Dy.CIT, Circle-1(1), Hyderabad V. M/s Asco Mobiles (P) Limited, Hyderabad

ITA 960/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74469 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 10-06-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ADAGIRI
• Assessee Lawyers: S RAMA RAO
• Keywords: Depreciation; Search and seizure
• Section: 115JB; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA.NO.960/HYD/2013 ASSESSMENT YEARS 2005-06 DCIT, CIRCLE 1(1) HYDERABAD VS. M/S. ASCO MOBILES (P) LTD., HYDERABAD PANAABCA6529Q (APPELLANT) (RESPONDENT) FOR REVENUE : MR. B. YADAGIRI FOR ASSESSEE : MR. S. RAMA RAO DATE OF HEARING : 02.01.2014 DATE OF PRONOUNCEMENT : 08.01.2014 ORDER PER B. RAMAKOTAIAH, A.M. THIS APPEAL FILED BY REVENUE IS AGAINST THE ORDE R OF THE CIT(A)-V, HYDERABAD DATED 21.02.2013. THE REVEN UE HAS RAISED THE FOLLOWING TWO MATERIAL GROUNDS : 2. THE LEARNED CIT(A) ERRED ALLOWING RELIEF BY HOLDING THAT THE INCOME IS NOT ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 3. THE LEARNED CIT(A) OUGHT TO HAVE CONFIRMED THE ACTION OF THE ASSESSING OFFICER IN TREATING THE INCOME DERIVED FROM SUB LETTING OF THE PROPERTY AS INCOME FROM HOUSE PROPERTY AND IN THE ALTERNATIVE SHOULD HAVE DIRECTED TO TREAT THE SAME AS INCOME UNDER THE HEAD OTHER SOURCE. 2. BRIEFLY STATED, ASSESSEE COMPANY FILED ITS RETUR N OF INCOME FOR THE ASSESSMENT YEAR 2005-2006 ON 30.10.2 005 ADMITTING NIL INCOME AFTER SETTING OFF BROUGHT FORW ARD LOSSES 2 ITA.NO.960/HYD/2013 M/S. ASCO MOBILES (P) LTD. HYDERABAD UNDER THE NORMAL PROVISIONS AND AT RS.23,49,510/- UNDER SECTION 115JB OF THE I.T. ACT, 1961. AS SEEN FROM T HE ANNUAL REPORT, THE ASSESSEE HAD ABOUT RS.108.61 LAKHS TURNO VER IN ITS BUSINESS APART FROM RECEIPTS OF RS.54.07 LAKHS WHIC H INCLUDED A LEASE RENT OF RS.46.75 LAKHS. ASSESSING OFFICER ON NOTICING THAT THIS LEASE RENT WAS ON SUB-LEASE OF PROPERTY SITUAT ED AT DOOR NO.6-3-1086, RAJ BHAVAN ROAD, HYDERABAD, ASKED THE A SSESSEE WHY THE INCOME THEREON SHOULD NOT BE ASSESSED AS IN COME FROM HOUSE PROPERTY. THE ASSESSEE SUBMITTED THAT THE SAI D PROPERTY WAS TAKEN ON LEASE FROM THREE OWNERS AND THE RENT F OR THE YEAR OF RS.13,73,100/- WAS DEBITED TO THE P & L ACCOUNT. THIS PROPERTY WAS LEASED OUT TO M/S. SPICE HOSPITALITY M ANAGEMENT PVT. LTD. FOR A MONTHLY RENT OF RS.4,50,000/- INCLU DING FIXTURES AS LISTED IN ANNEXURE-1 FOR THE PURPOSE OF RUNNING FOOD COURT BAR AND RESTAURANT. IT WAS SUBMITTED THAT THIS PROP ERTY WAS TAKEN FOR ASSESSEES OWN BUSINESS UNDER LEASE SINCE 1997-98 FOR DEALERSHIP OF M/S. GENERAL MOTORS WHICH WAS HOWEVER , CANCELLED AND ACCORDINGLY, THIS PROPERTY WAS SUB-LE ASED FROM AUGUST, 2004. THEREFORE, IT WAS SUBMITTED THAT ASSE SSEE HAS TREATED THE RENTAL INCOME OF SUB-LEASE AS INCOME F ROM BUSINESS AND CLAIMED THE RENT PAID AS IN EARLIER YEARS. BUT THE A.O. HOWEVER, DID NOT ACCEPT ANY OF THE SUBMISSIONS OF T HE ASSESSEE AND SIMPLY BROUGHT TO TAX THE LEASE RENT ALONE UNDE R THE HEAD INCOME FROM HOUSE PROPERTY IN HIS BRIEF ORDER IGN ORING THE OTHER INCOME SHOWN BY THE ASSESSEE AND ALSO NOT ALL OWING THE SUB-LEASE CLAIMED. 3. THE ASSESSEE CONTENDED BEFORE THE CIT(A) STATIN G THE FACTS AND LEGAL PROPOSITIONS TO SUBMIT THAT THE LEASING OF PROPERTY IS A BUSINESS PROPOSITION AND ASSESSING OF FICERS ORDER CONTAINED SO MANY MISTAKES THAT EVEN THE ADMITTED I NCOMES 3 ITA.NO.960/HYD/2013 M/S. ASCO MOBILES (P) LTD. HYDERABAD WERE NOT ASSESSED EVEN THOUGH THE ASSESSMENT WAS RE OPENED UNDER SECTION 147. THE LEARNED CIT(A), ACCEPTED THE CONTENTIONS AND DIRECTED THE A.O. TO TREAT THE INCOME AS INCOM E FROM BUSINESS AND VIDE PARA-5 DIRECTED THE A.O. TO CONS IDER THE PETITION OF THE ASSESSEE UNDER SECTION 154 AND TAKE APPROPRIATE ACTION IN ASSESSING THE CORRECT INCOME. 4. THE LEARNED D.R. RELYING ON THE ORDER OF THE A. O. SUBMITTED THAT THE LEARNED CIT(A) DID NOT EXAMINE N ATURE OF INCOMES AND IN HIS BRIEF ORDER DIRECTED THAT THE IN COME IS TO BE ASSESSED AS INCOME FROM BUSINESS, WHEREAS, THE LE ARNED CIT(A) SHOULD HAVE DIRECTED THAT THE INCOME HAS TO BE ASSE SSED UNDER OTHER SOURCE WHEN ASSESSEE DOES NOT OWN THE PROPE RTY. THE LEARNED D.R. RELIED ON THE DECISION OF THE MUMBAI T RIBUNAL IN THE CASE OF OCEAN CITY TRADING INDIA PVT. LTD. VS. ITO 124 ITD 413 FOR THE PROPOSITION THAT TO CALL AN INCOME AS INCOME FROM BUSINESS THERE MUST BE SOME TRADE, COMMERCE OR MAN UFACTURE OR ANY ADVENTURE OF NATURE OF TRADE, COMMERCE OR MA NUFACTURE. HE SUBMITTED THAT MERELY SUB-LETTING THE PROPERTY C ANNOT BE CONSIDERED AS A BUSINESS ACTIVITY. IT WAS THE SUBMI SSION THAT THE INCOME SHOULD HAVE BEEN TREATED AS INCOME FROM OTHER SOURCES, IF NOT AS INCOME FROM HOUSE PROPERTY. 5. THE LEARNED COUNSEL WHILE ADMITTING THAT A.O. DI D NOT COMPLETE THE ASSESSMENT PROPERLY NOR EXAMINED T HE ISSUES CORRECTLY, BROUGHT TO OUR NOTICE THAT THE ADMITTED INCOMES OF THE ASSESSEE FROM THE BUSINESS WERE NOT BROUGHT TO TAX. FURTHER, IT WAS SUBMITTED THAT APPLICATION UNDER SE CTION 154 FILED BEFORE THE A.O. WAS NOT EVEN ATTENDED TO, INS PITE OF DIRECTION FROM THE LEARNED CIT(A) ON THIS ISSUE. 4 ITA.NO.960/HYD/2013 M/S. ASCO MOBILES (P) LTD. HYDERABAD 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND EXAMINED THE RECORD. ADMITTEDLY, EVEN THOUGH THE AS SESSMENT WAS REOPENED UNDER SECTION 147, THE A.O. (MR. S. SR INIVASU, CIRCLE 1(1), HYDERABAD) COMPLETED THE ASSESSMENT SO CASUALLY EVEN THE ADMITTED INCOMES WERE NOT BROUGHT TO TAX N OR THERE WAS ANY FINDING ABOUT ASSESSEES ACTIVITY OF BUSINE SS. THERE IS NO DISCUSSION THE ISSUE OF LEASE IN DETAIL. IN THE ORDER, THE A.O. SIMPLY BROUGHT THE RENTAL INCOME OF RS.46,75,000/- UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND ALLOWED ONLY 30% OF STANDARD DEDUCTION TO ARRIVE AT NET ANNUAL VALUE OF RS.32,72,500/- AND CALCULATED THE TAX THEREON, WITH OUT EVEN ALLOWING THE LEASE RENT PAID. THE ASSESSEES BUSIN ESS HAS RESULTED IN SOME