TaxTMI 
TaxTMI 
2022 (6) TMI 738
X X X X Extracts X X X X
X X X X Extracts X X X X
....earned AO had failed to establish that a notice u/s 143(2) of the Act allegedly issued on 13.09.2012 was ever served on the assessee. In fact, the learned CIT(A) went into an error in confirming the order of assessment on the ground that the assessee had attended the assessment proceeding and had not objected to the proceedings before the completion of assessment proceedings, which consideration alone could not have been held as a valid consideration for upholding the assumption of jurisdiction to make an order u/s 143(3) of the Act. 2. That the learned CIT(A) has failed to comprehend that the burden to establish that the notice u/s 143(2) of the Act had been served within the statutory period had to be discharged by the AO and as such in the absence of such a burden having been discharged by the AO, it had to be held that very assumption of jurisdiction to frame an assessment u/s 143(3) of the Act is vitiated in law. The learned CIT(A) ought to have thus held that the order of assessment itself was nullity in law. 3. That the learned CIT(A) has erred both on facts and in law in substantially confirming the order of assessment in having failed to allow even the ro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m could not have been included in the total income of the assessee as unexplained credit, while confirming the addition of Rs. 5,62,81,575/- as an income from undisclosed sources, which sum had separately been disallowed. 6.2 That the learned CIT(A) has further erred in sustaining an addition of Rs. 1,83,00,000/- received by it as advance from Searock Developers Pvt. Ltd. against the sale of property, despite the fact the assessee had discharged its initial onus in establishing the identity, creditworthiness and genuineness of the transaction and as such the addition sustained by the learned CIT(A) is entirely misconceived. 6.2.1 The learned CIT(A) has further failed to appreciate that the additions of Rs. 7,45,81,575/- had been made by the learned AO only on the ground that the creditors had failed to respond to his notice u/s 133(6) of the Income Tax Act, which could not have been held to be any valid and legal basis. 6.2.2 That the learned CIT(A) has further failed to appreciate that it had been admitted by the AO in his order that the source of advance of Rs. 5,50,00,000/- had been established by the assessee when it had furnished the bank account of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (b) Rs. 34,61,513/-, expenditure incurred representing employees cost. (c) Rs. 93,63,130/- representing other costs as debited in the Profit & Loss account (i.e. Rs.3,76,74,222/- less Rs. 2,83,11,092/- which sum had not been claimed being provisions made) (d) Rs. 2,37,339/-, representing an amount of depreciation. 7.4 That the learned CIT(A) has failed to appreciate that out of an expenditure debited in the profit and loss account of Rs. 3,76,74,222/- the assessee itself had not claimed a amount of Rs. 2,83,11,092/- representing the provision made for advances, sinking fund, ground rent and property tax and as such he ought to have held that the assessee, to be allowed a deduction of Rs. 93,63,130/-. 7.5 That the learned CIT(A) ought to have directed the AO to allow a deduction of a sum aggregated to Rs. 3,70,35,314/- as an allowable expenditure, while computing its business income. 7.6 That the learned CIT(A) has thus erred in upholding the disallowance of an amount of Rs. 48,73,153/-, and claimed under the head 'interest' and the amount of interest paid to M/s Binaguri Tea Company Pvt. Ltd. despite the fact the said sum was debited....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that the notice has been duly served upon the assessee within the prescribed time limit. We uphold the following findings of the Ld. CIT(A)-1 : "...once a notice has been delivered by the Assessing Officer within the time prescribed under law to the postal department and the noting of the postal department states that a notice under section 143(2) has been delivered, it is a presumption that the notice has been correctly and properly served upon the appellant within the time prescribed and therefore, in view of the provisions of section 292BB, it is held that there is no merit in the contention of the appellant...". Accordingly, we reject these grounds. 5. Ground Nos. 3 and 3.1 relate to denial of deduction of expenditure while computing income under the head "Business". Perusal of the appellate order reveals that the Ld. CIT(A)-1 held that the assessee's business income comprised of income from management consultancy of Rs. 35,04,508/-, interest income of Rs. 72,40,190/- and profit on sale of asset of Rs. 60,447/-. The grievance of the assessee is that the expenditure relatable to the said business income debited to P&L Account ought to have been allowed as deductio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ctricity and water expenses of Rs. 7,74,232/- and repair and maintenance expenses of Rs. 5,68,929/-. 