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28-02-2019, Rational Art & Press, Section 22, 234B, 234C, Tribunal Mumbai

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2 months 2 weeks ago #8719 by amit
Section - 22, 234B, 234C
Order Date - 28-02-2019
Favouring - Revenue
Court - Tribunal Mumbai
Appellant - Rational Art & Press Pvt. Ltd.
Respondent - DCIT
Justice - G.S. Pannu VP & Ravish Sood JM
Citation - 219Taxpundit149
Appeal No. - ITA No.7615/Mum/2016
Asstt. Year - 2010-11

Order

PER : RAVISH SOOD, JM

The present cross appeals preferred by the assessee and the revenue are directed against the order passed by the CIT(A)-50, Mumbai dated 19.09.2016, which in turn arises from the assessment order passed under Sec.143(3) of the Income tax Act, 1961 (for short „IT Act‟), dated 26.03.2013 for A.Y. 2010-11. As common issues are involved in the aforementioned appeals, therefore, the same are being taken up and disposed off by way of a consolidated order. We shall first advert to the appeal filed by the assessee. The assessee has assailed the order of the CIT(A) before us on the following grounds of appeal :

“1. The Ld. Commissi ner of Income Tax (Appeals) - 50, Mumbai (hereinafter referred to as “the Ld. CIT (A)”) cried in law and on facts in upholding the addition of Rs. 8 1,328/- being purchase of M. S. Pipe from Diamond and Traders and paid by Account Payee cheques treating the transaction as non- genuine.

2. The Ld. CIT (A) erred in law and on facts in not appreciating that a sum of Rs. 11,02,50,000/- being the sub lease income for 7 months of the Appellant's associate company Fazlani Exports Pvt. Ltd. in respect of sub-lease of Rational House Property to M/s Goldman Sachs has already been assessed in the hands of M/s Fazlani Exports Pvt. Ltd. by the same A.O. who made the Appellant’ s assessment and stating that M/s Fazlani Exports Pvt. Ltd. sub- leased the said property at higher rent and treating such subleasing arrangement as a sham transaction.

3. The Ld. CIT (A) failed to appreciate that the said sum of Rs.11,02,50,000/- has been assessed in the Appellant's hands and also in the h ands of M/s Fazl an i Exports Pvt. Ltd., resulting into double addition.

4. Without prejudice to Ground No. 2 and 3 since the ALV of Rational House Property is included in the hands of the Appellan t, the Ld. CIT (A) erred in law and on f acts in upholding the action of the A.O. in not allowing the credit of TOS of Rs.2,27,18,521/- deducted by Goldman Sachs in the case of M/s Fazlani Exports Pvt. Ltd. to the Appellant while computing interest u/s 234B & 234C of the I.T. Act. The Appellant prays that reliefs on the aforesaid grounds be allowed and Appellate Order be modified accordingly. The Appellant craves leave to add to, alter amplify or delete any of the aforesaid grounds of appeal at or before the hearing.”

2. The assessee company which is a Hi-tech capital intensive agro company had filed its return of income for A.Y. 2010-11 on 15.10.2010, declaring net taxable income at Rs.8,11,38,570/-. The return of income filed by the assessee was processed as such under Sec. 143(1) of the IT Act. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2).

3. Briefly stated, the assessee owned a property at Prabhadevi, Mumbai viz. “Rational House” that was converted into a business centre. The aforesaid property for the past several years was leased by the assessee to its „sister concern‟ viz. M/s Fazlani Exports Pvt. Ltd. During the year under consideration the assessee had leased the property to M/s Fazlani Exports Pvt. Ltd for the first seven months i.e from April, 2009 to October, 2009 for a rent of Rs. 3,15,00,000/-(i.e @ Rs. 45,00,000/- p.m) which in turn had sub-leased the same to M/s Goldman Sachs (India) Securities Pvt. Ltd. for the aforesaid period for a rent of Rs. 11 02,50,000/- (i.e @ Rs. 1,57,50,000/- p.m). Insofar the remaining period of five months for the year under consideration i.e November, 2009 to March, 2010 was concerned, the assessee had directly leased the property to M/s Goldman Sachs (India) Securities Pvt. Ltd. for a total rent of Rs. 5,31,60,000/-. In the backdrop of the aforesaid facts the assessee had received a total rent of Rs. 8,46,60,000/- [i.e Rs. 3,15,00,000/- (+) Rs. 5,31,60,000/-] from leasing the property under consideration during the year.

4. During the course of the assessment proceedings the A.O noticed that the assessee had leased the property under consideration to its „sister concern‟ viz. M/s Fazlani Exports Pvt. Ltd. for a period of seven months i.e from April, 2009 to October,2009 for a rent of Rs. 3,15,00,000/-, which was substantially lower as in comparison to the rent of Rs. 11,02,50,000/- for which M/s Fazlani Exports Pvt. Ltd had in turn sub-leased the same to M/s Goldman Sachs (India) Securities Pvt. Ltd. It was also noticed by the A.O that for the remaining period of five months i.e November, 2009 to March, 2010 the assessee had received an amount of Rs. 8,46,60,000/- from M/s Goldman Sachs (India) Securities Pvt. Ltd. The A.O observed that the market rent of the property was substantially more than that received by the assessee from its „sister concern‟ viz. M/s Fazlani Exports Pvt. Ltd. On the basis of his aforesaid observations the A O called upon the assessee to explain as to why the transaction of giving the property on lease to M/s Fazlani Exports Pvt. Ltd may not be treated as sham and the full „Annual Lettable Value‟ (for short „ALV‟) of the property may not be brought to tax in its hands The reply filed by the assessee did not find favour with the A.O and he adopted the „ALV‟ of the property at Rs. 19,49,10,000/- and reworked the income of the assessee under the head „Income from house property‟. Apart therefrom, the A.O on the basis of information received from the Sales tax department, State of Maharashtra (through the investigation wing of the Income-tax department, Mumbai) that the assessee had made procured bogus purchase bills of M.S Pipes amounting to Rs. 81,328/- from a hawala party viz. M/s Diamond Traders, therein called upon the assessee to substantiate the genuineness and veracity of the purchase transaction. As the assessee failed to substantiate the purchase transaction to the satisfaction of the A.O, therefore, the latter disallowed the purchases to the said extent and made an addition of Rs. 81,328/- in the hands of the assessee.

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