M/s Ramdei Devi Mani Ram (P)Ltd., Varanasi V. ITO, Varanasi

CO 10/ALLD/2012

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8398 (ITAT-ALLAHABAD)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 18-04-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2000-2001
• Appeal Filed On: 26-07-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T P SHUKLA
• Assessee Lawyers: SUBHASH CHA ND
• Keywords: Unexplained investment; Charitable institution; Principle of natural justice; Reason to believe
• Section: 143(3); 147; 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, ALLAHABAD BENCH, ALLAHABAD BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NOS. 100 TO 105/ALLD./2012 ASSTT. YEAR : 2000-01 TO 2005-06 INCOME-TAX OFFICER, VS. M/S. RAMADEI DEVI MANI RAM PVT. LTD., 2(2), VARANASI. B-21/196, KAMACHHA, VARANASI. (PAN : AACCR 9637 F) C.O. NOS. 10 TO 15/ALLD./2012 (IN ITA NO. 100 TO 105/ALLD./2012) ASSTT. YEAR : 2000-01 TO 2005-06 M/S. RAMADEI DEVI MANI RAM PVT. LTD., VS. INCOME-T AX OFFICER, B-21/196, KAMACHHA, VARANASI. 2(2), VARANASI. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI T.P. SHUKLA, D.R. ASSESSEE BY : SHRI SUBHASH CHAND, ADVOCATE DATE OF HEARING : 15.04.2013 DATE OF PRONOUNCEMENT OF ORDER : 18 .04.2013 ORDER PER BHAVNESH SAINI, J.M.: ALL THE ABOVE DEPARTMENTAL APPEALS AND CROSS-OBJE CTIONS BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDERS OF THE LD. CIT(A), VARA NASI DATED 14.02.2012 FOR ALL THE ABOVE ASSESSMENT YEARS UNDER REFERENCE. ITA NOS. 100 TO 105/ALLD./2012 C.O. NOS. 10 TO 15/ALLD./2012 2 2. THE ISSUE IS COMMON IN ALL THE APPEALS. THE LD.C IT(A) DECIDED THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2005-06 AND TH E SAME ORDER WAS FOLLOWED IN THE REMAINING ASSESSMENT YEARS AND ALL THE APPEALS OF THE ASSESSEE WERE PARTLY ALLOWED. THE REVENUE AS WELL AS THE ASSESSEE HAVE R AISED SIMILAR GROUNDS IN THEIR APPEALS / CROSS-OBJECTIONS. BOTH THE PARTIES, THERE FORE, ARGUED ONLY IN ASSESSMENT YEAR 2005-06 AND STATED THAT SINCE THE ISSUE IS SAM E IN THE REMAINING APPEALS AND CROSS OBJECTIONS, THEREFORE, THE ORDER IN ASSESSMEN T YEAR 2005-06 MAY BE FOLLOWED IN OTHER DEPARTMENTAL APPEALS AS WELL AS CROSS OBJE CTIONS. WE, THEREFORE, PROCEED TO DECIDE ITA NO. 105/ALLD./2012 AND CROSS-OBJECTION N O. 15/ALLD./2012 FOR THE ASSESSMENT YEAR 2005-06 AS UNDER : ITA NO. 105/ALLD./2012 AND CROSS-OBJECTION NO. 15/ ALLD./2012: 3. THE REVENUE HAS FILED THE DEPARTMENTAL APPEAL ON THE FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND AS PER LAW LD CIT(A) ERRED IN REDUCING RENT RATES TO RS.1. 50 PER SQ. FT. FROM RS.6.66 PER SQ. FT., IGNORING THE MATERIAL FACTS ON THE RECORDS THAT THE RENT OF RS.6.66 PER SQ. FT IS RECEIVED BY THE ASSES SEE FROM OTHER TENANT OF THE SAME BUILDING AND ALSO THAT THE PREMISES IN QUESTION IS LOCATED ON FRONT OF MAIN ROAD, HAVING SAME COMMERCIAL VALUE . 2. WITHOUT PREJUDICE TO GROUND NO. 1 ABOVE, LD CIT (A) HIMSELF IN PARA 8 PAGE 3 OF APPELLATE ORDER HELD THE RATE A PPLICABLE TO THE SAME PREMISES IN AGREEMENT DATED 12.06.2008 WORKS O UT TO RS.5 PER SQ. FT FROM F.Y. 1998 ONWARDS. ITA NOS. 100 TO 105/ALLD./2012 C.O. NOS. 10 TO 15/ALLD./2012 3 4. THE ASSESSEE HAS FILED THE CROSS-OBJECTION ON SI X GROUNDS, HOWEVER, THE LD. COUNSEL FOR THE ASSESSEE ONLY PRESSED GROUND NO. 4 AND DID NOT PRESS THE REMAINING GROUNDS DURING THE COURSE OF HEARING. GROUND NO. 4 OF THE CROSS-OBJECTION READS AS UNDER : 4. BECAUSE IT IS FULLY EXPLAINED THAT FOR THE RELE VANT YEAR THE RATE PER SQ.FT. AS PER SETTLEMENT DEED DATED 12.06. 2008 IS RS.5/- PER SQ.FT. PER ANNUM I.E. RS. .42 PER SQ.FT. PER MONTH. THE LEARNED APPELLANT I.E. ASSESSING OFFICER HAS WRONGLY QUOTED THAT IT IS RS.5/- PER SQ.FT. FOR THE RELEVANT YEAR. 5. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH TH E PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND CONSIDERED TH E MATERIAL AVAILABLE ON RECORD AS REFERRED TO BY THE PARTIES DURING THE COURSE OF ARG UMENTS. 6. BRIEFLY, THE FACTS IN THIS CASE ARE THAT THE PRO CEEDINGS U/S. 147 WERE INITIATED ON THE GROUND THAT M/S. CHILDREN ACADEMY SOCIETY WH ICH IS RUNNING A SCHOOL HAS OCCUPIED A LAND BELONGING TO THE ASSESSEE-COMPANY A LONG WITH TWO FLOORS MEASURING 4735 SQ. FT. SITUATED AT B21/196, KAMACHH A, VARANASI SINCE OCTOBER, 1996. IT WAS ALSO GATHERED THAT LEASE DEED DATED 22 .10.1996 HAS BEEN EXECUTED IN THIS REGARD. THE ASSESSEE COMPANY HAS NOT ADMITTED ANY INCOME NOR ANY INCOME HAS BEEN ASSESSED. EVEN IF RENT HAS NOT BEEN ACTUAL LY RECEIVED, NOTIONAL INCOME CORRESPONDING TO MARKET RENT OF THE PROPERTY IS ASS ESSABLE U/S. 22 OF THE IT ACT. THUS, THERE WAS ESCAPEMENT OF SUBSTANTIAL INCOME FR OM THE HOUSE PROPERTY IN THIS ITA NOS. 100 TO 105/ALLD./2012 C.O. NOS. 10 TO 15/ALLD./2012 4 CASE. THE ASSESSING OFFICER ACCORDINGLY REOPENED TH E ASSESSMENT U/S. 147 OF THE IT ACT. ASSESSMENT WAS COMPLETED ON TOTAL INCOME AT RS .5,23,284/- ON 30.12.2007 VIDE ORDER U/S. 143(3)/148 MENTIONING THEREIN THAT THE INVOLVED AREA OF THE GROUND FLOOR AND FIRST FLOOR WAS 9470 SQ. FT. TAKING THE R ENT AT THE RATE OF RS.6.66 PER SQ. FT. AS PER PORTION OF THE SAME PROPERTY LET OUT TO LIC OF INDIA, THE FAIR RENTAL VALUE OF THE SAID PROPERTY WAS WORKED OUT AT RS.7,56,842/-. AFTER DEDUCTING THE MUNICIPAL TAXES AND STANDARD DEDUCTION AT THE RATE OF 30%, TH E VALUE OF THE PROPERTY WAS TAKEN AT RS.5,29,548/- AND FINALLY THE ASSESSMENT W AS COMPLETED AT RS.5,23,284/-. THE LD. CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE . THE ASSESSEE FILED APPEAL BEFORE THE ITAT, ALLAHABAD BENCH WHO RESTORED THE I SSUE TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE MATTER DE NOVO. THE MATTER WAS TAKEN UP BY THE ASSESSING OFFICER FOR PASSING THE ORDER AFRESH AND THE ASSESSEE WAS ASKED TO SUBSTANTIATE HIS CASE BY PRODUCING BILLS AND VOUCHE RS. THE ASSESSEE IN REPLY BEFORE THE ASSESSING OFFICER SUBMITTED THAT M/S. CHILDREN ACADEMY HAS NOT MADE ANY PAYMENT TOWARDS RENT TO THE ASSESSEE COMPANY DURING THE PERIOD IN QUESTION AND A DISPUTE BETWEEN THE MANAGEMENT OF THE ASSESSEE AS W ELL AS SOCIETY WAS CONTINUED AND COULD NOT BE RESOLVED. LATER ON COMPROMISE WAS ARRIVED AT BETWEEN THE ASSESSEE COMPANY AND CHILDREN ACADEMY SOCIETY AND R ENT DEED WAS EXECUTED AND AREA WISE RENT HAS BEEN WORKED OUT OF THE PREMISES AND TOTAL AMOUNT WAS PAID BY THE SOCIETY TO THE ASSESSEE COMPANY SIMULTANEOUSLY DURING THE FINANCIAL YEAR 2008- ITA NOS. 100 TO 105/ALLD./2012 C.O. NOS. 10 TO 15/ALLD./2012 5 09. THE ASSESSING OFFICER DID NOT BELIEVE THE RENT/ LEASE AGREEMENT DATED 22.10.1996 BECAUSE THE STAMP PAPER WAS PURCHASED ON 23.12.1996. THE ASSESSING OFFICER ALSO OBSERVED THAT THE ASSESSEE-COMPANY IS THE OWNER OF THE PROPERTY IN QUESTION AND HAS EVERY RIGHT OVER THE SAME. THE ASS ESSEE PLEADED BEFORE THE ASSESSING OFFICER THAT THE INVESTMENT IN CONSTRUCTI ON HAS BEEN MADE BY CHILDREN ACADEMY SOCIETY WHICH IS SHOWN IN THEIR BALANCE SHE ET. THE ASSESSEE OWNED THE LAND WHEREAS THE SOCIETY HAS CONSTRUCTED THE STRUCT URE, WHICH COULD BE VERIFIED FROM THE RECORD. NO RENT WAS PAID DURING THE YEAR U NDER CONSIDERATION. THE LEASE DATED 22.10.1996 WAS SUBMITTED DURING THE APPELLATE PROCEEDINGS AND WAS GENUINE. THE PROPOSED RATE OF RS.6.66 PER SQ. FT. IS HIGHLY UNREASONABLE AND AS PER MUNICIPAL VALUATION OF SCHOOL BUILDING WHEN THE ANN UAL LETTING VALUE IS NIL, THEREFORE, NO AMOUNT SHOULD BE TAXED AS ANNUAL LETT ING VALUE. THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION OF THE ASSESS EE AND A NET TAXABLE INCOME FROM HOUSE PROPERTY WAS HELD AT RS.7,59,094/-. THE ASSES SING OFFICER IN THE ASSESSMENT ORDER STATED AS UNDER : A) FIRST ISSUE IS THAT THE ASSESSEE COMPANY HAS NOT SHOWN HIS RENTAL INCOME FROM 22.10.96 TO 12.06.08 ON WHIC H IT HAS BEEN SAID THAT DUE TO DISPUTE THE DECISION OF LEASE SETTLEMENT WAS DONE BETWEEN THE ASSESSEE COMPANY AND CHILDREN SOCIETY ON 12.06.08 AND ACCORDINGLY THE RENT WAS DECIDED. A CCORDING TO WHICH TOTAL RENT RECEIVED FROM F.Y. 1998-99 TO 2 007-08 WAS WORKED OUT AT RS. 442020/- TOTAL RENT DURING THE YE AR WAS WORKED OUT AT RS. 44200/- OF HOUSE PROPERTY HAVING TOTAL AREA 8840 SQ/FT @ RS. 5 PER SQ.FT. WHEREAS THE ASSESSEE SHOULD SHOW THE EXPECTED RENT DURING THE YEAR WHICH THE ASSESSE E COMPANY ITA NOS. 100 TO 105/ALLD./2012 C.O. NOS. 10 TO 15/ALLD./2012 6 HAS NOT SHOWN. ELABORATE DISCUSSION HAS ALREADY BEE N DONE IN PARA 8.9 OF THIS ORDER. SO THE CALCULATION OF THE R ENT IS DONE IN THE FOLLOWING WAY : THE ASSESSEE HAS ALSO FAILED TO SUBSTANTIATE HIS CA SE BY PROVIDING FRESH EVIDENCES REGARDING THE RATE APPLIE D AS PER LIC BUILDING. ON COMPARISON OF RATE ASSESSEE VIDE HIS R EPLY DATED 29.12.2009. SIMPLY STATED THAT HIS BUILDING CANNOT BE COMPARED WITH A BUILDING OF HIGH CLASS CONSTRUCTION WHEREIN THE STATE BANK OF INDIA IS SITUATED. HE ALSO STATED THAT THE RECEIVABLE RENT FOR A BUILDING IS TO BE DETERMINED ON THE BASIS OF ANNUAL LETTING VALUE DETERMINED BY THE MUNICIPAL CORPORATION FOR A NY BUILDING. IN THIS CASE THE ANNUAL LETTING VALUE OF THE BUILDING OWNED BY THE CHILDREN ACADEMY HAS BEEN DETERMINED B Y THE MUNICIPAL CORPORATION AT RS. NIL AS THERE IS SCHOOL BUILDING THERE IS NOT HOUSE TAX OR WATER TAX PAYABLE AS IT I S EXEMPT FROM MUNICIPAL TAX. HERE IT IS PERTINENT TO MENTION THAT SCHOOL IS FUNC TIONING BY M/S CHILDREN ACADEMY SOCIETY IN THE BUILDING OF ASSESSE E COMPANY AND NOT IN IT OWN BUILDING. IN VIEW OF THE ABOVE ME NTIONED FACTS AND DISCUSSION THE CONTENTION OF THE ASSESSEE COMPA NY THAT THE OWNER OF THE BUILDING CONSTRUCTED AND OCCUPIED BY S OCIETY ON THE LAND OF ASSESSEE COMPANY, IS THE SOCIETY ITSELF , HAS GOT NO FORCE IN IT FURTHER, THERE IS NO SUCH CLAUSE IN THE LEASE DEED AS CLAIMED BY THE ASSESSEE, THAT GROUND FLOOR, FIRST F LOOR AND LANDS APPURTENANT THERETO OF THE SAID PROPERTY WAS ALLOWE D TO BE UTILIZED BY THE SOCIETY WITHOUT ANY PAYMENT OF RENT . HENCE, IN VIEW OF THE ABOVE MENTIONED FACTS AND CIRCUMSTANCES , THE NATIONAL INCOME CORRESPONDING TO THE MARKET RENT OF THE PROPERTY IS ASSESSABLE U/S 22 OF THE I.T. ACT IN TH E HANDED OF THE ASSESSEE COMPANY. DURING THE YEAR UNDER CONSIDERATION M/S CHILDREN AC ADEMY SOCIETY HAS OCCUPIED THE GROUND FLOOR (4734.9 SQ.FT ), FIRST FLOOR (4734.9 SQ.FT) AS ADMITTED BY AND LAND APPURTENANT (4105.1 SQ. FT) THERETO OF THE SAID PROPERTY (TOTAL AREA 13575 SQ.FT) AS ADMITTED BY THE DIRECTOR OF THE COMPANY SRI MAHIPAL DAS GUPTA IN HIS STATEMENT ON 30.11.2007 AND ALSO HIS R EPLY DATED 24.10.2009 RENT RECEIVED DURING THE A.Y. IS NIL. MU NICIPAL RENT ITA NOS. 100 TO 105/ALLD./2012 C.O. NOS. 10 TO 15/ALLD./2012 7 IS ALSO RS. 2300/- ANNUALLY. ON THE ABOVE BASIS, DU RING THE YEAR RENTED AREA IS 13575 SQ.FT AND TAKING THE RENT @ 6. 66 PER SQ.FT., THE FAIR RENTAL VALUE FO THE PROPERTY COMES TO RS. 1084914/- WHICH IS THE HIGHEST OF ALL THE THREE ANNUAL RENTS MENTIONED ABOVE. HENCE THE INCOME FROM THE HOUSE PROPERTY FOR THE YEAR UNDER CONSIDERATION IS CALCULATED AS UNDER : TOTAL HOUSE PROPERTY INCOME DURING A.Y. 2003-04 RS. 1084914/- LESS : I) MUNICIPAL TAXES 345/- II) STANDARD DEDUCTION @ 30% 325474/- RS. 325819/- RS. 759094/- 6.1 IT MAY ALSO BE ADDED HERE THAT THE ASSESSING OF FICER ALSO CONSIDERED THE OTHER ISSUES OF INVESTMENT SHOWN IN THE PROPERTY IN QUESTION AND SEPARATELY HELD THAT THE ASSESSEE HAS MADE INVESTMENT IN THE HOUSE PROPERTY WHICH REMAINED UNEXPLAINED INVESTMENT U/S. 69 OF THE IT ACT AND AC CORDINGLY MADE SEPARATE ADDITION OF RS.16,58,070/-. THE LD. CIT(A) ALSO CON SIDERED THIS ISSUE SEPARATELY AND CONSIDERING THE MATERIAL ON RECORD AND THAT INV ESTMENT IN CONSTRUCTION OF BUILDING WAS MADE BY CHILDREN ACADEMY SOCIETY, DELE TED THE ADDITION. THE REVENUE IS NOT IN APPEAL ON THE ISSUE OF UNEXPLAINE D INVESTMENT. 7. THE ASSESSEE CHALLENGED THE ORDER OF THE ASSESSI NG OFFICER WITH REGARD TO HOLDING OF TAXABLE INCOME FROM HOUSE PROPERTY IN A SUM OF RS.7,59,094/- BEFORE THE LD. CIT(A) AND SUBMITTED THAT OWNER OF THE PROP ERTY IS LIABLE FOR ASSESSED INCOME U/S. 22 OF THE IT ACT AND SINCE THE CONSTRUC TION IS RAISED BY CHILDREN ITA NOS. 100 TO 105/ALLD./2012 C.O. NOS. 10 TO 15/ALLD./2012 8 ACADEMY SOCIETY, THEREFORE, THEY ARE OWNER OF THE P ROPERTY AND OWNER CAN NEVER BE TREATED AS TENANT. THEREFORE, THE ASSESSING OFFI CER WAS NOT JUSTIFIED IN DECIDING THE ISSUE AGAINST THE ASSESSEE. THE ANNUAL LETTING VALUE AS DESCRIBED IN MUNICIPAL CORPORATION LAW FOR THE BUILDING OWNED BY THE CHARI TABLE INSTITUTIONS IS NIL. THEREFORE, THE ORDER OF THE ASSESSING OFFICER IS NO T JUSTIFIED. THE ASSESSEE ALSO FILED SUBMISSIONS BEFORE THE LD. CIT(A), WHICH IS R EPRODUCED IN THE APPELLATE ORDER AND THE SAME IS REPRODUCED AS UNDER : 6. AUTHORIZED REPRESENTATIVE DURING THE COURSE OF APPELLATE PROCEEDING SUBMITTED AS UNDER : A) (I) THAT ALL THE ASSESSMENTS HAS BEEN COMPLETED ON THE SAME LINE, DETAIL AS UNDER : SL. NO. PARTICULAR ITAY 00-01 ITAY 01-02 ITAY 02-03 ITAY 03-04 ITAY 04-05 ITAY 05-06 1. INCOME SHOWN BY ASSESSEE 4440 -26200 -38840 -42151 NIL -6264 2. INCOME FROM HOUSE PROPERTY 529525 529525 494200 759094 759094 759094 3. UNEXPLAINED INVESTMENT + ELECTRIC FITTING 238787 95000 143610 645300 708724 1658070 (II) THAT THIS ASSESSMENT WAS COMPLETED IN SET ASID E MATTER WITH DIRECTION TO COMPLETE DE NOVO BY THE THE HONORABLE INCOME TAX APPELLATE TRIBUNAL IN ITA NO. 101 TO 106 (ALLD.) OF 2008 RELATING TO ITAY 2000-01, 01-02, 02-03, 03-04, 04-0 5, 05-06. B) (I) THAT THE ORIGINAL ASSESSMENT HAS BEEN COMPLETED U/S 148 / 143(3) IF THE I.T. ACT, 1961 ON 31.102.2007 DETAIL AS UNDER : ITA NOS. 100 TO 105/ALLD./2012 C.O. NOS. 10 TO 15/ALLD./2012 9 SL. NO. PARTICULAR ITAY 00-01 ITAY 01-02 ITAY 02-03 ITAY 03-04 ITAY 04-05 ITAY 05-06 1. INCOME SHOWN BY ASSESSEE 4440 -26200 -38840 -42151 NIL -6264 2. INCOME FROM HOUSE PROPERTY 283556 283556 264653 529548 529548 529548 TOTAL 287996 257356 225813 487397 529548 523234 (II) THAT THE CIT (A) HAS CONFIRMED THE ASSESSMENT ORDER SET FORTH ABOVE AND THE HONBLE INCOME TAX APPELLATE TR IBUNAL SET ASIDE THE ORDER TO PASS DE NOVO. C) (I) THAT THE APPELLANT HAD PURCHASED THE HOUSER PRO PERTY FROM LATE KAILASH NATH SINGH & OTHER ON 29.12.93 VIDE RE GISTERED PURCHASE DEED EXECUTED ON THE SAME DAY IN THE REGIS TRAR OFFICE, VARANASI. (II) THAT PROPERTY COMPRISED OF OPEN LAND, PART OF CONSTRUCTED PORTION AND PARTLY ONLY CONSTRUCTED PORTION IN FIRS T / SECOND FLOOR, DETAIL AS UNDER : TOTAL LAND OPEN AND COVERED 8840 SFT. CONSTRUCTED PORTION 1468 SFT. GROUND FLOOR CONSTRUCTED PORTION 2953 SFT. FIRST FLOOR CONSTRUCTED PORTION 3216 WITHOUT LAND ON 1 ST FLOOR 7. AUTHORISED REPRESENTATIVE FURTHER SUBMITTED THAT AS UNDER : A) THAT THE ASSESSEE HAS PURCHASED THE HOUSE PROPERTY ON 29 TH DAY OF DECEMBER, 1993 FROM KAILASH SINGH AND THIS PURCH ASE DEED HAS BEEN REGISTERED IN THE OFFICE OF REGISTRAR, VAR ANASI ON 29.12.1993. THE DESCRIPTION OF THE PROPERTY PURCHAS ED BY THE ASSESSEE HAS BEEN MENTIONED IN THE PURCHASE DEED AN D QUOTED HEREUNDER : DESCRIPTION OF THE PROPERTY HEREBY SOLD ITA NOS. 100 TO 105/ALLD./2012 C.O. NOS. 10 TO 15/ALLD./2012 10 ONE PUCCA BRICK BUILT HOUSE BEING PORTIONS OF PREMI SES NO. B. 21/195A, B. 21/196A, AND B. 21/197B, IN EXISTENCE O N THE SPOT AS SINGLE UNIT IN MOHALLA KAMACHHA, VARANASI CITY H AVING ITS PASSAGE FOR INGRESS AND EGRESS FROM WEST TO EAST TH EN A TURN TOWARDS BOTH HAVING TOTAL MEASUREMENT OF 8840 SQ.FT AND THE COVERED AREA IN THE FIRST FLOOR IS 2953 SQ FT. I.E. COVERED AREA IS 4421 SQ.FT. AND OPEN AND ATTACHED THERETO IS 8840 S Q.FT FOUNDED AS BELOW : EAST : HOUSE OF ASLAM AND OTHERS WEST : MAIN ROAD NORTH : HOUSE OF CHADDA SOUTH : PREMISES NO. B. 21/195A, B. 21/196A AND B. 21/197B. B) (A) THAT THE PART OF THE PROPERTY I.E. 8840 SQ.FT. OF TOTAL AREA HAVING COVERED AREA IN THE GROUND FLOOR 1468 SQ.FT. WAS GIVEN TO CHILDREN ACADEMY SOCIETY FOR RUNNING EDUCATIONAL INSTITUTION ON THIS LAND. THEY WERE ALLOWED TO UTIL IZE THE LAND FOR THE PURPOSE OF EDUCATIONAL ACTIVITY AS WELL AS THEY WERE ALSO ALLOWED FOR CONSTRUCTION ON THE OPEN LAND. IN FACT, THE PROPERTY WAS A HOUSE PROPERTY AS IT HAS THE PREMISES NUMBER ALLOTTED BY THE VARANASI MUNICIPAL CORPORATION AS MENTIONED ABO VE. PART OF THE LEASE AGREEMENT DATED 22.10.96 IS QUOTED HER EUNDER : I) THAT IN VIEW OF THE SUBJECT OF THE SOCIETY WHICH TH E SOCIETY TO RENDER THE EDUCATION AMONGST THE CHILDRE N THE FIRST PARTY HAS DECIDED TO LEASE THEM THE BUILDING. II) THAT THE SECOND PARTY HAS A RIGHT TO CONSTRUCT THE CLASS ROOM ON THE SECOND FLOOR OF THE SAID BUILDING WHENE VER THEY REQUIRES OUT OF THEIR OWN FUNDS AND THE CONSTR UCTED PORTION SHALL BE OWNED BY THE SOCIETY. III) THAT THE FIRST PARTY SHALL NEVER BE THE OWNER OF AN Y PART OF THE CONSTRUCTED PORTION OF THE SCHOOL BUILDING CONSTRUCTED WITH THE FUND OF THE SECOND PARTY. C) HAT IN VIEW OF THIS LEASE AGREEMENT THE ASSESSEE HA S TRANSFERRED THE PROPERTY TO M/S CHILDREN ACADEMY TO IMPART EDUC ATION I.E. FOR CHARITABLE PURPOSES AND IT AMOUNTS TO CONSTRICT IVE ITA NOS. 100 TO 105/ALLD./2012 C.O. NOS. 10 TO 15/ALLD./2012 11 POSSESSION OF THE PROPERTY BY M/S CHILDREN ACADEMY. THE MENTION OF HOUSE NO. IN LEASE AGREEMENT IS IMMATERI AL DUE TO CONSTRUCTIVE POSSESSION. 7.1 THE LD. CIT(A), CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE LIGHT OF THE FINDINGS OF THE ASSESSING OFFICER CONFIRMED THE ORDER OF THE ASSESSING OFFICER WITH REGARD TO CALCULATION OF ANNUAL LETTING VALUE U/S. 22/23 OF THE IT ACT. HOWEVER, THE ASSESSING OFFICER WAS DIRECTED TO CALC ULATE THE RENTAL INCOME AT THE RATE OF RS.1.50 PER SQ. FT. AND ALLOWED THE APPEAL OF THE ASSESSEE PARTLY. FINDINGS OF THE LD. CIT(A) IN THE APPELLATE ORDER ARE REPRODUCE D AS UNDER : 5. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CAS E, AS REGARD THE RENTAL INCOME, I AM OF THE OPINION THAT ASSESSI NG OFFICER COULD NOT MAKE PROPER CONCLUSION ON THE ISSUE OF RENTAL I NCOME. IN FACT THE PORTION LET OUT BY THE ASSESSEE TO CHILDREN ACA DEMY COMPRISES OF OPEN LAND AND COVERED AREA ON GROUND FLOOR MEASU RING 1468 SQ. FEET. THE TOTAL LAND WAS 8840 SQ. FEET. AT THE TIME OF LET OUT THE ASSESSEE SHOWN INVESTMENT OF RS. 400000/- AS EVIDEN T FROM THE BALANCE SHEET AS ON 31.03.95 SUBMITTED BY THE ASSES SEE DURING THE COURSE OF APPELLATE PROCEEDINGS. ASSESSING OFFICER SHOULD HAVE COMPUTED THE RENTAL I NCOME FOR GROUND FLOOR BUILDING MEASURING 1468 SQ.FEET AND RE MAINING OPEN LAND (8840 -1468) 7372 SQ. FEET. THE PORTION LET OU T BY THE ASSESSEE TO CHILDREN ACADEMY SOCIETY IS SITUATED AT THE BACK SIDE OF LIC BUILDING SITUATED ON THE FRONT SIDE (ROAD SIDE). AS SESSING OFFICER SHOULD HAVE KEPT IN MIND THIS FACT WHILE ARRIVING A T THE NOTIONAL INCOME. AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THE CHART SHOWING RATE OF RENT FOR LIC AS PER DEED AT PREVAIL ING RATE FOR RELEVANT ASSESSMENT YEAR WHICH IS AS UNDER : ASSESSMENT YEAR RATE ITA NOS. 100 TO 105/ALLD./2012 C.O. NOS. 10 TO 15/ALLD./2012 12 2000-01 4.62/- PER SQ. FEET 2001-02 5.31/- PER SQ. FEET 2002-03 6.00/- PER SQ. FEET 2003-04 6.00/- PER SQ. FEET 2004-05 6.00/- PER SQ. FEET THE RELEVANT RATE SHOULD HAVE BEEN APPLIED BY THE A SSESSING OFFICER FOR RELEVANT ASSESSMENT YEARS. ASSESSING OF FICER COMPLETELY IGNORED THE FACT ABOUT THE PROPERTY LET OUT WHICH W AS SITUATED AT THE BACK PORTION AND COMMERCIAL RENTAL VALUE MUST B E LOWER THAN THE COMMERCIAL RENTAL VALUE OF FRONT SIDE. ASSESSIN G OFFICER AT THIS STATE FAILED TO APPRECIATE THIS PARTICULARS FACT, W HICH RESULTED IN DENIAL OF NATURAL JUSTICE TO THE ASSESSEE. CONSIDERING THE WHOLE SCENARIO OF THE CASE AND KEEP ING IN MIND THE LOCATION OF THE PROPERTY FLAT RATE OF RS. 1.50/ - FOR ENTIRE LAND MEASURING 8840 SQ.FEET INCLUDING THE GROUND FLOOR C ONSTRUCTED PORTION OF 1468 SQ. FEET FOR A.Y. 2000-01 TO 2005-0 6 WOULD BE ADEQUATE FOR THE CALCULATION OF RENTAL INCOME. ASSE SSING OFFICER ACCORDING DIRECTED TO CALCULATED THE RENTAL INCOME AT THE RATE OF RS. 1.50/- PER SQ. FEET FOR 8840 SQ.FEET LAND INCLU DING THE CONSTRUCTION PORTION OF 1468 SQ.FEET. THEREFORE, AD DITION ON ACCOUNT OF RENTAL INCOME IS RESTRICTED TO THIS EFFE CT. FURTHER ASSESSEE SUBMITTED THAT DUE TO NATURAL DISP UTE THE RENT WAS NOT PAID BY THE LESSEE AND DISPUTE OF RENT WAS SETT LED BY THE ASSESSEE AND CHILDREN ACADEMY SOCIETY VIDE AGREEMEN T DATED 12.06.2008. ALL THE RENT WAS RECEIVED BY THE ASSESS EE AS PER THE RENT SETTLEMENT DEED, ASSESSING OFFICER SHOULD KEEP IN MIND THIS FACT WHILE GIVING EFFECT TO THIS ORDER. THE REVENUE AS WELL AS THE ASSESSEE HAVE CHALLENGED THE FINDINGS OF THE LD. CIT(A) ON THE GROUNDS MENTIONED ABOVE. ITA NOS. 100 TO 105/ALLD./2012 C.O. NOS. 10 TO 15/ALLD./2012 13 8. THE LD. DR RELIED UPON THE ORDER OF THE ASSESSIN G OFFICER AND SUBMITTED THAT THE ASSESSEE WAS OWNER OF THE LAND AS WELL AS PART OF THE STRUCTURE. THEREFORE, THE ASSESSEE IS LIABLE FOR TAX IN RESPECT OF HOUSE PROP ERTY ACCORDING TO SECTION 22 AND 23 OF THE IT ACT. THE ASSESSING OFFICER ON THE BASI S OF THE RENT @ 6.66 PER SQ. FT. AS PER PORTION OF THE SAME PROPERTY LET OUT TO LIC OF INDIA HAS CORRECTLY VALUED THE FAIR RENTAL VALUE OF THE PROPERTY IN QUESTION. THE ASSESSING OFFICER RIGHTLY NOTED THAT THE LEASE AGREEMENT DATED 22.10.1996 WAS PREPA RED ON THE STAMP PAPER OF DATED 23.12.1996. IT IS DIFFICULT TO BELIEVE THAT N O RENT WOULD BE FIXED AT THE TIME OF LETTING OUT OF THE PROPERTY. THE LD. DR RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF D.L.F. UNITED LTD. VS. CI T, 149 ITR 24, IN WHICH IT WAS HELD THE ASSESSEE COMPANY, WHICH CARRIED ON THE BUSINESS OF COLONIZATION, BUILT A SCHOOL ON A PLOT OF LAND IN O NE OF THE COLONIES DEVELOPED BY IT. ITS BOARD OF DIRECTORS CREATED A T RUST AND THE ASSESSEE GAVE THE LAND AND BUILDING OF THE SCHOOL TO THE TRU ST ON A PERPETUAL LEASE OF ONE RUPEE PER YEAR. THE ITO MADE AN ESTIMA TE OF RS.5,000 AS THE NET ANNUAL VALUE OF THE PROPERTY AND BROUGHT TH E AMOUNT TO TAX IN THE HANDS OF THE ASSESSEE UNDER S. 22 OF THE I.T. A CT, 1961. THE AAC DELETED THE AMOUNT BUT, ON FURTHER APPEAL, THE TRIB UNAL RESTORED THE ORDER OF THE ITO. THE TRIBUNAL FOUND : (A) THAT THE PROCESS OF LETTING OUT WAS ONE OF EXPLOITATION AND NOT ONE OF DIVESTIN G ONESELF OF ALL RIGHTS IN THE PROPERTY; (B) THAT IT WAS OPEN TO THE ASSESSEE TO SELL THE PROPERTY SUBJECT TO THE LESSEES RIGHTS; (C) THAT T HE SUM OF ONE RUPEE WAS IN THE NATURE OF INCOME DERIVED FROM THE PROPER TY BY THE ASSESSEE AS OWNER; (D) THAT THE LEASE, THOUGH PERPETUAL, WAS A RIGHT SUBORDINATE TO OWNERSHIP; AND (E) THAT THE LEASE DE ED ITSELF CONTAINED A PROVISION WHEREBY THE ASSESSEE COULD RE-ENTER. TH E TRIBUNAL ALSO HELD THAT THE GRANT OF PERPETUAL LEASE OF THE SCHOO L BUILDING TO THE ITA NOS. 100 TO 105/ALLD./2012 C.O. NOS. 10 TO 15/ALLD./2012 14 TRUST WHICH RAN THE SCHOOL COULD NOT BE DESCRIBED A S INCIDENTAL TO THE ASSESSEES BUSINESS OF COLONIZATION. ON A REFERENCE : HELD, THAT THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE SUM OF RS.5,000 COULD BE ASSESSED IN THE HANDS OF THE ASSE SSEE-COMPANY AS ITS INCOME FROM HOUSE PROPERTY BY WAY OF ANNUAL LET TING VALUE OF THE PROPERTY. HELD ALSO, THAT THE TRIBUNAL WAS RIGHT IN ITS CONCLUSION THAT A PERPETUAL LEASE OF THE SCHOOL BUILDING TO THE TRUST WHICH RAN THE SCHOOL, COULD NOT BE DESCRIBED AS INCIDENTAL TO THE ASSESSEES BUSINESS OF COLONIZATION. 9. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THA T THE ASSESSEE HAS PURCHASED PROPERTY IN QUESTION AND ASSESSEE HAS LET OUT ONLY LAND AND NOT THE BUILDING. THE CONSTRUCTION IS RAISED BY THE SOCIETY THROUGH THEIR OWN FUNDS. THEREFORE, THE SOCIETY WAS OWNER OF THE SUPERSTRUCTURE FOR WHICH N O ANNUAL LETTING VALUE SHALL HAVE TO BE DETERMINED. THE STRUCTURE DOES NOT BELON G TO THE ASSESSEE. HE HAS REFERRED TO P.B.-133, WHICH IS LEASE AGREEMENT DATE D 22.10.1996 AND P.B.-135, WHICH IS SETTLEMENT AGREEMENT OF RENT DATED 12.06.2 008 AND SUBMITTED THAT SINCE NO RENT WAS SETTLED EARLIER, THEREFORE, THE PROMISE WA S MADE AND RENT PER SQ. FT. PER ANNUM THROUGH THIS SETTLEMENT OF RENT WAS FIXED AT RS.5/- PER SQ. FT. PER ANNUM FROM F.Y. 2001-02 TO 2005-06. PRIOR TO THAT RATE WA S RS.3/- PER SQ. FT. PER ANNUM. IN ALL THE CROSS OBJECTIONS, THE ASSESSEE HAS TAKEN RATE OF RS.5/- PER SQ. FT. IN GROUND NO. 4, BUT IN THE CROSS OBJECTION NO. 10/2012, RS. 3/- PER SQ. FT. IS CLAIMED ON GROUND NO. 4. HE HAS SUBMITTED THAT THE ASSESSEE ST ICK TO THE RATE OF RENT AS ITA NOS. 100 TO 105/ALLD./2012 C.O. NOS. 10 TO 15/ALLD./2012 15 PROMISED ON SETTLEMENT DEED DATED 12.06.2008. HE HA S RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT REPORTED IN 330 ITR 38, BU T NO RELEVANT CASE LAW WAS FOUND ON THE ABOVE SAID ITR. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE FINDINGS OF THE AUTHORITIES BELOW AND CONSIDERED THE MATERIAL AVAIL ABLE ON RECORD. SECTION 22 OF THE IT ACT PROVIDES AS UNDER : THE ANNUAL VALUE OF PROPERTY CONSISTING OF ANY BUIL DINGS OR LANDS APPURTENANT THERETO OF WHICH THE ASSESSEE IS THE OWNER OTHER THAN SUCH PORTIONS OF SUCH PROPERTY AS HE MAY OCCUP Y FOR THE PURPOSES OF ANY BUSINESS OR PROFESSION CARRIED ON B Y HIM THE PROFITS OF WHICH ARE CHARGEABLE TO INCOME-TAX, SHALL BE CHARGE ABLE TO INCOME- TAX UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. 10.1 SECTION 23 OF THE IT ACT PROVIDES AS UNDER : (1) FOR THE PURPOSES OF SECTION 22, THE ANNUAL VALU E 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 OR ANY PART OF THE PREVIOUS YEAR AND OWING TO SUCH VACANCY THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN ITA NOS. 100 TO 105/ALLD./2012 C.O. NOS. 10 TO 15/ALLD./2012 16 RESPECT THEREOF IS LESS THAN THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RECEIVED OR RECEIVABLE : PROVIDED THAT THE TAXES LEVIED BY ANY LOCAL AUTHORI TY IN RESPECT OF THE PROPERTY SHALL BE DEDUCTED (IRRESPECTIVE OF THE PRE VIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH TAXES WAS INCURRED BY THE OWNER ACCORDING TO THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY HIM) IN DETERMINING THE ANNUAL VALUE OF THE PROPERTY OF THAT PREVIOUS Y EAR IN WHICH SUCH TAXES ARE ACTUALLY PAID BY HIM. EXPLANATION. : FOR THE PURPOSES OF CLAUSE (B) OR CLAUSE (C) OF T HIS SUB- SECTION THE AMOUNT OF ACTUAL RENT RECEIVED OR RECEI VABLE BY THE OWNER SHALL NOT INCLUDE, SUBJECT TO SUCH RULES AS MAY BE MADE IN THIS BEHALF, THE AMOUNT OF RENT WHICH THE OWNER CANNOT REALISE. (2) WHERE THE PROPERTY CONSISTS OF A HOUSE OR PART OF A HOUSE WHICH (A) IS IN THE OCCUPATION OF THE OWNER FOR THE PURPO SES OF HIS OWN RESIDENCE; OR (B) CANNOT ACTUALLY BE OCCUPIED BY THE OWNER BY REA SON OF THE FACT THAT OWING TO HIS EMPLOYMENT, BUSINESS OR PROFESSIO N CARRIED ON AT ANY OTHER PLACE, HE HAS TO RESIDE AT THAT OTHER PLA CE IN A BUILDING NOT BELONGING TO HIM, THE ANNUAL VALUE OF SUCH HOUSE OR PART OF THE HOUSE SHALL BE TAKEN TO BE NIL. (3) THE PROVISIONS OF SUB-SECTION (2) SHALL NOT APP LY IF (A) THE HOUSE OR PART OF THE HOUSE IS ACTUALLY LET DURING THE WHOLE OR ANY PART OF THE PREVIOUS YEAR; OR (B) ANY OTHER BENEFIT THEREFROM IS DERIVED BY THE O WNER. (4) WHERE THE PROPERTY REFERRED TO IN SUB-SECTION ( 2) CONSISTS OF MORE THAN ONE HOUSE (A) THE PROVISIONS OF THAT SUB-SECTION SHALL APPLY ONLY IN RESPECT OF ONE OF SUCH HOUSES, WHICH THE ASSESSEE MAY, AT HIS OPTI ON, SPECIFY IN THIS BEHALF; ITA NOS. 100 TO 105/ALLD./2012 C.O. NOS. 10 TO 15/ALLD./2012 17 (B) THE ANNUAL VALUE OF THE HOUSE OR HOUSES, OTHER THAN THE HOUSE IN RESPECT OF WHICH THE ASSESSEE HAS EXERCISED AN OPTI ON UNDER CLAUSE (A), SHALL BE DETERMINED UNDER SUB-SECTION (1) AS I F SUCH HOUSE OR HOUSES HAD BEEN LET. 10.2 THE LEASE DEED DATED 22.10.1996, COPY OF WHICH IS FILED AT PAGE 133/134 OF THE PAPER BOOK READS AS UNDER : THIS AGREEMENT OF LEASE HAVE BEEN ENTERED INTO BET WEEN M/S. RAM DEI DEVI MANI RAM PVT. LTD. SITUATED AT B-21/19 6, KAMACHHA, VARANASI HEREIN AFTER REFERRED AS THE FIRST PARTY O F THE FIRST PART THROUGH ITS MANAGING DIRECTOR SHRI MAHIPAL DAS GUPT A AND M/S. CHILDREN ACADEMY SOCIETY SITUATED AT B-21/97, KAMAC HHA, VARANASI HEREIN AFTER REFERRED AS THE SECOND PART THROUGH IT S CHAIRMAN SMT. DEVI SAHU, W/O SHRI P FADUUMAN KUMAR SAHU, R/O B. 2 4/190, KASHMIRI GANJ, KHOJWA, VAANASI. WHEREAS THE FIRST PARTY IS OWNER OF THE BUILDING S ITUATED AT B. 21/196, KAMACHHA, VARANASI COMPRISED OF GROUND FLOO R AND FIRST FLOOR. WHEREAS THE SECOND PARTY IS A SOCIETY WITH THE OBJ ECT TO IMPART THE EDUCATION TO THE CHILDREN AND TO FULFILL THE OB JECT REQUIRES A BUILDING ON RENT. WHEREAS THE FIRST PARTY HAVE BEEN AGREED TO LEASE OUT ITS HOUSE PROPERTY SET FORTH ABOVE ON RENT AND THE SECOND PAR TY EXPRESSED ITS DESIRE TO LET IN THE SAID PROPERTY AND BOTH THE PAR TIES AGREED TO THE TERMS AND CONDITIONS OF THIS LEASE DEED DETAIL AS U NDER :- 1. THAT IN VIEW OF THE OBJECT OF THE SOCIETY WHICH THE SOCIETY TO RENDER THE EDUCATION AMONGST THE CHILDREN THE FIRST PARTY HAS DECIDED TO LEASE THEM THE BUILDING. 2. THAT THE SECOND PARTY HAS A RIGHT TO CONSTRUCT THE CLASS ROOM ON THE SECOND FLOOR OF THE SAID BUILDING WHENEVER THEY REQUIRE OUT OF THEIR OWN FUNDS AND THE CONSTRUCTED PORTION SHALL B E OWNED BY THE SOCIETY. ITA NOS. 100 TO 105/ALLD./2012 C.O. NOS. 10 TO 15/ALLD./2012 18 3. THAT THE FIRST PARTY SHALL NEVER BE THE OWNER OF AN Y PART OF THE CONSTRUCTED PORTION OF THE SCHOOL BUILDING CONSTRUC TED WITH THE FUND OF THE SECOND PARTY. IN WITNESS WHEREOF WE THE PARTIES BUT OUR SEAL & S IGNATURE OF THIS LEASE DEED ON 22 ND DAY OF OCTOBER, 1996 AT VARANASI. FOR 1 ST PARTY FOR 2 ND PARTY WITNESS : 1. INDU SINGH D 59/339 B JAI PRAKASH NAGAR SHIV PURVA, VARANASI 2. SUSHMA KUMARI 68,SHIVAJI NAGAR MAHMOORGANJ, VARANASI. 10.3 THE DEED OF SETTLEMENT OF RENT EXECUTED ON 12. 06.2008, COPY OF WHICH IS FILED AT 135 OF THE PAPER BOOK PROVIDES THAT THE AG REEMENT WAS EXECUTED EARLIER ON 22.10.1996 AND AS PER THE LEASE AGREEMENT, IT WAS D ECIDED THAT THE SOCIETY I.E., SECOND PARTY SHALL MAKE PAYMENT OF RENT WITHOUT DIS CLOSING THE RATE EITHER PER MONTH OR PER ANNUM AND THEREBY ANY PAYMENT OF RENT BY THE SOCIETY TO THE ASSESSEE COMPANY COULD NOT BE MADE UPTO 31.03.2008. THE SOCI ETY HAS CONSTRUCTED THE BUILDING FOR THE PURPOSE OF IMPARTING EDUCATION AND MADE EXPENSES AND AFTER NEGOTIATION, RENT WAS FIXED, WHICH WAS FINALIZED AN D THE RATE PER SQ. FT. PER ANNUM FROM F.Y. 1998-99 TO 2000-01 WAS FIXED AT RS.3/- AN D FROM F.Y. 2001-02 TO 2005- 06 WAS FIXED AT RS.5/- PER SQ. FT /PER ANNUM AND FO R F.Y. 2006-07 AND 2007-08, IT ITA NOS. 100 TO 105/ALLD./2012 C.O. NOS. 10 TO 15/ALLD./2012 19 WAS FIXED AT RS.8/- PER SQ. FT. ACCORDINGLY, TOTAL AMOUNT OF RENT OF RS.4,42,020/- WAS PAID BY THE SOCIETY TO THE ASSESSEE THROUGH CHE QUE AND ON WHICH TDS HAS BEEN DEDUCTED. 10.4 CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF ABOVE AGREEMENT IT IS CLEAR THAT THE ASSESSEE COMPANY HAS PURCHASED THE PROPERT Y IN QUESTION AND WAS OWNER OF THE SAME. THERE IS ONE PERSON COMMON IN THE ASSE SSEE COMPANY AS WELL AS IN M/S. CHILDREN ACADEMY SOCIETY, I.E., SHRI MAHIPAL D AS GUPTA WHO IS MANAGING DIRECTOR OF THE ASSESSEE COMPANY AND ALSO SECRETARY OF CHILDREN ACADEMY SOCIETY. THUS, THE MAIN PERSON IS COMMON IN ASSESSEE COMPANY AS WELL AS IN THE SOCIETY. THE LEASE AGREEMENT DATED 22.10.1996 IS PREPARED ON THE STAMP PAPER DATED 23.12.1996, WHICH IS INHERENTLY IMPOSSIBLE. THIS AM BIGUITY HAS NOT BEEN EXPLAINED BY THE ASSESSEE AT ALL TO THE SATISFACTION OF THE A .O. ANYHOW, THE LEASE DEED DATED 22.10.1996 REPRODUCED ABOVE, WOULD CLEARLY PROVE TH AT THE ASSESSEE COMPANY BEING THE FIRST PARTY WAS SHOWN AS OWNER OF THE BUI LDING IN QUESTION WHICH COMPRISED OF LAND, GROUND FLOOR AND FIRST FLOOR. TH E LD. CIT(A) IN HIS FINDINGS HAS ALSO SPECIFICALLY FOUND THAT THAT AT THE TIME OF LE TTING OUT OF THE PROPERTY IN QUESTION, THE ASSESSEE HAS SHOWN INVESTMENT OF RS.4 ,00,000/- AS IS EVIDENCE FROM THE BALANCE SHEET AS ON 31.03.1995 SUBMITTED BY THE ASSESSEE COMPANY DURING THE ITA NOS. 100 TO 105/ALLD./2012 C.O. NOS. 10 TO 15/ALLD./2012 20 COURSE OF APPELLATE PROCEEDINGS. THIS FACT IS NOT D ISPUTED BY THE ASSESSEE. THUS, THE ASSESSEE COMPANY IS NOT ONLY THE OWNER OF THE LAND IN QUESTION BUT ALSO CONSTRUCTED GROUND & FIRST FLOOR AT THE TIME OF LETTING OUT THE PROPERTY TO THE CHILDREN ACADEMY SOCIETY. THE ABOVE CONSTRUCTED PROPERTY IN QUESTION WAS LET OUT BY THE ASSESSEE COMPANY TO THE SOCIETY SUBJECT TO RENT. FURTHER RIG HTS WERE GIVEN TO THE SOCIETY TO CONSTRUCT CLASSROOMS ON SECOND FLOOR AT THEIR OWN F UNDS. BUT SURPRISINGLY, NO RENT WAS DISCLOSED IN THIS LEASE AGREEMENT WITHOUT ANY R EASONS. IT IS DIFFICULT TO BELIEVE THAT WHEN PROPERTY WAS LET OUT BY THE OWNER TO THE TENANT, HE WOULD NOT FIX THE RENT FOR USE AND OCCUPATION OF THE TENANTED PROPERTY DES PITE EXECUTING THE LEASE DEED IN WRITING. THESE FACTS AND THE DETAILS NOTED IN THE L EASE DEED AND SETTLEMENT DEED WOULD CLEARLY PROVE THAT THE ASSESSEE WAS OWNER OF THE LAND ALONG WITH GROUND AND FIRST FLOOR OF THE BUILDING IN QUESTION AND THE ASS ESSEE HAD NOT CEASED TO BE ITS OWNER AND COULD SUSPEND THE LEASE AS PER LAW. THE A SSESSEE HAS LET OUT THE PROPERTY AS AN OWNER IN HIS FULL CAPACITY, THEREFORE, THE AS SESSEE WAS LIABLE TO BE ASSESSED ON THE BONA FIDE ANNUAL LETTING VALUE OF THE PROPERTY AND THAT THERE IS NOTHING ON RECORD TO SHOW THAT THE OWNERSHIP OF THE PROPERTY H AS BEEN TRANSFERRED TO M/S. CHILDREN ACADEMY SOCIETY AT ALL. THERE IS ALSO NOTH ING ON RECORD THAT THE TENANTED PROPERTY HAS BEEN LET OUT AT CONCESSIONAL RATE ON C ONSIDERATION OF CHARITY OR OTHERWISE. IT IS PURELY A RENT AGREEMENT BETWEEN TH E OWNER AND THE TENANT. AS NOTED ABOVE SINCE SHRI MAHIPAL DAS GUPTA, THE MAIN PERSON OF THE ASSESSEE COMPANY AND ITA NOS. 100 TO 105/ALLD./2012 C.O. NOS. 10 TO 15/ALLD./2012 21 THE SOCIETY IS COMMON, THEREFORE, IT APPEARS THAT C ORRECT FACTS HAVE NOT BEEN BROUGHT ON RECORD JUST TO AVOID PAYMENT OF LEGITIMA TE TAXES. THE EXECUTION OF LEASE DEED DATED 22.10.1996 ON THE STAMP PAPER OF 23.12.1 996 ITSELF CREATE A DOUBT IN THE EXPLANATION OF THE ASSESSEE THAT NO RENT WAS FIXED. ONCE THE PROPERTY IS LET OUT TO THE TENANT, THERE IS BOUND TO BE TERMS AND CONDITIO NS OF THE PAYMENT OF RENT WHICH IS ALSO NOTED IN THE LEASE DEED THAT THE SOCIETY IN ORDER TO ACHIEVE ITS OBJECTS OF IMPARTING EDUCATION REQUIRES A BUILDING ON RENT. TH EREFORE, THERE IS NO REASON TO BELIEVE THAT THE PROPERTY IN QUESTION WAS LET OUT W ITHOUT RENT. SINCE THE MAIN PERSON IS COMMON THEREFORE, THERE APPEARS MANIPULAT ION IN THE EXPLANATION OF THE ASSESSEE AND NOT SHOWING THE CORRECT RENT RECEIVED BY THE ASSESSEE COMPANY FROM THE SOCIETY. IT APPEARS FURTHER THAT DEED OF SETTLE MENT OF RENT WAS EXECUTED ON 12.06.2008 WITHOUT ANY NECESSITY BECAUSE THE PROPER TY WAS ALREADY LET OUT TO THE TENANT SUBJECT TO RENT, THEREFORE, THERE IS NO QUES TION OF SETTLING THE RENT AFTER SEVERAL YEARS. THIS WOULD STRENGTHEN OUR FINDING TH AT THE CORRECT FACTS HAVE NOT BEEN BROUGHT ON RECORD WITH REGARD TO ACTUAL PAYMEN T OF RENT BY THE SOCIETY. IN SUCH CIRCUMSTANCES, THE ASSESSEE BEING THE OWNER OF THE LAND AND BUILDING WAS LIABLE FOR TAX ON ACCOUNT OF INCOME FROM HOUSE PROP ERTY AND ANNUAL LETTING VALUE SHALL HAVE TO BE DETERMINED AS PER SECTION 23(1)(A) OF THE IT ACT BEING THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR. WE MAY ADD HERE THAT THE ASSESSING OFFICER MADE PART OF TH E ADDITION ON ACCOUNT OF ITA NOS. 100 TO 105/ALLD./2012 C.O. NOS. 10 TO 15/ALLD./2012 22 UNEXPLAINED INVESTMENT IN THE PROPERTY IN CASE OF A SSESSEE, BUT SUCH INVESTMENT WAS DELETED BECAUSE THE LD. CIT(A) VERIFIED FROM TH E RECORD OF THE SOCIETY THAT PART INVESTMENT HAVE BEEN MADE BY THEM. SINCE IN THE LEA SE AGREEMENT DATED 22.10.1996 ITSELF, IT IS NOTED THAT AT THE TIME OF LETTING OUT OF THE PROPERTY, THE ASSESSEE WAS OWNER OF THE BUILDING IN QUESTION COMP RISING OF GROUND FLOOR AND FIRST FLOOR AND THE SOCIETY WAS PERMITTED TO CONSTRUCT TH E BUILDING AT SECOND FLOOR, THEREFORE, THE ASSESSEE MAY NOT BE LIABLE FOR ANNUA L LETTING VALUE OF SECOND FLOOR BECAUSE THE ASSESSEE HAS NOT MADE ANY INVESTMENT ON THE SECOND FLOOR. BUT IN RESPECT OF THE LAND, GROUND FLOOR AND FIRST FLOOR, THE ASSESSEE IS LIABLE TO PAY TAX ON THE INCOME FROM HOUSE PROPERTY. THE LD. CIT(A) WAS ALSO NOT JUSTIFIED IN REDUCING THE RATE ADOPTED BY THE ASSESSING OFFICER AT RS.6.6 6 PER SQ. FT. TO RS.1.50 PER SQ. FT. THE DECISION OF HONBLE DELHI HIGH COURT IN THE CAS E OF D.L.F. UNITED LTD. VS. CIT(SUPRA) SQUARELY APPLY IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. THE ASSESSING OFFICER ADOPTED THE RENT RATE OF RS.6.66 PER SQ. FT. AS PER PORTION OF SAME PROPERTY LET OUT TO LIC OF INDIA. THE LD. CIT(A) ON APPRECIATION OF FACTS FOUND THAT THE PORTION LET OUT BY THE ASSESSEE TO THE SOCIETY IS SITUATED AT THE BACK SIDE OF LIC BUILDING AND THIS SHOULD HAVE KEPT IN MIND WHILE AR RIVING AT THE NOTIONAL INCOME. THIS MAY BE THE RELEVANT REASON FOR REDUCING THE RA TE OF RENT AS ADOPTED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER IN THE ASS ESSMENT ORDER HAS SPECIFICALLY NOTED ON VERIFICATION OF THE FACTS THAT M/S. CHILDR EN ACADEMY SOCIETY HAS OCCUPIED ITA NOS. 100 TO 105/ALLD./2012 C.O. NOS. 10 TO 15/ALLD./2012 23 THE TOTAL AREA OF 13575 SQ. FT. IN THE PROPERTY IN QUESTION AT GROUND FLOOR, FIRST FLOOR AND LAND APPURTENANT THERETO AS WAS ADMITTED BY THE DIRECTOR OF ASSESSEE COMPANY, SHRI MAHIPAL DAS GUPTA IN HIS STATEMENT ON 30.11.20 07 AND ALSO IN HIS REPLY DATED 24.10.2009. THIS FACT IS CORROBORATED BY THE DETAIL S NOTED IN THE LEASE AGREEMENT DATED 22.10.1996 BECAUSE AT THE TIME OF LETTING OUT THE PROPERTY THE ASSESSEE WAS OWNER OF THE BUILDING COMPRISING LAND, GROUND FLOOR AND FIRST FLOOR. THE LD. CIT(A) IN HIS FINDINGS HAS CONFIRMED THE DETERMINATION OF ANNUAL LETTING VALUE IN RESPECT OF LAND AND GROUND FLOOR MEASURING 8840 SQ. FT., BUT T HE LD. CIT(A) FAILED TO TAKE INTO CONSIDERATION, THE CONSTRUCTION RAISED AT THE FIRST FLOOR BY THE ASSESSEE COMPANY. ACCORDING TO THE ASSESSING OFFICER, THE AREA OF CON STRUCTION AT FIRST FLOOR WAS 4,734.9 SQ. FT, WHICH FACT IS ADMITTED BY THE MANAG ING DIRECTOR OF THE ASSESSEE COMPANY. HOWEVER, ACCORDING TO THE VERSION OF THE A SSESSEE BEFORE THE LD. CIT(A), THE CONSTRUCTED PORTION AT FIRST FLOOR WAS 2953 SQ. FT. THERE IS NO MUCH DIFFERENCE IN THE SAME AND ONCE IT IS ADMITTED IN THE ORIGINAL LE ASE DEED THAT THE ASSESSEE WAS ALSO OWNER OF THE FIRST FLOOR AT THE TIME OF LETTIN G OF THE PROPERTY AND THE MANAGING DIRECTOR ADMITTED THE CONSTRUCTED PORTION AT FIRST FLOOR IN 4734.97 SQ. FT., THEREFORE, THIS AREA SHOULD NOT HAVE BEEN EXCLUDED BY THE LD.C IT(A) FROM CONSIDERING THE ANNUAL LETTING VALUE OF THE PROPERTY IN QUESTION. T HUS, THE TOTAL AREA HAS BEEN CORRECTLY TAKEN BY THE ASSESSING OFFICER FOR THE PU RPOSE OF COMPUTING THE ANNUAL LETTING VALUE OF THE PROPERTY IN QUESTION WHICH WAS RENTED OUT AS 13575 SQ. FT. ITA NOS. 100 TO 105/ALLD./2012 C.O. NOS. 10 TO 15/ALLD./2012 24 THERE WAS, THUS, NO JUSTIFICATION FOR THE LD. CIT(A ) TO EXCLUDE THE CONSTRUCTED PORTION AT FIRST FLOOR FOR THE PURPOSE OF DETERMINI NG ANNUAL LETTING VALUE. IT IS NECESSARY TO MENTION HERE THAT IN THREE APPEALS, TH E ASSESSING OFFICER HAS TAKEN THIS AREA FOR THE PURPOSE OF COMPUTING ANNUAL LETTI NG VALUE AND IN THREE APPEALS, THE ASSESSING OFFICER HAS TAKEN THE TOTAL AREA OF GROUN D FLOOR ONLY AT 8840 SQ. FT. THEREFORE, WHILE GIVING THE APPEAL EFFECT, THE ASSE SSING OFFICER WILL TAKE CARE OF THIS FACT ACCORDINGLY. WE MAY ALSO ADD HERE THAT AS PER THE SETTLEMENT DEED OF RENT DATED 12.06.2008, THE ASSESSEE HIMSELF HAS AGREED T O RS.5/- PER SQ. FT. AS RATE OF RENT IN F.Y. 2001-02 TO 2005-06. THEREFORE, THERE WAS NO JUSTIFICATION FOR THE LD. CIT(A) TO REDUCE THE RATE OF RENT TO RS.1.50 PER SQ . FT. THE LD. CIT(A), THEREFORE, SHOULD HAVE TAKEN RS.5/- PER SQ. FT. AS RATE OF REN T INSTEAD OF RS.6.66 PER SQ. FT. ADOPTED BY THE ASSESSING OFFICER. CONSIDERING THE F ACTS AND CIRCUMSTANCES NOTED ABOVE AND THE FACT THAT THE ASSESSEE HAS CONCEALED THE ACTUAL PAYMENT OF RENT SINCE BEGINNING OF LETTING OF THE PROPERTY ITSELF AND EVE N IF THE PROPERTY GIVEN ON RENT TO THE SOCIETY SITUATED AT THE BACK SIDE, THE RATE OF 1.50 PER SQ. FT BY THE CIT(A) WAS VERY LOW. THEREFORE, CONSIDERING THE TOTALITY OF FA CTS AND CIRCUMSTANCES OF THE CASE, IT WOULD BE REASONABLE TO ADOPT THE RENT @ RS.5/- P ER SQ. FT. AND THE ASSESSING OFFICER SHALL ASSESS THE SAME AS FAIR RENTAL VALUE OF THE PROPERTY AGAINST TOTAL AREA OF 13575 SQ. FT. CONSIDERED BY THE ASSESSING OFFICE R. THIS WOULD BE FURTHER STRENGTHENED BY THE FACT THAT THE ASSESSEE HAS LET OUT THE PROPERTY TO THE SOCIETY WHO ITA NOS. 100 TO 105/ALLD./2012 C.O. NOS. 10 TO 15/ALLD./2012 25 WERE IMPARTING EDUCATION, BUT MERELY THE TENANT WAS IMPARTING EDUCATION WOULD NOT BE A GROUND TO ADOPT THE NIL ANNUAL LETTING VAL UE AS PER THE MUNICIPAL CORPORATION BECAUSE THE ANNUAL LETTING VALUE SHALL HAVE TO BE DETERMINED IN THE CASE OF THE OWNER OF THE LAND AND BUILDING. SUCH CL AIM OF THE ASSESSEE IS ALSO INCORRECT BECAUSE IT IS NOT A DENYING FACT THAT THE PROPERTY WAS LET OUT BY THE ASSESSEE COMPANY TO THE SOCIETY/TENANT SUBJECT TO P AYMENT OF RENT. THUS, CROSS OBJECTION OF THE ASSESSEE WOULD HAVE NO MERIT AND I S LIABLE TO BE DISMISSED. THE DEPARTMENTAL APPEAL IS, THEREFORE, LIABLE TO SUCCEE D PARTLY BY MODIFYING THE ORDER OF THE LD. CIT(A). CONSIDERING THE ABOVE, WE MODIFY THE ORDER OF THE LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO CALCULATE THE R ENTAL INCOME AT THE RATE OF RS.5/- PER SQ. FT. IN RESPECT OF THE LAND AND BUILDING /CO NSTRUCTED PORTION IN GROUND FLOOR AND FIRST FLOOR AS PER FINDINGS OF ASSESSING OFFICE R IN ALL ASSESSMENT YEARS SEPARATELY ON EACH TENANTED PORTION. THE ASSESSING OFFICER SHALL DETERMINE THE RENTAL INCOME ACCORDINGLY IN ACCORDANCE WITH THE PR OVISIONS OF SECTION 22 AND 23 (1)(A) OF THE IT ACT. IN THE RESULT, THE CROSS-OBJE CTION OF THE ASSESSEE IS DISMISSED AND THE DEPARTMENTAL APPEAL IS PARTLY ALLOWED. REMAINING DEPARTMENTAL APPEALS AND CROSS-OBJECTION S : 11. IN ALL THE REMAINING DEPARTMENTAL APPEALS AND C ROSS OBJECTIONS, THE SAME ISSUE IS RAISED AS IS CONSIDERED IN THE ASSESSMENT YEAR 2005-06. THE LD. CIT(A) IN ITA NOS. 100 TO 105/ALLD./2012 C.O. NOS. 10 TO 15/ALLD./2012 26 THE REMAINING IMPUGNED ORDERS FOLLOWED HIS ORDER FO R ASSESSMENT YEAR 2005-06 AND ALLOWED THE APPEALS OF THE ASSESSEE PARTLY. BY FOLLOWING THE REASONS FOR DECISION IN ASSESSMENT YEAR 2005-06, WE DIRECT THE ASSESSING OFFICER TO CALCULATE THE RENTAL INCOME @ RS.5/- PER SQ. FT AS IS DIRECTE D ABOVE AND PASS THE ORDER ACCORDINGLY. IN THE RESULT, THE DEPARTMENTAL APPEAL S ARE PARTLY ALLOWED AND CROSS- OBJECTIONS OF THE ASSESSEE ARE DISMISSED. 12. IN THE RESULT, ALL THE DEPARTMENTAL APPEALS ARE PARTLY ALLOWED AND CROSS- OBJECTIONS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, ALLAHABAD 6. GUARD FILE ASSTT. REGISTRAR TRUE COPY