ACIT NON CORPORATE CIRCLE 1(1), CHENNAI vs. ABHAYA KASHMIRA, CHENNAI

आदेश/ O R D E R

PER S. JAYARAMAN, ACCOUNTANT MEMBER:

The Revenue filed appeal against the order of Commissioner of

Income Tax (Appeals)-2, Chennai in ITA No. 62/CIT(A)-12/15-16 dated

31.07.2017 for assessment year2012-13, on which the assessee filed

the CO. Later on, the assessee also filed an appeal in ITA No.

225/Chny/2018 against the same appeal order with a condonation

petition. Since, all the appeals are inter linked, they are taken up

together and decided as under.

luxury serviced apartments in the name of “Velocity” at Plot No. 6,7,8

&9 Ramgiri Extension, Taramani Link Road at Velachery. The assessee

admitted the rents received from six rooms situated in one floor as an

income from house property and the rental receipts from the remaining

rooms as an income from business receipts. While making the

assessment, the Assessing Officer after examining all the aspects held

that the assessee had no intention to invest her long term capital gains,

which arose on 06.10.2006 in purchase or acquisition of residential

house, even before investing the sale consideration in the capital gains

:-3-: ITA No.225/Chny/2018 & 2542/Chny/2017 & CO No. 5/Chny/2018

accounts scheme on 28.7.2007, the assessee had an intention to

construct the serviced apartments and sought plan permission from

CMDA as early as in April 2007 etc., and hence he withdrew the

deduction claimed u/s. 54 for assessment year 2007-08 and thereafter

taking all other factors into consideration, he assessed the income

received from the apartments under the head “business”, therefore,

added back the deduction claimed u/s. 24A on one portion. Further, he

found from the balance sheet that the assessee has shown the

outstanding credit balance of Rs. 76,62,674/- to M/s. Doshi and

Company – Builders. Since, the assessee has not furnished confirmation

from the creditor, he added Rs. 76,62,674/-. The AO found that the

assessee made investments in shares but did not compute disallowance

u/s. 14A, though interest is debited to P&L account. After considering,

the assessee’s reply, invoking section 14A r.w.r. 8D(ii) & (iii), the AO

disallowed Rs. 4,25,702/-. Aggrieved, the assessee filed an appeal

before the CIT(A). With regard to the addition of Rs. 76,62,674/-, the

Ld. CIT(A) called for a remand report from the AO based on which she

deleted this addition. However, confirmed the other two issues.

filed an appeal in ITA No. 2542/Chny/2017, on which the assessee filed

:-4-: ITA No.225/Chny/2018 & 2542/Chny/2017 & CO No. 5/Chny/2018

a CO in CO No. 5/Chny/2018. However, later on, the assessee filed an

appeal against the order of the CIT(A) in ITA No. 225/Chny/2018

against the other two issues with a condonation petition for the delay in

filing the appeal for 89 days.

“2. The Assessing Officer is not justified in raising objection to deletion of Rs.76.62 lakhs in their appeal filed after confirming the factual details in his remand report and having accepted the same to be in order. 3. The Assessing Officer has no credence to question the wisdom of the CIT (A) to allow the appeal on the issue of outstanding liability shown at Rs.76.62 lakhs and the alleged unexplained sum of Rs.73.3 lakhs when his remand report clearly spells out the breakup of the amounts as well as the source therefore and duly confirmed by the creditor which was examined by the Assessing Officer to conclude the facts and veracity thereof and thereafter furnish the clear remand report on this issue.”

CIT(A) failed to appreciate that in the remand report, the AO had held

that the confirmation of the outstanding liability is proved to the extent

of 3.36 lakhs only as against the total addition of Rs. 76.62 lakhs. Thus,

the Ld. CIT(A) erred in deleting the balance of Rs. 73.3 lakhs of

outstanding liability without further evidence and held that the same

was genuine. The Ld. DR invited our attention to the paper book,

wherein a copy of letter issued by Doshi & Company dated 31.03.2012

:-5-: ITA No.225/Chny/2018 & 2542/Chny/2017 & CO No. 5/Chny/2018

is kept in Page No. 9 and submitted that the balance receivable as on

31.03.2012 is shown at Rs. 3,26,364/- only. Thus, in the remand

report, the AO indicated that the claim of the assessee is supported to

this extent only. However, the Ld. CIT(A) mistook it as if the entire sum

i.e., 76,62,674/- was in order and deleted the balance sum without due

examination.

and submitted that the estimated cost of Velocity project was Rs.

345,62,674/- and the final cost of velocity project was Rs. 312,26,364/-

towards which Rs. 309,00,000/- was paid from 20.01.2018 to

21.03.2012 and the balance receivable as on 31.03.2012 was

Rs3,26,364/-, which was considered by the Assessing Officer and duly

admitted in the remand report. Therefore, the Ld. CIT(A) has correctly

deleted the addition.

of the remand report is extracted as under:

“Issue :1 In the original Assessment order outstanding credit balance of Rs 76,62,674 to M/s Doshi& Co was treated as non existing liability as the Assessee could not produce confirmation letter from M/s Doshi& co.

:-6-: ITA No.225/Chny/2018 & 2542/Chny/2017 & CO No. 5/Chny/2018

Assessee has submitted letter from M/s Doshi& Co as additional evidence and the same has been admitted under rule 46A by the Hon’ble Appellate Commissioner. Perusal of the newly furnished evidence reveals that the total outstanding liability towards M/s Doshi& Co was Rs 3,26,364 only not Rs 76,62,674 as claimed by the Assessee during the Assessment stage. The creditor party too has confirmed the same through his letter dated 31103/2012.The outstanding liability of Rs 76,62,674 break up as supported by the new evidence works out to Amount paid by Assessee’s father: 40,00,000 Difference in Estimate and final value of project : 33,36,310 Liability towards M/s Doshi& Co: 3,26,364 Total: 76,62,674 Thus the claim of the Assessee as supported by the newly admitted evidence is found to be in order.”

copy of remand report to the assessee. Further, there is an apparent

confusion on the genuineness of total outstanding liability as on

31.03.2012 of Rs. 76,62,674/-. The Revenue states that the AO has

accepted the liability to the extent of Rs. 3,26,364/- as is confirmed in

the letter claimed to have been issued by M/s. Doshi & Company and

for the balance sum of Rs. 73,36,310/- comprising the amount paid by

assessee’s father at Rs. 40,00,000/- and the difference in estimate and

final value of the project of Rs. 33,36,310/-, totalling at Rs. 73,36,310/-

the genuineness has not been examined by the AO. From the material

before us, it is not clear as to on what basis the total outstanding of Rs.

:-7-: ITA No.225/Chny/2018 & 2542/Chny/2017 & CO No. 5/Chny/2018

76,62,674/- was arrived at and on what basis the estimated cost, the

final cost of velocity project etc shown in the letter issued by M/s.

Doshi & Company was arrived , how it was reflected in the audited

accounts of the assessee as on 31.3.2012 etc., how and what basis it

was reconciled, verified etc is not clear.

back to the AO for fresh examination. The assessee shall lay relevant

materials in support of its contention before the AO and comply with

the requirements of the AO in accordance with law. The AO is free to

conduct appropriate enquiry as deemed fit, but he shall furnish

adequate opportunity to the assesssee on the material etc to be used

against it and decide the matter in accordance with law. The

Revenue’s appeal is treated as allowed for statistical purposes and the

CO is treated as dismissed.

assessee pleaded condonation of delay in filing the appeal for 89 days

stating that the order consequent to the appellate order was passed

dated 05.09.2017 raising a demand of Rs. 38,200/-, the assessee felt

that the tax payment was meagre and hence no further appeal be

:-8-: ITA No.225/Chny/2018 & 2542/Chny/2017 & CO No. 5/Chny/2018

preferred. When the department filed further appeal against the order

of the CIT(A) in ITA NO. 2542/Chny/2017 and its copy was served on

her on 05.01.2018, she took up the matter with her tax consultant, who

advised her to file appeal on these issues. On receipt of expert opinion,

realising her legal rights as well as to escape the consequential penalty

etc., she filed this appeal. Since, the delay in filing the appeal is not

wanton and in the interests of justice etc, it is submitted that the delay

may be condoned.

