CHAWLA TRADE & INVESTMENT P. LTD, MUMBAI V. ITO WD 6(2)-1, MUMBAI

ITA 8498/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8691 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 07-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A PRASAD
• Assessee Lawyers: H S RAHEJA
• Keywords: Business income; Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER I.T.A. NO.8498/M/2010 ASSESSMENT YEAR:2006-2007 M/S. CHAWLA TRADE & INVESTMENT PVT. LTD., 6 A/3, NAVJIVAN SOCIETY, MORI ROAD, MAHIM (WEST), MUMBAI 400 016. PAN:AAACC2115M VS. THE ITO, WD. 6(2)-1, AAYAKAR BHAVAN, MUMBAI 400 020. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI H.S. RAHEJA RESPONDENT BY : SHRI A. PRASAD, SR. DR DATE OF HEARING: 8.10.2012 DATE OF O RDER:12.10.2012 O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 7.12.2010 IS DIRECTED AGAINST THE ORDER OF CIT (A)-12, MUMBAI DATED 20.9.2010 IN RELATION TO A SSESSMENT YEAR 2006-2007. 2. IN THIS APPEAL, THE ASSESSEE RAISED THE FOLLOWING GROUNDS: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE CIT (A) WAS NOT JUSTIFIED IN TREATING THE INCOME FROM THE COMMISSIO N INCOME FROM THE BUSINESS CENTRE AS RENTAL INCOME AND AS INCOME FROM PROPERTY AS AGAINST BUSINESS INCOME AS CLAIMED BY THE APPELLANT. THE APPELLANT SUBMITS THAT THE CIT (A) HAS ERRED IN APPLYING THE DECISION IN THE CASE OF SHAMBHU INVESTMENTS P LTD. AND OTHER DECISIONS AND IN STATING THAT IT IS IMMATERIAL THAT THE AGREEMENT IS FOR RENT OR COMMISSION, AND IN HOLDING THAT THE APPELLANT HAS RENTED THE BU ILDING TO M/S. GULSHAN IMPEX. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE CIT (A) HAS GROSSLY ERRED IN CONFIRMING THE ADDITION OF RS. 4,54,500/- BEING THE COMMISSION INCOME EARNED BY 5 SEPARATE AND INDEPEND ENTLY ASSESSED INDIVIDUALS ON THE GROUND THAT THE SAME RELATES TO A PROPERTY WHICH WAS SOLD BY THE APPELLANT. THE APPELLANT SUBMITS THAT THE CIT (A) HAS ERRED I N CONCLUDING THAT THE INCOME EARNED BY THESE 5 INDIVIDUALS RELATES TO A PROPERTY WHEREAS THE FACTS IS THAT THE SAME IS EARNED BY THEM FROM ANOTH ER PROPERTY BEING OTHER THAN THE ONE SOLD BY THE APPELLANT. THE APPELLANT SUBMITS THAT THE CIT (A) HAS FAILED TO SEE THE DIFFERENCE BETWEEN THE PROPERTY SOLD AND THE OTHER PROPERTY OW NED INDEPENDENTLY BY 2 THESE 5 INDIVIDUALS HAVING TOTALLY IGNORED THE SUBM ISSIONS THAT THE PROPERTY WHICH WAS SOLD WAS NOT HABITABLE AND UNDER REPAIRS AND THAT NO INCOME COULD HAVE BEEN EARNED FROM THE SAME. 3. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE CIT (A) HAS ERRED IN CONCLUDING THAT THE RENTAL INCOME WAS EARNED BY THE BUYERS BEFORE THE DATE OF PURCHASE, AND IGNORING THE WRITT EN SUBMISSIONS OF THE APPELLANT ON THIS ISSUE. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE CIT (A) WAS NOT JUSTIFIED IN DISALLOWING THE EXPENSES C LAIMED BY THE APPELLANT ON THE GROUND THAT THE APPELLANT DID NOT CARRY OUT ANY BUSINESS ACTIVITY. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE FILED ITS RETURN OF INCOME AND THE SAME WAS SCRUTINIZED AND THE ASSESSE D INCOME WAS DETERMINED AT RS. 5,90,390/-. IT IS THE CLAIM IN THE RETURN THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUCTION. GROUND WISE ADJUDICATION IS GIVEN IN THE FOLLOWING PARAGRAPHS. 4. GROUND NO.1 RELATES TO TAXABILITY OF COMMISSION RECEIPTS UNDER THE HEAD OF INCOME IE INCOME FROM HOUSE PROPERTY . ASSESSEE DESIRES THAT THE SAME SHOULD BE TAXED AS BUSINESS INCOME. AO REJECTED THE SAME. IN THIS REGARD, AT THE VERY OUTSET, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT GROUND NO.1 IS NOT PRESSED. HOWEVER, HE MENTIONED THAT WHILE COMPUTING THE ANNU AL LETTING VALUE OF THE PROPERTY, THE ASSESSEE MAY BE GRANTED DEDUCTION IN RESPECT OF MUNICIPAL TAXES IN RESPECT OF THE PROPERTY. WE FIND MERIT IN THE COUN SELS ARGUMENT ACCORDINGLY, THE GROUND OF THE ASSESSEE IS DISMISSED AS NOT PRESSED WITH THE CONDITION THAT WHILE COMPUTING THE ANNUAL LETTING VALUE OF THE PROPERTY, THE TAXES PAID TO MUNICIPAL AUTHORITIES MUST BE ALLOWED TO THE ASSESSEE IN ACCO RDANCE WITH LAW. ACCORDINGLY, GROUND NO.1 IS DECIDED PRO-TANTO . 5. REGARDING GROUND NOS.2 AND 3 RELATING TO CONFIRM ING THE ADDITION OF RS. 4,54,500/- BEING THE COMMISSION INCOME EARNED BY 5 SEPARATE INDIVIDUALS TAXED IN THE HANDS OF THE ASSESSEE, THE LD COUNSEL MENTIONED THAT THE ASSESSING OFFICER AS WELL AS CIT (A) HAVE GONE ON WRONG PRESUMPTION THAT THE IMPUGNED SHOPS YIELDED RENTAL INCOME IN THE YEAR UNDER CONSIDERATION IN TH E HANDS OF THE OTHER INDIVIDUALS, 3 WHICH IS NOT FACTUALLY CORRECT. TO THAT EXTENT, AS PER LD COUNSEL, THE FINDINGS OF THE AO NARRATED IN PARA 5 ARE ERRONEOUS. FURTHER, HE M ENTIONED THAT THE FINDING OF THE REVENUE AUTHORITIES THAT PART OF THE PREMISES WAS S OLD BY POSTING MERELY JOURNAL ENTRIES IN THE BOOKS OF ACCOUNTS IS ALSO ERRONEOUS AS THE SAID TRANSACTION OF SALE INVOLVES PAYMENTS OF CONSIDERATION BY WAY OF CHEQUE S. IN THIS REGARD, THE DETAILS THAT WERE FURNISHED TO THE REVENUE AUTHORITIES WERE NOT APPRECIATED BY THEM. FURTHER, HE BROUGHT TO OUR ATTENTION PARA 5.3 OF TH E IMPUGNED ORDER AND MENTIONED THAT THE SAME IS NOT A SPEAKING ONE. LD COUNSEL ME NTIONED THAT THIS ISSUE CAN BE SET ASIDE FOR REMOVAL OF THE ABOVE SAID DISCREPANCI ES AND ADJUDICATE THE ISSUE INVOLVED IN GROUND NO.2 & 3 AFRESH AFTER GRANTING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 6. ON THE OTHER HAND, LD DR RELIED ON THE ORDER OF THE AO AND CIT (A) AND MENTIONED THAT THE ASSESSEE FAILED TO EXPLAIN THE I SSUES DISCUSSED IN PARA 5.3 OF THE IMPUGNED ORDER. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE O RDERS OF THE REVENUE AUTHORITIES AND PAPERS FILED BEFORE US. IT IS THE C ASE OF THE ASSESSEE THAT THE IMPUGNED PROPERTY WAS NEVER LET OUT AS IT WAS UNUSE D PREMISES AND NOT IN A WORTHY CONDITION FOR LET OUT DURING THE YEAR. WE ALSO FIN D A MISTAKE IN THE ORDER OF THE REVENUE THAT THE PREMISES WERE SOLD FOR NO CONSIDER ATION. THESE ISSUES REQUIRE BETTER APPRECIATION BY THE REVENUE BASED ON THE EXA MINATION OF THE FACTS WHICH ARE FILED BY THE ASSESSEE. LD COUNSEL PROPOSED TO GO BA CK TO THE AO IN ORDER TO PRESENT THE FACT IN A BETTER WAY IN THE SET ASIDE PROCEEDIN GS. WE FIND MERIT IN THE COUNSELS ARGUMENT ACCORDINGLY, GROUND NOS. 2 & 3 ARE SET ASI DE. 8. REGARDING GROUND NO.4 RELATING TO THE EXISTENCE OF BUSINESS ACTIVITIES IN THE YEAR UNDER CONSIDERATTION, LD COUNSEL BROUGHT TO OU R ATTENTION PAGE 4 OF THE PAPER BOOK IE COPY OF THE PROFIT & LOSS ACCOUNT FOR THE P RECEDING YEAR. IT SHOWS THAT THE ASSESSEE EARNED A SUM OF RS. 4.4 LAKHS BY WAY OF CO NSTRUCTION RECEIPTS AND ASSESSEE EARNED NIL RECEIPTS IN THE YEAR UNDER CONS IDERATION. IN THIS REGARD, LD COUNSEL MENTIONED THAT THE ABSENCE OF CONSTRUCTION RECEIPTS IN THE YEAR UNDER 4 CONSIDERATION SHOULD NOT BE CONSTRUED AS ABSENCE OF BUSINESS IN THIS YEAR. AS PER LD COUNSEL, ABSENCE OF BUSINESS AND ABSENCE OF BUSINES S RECEIPTS ARE TWO DIFFERENT THINGS. LD COUNSEL ARGUED STATING THAT THE ASSESSE E INCURRED EXPENDITURE FOR MAINTAINING THE BUSINESS ESTABLISHMENTS AND PROCEDU RES. INCURRING OF EXPENDITURE AS DEBITED TO THE PROFIT & LOSS ACCOUNT IS AN ESSENTIA L FOR CONTINUATION OF THE BUSINESS PROCESSES AND PERSONNEL. HE FURTHER MENTIONED THAT THIS ISSUE MAY ALSO BE SET ASIDE FOR FRESH ADJUDICATION AFTER EXAMINING NOT ONLY THE BUSINESS ACTIVITIES OF THE PAST BUT ALSO THE CURRENT AND LATER YEARS BUSINESS ACTIVITI ES OF THE ASSESSEE. 9. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 10. ON HEARING BOTH THE PARTIES AND PERUSED THE ORD ERS AND THE PAPER BOOK FILED BEFORE US. PAGE 4 SHOWS THAT THE ASSESSEE REGISTERE D EARNING OF INCOME AS AGAINS NIL IN THIS YEAR. THERE IS NO DATA RELAVANT FOR THE SUB SEQUENT YEARS. IN OUR OPINION, IT IS NOT FAIR FOR THE AO TO COME TO A CONCLUSION ON THE EXISTENCE OF BUSINESS BASED ON THE DATA RELEVANT FOR THE CURRENT YEAR ALONE. IN OUR OPINION, AO NEEDS TO CONSIDER DATA FOR MULTIPLE YEARS BEFORE COMING TO THE RIGHT CONCLUSIONS. IT IS THE PRAYER OF THE ASSESSEES COUNSEL THAT HE SHALL FURNISH REQUISITE DATA TO SUPPORT HIS CASE. WE FIND THAT THIS THE PRAYER OF THE ASSESSEES COUNSEL IS F AIR AND THE ISSUE HAS TO BE EXAMINED AFTER CONSIDERING THE SAID PRINCIPLES RELA TING TO THE BUSINESS ACTIVITIES OF THE ASSESSEE. WE FIND MERIT IN THE COUNSELS REQUES T FOR SETTING ASIDE THE ISSUE FOR FRESH ADJUDICATION. ACCORDINGLY, GROUND NO.4 IS SET ASIDE . 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF OCTOBER, 2012. SD/- SD/- (D. K. AGARWAL) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOU NTANT MEMBER DATE :12.10.2012 AT :MUMBAI OKK 5 COPY TO : 1. M/S. CHAWLA TRADE & INVESTMENT P. LTD., MUMBAI. 2. ITO, WARD 6(2)-1, MUMBAI. 3. THE CIT (A), CONCERNED. 4. THE CIT CONCERNED. 5. THE DR C, BENCH, ITAT, MUMBAI. 6. GUARD FILE. // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI