Shri Gurav Avinash madhukar, Sindhudurg v. ITO, Wd.-2(3),, Kudal

ITA 298/PUN/2010 | 2000-2001
Pronouncement Date: 29-07-2011 | Result: Allowed

Appeal Details

RSA Number 29824514 RSA 2010
Assessee PAN ACVPG9551H
Bench Pune
Appeal Number ITA 298/PUN/2010
Duration Of Justice 1 year(s) 5 month(s) 6 day(s)
Appellant Shri Gurav Avinash madhukar, Sindhudurg
Respondent ITO, Wd.-2(3),, Kudal
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 29-07-2011
Date Of Final Hearing 21-07-2011
Next Hearing Date 21-07-2011
Assessment Year 2000-2001
Appeal Filed On 22-02-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE SHRI I.C. SUDHIR (JM) AND SHRI G.S. PANNU (AM) ITA NOS. 298 TO 301/PN/2010 (ASSTT. YEARS : 2000-01 2001-02 2004-05 & 2005-06) SHRI GURAV AVINASH MADHUKAR ... APPELLANT PROP. HOTEL MADHUBAN M.K.G. ROAD KHAREPATAN TAL. KANKAVLI DIST. SINDHUDURG PAN ACVPG9551H V. INCOME - TAX OFFICER RESPONDENT WARD 2(3) KUDAL APPELLANT BY : SHRI M.K. KULKARNI RESPONDENT BY : SHRI S.K. AMBASTHA ORDER PER BENCH IN ALL THESE APPEALS THE FIRST APPELLATE ORDER H AS BEEN QUESTIONED BY THE ASSESSEE MAINLY ON TWO ISSUES. FIRSTLY AS TO WHET HER THE LD CIT(A) WAS JUSTIFIED IN DISMISSING THE APPEAL OF THE ASSESSEE FOR STATISTICAL PURPOSES CONFIRMING THE VIEW OF THE A.O THAT INCOME FROM LET TING OUT THE PROPERTY FOR LODGE CAN BE TAXED AS INCOME FROM HOUSE PROPERTY AN D CONSEQUENTLY DISALLOWING THE CLAIMED DEPRECIATION ? SECONDLY A S TO WHETHER THE LD CIT(A) HAS FAILED TO APPRECIATE THE DECISION OF PUNE BENC H OF THE TRIBUNAL FOR THE A.Y. 1999-2000 UPHOLDING THE VIEW OF THE A.O THAT INCOM E IN QUESTION WAS BUSINESS INCOME IN AN APPEAL PREFERRED AGAINST RE VISIONAL ORDER U/S. 263 OF THE ACT AND THUS INITIATION OF RE-ASSESSMENT PROCEE DINGS U/S. 147 WERE ONLY ON MERE CHANGE OF OPINION ?; AND THIRDLY AS TO WHETHE R ASSESSEE WAS LIABLE TO PAY INTEREST U/S. 234A 234B AND 234C OF THE ACT ? ITA . NOS. 298 TO 301/PN/2010 SHRI GURA V AVINASH MADHUKAR A.YS. 2000-01 2001 -02 2004-05 ETC. PAGE OF 7 2 2. THE ISSUE NOS. 1 & 2 ARE INTER CONNECTED. WE A RE THUS DECIDING THESE ISSUES SIMULTANEOUSLY. THESE ISSUES HAVE BEEN RAI SED IN GROUND NOS. 1 TO 5 OF THE APPEAL. 3. THE RELEVANT FACTS ARE THAT THE ASSESSEE IS ENGA GED IN THE BUSINESS OF RUNNING A HOTEL AND PERMIT ROOMS. THE RETURN OF IN COME FILED FOR THE A.YS. UNDER CONSIDERATION WERE PROCESSED U/S. 143(1)(A) OF THE ACT. SUBSEQUENTLY THE A.O ON VERIFICATION OF PROFIT & LOSS ACCOUNT FOUND THAT AN AMOUNT WAS CREDITED AS LOSS IN RENT RECEIPT AND AN AMOUNT WAS CLAIMED AS DEPRECIATION ON THE ENTIRE BUILDING INCLUDING THE PORTION LET OUT T O SMT. MALATI GURAV BY AN AGREEMENT DATED 01.12.1997 ON SOME MONTHLY RENT. T HE PORTION LET OUT TO SMT. MALATI GURAV WAS BEING USED FOR RUNNING A LODG E CONSISTING OF 1 ST AND 2 ND FLOORS OF THE BUILDING. AS THE ASSESSEE HAD CLAIME D THE SAID MONTHLY RENT RECEIVED FROM SMT MALATI GURAV AS INCOME FROM BUSIN ESS AND AS PER THE A.O THERE WAS NOTHING ON RECORD TO PROVE THAT THE ASSES SEE WAS EXPLOITING EXISTING COMMERCIAL ASSET HE BROUGHT THE AMOUNT OF RENT REC EIPT AS INCOME FROM HOUSE PROPERTY AND IN CONSEQUENCE DEPRECIATION WAS DISALL OWED. THE ASSESSEE COULD NOT SUCCEED EVEN IN FIRST APPEAL AGAINST THE SAID A SSESSMENT ORDER THEREFORE PRESENT APPEALS HAVE BEEN PREFERRED. 4. THE CONTENTION OF THE LD. A.R. REMAINED THAT IN THE A.Y. 1999-2000 THE A.O HAD ACCEPTED THE RENT RECEIVED FROM SMT. MALATI GURAV UNDER THE HEAD BUSINESS INCOME WHICH WAS SUBJECTED TO REVISION BY THE LD CIT U/S. 263 OF THE ACT. THE ASSESSEE HAD QUESTIONED THE ACTION OF THE LD CIT WHEREBY THE LD CIT INVOKING THE PROVISIONS OF SEC. 263 HAD SET ASI DE THE ASSESSMENT ORDER TREATING THE ASSESSMENT AS ERRONEOUS AND PREJUDICIA L TO THE INTEREST OF REVENUE. THE LD CIT WAS OF THE VIEW THAT IT WAS A TRANSACTION OF SIMPLY HIRING OF PROPERTY FETCHING RENT ASSESSABLE AS INCOME FROM PROPERTY AND NOT AS BUSINESS INCOME. THE ASSESSEE HAD QUESTIONED THE S AID REVISIONAL ORDER BEFORE THE TRIBUNAL VIDE ITA NO. 873/PN/2004 (A.Y. 1999-20 00) WHICH HAS BEEN ITA . NOS. 298 TO 301/PN/2010 SHRI GURA V AVINASH MADHUKAR A.YS. 2000-01 2001 -02 2004-05 ETC. PAGE OF 7 3 DECIDED IN FAVOUR OF THE ASSESSEE ON 30 TH APRIL 2008. THE LD. A.R. SUBMITTED THAT VIEW OF THE A.O ON THE ISSUE THAT THE RENT REC EIPT IS BUSINESS INCOME HAS BEEN UPHELD BY THE TRIBUNAL HENCE THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN TREATING THE RENT RECEIPT AS INCOME FROM PROPERTY. THE LD. A.R. SUBMITTED THAT THE ISSUE RAISED IN THE GROUND IN THIS REGARD IS TH US COVERED BY THE SAID DECISION OF THE TRIBUNAL. HE REFERRED PARA NO. 5 T HEREOF. LD. A.R. POINTED OUT FURTHER THAT AGAINST THE SAID ORDER DT. 30 TH APRIL 2008 OF THE TRIBUNAL IN THE APPEAL PREFERRED AGAINST SECTION 263 ORDER THE RE VENUE HAD GONE IN APPEAL BEFORE THE HONBLE BOMBAY HIGH COURT IN ITA X/1396 OF 2008 WHICH HAS ALSO BEEN DISMISSED. THUS ORDER OF THE TRIBUNAL HAS BE EN CONFIRMED. UNDER THIS BACKGROUND THE INITIATION OF RE-ASSESSMENT PROCEE DINGS U/S. 147 IN THE A.YS. UNDER CONSIDERATION IS ONLY ON MERE CHANGE OF OPIN ION HENCE THE ASSESSMENT ORDERS ARE NOT SUSTAINABLE. THE LD. A.R. SUBMITTE D FURTHER THAT THOUGH THE LD CIT(A) HAS DISMISSED THE APPEAL BY PASSING FINAL AN D CONCLUSIVE ORDER BUT HAS WRONGLY MENTIONED AS THE APPEAL IS DISMISSED FOR S TATISTICAL PURPOSES. THE LD. A.R. ALSO PLACED RELIANCE ON THE DECISION OF HO NBLE BOMBAY HIGH COURT IN THE CASE OF NUTAN WAREHOUSING CP. PVT. LTD. V/S. D CIT (2010) 47 DTR (BOM) 140 HOLDING THAT IF THE DOMINANT INTENTION OF THE A SSESSEE IS TO ACCEPT A COMMERCIAL ASSET BY CARRYING ON A COMMERCIAL ACTIVI TY THE INCOME THAT IS RECEIVED WOULD HAVE TO BE TREATED AS INCOME FROM B USINESS. HE SUBMITTED THAT THE BUILDING IN QUESTION IS COMMERCIAL AND IS BEING EXPLOITED AS SUCH BY THE ASSESSEE. THE LD. A.R. SUBMITTED THAT THE ASSES SEE IS RUNNING HOTEL IN THE PROPERTY IN THE NAME OF HOTEL MADHUBAN AND UPPER PORTION OF THE BUILDING HAS BEEN LET OUT TO SMT. MALATI GURAV I.E. MOTHER O F THE ASSESSEE WHICH IS BEING USED BY HER FOR RUNNING A LODGE. THE RENT RE CEIVED THEREFORE SHOULD HAVE BEEN TREATED AS INCOME FROM BUSINESS. 5. THE LD. D.R. ON THE OTHER HAND TRIED TO JUSTIF Y THE ORDERS OF THE AUTHORITIES BELOW. HE SUBMITTED FURTHER THAT DECIS ION IN THE APPEAL FOR A.Y. ITA . NOS. 298 TO 301/PN/2010 SHRI GURA V AVINASH MADHUKAR A.YS. 2000-01 2001 -02 2004-05 ETC. PAGE OF 7 4 1999-2000 (ITA NO. 873/PN/2004) RELIED UPON BY THE LD. A.R. IS NOT HELPFUL TO THE ASSESSEE AS THE ISSUE INVOLVED THEREIN WAS REGA RDING THE JURISDICTION OF CIT INVOKED U/S. 263 OF THE ACT. THE TRIBUNAL HAS ALLO WED THE APPEAL ONLY ON THE BASIS THAT WHERE TWO VIEWS ARE POSSIBLE AND INCOME TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF T HE REVENUE UNLESS THE VIEW TAKEN BY THE INCOME TAX OFFICER IS UN-SUSTAINABLE I N LAW. HE SUBMITTED FURTHER THAT THE DECISION OF HONBLE BOMBAY HIGH COURT IN T HE CASE OF NUTAN WAREHOUSING COMPANY (P) LTD. V/S. DCIT (SUPRA) IS H AVING DISTINGUISHABLE FACTS HENCE IT IS NOT RELEVANT. 6. CONSIDERING ABOVE SUBMISSIONS WE AGREE WITH THI S CONTENTION OF THE LD A.R. THAT THE FIRST APPEAL HAS BEEN DECIDED BY THE LD CIT(A) FULLY AND FINALLY AGAINST THE ASSESSEE BY DISMISSING THE SAME HENCE THE LD CIT(A) WAS NOT CORRECT IN CONCLUDING AS THE APPEAL IS DISMISSED FOR STATISTICAL PURPOSES; THE MISTAKE IS APPARENT FROM RECORD IN THE ORDER OF THE FIRST APPELLATE AUTHORITY WHICH COULD HAVE BEEN RECTIFIED ON THE REQUEST OF T HE ASSESSEE U/S. 154 OF THE ACT. THERE IS HOWEVER NO DOUBT AS IT IS APPAREN T FROM THE FIRST APPELLATE ORDER THAT THE FIRST APPEAL HAS BEEN DISMISSED FINA LLY. SO FAR AS THE CONTENTION OF THE LD. A.R. THAT THE ISSUE REGARDING THE NATURE OF RENT RECEIPT HAS BEEN DECIDED BY THE TRIBUNAL IN THE APPEAL FOR A.Y. 199 9-2000 (SUPRA) IS CONCERNED WE DO NOT AGREE WITH THIS CONTENTION. THE ISSUE B EFORE THE TRIBUNAL IN THAT APPEAL WAS AS TO WHETHER THE LD CIT WAS JUSTIFIED I N INVOKING THE PROVISIONS OF SECTION 263 OF THE ORDER TO SET ASIDE THE ASSESSMEN T ORDER BY TAKING AN ANOTHER LEGAL VIEW THAN THAT TAKEN BY THE A.O. TH E TRIBUNAL QUASHED THE IMPUGNED ORDER PASSED U/S. 263 OF THE ACT FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. 243 ITR 83 (ASSESSEE) WHEREIN IT HAS BEEN HELD THAT WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH T HE COMMISSIONER DOES NOT ITA . NOS. 298 TO 301/PN/2010 SHRI GURA V AVINASH MADHUKAR A.YS. 2000-01 2001 -02 2004-05 ETC. PAGE OF 7 5 AGREE IT CANNOT BE TREATED AS AN ERRONEOUS ORDER P REJUDICIAL TO THE INTEREST OF REVENUE UNLESS THE VIEW TAKEN BY THE INCOME TAX OF FICER IS UNSUSTAINABLE IN LAW. THE SAID ORDER DATED 30 TH APRIL 2008 OF THE TRIBUNAL IN THE APPEAL AGAINST SEC. 263 ORDER IS THUS NOT HELPFUL TO THE ASSESSEE . LD CIT(A) WAS JUSTIFIED IN HOLDING AS SUCH. 7. NOW THE QUESTION REMAINS TO BE ADJUDICATED UPON IS AS TO WHETHER THE RENT RECEIPT IN QUESTION CAN BE TREATED AS INCOME F ROM BUSINESS. AN IDENTICAL ISSUE WAS RAISED BEFORE THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF NUTAN WAREHOUSING CO. (P.) LTD. V/S.DCIT (SUPRA). THE FACTS THERE WAS SLIGHTLY DIFFERENT AS IN THAT CASE ENTIRE BUILDING I.E. WAREHOUSE WAS LET OUT VIDE AN AGREEMENT. THE TRIBUNAL HELD THAT THE INC OME RECEIVED FROM THE LEASING OF THE WAREHOUSE WAS ASSESSABLE AS INCOME F ROM HOUSE PROPERTY. THE CONTENTION OF THE ASSESSEE BEFORE THE HONBLE HIGH COURT REMAINED THAT THE TRIBUNAL HAS HELD SO WITHOUT CONSIDERING THE TERMS OF THE AGREEMENT. THE HONBLE HIGH COURT OBSERVED THAT MERELY STYLING AN AGREEMENT AS A WAREHOUSING AGREEMENT WOULD NOT BE CONCLUSIVE OF TH E NATURE OF THE TRANSACTION SINCE IT IS TO THE TRIBUNAL FOR DETERMI NING AS TO WHETHER THE TRANSACTION WAS BARE LETTING OUT OF THE ASSET OR WH ETHER THE ASSESSEE WAS CARRYING ON A COMMERCIAL ACTIVITY INVOLVING WAREHO USING OPERATION. THE HONBLE HIGH COURT HAS BEEN PLEASED TO HOLD THAT IF THE PRIMARY OR THE DOMINANT OBJECT IS TO LEASE OR LET OUT PROPERTY T HE INCOME WHICH IS DERIVED FROM THE PROPERTY WOULD HAVE TO BE REGARDED AS INCO ME FROM HOUSE PROPERTY BUT IF THE DOMINANT INTENTION OF THE ASSESSEE IS TO EXPLOIT A COMMERCIAL ASSET BY CARRYING ON A COMMERCIAL ACTIVITY THE INCOME TH AT IS RECEIVED WOULD HAVE TO BE TREATED AS INCOME FROM BUSINESS. THE HONBLE HI GH COURT HAS ACCORDINGLY REMANDED THE PROCEEDINGS BACK TO THE A.O FOR A FRES H DETERMINATION IN ACCORDANCE WITH LAW WITH THIS OBSERVATION THAT THE TRIBUNAL HAS NOT CONSIDERED THE ABOVE ASPECTS. ITA . NOS. 298 TO 301/PN/2010 SHRI GURA V AVINASH MADHUKAR A.YS. 2000-01 2001 -02 2004-05 ETC. PAGE OF 7 6 8. IN THE PRESENT CASE AS WELL WE ARE OF THE VIEW THAT THE ISSUE REGARDING THE NATURE OF THE INCOME OF RENTAL RECEIPT HAS NOT BEEN EXAMINED BY THE AUTHORITIES BELOW AS TO WHAT IS THE PRIMARY OR DOMI NANT OBJECT IN LEASING OR LETTING OF PROPERTY IN QUESTION TO SMT. MALATI GURA V. THUS THE DOMINANT INTENTION OF THE ASSESSEE TO EXPLOIT THE PROPERTY H AS REMAINED TO BE DETERMINED TO DECIDE THE NATURE OF THE RENT RECEIPT . WE THUS RESPECTFULLY FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF NUTAN WAREHOUSING CO. (P) LTD. V/S. DCIT (SUPRA) SET ASID E THE ISSUE TO THE FILE OF THE A.O FOR FRESH DETERMINATION IN ACCORDANCE WITH LAW AS DIRECTED BY THE HONBLE BOMBAY HIGH COURT IN THE SAID DECISION AS THE RATIO LAID DOWN THEREIN IS VERY MUCH APPLICABLE IN THE PRESENT CASE. THE GROUNDS I NVOLVING THE ISSUES ARE THUS ALLOWED FOR STATISTICAL PURPOSES. 9. SO FAR AS THE VALIDITY OF RE-OPENING OF THE ASSE SSMENT IS CONCERNED ADMITTEDLY RETURN WAS PROCESSED U/S. 143(1)(A) OF THE ACT HENCE IT CANNOT BE SAID THAT ON EARLIER OCCASION THE A.O HAD FORMED A NY VIEW ON THE ISSUE WHICH WAS SUBSEQUENTLY CHANGED BY THE A.O. THUS THERE I S NO SUBSTANCE IN THE CONTENTION OF THE LD. A.R. THAT REOPENING U/S. 147 OF THE ACT HAS BEEN INITIATED IN THE PRESENT CASE BY THE A.O DUE TO CHANGE OF OPI NION. THE ISSUE IS THUS DECIDED AGAINST THE ASSESSEE. THE GROUNDS TO THIS EXTENT ARE THUS REJECTED. 10. THE ISSUE REGARDING THE VALIDITY OF CHARGING OF INTEREST U/S. 234A 234B AND 234C OF THE ACT AGAINST THE ASSESSEE IS CONSEQU ENTIAL IN NATURE HENCE THE GROUND NO. 6 INVOLVING THE ISSUE DOES NOT NEED INDE PENDENT ADJUDICATION. 11. IN RESULT APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. ITA . NOS. 298 TO 301/PN/2010 SHRI GURA V AVINASH MADHUKAR A.YS. 2000-01 2001 -02 2004-05 ETC. PAGE OF 7 7 THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 29TH J ULY 2011. SD/- SD/- ( G.S. PANNU ) ACCOUNTANT MEMBER ( I.C. SUDHIR ) JUDICIAL MEMBER PUNE DATED THE 29TH JULY 2011 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT I/II KOLHAPUR/CIT (CENTRAL) PUNE 4. THE CIT(A)- KOLHAPUR 5. THE D.R. B BENCH PUNE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE