KATIAWAD INVESTMENTS P. LTD, MUMBAI V. ITO WD 6(2)(4), MUMBAI

ITA 866/MUM/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3869 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 09-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRAVAN KUMAR
• Keywords: Business income; Principle of natural justice
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI J. SUDHAKAR REDDY, A.M. AND SHRI V. DUR GA RAO, J.M. ITA NO. 866/M/2009 ASSESSMENT YEAR: 2005-06 KATIAWAD INVESTMENTS P. LTD. APPELLANT 501, JOSHI CHAMBERS, BHARUCH STREET, CARNAC BUNDER, MUMBAI 400 009. (PAN AAACK2183M) VS. INCOME TAX OFFICER, RESPONDENT WARD 6(2)(4), ROOM NO. 562,, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. APPELLANT BY : MR. VIMAL PUNAMIYA RESPONDENT BY : MR. SHRAVAN KUMAR ORDER PER V. DURGA RAO, J.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF CIT(A)- VI, MUMBAI, PASSED ON 06/02/2008 FOR THE AS SESSMENT YEAR 2005-06 WHEREIN THE ASSESSEE HAS RAISED THE FOLLOWI NG GROUNDS OF APPEAL:- 1. THE LEARNED CIT(A) ERRED IN DISMISSING THE APPE AL. 2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ANNU AL LETTING VALUE. 3. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ORDER OF LEARNED AO FOR CHARGING OF INTEREST U/S 234B AND 234C OF THE IT ACT, 1961. 4. THE ORDER OF LEARNED AO IS AGAINST LAW, EQUITY, NATURAL JUSTICES AND EVIDENCE ON RECORD. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS A COMPANY ENGAGED IN DEALING IN REAL ESTATES, SHARES AND SECU RITIES. THE ASSESSEE ITA NO. 866/M/09 KATIAWAD INVESTMENTS P. LTD. 2 FILED ITS RETURN OF INCOME DECLARING INCOME OF ` . 29,474/- ON 26/10/2005. THE AO NOTICED FROM THE DETAILS OF SALE S AND OTHER INCOME FILED DURING THE COURSE OF ASSESSMENT PROCEE DINGS THAT SALES & OTHER INCOME OF ` . 5,40,000/- CREDITED TO P&L A/C IS NOTHING BUT REN T INCOME. ON BEING ASKED TO FURNISH THE DETAILS OF TH E PROPERTY GIVEN ON RENT, PROOF OF PAYMENT OF MUNICIPALITY TAXES ETC, T HE ASSESSEE FILED THE DETAILS, FROM WHICH THE AO NOTICED THAT THE ASSESSE E COMPANY HAD RECEIVED ` . 5,40,000/- FOR PROPERTY GIVEN ON LEAVE & LICENCE TO DEUSCHE BANK AC AND ABN AMRO BANK. THE ASSESSEE CLA IMED THE SAID AMOUNT AS BUSINESS INCOME AND AFTER CLAIMING VARIOU S EXPENSES, NET INCOME OF ` . 29,474/- DECLARED IN THE RETURN OF INCOME. THE AO WAS OF THE VIEW THAT THE INCOME DERIVED BY THE ASSESSEE FR OM FLATS WAS INCOME RECEIVED FROM PROPERTY AND FELL UNDER THE SP ECIFIC HEAD DESCRIBED IN SECTION 9. THE AO HELD THAT THE CHARAC TER OF THAT INCOME WAS NOT ALTERED BECAUSE IT WAS RECEIVED BY A COMPAN Y FORMED WITH THE OBJECT OF DEALING IN REAL ESTATE. THEREFORE, THE AO TREATED THE INCOME OF ` . 5,40,000/- RECEIVED BY THE ASSESSEE ON RENTS UNDE R THE HEAD INCOME FROM HOUSE PROPERTY INSTEAD OF UNDER HEAD BUSINESS INCOME AS CLAIMED BY THE ASSESSEE. THEREAFTER, THE AO DETE RMINED THE ANNUAL VALUE OF THE PROPERTY AS PER THE PROVISIONS OF SECT ION 23, AT ` . 10,80,000/- AND THE INCOME FROM HOUSE PROPERTY DETE RMINED AT ` . 7,07,420/-, THE DETAILS OF WHICH WAS MENTIONED AT P AGE 5 OF HIS ASSESSMENT ORDER. THE CIT(A) CONFIRMED THE ACTION O F THE ASSESSING OFFICER. 3. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. THE POINTS OF CONTENTION IN THI S APPEAL ARE THE TREATMENT OF INCOME FROM RENT INCOME, I.E., WHETHER THE SAME BE TREATED AS INCOME FROM HOUSE PROPERTY OR AS BUSIN ESS INCOME AND THE ADDITION ON ACCOUNT OF NOTIONAL INCOME OF RENT DISREGARDING THE ACTUAL AMOUNT OF RENT RECEIVED. IT IS AN ADMITTED F ACT THAT THE ASSESSEE IS A OWNER OF FLATS, WHICH WERE LET OUT AN D THE ASSESSEE RECEIVED INCOME OF ` . 5,40,000/- AS RENT. THE SUBMISSIONS OF THE ITA NO. 866/M/09 KATIAWAD INVESTMENTS P. LTD. 3 ASSESSEE BEFORE THE AO ARE THAT THE ASSESSEE IS IN THE BUSINESS OF DEALING IN SHARES AND IN REAL ESTATE BUSINESS. ACCO RDING TO THE ASSESSEE, THE INCOME RECEIVED BY THE ASSESSEE BY LE TTING OUT THE PREMISES IS A BUSINESS INCOME. IT IS NOT CLEAR FROM THE RECORD WHAT IS THE INCOME OF THE ASSESSEE FROM DEALING IN SHARES A S WELL AS FROM DEALING IN REAL ESTATE. WE FIND THAT THE ASSESSEE H AS SHOWN ONLY THE INCOME OF ` . 5,40,000/- FROM RENTS. IN THESE CIRCUMSTANCES, WE DEEM IT FIT AND PROPER TO REMIT THE ISSUE BACK TO THE FI LE OF THE AO WITH A DIRECTION TO EXAMINE THE ENTIRE FACTS OF THE CASE A ND THE NATURE OF THE BUSINESS ACTIVITIES CARRIED BY THE ASSESSEE AND DEC IDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER PROVIDING REASONABLE O PPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE DO SO. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TRE ATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF NOVEMBER, 2010. SD/- SD/- (J. SUDHAKAR REDDY) (V . DURGA RAO) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI, DATED: 12 TH NOVEMBER, 2010 ITA NO. 866/M/09 KATIAWAD INVESTMENTS P. LTD. 4 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, A BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI. KV