PROFIT AND ALSO HAS OTHER INCOMES . EVEN THE CLAIM OF DEPRECIATION/CARRIED FORWARD DEPRECIATION WERE ALSO NOT EXAMINED. THE ORDER OF THE A.O. THEREFORE, IS FULL OF MISTAKES AND NOT ACCORDING TO FACTS AND LAW. IN SPITE OF AS SESSEE BRINGING IT TO THE NOTICE OF THE A.O. UNDER SECTION 154 OF THE ACT, NO ACTION SEEMS TO HAVE BEEN TAKEN. WE ARE AFRAID T HAT THE ORDER PER SE CANNOT BE SUSTAINED MORE SO, WHEN THE PROCEEDINGS WERE INITIATED/ REOPENED UNDER SECTION 147. WE WER E ALSO TO PLACE ON RECORD OUR UNHAPPINESS AS TO WHY THE DEPAR TMENT IS ALLOWING OFFICERS TO PASS SUCH CASUAL ORDERS AND WH Y NO ACTION HAS BEEN TAKEN EVEN BY THE LEARNED CIT(A), WHEN HE H AS CO- TERMINUS POWERS WITH THAT OF THE A.O FOR RECTIFYING / ENHANCING THE INCOMES. 7. BE THAT AS IT MAY, THE ISSUE BEFORE US IS, WH ETHER THE SUB-LEASE INCOME IS TO BE ASSESSED UNDER THE HE AD INCOME FROM BUSINESS OR INCOME FROM OTHER SOURCES. IT WAS THE CONTENTION OF THE ASSESSEE THAT THE PROPERTY WAS TA KEN FOR BUSINESS PURPOSES FROM 1997-98 AND CONSEQUENT TO 5 ITA.NO.960/HYD/2013 M/S. ASCO MOBILES (P) LTD. HYDERABAD CANCELLATION OF DEALERSHIP OF GENERAL MOTORS THE PR OPERTY WAS SUB-LEASED TO ANOTHER COMPANY BEING COMMERCIAL PROP ERTY. ASSESSEE ALSO LEASED OUT VARIOUS OTHER FURNITURE AN D FIXTURES ACCORDINGLY, THE SAME IS TO BE TREATED AS INCOME F ROM BUSINESS. THIS ASPECT REQUIRES EXAMINATION OF LEASE AGREEMENT FROM THE ORIGINAL OWNERS BY THE ASSESSEE-COMPANY AND ALSO TH E NATURE OF ACTIVITY UNDERTAKEN BY THE ASSESSEE-COMPANY AFTER T HE PROPERTY WAS LEASED-OUT. SINCE NONE OF THESE ISSUES WERE EXA MINED, WE ARE OF THE OPINION THAT A.O. SHOULD RE-EXAMINE THE ISSUE AND DETERMINE WHETHER THE INCOME IS TO BE ASSESSED UNDE R THE HEAD BUSINESS OR UNDER OTHER SOURCES AS CONTENDED BY THE REVENUE. WE ALSO DIRECT THE A.O. TO INCLUDE OTHER IN COMES WHICH ARE NOT CONSIDERED AND ALLOW THE SET OFF OF OTHER E XPENDITURE FROM THE BUSINESS INCLUDING CARRIED FORWARD DEPRECI ATION AS PER THE PROVISIONS OF LAW. HE SHOULD ALSO GIVE A FINDIN G ABOUT THE LOSSES/ DEPRECIATION TO BE CARRIED FORWARD, IF NOT SET OFF AND THE INCOME TO BE DETERMINED UNDER SECTION 115JB OF THE ACT, WHICH THE A.O. MISSED ALTOGETHER IN THE ORDER. WITH THESE DIRECTIONS, WE SET ASIDE THE ORDERS OF AO AND CIT(A) AND RESTOR E THE ASSESSMENT TO THE FILE OF THE A.O. TO RE-DO AFRESH . GROUNDS ARE CONSIDERED AS ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 08.01. 2014. SD/- SD/- (SAKTIJIT DEY) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT ME MBER HYDERABAD, DATE 08 TH JANUARY, 2014 VBP/- 6 ITA.NO.960/HYD/2013 M/S. ASCO MOBILES (P) LTD. HYDERABAD COPY TO 1. DCIT, CIRCLE 1(1), 4 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 2. M/S. ASCO MOBILES (P) LTD., HYDERABAD C/O. S. RAMA RAO, ADVOCATE, FLAT NO.102, SHRIYAS ELEGANCE, 3-6-6 43, STREET NO.9, HIMAYATNAGAR, HYDERABAD 500 029. 3. CIT(A)-V, HYDERABAD. 4. CIT-IV, HYDERABAD 5. D.R. A BENCH, ITAT, HYDERABAD.