2013 (10) TMI 702 - AT - Income Tax

Tribunal upholds CIT(A) decisions on assessments, including plot rent disallowance and TDS non-deduction.

The Tribunal upheld the CIT(A)'s decisions on all issues, dismissing the appeals. The reopening of assessments was deemed valid, the disallowance of 'plot ... Reassessment u/s 147 - Storage Charges – Income from House Property OR Not - The assessee has declared 'storage charges' as income from house property and accordingly claimed statutory deduction of 30% - Held that:- From the reading of the letter dated 5.8.2009 sent by the AO, we notice that the AO has sufficiently explained the grounds on the basis of which he has entertained the belief about the escapement of income - Relying upon GKN Driveshafts (India) Ltd Vs. ITO and Others[2002 (11) TMI 7 - SUPREME Court] - the communication cannot be found fault with - the assessee has sought the reasons for issuing the notices and the AO has supplied the reasons - Thereafter the assessee did not object to the reopening nor did it pointed out the alleged insufficiency of reasons - Instead, we notice that the assessee has participated in the assessment proceedings without raising any objection - Since the assessee did not object to the said communication, there was no occasion for the AO to address the contentions urged. Deduction on Income from House Property - The assessee has claimed 'Plot rent' paid to Cochin Port Trust as deduction while computing the income from house property – Held that:- The provisions of Income tax provide for method of computation of income under the head Income from house property - Section 24 of the Act provides for the specific deductions to be allowed from the Annual rental value determined in the manner prescribed in the Act - Sec. 24 of the Act does not provide for deduction of ground rent (plot rent) while computing the income under the head Income from house property – there was no infirmity in the decision of Ld CIT(A) on the issue. Disallowance u/s 40(a)(ia) of the Act – the assessee did not deduct tax at source from the payments made for transport and delivery charges, which attract disallowance u/s 40(a)(ia) of the Act – Held that:- The Ld CIT(A) called for a remand report from the AO - In the report, the AO recommended for disallowance of only Rs.2,52,779/- and Rs.3,47,482/- respectively for assessment years 2005-06 and 2006-07. Accordingly, the Ld CIT(A) sustained the addition to the extent recommended in the remand report and granted relief in respect of balance amounts. Still aggrieved, the assessee is contesting the additions sustained by the ld CIT(A). Addition made u/s 41(1) of the Act - the assessee has written off balances from Sundry creditors account, but did not declare it as income u/s 41(1) of the Act – Held that:- The assessee has written off sundry creditors' balances in assessment year 2005-06 and credited the same in the Profit and Loss account - However, while computing the total income, the assessee excluded the above amount - the liability so written off by the assessee is assessable u/s 41(1) of the Act - The assessee has also failed to show that the amounts have not been allowed as a deduction - the assessee, instead of proving its claim with material evidences, simply finds fault with the assessing officer, that too with oral submissions - such types of oral contentions cannot be recognized - the Explanation 1 to sec. 41(1) provides for assessing of liabilities written off by unilateral act also – Decided against Assessee. Issues Involved:1. Reopening of assessment.2. Deduction of 'plot rent' against income from house property.3. Disallowance under Section 40(a)(ia) of the Act.4. Addition under Section 41(1) of the Act for sundry creditors written off.Detailed Analysis:1. Reopening of Assessment:The assessee challenged the reopening of assessments for the years 2005-06 and 2006-07, arguing that it was barred by limitation, lacked sufficient reasons, and that the AO failed to communicate the reasons for reopening. The AO had identified several irregularities, such as declaring 'storage charges' as income from house property, claiming 'plot rent' as a deduction, non-deduction of TDS on certain payments, and not declaring written-off sundry creditors as income. The AO issued notices under Section 148, believing income had escaped assessment.The CIT(A) upheld the reopening, noting that the original returns were accepted under Section 143(1) and that the AO had communicated the reasons for reopening. The CIT(A) also cited case law supporting the use of audit objections as a basis for reopening if the AO applies his mind to them. The Tribunal agreed with the CIT(A), stating that the AO had sufficiently explained the grounds for reopening and that the assessee had participated in the proceedings without raising objections at the appropriate time.2. Deduction of 'Plot Rent' Against Income from House Property:The assessee claimed a deduction for 'plot rent' paid to Cochin Port Trust against income from house property. The AO disallowed this, stating such a deduction is not provided under Section 24 of the Act. The CIT(A) confirmed this disallowance. The Tribunal noted that the rental income received by the assessee was not linked to the payment of plot rent and that Section 24 does not provide for such a deduction. Therefore, the Tribunal upheld the CIT(A)'s decision.3. Disallowance Under Section 40(a)(ia) of the Act:The AO disallowed payments for transportation, delivery, and trailer hire charges due to non-deduction of TDS, amounting to Rs. 25,51,556/- for 2005-06 and Rs. 29,37,253/- for 2006-07. The CIT(A), based on a remand report, reduced the disallowance to Rs. 2,52,779/- and Rs. 3,47,482/- respectively. The assessee argued that the payments were made during the year and nothing remained payable at year-end, relying on the Merilyn Shipping case. However, the Tribunal noted that subsequent case law had held the Merilyn Shipping decision as not good law. Thus, the Tribunal upheld the CIT(A)'s decision.4. Addition Under Section 41(1) of the Act for Sundry Creditors Written Off:The AO added Rs. 2,87,677/- to the income for 2005-06, representing sundry creditors' balances written off by the assessee. The CIT(A) confirmed this addition. The assessee argued that Section 41(1) applies only if the amounts were previously allowed as deductions, and the AO had not established this. The Tribunal noted that the assessee also failed to prove that the amounts were not allowed as deductions and that unilateral writing off of liabilities could attract Section 41(1). Therefore, the Tribunal upheld the CIT(A)'s decision.Conclusion:The Tribunal dismissed the appeals, upholding the CIT(A)'s decisions on all issues. The reopening of assessments was deemed valid, the disallowance of 'plot rent' and amounts under Section 40(a)(ia) were upheld, and the addition under Section 41(1) for sundry creditors written off was confirmed.