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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC-1: NEW DELHI
Before: SMT. DIVA SINGH
The present appeal has been filed by the assessee assailing the correctness of the order dated 14.10.2015 of CIT(A)-32, New Delhi pertaining to 2011-12 assessment year on the following grounds :-
“That the learned CIT(A) has grossly erred in law in confirming the order of the Assessing Officer in disallowing the expenses incurred by the assessee pertaining to Malkaganj Property amounting to Rs. 749,154/- on wholly illegal, unwarranted and untenable grounds. That the findings of learned CIT(A) that the assessee admitted that the Malkaganj Property was not used for its business purposes are factually incorrect and perverse and not borne from the records. That the learned CIT(A) has grossly erred in law in holding that the usages of residential property for commercial purposes would disentitle the assessee from claiming the expenditure in respect of upkeep and maintenance of such property.
That the learned CIT(A) has erred in law in disallowing the depreciation in respect of Jasola Property on wholly untenable and illegal grounds. That the findings of the learned CIT(A) in respect of Jasola Property are self-contradictory while concluding that Jasola Property was not used by the assessee during the year under consideration.”
Both the ld. AR and the ld. Senior DR were heard. It was a common stand of both the sides that the issue in the present appeal pertains to the addition on account of Malkaganj property held by the assessee. The parties were required to address the nature of assessee’s business. From pages 2 & 3 of the assessment order, it was evident that the assessee claimed to have utilized the said premises for business purposes and as per the Inspector’s report dated 20.09.2013 taken into consideration by the AO, the office allegedly shifted to NOIDA, in view of the drive of the MCD to vacate the residential flats and this fact was informed by employee of the assessee Nand Lal, found at the premises. A perusal of pages 5 & 6 further shows that the conclusion against the assessee was further based the fact that for the specific period, certain minimum electricity bills were generated. Accordingly on account of these facts, the assessee’s reply dated 05.12.2013 was dismissed holding that these were not the business expenditure. On facts we find that there is no discussion whatsoever as to what was the business of the assessee. It has neither been addressed by the AO nor by the CIT (A). The ld. AR, relying upon page 5 of the assessment order, though submitted that the assessee was utilizing the premises for storing samples on account of which some orders were received and commission presumably was earned. However, he was also unable to address the nature of assessee’s business. It was his stand that no doubt, the specific premises which originally were used for the business of the assessee had to be vacated on account of drive of the MCD and thereafter, the said premises were utilized only for storage of record and samples etc. and an employee of the assessee admittedly was found even in September, 2013 by the Inspector. Thus, it was argued the claim that the premises were utilized for the business of the assessee cannot be discarded. The usage of minimum electricity charges incurred for the business it was submitted supports the fact that the premises were used for storage only. Exactly samples of what commodity were stored he was unable to address. In the absence of any discussion on what was the business of the assessee, ld. AR submitted that he has no objection if the issue is restored. The ld. Senior DR relied upon the orders of the authorities below but was also unable to address what was the business of the assessee as the tax authorities had also failed to address the same.
I have considered the rival contentions and perused the material on record. It is seen that the assessee’s return declaring income of Rs.17,77,906/- was subjected to scrutiny assessment. The assessee was found to have received a commission income of Rs.5,09,07,118/-. As per the Inspector’s report dated 20.09.2013, extracted in pages 1 & 2 of the assessment order, the Inspector qua this specific property i.e. 11, Gandhi Square, Malkaganj noted as under :-
“Another premise at 11, Gandhi Square, Malka Ganj Delhi was visited by me on 24.09.2013 comprises three floor (ground + two floors). All this property is under possession of M/s. Cascade Enterprises, whereas Ground floor is vacant, First floor is rented out, Second Floor is also vacant. On enquiry from Mr. Nandlal, Caretaker of this building, I came to know me that the office of M/s Cascade Enterprises operated from Ground Floor upto year 2008, after the drive of MCD to vacate the residential flats used for business purpose, the office shifted to Noida. Mr. Nandlal was the employee of Cascade Enterprises."
3.1. The electricity and water expenses to the extent of Rs.21,641/- and Rs.1085/- and repair & painting expenditure to the tune of Rs.3,42,792/- were claimed. Considering the fact that the assessee had accepted that due to impending action of the MCD, the office was shifted, the AO rejected the claim which was sustained in appeal by the CIT(A).
3.2. In the absence of any discussion on facts, the conclusion arrives at cannot be sustained. Whether the premises, specifically ground floor and basement stated to be under assessee’s occupation was used for the business of the assessee or not would depend on what was the business. The general answer that some samples were being stored can neither be accepted nor rejected without any discussion on facts. In the circumstances, it is deemed appropriate to accept the prayer of the parties and restore the issue back the file of the AO with a direction to first address the nature of assessee’s business and thereafter, examine whether the specific premises have been used as a godown/storage place by the assessee which is the specific claim made by the assessee. The fact that the Inspector in September 2013 found that the business premises had shifted elsewhere per se does not detract from the assessee’s claim as on the contrary it supports the claim that the specific premises were manned by assessee’s employee. Whether samples were being stored there or not would depended on what was the business of the assessee. Accordingly the issues are restored with the afore-mentioned direction back to the AO who shall pass a speaking order in accordance with law after giving the assessee an opportunity of being heard. The said order was pronounced in the presence of the parties on the date of hearing itself.
In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on this 23rd day of September, 2016.