DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 3(1), VISAKHAPATNAM vs. PRABHU KISHORE VALLURUPALLI, VISAKHAPATNAM

The appeal in ITA No. 366/VIZ/2024 filed by the assessee against order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal centre, Delhi [hereinafter in short “Ld.CIT(A)”] vide DIN & Order No.ITBA/NFAC/S/250/2024-25/1067196352(1) dated 31.07.2024 for the A.Y.2018-19 arising out of order passed under section 143(3) of the Income Tax Act, 1961 (in short ‘Act’) dated 29.09.2021. The revenue has filed cross appeal in ITA No. 419/VIZ/2024.

Since both the appeals are inter-connected, these appeals are clubbed, heard and a consolidated order being passed. First, we take up the assessee’s appeal in ITA No. 366/VIZ/2024.

Brief facts of the case are that, assessee being an individual e-filed its return of income on 31.10.2018 admitting a total income of Rs. 13,91,84,930/-. The case was selected for scrutiny under CASS and statutory notices under section 143(2) and 142(1) of the Act were issued along with questionnaire and served on the assessee from time to time. In response, assessee furnished information / documents through ITBA system from time to time. Ld. AO on

Further, Ld. AO also observed that assessee has not deducted tax at source on various expenditures and accordingly issued a show-cause notice dated 13.06.2021 requiring the assessee to show cause why 10% of the total expenditure as stated in Para No. 6.1 of the order of the Ld. AO shall not be disallowed which amounts to Rs.5,00,00,000/-. The assessee submitted his reply on 17.07.2021. After carefully perusing the Assessee’s submissions, the Ld. AO did not accept the explanations provided by the assessee thereby

Further Ld. AO also proceeded to add an amount of Rs. 29,28,802/- under the head “income from house property” stating that the assessee has shown rental income as Nil in the Profit & Loss Account, inspite of earning rental income from several properties.

Being aggrieved by the above additions, assessee filed appeal before Ld.CIT(A). Assessee reiterated the submissions made before Ld. AO. Ld.CIT(A) called for Remand Report from the Jurisdictional Assessing Officer which was received on 26.02.2023. Remand Report was sent to the assessee for its rebuttal. Assessee filed its response on Remand Report on 14.08.2023. Ld.CIT(A) considering the Remand Report and the reply furnished by the assessee, upheld the addition of Rs. 1.71 crores on which no TDS has been made as declared by the assessee and reproduced in the order of the Ld.AO as follows:

Further, Ld. CIT(A) considering the submissions on the addition to the rental income, Ld. CIT(A) found that income has been considered in the computation of total income and partly allowed by confirming addition of Rs.8,21,741/- which assessee claimed that the property was vacant for the period of nine months.

With respect to the addition of Rs.6.51 crores, the Jurisdictional Assessing officer has mentioned in his Remand Report that since the assets consist of investment made in various proprietary concerns and there are no assets which can be termed as non-business assets and hence requested the Ld.CIT(A) to grant relief to the extent of Rs.6.51 crores. Ld. CIT(A) considering the reply to the Remand Report deleted the addition of Rs.6.51 crores. Thus, the appeal made by the assessee was partly allowed by the Ld.CIT(A).

Ground Nos. 1 & 4 are general in nature and needs no adjudication.

Ground No. 2 is with respect to sustaining of Rs. 1,71,00,000/- by the Ld.CIT(A) towards adhoc disallowance of expenditure comprising of Travelling & Conveyance for not deducting tax at source. On this issue Ld.Authorised Representative [hereinafter “Ld.AR”] submitted that the assessee has not deducted TDS on various expenditures since it is well below the threshold as prescribed under the respective sections. He further submitted that copies of the bills were made available before Ld. AO which was not considered by the Ld.AO. Ld. AO without any basis proceeded to make an adhoc disallowance of Rs. 5,00,00,000/- on the basis of assumptions. He therefore pleaded that the

Per contra, Ld. Departmental Representative [hereinafter in short “Ld.DR”] fully relied on the orders of the Ld. AO.

We have heard both the sides and perused the material available on record. Assessee has incurred following expenses as detailed below : -

The assessee has given party wise details of only such parties from whom TDS was deducted whereas assessee has failed to provide party wise details for the remaining amounts on which TDS was not deducted. Ld. AO considering the non-deduction portion as suspectful, therefore proceeded to consider the

Ground No. 3 is with respect to addition of Rs. 8,21,741/-. Ld.AR submitted that rental income for the property was offered for three months and for the balance nine months assessee has claimed vacancy allowance as permissible under the Act. Ld.AR further submitted that the Revenue Authorities did not consider the vacant position of the property and has proportionately computed the rental income for the purpose of addition to the total income declaredby the assessee. He therefore pleaded that this amount may be deleted.

We have heard both the sides and perused the material available on record. It is an admitted fact the assessee has declared rental income as per the actual rent received during the impugned assessment year. Section 23(1)(c) of the Act is reproduced below for the purpose of ready reference.

On a bare reading of the section,if the property is vacant for part of the year annual value shall be determined on the basis of the actual rent received or receivable by the owner of the property in respect thereof owing to vacancy is less than the sum referred to in clause (a) of the Act,which is the sum for which the property might reasonably be expected from year to year.We therefore of the considered view that assessee is entitled to claim the vacancy allowance as per section 23(1)(c) of the Act referred above and direct Ld. AO to delete the addition of Rs.8,21,741/-. Thus, ground no. 3 raised by the assessee is allowed.

Facts being the same, are not discussed again.

Revenue has raised following grounds of appeal: -

Ground Nos. 1, 3 & 4 are general in nature and needs no adjudication.

Ground No. 2 is with respect to deletion of addition of Rs.3.29 crores by the Ld. CIT(A).

Per contra, Ld.AR requested the issue may be remitted back to the file of the Ld. AO for verification of actual disallowances arising out of not complying with the TDS provisions.

We have heard both the sides and perused the material available on record. While adjudicating the appeal in ITA No. 366/VIZ/2024 filed by the assessee the assessee has raised identical ground and the issue was remitted back to the file of Ld. AO for verification and deciding the disallowances in accordance with law. Since Ground No. 2 raised by the revenue is identical to the Ground No. 2 our decision mentioned in the aforesaid paragraphs while adjudicating the assessee’s appeal, shall apply to the appeal of the revenue also. Thereby this ground by the revenue is allowed for statistical purposes.

In the result, appeal of the revenue is allowed for statistical purposes.

To sum-up, assessee’s appeal is partly allowed for statistical purpose and revenue appeal is allowed for statistical purposes. Order pronounced in the open court on 20th February, 2025. Sd/- Sd/- (के.नरधिम्हा चारी) (एि बालाकृष्णन) (K. NARASIMHA CHARY) (S. BALAKRISHNAN) न्याधयकिदस्य/JUDICIAL MEMBER लेखा िदस्य/ACCOUNTANT MEMBER Dated: 20.02.2025 Giridhar, Sr.PS