Ram Krishan Kulwant Rai Industries Pvt. Ltd., New Delhi V. ACIT, New Delhi

MA 131/DEL/2011

• Counselvise Citation: [2012] 123 COUNSELVISE.COM (IT) 9323 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 7 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 30-11-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2005-2006
• Appeal Filed On: 23-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: BHIM SINGH
• Assessee Lawyers: MRS INDRA BANSAL
• Keywords: Rectification of order; Fair market value

Judgement Text

MA NO. 131/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH FRIDAY (E), NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI C.M. GARG, JUDICIAL MEMBER MA NO. 131/DEL/2011 (IN ITA NO. 1803/DEL/2010) A.Y. 2005-06 RAM KRISHAN KULWANT RAI INDUSTRIES PVT. LTD., VS. A SSTT. COMMISSIONER OF INCOME GATE NO. 3, 1 ST FLOOR, TAX, CENTRAL CIRCLE-9, JEEVAN TARA BUILDING, NEW DELHI 5, PARLIAMENT STREET, NEW DELHI (PAN : AAACR 3128B) [APPELLANT] (RESPONDENT) ASSESSEE BY : MRS. INDRA BANSAL, CA DEPARTMENT BY : SH. BHIM SINGH, SR. D.R. ORDER PER SHAMIM YAHYA, AM BY WAY OF THIS MISC. APPLICATION ASSESSEE SEEKS RECT IFICATION OF MISTAKE IN THE ORDER OF THE TRIBUNAL PASSED IN ITA N O. 1803/DEL/2010 DATED 22.10.2010. THE CONCERNED ISSUE WAS ADJUDIC ATED BY THE TRIBUNAL AS UNDER:- 4. THE NEXT ISSUE RAISED IS THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE DISALLO WANCE OF THE CLAIM OF DEDUCTION OF THE RENT PAID BY THE A PPELLANT AMOUNTING TO ` 2,57,543/- TO LIC OF INDIA IN RESPECT OF OFFICE AT JEEVAN TARA BUILDING, 5, PARLIAMENT STREET, NEW DEL HI AGAINST THE AMOUNT OF LEASE RENTAL INCOME OF ` 1,44,0 00/- MA NO. 131/DEL/2011 2 RECEIVED BY IT FROM SUB-LETTING OF THE SAID OFFICE S PACE TO SUB-TENANTS. THE SAME IS LIABLE TO BE ALLOWED AS D EDUCTION AS PER THE PROVISIONS OF SECTION 57(III) OF INCOME TAX ACT, 1961. 5. ON THIS ISSUE ASSESSING OFFICER NOTED THAT AT ONE HAND ASSESSEE HAS RECEIVED LEASE RENT FROM 5, JEEVA N TARA BUILDING, PARLIAMENT STREET, NEW DELHI, AT ` 1,44,000 /-, BUT AT THE OTHER HAND RENT PAID OF ` 2,57,543/- HAS BEE N DEBITED IN THE PROFIT AND LOSS ACCOUNT AGAINST THE SAME PR OPERTY DURING THE YEAR UNDER CONSIDERATION. ASSESSING OFFI CER FURTHER NOTED THAT NO EVIDENCE, WHATSOEVER, HAVE B EEN FILED BY THE ASSESSEE WITH REGARD TO LEASE RENT REC EIVED AND RENT PAID IN RESPECT OF SAME PROPERTY. APART FROM TH E RENT PAID, OTHER EXPENSES LIKE CONVEYANCE, TRAVELLING, PROFESSIONAL CHARGES, ELECTRICITY AND WATER ETC., H AVE BEEN DEBITED IN THE PROFIT AND LOSS ACCOUNT AGAINST THE LEASE RENT RECEIPT. IN