Income Tax Appellate Tribunal - Mumbai
Rational Art & Press P.Ltd, Mumbai vs Dcit Cen Cir 44, Mumbai on 28 February, 2019
Rational Art & Press P. Ltd. Vs. DCIT - ITA No. 7615/Mum/2016 1
DCIT vs. Rational Art & Press P. Ltd. - ITA No. 7673/Mum/2016
IN THE INCOME TAX APPELLATE TRIBUNAL
"D" Bench, Mumbai
Before Shri G.Manjunatha, Accountant Member
and Shri Ravish Sood, Judicial Member
ITA No.7615/Mum/2016
(Assessment Years: 2010-11)
M/s Rational Art & Press Pvt. Dy. Commissioner of Income Tax
Ltd., 21, Nirmal, Central Circle - 44,
Vs.
Nariman Point, R. No. 656, Aayakar Bhavan,
Mumbai - 400 021 Mumbai - 400 020
PAN AAACR7185E
(Appellant) (Respondent)
ITA No.7673/Mum/2016
(Assessment Year: 2010-11)
DCIT, Central Circle -8(1) M/s Rational Art & Press Pvt. Ltd.
R. No. 656, 6th Floor, 21, Nirmal, Nariman Point,
Vs.
Aayakar Bhavan, M.K. Road, Mumbai - 400 021
Mumbai - 400 020
PAN AAACR7185E
(Appellant) (Respondent)
Assessee by: Shri Pankaj R. Toprani
Revenue by: Shri Sanjay Singh, D.R
Date of Hearing: 25.02.2019
Date of Pronouncement: 28.02.2019
Rational Art & Press P. Ltd. Vs. DCIT - ITA No. 7615/Mum/2016 2
DCIT vs. Rational Art & Press P. Ltd. - ITA No. 7673/Mum/2016
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. T he Ld. Co mmiss io ner of Inco me T ax (Appeals) - 50, Mu mb ai (hereinafter referred to as "the Ld. CIT (A)") cried in law and on f acts in upholding the addition of Rs. 8 1,328/ - being purchase of M. S. Pipe f rom Diamon d and T raders and paid by Acco unt Payee cheques treating the transaction as non- genuine.
2. T h e L d . C IT ( A ) e r r e d in l a w a n d o n f a c ts in n o t a p p r e c ia t in g that a sum of Rs. 11,02,50,000/ - being the sub-lease income f or 7 mon ths of the Ap pellan t's assoc iate co mp any F azl an i E xports Pvt. L td. in respect of sub -lease of Ratio nal Ho use Property to M/s Goldman Sachs has already been assessed in the hands of M/s Fazl ani Exports Pvt. Ltd. by the same A.O. wh o mad e th e A p p e ll an t' s as s e ss me n t an d s ta tin g th a t M / s F az l an i E x p o r ts P v t. L td . s u b - le a s e d th e s a id p r o p e r t y a t h ig h e r r e n t a n d tr e a t in g s u c h s u b le as in g ar r a n g e me n t as a sham transaction.
3. T h e L d . C IT ( A ) f ai l e d to a p p r e c ia te t h a t t h e s a id s u m o f R s . 1 1, 02 , 50, 00 0/ - h as be e n ass essed in th e Ap pe llan t' s h an ds a n d a l s o i n t h e h a n d s o f M / s F a z l a n i E x p o r t s P v t . L t d . , resulting into double addition.
4. W i th o u t p r e ju d ic e to G r o u n d N o . 2 a n d 3 s in c e th e A L V of R a t io n a l H o u s e P r o p e r ty is in c l u d e d in th e h a n d s of th e Appellan t, the Ld. C IT (A) erred in la w 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 Rational Art & Press P. Ltd. Vs. DCIT - ITA No. 7615/Mum/2016 3 DCIT vs. Rational Art & Press P. Ltd. - ITA No. 7673/Mum/2016 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 Rational Art & Press P. Ltd. Vs. DCIT - ITA No. 7615/Mum/2016 4 DCIT vs. Rational Art & Press P. Ltd. - ITA No. 7673/Mum/2016 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.
Rational Art & Press P. Ltd. Vs. DCIT - ITA No. 7615/Mum/2016 5 DCIT vs. Rational Art & Press P. Ltd. - ITA No. 7673/Mum/2016
5. Aggrieved, the assessee carried the matter in appeal before the CIT(A). It was submitted by the assessee in the course of the appellate proceedings that the A.O had erred in characterising the leasing of the property by the assessee as a sham transaction and thus wrongly included the rent received by M/s Fazlani Export Pvt. Ltd. in the income of the assessee. However, the CIT(A) was not persuaded to subscribe to the aforesaid contention of the assessee. It was observed by him that the assessee had leased the property to its „sister concern‟ viz. M/s Fazlani Exports Pvt. Ltd. at a rent of Rs. 45,00,000/- per month, which in turn had sub-leased the same to M/s Goldman Sachs (India) Securities Pvt. Ltd at a rent of Rs. 1,57,50,000/- per month. On the basis of the aforesaid facts, the CIT(A) was of the view that the A.O taking cognizance of the fact that the property was leased by the assessee to its „sister concern‟ at far below the market rate with no justifiable reason for so doing, had thus rightly held the same as a sham transaction. It was further observed by the CIT(A) that the A.O had not included the sub-leasing receipts of M/s Fazlani Exports Pvt. Ltd. in the income of the assessee. In fact, the A.O using the rent of Rs. 11,02,50,000/- which was received by M/s Fazlani Exports Pvt. Ltd. on sub-leasing the property to M/s Goldman Sachs (India) Securities Pvt. Ltd, had adopted the same working out the „ALV‟ of the property and bringing the same to tax in the hands of the assessee. The CIT(A) in the backdrop of the aforesaid facts principally approved the determining of the „ALV‟ of the property by the A.O. However, it was observed by the CIT(A) that the A.O had erred in computing the „ALV‟ of the property for the entire year at Rs. 19,49,10,000/- [Rs. 11,02,50,000/- (for 7 months) + Rs. 8,46,60,000/- (for 5 months)]. The CIT(A) noticed that as the actual rent received by the assessee for the last 5 months was Rs. 5,31,60,000/-, therefore, as per the method applied by the A.O the „ALV‟ of the property worked out at Rs.
Rational Art & Press P. Ltd. Vs. DCIT - ITA No. 7615/Mum/2016 6 DCIT vs. Rational Art & Press P. Ltd. - ITA No. 7673/Mum/2016 16,34,10,000/-[Rs. 11,02,50,000/-(7 months) + Rs. 5,31,60,000/- (5 months)] and not Rs. 19,49,10,000/-. On the basis of his aforesaid observations the CIT(A) partly allowed the appeal.
6. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The ld. Authorized Representative (for short „A.R‟) for the assessee took us through the facts of the case. It was submitted by the ld. A.R that the assessee company had during the year let out its property viz. „Rational House‟ 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 at a rent of Rs.45,00,000/- per month. Further, the said sister concern viz. M/s Fazlani Exports Pvt. Ltd. had sub-leased the said property for the aforesaid period to M/s Goldman Sachs (India) Securities Pvt. Ltd. from April, 2009 to October, 2009 @ Rs. 1,57,50,000/- per month. The ld. A.R submitted that the A.O had wrongly included the rental income received by M/s Fazlani Exports Pvt. Ltd. in the income of the assessee. It was averred by the ld. A.R that the rental receipts of Rs.11,02,50,000/- received by M/s Fazlani Exports Pvt. Ltd. had duly been offered by the latter concern in its return of income for the year under consideration and had been brought to tax in its hands. In sum and substance, it was the contention of the ld. A.R that the inclusion of the aforesaid rental receipts in the hands of the assessee had resulted to double taxation. It was further submitted by the ld. A.R that a coordinate bench of the Tribunal viz. ITAT "F" Bench, Mumbai, while disposing off the appeal of the aforesaid „sister concern‟ viz. M/s Fazlani Export Pvt. Ltd. Vs. DCIT (ITA No. 4090/Mum/2016; dated 04.05.2018) (copy placed on record) for the year under consideration i.e A.Y 2010-11, had concluded that the sub-leasing receipts of Rs.11,02,50,000/- were liable to be assessed in its hands as "Income from other sources". It was submitted by the ld. A.R that now when Rational Art & Press P. Ltd. Vs. DCIT - ITA No. 7615/Mum/2016 7 DCIT vs. Rational Art & Press P. Ltd. - ITA No. 7673/Mum/2016 the sub-leasing receipts of Rs.11,02,50,000/- had been held to be the income M/s Fazlani Exports Pvt. Ltd., therefore, the same could not be assessed as the income of the assessee. The ld. A.R taking us through the facts that were involved in the aforesaid appeal, submitted that the issue before the Tribunal was as to whether the income received by M/s Fazlani Exports Pvt. Ltd. from subletting the property was liable to be assessed under the head "business income" or as „Income from other sources‟. The ld. A.R taking us through the order of the Tribunal submitted that after necessary deliberations the Tribunal had concluded that the sub-leasing receipts were liable to be assessed as "Income from other sources". The ld. A.R in the backdrop of the aforesaid observations of the Tribunal submitted that as the issue that the sub-leasing receipts were liable to be assessed as the income of M/s Fazlani Exports Pvt. Ltd. had been settled pursuant to the aforesaid order of the Tribunal, therefore, the view taken by the lower authorities in the present case that the same were liable to be added to the income of the assessee by treating the lease transaction entered into by the latter with M/s Fazlani Exports Pvt. Ltd. as a sham transaction could not be sustained and was liable to be vacated. In sum and substance, it was the contention of the ld. A.R that now when the income from sub-leasing of the property had been brought to tax in the hands of M/s Fazlani Exports Pvt. Ltd., therefore, it could not be once again assessed in the hands of the assessee company. Apart therefrom, it was submitted by the ld. A.R that the lower authorities had erred in making a disallowance of purchases of Rs.81,328/- of M.S. Pipes that was made by the assessee from M/s Diamond Traders, Mumbai, during the year under consideration. The ld. A.R. submitted that in the course of the assessment proceedings the assessee in order to substantiate the genuineness of the purchase transaction under consideration had furnished the copies of the Rational Art & Press P. Ltd. Vs. DCIT - ITA No. 7615/Mum/2016 8 DCIT vs. Rational Art & Press P. Ltd. - ITA No. 7673/Mum/2016 invoices along with the copy of the ledger account of the aforesaid supplier party viz. M/s Diamond Trader. Further, it was submitted by the ld. A.R that the fact that the payment of the purchase consideration to the aforementioned supplier party was made vide account payee cheque was also brought to the notice of the A.O. It was averred by the ld. A.R that the lower authorities bypassing the aforesaid factual position had whimsically disallowed the genuine purchases of Rs.81,328/- that were made by the assessee from the aforementioned supplier party.
7. Per contra, the ld. Departmental Representative (for short „D.R‟) submitted that the contention advanced by the counsel for the assessee that the A.O had added the sub-leasing receipts of M/s Fazlani Exports Pvt. Ltd. in the hands of the assessee was absolutely misplaced and rather misconceived. It was submitted by the ld. D.R that the A.O taking cognizance of the fact that the property under consideration viz. "Rational House" was sub-leased by M/s Fazlani Exports Pvt. Ltd. at a substantially higher rent, had thus adopted the said market rent which the property was admittedly fetching for working out the „ALV‟ of the property under consideration and had brought the same to tax under Sec. 23(1)(a) of the IT Act in the hands of the assessee. It was submitted by the ld. D.R that it was incorrect on the part of the counsel for the assessee to state that the sub- leasing receipts of M/s Fazlani Exports Pvt. Ltd. had been clubbed/added by the A.O in the hands of the assessee. As regards the support drawn by the ld. A.R from the order of a coordinate bench of the Tribunal in the case of M/s Fazlani Exports Pvt. Ltd. Vs. DCIT, Central Circle-44, Mumbai (ITA No. 4090/Mum/2016; dated 04.05.2018) for the year under consideration viz. A.Y. 2010-11, it was submitted by the ld. D.R that the Tribunal in the said case had observed that the A.O while framing the assessment in the case of M/s Rational Art & Press P. Ltd. Vs. DCIT - ITA No. 7615/Mum/2016 9 DCIT vs. Rational Art & Press P. Ltd. - ITA No. 7673/Mum/2016 Rational Art & Press Pvt. Ltd.(i.e the assessee before us) had taken the lease transaction entered into by the latter with its „sister concern‟ viz. M/s Fazlani Exports Pvt. Ltd. as a sham transaction only in the context of the substantially lower rent at which the property was leased out as in comparison to the rent at which said „sister concern‟ viz. M/s Fazlani Exports Pvt. Ltd. had in turn sub-leased the same to M/s Goldman Sachs Pvt. Ltd. It was averred by the ld. D.R that the Tribunal had specifically observed that the A.O had only considered the rent received by M/s Fazlani Exports Pvt. Ltd. from M/s Goldman Sachs (India) Securities Pvt. Ltd. as a guiding factor/indicator for determining the ALV of the property under consideration. In sum and substance, it was the contention of the ld. D.R that the A.O after taking cognizance of the fact that the assessee had leased the property under consideration to its „sister concern‟ viz. M/s Fazlani Exports Pvt. Ltd. at a substantially lower rent, had only in the said context characterised the same as a sham transaction. Insofar, the contention advanced by the ld. counsel for the assessee that in case the sub- leasing receipts were assessed in hands of the assessee, then keeping in view the fact that the same had already been assessed in the hands of M/s Fazlani Exports Pvt. Ltd., the same would lead to double taxation was concerned, it was averred by the ld. D.R that the said contention of the assessee was absolutely misplaced. The ld. D.R submitted that now when the „sister concern‟ viz. M/s Fazlani Exports Pvt. Ltd. had sub-leased the property and had shown the sub-leasing receipts as its income, therefore, it was not permissible on its part to now turn around and claim that the same was not liable to be assessed in its hands. It was submitted by the ld. D.R that the contention that was raised by the „sister concern‟ of the assessee viz. M/s Fazlani Exports Pvt. Ltd. in its appeal for the year under consideration before the Tribunal that now when the sub-leasing Rational Art & Press P. Ltd. Vs. DCIT - ITA No. 7615/Mum/2016 10 DCIT vs. Rational Art & Press P. Ltd. - ITA No. 7673/Mum/2016 receipts had been assessed in the hands of M/s Rational House & Press Pvt. Ltd. (i.e the assessee before us), therefore, the same could not be held as its income, was however not accepted by the Tribunal. On the basis of his aforesaid contention it was submitted by the ld. D.R that the CIT(A) had rightly sustained the addition made by the A.O towards the „ALV‟ of the property under consideration. Insofar the addition made by the A.O towards bogus purchases booked by the assessee in its accounts was concerned, it was submitted by the ld. D.R that as the assessee had failed to substantiate the genuineness and veracity of the purchase of Rs. 81,328/- that were claimed to have been made from a hawala party viz. M/s Diamond Trader, therefore, the lower authorities had rightly disallowed the same.
8. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. Admittedly, the assessee during the year under consideration had leased the property viz. "Rational House" 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/- per month), which in turn had sub-leased the same to M/s Goldman Sachs (India) Securities Pvt. Ltd. during the said period for a rent of Rs. 11,02,50,000/- (i.e @ Rs. 1,57,50,000/- per month). As for the remaining period of five months for the year under consideration i.e November, 2009 to March, 2010, 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/-. Thus, 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/-] on leasing the property under consideration during the year which was shown by it in its return of income under the head "income from house property".
Rational Art & Press P. Ltd. Vs. DCIT - ITA No. 7615/Mum/2016 11 DCIT vs. Rational Art & Press P. Ltd. - ITA No. 7673/Mum/2016
9. As observed by hereinabove, the property during the year for the first seven months i.e from April, 2009 to October, 2009 was leased by the assessee to its „sister concern‟ viz. M/s Fazlani Exports Pvt. Ltd. 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 for the aforesaid period to M/s Goldman Sachs (India) Securities Pvt. Ltd. We find that on the basis of the aforesaid facts the A.O had taken the „ALV‟ of the property at Rs. 19,49,10,000/-[Rs.11,02,50,000/- (+) Rs. 8,46,60,000/-]. However, the CIT(A) observing that the A.O had wrongly taken the rent of Rs. 8,46,60,000/- that was received by the assessee for the entire year, as the rent for the last 5 months of the year, corrected the said mistake and worked out the „ALV‟ of the property for the entire year at Rs. 16,34,10,000/- [Rs. 11,02,50,000/- (+) Rs. 5,31,60,000/-]. Insofar the determination of the „ALV‟ of the property under consideration by the lower authorities is concerned, we find that the same had been worked out by them as per Sec. 23(1) of the IT Act, which reads as under (relevant extract):
" 23 (1). For the purpose of section 22, the annual value of any property shall be deemed to be :
(a) The sum for which the property might reasonably be expected to let from year to year; or
(b) where the property or any part of the property is let and the actual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause (a), the amount so received or receivable; or
(c) where the property or any part of the property is let and was vacant during the whole year or any part of the previous year and owing to such vacancy the actual rent received or receivable by the owner in respect thereof is less than the sum referred to in clause (a), the amount so received or receivable.
...................................................................................................."
We are of the considered view that as the property under consideration was leased by the assessee to its „sister concern‟ viz. M/s Fazlani Rational Art & Press P. Ltd. Vs. DCIT - ITA No. 7615/Mum/2016 12 DCIT vs. Rational Art & Press P. Ltd. - ITA No. 7673/Mum/2016 Exports Pvt. Ltd. during 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/- per month), which was substantially lower than the rent of Rs. 11,02,50,000/- (i.e @ Rs. 1,57,50,000/- per month) for which the same was in turn sub-leased by M/s Fazlani Exports Pvt. Ltd. to M/s Goldman Sachs (India) Securities Pvt. Ltd., therefore, the lower authorities had rightly characterised the arrangement of leasing the property by the assessee at a suppressed rent to M/s Fazlani Exports Pvt. Ltd. as a sham transaction. In our considered view as the actual rent of Rs. 3,15,00,000/- (i.e @ Rs. 45,00,000/- p.m) received by the assessee from leasing the property for a period of seven months to its „sister concern‟ viz. M/s Fazlani Exports Pvt. Ltd. was substantially lower than the sum of Rs. 11,02,50,000/- (i.e @ Rs. 1,57,50,000/-p.m) for which the said property had admittedly been sub-leased during the said period by M/s Fazlani Exports Pvt. Ltd, therefore, in our considered view the A.O had rightly worked out the „ALV‟ of the property for the said period of seven months under Sec. 23(1)(a) i.e by adopting the sum of Rs. 11,02,50,000/- for which the property during the said period could have reasonably be let by the assessee. Apart therefrom, we are also in agreement with the observation of the CIT(A) that the A.O had not added/clubbed the sub-leasing receipts of M/s Fazlani Exports Pvt. Ltd. in the hands of the assessee, but had only reworked out the „ALV‟ of the property after taking cognizance of the rent which the property admittedly had fetched during the relevant period on sub-leasing of the same by M/s Fazlani Exports Pvt. Ltd. In fact, as observed by us hereinabove, the coordinate bench of the Tribunal i.e ITAT, "F" Bench, Mumbai while disposing off the appeal of the „sister concern‟ viz. M/s Fazlani Exports Pvt. Ltd. Vs. DCIT, Central Circle-44, Mumbai (ITA No. 4090/Mum/2016; dated 04.05.2018) for the year under consideration viz. A.Y. 2010-11, had Rational Art & Press P. Ltd. Vs. DCIT - ITA No. 7615/Mum/2016 13 DCIT vs. Rational Art & Press P. Ltd. - ITA No. 7673/Mum/2016 specifically observed that the A.O had considered the rent received by M/s Fazlani Exports Pvt. Ltd. from M/s Goldman Sachs (India) Securities Pvt. Ltd. as a guiding factor/indicator for determining the „ALV‟ of the property under consideration. Insofar, the contention of the ld. A.R that the assessing of the sub-leasing receipts of M/s Fazlani Exports Pvt Ltd in the hands of the assessee would lead to double taxation is concerned, the same as observed by us hereinabove is based on absolutely misplaced and misconceived facts. As observed by us hereinabove, the lower authorities had not assessed the sub- leasing receipts of M/s Fazlani Exports Pvt. Ltd. in the hands of the assessee, but as observed by the coordinate bench of the Tribunal while disposing off the appeal of the aforesaid „sister concern‟ viz. M/s Fazlani Exports Pvt. Ltd. Vs. DCIT, Central Circle-44, Mumbai (ITA No. 4090/Mum/2016; dated 04.05.2018) for the year under consideration viz. A.Y. 2010-11, the A.O while framing the assessment in the case of the assessee had only considered the rent received by M/s Fazlani Exports Pvt. Ltd. from M/s Goldman Sachs (India) Securities Pvt. Ltd. as a guiding factor/indicator for determining the „ALV‟ of the property under consideration. We thus not finding any infirmity in the order of the CIT(A) who had principally approved the working of the „ALV‟ by the A.O and had taken the same at Rs. 16,34,10,000/-, uphold his order to the said extent. The Grounds of appeal No. 2 to 4 raised by the assessee are dismissed.
10. As regards the disallowance of purchases of M.S. Pipes amounting to Rs. 81,328/- that was claimed by the assessee to have been made from M/s Diamond Traders, Mumbai, during the year under consideration, we are in agreement with the view taken by the lower authorities that the assessee had failed to establish the genuineness and veracity of the purchase transaction under consideration. However, at the same time we find that the Rational Art & Press P. Ltd. Vs. DCIT - ITA No. 7615/Mum/2016 14 DCIT vs. Rational Art & Press P. Ltd. - ITA No. 7673/Mum/2016 sales/consumption of the material claimed by the assessee to have been purchased from the aforementioned party had not been dislodged or disproved by the revenue. In the backdrop of the aforesaid facts, we are of the considered view that the assessee can safely be held to have purchased the goods at a discounted value from unidentified suppliers operating in the open/grey market. Insofar the saving or the profit which the assessee would have made by purchasing the goods from the open/grey market, as against the value at which the same had been booked in its accounts can safely be taken at 12.5% of the aggregate value of such purchases of Rs. 81,328/-. We thus direct the A.O to restrict the addition in respect of the aforesaid unsubstantiated purchases at Rs. 10,166/- (i/e 12.5% of Rs. 81,328/-). The Ground of appeal No. 1 raised by the assessee is partly allowed.
11. The appeal of the assessee is partly allowed.
ITA No. 7673/Mum/2016AY. 2010-11
12. We shall now advert to the appeal of the revenue. The revenue has assailed the order of the CIT(A) on the following grounds:
"1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) having held the transaction to be sham, erred in deleting the addition of Rs. 3,15,00,000/- made by the Assessing Officer, in respect of the lease rent received by the assessee, without appreciating the fact that the same were based on the submissions made before the Assessing Officer during the assessment proceedings.
2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the additions amounting to Rs. 3,15,00,000/- made by the Assessing Officer, in respect of the lease rent received by the assessee, based on the arguments of the appellant's representative, without appreciating the fact that the said additions were made on the basis of evidences before the Assessing Officer during the assessment proceedings. The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored. The appellant craves leave to amend or alter any ground and/or add new grounds which may be necessary."
Rational Art & Press P. Ltd. Vs. DCIT - ITA No. 7615/Mum/2016 15 DCIT vs. Rational Art & Press P. Ltd. - ITA No. 7673/Mum/2016
13. We find that the only grievance of the revenue is that the CIT(A) has erred in scaling down the addition made by the A.O to the extent of Rs. 3,15,00,000/-. As observed by us hereinabove, the A.O had worked out the „ALV‟ of the property at Rs. 19,49,10,000/-[Rs. 11,02,50,000/- (+) Rs. 8,46,60,000/-]. However, the CIT(A) observing that the A.O had wrongly taken the rent of Rs. 8,46,60,000/- received by the assessee for the entire year as the rent for the last 5 months of the year, had thus corrected the said mistake and reworked the „ALV‟ of the property for the entire year at Rs. 16,34,10,000/- [Rs. 11,02,50,000/- (+) Rs. 5,31,60,000/-]. We are unable to persuade ourselves to subscribe to the claim of the revenue that the aforesaid view so taken by the CIT(A) suffers from any infirmity. In fact, the revenue while raising the said contention had lost sight of the fact that the CIT(A) had reworked the „ALV‟ of the property accepting the basis adopted by the A.O. However, for the sake of clarity we direct the A.O to compute the income of the assessee under the head "Income from house property" after adopting the „ALV‟ of the property under consideration at Rs. 16,34,10,000/-.
14. The appeal of the revenue is disposed off in terms of our aforesaid observations.
15. The appeal of the assessee viz. ITA No. 7615/Mum/2016 is dismissed and the appeal of the revenue viz. ITA No. 7673/Mum/2016 is disposed off in terms of our aforesaid observations.
Order pronounced in the open court on 28.02.2019
Sd/- Sd/-
(G.Manjunatha) (Ravish Sood)
ACCOUNTANT MEMBER JUDICIAL MEMBER
भुंफई Mumbai; ददन ुंक 28.02.2019
Ps. Rohit
Rational Art & Press P. Ltd. Vs. DCIT - ITA No. 7615/Mum/2016 16 DCIT vs. Rational Art & Press P. Ltd. - ITA No. 7673/Mum/2016 आदे शकीप्रतिलऱपिअग्रेपिि/Copy of the Order forwarded to :
1. अऩीर थी/ The Appellant
2. प्रत्मथी/ The Respondent.
3. आमकयआमक्त(अऩीर) / The CIT(A)-
4. आमकयआमक्त/ CIT
5. विब गीमप्रतततनधध, आमकयअऩीरीमअधधकयण, भुंफई/ DR, ITAT, Mumbai
6. ग र्डप ईर / Guard file.
सत्म वऩतप्रतत //True Copy// आदे शानस ु ार/ BY ORDER, उि/सहायकिंजीकार (Dy./Asstt. Registrar) आयकरअिीऱीयअधिकरण, भुंफई / ITAT, Mumbai