6.3 The reply of the assessee was not acceptable to the Ld. AO. According to him these income are assessable as 'income from house property' as per ratio decidendi in the case of Shambhu Investment [263 ITR 143 & 249 ITR 47] where the Hon'ble Supreme Court confirmed the order of the Hon'ble Calcutta High Court wherein it is held as under :- "Hence, we hold that prime object of the assessee under the said agreement was to let out the portion of the said property to various occupants by giving them additional right of using the furniture and fixtures and other common facilities for which rent was being paid month by month in addition to the security free advance covering the entire cost of the said immovable property. In view of the facts and law discussed above, we hold that the income derived from the said property is an income from property and should be assessed as such." 6.4 The Ld. AO also observed (page 12 of Assessment Order) that the assessee has itself admitted in its submission made in AY 2010-11 that income from Business Centre is inclusive of cost ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3(3) of the Act for subsequent AY 2013-14 and 2014-15 the Ld. AO has accepted that income derived from Business Centre is Business income. Therefore, the principle of consistency applies as in the preceding and subsequent assessment years the income from Business Centre has been assessed as Business income. Reliance is placed on the judgement of the Apex Court in CIT vs. Excel Industries Ltd. (2013) 358 ITR 295 (SC), CIT vs. J.K. Charitable Trust 308 ITR 161 (SC) and CIT vs. Maruti Suzuki India Ltd. 416 ITR 613 (SC). 6.8.3 The contention of the assessee is that it has not let out any property or part thereof, instead it has been allowing the spaces for commercial use by commercially exploiting the property for the purpose of business. Therefore the impugned income from Business Centre is assessable as business income and not as income from house property. In support, reliance is placed on Chennai Properties & Investment Ltd. vs. CIT (2015) 373 ITR 673 (SC); Rayala Corporation (P) Ltd. vs. ACIT (2016) 386 ITR 500 (SC); PCIT vs. Sri Bharathi Warehousing Corporation (2017) 392 ITR 160 (AP). 6.8.4 Likewise, it is submitted that the amount of Rs. 13,43,161/- received by way of rei....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment of monthly Licence Fee and other charges to enable them to carry on their business operations within the basic structure and framework of the Business Centre. 6.10.1 In the backdrop of the above factual matrix, we find substance in the submission of the assessee that it was never the intention of the assessee to let out its commercial building for the purpose of enjoying the rent but to commercially exploit the same by letting it out Therefore, income derived therefrom partakes the character of income from business. 6.10.2 During the assessment proceedings it was brought to the notice of the Ld. AO that since inception starting from AY 2002-03 the assessee company has been receiving Business Centre income which has duly been assessed as Business income till AY 2007-08. The activity of the Business Centre was dormant in AY 2008-09 for which the assessee furnished explanation. The inability of the assessee to make use of the commercial building in one year will not change its nature. In the following AY 2009-10 Business Centre receipts were taxed as Business income. Except the AYs 2010-11, 2011-12 and 2012-13 Business Centre receipts have again been taxed as Business incom....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y. The point to be noted is that in the case before the Hon'ble Calcutta High Court there was no commercial exploitation of the property by the assessee whereas in the case of the assessee before us the prime object of the assessee was not to let out any property or part thereof, instead the assessee had been allowing the spaces for commercial use by commercially exploiting the property for the purpose of business. In such a scenario income derived by commercially exploiting the property is assessable as business income as held in the judgements relied upon by the assessee. In our opinion reliance by the Ld. AO on the decision of Calcutta High Court in Shambhu Investment Pvt. Ltd. (supra), confirmed by the Hon'ble Supreme Court is totally misplaced as in that case there was no commercial exploitation of the property by the assessee. 6.10.6 We, therefore, hold that the income derived by the assessee from running Business Centre amounting in all to Rs. 1,17,76,874/- and income of Rs. 13,43,161/- by way of reimbursement of expense constitute Business income and are assessable as such. The Ld. AO is directed to modify the assessment and carry out necessary consequential amendments. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of a few lakhs and the next deposit in the said Bank A/c is on 9-6-2010 which is Rs. 10 Lakhs. Besides, from the copy of Return of Income of the said party it is seen that income for FY 2010-11 relevant to A.Y. 2011-12 is NIL. ii The amount of Rs. 1,83,00,000/- is shown to have been received from Searock Developers Pvt. Ltd. for the first time during the year and that too as an advance from customer and even if the assessee's contention of some dispute is accepted, it is not comprehensible how & why assessee should hold on to the said amount. In fact, in ordinary course whenever there is any dispute the said amount would be returned forthwith." He, therefore, made impugned addition under section 68 read with section 69A of the Act. 8.4 On appeal, the Ld. CIT(A)-1 discussed this issue in para 4.4 of his appellate order. The assessee submitted before the Ld. CIT(A)-1 that in respect of unsecured loan of Rs. 5,62,85,575/- received from Binaguri Tea Company Pvt. Ltd., it filed before the Ld. AO a confirmation of account from the said company which is an income-tax payee and is assessed at PAN: AABCD1008P. The bank statement of the assessee was also filed from where it i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....preciation of material and other attending circumstances available on record. The opinion of the Assessing Officer is required to be formed objectively with reference to the material available on record. Application of mind is a sine qua non for forming the opinion. 8.8 The onus of proving the source of a sum of money found to have been received by the assessee is on him as held by the Hon'ble Supreme Court in Kale Khan Mohammad Hanif vs. Commissioner of Income-Tax (1963) 50 ITR 1 (SC) and Roshan Di Hatti vs. CIT (1997) 107 ITR 938 (SC). 8.9 It is also well settled that in the case of cash credit entry it is necessary for the assessee to prove not only the identity of the creditors but also to prove the capacity of the creditors to advance the money and the genuineness of the transaction. In C. Kant & Co. vs Commissioner Of Income-Tax (1980) 126 ITR 63 (Cal), the Hon'ble Calcutta High Court held that on whom the onus of proof lies in a particular case is a question of law . But whether the onus has been discharged in a particular case is a question of fact. 8.10 Hon'ble Kolkata High Court observed in the case of S.K. Bothra & Sons (HUF) vs. ITO (2011) 203 TAXMAN 436 (Kol) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sses of the alleged creditors who were income-tax assessees and their index numbers were on the file of the Revenue. Apart from issuing notices under section 131 at the instance of the assessee, the revenue did not pursue the matter further. In those circumstances, the Hon'ble Supreme Court held that if the Tribunal came to the conclusion that the assessee has discharged the burden which lay on him, then it could not be said that such conclusion was unreasonable or perverse or based on no evidence. 9.3 Secondly, according to the Ld. AO there is deposit of Rs. 5,85,00,000/- on 25.05.2010 just three days earlier in the account of the creditor in HDFC bank. In this regard, the submission of the assessee is that the said deposit is through clearance of a cheque. It is not a deposit in cash. 9.4 Thirdly, as per Ld. AO the account of the creditor reflected few transactions, the submission of the assessee is that the Ld. AO overlooked the fact that the said account was only one of the account and not all (page 274 of the Paper Book). 9.5 Lastly, the Ld. AO observed that income of the creditor for AY 2011-12 as per return is NIL. The assessee stated that during appellate proceedin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cannot be the basis of the addition. In fact inability of the assessee to refund the amount back to the creditor is the cause of dispute between the assessee and the creditor. Drawing our attention to the ledger account of the creditor for the subsequent year (page 462 of the Paper Book), it is submitted that the assessee had further refunded Rs. 1 lac. It is pointed out that the Ld. AO has not disputed either the creditworthiness or the source of the credit. The assessee has placed on record Financial Account of the creditor for the year ending on 31.03.2011 (page 438-451 of the Paper Book). Profit and Loss Account shows the income of Rs. 39,55,609/- in AY 2011-12 as against income of Rs. 25,33,745/- of the preceding year. 10.3 Having heard the submission of the parties and on careful consideration thereof, we have reached to the conclusion that the assessee has discharged the primary onus which lay upon it. The identity of the creditor, the creditworthiness of the creditor and genuineness of the transaction have been proved by the assessee. In CIT vs. Bedi & Co. Pvt. Ltd. (1998) 230 ITR 580 (SC) , the Hon'ble Supreme Court held that where the explanation offered by the assesse....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... not been disputed by the Ld. AO from AY 2013-14 onwards and interest claimed by the assessee has not been disallowed. 14.3 On consideration of the submission of the parties we are of the view that the impugned interest paid on borrowal for the purpose of assessee's business has to be allowed under section 36(1)(iii) of the Act. We, therefore, direct the AO to allow the interest (inclusive of TDS deposited by the assessee to the credit of the lender) while computing income of the assessee under the head 'business'. It may not be out of place to mention that the loan obtained by the assessee appearing in its books as credit has been held to be genuine by us. Accordingly, interest on the capital borrowed for the purposes of business is a deductible expenditure. We direct the Ld. AO to modify the assessment. 15. Ground No. 7.7 relates to write off of outstanding credit balance of Rs. 1,90,64,516/- in the account of M/s. Bell Ceramics Ltd.. The Ld. AO made the disallowance holding that its nexus with income earned during the year is not established (page 14 of the Assessment Order). Before the Ld. CIT(A)-1 the assessee submitted that the impugned sum has been claimed by the asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
....: "1. That the learned Commissioner of Income Tax (Appeals), has erred both on facts and in law in holding that the income derived from running of business centre is the income from property and is not the income from business. 2. That the learned CIT(A) ought to have held that the entire expenditure incurred and debited in the Profit & Loss account and claimed by it in the computation of income of Rs. 3,43,32,655/- be allowed, when it has not been disputed that the assessee was engaged in the business. The finding of the learned CIT(A) that the only proportionate expenditure is allowable is erroneous. He has failed to appreciate that once the assessee is engaged in the business, the entire expenditure incurred and debited in the Profit & Loss account which has not been disputed, is an allowable deduction. 3. That in any case and without prejudice, the learned Commissioner of Income Tax (Appeals), has failed to appreciate that as the income earned by it from business centre aggregated to Rs. 1,45,64,364/- is held to be income from property, then statutory deduction u/s 24(a) of the Income Tax Act had to be allowed, and thus the disallowance made of Rs. 25....