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Income Tax Appellate Tribunal, MUMBAI BENCHES “C”, MUMBAI
Before: Shri Joginder Singh, & Shri Ramit Kochar
आदेश / O R D E R
Per Joginder Singh (Judicial Member) The assessee as well as the Revenue is in cross appeals for assessment year 2004-05 against the impugned order dated 20/12/2013 of the ld. First Appellate Authority, Mumbai. First, we shall take up appeal of the assessee ( Rs.38,50,000/- on account of repairs to Kennedy house by the trust.
The crux of argument advanced by Shri N.R. Agrawal, ld. counsel for the assessee, is that the assessee is the president of two labour unions and also trustee in a charitable trust namely Free Trade Union Multipurpose Trust by contending that the repair was done by the trust of the union building and payment for repairs was made by the trust only. The building was explained to be of four floors and the contractor who carried out the repair was also searched, his statement was recorded, wherein, he nowhere says that repair was not carried out by him or he returned the money to the assessee. It was explained that the figures broadly tallies. Our attention was invited to pages 26 & 27 of the paper book. Again the statement was recorded for which our attention was invited to pages 41 and 47 of the paper book. Again, the statement was recorded third time for which our attention was invited to page 29 of the paper book. It was empathetically asserted that even if the payments are 3 Chandbibi Zaidi & 1392/Mum/2014 held to be bogus, how it can be the income of the assessee. if found otherwise, it may be of the trust but not of the assessee. The payments were claimed to be made by cheque. Mr. Agrawal contended that the assessee asked for cross examination but the same was denied to the assessee, for which our attention was invited to page 9 of the paper book. It was claimed that ld. Commissioner of Income Tax (Appeals) called for remand report from the Assessing Officer and at that time also cross examination was not allowed, however, the statement was claimed to be in favour of the assessee. It was explained that protective addition has been made in the case of the assessee. Our attention was also invited to page 38 of the order of the ld. Commissioner of Income Tax (Appeals).
2.1. On the other hand, the ld. DR, Shri M. Dayasagar, defended the conclusion arrived at in the impugned order by defending the conclusion arrived at by the ld. First Appellate Authority.
2.2. We have considered the rival submissions and perused the material available on record. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, we note that the assessee is the president of two trade unions namely Mumbai Majdoor Sabha (MMS) and Engineering
4 Chandbibi Zaidi & 1392/Mum/2014 Majdoor Sabh (EMS). The assessee is also the managing trustee of free trade union multipurpose trust (FTUMPT), a public charitable trust, closely associated with the aforesaid trade unions. Search and seizure action u/s 132 (1) of the Act was carried out in Chandbibi Zaidi Group of cases on 20/08/2009 and on subsequent dates by the DDIT(Investigation unit), Mumbai. Subsequently, notice u/s 153A of the Act was served upon the assessee to which the assessee declared loss of Rs.57,88,980/- on 09/07/2010. Thereafter, notices u/s 143(2) and 142(1) were issued on different dates asking the assessee to file certain details, clarification etc. The assessee attended the assessment proceedings from time to time and furnished the details as is evident from para 2 (pag-1) of the assessment order itself.
The ld. Assessing Officer made addition of Rs.38,50,000/- with respect to repairs made in the trade union building namely “Keneddy House” and the trust claimed to have made the payments to the contractor for such repairs. The ld. Assessing Officer held the claimed repairs to be bogus/non-existent and thus, he made the addition. The ld. Assessing Officer was of the view that no such repairs were carried out. The statement of the contractor, Mr. Shankar Gaddam, was recorded on 20/08/2009 (pages 23 to 28 of the paper book), wherein, in reply to question no.8 of the statement (page 26 of the paper book) with respect to receipt of payments of the contract
5 Chandbibi Zaidi & 1392/Mum/2014 amount from the trade unions, he specifically tendered that he received the following amounts:-
Assessment Year Amount Received (in Rupees) 2003-04 16,41,258/- 2004-05 34,51,385/- 2005-06 16,90,545/- 2006-07 15,64,096/- Total 83,47,284 2.3. We have perused the statement and as canvassed by the ld. counsel for the assessee, nowhere, the contractor tendered that either he did not carry out the contract work or he returned the money in cash to the assessee. Meaning thereby, carrying out of repairing work and payment of the contract amount was duly confirmed by the contractor. The statement of the contractor was again recorded on 09/12/2011 (page-38 onwards of the paper book) wherein, in reply to question no. 3, he categorically stated that he carried out the repairing work of the Union Bhawan from A.Y. 2002- 03 to 2005-06. In reply to question no. 4, he named the building as Kennedy House. In reply to question no.6 (page 39 of the paper book), he specifically tendered that he received Rs.22 lakhs through cheque for carrying out the repair of Keneddy House. In reply to question no. 5 (page 39 of the paper book), he even told the total area of the building, the nature of repairing was told to the marvel flooring, tilling work, POP, electric work, plumbing, painting, etc, therefore,
6 Chandbibi Zaidi & 1392/Mum/2014 the contention of the ld. DR/Assessing Officer that no repairing was carried out by the contractor is not substantiated. We further note that an agreement was entered into between Engineering Majdoor Sabha on 31/03/2003 and M/s Free Trade Union Multipurpose Project Trust for establishing, starting, running and maintaining pathological laboratories and clinic for extending free medical benefits to the members of the affiliated trade unions and other lower class people in general (at the subsidized cost to the other people) (page 43 to 50 of the paper book). It is also noted that when the second statement was recorded on 09/12/2011, no oath was administered to the contractor (page 38 onwards of the paper book). However, in reply to question no. 13 (page-41 of the paper book), he tendered that for repairing of the ground floor of the building approximately Rs. 22 to 23 lakhs was paid to him by the trust, Rs.5.5 to 6 lakhs for the office at the ground floor, Rs.50 lakhs for the plaster and painting of terrace etc. Therefore, the contention of the ld. DR/Assessing Officer that no repairing was carried out by the trust is not substantiated. It is noteworthy that third time, the statement of the contractor was recorded on 07/11/2009 (page 29 onwards of the paper book), wherein, in reply to question no.3, he categorically stated that he received the payment of Rs.22 lakhs through cheque and the same were reflected in his return of income. In reply to question no.5, he specifically tendered that he received the payment through cheque only. The Department has not 7 Chandbibi Zaidi & 1392/Mum/2014 brought any evidence on record either the repairs were bogus or the money was returned to the assessee. No addition can be sustained merely on the basis of presumption. Even otherwise, as canvassed by the ld. counsel for the assessee, that addition, if any, has to be made that can possibly be made, if any evidence is found, only in the hands of the trust, who made the payments and not in the hands of the assessee. It is also noted, as admitted by the Department also (page-9 of the paper book) that in spite of specifically asking by the assessee for cross examination, it was not provided to the assessee, thus, the assessee was precluded from its statutory right to defend, consequently, the statement which is the sole basis of making the addition cannot be relied upon. We observe here that the statement so tendered rather supports the case of the assessee as the contractor himself during investigation that in fact he carried out the work (question no. 3 and 4) statement dated 07/11/2009 (page 39 to 41 of the paper book). In reply to question no.7 (statement dated 07/11/2009), the contractor consented that he received more payments than claimed by the Department. It is immaterial how and why the contractor deposited in cash in his account, such deposits in cash are unrelated to the assessee and if any cash has been deposited has to be explained by the contractor and not the assessee. The ld. counsel also explained before us that the Assessing Officer was invited to examine the work carried out by the contractor himself, so that the controversy may be put to rest but that 8 Chandbibi Zaidi & 1392/Mum/2014 was not accepted by the Assessing Officer for the reasons best known to him. Totality of facts, clearly indicates that no evidence has been produced by the Revenue in support of its claim. It is also noteworthy that there are other eleven working committee members in the union and the number of other trustees, it is unknown as to how the assessee was picked up to make the addition. Even otherwise, nothing was seized, during search operation, indicating that any income arose to the assessee out of the repairing work done by the contractor on behalf of the trust. It is also noteworthy, that the contractor, Shri Shankar Goddam, never tendered in the statement, recorded on various dates, that he repaid the money in cash to the assessee. Our observation further gets support from the observation made in the impugned order itself (page-38 of the paper book internal page 33 of the impugned order), wherein, it has been observed that “it is true that Shankar Goddam has never confessed to return the amount to Chandbibi Zaidi, the appellant. It is also noted that in conclusion to para 5 of the impugned order, the addition was restricted to 75% of the additions made in each of the relevant years. It fortifies the case of the assessee because, if no repairing work was carried out it has to be disallowed fully or allowed fully as has been claimed unless and until contrary material is brought on record, thus, this ground of the assessee is allowed.
The next ground raised by the assessee pertains to confirming the addition of Rs.1,27,43,940/- on account of 9 Chandbibi Zaidi & 1392/Mum/2014 “workers aid” paid by the unions as a compensation during strike period at different places. The crux of argument advanced on behalf of the assessee is that financial aid is provided to the workers by the unions for the strike period by explaining that the workers are part/members of the unions and in spite of doing the pest control, the vouchers, kept in the terrace (being in large number) could not be saved. It was empathetically argued that books of accounts are audited and the auditor duly filed the affidavit before Assessing Officer as well as ld. Commissioner of Income Tax (Appeals) confirming that he verified the vouchers and then only he made the report ready for which our attention was invited to the affidavit of the auditor (page 67 of the paper book), affidavit of the General Secretary of the Union (Page 68 of the paper book), affidavit of the Cashier of the Union (page 69 of the paper book), Officer bearers (page 70 of the paper book), affidavit of the workers as a sample (pages 71 to 73 of the paper book), resolution passed by the management committee approving the payment to the workers (page 74 of the paper book), proof of payments (page 75 to 84 of the paper book) and identical affidavits from other unions (page 85 to 96 of the paper book). Alternatively, it was argued that if at all any addition is required to be made that has to be made in the hands of the individual Majdoor Sabha and not in the case of the assessee. The ld. counsel further asserted that there are other ten committee members and no addition was made in their hands and the assessee was simply
10 Chandbibi Zaidi & 1392/Mum/2014 selected with the purpose of harassment. Our attention was invited to page 60 of the paper book containing order u/s 143(3) of the Act for A. Y. 2004-05, wherein, on identical fact, no addition was made by Assessing Officer. Our attention was further invited to page 62 of the paper book in the case of Engineering Majdoor Sabha, wherein, on identical facts, no disallowance was made in order framed u/s 143(3) of the Act. It was also pleaded that addition u/s 153A of the Act can be made only on the basis of seized materials for which reliance was placed upon the decision Murli Agro (ITA No.36 of 2009) order dated 29/10/2010 by claiming that no material was seized against the assessee during the search action, thus, no addition can be made. It was contended that only jewelry worth Rs.4,80,150/- was seized. Our attention was invited to the order of the Tribunal, wherein, in the case of Engineering Majdoor Sabha, the Tribunal held that addition can be made u/s 153A only with respect to seized material (ITA No.1373 to 1379/Mum/2013) order dated 25/02/2015.
3.1. On the other hand, the ld. DR, defended the addition by placing reliance upon the finding contained in the order of the ld. Commissioner of Income Tax (Appeals).
3.2. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that, certain payments were made to the workers, during strike period, by the unions as an aid. The ld. Assessing Officer asked the assessee to produce the vouchers. The 11 Chandbibi Zaidi & 1392/Mum/2014 assessee/unions claimed that due to large volume of papers, the same were kept in terrace, which were destroyed by ants/white ants. The addition was made by the Assessing Officer on the premise that the assessee was expected to take more pre-caution. Without going into much deliberation, under the facts, now question arises whether the assessee took reasonable precaution and further genuineness of the vouchers. The assessee claimed that pest control was done still the vouchers would not be saved. So far as, reliability of vouchers and consequent payments are concerned, we find that books of accounts of the assessee are audited and the auditor filed the affidavit (page-67 of the paper book) affirming that he audited the accounts of the trade unions and while auditing the books all vouchers were produced by the concern trade unions for his inspection and verification and more particularly payment made to workers aid. He stated in the affidavit that such vouchers were checked by him. It is also noted that General Secretary of the Union (page 68 of the paper book), who is authorized signatory on behalf of the unions, stated in his affidavit that he is responsible for maintaining the record and he withdrew the amounts from the accounts of the unions for the purposes of distribution among the workmen. Identically, the accountant of the Engineering Majdoor Sabha, Shri Babu Poshanna Tunnala (page 69 of the paper book) stated that his work was to maintain accounts of the unions, to draw and deposit cheques, to reconcile accounts etc and further stated that he
12 Chandbibi Zaidi & 1392/Mum/2014 withdrew the amounts from the bank for the purposes of distribution amongst the workers as a workers aid. He has further stated that vouchers were duly signed by the concerned workers. Likewise, one of the Secretaries, Shri Guruprasad Bacharam Varma, tendered identical affidavit (page 70 of the paper book) confirming disbursement of aid to the workers. Likewise, affidavits from workers (as a sample copy) (Pages 71 to 73 of the paper book) affirming receipt of aid has been furnished. At page-47 of the paper book, there is extract of meeting of the general counsel committee of the Engineering Majdoor Sabha, held on 03/01/2004 at Kennedy House resolving that the amount of Rs.86,60,000/- has to be given to the workers (page 74 of the paper book). The details of workers along with the payments made to them are available from pages 75 to 84 of the paper book. It is noteworthy that all these documents were neither established to be bogus by the Revenue nor any evidence was brought on record contradicting the claim of the assessee. At page 85 to 90 of the paper book, certain affidavits have been filed substantiating the withdrawal of payments from the accounts of the trade unions for the purposes of distribution amongst the workmen force. In view of this fact, we find merit/force in the contention of the assessee. We further note that identically (page 91) there is a resolution of the Mumbai Majdoor Sabha also for distributing aid to the workers to the tune of Rs.24,31,513/- and further the names and exact amount disbursed to the workers find place at pages 92 to 96
13 Chandbibi Zaidi & 1392/Mum/2014 of the paper book. This factual matrix was not controverted by the Revenue. It is also noteworthy that for assessment year 2004-05 that too an order u/s 143(3) of the Act, identically no disallowance was made. In the case of Engineering Majdoor Sabha (page 62 to 66 of the paper book) for A.Y. 2003-04, no disallowance was made while framing the assessment u/s 143(3) r.w.s 147 of the Act. It is also noted that one Nandkishore Rashiklal Agrawal, (page 67 of the paper book) has sworn affidavit stating that he audited the accounts of Engineering Majdoor Sabha and Mumbai Majdoor Sabha and all vouchers/books of accounts were produced by concerned trade unions for his inspection and verifications including vouchers relating to workers and the same were checked by him. Totality of facts clearly indicates that the vouchers were in existence, duly checked by the auditors at the relevant time, payments were made to the workers as a aid, therefore, we find merit in the argument of the assessee. We also observe that under the facts narrated hereinabove, no addition can be sustained in the hands of the assessee, because addition, if any, is to be made that may be in the hands of the individual majdoor sabha. As to how the assessee was picked up out and remaining members of the Managing Committee were not touched is not known. Even otherwise u/s 153A of the Act, addition can be made on the basis of seized material. For this proposition, we find support from the decision from Hon’ble jurisdictional High Court in the case of CIT vs M/s Murli Agro Products Ltd. (ITA
14 Chandbibi Zaidi & 1392/Mum/2014 No.36 of 2009) order dated 29/10/2010 and to 1379/Mum/2013 in the case of M/s Engineering Majdoor Sabha vs ACIT, order dated 25/02/2015, thus, in the absence of any contrary material, substantiating the version of the Department, we allow this ground of the assessee.
The next ground i.e. ground no.3, raised by the assessee pertains to confirming additions to the income of relatives of the assessee Mr. Waize Ali, Ms. Ravish Zaidi, Khirad Zaidi and Nasir Ali Zaidi. The crux of argument advanced on behalf of the assessee that the aforementioned relatives of the assessee were studying abroad, mostly in Canada, received education aid from the union. The bank account was operated as joint account with the students, simply for operation out of India as the relatives were staying/studying abroad. It was contended that the addition in the hands of the assessee is not warranted even otherwise, the assessee disclosed Rs.72 lakhs. The education loan was explained to be received by the relatives from the union, the same was disclosed and due taxes were paid. It was pointed out that the ld. Commissioner of Income Tax (Appeals) called the remand report from the Assessing Officer, who agreed that these deposits cannot be added to the income of the assessee and only interest income can be added. It was pointed out that department filed appeal before the Tribunal in the case of four relatives, against the relief granted by the Commissioner of Income Tax (Appeals), wherein, the stand of 15 Chandbibi Zaidi & 1392/Mum/2014 the ld. First Appellate Authority was confirmed i.e. decided in favour of the assessee.
4.1. On the other hand, the ld. DR, defended the conclusion arrived at in the impugned order.
4.2. We have considered the rival submissions and perused the material available on record. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, we note that additions were made on the basis of amounts deposited in the bank accounts of Ravish Zaidi, Waize Ali, Khurad Zaidi, and Nasir Ali Zaidi. Mr. Waize Mukhtar Ali was claimed to be nephew of the assessee. During the course of search, a bank account was found in the name of Waize Mukhtar Ali and the assessee Ms. Chandbibi Zaidi (joint name), the name of the assessee appears as a second name. It is noted that the ld. Commissioner of Income Tax (Appeals) called for a remand report from the ld. Assessing Officer, who practically agreed that these deposit cannot be added in the hands of the assessee and only interest income can be added. It is noted that this a case of capital formation by way of gift and the education aid/loan were received before 2003 and further in regular assessment, due taxes were paid, therefore, interest income, if any, can only be added, in the hands of the assessee. From the balance sheet of Nashir Ali Zaidi, as 16 Chandbibi Zaidi & 1392/Mum/2014 on 31/03/2004 (page 132 of the paper book) it is evident that nothing is available in the capital account and in its capital and liabilities, the gift received from the assessee has been duly declared. The ld. counsel, during hearing, pointed out that in the cases of these four relatives, department filed appeal before the ld. Commissioner of Income Tax (Appeals), wherein, relief was granted to these assesses and the Tribunal on further appeal confirmed in favour of the assessees (ITA No.1345/Mum/2014). This factual matrix was not controverted by the Revenue. In view of this factual matrix, the ld. Assessing Officer is directed to add interest income only and subject to limited verification of the fresh credits in the accounts of the said persons in accordance of the mandate of the Act, therefore, this ground is partly allowed.
The next ground i.e. ground no.4, the issue pertains to confirming treatment of loss incurred on sale of Griraj Flat as a loss under the head “capital loss” in spite of the fact that the nothing was seized during the search. The crux of argument advanced on behalf of the assessee is that in the year 2002, the assessee received flat as a gift at Griraj Society from the union. Assessment Year 2002-03 was reopened and this flat was added as income u/s 28(iv) as a perquisite etc. In 2004, the assessee sold this flat and incurred loss of Rs.1 crore. It was explained that the assessee paid Rs.2 crore as a stamp duty on the flat and later on the flat was sold for Rs.1 crore (due to fall in prices of the property), this loss was 17 Chandbibi Zaidi & 1392/Mum/2014 claimed as business loss. It was explained that the ld. Assessing Officer rectified the order and allowed as a business loss and not as a capital loss. Our attention was invited to page 135 of the paper book (containing rectification order u/s 154 of the Act) order dated 27/03/2008. It was explained that in A.Y. 2005-06 (page 136 of the paper book rectification order u/s 154 of the Act dated 27/03/2008 was passed in which also, relief was granted to the assessee, therefore, this was not an issue during the search as the search was carried out in 2009. It was also contended that no incriminating documents/material was found during the search, therefore, this order stands. The ld. DR neither controverted the explanation of the assessee nor passing the rectification order passed u/s 154 of the Act dated 27/03/2008 for A.Y. 2004-05 and 2005-06, therefore, we find merit in the argument of the assessee as no addition can be made under aforementioned circumstances as nothing adverse was found by the Department during search and the original assessments are not abated as the date of search is 20/08/2009 and the relevant assessment year is 2004-05 whereby time for issuing notice u/s 143(2) of the Act for framing assessment u/s 143(3) of the Act has already expired and no new incriminating material is stated to have been found during the course of search, hence, in accordance with the provisions of Section 153A of the Act and the decision of Hon’ble jurisdictional High Court in the case of Continental Warehousing Corporation (Nheva Sheva) Ltd. (2015) 58
18 Chandbibi Zaidi & 1392/Mum/2014 taxmann.com 78(Bom) and more specifically, when the Assessing Officer himself found the claim of the assessee in order and recomputed the loss on account of sale of flat (being held as professional receipt/professional asset) as a professional loss. This ground of the assessee is, therefore, allowed.
