SHRI PRAMOD KUMAR SETHI,INDORE vs. THE ACIT 3(1), INDORE

आदेश / O R D E R

PER MANISH BORAD, A.M: The above captioned Cross appeals for Assessment Year 2006-

07 and Revenue’s appeal for A.Y. 2007-08 are directed against the

order of Ld. Commissioner of Income Tax(Appeals)-I, Indore, (in

short ‘CIT(A)’), vide appeal No. IT-433/2008-08 & 290/2009-10

order dated 21.02.2014 which is arising out of the order u/s 143(3)

of the Income Tax Act 1961(hereinafter called as the ‘Act’) framed on

27.02.2015 by ACIT, Range-3, Indore.

common and relating to the same assessee, these were heard

together and are being disposed off by this common order for sake

of convenience and brevity.

assessee is an individual engaged in the business of real estate. He

declared income of Rs. 15,56,530/- in the return of income filed on

13.10.2006. Case selected for scrutiny. Notices u/s 143(2) and

Pramod Kumar Sethi I.T.A. No. 382 & 383/Ind/14

142(1) of the Act were duly served upon the assessee. Ld.A.O while

examining the financial statements noticed that certain unsecured

loans were taken during the year from four parties for a total

amount of Rs.1,02,00,000/- and interest of Rs.6,14,855/- was paid

thereon. In order to satisfy about the identity, genuineness and

creditworthiness of alleged unsecured loans, Ld.A.O called for

various information which were duly supplied by him. Ld.A.O

linked the alleged cash creditor companies as part of Lunkard

Group of Companies on which survey was conducted u/s 133A of

the Act on 2.5.2006 wherein it was noticed that some of the group

companies are alleged to be in the practice of providing

accommodation entries. Ld.A.O gave his finding of fact that the

alleged cash creditor companies which gave loan to the assessee

were not part of the group of companies held by the Lunkard

Group but they were in association with the Lunkard Group of

companies. Though the assessee furnished all necessary evidences

to prove the identity, genuineness and creditworthiness of the cash

credit companies by way of providing various documentary

evidences along with the confirmation letters to show that the

alleged loans were repaid during the year itself and the interest for 3

Pramod Kumar Sethi I.T.A. No. 382 & 383/Ind/14

the period for which they were held as loan was given after

deducting tax at source and all the transactions were carried out

through account payee cheque. But these evidences were not

sufficient to satisfy the Ld.A.O and he held that the alleged

unsecured loans are not genuine and made addition u/s 68 of the

Act at Rs.1,05,00,000/-. Ld.A.O also disallowed interest

expenditure of Rs. 6,14,855/- claimed on these unsecured loans.

Ld.A.O also made addition for unexplained expenditure of

Rs.5,25,000/- being the amount that the assessee may have

incurred for procuring alleged accommodation entries.

the assessee has shown rental income of Rs.26,87,635/- and has

claimed deduction u/s 24 of the Act at Rs.7,99,350/-. Ld.A.O

denied this deduction by taking a view that as the assessee is

engaged in the real estate business, the alleged rental income

should be treated as business income. After making above addition

income assessed at Rs.1,39,88,735/- in following manner;

Income as per return Rs. 15,56,530/- Add: 1. Addition U/s 68 of the I.T. Act, 1961 Rs.1,05,00,000/-

Pramod Kumar Sethi I.T.A. No. 382 & 383/Ind/14

income of Rs.27.72,380/- in the income tax return filed on

25.10.2007. The case was selected for scrutiny. Similar issue of

unsecured loan at Rs.1,25,00,000/- came up before Ld.A.O from

the same cash creditors as were there in A.Y. 2006-07. This year

the total sum was Rs.1,25,00,000/-. Taking the same view as that

for Assessment Year 2006-07, Ld.A.O made the addition for

unexplained cash credit u/s 68 of the Act and the interest on the

loans and expenditure incurred for accommodation entries at

Rs.1,25,00,000/-, Rs.5,55,875/-, and Rs.6,25,000/- respectively

thereby assessing income at Rs.1,64,53,255/- in following manner;

Income as per return Rs. 27,72,380/- Add: 1. Addition U/s 68 of the I.T. Act, 1961 Rs.1,25,00,000/-

Pramod Kumar Sethi I.T.A. No. 382 & 383/Ind/14

Assessment Year 2006-07 and 2007-08. Ld.CIT(A) deleted the

addition relating to unexplained cash credit and interest paid there

on and unexplained expenditure along with the relevant ground

raised by the assessee. However the addition for disallowance of

deduction u/s 24 claimed by the assessee on the rental income was

sustained at Rs.7,92,350/-.

Assessment Year 2006-07 and revenue appeal for Assessment Year

2007-08.

& I.T.A.No. 383/Ind/2014 raising following common ground for

Assessment Year 2006-07 and 2007-08 respectively.

“1. Deleting the addition of Rs.1,05,00,000/- & Rs.1,25,00,000/- for A.Y. 2006-07 & 2007-08 respectively. That on the facts & circumstances of the case, the identity, creditworthiness and genuineness of the creditors was not properly proven before AO and therefore the same needed to be added.

Pramod Kumar Sethi I.T.A. No. 382 & 383/Ind/14

supporting the orders of Ld.A.O submitting that the assessee failed

to prove the genuineness of the alleged unsecured loans.

of Ld.CIT(A) and also submitted that all the unsecured loans are

taken through account payee cheque and are repaid during the year

itself. Interest has been paid after deduction of tax. All the four

companies giving unsecured loans to the assessee for both the

assessment years 2006-07 and 2007-08 are duly assessed to tax

and their assessment u/s 143(3) of the Act has been framed and

the copies of the same are available at page 66-73 of the paper

book. Ld. Counsel also submitted that unsecured loans from these

parties were taken in the preceding years also but no such addition

have been made in the assessment proceedings completed by the

Pramod Kumar Sethi I.T.A. No. 382 & 383/Ind/14

revenue authorities. Ld. Counsel for the assessee also submitted

that the issue raised in the ground raised by the revenue is

squarely covered in favour of the assessee by the decision of Hon'ble

Indore Tribunal in the case of ACIT V/s Girish Kumar Sharda

(2014) 23 ITJ 701 (Trib. Indore) order dated 30.1.2014 as the very

same set of facts came up for adjudication regarding unsecured

loan taken from same companies and were held to be unexplained

cash credit u/s 68 of the Act. Ld.CIT(A) in this case deleted the

addition and when the revenue came in appeal before the Tribunal,

the issue was decided against the revenue and in favour of the

assessee holding that all the four alleged cash creditors are genuine

and the loan taken from these cash creditors are duly evidenced by

necessary documents which proves the identity, genuineness and

creditworthiness.

judgments;

Pramod Kumar Sethi I.T.A. No. 382 & 383/Ind/14

placed before us and gone through the judgments carefully.

Revenue is aggrieved with the deletion of following additions by

Ld.CIT(A) made by the A.O for Assessment Year 2006-07 and 2007-

08 for the alleged unexplained cash credit and interest paid there

on and undisclosed expenditure for procuring accommodation

entries.

S.No. Name of the Company Unsecured loans Interest paid taken 1 Trimurti Finvest P.Ltd 30,00,000/- 1,65,040/- 2 Purvi Finvest Ltd 5,00,000/- 63,782/- 3 K.K. Patel Finance Ltd 40,00,000/- 3,08,740/- 4 East West Finvest India 27,00,000/- 77,293/- Ltd 1,02,00,000/- 6,14,855/-

Addition of Rs.5,25,000/- made for Assessment Year 2006-07 for procuring loans.

S.No. Name of the Company Unsecured loans Interest paid taken 1 Trimurti Finvest P.Ltd 35,00,000/- 1,80,875/- 2 Purvi Finvest Ltd 30,00,000/- 1,25,250/- 3 K.K. Patel Finance Ltd 30,00,000/- 1,05,000/- 4 East West Finvest India 30,00,000/- 1,44,750/- Ltd 1,25,00,000/- 5,55,875/-

Pramod Kumar Sethi I.T.A. No. 382 & 383/Ind/14

Addition of Rs.6,25,000/- made for Assessment Year 2007-08 for procuring loans.

2006-07 as well as details annexed in the paper book we find that

the unsecured loans taken from the four companies is in total

Rs.1,02,00,000/- but the addition made by the A.O is at

Rs.1,05,00,000/- and this particular figure of Rs.1,05,00,000/- is

consistently appearing in all the communications as well as

appellate order and the ground of appeal raised by the revenue.

Confirmation of account submitted by the assessee reveals that the

correct figure of unsecured loan referred from the above four parties

totals Rs.1,02,00,000/- and not Rs.1,05,00,000/-.

Assessing Officer were deleted by the Ld.CIT(A) for both assessment

years 2006-07 & 2007-08 observing as follows;

“5.Gr. No. 1st of appeal is against addition of unsecured loans of Rs.l,05,00,000/--& Rs.l,25,00,000/- and interest thereon of Rs.6,14,855/- & Rs.5,55,875/- for AY 2006-07 and AY 2007-08 The addition has been made by AO on the basis of a general observation that such creditors have been found to be providing accommodation entries to a large number of persons. The 10

Pramod Kumar Sethi I.T.A. No. 382 & 383/Ind/14

confirmation letter and copy of returns of such depositors was furnished before AO, but AO was of the view that they have low income & thus they were not having creditworthiness to provide such unsecured loan. The appellant submitted that confirmation from all depositors were filed alongwith PAN numbers. All the amount were received by cheques.

Pramod Kumar Sethi I.T.A. No. 382 & 383/Ind/14

appellant. Since all the depositors have confirmed about giving such deposits, the amounts were given 'through account payee cheques, the depositors were all filing returns of income, proof of which is furnished and even bank statements of depositors were furnished and in such bank accounts of depositors, no cash deposits were seen. Further the reference of AO to survey of Lunkad group & to the term of accommodation entry provider does not help revenue's case because that survey took place in 2006 and after considering the findings of survey the Hon'ble ITAT, Indore in case of Mis Narmada Extrusion P. ltd came to conclusion that various credits provided by Lunkad group could be considered as unexplained only if name of such party appeared in the cash book impounded during survey of Lunkad group and Lunkad group failed to explain source of the same. However name of appellant do not appear in cash book impounded in survey of Lunkad Group reproduced on page 9,10 and 11 of assessment order and that is why AO did not refer to any adverse material directly implicating appellant but made a bald remark without any evidence. AO failed to examine the depositors or appellant and failed to establish that such unsecured loan transaction was a part of pre meditated plan - a smokescreen - conceived and executed with the connivance of the assessee. In these circumstances the appellant has discharged the initial onus as held in cases of M/s Kinetic Capital finance Ltd.(2013) 354 ITR 296 (Del) and Mod Creations (P) ltd (2013)354 ITR 282 (Del).

Pramod Kumar Sethi I.T.A. No. 382 & 383/Ind/14

creditors as held in case of Lovely Exports (P) ltd (2008) 216 CTR (SC) 195 and Mod Creations (P) ltd (2013) 354 ITR 282 (Del). Since appellant discharged initial onus, the onus shifted on revenue and there was no legal obligation on the appellant to produce directors of creditors before AO and if AO had any doubt about identity of share applicants despite their filing income tax returns, he could have summoned them as held in case of Victor Electrodes ltd (2010) 329 ITR 271 (Del). Where ROI (Return of Income) was filed by creditors of appellant and was accepted by AO of the creditors even u/s 143(3) of LT. Act. and payments were made through account payee cheques, genuineness of transaction cannot be doubted, AO has not conducted any enquiry into the same or has no material in his possession to show those particulars are false and cannot be acted upon, then no addition can be made in hands of appellant vi] s 68 as held in case of Gangehwari Metal P. ltd (2013) 214 Taxman 423 (Del). In this case it was noted by the Hon'ble judges that AO sat with folded hands till the appellant exhausted all the evidence or material in his possession and then came forward to merely reject the same on .the presumptions. In such an eventuality no addition can be made u/ s 68 of LT. Act.

heavy reliance on the decision of the Indore Tribunal in the case of

ACIT V/s Girish Kumar Sharda (supra) wherein similar issue of 13

Pramod Kumar Sethi I.T.A. No. 382 & 383/Ind/14

unexplained cash credit from the same set of four companies came

up for adjudication and the Tribunal dismissed the revenue’s

appeal observing as follows;

“9. Rival contentions have been considered and records perused. From the record, we found that the assessee had borrowed loans from the following parties.

