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Income Tax Appellate Tribunal, “D” BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI S. JAYARAMAN
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.
Smt. Abhaya Kashmira, the assessee, is running a business of
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.
Aggrieved against the deletion of Rs. 76,62,674/-, the Revenue
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.
The assessee filed CO with the following grounds of appeal:
“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.”
On the Revenue’s appeal, the Ld. DR submitted that the Ld.
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.
Per contra, the Ld. AR invited our attention to the same material
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.
We have considered the rival submissions. The relevant portion
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.”
From the above, it is clear that the Ld. CIT(A) has not furnished a
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.
In the facts and circumstances, we deem it fit to remit this issue
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.
Now let us take the appeal in ITA No. 225/Chny/2017. The
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.
We heard the rival contentions and in the interests of justice, we
condone the delay.
The Ld. AR submitted that the Ld. CIT(A) erred in concluding the
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.
With regard to the disallowance sustained u/s. 14A, the AR
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.
Per contra, the Ld. DR submitted that the assessee with her
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.
We heard the rival submissions and gone through the relevant
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
With regard to the disallowance u/s. 14A r.w.r. 8D, since, the
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.
In the result, the Revenue’s appeal in ITA No. 2542/Chny/2017
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