The next ground pertains to confirming addition of deemed income of Rs.1,59,500/- from the vacant flat. The crux of argument on behalf of the assessee is that the issue has already been decided in favour of the assessee by the Tribunal in the case of assessee itself (ITA No.2347 and 1372/Mum/2013) order dated 29/07/2015. This factual matrix was consented to be correct by the ld. DR. 6.1. We have considered the rival submissions and perused the material available on record and find that the Tribunal vide aforesaid order dated 29/07/2015 decided the issue. The relevant portion of the same is reproduced hereunder:-
“24. In ground no. 1, the assessee has challenged the addition of Rs. 3,87,600/- on account of deemed income from vacant plot and not allowing deduction of brokerage of Rs.50,000/-.
So far as the issue of brokerage of Rs. 50,000/- is concerned, the Ld. Counsel for the assessee, submitted that the same is not pressed and requested to withdraw the said ground. Accordingly, the claim for deduction of brokerage amount of Rs. 50,000/- is dismissed as not pressed.
19 Chandbibi Zaidi & 1392/Mum/2014
As regards the addition of Rs.3,87,600/- on account of deemed income for house property, the relevant fact is that the assessee was owner of five flats in Mumbai, out of which two flats at Spencer’s CHS at Bandra were let out and rental income was offered. Flat at Crescent Height was claimed as self occupied. However, for the remaining two flats i.e. Giriraj Apartment, Oceanic Apartment, assessee has not offered any income, which is the subject matter of addition by the AO. The Assessing Officer issued notice u/s 133(6) to the Secretaries of both the housing societies for furnishing the details of let out value of the flats in their respective societies, on identical size of the flats and the rental income earned during the same period. In response, it was submitted that the rental rate in Giriraj Apartment was Rs. 20 per sq. ft. and accordingly, the Assessing Officer determined the rental value at Rs. 2,32,200. So far as Oceanic CHS, the Assessing officer received no information, therefore, he estimated the fair market rent on same value, i.e. at Rs. 20 and accordingly, the annual letting value was estimated at Rs. 1,54,800/-. The assessee on the other hand, contended that the municipal value rates of these flats were at Rs. 3,281/- and Rs. 2,643/- respectively, therefore, this value should be adopted as these flats were not let out. However, the Assessing Officer held that the said valuation cannot be accepted.
During the appellate proceedings, the assessee submitted that Giriraj Flat was occupied by the assessee for the first 9 months for the self occupation, therefore, Assessing Officer should have allowed proportionate exemption. Further, the assessee had purchased a flat at Crescent Heights CHS in December, 2002 and shifted to this new flat which is a self-occupied. She also furnished purchase agreement with the Crescent Heights. Since these were new facts and additional evidences, the Ld. CIT(A) forwarded the same to the Assessing
20 Chandbibi Zaidi & 1392/Mum/2014
Officer for submission of the remand report. The relevant extract of which have been incorporated by CIT(A) in para 9 (Page 5 of the appellate order).
On perusal of material on record, the Ld. CIT(A) held that it has option of the assessee to keep one house as self-occupied property and the balance properties have to be offered for taxation under the head “income from house property”. Since assessee has already exercise the option at the time of filing of return of income, therefore she is bound to accept the same as per the assessee’s own declaration. The assessee cannot claim that no ALV of the property can be taken because it was declared as self-occupied property. He thus upheld the ALV estimated by the Assessing Officer which was based on enquiry done through respective CHS.
Before us, the Ld. Counsel submitted that since these properties were not rented out in the assessment year in question therefore, the ALV should be taken as per the municipal valuation, as held in several cases of the Mumbai Tribunal as well as by the Hon’ble Bombay High Court in the case of CIT vs Tip Top Typography, reported in 48 taxman.com 191. These properties were only rented out in assessment year 2005-06. Further, so far as Crescent Heights CHS is concerned, the same was purchased in December, 2002 therefore only the value of the three months should have been taken. On the other hand, Ld. DR relied upon the finding of the Assessing Officer as well as CIT(A).
After hearing both the parties, it is seen that out of five flats, the assessee has rented out two flats and one has been declared as self- occupied property. The issue is, whether the other two properties i.e. Giriraj Apartment and Oceanic Apartment which have not been let out, what should be the ALV. Since it has not been let out then ALV
21 Chandbibi Zaidi & 1392/Mum/2014 can be determined on the basis of municipal valuation, as held by the Hon’ble Bombay High Court in the cases of Tip Top Typography (supra). Accordingly, the Assessing Officer directed to follow the decision of the Hon’ble High Court for determination of the ALV of the said two flats. Ground no.1 as raised by the assessee is partly allowed.”
In view of the above, the ld. Assessing Officer is directed to follow the aforesaid order of the Tribunal.
The next ground i.e. ground no.6 pertains to treatment of loss instead of business loss and confirmed taxing of deemed income from vacant flat at Oceanic Apartment, income on account of workers aid etc. This ground was not argued by the ld. counsel for the assessee being general in nature, therefore, dismissed as not pressed.
The next ground pertains to section 234B(3) etc of the Act. The ld. counsel for the assessee in view of the decision in south Indian Bank Ltd vs CIT (2003) 325 ITR 517 (Kerala) withdrew this ground, therefore, this ground is dismissed as withdrawn.
Resultantly, the appeal of the assessee is partly allowed.
Now, we shall take up appeal of the Revenue (ITA No.1392/Mum/2014), wherein, first ground pertains to deleting the disallowance made on account of remuneration of Rs.3 lakh stated to be paid to workers and claimed as 22 Chandbibi Zaidi & 1392/Mum/2014 expense from the honorarium/salary received by the assessee from the unions M/s Engineering Majdoor Sabha and M/s Majdoor Sabha without appreciating the fact that assessee failed to establish that any work was done by the workers. Identical argument was advanced by the ld. DR by placing reliance upon the assessment order. On the other hand, the ld. counsel for the assessee defended the conclusion arrived at in the impugned order by contending that nothing was seized during seizure operation and allowed u/s 143(3) of the Act for which our attention was invited to pages 60 to 61 of the paper book containing original assessment order by further explaining that the assessee produced the receipt before the Assessing Officer of the workers, who completed the work. However, the ld. DR, brought to our notice that in the case of assessee for A.Y. 2003-04 (ITA No.2437/Mum/2013 and on identical issue, the Tribunal, decided the issue against the assessee. He referred to the order of the Tribunal dated 29/07/2015. In reply, the ld. counsel for the assessee claimed that in the present assessment year, the payment has been made through cheque, therefore, the genuineness of the payment is not in dispute.
9.1. We have considered the rival submissions and perused the material available on record. In view of the above, we are reproducing hereunder the relevant portion from the aforesaid order for ready reference:-
23 Chandbibi Zaidi & 1392/Mum/2014 “31. As regards addition of Rs.3 lakhs for remuneration paid as raised in Ground no.2, the Assessing Officer had made the addition on the ground that the assessee has claimed to have paid honorarium of Rs. 3 lakhs to some persons and claimed deduction thereof. At the time of search and seizure action the assessee failed to give any name of the recipient. Before the Assessing Officer, the assessee had stated that she had made payments to various persons in cash, out of which, two persons had appeared before the Assessing Officer and stated they work for the unions. However, they could not explain the nature of work done for the assessee. The Assessing Officer further noted out of the payment of Rs. 3 lakhs, the assessee could furnish vouchers for Rs.25,000/- only, which too does not contain any number or the detail as to who is authorized to pay and the purpose of payment. Accordingly, he disallowed the payment of Rs. 3 lakhs.
Before the CIT(A), the assessee submitted the details of monthly salary, nature of the work done by the parties for the assessee and the confirmation of the some of the recipients who were produced before the Assessing Officer, and stated that the Assessing Officer has not carried out any enquiry. The Ld. CIT(A) confirmed the addition on the ground that remuneration paid to certain persons who have assisted to the assessee in respect of Union activities cannot be allowed in case of the assessee because she has earned only salary income and honorarium herself and there is no provision to allow such expenditure from salary.
After hearing both the parties, we find that not only the assessee has failed to prove the genuineness of the payment but also, how such a deduction is allowable to her. The finding of the CIT(A) that there is no provision under the head “income from salary” to allow such nature of claim to the assessee appears to be correct. Thus, such an expenditure claimed by the assessee has rightly been disallowed and accordingly, ground no.2 as raised by the assessee is dismissed.”
24 Chandbibi Zaidi & 1392/Mum/2014 However, we find from para 33 of the aforesaid order of the Tribunal, that since, the assessee could not prove the genuineness of the payment, in that situation, the Tribunal decided the issue against the assessee. Whereas, in the appeal before us, the assessee has claimed that the payment was made through cheque. In view of this factual position, we direct the ld. Assessing Officer to examine the claim of the assessee and decide in accordance with law, therefore, this ground of the assessee is allowed for statistical purpose only.
The next grounds i.e. grounds 2 to 2.2 are with respect to expenditure disallowed for repairs of Kennedy House is concerned, we have already deliberated this issue on earlier para of this order, therefore, we affirm the conclusion drawn in the impugned order as neither any infirmity is noticed by us nor any adverse material was produced by the Revenue to substantiate their contention, therefore, we affirm the stand of the ld. Commissioner of Income Tax (Appeals).
The next ground raised by the Revenue pertains to deleting the addition made u/s 68 of the Act on account of loan from M/s Genesis Trading Pvt. Ltd. amounting to Rs.39,48,050/- without appreciating the fact that the assessee could not established the creditworthiness of the M/s Genesis Trading Pvt. ltd.
11.1. The crux of argument on behalf of the Revenue is in support to the assessment order by inviting our attention to 25 Chandbibi Zaidi & 1392/Mum/2014 para 2.7.27 to 7.65 (Pages 23 to 28 of the assessment order) and relevant finding in pra 8.5 and 8.6 (page 51) of the impugned order. On the other hand, the ld. counsel for the assessee explained that M/s Genesis Trading Company is assessed with the same Assessing Officer. They received share application from outsiders and the assessee received loan from M/s Genesis Trading Company. It was contended that any addition, if any, is to be made that can be made in the hands of M/s Genesis Trading Company and not the assessee. It was contended that Directors of the Company were produced, addition was made in the hands of the company also and in the case of the company, books of accounts of share applicants were produced, cross examination were done, statements of the Directors were recorded and they confirmed the loan. Our attention was invited to page 295 to 314 of the paper book.
11.2. We have considered the rival submissions and perused the material available on record. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, there is no dispute to the fact that the amounts added in the hands of the assessee are also reflected as loans received from M/s Genesis Trading Pvt. Ltd. and also in the books of the company. The loans have 26 Chandbibi Zaidi & 1392/Mum/2014 been advanced by way of cheque and the addition was made merely on the ground that identity, genuineness and creditworthiness of M/s Genesis Trading Pvt. ltd. was not established. The company was controlled by the assessee as a Director, therefore, the identity cannot be disputed. The assessee produced the evidence of establishing all the three ingredients of section 68, produced the Directors of the investing company, who have confirmed the transaction, therefore, we find merit in the conclusion of the ld. Commissioner of Income Tax (Appeals) that no addition is warranted. We have also perused the statement of Directors of the company, who have duly confirmed the loan. Even otherwise, the credit has already been assessed in the hands of the M/s Genesis Trading Pvt. Ltd, no double addition is permitted, thus, we affirm the stand of the ld. Commissioner of Income Tax (Appeals), resulting into dismissal of appeal of the Revenue. Finally, the appeal of the assessee as well as of the Revenue is partly allowed for statistical purposes. This Order was pronounced in the open court in the presence of ld. representatives from both sides at the conclusion of the hearing on 12/11/2015.