TaxTMI 
TaxTMI 
2026 (6) TMI 125
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....addition on the account of disallowance of expenses not incurred by the assessee was at Rs. 45,01,274/-. That the aforesaid assessment order bears number:- ITBA/AST/S/143(3)/2018-19/1014395459(1) & that the same is dated 18.12.2018 which is here in after referred to as the "Impugned Assessment Order". 2.2 The case of the assessee was selected for scrutiny under CASS & a notice u/s 143(2) was issued. Thereafter, notice(s) u/s 143(1) was issued & so also a show cause notice. 2.3 That the assessee in his submissions has stated that the assessee is a LLP converted from the Pvt Ltd. Company. The assessee during the relevant period i.e. 11.01.2016 carried no business activity during the year. The assessee rented out its property to others. The company namely Nagpal hospitality Pvt Ltd. 2.4 That in response to the show cause notice the assessee claimed municipal taxes paid during the relevant period is of Rs. 75,01,274/-. But out of the aforesaid amount Rs. 45,01,274/- was paid during the period 01.04.2015 to 10.01.2016 and Rs. 30,00,000/- had been paid during the period 11.01.2016 to 31.03.2016. Although all the payments have made by the same assessee, only technically speaking ....
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....d been paid during the period of 01.04.2015 to 10.01.2016 and Rs. 30,00,000/- had been paid during the period 11.01.2016 to 31.03.2016. Further, the appellant has submitted that all the payments had been made by the same assessee, only technically speaking there are two separate assessees but actually there is only one assessee who had got itself converted into LLP from private limited. 6.3 On perusal of the assessment order and written submissions alongwith documents submitted by the appellant, it is noted that appellant has disclosed rental income of Rs. 36,00,000/- which was received from M/s Nagpal Hospitality Private Limited only for the month of February and March, 2016 and claimed TDS credit of Rs. 3,60,000/- in its income tax return for the year under consideration. It is noted that appellant has disclosed rental income only for the 2 months i.e. the period of conversion from company to LLP whereas expenses has been claimed for the complete year. It is noted that AO has allowed expenses of Rs. 30,00,000/- which had been paid during the period 11.01.2016 to 31.03.2016 and balance amount of Rs. 45,01,274/- pertains to the prior period of conversion to LLP has been di....
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.... liability, and tax neutrality were neither duly considered nor properly adjudicated. 6. That the appellant craves leave to add, amend, alter, or withdraw any ground(s) of appeal at or before the time of hearing. 2.8 That the assessee has also placed on the record of this Tribunal following facts of the case which is reproduced by us as below:- "1. The appellant, M/s McKenzie Philip (India) LLP (PAN: ABCFM1876B), is a resident assessee. The appellant was originally incorporated as a private limited company and was converted into a Limited Liability Partnership on 11.01.2016 in accordance with the provisions of the LLP Act, 2008. The conversion was carried out in compliance with section 47(xiiib) of the Income-tax Act, 1961, and was therefore tax neutral, with all assets, liabilities, rights, and obligations of the erstwhile company vesting in the LLP by operation of law. 2. For Assessment Year 2016-17, the appellant filed its return of income on 04.08.2016, declaring a loss of 39,01,274. The return was processed under section 143(1) and subsequently selected for scrutiny. The assessment was completed under section 143(3) vide order dated 18.12.2018. ....
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....ion under section 47(xiiib), and hence prefers the present appeal before the Hon'ble Income Tax Appellate Tribunal." 3. Record of Hearing 3.1 The hearing in the matter took place before this Tribunal on 21.04.2026 & 27.04.2026 when the Ld. AR for & on behalf of the Assessee appeared before us & interalia contended that the "Impugned Order" is bad in law, illegal & not Proper. It therefore deserves to be set aside. It was submitted on 21.04.2026 that the present assessee is an 'LLP' & earlier it was a 'Pvt Ltd' company under Co's Act. The date of conversion from the Pvt ltd company to LLP was on 11.01.2026. That on 01.02.2016 the present LLP assessee rented out the premises & claimed the expenses of the Property tax [in respect of immovable property transferred to them], before & after incorporation as 'LLP'. The disallowance of Rs. 45,01,274/- was added to the ROI which was of [Rs. (-) 39,01,274/-] & total income from the loss return at NIL was quantified & assessed at Rs. 6,00,000/- [Rs. Six lakh]. It was broadly submitted that the assessee entity is more or less same & no advercial view should be taken. It was contended that the loss to be allowed on conversion from "Pv....
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....75 lakh odd amount restricted to 36 lakh, hence NIL ROI. [Our attention was also invited to the COI page 49 & 50 of the PB]. Annual let able value is Rs. 3,60,000/-. Taxes paid to local authority is Rs. 75,01,274/-. Total income from house property loss was at Rs. (-) 39,01,274/- TDS/TCS were at Rs. 3,60,000/-. Amount refundable was Rs. 3,60,000/-. The Ld. AR finally submitted that whole of loss off should be allowed. In the alternative submitted that on the Rs. 6 lakh income relief as applicable of 30% [ standard deduction] should be allowed. The Ld. DR stated that no revenue natural exercise as ROI not filed by 'Pvt Ltd entity'. The hearing was over & concluded. 4. Observations Findings & conclusions 4.1 We have to decide the legality, validity and proprietary of the "impugned order" basis records of the case & the rival submission canvassed before us. 4.2 We have carefully perused the records of the case and have heard the submissions. 4.3 We basis records of the case & after hearing & further upon examining the rival contentions of the Ld. AR & the Ld. DR canvassed before us, are of the considered opinion that the "Impugned Assessment Order" and the "Impugned Order"....