TaxTMI 
TaxTMI 
2020 (3) TMI 226
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....up ITA No.76/Ahd/2011 for AY 2007-08, wherein the assessee has raised the following grounds of appeal: 11.1. the order passed u/s.250 on 22.10.2010 for A.Y. 2007-08 by CIT(A)-XVI, Ahmedabad upholding order u/s.143(3) dated 31.12.2009 is wholly illegal, unlawful and against the principles of natural justice. 1.2. TheLd.CIT(A) has grievously erred in law and or on facts in passing the impugned order without allowing sufficient opportunity to the appellant. The Ld.CIT(A) has erred in not considering fully and properly the submissions made and material produced by the appellant. 2.1. The Ld.CIT(A) has grievously erred in law and on facts in confirming the disallowance of expenses of Rs. 14,26,813/-. 2.2. That in the facts and circumstances of the case as well as in law, the Ld.CIT(A) ought not to have upheld the disallowance of expenses of Rs. 14,26,813/-. 2.3. The Ld.CIT(A) has grievously erred in upholding that there was no business activity during the year and the appellant had failed to prove the same. The appellant was not allowed sufficient opportunity to produce evidence in this regard. 3.1. The Ld.CIT(A) has erred in upholdi....
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....ness was not closed. Therefore in absence of any detail such as when he started business and when slowdown came in market and when he restarted his business after lull in market, the contention of the assessee is not acceptable. Accordingly the learned CIT (A) confirmed the order of the AO. Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us. 6. The learned AR before us filed a paper book running from pages 1 to 71 and submitted that the business activities of the assessee were not discontinued/closed down. As such there was a lull in the business activities and therefore it could not show any income under the head business and profession. The learned AR further claimed that the assessee in the assessment year 2010-11 has re-started its business activities. The learned AR in support of his contention drew our attention on the financial statements for the assessment year 2010-11. 6.2. The learned AR also buttressed his contention by filing the assessment order under section 143(3) of the Act for the assessment year 2006-07 wherein the business activities of the assessee were shown. 6.3. In view of the above the learned AR claimed that....
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....d on its business activities in the immediate previous assessment year i.e. 2006-07 and in A.Y. 2010-11 but in between there was no business activity for the assessment years 2007-08, 2008-09 and 2009-10. 9. The next issue arises whether the temporary lull in the business activities amount to closure of the business. The answer certainly is in negative. It is because there can be a situation when the assessee is not able to generate any business but it has to incur the expenses to keep its business setup in existence. Thus in such a situation the assessee cannot be denied the claim of expenses incurred during the period when he was not able to generate the business. Furthermore, it is also important to note that the business is governed by the market forces which are beyond the control of the assessee. Thus merely lull in the business activities does not mean that the assessee has closed down its business activities. Accordingly, we hold that the assessee cannot be deprived from the benefit of claiming the deduction for the expenses incurred to keep the setup of the business in existence. 10. Regarding the question No.2 as discussed above, we note that the expenses incurre....
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....the assessee). 11.3. The assessee accordingly claimed to have received rent from the lessee which is chargeable to tax under the head income from house property. Thus the assessee claimed the deduction against such rental income under the provisions of section 24 (a) and 24(b) of the Act for Rs. 18,17,612/- and Rs. 8,00,388/- respectively. 11.4. The AO during the assessment proceeding deputed the inspector to verify the property let out by the assessee to the lessee as discussed above. 11.5. The inspector of the income tax in turn submitted that the bungalow has been demolished by the lessee and the piece of land is being used for the purpose of patrol pump activity. 11.6. In view of the above the AO held that the rent received by the assessee is from letting out the land and not the house property. Therefore the same cannot be treated income under the head house property but the income from other sources. Eventually, the assessee cannot be allowed deduction claimed by him under the provisions of section 24(a) and 24(b) of the Act. 11.7. The AO also observed that the supplementary deed by the assessee dated 11th of September 2006 is self-serving document and cannot b....
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....here is nothing on record that the lessee has enjoyed the Bunglow as house property or intended to enjoy it. On the contrary, as stated by the AO the intention of the appellant as well as the lessee was clearly to give and take the land on which the lessee right from the beginning wanted to construct a petrol pump. It cannot be argument of the AO that person who wanted to take Bunglow on rent decided to demolish and make petrol pump without the intention being very clear right in the beginning. The AO has quoted from the deed to show that the lessee was taking the lease of plot on rent. Page 6 of the lease agreement clearly shows that the lesser has delivered to the lessee vacant and peaceful possession f the entire said land. In the agreement itself, the intention is very clear because on page number eight and nine clause (ix), and clause (xiv) clearly show that the lessee shall have the right to carry on any construction on the said land for running its business. If the intention was to make any construction for running its business then enjoyment of bunglow can never be the intention in the beginning also. In view of this reason, I agree with the AO that the income earn....