THE COMPUTATION OF INCOME, AS AGAINST LEASE INCOME FORM SUB-LETTING, VARIOUS EXPENSES HAVE BEEN CLAIMED. AFTER SETTING OFF OF BOTH LEASE INCOME A ND EXPENSES INCURRED, INCOME FROM OTHER SOURCES HAVE B EEN DECLARED AT NIL. ASSESSING OFFICER FURTHER OBSERV ED THAT IT DOES NOT ESTABLISH THAT EXPENSES ARE WHOLLY AND NECESSARILY INCURRED FOR EARNING SUCH HAVE NOT BEEN ESTABLISHED. THE GENUINENESS OF SUCH EXPENSES INCUR RED HAVE ALSO NOT BEEN PROVED WITH SUFFICIENT DOCUMENTS IN THE SHAPE OF BILLS, VOUCHERS. BOOKS OF ACCOUNTS HAVE ALSO NOT BEEN PRODUCED FOR EXAMINATION. HENCE ASSESSING OF FICER HELD THAT IN THE ABSENCE OF ANY SUPPORTING DOCUMENT S OR MA NO. 131/DEL/2011 3 AGREEMENTS, THE EXPENSES INCURRED AND RENTAL PAID FO R THE SAME PROPERTY AGAINST WHICH LEASE INCOME HAVE BEEN SHOWN IS DISALLOWED. ASSESSING OFFICER FURTHER O PINED THAT THE LEASE RENT SHOWED BY THE ASSESSEE WAS VERY LOW AND HE PROCEEDED TO ESTIMATE THE SAME AT ` 6,00,000/- PER A NNUM. HENCE, HE TREATED THE RENTAL INCOME RECEIVED UNDER T HE HEAD INCOME FROM OTHER SOURCES AND THE ANNUAL VAL UE OF THE SAME WAS ESTIMATED AT ` 6,00,000/-. HOWEVER, HE ALLOWED THE STANDARD DEDUCTION U/S 24(A) OF THE IT ACT. 6. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE ISSUE AS UNDER:- I HAVE CONSIDERED THE FACTS OF THE CASE. THE SUBMISSION OF THE APPELLANT HAS ALSO BEEN GONE THROUGH VERY CAREFULLY. ON GOING THROUGH THE SUBMISSION OF THE APPELLANT AND PERUSAL OF THE AGREEMENT IT IS VERY CLEARLY ESTABLISHED THAT THE APPELLANT IS NOT THE OWNER OF THE SAID PREMISES. THEREFORE, ANY AMOUNT RECEIVED AS LEASE RENTAL AS PER INFORMAL ARRANGEMENT CANNOT BE ASSESSED AS UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IT IS ALSO FA CT THAT THE APPELLANT HAS GIVEN THIS PREMISES TO ITS SI STER CONCERN ONLY. THE ASSESSING OFFICER HIMSELF MENTIONS THAT APPELLANT IS PAYING RENT OF ` 2,57,543 /- TO LIC FOR THE ENTIRE PREMISES AND IT IS USING PART OF THE PREMISES FOR ITS OWN BUSINESS PURPOSES ALSO. THUS I T IS VERY CLEAR THAT ONLY PART OF THE PREMISES HAS BEEN ALLOWED TO BE USED BY OTHER SISTER CONCERNS. MA NO. 131/DEL/2011 4 THEREFORE, THE RENT CHARGED FROM THEM AT ` 1,44,000/ - IS NOT UNREASONABLE. IN ANY CASE, AS HELD EARLIER, THIS LEASE RENTAL CANNOT BE TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IT CANNOT BE TAXED UNDER ANY OTHER HEAD ALSO. THEREFORE IT HAS TO BE ASSESSED U /S 56(1) OF THE ACT. FURTHER THERE IS NO CONCEPT OF ESTIMATION OF FAIR MARKET VALUE OF RENT ONCE INCOME IS ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES, THEN EXPENSES ETC. CLAIMED AGAINST THAT