M/S. AGACHE ASSOCIATES LTD.,NEW DELHI vs. ITO, NEW DELHI

ORDER The present appeal has been filed by the assessee assailing the correctness of the order dated 08.05.2014 of CIT(A)-IV, New Delhi pertaining to 2011-12 assessment year on the following grounds:-

1. “The Ld. CIT(A) has erred in confirming the order of the AO in making the assessment at the income of Rs. 49,58,270 as against the returned income of Rs. 6,07,510.

2. The Ld CIT(A) has erred in confirming the order of the Ld. AO in treating the services charges received by the Appellant for warehouses amounting to Rs.71,61,086 under the head "Income from House Property" instead of "Income from Business or Profession" whereas the same has been assessed as business income in earlier years also. 3. The Ld CIT(A) has erred in confirming the order of the Ld. AO in not appreciating that the main objects of the appellant company is to provide the services of warehouses and go downs. 4. The Ld CIT(A) has erred in confirming the order of the Ld. AO in not allowing the expenses as per the profit and loss account.

I.T.A .No.-4367/Del/2014

5. The Ld CIT(A) has erred in confirming the order of the Ld. AO in treating the interest income of Rs. 69,283 as income from other sources as against the same been declared as income from business.

6. The order of the CIT(A) is against law and facts of the case. 7. The appellant craves the right to add, amend or withdraw any grounds of appeal at the time of hearing.”

2. No one was present on behalf of the assessee at the time of hearing as notice sent by the Registry has come back unserved. However, considering the material available on record it was considered appropriate to proceed with the present appeal ex-parte qua the assessee appellant on merit after hearing the Ld. Sr.DR. A perusal of the assessment order shows that the assessee company in the year under consideration was engaged in providing warehousing facilities and had received rental income therefrom. The AO required the assessee to explain why the business income should not be treated as rental income. The assessee on facts is found to have afforded the following explanation dated 21.11.2010 as under:-

"the above mentioned case has been adjourned for today and your goodself has asked us to show cause why the income from warehouses disclosed in income tax return as business income by the assessee should not be treated as income from house property. As desired by your goodself we hereby submit as follows:

1. 1. The assessee is a limited company and owns property at Kolkata in which there as about 30 godowns and company provides the services of warehouses to the users and also provide the services of maintenance on account of security, cleaning etc. to the users in return to which they are charging the service charge which is shown as income.

2. In order to carry on the above business the assessee company has enrolled regular staff whose PF is deducted and all compliances are made besides this contractual staff is al hired for providing the security and also to carry out the regular repair and maintenance. The assessee is maintaining regular books of account which are duly audited and income tax return are filed year after year which have also been accepted every year.

3. The assessee is not charging rent but services charges for providing the facility of storage and other devices thereto. The fact of providing the services is also evident from filing of the service tax return and also from the fact that the assessee has regular employees who have been employed and paid salaries after deduction of their PF Page 2 of 4

I.T.A .No.-4367/Del/2014 etc. which is further evident from the books of account and audited balance sheet.

2.1. In support of the claim, various decisions of Courts and Tribunal were relied upon.

However the AO not convinced with the explanation offered held that income was to be assessed as income from house property and not as income from business. Reliance was also placed on the view taken by the AO in 2008-09 AY, the Ld. Sr. DR was required to point out any finding recorded in the impugned order, as herein also the said authority has proceeded on a discussion on the legal issue without marshalling the facts first. It is further seen that even in the assessment order, no independent finding of the AO is found recorded. Since as per the Ground raised, a reference is made to the position on the issue in earlier years. The Ld.Sr.DR on query was also unable to address the position as it has neither been addressed by the AO nor by the CIT(A). Accordingly, in the absence of any discussion on facts on the past history of the assessee on the issue, it is considered appropriate to restore the issue back to the AO for first addressing the facts. In the facts of the present case it is necessary to consider the Articles and Memorandum of I.T.A .No.-4367/Del/2014 Association of the specific assessee company and the past history on the issue as without addressing the facts the judgements cannot be of any help. A decision can be said to be applicable to a case only if facts have been marshaled. In the absence of any discussion on material facts, the issue is restored back to the AO with the direction to pass a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard.