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Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: SHRI RAJPAL YADAV & SHRI MANISH BORAD
PER RAJPAL YADAV, JUDICIAL MEMBER:
The Revenue is in appeal before the Tribunal against the order of the ld. Commissioner of Income-tax (Appeals)-XXI, Ahmedabad dated 18.03.2014 passed for Assessment Year 2007-08. On receipt of notice in the Revenue’s appeal, the assessee has filed Cross-Objection bearing No. 157/Ahd/2014. 2. The Revenue has taken three grounds of appeal, out of which Ground Nos. 2 and 3 are general grounds of appeal and they do not call for recording of any specific findings.
In the first ground of appeal, the Revenue has pleaded that the ld.CIT(A) has erred in deleting the disallowance of expenses claimed against income chargeable to tax under the head “income from other
ITA No. 1716 & CO/157 Ahd/2014 Assessee : Shri Devang H. Gadhvi For AY: 2007-08 2 sources”. The Revenue further pleaded that the assessee has failed to discharge its onus to prove that the expenses claimed had been incurred for the purpose of wholly and exclusively for making/earning such income.
The brief facts of the case are that the assessee has filed return of income on 31.10.2007 declaring total income of Rs. 44,54,660/-. The case of the assessee was selected for scrutiny assessment and notice under Section 143(2) of the Act was issued and served upon the assessee. On scrutiny of the accounts, it revealed to the Assessing Officer that the assessee was engaged in the business of transportation in the name and style of “Jay Mataji Transport”. He was also running a warehouse in the name of “Gadhavi Warehousing Corporation”. The assessee has declared total income at Rs.44,54,660/- from warehousing charges as business income. The Assessing Officer was of the opinion that this income is just a rental income and it should have not been shown as a business income. The ld. Assessing Officer had issued a show-cause notice to the assessee inviting his explanation as to why the income for providing various services should not be treated as income from other sources. The assessee filed a detailed written submission which has been reproduced by the Assessing Officer. We deem it appropriate to note the relevant part of the submissions of the assessee which reads as under:-
“Further it should be noted that I am providing service of werehousing to various leading Banks/Financial institutions like HDFC Bank, ICICI Bank, Standard Chartered Bank, Development Credit Bank, LT Finance, Cholamandalam Finance, Bajaj Finance, Reliance Capital and many others. We had submitted some copies of agreements with these banks/ Institutions at the time of assessment proceedings. This is a systematic business activity and agreement entered into with parties also suggests that we have to provide various services along with storing of vehicles
ITA No. 1716 & CO/157 Ahd/2014 Assessee : Shri Devang H. Gadhvi For AY: 2007-08 3
which is a part of our total activities. We have to provide various services both before and after the storing of vehicles. We also facilitate the picking and taking delivery of vehicles including by cranes and thereafter stored at our place. We provide complete security and maintenance of vehicles at our place. We are the custodian of the vehicles. We have employed various employees including security personnel at the site. We also have special Dogs at the site for security purpose. We pay security charges and deduct taxes accordingly. It cannot be termed as activity to be covered under income from the other sources. We are also paying service tax on this warehousing business. Please note that the space is not given on rent neither it is allocated beforehand on prior basis. Vehicles are stored/parked on the vacant space as and when they arrive. The bills are raised for the service provided. We had also submitted copies of bills for verification at the time of assessment proceedings. It is a systematic commercial activity. A regular business income cannot be taxed under the head Income from other sources.
Further I beg to bring to your kind notice that as per your letter there is change of opinion and you want to consider this income as Income from other sources. In this context I would humbly request your goodselves to kindly proved any new information or opinion which have subsequently come across for reopening this assessment as income from other sources and not Business income because the same was already clarified earlier during the assessment proceedings.
I would also like to refer to the decision of Usha International (Delhi H.C.) and Gujarat Power Corp. Ltd. (Guj. H.C.) where in it has been said that an assessment cannot be reopened merely on the ground of change of opinion unless there is some fresh or Tangible materials available and not considered during the original assessment. The fact of the decision of Sankarnarayana Hotels (P) Ltd. referred by you in your letter is not at all relevant to the nature of business I have. In our case there is no lease involved and moreover the services provided by us are forming part of the total warehousing/storing activity and there is no bifurcation involved as far as our activities are concerned.
I would also like to bring to your kind notice and without admitting the said income as Income from other sources, that there will not be any effect or change in the net taxable income as the expenses claimed as business expenditure shall also be allowed as deduction u/s. 57(iii). Hence, the result as the net taxable income will remain the same.
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The learned Assessing Officer, without dealing with this explanation of the assessee, made an addition of Rs.32,59,536/-.
The assessee has reiterated his submission which has been reproduced by the learned First Appellate Authority. Learned CIT(A) has observed that the amount of Rs.32,59,536/- is already forming part of the total income and it cannot be added again merely on account of change of head of income. The findings recorded by the ld. CIT(A) read as under:-
2 I have considered the assessment order and the submissions made by the appellant. The appellant has shown warehousing charges as income from business and profession. The AO has held that it should be considered as income from other sources, relying on the decision in the case of Shankaranarayana Hotels (P) Ltd. and added Rs.32,59,536/- in the total income. The Assessing Officer is not justified in making addition of Rs.32,59,536/- in the total income of Rs.46,50,708/- because total income already includes income of Rs.32,59,536/- as income from business and profession. The change of head of income will not amount to addition in the total income. The appellant has relied on the decision of Hon'ble Limited (2013) 34 taxmann.com 155 (Guj.) in which the Hon'ble Court has held that, because of the nomenclature of the receipt as service charges, does not change the nature of income to be assessed under the head 'income from other sources' instead of 'income from business or profession'. In view of the above, addition of Rs.32,59,536/- made by the Assessing Officer is deleted.”
In the light of above finding, if ground of appeal taken by the Revenue is being perused, then it would reveal that it is totally misconceived. Learned Assessing Officer has not disallowed any expenditures which were incurred by the assessee for earning income from other sources. He has simply bifurcated the receipt and treated part of the receipt as income from other sources. The Assessing Officer nowhere observed that the assessee has failed to demonstrate the ITA No. 1716 & CO/157 Ahd/2014 Assessee : Shri Devang H. Gadhvi For AY: 2007-08 5
genuineness of the expenditure incurred for earning this receipt. The ld. CIT(A) has considered this aspect, observing that income has already been shown by the assessee. Merely on account of change of head, it cannot be added again. Considering the findings of the ld. CIT(A), we do not find any merit in this appeal of the Revenue, which is dismissed.
So far as the Cross-objection of the assessee is concerned, the assessee has challenged the reopening of assessment. When we have expressed that there is no merit in the appeal of the Revenue, the ld. Counsel for the assessee did not press the Cross-objection. Hence, it is rejected.
In the result, the appeal as well as cross-objection, both are dismissed.
Order pronounced in the Court on 11th October, 2017 at Ahmedabad. (MANISH BORAD) JUDICIAL MEMBER Ahmedabad; Dated 11/10/2017 Biju T., Sr.PS
आदेश क" ""त"ल"प अ"े"षत/Copy of the Order forwarded to : 1. अपीलाथ" / The Appellant
""यथ" / The Respondent. 3. संबं"धत आयकर आयु"त / Concerned CIT 4. आयकर आयु"त(अपील) / The CIT(A)
"वभागीय ""त"न"ध, आयकर अपील"य अ"धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड" फाईल / Guard file. आदेशानुसार/ BY ORDER,उप/सहायक पंजीकार (Dy./Asstt.