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Facts
The assessee, a partnership firm, did not file a return of income. The Assessing Officer (AO) determined income based on rental receipts of ₹48,30,000 from Nathella Sampath Jewellery Pvt. Ltd., adding it to the total income. The assessee's submissions that no income accrued as the company was undergoing liquidation and CIRP were rejected by the AO and the CIT(A).
Held
The Tribunal noted that M/s. Nathella Sampath Jewellery Pvt. Ltd. was in liquidation proceedings, and while the claim was admitted, there was no evidence that the rental income was received by the assessee or accrued to them. Therefore, it could not be charged to tax in the year under consideration.
Key Issues
Whether the addition of rental income of ₹48,30,000/- to the assessee's total income was justified when the payer company was undergoing liquidation and the income had not been received or accrued to the assessee.
Sections Cited
148, 142(1), 147, 144, 144B
AI-generated summary — verify with the full judgment below
Before: Shri S.S. Viswanethra Ravi & Shri S.R. Raghunatha
O R D E R PER BENCH: These four appeals filed by the assessee are directed against separate common order dated 27.05.2024 passed by the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [NFAC], Delhi for the assessment years 2013-14 to 2016-17.
Since the issue raised in the appeals are similar based on the same identical facts, with the consent of the both the parties, we proceed to hear all these appeals together and pass consolidated order for the sake of convenience.
Let us take up appeal in as lead case for adjudication, as except change of figure, the facts are identical.
The assessee raised 12 grounds of appeal amongst which, the only issue emanates for our consideration in all assessment years under appeal as to whether the ld. CIT(A)/NFAC is justified in confirming the addition made by the Assessing Officer on account of income from house property in the facts and circumstances of the case.
The assessee is a partnership firm and no return of income filed. According to the Assessing Officer, the assessee received an amount of ₹.48,30,000/- by way of rental receipt from Nathella Sampath Jewellery Private Limited. The Assessing Officer issued notice under section 148 of the Income Tax Act, 1961 [“Act” in short], but, no return of income filed in response to the said notice. Notice under section 142(1) of the Act, the Assessing Officer requested the assessee to furnish all bank accounts, details relating to rental income, details of TDS/TCS, etc. the assessee uploaded its reply on 31.12.2021 and 21.01.2022 on ITBA portal, the submissions of which are reproduced in para 4.1 of the assessment order. The Assessing Officer did not found the submissions of the assessee acceptable, thereby, held the rental receipt of ₹.48,30,000/- are deemed to be received by the assessee and added to the total income of the assessee and determined the income of the assessee at ₹.48,30,000/- vide his order dated 28.03.2022 passed under section 147 r.w.s. 144 r.w.s. 144B of the Act.
Aggrieved, the assessee challenged the same before the ld. CIT(A). The ld. CIT(A) discussed the issue in detail with reference to the written submissions filed by the assessee. It was contended before the ld. CIT(A) that no income was accrued to the assessee in the year under consideration and it was brought to the notice of the ld. CIT(A) that M/s. Nathella Sampath Jewellery Pvt. Ltd. was in the process of liquidation and the Corporate Insolvency Resolution Process (CIRP in short) is pending. Further, the said rental income when it is received will be offered to tax in the following years. The ld. CIT(A) observed that the assessee failed to rebut the observation and finding of the Assessing Officer with any evidence and confirmed the addition made by the Assessing Officer.
Before us, the ld. AR Shri N. Arjun Raj, Advocate reiterated the same submissions as made before the Assessing Officer and the ld. CIT(A). Further, he drew our attention to paper book page 89, which is list of Operational Creditor as on 17.10.2018 before the CIRP, wherein, it is noted that an amount of ₹.5,27,59,287/- was claimed against the assessee and also admitted. The ld. AR vehemently argued that the said amount did not reach the hands of the assessee and cannot be charged to tax.
The ld. DR Ms. Gouthami Manivasagam, JCIT vehemently opposed the submissions of the ld. AR and stated that the Assessing Officer added the said amount to the total income of the assessee on the basis of deduction of TDS on the rental income. The assessee cannot deny receipt of rental income. She argued that there is no guarantee the assessee would offer rental in the year of receipt and requested the Bench to direct the assessee to bring it to the knowledge of the Assessing Officer.
Having heard both the parties, we note that M/s. Nathella Sampath Jewellery Pvt. Ltd. is before the CIRP in terms of the Liquidation proceedings, wherein, it is observed that the claim against the assessee admitted, which is clear from page 89 of the paper book. The said liquidation proceedings were in the knowledge of the Assessing Officer and the ld. CIT(A), but, the ld. CIT(A) observed that no evidence put forth by the assessee in support of its contention and there is no rental receipt accrued in terms of TDS. The fact remains admitted that the proceeding under CIRP is pending and the said M/s. Nathella Sampath Jewellery Pvt. Ltd. accepted the liability to pay the rental income in its books of account.
There was no evidence before us that the rental income has been received by the assessee except deduction of TDS. Therefore, when there is no income received nor accrued to the assessee, it cannot be chargeable to tax in the year under consideration. Thus, the order of the ld. CIT(A) is not justified, but, however, taking into consideration the submissions of the ld. DR, we direct the assessee to offer the said rental income to tax at the time of realization. Thus, the ground raised by the assessee is allowed for all the assessment years under appeal.
In the result, the appeal filed by the assessee is allowed.
Order pronounced on 13th September, 2024 at Chennai.