Sri Saptagiri Realtors, Hyd, Hyderabad V. ITO, Ward-9(1), Hyd, Hyderabad

ITA 942/HYD/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2345 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 27-04-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 22-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N SWAPNA
• Assessee Lawyers: N ARVIND
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ITA NO. 942/HYD/2016 ASSESSMENT YEAR: 2010-11 M/S. SRI SAPTAGIRI REALTORS, HYDERABAD. PAN ABIFS8343P VS. INCOME-TAX OFFICER, WARD 9(1), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI N. ARVIND REVENUE BY : SMT. N. SWAPNA DATE OF HEARING : 05-07-2017 DATE OF PRONOUNCEMENT : 07-07-2017 ORDER PER D.S. SUNDER SINGH, A.M: ALL THE GROUNDS IN THIS APPEAL ARE RELATED TO ASSESSMENT OF TOTAL INCOME UNDER THE HEAD BUSINESS INCOME AGAINST THE ADMISSION OF INCOME UNDER THE HEAD INCOME FROM PROPERTY. 1. THE ORDERS OF THE CIT(A) VII, HYDERABAD IS WRONG IN LAW AND ON FACTS OF THE CASE. 2. THE CIT(A) VII ERRED IN CONFIRMING THE ADDITION MADE BY THE A.O AMOUNTING TO RS. 5,34,017/- AS THE INCOME PERTAINS TO BUSINESS INCOME INSTEAD OF HOUSE PROPERTY INCOME. 3. IN VIEW OF THE AFORESAID GROUNDS ANY ANY OTHER GROUNDS TO BE PUT FORTH BY THE APPELLANTS AT THE TIME OF APPEAL PROCEEDINGS AND REQUESTS THAT THE ADDITION BE DELETED OR TO PASS SUITABLE ORDERS IN THE MATTER. 2 ITA NO. 942/HYD/2016 M/S SRI SAPTAGIRI REALTORS., HYDERABAD. 2. ASSESSEE IS DERIVING INCOME FROM LETTING OUT OF THE PROPERTIES. FOR THE A.Y 2010-11, THE ASSESSEE FILED RETURN OF INCOME ADMITTING TOTAL INCOME OF RS. 12,64,664/- UNDER THE HEAD INCOME FROM PROPERTY. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT AND THE TOTAL INCOME WAS DETERMINED AT RS. 17,98,681/- HOLDING THE INCOME AS BUSINESS INCOME. DURING THE ASSESSMENT PROCEEDINGS, THE A.O NOTICED THAT THE ASSESSEE HAS TAKEN THE PREMISES ON LEASE AND SUB-LET THE SAME TO OTHERS AFTER MAKING SOME SMALL MODIFICATIONS. THE PARTNERSHIP DEED ALSO SHOWS ONE OF THE ACTIVITIES OF THE ASSESSEES BUSINESS IS TO ACQUIRE THE LANDS ON LEASE, TO ACQUIRE LEASE HOLD RIGHTS OF THE PROPERTIES AND LETTING OUT THE PROPERTIES OR SUB-LEASING OF THE LEASE HOLDING RIGHTS TAKEN BY THE ASSESSEE, APART FROM THE OTHER ACTIVITIES OF BUILDERS, DEVELOPMENT AND OTHER REAL-ESTATE RELATED ACTIVITIES. IN THIS CASE, THE ASSESSEE HAS ACQUIRED LEASE HOLD RIGHTS OF SHOP NO. 42, MAHBOOB MANSION, HYDERABAD ON LEASE AND LET OUT THE SAME TO OTHERS NAMELY (I) M/S. AIRCEL LTD., (II) SUMAN CHIT FUNDS P LTD., (III) STYLE SPA FURNITURE LTD., AND (IV) BIRLA SUN LIFE INSURANCE AND RECEIVED THE RENTS OF RS. 17,80,056/-, WHICH WAS ASSESSED AS INCOME FROM BUSINESS BY AO. THE ASSESSEE WENT ON APPEAL BEFORE THE FIRST APPELLATE AUTHORITY, BUT NONE APPEARED BEFORE THE CIT (A). 3. LD. CIT(A) DISMISSED THE APPEAL EX-PARTE AND CONFIRMED THE ORDER OF THE A.O. 3 ITA NO. 942/HYD/2016 M/S SRI SAPTAGIRI REALTORS., HYDERABAD. 4. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE FILED THE PRESENT APPEAL BEFORE US. 5. LD AR, APPEARING FOR THE ASSESSEE, ARGUED THAT THE ASSESSEE WAS RECEIVING THE RENTS BY SUB-LEASING THE PROPERTIES AND THE SAME WERE ASSESSED AS INCOME FROM THE PROPERTY FOR THE EARLIER YEARS, WHICH WAS ACCEPTED BY THE DEPARTMENT. IN THE YEAR UNDER CONSIDERATION, THE A.O TAKEN U-TURN AND HELD THE RENTAL INCOME AS INCOME FROM PROPERTY. IN THIS REGARD, LD. AR RELIED ON THE DECISION OF ITAT, DELHI BENCH IN THE CASE OF M/S AB HOTELS LTD. V. ASST. CIT (2015) 64 (II) ITCL 588 (DEL A TRIB): 2015 TAXPUB (DT) 1950 (DEL A- TRIB). 6. ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 7. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PLACED ON RECORD. THE ASSESSEE HAS TAKEN THE PROPERTY ON LEASE AND MADE CERTAIN MODIFICATIONS AND LET OUT THE (SUBLEASE/SUBLETS)) SAME TO THE VARIOUS OTHER TENANTS. THE PARTNERSHIP DEED SUPPORTS THE ASSESSEES ACTIVITY AS BUSINESS ACTIVITY. HOWEVER, THE ASSESSEE HAS ADMITTED THE INCOME UNDER THE HEAD INCOME FROM PROPERTY AND THE SAME WAS ACCEPTED BY THE DEPARTMENT FOR THE EARLIER YEARS U/S 143(1) BUT NO ASSESSMENT WAS MADE U/S 143(3) OF THE IT ACT. THERE WAS NO OCCASION FOR THE DEPARTMENT TO EXAMINE THE FACTS OF THE CASE IN THE EARLIER YEARS. AS PER THE INCOME TAX ACT, IF THE ASSESSEE, BEING 4 ITA NO. 942/HYD/2016 M/S SRI SAPTAGIRI REALTORS., HYDERABAD. OWNER OF THE PROPERTY AND NOT CARRYING ON ANY BUSINESS OR PROFESSION FROM THE SAID PREMISES, THE RENTAL INCOME DERIVED FROM SUCH PROPERTY IS REQUIRED TO BE ASSESSED AS INCOME FROM PROPERTY. ASSESSEE SHOULD BE THE OWNER OF THE PROPERTY FOR ASSESSMENT OF INCOME UNDER THE HEAD INCOME FORM PROPERTY. IN THIS CASE, THE ASSESSEE HAS NOT PLACED THE SALE DEEDS OR LEASE DEEDS FROM THE OWNER OF THE PROPERTY, WITH REGARD TO THE PERIOD OF LEASE TAKEN. WHETHER THE ASSESSEE CAN BE TREATED AS OWNER OR NOT AND THAT THE INCOME REQUIRED TO BE ASSESSED INCOME FROM PROPERTY OR UNDER THE HEAD BUSINESS INCOME WAS NOT EXAMINED BY THE CIT(A) DUE TO NON-RESPONSE OF THE ASSESSEE. DURING THE APPEAL HEARING, THE LD. AR SUBMITTED THAT THE ASSESSEE COULD NOT ATTEND BEFORE THE CIT(A) DUE TO PROLONGED ILL HEALTH. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT ONE MORE OPPORTUNITY SHOULD BE GIVEN TO THE ASSESSEE TO EXAMINE WHETHER THE ASSESSEES INCOME SHOULD BE ASSESSED AS INCOME FROM PROPERTY OR BUSINESS AFTER VERIFYING THE COMPLETE DOCUMENTS AND EVIDENCES. WE ARE OF THE CONSIDERED OPINION THAT THE ISSUES INVOLVED IN THIS APPEAL ARE REQUIRED TO BE REMITTED TO THE FILE OF CIT(A) TO EXAMINE THE FACTS AND CONDITIONS OF THE RELEVANT LEASE DEEDS TAKEN BY THE ASSESSEE AND LEASE DEEDS ENTERED INTO BY THE ASSESSEE, WITH REGARD TO SUB-LETTING OF THE PROPERTIES AND DECIDE THE ISSUE. ACCORDINGLY, THE ORDERS OF THE LD.CIT(A) ARE SET A SIDE AND THE ENTIRE ISSUE IS REMITTED BACK TO THE FILE OF THE CIT(A) TO DECIDE THE ISSUE AFRESH ON MERITS THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 5 ITA NO. 942/HYD/2016 M/S SRI SAPTAGIRI REALTORS., HYDERABAD. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 07 TH JULY, 2017. SD/- SD/- (V. DURGA RAO) (D.S. SUNDER SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 07 TH JULY, 2017. KRK 1 M/S SRI SAPTAGIRI REALTORS C/O N. NAGARAJU & A. ARVIND, ADVOCATE & TAX CONSULTANT, FLAT NO. 12, MANOHAR APTS, VIDYANAGAR, HYDERABAD-44. 2 ITO, WARD NO. 9(1), HYDERABAD. 3 CIT(A)-7, HYDERABAD. 4 THE PR. COMMISSIONER OF INCOME TAX, RANGE-7, HYDERABAD. 5 THE DR, ITAT HYDERABAD 6 GUARD FILE