Pramod Kumar Sethi I.T.A. No. 382 & 383/Ind/14

given the deposits as and when maturity of deposits received from others. M/ s. Purvi Finvest Limited, Indore, is being regular! assessed to tax. and filed confirmation of account along with the bank statement in which transaction of assessee is reflected. The address of the creditor and M/ s. East West Finvest India Limited is common and it may be possible that the' directors are common and hence signed by one person. The S-al company also engaged in the business of finance activities and they have given deposits as and when maturity of deposits received from others.

11.From the record, we also found that the Ld. Assessing Officer asked to explain the genuineness of the credits as well as identity and creditworthiness Q creditors. in response, the assessee filed confirmation from the creditors.

12.However, the Assessing Officer did not agree with the assessee's contention and added the amount u/s 68 of the Income-tax Act, 1961. By the impugned order, the Ld. CIT(A) deleted the addition by following his order in another assessee, wherein similar additions were deleted by observing that these additions were not warranted in the hands of the assessee but in the hands of the lenders. During the course of hearing, the Ld. CIT DR drew our attention to the order of the Tribunal, in the case of Asstt. CIT Vs. Narmada Extrusion Ltd. (2012) 19 ITJ 202 (Trib.-Indore), Order dated 30.12.2011, wherein the Tribunal have observed that the Ld. CIT(A) was not justified in deleting the addition on the ground that the addition is to be made in the hands of the person who has given the loan and not in the hands of the beneficiaries. It is clear from the order of the Tribunal in that order of the Ld. CIT(A) was reversed on the issue of taxability of

Pramod Kumar Sethi I.T.A. No. 382 & 383/Ind/14

the impugned amount in the hands of creditors or assessee who was beneficiaries. The Tribunal have held that amount is required to be added in the hands of the beneficiaries, thus, reasoning given by the Ld. CIT(A) was not accepted. However, in this order of Narmada Extrusions (supra), the Tribunal have also dealt with the merit of the addition and found that addition to be restricted to the extent of entries found in the material collected during the course of survey at Lunkad Group and not to the extent of entire amount of loan so taken from Lunkad Group.

13.From the record, we found that Assessing Officer has made addition in respect of the loans which were taken and even repaid by the assessee. While making the addition, following was the precise observations of the Assessing Officer :-.

"The assessee's balance sheet reflects credits amounting to Rs. 2,70,21,800/-. He asked to explain the genuineness of the credits as well as identity and creditworthiness of the creditor, in response, the assessee has filed confirmations from the said creditors, in response, the assessee has filed confirmations from the said creditors, copies of final accounts have been filed in respect of one creditor and copy of acknowledgement of return in respect of one person. The lender's names include some of the persons who are considered to be regular name lenders'. The names in question alongwith the amount shown as received from them are reflected below :-

1 M/s. K.K. Patel Fianance Ltd,Indore Rs.10,00,000/- 2 M/s. East West Finvest Ltd, Rs.35,00,000/- Indore 3 M/s Purvi Finvest Ltd, Indore Rs.29,00,000/- 4 Ms/ Trimurti Finvest Ltd, Indore Rs.61,50,000/- Total Rs.1,35,50,000/- 16

Pramod Kumar Sethi I.T.A. No. 382 & 383/Ind/14

The same wordings are given in the subsequent assessment years for making the addition of Cash Credit."

14.The Ld, CITCA) has deleted the addition by observing that addition is warranted In the hands of lenders and not in the hands of the assessee, otherwise it will amount to double addition. On merit of the addition so made b the Assessing Officer, we do not find any substance in so far as the assessee has discharged the onus casted upon a cost upon him by filing a confirmation certificate of the creditors duly signed and specifying full name, address and PAN of the creditors. In addition to the confirmation certificate the assessee has also filed the acknowledgement for filing of return of income by the creditor along with their computation of income, audited accounts, bank statements and copies of account.

15.After perusing bank statement of the creditors as placed on record, we find that no cash was deposited in the Bank prior to issuance of cheque moreover there is no cash transaction in the bank statement and we found that all the amounts are received and paid through account payee cheques.

16.As per material placed on record, we found that the Ld. Assessing Officer has not made any efforts by calling information Vis 133(6) or by issuing summon VIS 131 to any of the creditors which is evident from the, assessment order itself. Moreover, it is also clear from the assessment order that the Assessing Officer had never asked the assessee to produce the creditors.

Pramod Kumar Sethi I.T.A. No. 382 & 383/Ind/14

17.As per requirement of Section 68 the sum credited in the books of accounts can be considered to be the income of the assessee in a case where the assessee does not offer any explanation or the explanation offered by him, in the opinion of Assessing Officer is not satisfactory. The explanation of the assessee in the present case is that all these creditors are income tax assessees and their PANs have given alongwith their copy of bank account as well as preceding years. By filing these evidences, it can be said that the assessee had is charged the initial burden laid upon him under Section 68. When the particulars regarding income tax assessment and bank account, audited balance sheet duly indicating advancing of loan to the assessee, have been filed then initial burden has to be held to be discharged and then the burden shifts on the Revenue to show that what is stated or explained by the assessee is not satisfactory. No material whatsoever, has been brought on record by the Ld. Assessing Officer to show that what was explained by the assessee, was not a correct state of affairs. If any sum is found credited in the accounts of the creditors. Then the creditors may be examined so as to explain the credit so far as the source of deposit in the account of the assessee is concerned. The assessee can be considered to have explained by bringing the material on record in the shape of confirmations, bank account and income tax numbers of that person. Thus the assessee had filed ample evidence to discharge the burden cast upon him and the Ld. Assessing Officer has not brought any material on record to show that the explanation filed by the assessee, was in any manner, unsatisfactory consequent thereto the evidence filed b the assessee remain unrebutted,

18.There is no dispute to the fact that the loan taken from these 18

Pramod Kumar Sethi I.T.A. No. 382 & 383/Ind/14

creditors were were duly repaid by the assessee by account payee cheques in the Assessment Years 200.5-06 to 2007-08 i.e, much prior to the date of search carried by the Department which is evident from copies of account of these creditors.

19.After persuing the balance sheet of various lender companies as per the au ted acoounts, we found that all the parties from whom loan was taken were having substantial funds available with them to advance the money. Position of share capital, reserves and surplus cash and balance, as per the audited balance, as per the audited balance sheet with various companies were as under :

Name of the Paidup share Reserve & Cash & Bank creditor capital as on surplus as on balance as on 31st March 31st March 31st March East West 3,67,11,000/- 86,424/- 21,31,898/- Finvest India Ltd Purvi 4,47,67,000/- 63,229/- 20,62,494/- Finvest Ltd Trimurti 3,60,00,000/- 3,08,99,041/- 21,23,021/- Finvest Pvt. Ltd K.K. Patel 89,32,500/- 61,43,922/- 26,73,752/- Finance Ltd

20.Merely on the basis of returned income, the Assessing Officer jumped to the conclusion that these lenders were not having sufficient funds to advance the money to the assessee. The Ld. Assessing Officer without going through the audited accounts unnecessarily gone on the fact that these creditors are not having sufficient income to advance the money. It is settled law that the financial worth of a company could not be judged with its income but one has to see that how many funds is available

Pramod Kumar Sethi I.T.A. No. 382 & 383/Ind/14

with it in the bank account at the time of advancing loan.

21.It was also contention of Ld. Authorized Representative that the Ld. CIT(A) has rightly deleted the addition by relying on various decisions gi yen in his order in addition to that reliance was also placed on the following decision :-

(a) CIT v. Orissa Corporation P. Ltd., (1986) 159ITR 78 (SC) (1986) 52 CTR 138 in the instant case, the Hon'ble Apex Court held as under : "In this case, the assessee had given the names and address of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income tax assessees. Their index numbers were income tax assessees. Their index numbers were in the file of the Revenue. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were credit worthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do anything further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or preserve or based on no evidence. If the conclusion is based on same evidence on which a conclusion could be arrived at, no question of law as such arises."

22.Now coming to the decision of armada Extrusions Limited in IT(SS).A. Nos. 3271jndl2011 order dated 30.12.2011, as cited by the Ld. CIT DR, we found that in this case also on merit it was held that the addition should be restricted with reference to the incriminating documents found during course of survey La the

Pramod Kumar Sethi I.T.A. No. 382 & 383/Ind/14

case of Lunkad Group from 1.4.2006 to 1.5.2006. It was also observed at page 53 of the said order that the addition should be made with reference to the amount of cash found to be given by the assessee to the Lunkad Group as per incriminating documents so found at Lunkad Group during survey after giving opportunity to the assessee for cross examination. Merely presumption without any material on record to the effect that even in respect of earlier years, the assessee might have given cash to the Lunkad Group for getting unsecured loan, is not justified. In the instant case before us, the Assessing Officer could not bring out any material to suggest that any incriminating entry was found in the documents so collected by the Department from Lunkad Group which pertains to the period 1.4.2006 to 1.5.2006. It is not in dispute that all the loan transactions were through account payee cheques, confirmations were given, creditworthiness were also proved from the balance sheet. Furthermore, all the loans were also repaid by cheques, we, therefore, do not find any merit in the action of Assessing Officer for making any addition in respect of these loan transactions.

23.As the addition made U!S 68 is held to be not justified, we do not find any infirmity in the order of CIT(A) for deleting the disallowance of interest, which was based on the addition of cash credit U IS 68.

24.As we have already dealt with the issue on merit we are not going in the validity of the assessment framed U/S 153A read with Section 143(3) for making addition, where no incriminating material relating to assessment years in question were found and seized from the premises of the assessee.

Pramod Kumar Sethi I.T.A. No. 382 & 383/Ind/14

Pramod Kumar Sethi I.T.A. No. 382 & 383/Ind/14

funds for giving on credit towards interest. Identity of four companies are well established. Genuineness is duly proved by the transactions which are made through account payee cheque. All necessary details including bank statement/ financial statements, confirmation of account, PAN detail have been filed with these four companies and are placed on record at all proceedings are sufficient to prove the creditworthiness. The alleged unsecured loan of Rs.1,02,00,000/- and Rs.1,25,00,000/- were accepted during the year and were repaid also during the year which supports the contention of the assessee that the alleged loans were taken for business needs and were repaid back when the funds were available.

Pramod Kumar Sethi I.T.A. No. 382 & 383/Ind/14

Rs.1,02,00,000/- and Rs.1,25,00,000/- for alleged unsecured

loans and also deletion of disallowance of interest on such

loans at Rs.6,14,855/- andRs.5,55,815/- and also deleting the

addition for undisclosed expenditure of Rs.5,25,000/- and

Rs.6,25,000/-. We accordingly dismiss Revenue’s Ground No.1, 2 &3 for Assessment Year 2006-07 and 2007-08

respectively.

adjudication.

2006-07 and 2007-08 stands dismissed.

2006-07 being I.T.A.No.392/Ind/2014 raising following

grounds;

“1. That on the facts & circumstances of the case, the learned CIT has erred in treating the rental income earned from House property for Rs.26,87,635/- as business income and thereby confirming an addition of Rs.7,92,350/- claimed u/s 24 as a deduction”.

denying the benefit of deduction u/s 24 of the Act at

Pramod Kumar Sethi I.T.A. No. 382 & 383/Ind/14

Rs.7,92,350/- against the income earned from House property at Rs.26,87,635/-. Brief facts relevant to this issue are that the assessee is engaged in the real estate business. Some immoveable property which remains unsold are part of the closing stock. As these properties could not be sold the assessee leased them for earning rental income to various consultants. The rental income received at Rs.26,87,635/-has been shown under the head income from house property and deduction u/s 24 of the Act @30% of the rent received was claimed at Rs.7,92,350/-. Ld.A.O took a view that the main activity of the assessee is of real estate business and leased out properties were commercial complex, therefore the alleged receipt of Rs.26,87,635/- is a business receipt and no deduction is allowable u/s 24 of the Act. Appeal filed by the assessee before the Ld.CIT(A) find no favour to the assessee. 22. Now the assessee is in appeal before the Tribunal. 23. Ld. Counsel for the assessee has made following written submissions in support of his contention that the rental income from the said unsold immoveable property is being regularly shown under the head income from house property 25

Pramod Kumar Sethi I.T.A. No. 382 & 383/Ind/14

and deduction u/s 24 of the Act have been claimed

consistently. In the subsequent years also this claim has been

allowed by the revenue authorities.

Pramod Kumar Sethi I.T.A. No. 382 & 383/Ind/14

24 of Income Tax Act, 1961. However, Ld.CIT(A) upon appeal of appellant against the impugned order of Ld.AO has allowed the appeal in favour of the appellant. Also, it is important to note here that department has not appealed further in this case against the order of Ld. CIT(A). 7. That we wish to submit before this bench that even in A Y 2007-08 department has allowed the standard deduction of 30% on rental income and has not raised this issue during the course of assessment proceedings. 8. Ld. Counsel for the assesee relied on following judgments; i) East India Housing and Land Development Trust Ltd. V(1961) 42 ITR 49 (S.C) ii) Azimganj Estate Pvt. Ltd Vs CIT (2013) 352 ITR 82(Cal) iii) New Delhi Hotels Ltd. V(2014) 360 ITR 187 (Del)

24 Per contra Ld. Departmental Representative vehemently

argued and supporting the orders of both the lower

authorities.

placed before us. The sole grievance of the assessee relates to

the eligibility of the deduction u/s 24 of the Act @30% from

rental income from house property. The assessee is engaged

in the business of real estate and some part of the constructed

area which remain unsold were being rented out. The rented

immoveable properties are included in the closing stock of the

Pramod Kumar Sethi I.T.A. No. 382 & 383/Ind/14

company. Now whether the rental income received from such immovable properties which are part of the business stock are to be taken as business income or from house property. The above question needs to be adjudicated in the light of judicial pronouncements of Hon'ble Apex Court in the case of East India Housing and Land Development Trust Ltd (Supra) wherein Hon'ble Apex Court has categorically held that “the income derived by the company from shops and stalls was income received from house property and fell under the specific head described in Section 9. The character of that income was not altered because it was received by the company formed with the object of developing and setting up markets”. 26. The Hon'ble High Court of Calcutta in the case of Azimganj Estate Pvt. Ltd Vs CIT held that “in the case of property builder and developer assessee-rental income from unsold flats are to be taken as income from house property”. 27. Hon'ble High Court of Delhi in the case of New Delhi Hotels Ltd has also held that “in case of property builder and developer assessee rental income from unsold flats shown as 28

Pramod Kumar Sethi I.T.A. No. 382 & 383/Ind/14

stock in trade is assessable as income from house property”. 28. We therefore respectfully following above judgment and examining the facts of instant appeal are of the considered view that the alleged receipts of Rs.26,87,635/- are purely rental income from renting out unsold property and manner of earning such income is purely taxable under the head income from house property and by no canon can be treated as business income and therefore the assessee is eligible for deduction u/s 24 of the Act @30% of the rental income which in this case is Rs.7,92,350/-. The plea of the assessee further finds support that in the subsequent years this claim of the assessee of showing rental income of house property and claim of deduction u/s 24 of the Act has been consistently allowed by the revenue authorities. We therefore set aside the finding of Ld.CIT(A) for Assessment Year 2006-07 and allow the sole ground No.1 raised by the assessee. 29. Ground No.2 being general in nature which needs no adjudication.

Pramod Kumar Sethi I.T.A. No. 382 & 383/Ind/14

383/Ind/2014 are dismissed and I.T.A.No.392/Ind/2014 filed by

the assessee is allowed.

Order was pronounced in the open court on 06.11.2018.

Sd/- Sd/-

(KUL BHARAT) (MANISH BORAD) JUDICIALMEMBER ACCOUNTANTMEMBER

Indore; �दनांक Dated : 06 /11/2018

/Dev Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file.

By order Asstt. Registrar,I.T.A.T.,Indore