INCOME CAN BE ALLOWED ONLY U/S 57(III) OF THE ACT. THEREFORE, EVEN OTHERWISE THE ESTIMATION OF LEASE R ENT AT ` 6 LAKHS AS DONE BY THE ASSESSING OFFICER CANN OT BE UPHELD. HOWEVER, ONCE INCOME IS ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES, THEN EXPENSES ETC. CLAIMED AGAINST THAT INCOME CAN BE ALLOWED ONLY U/S 57(III) OF THE ACT, ONLY SUCH EXPENSES WHICH ARE LA ID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNING OF SUCH INCOME CAN BE ALLOWED. IN THE INSTANT CASE, ASSESSING OFFICER H AS OBSERVED THAT THESE EXPENSES COULD NOT BE ESTABLISHED BY THE APPELLANT AS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING THIS INCOME A ND GENUINENESS OF SUCH EXPENSES ALSO COULD NOT BE ESTABLISHED. BEFORE UNDERSIGNED ALSO NO SUCH EVIDENCES WERE PRODUCED NOR ANY EFFORTS WERE MADE TO ESTABLISH THAT EXPENSES SO CLAIMED AGAINST LEASE INCOME ARE LAID OUT WHOLLY AND EXCLUSIVELY FOR THE MA NO. 131/DEL/2011 5 PURPOSE OF EARNING OF THIS INCOME. IT IS THEREFORE, HELD THAT NO EXPENSES CAN BE ALLOWED AGAINST SUCH INCOME . THUS THE ASSESSING OFFICER IS DIRECTED TO TAX ` 1,44,000/- BEING LEASE RENTAL RECEIVED BY THE APPEL LANT SEPARATELY AS INCOME FROM OTHER SOURCES AS AGAINS T ` 4,20,000/- ASSESSED BY HIM UNDER THE HEAD INCOME FR OM HOUSE PROPERTY. THUS APPELLANT GETS RELIEF OF ` 2, 76,000/- ON THESE GROUNDS. 2. IN RESPECT OF THE AFORESAID TRIBUNALS ORDER AS SESSEE HAS FILED A MISC. APPLICATION FOR RECTIFICATION OF MISTAKE, WHICH WAS SUMMARIZED AS UNDER:- 5. THAT THE ORDER SUFFERS FROM THE MISTAKE APPARENT FROM THE RECORD IN AS MUCH AS HONBLE TRIBUNAL HAS COME THE CONCLUSION AT PARA NO. 8 AT LAST PAGE (12 TH TO 14 TH LINE) OF THE APPELLATE ORDER THAT RENT PAID BY TH E ASSESSEE FOR THE SAID PROPERTY TO LIC OF INDIA CAN ALSO BY NO STRETCH OF IMAGINATION BE CONSIDERED AS EXPENDITURE INCURRED FOR EARNING THE SAID INCOME, WITHOUT APPRECIATING THE FACT THAT THE ASSESSING OFFICER HAS HIMSELF MENTIONED AT PARA NO. 3 AT PAGE NO. 2 OF THE ASSESSMENT ORDER THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS DECLARED LEASING INCOME FROM SUB-LETTING OF 5, JEEVAN TARA BUILDING, PARLIAMENT STREET, NEW DELHI AT RS. 1,44,000/-. THE ASSESSEES OFFICE IS ALSO SITUATE D AT 5, JEEVAN TARA BUILDING, PARLIAMENT STREET, NEW DELHI AND DURING THE YEAR RENT PAID HAS BEEN DEBITED AT PROFI T MA NO. 131/DEL/2011 6 AND LOSS ACCOUNT TO THE TUNE OF RS. 2,57,543/-. A T ONE HAND LEASE RENT HAS BEEN RECEIVED IN RESPECT OF 5, JEEVAN TARA BUILDING, PARLIAMENT STREET, NEW DELHI AT RS. 1,44,000/-, BUT AT THE OTHER HAND RENT PAID OF RS. 2,57,543/- HAS BEEN DEBITED IN THE PROFIT AND LOSS ACCOUNT AGAINST THE SAME PROPERTY DURING THE YEAR UNDER CONSIDERATION. THEREFORE, THE ORDER IS LIABLE TO BE RECTIFIED UND ER SECTION 254(2) OF THE INCOME TAX ACT, 1961. 