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....ungalow will be used for the purpose of the petrol pump. The lessee was not interested in the bungalow at all. It is because the lessee immediately after entering into the lease agreement started the process of getting approval from various authorities for the purpose of petrol pump. This fact can be verified from the commencement letter issued by the Ahmadabad Municipal Corporation to the lessee dated 30-11-2007 where the lessee got NOC from certain authorities as detailed under: i. NOC from Ministry of Commerce and Industry Dept of Explosive for petrol pump vide letter dated 27/11/2006, ii. NOC from police department vide letter dated 08/02/2007 and iii. NOC from Archaeological Survey of India vide letter dated 19-04- 2007. 14.1. Finally, the Ahmadabad Municipal Corporation on the basis of above mentioned NOCs issued the commencement letter vide order dated 30/11/2007. From the above mentioned facts it is transpired that the lessee never used the bungalow/building. As such, the lessee was only using land for the purpose its petrol pump business. Thus the rent paid by the lessee to the assessee was towards the use of land and not for the use of the....
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....007-08 by CIT(A)-XVI, Abad confirming the penalty of Rs. 13,62,000 levied by AO in respect of disallowances of business expenses of Rs. 14,26,813 and rental income treated as income from other sources by Rs. 26,18,000 is wholly illegal, unlawful and against the principles of natural justice. 1.2. The Ld.CIT(A) has grievously erred in law and or on facts in not considering fully and properly the explanations furnished and the evidence produced by the appellant. The Ld.AO has grievously erred in holding that the appellant had knowingly made false, incorrect, inappropriate, bogus and mischievous claim. 2.1. The Ld.CIT(A) has grievously erred in law and or on facts in upholding that the appellant had furnished inaccurate particulars in the return of income in respect of the amount aggregating to Rs. 40,44,813 consisting of disallowance of business expenses of Rs. 14,26,813 and rental income treated as income from other sources by Rs. 26,18,000 and thereby levying penalty of Rs. 13,62,000. 2.2. That in the facts and circumstances of the case as well as in law, the ld.CIT(A) ought not to have upheld that the appellant had furnished inaccurate particulars of inc....
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....ch addition/disallowance. Hence we direct the AO delete the penalty with respect to addition of Rs. 14 26,813/- on account of business expenses disallowed. 20. Coming to the next part of penalty imposed on addition of Rs. 26,18,000/- being disallowances of deduction claimed under section 24(a) and 24(b) of the Act. The first part of the penalty under section 24(a) of the Act represents the disallowance of the standard deduction claimed by the assessee against the rental income under the head house property. 20.1. The provisions of section 24(a) of the Act, mandates to allow the benefit of the standard deduction to the assessee on account of repair and maintenance expenses of the rented property from gross rental income taxable under the head house property. The standard deduction under section 24(a) of the Act, is being statutory in nature and has to be allowed irrespective of the actual expenses incurred by the assessee. In the present case the assessee has shown the income under the head house property and accordingly the deduction under section 2(a) of the Act was claimed. But the claim of the assessee was denied on the ground that the impugned rental income was taxable un....
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....ent of income. It was argued that the falsehood in accounts can take either of the two forms: (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. Such contention could not be accepted as the assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the revenue, that, by itself, would not attract the penalty under section 271(1)(c). If the contention of the revenue was accepted, then in case of every return where the claim made was not accepted by the Assessing Officer for any reason, the assessee would invite penalty under section 271(1)(c). That is clearly not the intendmen....
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.... assessee claimed that the interest was paid on the money borrowed which was invested in the impugned property from where he was getting the rental income. The assessee has also furnished the details of the parties from whomhe has borrowed fund which was utilized for the purpose of the investments. However the AO without verifying the genuineness of the details furnished by the assessee has levied the penalty merely on the ground that such interest expenses was disallowed during the quantum proceedings. As such the penalty proceedings being distinct and separate from the assessment proceedings, the AO is under the obligation to carry out the fresh verification as held by the Hon'ble Gujarat High Court in the case of National Textiles Vs. CIT reported 249 ITR 125. The relevant extract of the judgment is extracted below: "In the instant case, the cash credits were not satisfactorily explained by evidence and documents. The parties who had advanced the alleged temporary loans were neither disclosed with their particulars nor any supporting documents were on record. Only two entries were explained. The accountant who had arranged the loan was not produced stating that he ha....