TMI Blog2009 (9) TMI 680X X X X Extracts X X X X X X X X Extracts X X X X ..... The appellant prays that the order of the learned CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored. 3. The assessee is a partnership firm. In course of assessment proceedings, the Assessing Officer called for bank statement of the assessee with Corporation Bank and Apna Sahkari Bank. On verification of the same, the Assessing Officer found huge cash deposits in the bank account. On 13-3-2006, the assessee was called upon to explain source of cash deposited in the bank accounts. Case was fixed on 16-3-2006; but nobody attended on behalf of the assessee. In those circumstances, the Assessing Officer treated cash deposited in the bank accounts as unexplained. Sum of Rs. 14,13,700 and Rs. 3,67,000 was added being unexplained cash deposited in the Corporation Bank and Apna Sahakari Bank respectively. 4. Before learned CIT(A), the assessee submitted that there was mistake in the quantum of deposits in cash which was added by the Assessing Officer in the order of assessment. The assessee filed copies of bank statement in support of its claim. Learned CIT(A) called upon the Assessing Officer to verify the claim of the assessee and submit a rema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith regard to actual figures that ought to have been added as unexplained cash deposits in the bank accounts. The CIT(A) neither called for a remand report nor confronted the Assessing Officer with regard to the additional evidence of earlier withdrawals from the Bank Account explaining the source of funds for deposit of funds in the very same bank account. Rule 46A(3) clearly mandates that additional evidence can be considered only after the Assessing Officer has had reasonable opportunity of examining the additional evidence. There has been violation of the above provisions. In those circumstances, we deem it fit and proper to set aside the order of the learned CIT(A) and restore the issue with regard to explanation of source of funds for cash deposited in the bank account to the Assessing Officer for fresh examination. The Assessing Officer will consider additional evidence filed by the assessee before learned CIT(A) and after affording the assessee opportunity of being heard, decide the issue in accordance with law. Appeal of the revenue is treated as allowed for statistical purposes. 7. ITA Nos. 1633 1634/Mum./06 are appeals by the assessee against, a common order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 and Rs. 2,10,000 in assessment years 1999-2000 2001-02 respectively. Learned CIT(A) upheld the additions made by the Assessing Officer. 11. Before us, learned counsel for the assessee submitted that in the appeal against the block assessment order, block assessment order was set aside. According to him, the addition cannot be made in regular assessment which is not substitute for making addition, which was deleted in the block assessment proceedings. He filed copy of the Tribunal s decision in the block assessment proceedings. He also relied on the decision of Hon ble Bombay High Court in the case of Smt. Mira Ananta Naik v. Dy. CIT [Writ Petition No. 101 (Bom.) of 2000, dated 6-8-2008]; wherein Hon ble Bombay High Court had quashed initiation of reassessment proceedings, where such reassessment proceedings were initiated for the reason that addition made in the block assessment was quashed. According to him, present addition made has to be quashed. Learned Departmental Representative pointed that statement in question was recorded in the block assessment proceedings; but it had nothing to do with the block assessment proceedings. He relied on the order of learned CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Ambala Jhaveri and Shri Nishit Rajendra Jhaveri. The main object of the firm as per clause-3 of the partnership deed was The Partnership shall take the premises on rent and to sub-let or any other business as may be mutually agreed by the parties from time to time . MAHADA constructed buildings under PNGP scheme known as Shyam Sunder Co-operative Society, Ram Darsan Co-operative Society, Sindhu Co-operative Society at Jariwala Compound Market, Opp. Navjivan Post Office, Lamington Road, Mumbai-400 088. There was a reservation of municipal retail market on the plot on which, MAHADA had put up construction. Therefore, MAHADA had handed over the ground floor (stilt portion) of the above said building to BMC by recovering the necessary cost. The Market Department of the BMC auctioned the stilt portion admeasuring 17,925 sq.ft. located in the ground floor of the buildings developed by MAHADA under PNGP scheme known as Shyam Sunder Co-operative Society, Ram Darsan co-operative Society and Sindhu Co-operative society in the year 1993 and on a monthly stallage charges basis. The assessee was a successful bidder and was handed over possession of the said area on 28-5-1993. This area will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the date of taking possession of the market portion failing which the license of the market portion is liable to be revoked. In the event the licensee keeps the market section in unused condition for more than three months, the deposits paid by the bidder was liable to be forfeited and the successful bidder was to hand over the peaceful and vacant possession of the market section to Dy. Municipal Commissioner (I) or his representative and the corporation will be at liberty to re-auction the market section. The licensee in such event shall not be entitled for any claim for any amount as and by way of compensation or damage. Clause (23) provides that the successful bidder will have to obtain the necessary Registration Certificate for the business under Shops and Establishment Act and also all other required licenses from the Corporation and/or Government or any other competent authority for carrying on the said trading or business in the said market portion required under the various provisions of the BMC Act or any other enactment. 16. Since assessee was the highest bidder, as per the terms and conditions of the auction, this stilt portion was handed over to the assessee. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emed to be the owner of that building or part thereof. Clause ( f ) of section 269UA defines transfer for the purpose of Chapter XX-C of the Act ( i ) in relation to any immovable property referred to in sub-clause ( i ) of clause ( d ) means transfer of such property by way of sale or exchange or lease for a term of not less than twelve years and allowing the possession of such property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882. Explanation to clause ( f ) of section 269UA lays down that a lease which provides for extension of the term thereof by a further term or terms of not less than 12 years, if aggregate of the terms for which such lease is to be granted and further term or terms for which it can be so extended is not less than 12 years. According to the Assessing Officer, the assessee was a lessee of the market area under BMC. Because the lease was more than 12 years (initial period of lease of 10 years and additional period of 10 years and thereafter 5 years block) cumulatively the assessee will deemed owner of the market area under section 27( iiib ) read with clause ( f ) to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a lease compensation and the assessee is referred to as lessor. ( d )In the books of account of the assessee, the receipt from the occupations of shops by the assessee is also shown as lease compensation. The deposit received from the occupiers of the stall are shown as sub-lease deposit . ( e )The assessee had shown the market area as an asset in its balance sheet and claimed depreciation on the same. ( f )The BMC has assessed property tax in the name of the assessee for the market area. 20. Before the Assessing Officer, the assessee relied on some correspondence by BMC wherein the assessee was described only as a licensee and that property tax was to be paid only by the market department of BMC. The Assessing Officer rejected the plea of the assessee on the ground that those letters were earlier to 22-5-2003 when BMC levied property tax on the assessee in respect of the market area. With regard to the plea of the assessee that income in question is income from business, the Assessing Officer held that the word business is defined in section 2(13) to include any trade, commerce, manufacture or any adventure or concern in the nature of trade, commerce or manufact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f various stalls and doing so constituted a business activity. 22. On the issue whether income in question is Income from house property or business . Learned CIT(A) first referred to the principles to be applied in such cases as laid down by Hon ble Gujarat High Court in the case of CIT v. New India Industrial Ltd. [1993] 201 ITR 208. Thereafter learned CIT(A) referred to decision of Hon ble Supreme Court in the case S.G. Mercantile Corpn. (P.) Ltd. v. CIT [1972] 83 ITR 700 ; wherein Hon ble Supreme Court explained as to what would constituted business. Learned CIT(A) also referred to following other decisions in the case of CIT v. Pateshwari Electrical Associate Industries (P.) Ltd. [2006] 182 ITR 61 (All.); Dy. CIT v. Manmit Arcade (P.) Ltd. [2005] 147 Taxman 25 ; Sri Balaji Enterprises v. CIT [1997] 225 ITR 471 (Kar.) and finally concluded that the facts of the assessee s case were identical to the facts of Hon ble Karnataka High Court in the case of Sri Balaji Enterprises ( supra ). In the case of Sri Balaji Enterprises ( supra ), the assessee was constituted to carry on business in dealing in real estates and development of commercial complex an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rea of the stilt portion at Municipal land at Jariwala Compound building for the construction and development and maintenance of the municipal markets, which in turn had put up the same in a public auction in 1993, in which the assessee has become the successful bidder and thus the firm was allotted the municipal market portion on a quarterly payment of stallage charges. The property is owned by the Municipal Corporation and the assessee had to obtain a license under section 401 of the BMC Act and as per the terms and conditions of the auction it cannot carry on any activity other than those prescribed in the said auction terms as well as subsequent correspondences with the BMC. The construction whatever that has been put up by the assessee has to revert back to the BMC. All these facts go against the creation of any interest in the said property in favour of the assessee-firm. If a property has been taken on lease, then the assessee obtains full interest to do anything whatever he wants expecting the sale of the same and the title of the same. Such an interest is not available in this case which alone distinguishes the present assessee s transaction from lease and, hence, it is fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s income. In our opinion, the assessee received income by letting out shops/stalls; and therefore, the same has to be held as income from house property. Of course, other condition that the assessee should be the owner of the property will be discussed in the succeeding paragraphs. Learned CIT(A) in coming to the conclusion that receipt is one from business has not given any facts by which, the assessee could be said to have rendered any services in a systematic and organized way. As already mentioned, he has referred to certain decisions; but has not pointed out as to how the ratio laid down in those decisions will apply to the case of the assessee. As already stated, the assessee was only complying with terms of the allotment of the market area by BMC and in the process, was passing over its liability to the occupiers of shops/stalls. We, therefore, have no hesitation in holding that the conclusions of learned CIT(A) in this regard were erroneous and that of the Assessing Officer were correct. 27. On the question whether the assessee was owner of the property within the meaning of section 27( iiib ) of the Act, learned CIT(A) has held that occupation of various shops/stalls b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te a lease or a licence (3) if the documents creates an interest in the property, it is a lease, but if it only permits another to make use of the property of which the legal possession continues with the owners, it is a licence, and (4) if under the documents a party gets exclusive possession of the property, prima facie, he is considered to be a tenant; but circumstances may be established which negative the intention to create a lease. Judged by the said tests, it is not possible to hold that the document is not of licence. Certainly it does not confer only a bare personal privilege on the respondent to make use of the rooms. It puts him in exclusive possession of them, untrammelled by the control and free from the directions of the appellants. The covenants are those that are usually found or expected to be included in a lease deed. The right of the respondent to transfer his interest under the documents although with the consent of the appellants, is destructive of any theory of licence. The solitary circumstance that the rooms let out in the present case are situated in a building, wherein a hotel is run cannot make any difference in the character of the holding. The intent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years. In those circumstances, the assessee was the owner of the property. Since, the assessee was owner of the property, income earned from letting out the property was to be assessed under the head Income from house property . For all the above reasons, we reverse the order of learned CIT(A) and restore the order of the Assessing Officer in this regard. 29. Consequently, ground No. 1 in ITA Nos. 1928 to 1931/Mum./06; and grounds of appeal in other appeals of the revenue i.e., ITA Nos. 5538/Mum./06 and 2459/Mum./07 are allowed. 30. There is one more issue in ITA Nos. 1928 to 1931/Mum./06. The issue is as to whether deposits received by the assessee from the sub-lessee are non-refundable deposits which can be treated as income of the assessee. 31. The Assessing Officer added deposits received by the assessee from the allottees at the time of sub-leasing the market stalls as the income of the assessee for the respective years concerned. Assessment years Deposit received (Rs.) 1999-2000 39,12,000 2000-01 26,86,000 2001-02 22,10,000 2002-03 10,13,000 This has been discussed vid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -32 containing 50 sq.ft. each. The relevant portions of the statements have been extracted in pages 15 16 of the assessment order. Again the Assessing Officer has stated that except two or three sub-licensees, majority of them did not turn-up in spite of summons issued to them. He held these deposits as the sales price of the shops/stalls sold to these sub-lessees. For coming to this conclusion he relied upon the statement recorded by him from three witnesses who were the sub-tenants of the shops/stalls, namely Shri Tarani Brahmachari, Shri Rakesh Chandra Upadhyay and Shri Pravin Darji. The Assessing Officer has held that : ( a )Most of the sub-lessees were ordinary/petty business-men like Tailors, Gold-smiths etc., who were illiterate or semi-literate. ( b )Their business did not require to maintain books of account. ( c )Most of the agreements did not contain the signature of the witnesses. ( d )The deposits were taken from different people were without any uniform practice, so much so they were disproportionate as compared to the rent charged and, therefore, he has concluded that these deposits were nothing but consideration received in lump sum for the transfer of sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer is held to be correct, then the sum in question cannot be taxed as business income; but only computation of capital gain has to be made. ( e )Refundable deposits cannot be treated as income. In this regard, learned CIT(A) referred to following judicial pronouncements : u Siddheshwar Sahakari Sakhar Karkhana Ltd. v. CIT [2004] 270 ITR 1 (SC); u Shri Nirmal Commercial Ltd. v. CIT [1992] 193 ITR 694 (Bom.) 34. For all the above reasons, learned CIT(A) deleted the addition made by the Assessing Officer. Aggrieved by the order of learned CIT(A), the revenue has raised relevant grounds of appeal before the Tribunal. 35. We have considered the submissions of learned Departmental Representative, who relied on the order of the Assessing Officer. Learned counsel for the assessee relied on the order of learned CIT(A). We are of the view that the order of learned CIT(A) on this issue does not call for any interference. In our view, the revenue has not established that the receipts in question are in the nature of income. Fact that the assessee shows above sums as liability in its balance sheet also goes to show that the amount received is not in the natu ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