condone the delay.

income from house property as income from business based upon the

assessee’s settling the addition made u/s. 54 in the assessment for

assessment year 2007-08 under Direct Taxes Dispute Resolution

Scheme, 2016. The CIT(A) has not justified in treating the receipts

from one floor of the impugned property as business income when no

service tax was levied or collected as opposed to service apartment

business done qua other floors. The Ld. CIT(A) is not justified in

condoning the assessment made under the head “house property” by

:-9-: ITA No.225/Chny/2018 & 2542/Chny/2017 & CO No. 5/Chny/2018

resorting to subterfuge of section 292B which does not condone the

legal effect of treating the income from house property sans service tax

levy.

submitted that the investments in shares of M/s. Shasun

Pharmaceuticals Pvt. Ltd. is a strategic investment made long

before.Since the year 2008, the total investment in group companies

are shown at Rs. 39,30,000/-. While, the balance 20,000 receipts

investments in shares of unlisted companies. No fresh investments

during the relevant previous year either out of own funds or borrowed

capital. The initial investments in shares were made out of internal

accrual and not out of borrowed funds and no expenditure was incurred

in connection with earning the dividend income. The financial charges

debited in the books of accounts pertains to term loan and overdraft

facility for meeting the working capital requirement etc and hence, the

Ld. CIT(A) erred in sustaining the disallowance made u/s. 14A r.w.r. 8D.

father had submitted a plan to CMDA for construction of services

apartments in April 2007 itself much before the deposits made in capital

:-10-: ITA No.225/Chny/2018 & 2542/Chny/2017 & CO No. 5/Chny/2018

gains accounts scheme which indicated the intention to construct the

serviced apartments and not a residential house. She purchased FSI at

a cost of Rs. 34.63 lakhs and quoted extensively from the order of the

Ld. CIT(A) including the fact that the assessee settled the addition

made u/s. 54 in the assessment for assessment year 2007-08 under

Direct Taxes Dispute Resolution Scheme, 2016 which also clearly

establishes the fact that the investment in the impugned property is of

commercial nature etc and supported the orders of lower authorities.

materials. We find that the AO has not examined as to whether there is

commonality or difference in the nature of the rooms, services,

periodicity of rent , the charges , if any, charged for other facilities etc

from the tenants from the portions from which income is admitted

under the head “house property” vis-a-vis the persons in services

apartments from which income is admitted under the head “business”

etc from the contemporaneous material. In the facts and

circumstances, we deem it fit to remit this issue back to the AO for

proper appreciation of facts and decide the issue in accordance with

law.

:-11-: ITA No.225/Chny/2018 & 2542/Chny/2017 & CO No. 5/Chny/2018

impugned investments were claimed to have been made long before

from internal accrual and the assessee claimed to have not incurred any

expenditure out of borrowings etc, we deem it fit to remit this issue

back to the AO for due examination on the facts and decide the issue in

accordance with law. In the result, the assessee’s appeal is treated as

allowed for statistical purposes.

and the assessee’s appeal in ITA No. 225/Chny/2018 are treated as

allowed for statistical purposes and the assessee’s CO in CO No.

05/Chny/2018 is dismissed.

Order pronounced on Tuesday, the 27th day of November, 2018 at Chennai.

Sd/- Sd/- (एस जयरामन) (एन.आर.एस .गणेशन) (S. JAYARAMAN) (N.R.S. GANESAN) लेखासद�य/Accountant Member �या�यकसद�य/Judicial Member

चे�नई/Chennai, 3दनांक/Dated: 27th November, 2018 JPV आदेशक.#�त4ल5पअ6े5षत/Copy to: 1. अपीलाथ&/Appellant 2. #$यथ&/Respondent 3. आयकरआयु8त ) अपील(/CIT(A) 5. 5वभागीय#�त�न�ध/DR 6. गाड:फाईल/GF 4. आयकरआयु8त/CIT