2021 (3) TMI 1061 - AT - Income Tax

Income from house property - Income received on leasing of land and building - allowing deduction u/s 24F - assessee was not entitled for deduction @ 30% U/s 24A and interest expenses U/s 24B - HELD THAT - A.O. has failed to pin point any violation of any condition regarding chargeability of income under the head income from house property . A.O. was not competent to treat the income earned by the assessee from rentals to be considered under the head income from other sources . More particularly when the assessee had fulfilled all basic conditions for treating the income under the head income from house property as enumerated in Section 22 - as meticulously gone through the orders passed by the revenue authorities and we found that the ld. CIT(A) while dealing with these amounts have elaborately discussed the provisions of Section 22 of the Act and the ingredients contained therein for treating the income earned by the assessee by giving portion of the property on rent and had rightly concluded that the assessee had correctly shown the said income under the head income from house property as the assessee had fulfilled all the basis conditions of Section 22 of the Act for treating the income under the head income from house property therefore it was rightly held that the assessee was also entitled for deduction U/s 24(a) and 24(b) of the Act. No new facts or circumstances have been brought before us in order to rebut or controvert the findings so recoded by the ld. CIT(A). Therefore we find no reasons to interfere into or deviate from the findings recorded by the ld. CIT(A). Hence these grounds raised by the revenue stand dismissed and the order passed by the ld. CIT(A) qua these issues stand affirmed. N.P. on declared sales - Assessee excluded the rent receipts from the net profit - HELD THAT - In NP rate chart the NP has been shown at 77, 23, 674/- which includes rent receipts. However in the above chart which has now been filed by the assessee which excludes the rent receipt from the net profit claimed by the assessee. Thus in our view the assessee had rightly excluded the rent receipts from the net profit as from the financial statements i.e. from the computation of total income we noticed that the rental income had been considered separately under the head income from house property and on which tax has already been paid. Therefore in order to avoid double taxation the assessee had excluded the rent receipts from the net profit which has now been reflected in the above chart which is termed as Annexure-A. Under these facts and circumstances we direct the A.O. to apply N.P. rate after excluding the rent receipts from the total income of the assessee. With these directions we restore this issue back to the file of the A.O. for deciding the issue afresh on the basis of above direction.

Issues Involved:
1. Estimation of sales based on the Circulation Certificate.
2. Addition of net profit on estimated sales.
3. Classification of income from leasing of land and building under the head 'income from house property' and allowing deduction under Section 24 of the Income Tax Act, 1961.

Detailed Analysis:

Issue 1: Estimation of Sales Based on the Circulation Certificate
The assessee contended that the sales estimation of ?2,40,02,905/- by the Assessing Officer (AO) based on the Circulation Certificate was incorrect. The assessee maintained regular books of accounts with no discrepancies, and the books were not rejected by the AO. The AO had estimated the sales using the circulation certificate submitted to the Registrar of Newspapers, which showed higher sales figures to obtain better advertisement rates. The AO allowed a 25% discount on these figures and added the remaining amount as concealed sales.

The Tribunal noted that the AO had not rejected the books of accounts and found no discrepancies in them. It was held that the Circulation Certificate, being part of the assessee's records, could be used for calculating income. However, the Tribunal agreed with the assessee's alternative plea that only the net profit rate should be taxed in case of a mismatch in turnover figures.

Issue 2: Addition of Net Profit on Estimated Sales
The AO added the entire amount of ?2,40,02,905/- as concealed sales, while the CIT(A) allowed the addition based on the net profit rate of 14.26%. The Tribunal upheld the CIT(A)'s approach, noting that the net profit rate should be applied to the difference in sales figures. The Tribunal also considered the assessee's submission that the rental income should be excluded from the net profit calculation to avoid double taxation. The Tribunal directed the AO to recalculate the net profit rate after excluding the rent receipts from the total income.

Issue 3: Classification of Income from Leasing of Land and Building
The Revenue challenged the CIT(A)'s decision to classify the income from leasing land and building as 'income from house property' and allow deductions under Section 24 of the Act. The AO had treated this income as 'income from other sources' due to alleged violations of the terms and conditions of the land allotment, including subletting more than the permitted area without prior permission.

The Tribunal found that the assessee had fulfilled the basic conditions for treating the income under the head 'income from house property' as per Section 22 of the Act. It was noted that any violation of other Acts could not change the head of income under the Income Tax Act. The Tribunal upheld the CIT(A)'s decision, allowing the deductions under Section 24(a) and 24(b) of the Act.

Conclusion:
The Tribunal dismissed the Revenue's appeal regarding the classification of income from leasing as 'income from house property' and upheld the CIT(A)'s decision on this matter. The Tribunal also directed the AO to recalculate the net profit rate after excluding the rent receipts from the total income, thereby partly allowing the assessee's appeal for statistical purposes. The final order pronounced was to partly allow the Revenue's appeal for statistical purposes and fully allow the assessee's appeal for statistical purposes.

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