6. THAT THE ORDER SUFFERS FROM THE MISTAKE APPARENT FROM THE RECORD IN AS MUCH AS HONBLE TRIBUNAL HAS COME TO THE CONCLUSION AT PARA NO. 8 AT LAST PAGE (15 TH AND 16 TH LINE) OF THE APPELLATE ORDER THAT IT IS IN COMPREHENDIBLE AS TO HOW CAN ONE TAKE A PREMISES AT RENT OF RS. 2,57,543/- TO EARN LEASE RENTAL INCOME OF RS. 1,44,000/-, WITHOUT APPRECIATING THE FACT IT I S SUBMITTED THAT LD. COMMISSIONER OF INCOME TAX (A) HAS GIVEN THE FINDING AT PARA NO. 3.3 AT PAGE NO. 7 (LAST SECOND LINE ONWARDS OF THE C.I.T.(A) ORDER TH AT ..THE ASSESSING OFFICER HIMSELF MENTIONS THAT APPELLANT IS PAYING RENT OF RS. 2,57,547/- TO LIC F OR THE ENTIRE PREMISES AND IT IS USING PART OF THE PREMISES FOR ITS OWN BUSINESS PURPOSES ALSO. THUS IT IS VERY C LEAR THAT ONLY PART OF THE PREMISES HAS BEEN ALLOWED TO B E USED BY OTHER SISTER CONCERNS. THEREFORE, THE REN T CHARGED FROM THEM AT RS. 1,44,000/- IS NOT UNREASONABLE. MA NO. 131/DEL/2011 7 THEREFORE, THE ORDER IS LIABLE TO BE RECTIFIED UND ER SECTION 254(2) OF THE INCOME TAX ACT, 1961. 7. THAT UNDER SECTION 57(III) OF THE INCOME TAX ACT, 1961 THE DEDUCTION OF RENT PAID BY THE APPELLANT FOR TH E OFFICE SPACE SITUATED AT JEEVAN TARA BUILDING, 5, PARLIAMENT STREET, NEW DELHI IS ALLOWABLE AGAINST TH E INCOME EARNED BY THE APPELLANT FROM SUB-LETTING A P ART / PORTION OF SAID OFFICE SPACE AND USING THE REMAIN ING PORTION FOR ITS OWN OFFICE USE. 8. THAT PARA NO. 6 AND 7 ARE MISSING IN THE APPELLAT E ORDER DATED 22.10.2010 OF HONBLE TRIBUNAL RECEIVED BY THE APPELLANT. 3. WE HAVE HEARD BOTH THE COUNSEL ON THIS ISSUE A ND PERUSED THE RECORDS. WE FIND THAT SECTION 254(2) OF THE ACT MANDATES RECTIFICATION OF MISTAKE WHICH ARE APPARENT FROM RECORD. NOW CONS IDERING THE ABOVE, WE FIND THAT TRIBUNAL HAD ELABORATELY DEALT WITH THE ISSUE RAISED IN THE APPEAL. THE DISALLOWANCE OF EXPENSES WAS B ASED UPON CONCURRENT FINDING BY THE ASSESSING OFFICER & LD. COMMISSIONER OF INCOME TAX (A) THAT NO SUPPORTING WAS PROVIDED TO TREAT THE EXPENSES AS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING THE INCOME. IT HAS FURTHER BEEN FOUND BY THE AUTHORI TIES BELOW THAT NO EVIDENCE IN THIS RGARD WAS FURNISHED. HENCE, WE FIND THAT IN THIS CASE ASSESSEE IS SEEKING REVIEW OF THE ORDER IN THE GARB OF RECTIFICATION OF MISTAKE. IT IS A SETTLED LAW THAT U/S 254(2) OF THE IT ACT THE REVIEW OF THE EARLIER ORDER IS NOT PERMISSIBLE. MA NO. 