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TMI Blog2024 (9) TMI 448X X X X Extracts X X X X X X X X Extracts X X X X ..... ee merely on surmises ignoring the facts and evidences placed on record. The said disallowance must be deleted. iii) The CIT(A) erred in law and on facts in confirming the addition of Rs. 1,17,200/- on account of Annual Lettable Value (ALV) of the Defence Colony property sold during the relevant period in July 2015 which was kept compulsorily vacant for the purpose of sale ignoring the evidences and submissions placed on record. Thus, the addition so made should be deleted. iv) The appellant craves the leave to add, substitute, modify, delete or amend all or any ground of appeal either before or at the time of hearing. 2. The facts in brief as noted from the orders of the authorities below are that the assessee company e-filed its Return of Income on 30.09.2016 declaring a total income of Rs. 10,64,26,790/-. On being put to scrutiny, the Assessing Officer called for various details along with the supporting documents as noted by the Assessing Officer. The assessee is in the business of real estate and has also earned income from interest etc. The Assessing Officer made various additions and determined the taxable income at Rs. 13,41,23,530/-. The learned CIT(A) has allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s contentions that there was some administrative difficulties in opening demat account are not acceptable. 8. Another reason given by the Assessing Officer in the Assessment Order was that there was no one-to-one co-relation of the share-purchase sale transactions and the bank statement and all the amounts have been settled by the issuing a cheque on account of loss incurred on 31st March, 2016. The learned Assessing Officer also observed that apart from this year the assessee is having no shares transaction in any other year and the loss claimed to have been incurred by the assessee is only to reduce its tax liability. It was further observed that since the transaction done by the SGS Infratech Ltd. cannot be differentiated from the transaction as done by assessee company in its own name, it is, in the views of Assessing Officer only a fiction created by the assessee and assessee had no intention of buying or selling any shares and it is a case of buying of loss. Yet another reason given by the learned Assessing Officer that no prudent business entity would indulge into such activities of doing transaction on behalf of some other company without any remuneration. In other words, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 53 to 54 of the Paper Book. The books of accounts of both the entities had been duly audited and certified by the Auditors of the Company as true and fair, it was submitted. The Auditors in their wisdom had also given a Note to this effect as has already been referred to and reproduced hereinabove from Paper Book Page 48. It has been submitted that although the Assessing Officer had treated the transaction as bogus, but has not rejected the books of accounts either of the assessee or that of the SGS Infratech Ltd. Therefore, making the final payment on account of loss incurred before the end of financial year cannot be adversely viewed especially when transactions of purchase and sale of shares have been recorded on day today basis in the regular books of accounts maintained by the assessee and SGS Infratech Ltd. 14. The learned Authorised Representative has further submitted that Assessing Officer's contention that no prudent person does such type of transaction unless he gets some compensation is also misleading. It is noted from agreement between parties, 10% of the profit was to go to SGS Infratech Ltd. or the other company and therefore it was not as if these services of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e actual facts of this matter, such suspicion also gets dispelled and remains a suspicion. It has further been submitted that the law on this issue is well settled that suspicion and surmises, howsoever strong, cannot be the ground for making addition. For this legal proposition, the assessee has relied upon one of the judgement on this proposition is that of CIT vs. Daulat Ram Rawatmull reported in 53 ITR 574 (SC)as noted from the Synopsis filed. 17. Finally the Authorised Representative submitted that Assessing Officer's action of making addition on this account is not maintainable and has urged upon the Bench to delete the same. 18. The learned DR appearing on behalf of the Department has relied upon the Orders of authorities below. 19. It has been submitted by the learned DR that the Assessing Officer has thoroughly examined this transaction and has arrived a valid conclusion that it was a case of buying of loss and not the actual sale and purchase transaction of shares. It has been submitted that nothing stopped the assessee from opening a demat account in its own name he read out paras 3.2 and 3.3 of Assessment Order in support of his arguments. 20. On a query from the Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the way of the assessee to claim the loss which has been incurred by the assessee although through the demat account of sister concern for which sister concern namely SGS Infratech Ltd. was to get a compensation of 10% of the profit but unfortunately in the transaction of sale and purchase of shares, there were substantial loss. Therefore nothing accrued to SGS Infratech Ltd. The reasoning given by the learned Assessing Officer in the Assessment Order are in the nature of doubts and suspicion and the opinion of the Assessing Officer as to how such transactions are normally structured. We are inclined to accept the contentions that a bonafide business arrangement between the sister concerns for which an agreement was signed between the parties, which agreement has not been treated as a shell or bogus even by the Assessing Officer or the CIT(A), does not convert the genuine transaction into bogus transaction as has been done by authorities below. It is not the case of the Assessing Officer or CIT(A) that losses have not been incurred. On the contrary losses incurred by SGS Infratech Ltd. have been assessed. Only such part of losses, which SGS Infratech Ltd. incurred on behalf of asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to taxing the same income twice - once in the hands of the Directors and again the hands of the assessee. Similarly it has been submitted that once the learned CIT(A) has allowed the remuneration i.e. salaries etc. of the staff including electricity charges etc. there was no reason to disallow the expenses paid to employees on account of travelling and conveyance incurred by the employees. It has been submitted that the real test for allowing an expense is as to whether the expense has been incurred wholly and exclusively for the purposes of business of the assessee. Admittedly the assessee was engaged in the business of hospitality and trading of shares for which expenses are required to be allowed. 27. The learned DR on the contrary relied upon the order of the authorities below and has submitted that the approach of the Assessing Officer as upheld by the learned CIT(A) is correct because the assessee does not deserve any allowance and there was no need to incur such expenses. 28. We have heard the rival contentions, perused the Assessment Order as well as CIT(A)'s Order on this issue. In our views, the sole reason for the Assessing Officer to make the disallowance is that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) Where the property consists of a house or part of a house which - (a) is in the occupation of the owner for the purposes of his own residence; or (b) cannot actually be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on at any other place, he has to reside at that other place in a building not belonging to him, the annual value of such house or part of the house shall be taken to be nil. 32. The learned DR relied upon the orders of authorities below. 33. We are of the opinion that for the purposes of computing the income from house property u/s 22 of the Income Tax Act, the ALV is required to be computed at per section 23. Section 23 is a deeming provision and taxes are required to be paid by an assessee if it is found to be the owner of such property. Admittedly, the assessee is owner of such property although for the part of the year. The provisions of section 23(2) have two sub-clauses (a) and (b). Admittedly clause (b) of section 23(2) is not attracted on the facts of the assessee's case. As far as clause (a) is concerned, the same can be invoked only if the assessee as an owner is in occupancy of such propert ..... X X X X Extracts X X X X X X X X Extracts X X X X
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