TMI Blog2018 (9) TMI 780X X X X Extracts X X X X X X X X Extracts X X X X ..... LP Plastics Pvt. Ltd., and M/s.Standard Gold Electricals Pvt. Ltd to commercially exploit the asset, which has to be assessed as business income. - Decided in favour of assessee. Addition u/s 68 as received from undisclosed sources - AO disallowed amount received by assessee towards job work, since the Principal failed to deduct TDS from payments made to assessee, in view of provisions of section 194C - CIT (A) restricting allowability of business expenses to the extent of 50% - Held that:- Admittedly for the year under consideration, amount credited in books of accounts are income in hands of assessee, which has been declared by assessee under the head, “Income from Business”. In fact, view formed by authorities below is based on presumption that assessee is the owner of the said amount credited in cash. Further authorities below rejected submissions of assessee, without making any enquiries in relation to nature of income received on the basis of preceding assessment years. We therefore are of considered opinion that the addition made by Ld.AO which is sustained by Ld. CIT (A) needs proper verification by Ld.AO. Merely on surmises and conjunctures no addition can be made u/s 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived from letting out of factory Premises situated in government notified industrial area of the appellant is subject to assessment as per the provisions of section 22 of IT Act 1961 under the head Income from House Property, whereas the income of the appellant is subject to tax as per the provisions of section 28 of IT Act 1961 under the head Income from Business Profession as Appellant is engaged in the business of letting out of commercial Industrial premises. 2. The Ld. CIT(Appeals) has erred in confirming addition of ₹ 15,23,025/- on account of Income from House Property which is taxable at ₹ 21,75,750/- as per provisions of section 28 of IT Act 1961 under the head Income from Business Profession i.e. on gross basis without 30% standard deduction under section 24 of IT Act 1961 as Appellant is engaged in the business of letting out of commercial industrial premises, the same may please be taxed under appropriate head of income. 3. The Ld. CIT(Appeals) has erred in confirming that the job work receipts amounting to ₹ 2,50,000/- earned by the appellant are subject to tax u/s 68 of IT Act 1961 as Appellant is a registered SSI Unit in Gurgaon, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as submitted by assessee that as per Memorandum of Association of assessee, main objects consists of renting of property. It was submitted by assessee that in preceding assessment years, rental income received by assessee was consistently assessed under the head Income from Business . 3. After considering submissions advanced by assessee, Ld.AO was of the opinion that rental income from property has to be treated and taxed under the head Income from House Property . Ld.AO therefore rejected submissions of assessee and considered rental income under the head Income from House Property . 4. Further Ld.AO observed that assessee claimed to have received receipts on account of job work, which was declared as income from business. On a show cause notice issued by Ld.AO, assessee submitted that entire income from job work was received in cash. It was submitted by assessee that job work receipt were booked by assessee in 2 months at ₹ 25,000/-and ₹ 20,000/-for remaining 10 months totaling to ₹ 2,50,000/-. Ld.AO considered job work receipts in cash as income from undisclosed sources, since none of the 12 parties revealed their identity to assessee for purposes of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s submitted that during the year, assessee engaged skilled workers, required machineries within the area of 5766 ft. It was submitted that assessee owned factory building having total area of 20,000 ft. Ld.AR submitted that out of total area, area of factory building admeasuring 14,234 ft. was let out to M/s.ALP Plastics Pvt. Ltd., and M/s.Standard Gold Electricals Pvt. Ltd. It was further submitted that in preceding years, factory rental income has been assessed as business income, and all expenses incurred by assessee were allowed as business expenses in connection with rental income. Ld.AR further submitted that as per Memorandum of Association, one of the main activity of assessee was letting out of owned commercial premises. Ld.AR submitted that out of total area of 20,000 ft., more than 75% was let out to two parties along with machinery, since assessment year 1992-93 onwards to various parties. 12. On the contrary Ld.DR relying upon order of Ld.CIT (A) submitted that assessee is owner of entire property, which is being used by assessee itself, and therefore any income generated from such property used by assessee, would constitute Income from House Property and computat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the above discussions we allow Ground No. 1 and 2 raised by assessee. 17. Ground No. 3 4 are in respect of receipts amounting to ₹ 2,50,000/- earned by assessee, which has been taxed under section 68 as received from undisclosed sources. Assessee has also alleged that Ld.CIT (A) erred in restricting allowability of business expenses to the extent of 50%, without any justification. 18. Ld.AR submitted that assessee was carrying on its business activity of job work and had earned income of ₹ 2,50,000 during the year under consideration. He submitted that assessing officer wrongly invoked provisions of section 68, and has treated receipts of job work under the head Income from Other Sources , on the ground that money has been received in cash, and that assessee received job work income of ₹ 25,000 for 2 months and ₹ 20,000 for rest of 10 months. Assessing officer observed that assessee booked job work income as single monthly entry in its cash book and invoked provisions of section 68 on conjectures. He submitted that section 68 would not be applicable, as assessee had furnished complete details of job work income earned along with bills/vouchers b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer had not rejected books of accounts, but had disallowed expenditure as supporting evidences in the form of vouchers were not found to be authentic. Ld.AO observed that no bona fide activity was carried out during the year by assessee. 23. It has been submitted by assessee that job work income is disclosed in books of account as Income from Business , cannot be changed to Income from undisclosed sources . It has been submitted that assessee is continuously engaged in doing job work activity since past many assessment years, which has not been disputed by authorities below. 24. He referred to paper book wherein profit and loss account of preceding assessment years have been annexed, showing income received by job work. Further it is observed that income received from job work has been declared by assessee as business income, which has been accepted in preceding years. Admittedly for the year under consideration, amount credited in books of accounts are income in hands of assessee, which has been declared by assessee under the head, Income from Business . In fact, view formed by authorities below is based on presumption that assessee is the owner of the said amount cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oper verification of nature of income in the hands of assessee having regards to the evidences placed before him as per law. 27. In the result ground No.3 stands allowed for statistical purposes and ground no.4 is set aside to compute disallowance of expenses, if any as per law, in the event it is established that no job work activity has been carried out by assessee during the year. It is further directed that expenses relating to rental income and certain statutory expenses should not be disallowed. 28. Ground No. 5 has been raised by assessee in respect of the addition amounting to ₹ 3,46,693/- made on account of interest paid on loans. 29. Ld.AR submitted that assessee had taken following loans from various parties to whom interest amounting to ₹ 3,46,693/- was paid. S. No. Name Opening Balance Fresh Advances Closing Balance 1. Reema Gupta 6,50,000/- 6,50,000/- 13,00,000/- 2. Venimadhav Commodities Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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