPA). THEREFORE, THE UNIT WAS GIVEN ON LEASE ALONG WITH P LANT AND MACHINERY, LAB, RAW MATERIAL HANDLING SECTION AND B OILERS WHICH ARE DEPRECIABLE ASSETS, INITIALLY, FOR A TEMP ORARY PERIOD, AFTER WHICH, ASSETS WERE SHOWN TO HAVE GOT BACK TO THE ASSESSEE COMPANY. SINCE THE ASSETS ARE DEPRECIABLE ASSETS USED IN THE BUSINESS OF THE ASSESSEE, THE INCOME WA S TREATED AS BUSINESS INCOME BY THE ASSESSEE AND ACCORDINGLY, RETURNS 3 ITA.NO.795 TO 800/HYD/2012 M/S.SUNDER STEELS LTD., SECUNDERABAD. WERE FILED BOTH ORIGINALLY AND ALSO CONSEQUENT TO V ARIOUS PROCEEDINGS UNDER SECTION 147 OR UNDER SECTION 153A . THE A.O. HOWEVER, WAS OF THE VIEW THAT THE INCOME CANNO T BE TREATED AS BUSINESS INCOME AND EXCLUDED THE RECEIPT S RECEIVED FROM THE BUSINESS INCOME AND TREATED IT UNDER THE H EAD OTHER SOURCES. HOWEVER, WHILE CONSIDERING THE INCOME UNDE R THE HEAD OTHER SOURCES, A.O. HAS NOT ALLOWED ANY EXPE NDITURE AND THE GROSS RECEIPTS WERE ASSESSED AS SUCH IN THE IMPUGNED ASSESSMENT YEARS. 2.2 LD. CIT(A) AFTER CONSIDERING THE FACTS OF T HE CASE AND CASE LAW ON THE ISSUE HELD THAT ACTION OF THE A.O. IS NOT CORRECT AND DIRECTED THE A.O. TO TREAT THE SAME AS INCOME F ROM BUSINESS ONLY. HIS ORDER IN PARA 4.8 IS AS UNDER : 4.8. COMING TO THE FACTS OF THE CASE, THE APPELLAN T COMPANY IS INTO THE BUSINESS OF MANUFACTURING STEEL AND MS INGOTS, AND THE SPONGE IRON DIVISION WHICH HAS BEEN LEASED OUT FOR A BRIEF PERIOD OF 21 MONTHS INCLUDING THE Y EAR UNDER REFERENCE. THE APPELLANT ALSO EXPLAINED THE BACKGRO UND OF THE COMPANY FOR WHICH SUCH BUSINESS/COMMERCIAL ASSE TS WERE LEASED OUT WHICH HAVE BEEN REVERTED BACK TO TH E COMPANY AFTER A GAP OF FEW YEARS TIME. THIS FACT CL EARLY INDICATE THAT IT WAS ONLY THE CASE OF EXPLOITATION OF BUSINESS ASSETS WHICH WERE NOT CEASED TO BE HELD BY THE APPE LLANT. FURTHER, AS INDICATED THE APPELLANT HAS KEPT THE RE LEVANT PERMITS AND LICENSE TO ITS NAME AND NEVER PARTED WI TH THEM. UNDER THE CIRCUMSTANCES, I AM OF THE CONSIDERED OPI NION THAT THE RATIO OF THE DECISION OF HONBLE HIGH COURT IN THE CASE OF GV RATTIAH & CO AS WELL AS THE PROPOSITIONS AS LAID DOWN BY THE SUPREME COURT IN THE CASE OF SULTAN BROTHERS P. LTD. VS. CIT AND UNIVERSAL PLAST LTD. VS.CIT (SUPRA) ARE AP PLICABLE IN THIS CASE AND THE INCOME RECEIVED AS LEASE RENT MAY BE ASSESSED AS BUSINESS INCOME. ON THESE LINES, THE LE ASE RENT RECEIVED BY THE APPELLANT IS HELD TO BE THE INCOME DERIVED ON EXPLOITATION OF BUSINESS ASSETS BUT NOT AS PROPERTY . ACCORDINGLY, THE ADDITION OF RS.48,00,000/- MADE BY THE A.O. TREATING THE ENTIRE LEASE RENT AS BUSINESS INC OME, WITHOUT ALLOWING THE EXPENSES RELATED TO THE SAID I NCOME, IS DELETED. HENCE, THIS GROUND OF APPEAL IS TREATED AS ALLOWED. 4 ITA.NO.795 TO 800/HYD/2012 M/S.SUNDER STEELS LTD., SECUNDERABAD. 3. REVENUE IS AGGRIEVED. WHEN THE CASES ARE POSTED FOR HEARING, NONE APPEARED ON BEHALF OF THE ASSESSE E. EVEN WHEN THE CASES ARE POSTED EARLIER, NONE APPEARED AN D NOTICES WERE SENT FOR SERVICE THROUGH D.R. AT LEAST 3 OCCAT IONS EARLIER. THERE WAS NO INFORMATION ON RECORD THAT THE NOTICES WERE SERVED BY THE REVENUE. THEREFORE, THE CASES WERE HE ARD EXPARTE ASSESSEE AND DECIDED AFTER HEARING THE LEAR NED D.R. 4. AFTER CONSIDERING THE CONTENTIONS OF THE LEARNE D D.R. AND EXAMINING THE FACTS OF THE CASE, WE AGREE WITH THE FINDINGS OF THE LD. CIT(A). THERE IS NO MERIT IN TH E REVENUE CONTENTION AS THE ACTION OF THE A.O. IN EXCLUDING I NCOME FROM BUSINESS AND ASSESSING THE SAME UNDER THE HEAD OTH ER SOURCES IS NOT PROPER. EVEN IF FOR THE SAKE OF ARG UMENT, THE INCOME IS TO BE TREATED AS INCOME FROM OTHER SOURC ES, A.O. IS DUTY BOUND TO ALLOW THE RELEVANT EXPENDITURE LIKE D EPRECIATION AND OTHER INCIDENTAL EXPENDITURE IN EARNING SUCH IN COME. HIS ACTION IN EXCLUDING THE GROSS INCOME RECEIVED WITHO UT ANY EXPENDITURE THEREON ITSELF IS NOT CORRECT. MOREOVER , ASSESSEE HAS CONTINUED TO DO BUSINESS AND PUT THE ASSETS IN PROPER WORKING CONDITION AND ALSO AS NOTED BY THE LD. CIT( A), GOT THE BASIC LICENSES ASSOCIATED WITH SUCH UNIT. WE AGREE WITH THE FINDINGS OF THE LD. CIT(A) THAT INCOME HAS TO BE CO NSIDERED AS BUSINESS INCOME. EVEN OTHERWISE, WHETHER THE INCOME WAS TREATED AS BUSINESS INCOME OR INCOME FROM OTHER SOU RCES THERE IS NO EFFECT ON COMPUTATION OF INCOME IN THIS CASE. UNLESS THE INCOME IS TAKEN UNDER THE HEAD INCOME FROM HOUSE P ROPERTY WORKING OF INCOME DOES NOT VARY WHETHER INCOME IS C ONSIDERED UNDER THE HEAD BUSINESS OR OTHER SOURCES. IN VI EW OF THIS, WE ARE OF THE OPINION THAT THERE IS NO MERIT IN THE REVENUE APPEALS IN ALL THE SIX ASSESSMENT YEARS ON THE ABOV E ISSUE. WE ALSO FIND THAT LD. CIT(A) DID NOT ADMIT ANY OF THE ADDITIONAL 5 ITA.NO.795 TO 800/HYD/2012 M/S.SUNDER STEELS LTD., SECUNDERABAD. EVIDENCE AS CONTENDED IN GROUND NO.2. ACCORDINGLY, GROUNDS ON THIS ISSUE IN ALL THE ASSESSMENT YEARS ARE REJEC TED. 5. ONE MORE ISSUE FOR A.Y. 2005-06 RAISED BY THE REVENUE IS AS UNDER : 5. THE LD. CIT(A) OUGHT TO HAVE SUSTAINED THE DISALLOWANCE MADE ON ACCOUNT OF SHARE APPLICATION MONEY. 6. THE LD. CIT(A) OUGHT NOT TO HAVE ADJUDICATED UPO N THE ISSUE OF SET OFF OF LOSSES WHEN THE ISSUE WAS NOT R AISED BY THE ASSESSEE IN THE GROUNDS OF APPEAL. 6. WHILE COMPUTING THE TAXABLE INCOME, A.O. CONSIDERED AN AMOUNT OF RS.85,73,857/- AS INCOME FR OM OTHER SOURCES STATED TO BE SHARE APPLICATION MONEY RECEIV ED TREATED AS INCOME. THIS ADDITION WAS IN FACT MADE IN THE OR IGINAL PROCEEDINGS UNDER SECTION 143(3) CONCLUDED EARLIER VIDE ORDER DATED 31.12.2007 ON WHICH, SEPARATE APPEALS WERE FI LED. SINCE THE MATTERS WERE PENDING IN APPEAL, THE ASSESSMENT HAS NOT BEEN ABATED. HOWEVER, A.O. IN THE PRESENT PROCEEDIN GS ALSO ADDED THE SAME AMOUNT. LD. CIT(A) DID NOT ADJUDICAT E THE ISSUE AS THIS ISSUE ARISES IN EARLIER PROCEEDINGS W HICH ARE PENDING FOR ADJUDICATION SEPARATELY. ASSESSEE ALSO IN THE COURSE OF WRITTEN SUBMISSIONS BEFORE THE LD. CIT(A) CONTENDED THAT THESE MATTERS WERE PENDING SEPARATELY AND THER EFORE, THEY DID NOT RAISE THE ISSUE IN THE PRESENT PROCEEDINGS. LD. CIT(A) ON NOTICING THAT THERE IS NO DISCUSSION IN THE ASSE SSMENT ORDER AND APPEAL AS REGARDS THE ADDITION OF THE ABOVE AMO UNT AND APPEAL PROCEEDINGS ARE PENDING ON THE ASSESSMENT OR DER UNDER SECTION 143(3) CONCLUDED EARLIER, HE DID NOT ADJUDI CATE THE ISSUE. FURTHER, HE DIRECTED THE A.O. TO ADJUST OTHE R INCOME AGAINST THE CARRIED FORWARD DEPRECIATION LOSSES, PE NDING OUTCOME OF THE APPEAL AGAINST THE ORIGINAL ASSESSME NT ORDER. 6 ITA.NO.795 TO 800/HYD/2012 M/S.SUNDER STEELS LTD., SECUNDERABAD. 7. WE ARE UNABLE TO UNDERSTAND THE GRIEVANCE OF TH E REVENUE ON THE ABOVE ISSUE. WHEN THE ISSUE DOES NOT ARISE OUT OF THE PRESENT ASSESSMENT ORDER AND SINCE THE LD. C IT(A) HIMSELF RECORDS THAT THIS ISSUE WAS TO BE CONSIDERE D SEPARATELY IN ANOTHER PROCEEDING, RAISING THE GROUNDS BY THE R EVENUE ITSELF ON THIS ISSUE IS INFRUCTUOUS. ACCORDINGLY, T HEY ARE DISMISSED. 8. IN THE RESULT, ALL THE APPEALS OF REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.04.2014. SD/- SD/- (SAKTIJIT DEY) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 29 TH APRIL, 2014 VBP/- COPY TO : 1. ACIT, CENTRAL CIRCLE-4, HYDERABAD. 2. M/S. SUNDER STEELS LTD. 1-7-228/44, U.B. COMPLEX , PARADISE CIRCLE, SECUNDERABAD. 3. CIT(A)-VII, HYDERABAD 4. CIT, (CENTRAL), HYDERABAD 5. D.R. ITAT, B BENCH, HYDERABAD.