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TMI Blog2017 (11) TMI 1148X X X X Extracts X X X X X X X X Extracts X X X X ..... conomic zones, filed its return of income for the assessment year 2009-10 on 29-09-2009 declaring total income at Nil. The case was selected for scrutiny and notices u/s 143(2) dated 24-08- 2010 and u/s 142(1) dated 08-02-2011 along with questionnaire were issued calling for various details. In response to notices, the authorized representative of the assessee appeared from time to time and furnished the details, as called for. The assessment was completed u/s 143(3) on 29-12-2011 determining the total income at Rs. 179,50,73,585 interalia making additions / disallowances towards unexplained share capital, expenses attributable to income from house property, professional fees to be amortised, depreciation on service apartments, interest disallowance on assets not put to use and unexplained credits. Aggrieved by the assessment order, the assessee preferred appeal before the CIT(A). 3. Before the CIT(A), the assessee has filed elaborate written submissions to challenge each and every additions made by the AO. The CIT(A), for the detailed reasons recorded in his order dated 25-04-2012, partly allowed appeal filed by the assessee, wherein he sustained additions towards disallowance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns dated 22-12-2011 of Mauritius Revenue Authorities, without scrutinizing and bringing on record the reasons for the difference in the communication of Mauritius Revenue Authorities dated 21-11-2011 on which addition u/s 68 had been made. The Ld.DR further submitted that the Ld.CIT(A) erred in technically not giving opportunity to the AO to comment on the difference between the two communications of Mauritius Revenue Authorities and drawing a unilateral conclusion. The CIT(A) erred in coming to the conclusion that the assessee had discharged the onus cast upon it relying upon the reconciliation provided by the assessee without there being no enquiry made either by himself or through the AO. The Ld.DR further submitted tht the initial communication received from Mauritius Revenue Authorities on 21-11-2011 contains income-tax returns filed by Strand Developers Mauritius Ltd with Mauritius Revenue Authorities does not indicate any investment by the creditor in the assessee company. The letter received from the Mauritius Revenue Authorities clearly states that the company had filed income-tax returns as per which it has returned a net loss of Mauritius Rs. 3,802 and the balance-sheet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ritius Revenue Authorities through FT & TR clearly establishes the fact that the assessee company has received share capital and share application money from M/s Strand Developers Mauritius Ltd. The Ld.AR further submitted that the Mauritius Revenue Authorities in their letter dated 26-12-2011 explained the reasons for difference in earlier communication sent vide letter dated 21-11-2011 which states that the earlier letter sent along with the income-tax return filed with Mauritius Revenue Authorities was incomplete and computer print out of the return, where all the details had through oversight not been input. The subsequent communication dated 22- 12-2011 contains the return filed by M/s Strand Developers Mauritius Ltd, which establishes the fact of investment in assessee company. The said communication also forwarded the full details like name, address and citizenship of directors, copy of share certificate issued by the assessee, bank statements of M/s Strand Developers Mauritius Ltd, the business customer information and account opening form of HSBC Bank Mauritius Ltd, the income statement of Strand Developers Mauritius Ltd. All these documents were received from the Mauritiu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in assessee company. Based on the reply and evidences furnished by the FT & TR, Department of Revenue, the AO came to the conclusion that the assessee has failed to discharge capacity and creditworthiness of the shareholder. The contention of the assessee is that it has discharged the initial onus cast upon it by proving identity, genuineness of the transaction and creditworthiness of the party. The assessee further contended that though initial communication received from Mauritius Revenue Authorities did not contain full details about investment made by M/s Strand Developers Mauritius Ltd, subsequent communication received on 21-12-2011 from Mauritius Revenue Authorities proves the fact of investment made by M/s Strand Developers Mauritius Ltd in the share capital and share application money of the assessee company. The assessee further contended that the Mauritius Revenue Authorities in their letter dated 21-12-2011 has clarified the reasons for difference for two communications sent about M/s Strand Developers Mauritius Ltd and also clarified such difference in the earlier communication is on account of incomplete computer print out of the return where all details had through o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tomer information cum account opening form of HSBC Mauritius Ltd and financial statement of M/s Strand Developers Mauritius Ltd. The AO also not disputed the fact that the reasons for difference in two communications sent by the Mauritius Revenue Authorities has been clarified by the Director General of Mauritius Revenue Authorities in their communication dated 21-12-2011 which has been extracted by the CIT(A) in his order at para 3.4.1. The other documents sent by the Mauritius Revenue Authorities has also been listed by the CIT(A) in the same paragraph. By these documents, a clarification has been received from the Director General of Mauritius Revenue Authorities which was forwarded by the Under Secretary, FT & TR-II, CBDT directly to the AO. Therefore, we are of the view that there is no merit in the arguments of the Ld.DR that the CIT(A) has not considered the necessity of further enquiry with regard to the genuineness of transactions and creditworthiness of the parties. We further are of the opinion that once communication received from the designated authority through FT & TR which is the authorized agency for exchanging information between two countries u/s 90 of the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the FT&TR Division has not chosen to call for any other information with regard to the amount received from M/s Strand Developers Mauritius Ltd and now accusing the CIT(A) of not giving proper opportunity to comment on the difference between the two communications of Mauritius Revenue Authorities. We further observe that the reasons for difference between two communications sent by Mauritius Revenue Authorities has been clarified by the Director General of Mauritius Revenue Authorities in their second communication dated 21-12-2011 which clearly states that the initial communication sent along with income-tax return of M/s Strand Developers Mauritius Ltd is incomplete and also subsequent income-tax return copy is a full fledged return filed by the assessee which clearly establishes investment made in assessee company. The other details like share certificate issued by the assessee company and bank statement of M/s Strand Developers Mauritius Ltd clearly establishes receipt of money by the assessee company. The assessee also furnished copies of FCGPR and other compliances with respect to RBI and Foreign Inward Remitance Certificate which clearly proves the identity, genuineness of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ministrative and other expenses should not be proportionately disallowed in proportion to Income from house property and Income from business. In response to the show cause notice, the assessee submitted that it has disallowed expenses specifically related to the activity of income from house property in the computation of income. The assessee further contended that the remaining expenses are in the nature of general admistrative and other expenses, but mainly incurred in the business activity of the assessee, therefore, no further disallowance is called for in proportion to income earned from the activity of letting out of premises and letting out of fit outs. 13. The AO, after considering the explanation of the assessee observed that the revised return filed by the assessee rejected in view of the fact that it has barred by limitation. The AO further observed that the assessee's business consists of letting out of premises alongwith fit outs. The assessee itself has admitted the fact that in some cases, the premises were let out along with fit outs and in some other cases, only premises were let out. The assessee company has entered into separate agreements for premises and fit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g and other expenses which are relatable to the activity of income from house property. Aggrieved by the order of CIT(A), the assessee is in appeal before us. 15. The Ld.AR for the assessee submitted that the Ld.CIT(A) was erred in upholding the disallowance of property maintenance expenses incurred by the assessee for the purpose of earning income taxable under the head 'Profits and gains of business' on the ground that the claim of the assessee is not made in the return of income. The Ld.AR further submitted that the assessee itself has disallowed certain expenses directly attributable to the activity of income from house property and the AO while working out proportionate disallowance has not considered the expenses already disallowed by the assessee like rates and taxes, property maintenance expenses, donation and professional fees. The Ld.AR further referring to the decision of Hon'ble Supreme Court in the case of Rajasthan State Warehousing Corporation vs CIT 242 ITR 451 (SC) submitted that once the assessee is into the undivisible business, disallowance of administrative and other expenses on the basis of income received from various activities cannot be disallowed. The Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of expenses incurred in relation to house property, the AO has wrongly excluded expenditure suoto moto disallowed by the assessee in its computation to the extent of Rs. 97,94,884 as against total disallowances made by the assessee for Rs. 1,20,45,714. The assessee further contended that it had disallowed expenses like rates and taxes, property maintenance expenses, professional fees and donations which works out to Rs. 1,20,45,714. The assessee has filed working explaining the computation for disallowance by the AO and actual disallowances required to be made while computing income under the head 'Income from business. According to the assessee, the AO has failed to exclude rates taxes, donation and professional fees. The assessee further contended that expenses in the nature of corporate / routine expenses allowable u/s 37 exclusively pertains to business activity of the assessee also has been included by the AO in determining the total disallowances. The assessee further contended that all expenses relatable to the activity of income from house property has been suo moto disallowed by it in the computation and if all further disallowance is required towards general administr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivity of property maintenance charges from the tenants. The assessee further contended that by mistake it has suo moto disallowed expenditure incurred towards property maintenance like security, watch and ward and other expenses which are incurred exclusively in connection with property maintenance charges recovered from the tenants which is deductible against income from business. The assessee further contended that it has filed a revised return revising its claim in respect of property maintenance charges. However, the AO has disallowed its claim merely on the ground that the revised return filed by the assessee is belated and hence cannot be allowed in view of the decision of Hon'ble Supreme Court in the case of Goetze (India) Ltd vs CIT (supra). The assessee further submitted that the AO has not disputed the fact that property maintenance expenditure has been incurred against property maintenance charges received from the tenants. He denied the claim on technical ground that return filed by the assessee is barred by limitation. 20. Having heard both the sides and considered material available on record, we find that the assessee has suo moto disallowed property maintenance exp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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