TaxTMI 
TaxTMI 
2013 (10) TMI 702
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....ssee has declared 'storage charges' as income from house property and accordingly claimed statutory deduction of 30% thereon. (b) the assessee has claimed 'Plot rent' paid to Cochin Port Trust as deduction while computing the income from house property. (c) the assessee did not deduct tax at source from the payments made for transport and delivery charges, which attract disallowance u/s 40(a)(ia) of the Act. (d) the assessee has written off balances from Sundry creditors account, but did not declare it as income u/s 41(1) of the Act. AO noticed that all the above said irregularities, if corrected, would result in enhancement of income. Hence, the AO formed the belief that the income has escaped assessment and accordingly reopened the assessments by issuing notices dated 10-9- 2008 u/s 148 of the Act. In response to the said notices, the assessee filed returns of income along with covering letters, wherein the assessee requested the AO to intimate the reason for reopening of assessment. 2.1 The AO, vide his letter dated 5-8-2009, intimated the assessee about the reasons for re-opening of assessment mentioning the irregularities narrated above. The said letter reads as under:- ....
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.... valid. 2.4 Before us, the assessee is contesting the decision of Ld CIT(A) on the legal issue cited above. The Ld A.R submitted that the AO has not properly communicated the reasons for reopening the assessments and hence the reassessment proceedings should be held to be invalid. On the other hand, the Ld D.R submitted that the Ld CIT(A) has properly addressed all the contentions of the assessee and accordingly contended that the order of Ld CIT(A) on this issue should be upheld. 2.5 We have heard the rival contentions and carefully perused the record. Admittedly, the returns filed for both the years under consideration have been processed u/s 143(1) of the Act. Further the reassessment notices have been issued within four years from the end of the assessment year. With regard to the contentions of the assessee that the information has been received from audit party, we agree with the decision of Ld CIT(A) that the said information can be the basis for reopening of assessment, provided that the AO has applied his mind on the issues and formed the belief about escapement of income. As pointed out by Ld CIT(A), both the assessment orders sufficiently depict the application of mind....
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....s urged on merits. In both the years, the assessee had claimed deduction of "plot rent" (Ground rent) paid to Cochin port trust against income computed under the head income from house property. The AO disallowed the said claim on the ground that such a deduction is not provided u/s 24 of the Act. The Ld CIT(A) also confirmed the said disallowance made by the AO. According to the assessee, the building from which the rent was derived is situated on the land owned by Cochin Port trust. According to Ld A.R, the rent collected for the building was a composite rent consisting of rent for building and rent for land. Accordingly, it was submitted that the rental income should be segregated into building rent and plot rent. Accordingly it was submitted that the building rent alone was offered as income under the Income from house property by deducting the plot rent from the total rental income. 3.1 We have also heard Ld D.R in this regard. During the course of hearing, a specific query was put to Ld A.R as to whether the Cochin Port Trust was also a party to the rental agreement and if so whether the rental agreement provides for bifurcation of rental income into building rent and plot r....
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.... at the year end. Accordingly he submitted that the provisions of sec. 40(a)(ia) of the Act shall not apply to it. Apparently, the assessee is placing reliance on the decision of Visakhapatnam Special Bench in the case of Merilyn Shipping (138 ITD ). However, the decision rendered in the above said case has been held to be not a good law in the following cases. (a) CIT Vs. Crescent Export Syndicate (Order dated 3.4.2013)(Cal) (b) CIT Vs. Sikandarkhan T Tunvar (Order dated 2.5.2013) (Guj) Hence, we are unable to agree with the contentions raised by Ld A.R. Accordingly, we uphold the order of Ld CIT(A) on this issue. 5. The last issue relates to the addition made u/s 41(1) of the Act in respect of sundry creditors written off by the assessee. The AO noticed that the assessee has written off sundry creditors' balances to the tune of Rs.2,87,677/- in assessment year 2005-06 and credited the same in the Profit and Loss account. However, while computing the total income, the assessee excluded the above said amount. The AO held that the liability so written off by the assessee is assessable u/s 41(1) of the Act and accordingly assessed the same. The Ld CIT(A) also confirmed the order ....