TECHSTAR INFOTECH (INDIA) P.LTD,MUMBAI vs. ITO 10(3)(3), MUMBAI

The present appeal has been preferred by the assessee against the order dated 19.07.2016 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2009-10.

The assessee has challenged in the various grounds of appeal the issue of reopening under section 147 read with section 148 of the Act to be bad in law and also decided the merit on addition. The assessee has challenged confirmation of addition of income of Rs.35,98,356/- as house property income by Ld. CIT(A) upholding the order of AO.

The facts in brief are that during the course of assessment proceedings the AO found that assessee has received a sum of Rs.35,98,356/- from MTNL in respect of the property qua which the lease and license agreement was not renewed due to dispute and MTNL was occupying the premises even after the agreement expired. The assessee has also filed an eviction suit against MTNL. The said amount of Rs. 35,98,356/- was remitted by MTNL by way of ECS and it was directly credited to assessee’s account and assessee has no control over the funds transfer . The assessee submitted that it has not accounted for as rental income from the said property as it would have jeopardize the legal rights of the assessee and it was shown as deposits under the head “ Current Liabilities”. The assessee has also not accounted for the TDS deducted by MTNL. The AO, however, brushed aside the contentions of the assessee and came to conclusion that the said amount is liable to be taxed under the head income from house property and accordingly added the same to the income of the assessee which was affirmed by Ld. CIT(A) also.

At the outset, the Ld. A.R. submitted that the identical issue has been decided in assessee’s own case in A.Y. 2011-12 order dated 10.06.2019 whereby the similar issue has been restored to the file of the AO to decide the same in the light of decision of the co-ordinate bench of the Tribunal’s in A.Y. 2010-11 in assessee’s own case vide order dated 22.05.2019. The Ld. A.R. submitted that the present appeal should also be decided on the same lines by restoring the issue back to the file of the AO.

After hearing both the parties and perusing the material on record, we observe that an identical issue has been decided in A.Y. 2011-12 (supra) operative part is reproduced as under: “3. I have heard both the counsel and perused the records. It transpires that identical issue was considered by this ITAT in A.Y. 2010-11 in assessee’s own case vide order dated 22.5.2019, facts of the case are identical and the Tribunal has set aside the matter and directed as under :- 8. We have considered the rival submission of the landed representative of the parties and have gone through the orders of authorities below. We have also deliberated on various case laws relied by lower authorities. The facts of the case that the tenant/ licensee despite efflux of lease period are occupying the tenanted portion are not in dispute. The tenant is remitting the user charges by way of ECS. The assessee has claimed that the payment made through ECS is not on account of contractual payment of rent and nothing but part of mesne profit. The assessee had treated the said amount as part payment of deposits of mesne profit. The parties have locked their horn on the taxability of receipt, whether it should be taxed as revenue receipt chargeable to tax or it should be treated as mesne profit being capital receipt and not chargeable to tax. The learned AR of the assessee had strongly relied upon the decision of Special Bench in Narang Overseas Private Ltd (supra) wherein the Special Bench of Mumbai Tribunal held that when the assessee was deprived of the use and occupation of the property and therefore, the mesne profit received by the assessee under the consent decree awarded by the Apex Court at the rate of Rs. 10 lakhs p.m. was on account of damages for deprivation of use and occupation of the profits and therefore, the sum so received was capital in nature not chargeable to tax. In the present case the assessee has filed already obtained a judgement and decree of vacant and peaceful possession of tenanted premises vides order dated 29th July 2016 passed by learned Judge of Small Cause Court Bombay. While passing the judgement in degree the learned Judge of Small Cause Court Bombay directed the assessee to initiate separate proceeding under Order 20 Rule 12 of CPC for inquiry for recovery of mesne profit. The said proceeding for determination of quantum of mesne profit under Order 20 Rule 12 of CPC initiated by assessee is still pending. The main thrust of submission of learned AR of the assessee was that the issue of taxability or otherwise of mesne profit does not arise during the year under consideration and all the submission of made only to the demonstrate the facts that the amount received during the year is to be adjusted against mesne profit which might be awarded by learned Small Cause Court in a separate proceedings. Therefore, considering the submission of learned AR of the assessee that the decision of learned Small Cause Court on the quantum of mesne profit is awaited, this ground of appeal is restored back to the file of assessing officer to decide the issue afresh after taking in to consideration of decision of Small Cause Court. The assessing officer is directed to consider the decision of Special Bench of in Narang Overseas Private Ltd (supra) and pass the order in accordance with law. Needless to 4 M/s. Techstar Infotech (India) P. Ltd. record that assessing officer shall grant fair and proper opportunity before passing order on the issue. In the result the grounds of the appeal raised by the assessee is allowed for statistical purpose. 4. Respectfully following the precedent as above, I set aside this issue to the file of the Assessing Officer with same direction as above.

The facts in the present case are materially same vis-à-vis the facts of the case as decided by the co-ordinate bench of the Tribunal. We, therefore, set aside the issue to the file of the AO to decide the same by respectfully following the decision of the co-ordinate bench of the Tribunal.

The issue raised by the assessee on reopening under section 147 read with section148 is not being adjudicated as the issue on merit has been restored to the file of the AO.

In the result, the appeal of the assessee is partly allowed.