Little Developers, Mumbai vs Department Of Income Tax

Asstt. Commissioner of Income बनाम/ M/s Little Developers, Tax, Central Circle -24 & 26, Vs. Gods Gift towers, 4th floors, 4th floor, Aayakar Bhavan, Hill road, M K Road, Bandra (W), Mumbai-400020 Mumbai-400050 (अपीलाथ /Appellant) .. ( यथ / Respondent)

CO No.12/Mum/2012 Arising out of ITA No.3813/Mum/2011

M/s Little Developers, बनाम/ Asstt. Commissioner of Income Gods Gift towers, 4th floors, Vs. Tax, Central Circle -24 & 26, Hill road, 4th floor, Aayakar Bhavan, Bandra (W), M K Road, Mumbai-400050 Mumbai-400020

(अपीलाथ /Appellant) .. ( यथ / Respondent)

थायी ले ख ा सं . /जीआइआर सं . /PAN/GIR No. :AABFL3067F

अपीलाथ ओर से / Revenue by Shri Hemant J Lal यथ क ओर से/ Assessee by Shri Rajesh Sanghvi

सुनवाई क तार ख / Date of Hearing : 11.3.2015 घोषणा क तार ख /Date of Pronouncement : 8.5.2015

आदे श / O R D E R Per B R Baskaran, AM:

The appeal filed by the Revenue and Cross-objection thereto filed by the assessee are directed against the order dated 14.2.2011 passed by the ld. CIT(A)-39, Mumbai and they relate to the assessment year 2004-05.

2 ITA. No.3813/Mum/2011 and CO 12/Mum/2012

2. The revenue is aggrieved by the decision of Ld CIT(A) in deleting the addition of Rs.7.03 crores relating to bogus tenancy rights.

3. We heard the parties and perused the record. The assessee is engaged in the business of development of buildings. A search operation u/s 132 of the Act was conducted on 8.5.2007 in the case of Bindra Rohra group and the assessee was also subjected to search. In the assessment proceedings conducted u/s 153A r.w.s. 143(3) of the Act, the assessing officer disallowed the claim of payment made towards tenancy right and accordingly determined the total income at Rs.7,33,63,710/- as against the returned income of Rs.29,16,621/-. The ld CIT(A) deleted the said addition and hence the revenue has filed this appeal before us.

4. However, we notice that the Ld CIT(A) has deleted the impugned addition on the ground that no incriminating material relating to the same was found during the course of search. Further the issue relating to payments made to tenants was seen examined at the original assessment proceedings. The observations made and decision taken by ld. CIT(A), vide paras 24 to 27 of his order are extracted below, for the sake of convenience.

"24 I have gone through the issue. In this case, the original assessment for this AY 2004-05 was completed u/s 143(3) on 28.12.2006. The original assessment for AY.2003-04 was completed u/s 143(3) on 24.3.2006. The fact that the claim of tenancy was made in the earlier assessment proceedings could be seen from the assessment order dt. 24.3.2006 for A.Y. 2003-04 (please see page 4 of the assessment order). The fact that the claim of tenancy was made in the original assessment in A.Y. 2003-04 can also be seen from the CIT(A)'s order for A.Y. 2003-04 [Page 3 of the CIT(A)'s order]. Further, it is seen from the Deed of Conveyance dt. 25.1.2000 executed by the erstwhile owner of the property Mrs. Mehra Rustomji Vachha also refers to the tenancy. Last part of page 4 of the deed and page 5 and first part of page 6 of the deed read as follows:-

3 ITA. No.3813/Mum/2011 and CO 12/Mum/2012

"AND Whereas the main structure known as 'Roshani' and an outhouse standing on the said property were constructed prior to 1940 AND WHEREAS the said structure 'Roshani' and the outhouse comprise of ground and one upper floor and are very old and are in a dilapidated condition, having a total carpet area of 5045 sq. ft. i.e. 468.68 sq. metres AND WHEREAS the vendor and the said Nergish are in occupation of an area admeasuring 1255 sq. ft. in the said structure on the first floor while the remaining portions of the said structure and the outhouse are in occupation of tenants whose details as to the names, areas occupied and rents are shown in the 'Annexure' annexed hereto AND WHEREAS there is also an enclosed garage in the compound of the said property and the same is being used by the Vendor herein;

AND WHEREAS the Purchasers herein have approached the Vendor for purchase of the Vendor's undivided share, right, title and interest in the said property AND WHEREAS the Vendor has agreed to sell and transfer her undivided 1/2 share, right, title and interest in the said property, free from all encumbrances but subject to the said tenants as aforesaid, to the Purchasers herein for a lumpsum consideration of Rs.52,50,000/- (Rupees Fifty Two Lakhs Fifty Thousand only), it being further agreed that the Vendor shall not be liable to the Purchasers with regard to the remaining undivided 1/2 share held by the said Nergish and that it shall be the sole responsibility and liability of the Purchasers to deal with the said Nergish; AND WHEREAS as far as the said tenants are concerned, it has been agreed that the purchasers shall deal with the said tenants as they may deem fit for which purpose the Vendor shall simultaneously on the execution of this Indenture attorn the tenancies of the said tenants in favour of the purchasers as far as the Vendor's undivided 1/2 share is concerned."

Annexure of this agreement reads as follows:-

4 ITA. No.3813/Mum/2011 and CO 12/Mum/2012

ANNEXURE NAME OF TENANT CARPET AREA IN RENT (Rs.) SQ.FT.

MAIN BUILDING OCCUPANCY

Nargish and Mehra (Owners) 1225 Garage (App) (Mehra) 200 1455

MAIN BUILDING (TENANTS) Mrs. N Frenchman 625 230.00 Ms.Tina Bathija 1106 550.00 Mrs.Shehzen Siddique 1105 410.00 Mrs. Yasmin Patel 1103 339.55

OUT HOUSE Mr.Zain Vasi 1106 130.00 5045

25. Similarly, the Deed of Conveyance dt. 25.1.2000 executed by the erstwhile owner Mrs. Nergish Rustomji Vachha of the property also brings out the above facts. The valuation report issued by Hanware Consultants dt. 5.1.2000 also refers about the tenements. The appellant also could produce some of the rental receipts issued to the tenants.

26. From these facts, it is seen that the issue of tenancy and the tenants were settled in the year 2000; itself and the erstwhile owners of the property and the purchasers of the property (i.e. the appellant) have agreed to the issue of tenancy and the responsibility to deal with the tenants was of the appellant. The appellant has entered into agreements with the tenants and in view of the tenancy, certain built up area was allotted to the tenants. These facts were also brought on record during the original assessment proceedings u/s 143(3) of the IT. Act for A.Y. 2003-04. During the search proceedings, no incriminating documents were found to show that the tenancy claimed by any of the tenants is bogus. The A.O. has not believed the issue of tenancy because the appellant could not produce Ration Cards and electricity bills of the tenants which were related to the period prior to year 2000 and the A.O. has asked the appellant to produce the details in the year 2009. It is to be appreciated that it will be very difficult to locate such old records which are more than 10 years old. Further, the A.O.'s 5 ITA. No.3813/Mum/2011 and CO 12/Mum/2012

has taken a view because one of the tenants is Ms. Tina Bindra who is the wife of one of the partners of the appellant firm. In this regard, it is to be noted that the marriage between Ms.Tina and Mr.Bindra has taken place in the year 2002, whereas the deed executed by the erstwhile owner of the property in 2000 itself shows Ms.Tina as a tenant and as a result, the claim of tenancy by Ms. Tina Bindra doesn't appear to have been arranged because she is the wife of a partner of the appellant firm.

27. In view of these discussions, I am of the view that the issue of tenants was supported by evidences and in fact the issue of tenants was also known to the A.O. at the original assessment proceedings u/s 143(3) of the Act and the A.O. in the assessment u/s 153A of the Act has no other documents to disprove the appellant's claim. In view of this, the appellant's claim of tenancy and the built up area provided to the tenants has to be accepted. Hence, the A.O. is directed to delete the entire addition made in the impugned assessment order."

5. The present assessment year, viz., assessment year 2004-05 falls in the category of completed assessment, which shall not abate by the reason of initiation of proceeding u/s 153A of the Act. In the instant case, the Ld CIT(A) has given a definite finding that no incriminating material was found during the course of search to show that the tenancy right claimed by any of the tenants was wrong. Under these set of facts, the assessing officer is not entitled to disturb the completed assessments as held by the Hon'ble jurisdictional Bombay High Court in the case of Murali Agro products Ltd (Income tax Appeal No. 36 of 2009 dated 29.10.2010) and also by the Mumbai Special bench of Tribunal in the case of All cargo Global logistics Ltd (137 ITD 287)(SB). Further we notice that the Ld CIT(A) has analysed the factual matrix of the matter and has given a definite finding that the claim of existence tenancy right stands proved by contemporary evidences. Before us, the revenue could not furnish any material to contradict the findings given by Ld CIT(A). Under these set of 6 ITA. No.3813/Mum/2011 and CO 12/Mum/2012

facts, we do not find any reason to interfere with the order passed by Ld CIT(A) on this issue.

6. The assessee has filed cross objections to support the view taken by the Ld CIT(A). Apart from that, the assessee has also urged certain legal grounds. Since we are dismissing the appeal filed by the revenue, we do not find it necessary to adjudicate the issues urged in the Cross objection filed by the assessee.

7. In the result, the appeal filed by the revenue and the cross-objection of the assessee are dismissed.

The above order was pronounced in the open court on 8th May, 2015.

घोषणा खुले यायालय म दनांकः 8th May, 2015 को क गई ।

Sd sd (संजय गग/SANJAY GARG) ( बी.आर.बा करन / B.R. BASKARAN) या यक सद य / JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER मुंबई Mumbai: 8th May,2015. व. न.स./ SRL , Sr. PS

आदे श क त ल प अ े षत/Copy of the Order forwarded to :

1. अपीलाथ / The Appellant

2. यथ / The Respondent.

3. आयकर आयु त(अपील) / The CIT(A)- concerned

4. आयकर आयु त / CIT concerned

5. वभागीय त न ध, आयकर अपील य अ धकरण, मुंबई / DR, ITAT, Mumbai concerned

6. गाड फाईल / Guard file.

आदे शानस ु ार/ BY ORDER, True copy सहायक पंजीकार (Asstt. Registrar) आयकर अपील य अ धकरण, मुंबई /ITAT, Mumbai