131/DEL/2011 8 3.1 IN THIS REGARD WE FIND THAT HONBLE DELHI HIGH COURTS EXPOSITION ON THE SCOPE OF RECTIFICATION U/S 254(2) AS REPOR TED IN THE CASE OF RAS BIHARI BANSAL VS. C.I.T. (2007) 293 ITR 365 IS AS UNDER:- SECTION 254 OF THE INCOME TAX ACT, 1961, ENABLES T HE CONCERNED TO RECTIFY ANY MISTAKE APPARENT FROM THE RECORD. IT IS WELL SETTLED THAT AN OVERSIGHT OF A FACT CANNOT CONSTITUTE AN APPARENT MISTAKE RECTIFIABLE UNDER TH IS SECTION. SIMILARLY, FAILURE OF THE TRIBUNAL TO CONS IDER AN ARGUMENT ADVANCED BY EITHER PARTY FOR ARRIVING AT A CONCLUSION, IS NOT AN ERROR APPARENT ON RECORD, ALT HOUGH IT MAY BE AN ERROR OF JUDGMENT. THE MERE FACT THAT THE TRIBUNAL HAD NOT ALLOWED A DEDUCTION, EVEN IF THE CONCLUSION IS WRONG, WILL BE NO GROUND FOR MOVING AN APPLICATI ON UNDER SECTION 254(2) OF THE ACT. FURTHER, IN THE GARB OF AN APPLICATION FOR RECTIFICATION, THE ASSESSEE CANNOT BE PERMITTED TO REOPEN AND RE-ARGUE THE WHOLE MATTER, W HICH IS BEYOND THE SCOPE OF THE SECTION. 3.2 WE FURTHER FIND THAT HONBLE DELHI HIGH COURT DE CISION IN THE CASE OF C.I.T. VS. HINDUSTAN COCA COLA BEVERAGES P. LTD. (2007) 293 ITR 163 WHEREIN THE HONBLE HIGH COURT HAS DEALT WITH THE ISSUE AS UNDER:- UNDER SECTION 254(2) OF THE INCOME TAX ACT, 1961, THE TRIBUNAL HAS THE POWER TO RECTIFY MISTAKES IN ITS O RDER. HOWEVER, IT IS PLAIN THAT THE POWER TO RECTIFY A MIS TAKE IS NOT EQUIVALENT TO A POWER TO REVIEW OR RECALL THE ORDE R SOUGHT TO BE RECTIFIED. RECTIFICATION IS A SPECIES OF TH E LARGER CONCEPT OF REVIEW. ALTHOUGH IT IS POSSIBLE THAT TH E PREREQUISITE FOR EXERCISE OF EITHER POWER MAY BE SI MILAR (A MISTAKE APPARENT FROM THE RECORD), BY ITS VERY NATURE THE MA NO. 131/DEL/2011 9 POWER TO RECTIFY A MISTAKE CANNOT RESULT IN THE RECA LL AND REVIEW OF THE ORDER SOUGHT TO BE RECTIFIED. 4. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND PRECEDENTS, IN OUR CONSIDERED OPINION, THERE IS NO APPARENT MISTAKE ON RECORD IN THE ORDER OF THE ITAT. WE FURTHER FIND THAT ASSESSEES CLAIM THAT PARA 6 & 7 ARE MISSING IN TRIBUNALS ORDER IS FACTUALLY WRONG, THE RELEVANT ORDER IN COMPLETE FORM IS AVAILABLE IN THE TRIBUNALS FOLDER , AND THE SAME HAS ALSO BEEN REPRODUCED ABOVE. ACCORDINGLY, WE DISMISS THE MISC. APPLICATION FILED BY THE ASSESSEE. 5. IN THE RESULT, THE MISC. APPLICATION FILED BY TH E ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30/11/201 2. SD/ SD/ SD/ SD/- -- - SD/ SD/ SD/ SD/- -- - [C.M. GARG] [C.M. GARG] [C.M. GARG] [C.M. GARG] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE:- 30/11/2012 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES