H.Noormohamed, CHENNAI V. ACIT, CHENNAI

CO 135/CHNY/2011

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7151 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 20-04-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 18-04-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 05-08-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: R VENKATESH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI [BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER] I.T.A.NO.1257/MDS/2011 ASSESSMENT YEAR : 2006-07 THE ACIT COMPANY CIRCLE V(4) CHENNAI VS SHRI H. NOOR MOHAMMED NO.31, 9 TH CROSS STREET RADHAKRISHNAN SALAI MYLAPORE, CHENNAI 600 004 [PAN AAEPN 9214B] (APPELLANT) (RESPONDENT) C.O.NO.135/MDS/2011 ASSESSMENT YEAR : 2006-07 SHRI H. NOOR MOHAMMED NO.31, 9 TH CROSS STREET RADHAKRISHNAN SALAI MYLAPORE, CHENNAI 600 004 VS THE ACIT COMPANY CIRCLE V(4) CHENNAI (CROSS OBJECTOR) (RESPONDENT) DEPARTMENT BY : SHRI SHAJI P. JACOB, ADDL. CIT ASSESSEE BY : SHRI R.VENKATESH, CA DATE OF HEARING : 18-04-2012 DATE OF PRONOUNCEMENT : 20-04-2012 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL BY THE REVENUE AND TH E CROSS OBJECTION FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD.CIT(A )-V, CHENNAI, DATED 12.4.2011. I.T.A.NO.1257/11 C.O NO. 135/11 :- 2 -: 2. THE GRIEVANCE OF THE REVENUE IS THAT THE LD.CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER BY ADOPTING THE HIGHEST RATE PER SQ. FT. FOR DETERMINING THE RENT R ECEIVABLE FOR ALL THE SHOPS IN THE COMMERCIAL COMPLEXES LET OUT BY THE A SSESSEE. 3. THE LD. DR ARGUED THAT THE ASSESSING OFFICER FOUND FROM THE DETAILS SUBMITTED BY THE ASSESSEE THAT THE PROPERT IES LOCATED AT 195 NSC BOSE ROAD AND 4, BADRIAN STREET, ARE LOCATED IN A VERY PRIME PLACE AT CHENNAI. IT WAS JUST OPPOSITE TO THE HIGH COURT OF CHENNAI. IT WAS FOUND THAT THE ASSESSEE HAD RETURNED LOWER INC OME FROM THE PROPERTY. ON QUERY TO SUBSTANTIATE THE SAME, THE ASSESSEE HAD NOT PROVIDED ADEQUATE EXPLANATION. UNDER THE CIRCUMSTA NCES, THE ASSESSING OFFICER ESTIMATED THE RENTAL INCOME AS PE R THE HIGHEST RENTAL INCOME OFFERED BY THE ASSESSEE ITSELF OF ` 112.50 PER SQ FT AREA PER MONTH FROM THE SAME HOUSE PROPERTY WHICH WAS A HUGE SINGLE COMPLEX. HE FOUND THAT THE TOTAL LET OUT AREA IN T HE PROPERTY IS 4000 SQ FT TAKING THE ACCEPTABLE ANNUAL VALUE/SQ FT AS ` 112.50 PER MONTH, THE TOTAL ANNUAL VALUE OF THE PROPERTY WAS WORKED O UT TO BE ` 54 LAKHS PER ANNUM. THE ASSESSEE HAD OFFERED ` 9,90,150/- ONLY. THEREFORE, THE DIFFERENCE AMOUNT OF ` 44,09,850/- AFTER ALLOWING STANDARD DEDUCTION @ 30%, THE NET ADDITIONAL INCOME FROM THE PROPERTY WAS ASSESSED AT ` 30,86,895/-. SIMILARLY, ADDITIONAL INCOME FROM H OUSE PROPERTY AT 4, BADRIAN STREET WAS COMPUTED AT ` 1,55,977/- WHICH WAS I.T.A.NO.1257/11 C.O NO. 135/11 :- 3 -: ADDED TO THE INCOME OF THE ASSESSEE. HE RELIED O N THE GROUNDS OF APPEAL AND SUBMITTED THAT THE LD.CIT(A) WAS NOT JU STIFIED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER. 4. ON THE OTHER HAND, THE LD. A.R OF THE ASSESSEE SUBM ITTED THAT THE PROPERTY AT NSC BOSE ROAD IS A COMMERCIAL COMPLEX HOUSING ABOUT 29 SHOPS IN BASEMENT, GROUND FLOOR AND FIRST FLOOR AND THE PROPERTY AT NO.4 BADRIAN STREET IS ALSO A COMMERCIA L-CUM-RESIDENTIAL COMPLEX HOUSING ABOUT 11 RESIDENTS AND ONE SHOP. T HE SHOPS IN BOTH THE COMPLEXES ARE RANGING FROM SMALL TO BIG, FRONTA GE TO BACK, ROAD SIDE FACING OR IN THE INTERIOR, WITH OR WITHOUT CAR PARKING FACILITY, FACING VARIOUS DIRECTIONS ETC. THE TENANTS ARE BUSINESS C ONCERNS, MAJORITY OF WHOM HAVE BEEN IN OCCUPATION OF THE SHOPS FOR NUMBE R OF YEARS. THE DETAILS OF THE RENT RECEIVED FROM EACH OF THE COMME RCIAL ESTABLISHMENT AND OTHER DETAILS WERE FURNISHED BEFORE THE ASSESSI NG OFFICER ALONGWITH DETAILED NOTES AND SUBMISSIONS ON HIS QUE RIES DURING THE ASSESSMENT PROCEEDINGS. IT WAS SUBMITTED THAT IN M AKING ADDITION OUT OF SURMISES AND SUSPICION, THE ASSESSING OFFICER RE LIED ON THE DISCUSSION NOTED BY HIM IN PARA 2 PAGE 2 OF THE ASS ESSMENT ORDER WHICH READS AS ON THE QUERY TO SUBSTANTIATE THE SAME RENTAL INCOME , THE ASSESSEE HAS NOT PRODUCED ADEQUATE EXPLANATION . THIS OBSERVATION IS CONTRARY TO THE FACTS ON RECORD AS T HE ASSESSEE HAD IN FACT PRODUCED THE DETAILS AND MADE SUBMISSIONS IN R ESPECT OF THE ISSUE I.T.A.NO.1257/11 C.O NO. 135/11 :- 4 -: WHICH THE ASSESSING OFFICER DID NOT EVEN NARRATE IN THE ASSESSMENT ORDER. IT WAS FURTHER SUBMITTED THAT IN THE SUBSEQ UENT YEARS, ON THIS ISSUE NO ADDITION WAS MADE AS THE FACT AS TO THE AC TUAL RECEIPT OF RENT FROM EACH OF THE TENANT WAS WELL ESTABLISHED AS THE CASE IS FOR THIS YEAR AND FOR ALL THE YEARS. IT WAS THEREFORE, SUBM ITTED THAT THE ASSESSING OFFICER HAD NO AUTHORITY TO ALTER THE ACT UAL RENT RECEIVED FROM THE TENANT, A FACT WHICH IS NOT PROVED TO BE I NCORRECT NEITHER THERE ARE ANY ADVERSE FINDINGS IN RESPECT OF THE AC TUAL RENT RECEIVED. THEREFORE, IT WAS SUBMITTED THAT MAKING AN ESTIMATE D ADDITION BASED ON THE MAXIMUM PER SQ FT RATE RECEIVED FROM ONE OF THE SMALL TENANT WOULD BE HIGHLY ERRONEOUS AND UNJUSTIFIED RESULTING IN TAX DEMAND WHICH IS DISPROPORTIONATE TO THE ACTUAL INCOME. RE NT IS A COMPLEX ISSUE ESPECIALLY IN A COMMERCIAL COMPLEX AND VARIOU S FACTORS DETERMINE THE RENT WHICH COULD RANGE FROM SMALL TO BIG, FRONT AGE TO BACK, ELEVATED TO NON-ELEVATED AREA, YEARS OF HOLDING OF TENANCY, RELATIONSHIP AND KNOWLEDGE OF THE TENANT, NATURE OF PRODUCT IN BUSINESS UNDERTAKEN BY THE TENANT, THE DOOR NUMBER OF THE SHOP, THE DIRECTION THAT THE SHOP IS FACING, THE AMOUNT OF DE POSIT AND VARIOUS OTHER REASONS. THEREFORE, TO QUANTIFY THE RENT IN RESPECT OF THE ENTIRE COMPLEX BASED ON PER SQ FT RATE RELATING TO RENT OF A SHOP, WHICH MAY BE HIGH FOR VARIOUS REASONS, WOULD BE HIGHLY ERRONE OUS AND NOT PROVIDED IN LAW IN RESPECT OF ASSESSMENT OF INCOME FROM HOUSE I.T.A.NO.1257/11 C.O NO. 135/11 :- 5 -: PROPERTY. HENCE, HE SUBMITTED THAT THE LD.CIT(A) HAS RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE IS OWNER OF PROPERTY AT 195, NSC BOSE ROAD AND 4 BADRIAN STREET . THE ASSESSEE HAD SHOWN RENTAL INCOME FROM NSC BOSE ROAD PROPERTY AT ` 9,90,150/- AND RENTAL INCOME FROM BADRIAN STREET P ROPERTY AT ` 2,51,800/-. THE ASSESSING OFFICER OBSERVING THAT T HE ASSESSEE HAD NOT PROVIDED ADEQUATE EXPLANATION IN SUPPORT OF THE RENTAL INCOME SHOWN IN THE RETURN OF INCOME, BY TAKING THE HIGHES T RENTAL INCOME OF ` 112.50 PER SQ FT/MONTH FROM A TENANT OF THE ASSES SEE, HE ESTIMATED THE RENTAL INCOME FROM THE NSC BOSE ROAD PROPERTY A T ` 54 LAKHS AND AFTER REDUCING ` 9,90,150/- SHOWN BY THE ASSESSEE IN THE RETURN OF INCOME AND AFTER REDUCING 30% ON ACCOUNT OF STANDAR D DEDUCTION, MADE AN ADDITION OF 30,86,895/-. SIMILARLY, FOR BA DRAIN STREET PROPERTY, THE ASSESSING OFFICER, BY TAKING THE HIGH EST RENTAL INCOME PER SQ FT FROM ONE OF THE TENANTS SHOWN BY THE ASS ESSEE AT ` 5.12 PER SQ FT PER MONTH, ESTIMATED THE ANNUAL RENTAL INCOME AT ` 4,74,624/- AND AFTER REDUCING RENTAL INCOME SHOWN BY THE ASSE SSEE OF ` 2,51,800/- AND AFTER ALLOWING STANDARD DEDUCTION @ 30%, ESTIMATED I.T.A.NO.1257/11 C.O NO. 135/11 :- 6 -: THE ADDITIONAL RENTAL INCOME OF THIS PROPERTY AT ` 1,55,977/- AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 6. ON APPEAL, THE LD.CIT(A) DELETED THE ADDITION BY O BSERVING AS UNDER: B) I NOW DEAL WITH THE ESTIMATED ADDITIONS IN RES PECT OF RENTAL INCOME FROM TWO COMMERCIAL COMPLEXES AS IN GROUND NO.5. I FIND THAT THERE IS NO POSITIVE AND CONCRETE EVIDENCE WITH THE ASSESSING OFFICER TO SHOW THAT THE ACTUAL RENT RECEIVED BY THE APPELLANT IS IN EXCESS OF THAT OFFE RED IN RESPECT OF EACH OF THE SHOPS/UNITS IN THE TWO COMPLEXES. TH E AO CANNOT SUBSTITUTE THE ACTUAL RENT RECEIVED ON THE B ASIS OF HIGHEST RENT RECEIVED FROM A SHOP WITHIN THE COMPL EX AS FIXATION OF RENT THROUGH NEGOTIATED PROCESS IS A CO MPLEX MATTER AND TAKES INTO ACCOUNT VARIOUS FACTORS AND CIRCUMST ANCES, WHICH WERE CORRECTLY AND DULY BROUGHT OUT BY THE AP PELLANT IN HIS SUBMISSIONS. IT WOULD BE UNREAL TO ESTIMATE TH E RENTAL INCOME AS MADE BY THE ASSESSING OFFICER IN THE IMP UGNED ASSESSMENT. IF THERE WAS ANY DOUBT ON THE ACTUAL R ECEIPT OF RENT, IT SHOULD HAVE BEEN BROUGHT OUT UPON ENQUIRY AND NOT ON ESTIMATION, AS THE CONTRACT WITH THE TENANTS CANNOT BE ALTERED UNLESS PROVED TO BE INCORRECT OR A SHAM. I AM THERE FORE CONSTRAINED TO ACCEPT WITH THE APPELLANT ON THE IS SUE AND ALLOW THE GROUND RELATING TO THE ESTIMATED ADDITIO N IN RESPECT OF RENTAL INCOME FROM TWO COMPLEXES AT N.S.C. BOSE ROAD AND BADRIAN STREET. 12. THE ASSESSING OFFICER IS DIRECTED TO DELETE RS. 30,86,895/- ON ACCOUNT INCOME FROM COMMERCIAL COMPLEX SITUATED AT NO.195, N.S.C. BOSE ROAD, AND RS.1,55,977/- ON ACCO UNT OF INCOME FROM PROPERTY SITUATED AT NO.4, BADRAIN STR EET AS ADDITIONAL HOUSE PROPERTY INCOME ASSESSED FROM THE AFORESAID TWO COMPLEXES. 7. WE FIND THAT NO SPECIFIC DEFECT IN THE ORDER OF THE LD.CIT(A) COULD BE POINTED OUT BY THE LD. DR. WE FIND THAT N O MATERIAL HAS BEEN BROUGHT ON RECORD TO SHOW THAT THE ACTUAL RENT RECE IVED OR THE FAIR ANNUAL LET OUT VALUE WAS MORE THAN THE RENTAL INCOM E SHOWN BY THE I.T.A.NO.1257/11 C.O NO. 135/11 :- 7 -: ASSESSEE. THE LD. DR ALSO COULD NOT BRING ANY MATE RIAL BEFORE US TO SHOW THAT THE RENTAL INCOME ASSESSED IN THE CASE OF THE ASSESSEE FROM THE PROPERTIES IN QUESTION IN THE PRECEDING YE ARS OR IN THE SUBSEQUENT YEARS WERE SUBSTANTIALLY MORE THAN THE R ENTAL INCOME CLAIMED BY THE ASSESSEE DURING THE YEAR UNDER CO NSIDERATION. IN THE ABSENCE OF ANY SUCH MATERIAL WE DO NOT FIND ANY GOO D REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A) WHICH IS CONFIRMED AND THE GROUNDS OF APPEAL OF THE REVENUE ARE DISMISSED. 8. IN THE CROSS OBJECTION FILED BY THE ASSESSEE THE ASSESSEE HAS MERELY SUPPORTED THE ORDER OF THE LD.CIT(A). AS THERE IS NO GRIEVANCE TO THE ASSESSEE AGAINST THE ORDER OF THE LD.CIT(A), THE CROSS OBJECTION FILED BY THE ASSESSEE IS INFRUCTUO US AND HENCE DISMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE AN D THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20.4.2012. SD/- SD/- (VIKAS AWASTHY) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED: 20 TH APRIL, 2012 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR