2014 (6) TMI 662 - AT - Income Tax

Tribunal emphasizes evidence verification for income nature in appeal decisions

The Tribunal allowed the appeals for statistical purposes, emphasizing the importance of proper verification and examination of evidence to determine the ... Admission of additional evidence - Confirmation of income from rental business - Leased premises treated as 'Income from House Property – Addition u/s 68 of the Act – Sundry creditors – Held that:- The assessment order as well as the order of CIT(A) are passed ex parte for want of any representation from the side of the assessee - assessee has explained the reasons for non-appearance as fault on the part of the assessee, who did not appear before the authorities below and the assessee was kept in dark - the additional evidence intended to be filed by the assessee is relevant for the purpose of determining the nature of income received for the factory building given on license for conduct of business. The assessee has also sought to file the additional evidence in the shape of details of asset and machinery in the factory premises which was given on license - the additional evidence sought to be filed by the assessee requires a proper verification and examination at the level of AO – thus, the additional evidence to be filed by the assessee – thus, the AO is directed to decide the issue after verification and examination of the additional evidence filed by the assessee - the claim of depreciation is also required to be examined by the AO if the income received by the assessee is treated as business income - the assessee has claimed depreciation including land and building which requires a proper verification – Decided in favour of Assessee. Issues: Appeal against orders of CIT(A) for A.Y. 2007-08 and 2008-09, delay in filing appeal for A.Y. 2008-09, common grounds raised in both appeals, treatment of income from rental business, addition of sundry creditors, non-appearance before authorities, admission of additional evidence, nature of income received, verification of additional evidence, examination of depreciation claim.Analysis:1. Delay Condonation for A.Y. 2008-09:The assessee filed two appeals against CIT(A) orders for A.Y. 2007-08 and 2008-09, with a delay of 95 days in filing the latter. The reason cited was the hospitalization of the Managing Partner. The Tribunal, after hearing both parties, accepted the explanation for the delay due to the Managing Partner's hospitalization. Given that the issues for both assessment years were common and the appeal for A.Y. 2007-08 was filed within the time limit, the Tribunal condoned the delay in filing the appeal for A.Y. 2008-09 in the interest of justice.2. Grounds Raised by Assessee:The assessee raised common grounds in both appeals concerning the treatment of income from rental business and addition of sundry creditors. For A.Y. 2007-08, the appeal was decided ex parte as no representation was made before the authorities. The CIT(A) upheld the assessment under section 144 of the Income Tax Act. For A.Y. 2008-09, though representation was made, the CIT(A) followed the A.Y. 2007-08 order. The assessee contended that non-appearance was due to the Authorized Representative's lapse, leading to a petition for admission of additional evidence.3. Admission of Additional Evidence:The Authorized Representative argued that non-appearance was due to the Representative's fault and filed a petition under rule 29 for additional evidence admission. The evidence aimed to determine the actual nature of income, challenging the treatment of license fee as 'income from house property.' The Tribunal allowed the additional evidence submission, emphasizing its relevance and the need for proper verification by the Assessing Officer.4. Verification and Examination of Evidence:The Tribunal set aside the matter for both assessment years for the Assessing Officer to verify and examine the additional evidence. The AO was directed to decide the issue after proper examination, including the claim of depreciation if the income is considered business income. The AO was also tasked with verifying the proof of payment of cost related to depreciation.5. Final Decision:In conclusion, the Tribunal allowed the appeals for statistical purposes, emphasizing the importance of proper verification and examination of evidence to determine the nature of income received. The decision aimed at ensuring justice and thorough examination of the relevant issues.This detailed analysis of the judgment highlights the key issues, arguments presented, and the Tribunal's decisions regarding the delay in filing the appeal, treatment of income, admission of additional evidence, and the need for verification and examination by the Assessing Officer.