H.S. Buildcon Pvt Ltd., Ahmedabad V. DCIT, Circle-2(1)(1), Ahmedabad

ITA 1151/AHD/2018

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 7396 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 07-04-2020
• Assessment Year: 2014-2015
• Appeal Filed On: 04-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: BIREN SHAH
• Keywords: Fair market value
• Section: 143(2); 113; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI WASEEM AHMED, ACCOUNTANT MEMBER) [THROUGH VIRTUAL COURT] ITA. NO: 1151/AHD/2018 (ASSESSMENT YEARS: 2014-15) H.S. BUILDCON PVT. LTD. 113 C/O SAFAL PEGASUS, OPP. KIRAN MOTORS, 100 FT. ROAD, PRAHALDNAGAR, AHMEDABAD-380015 PAN NO. AABCH 9666B DCIT, CIRCLE-2(1)(1), AHMEDABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI BIREN SHAH, A.R. RESPONDENT BY : SHRI VIRENDRA SINGH, SR. D.R. ( )/ ORDER DATE OF HEARING : 02-12-2020 DATE OF PRONOUNCEMENT : 19 -01-2021 PER MAHAVIR PRASAD, J.M. 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (HEREINAFTER CALLED CIT(A)) ORDER NO. CIT(A)-2/333/DC. CIR. ITA NO. 1151/AHD/2018 . A.Y. 2014-15 2 2(1)(1)/2016-17 ORDER DATED 26/12/2017 ARISING OUT OF ASSESSMENT ORDER DATED 26/08/2016. ASSESSEE HAS TAKEN SOLELY GROUND OF APPEAL: 1. THE LEARNED CIT (A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.30,86,510/- TOWARDS RENTAL INCOME FOLLOWING THE APPELLATE ORDER FOR THE PRECEDING ASSESSMENT YEAR. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT (A) OUGHT TO HAVE DELETED THE ADDITION OF RS.30,86,510/-. 3. IT IS THEREFORE PRAYED THAT THE ADDITION OF RS.30,86,510/- MAY BE DELETED. 4. THIS APPEAL IS LATE BY ABOUT 47 DAYS DUE TO REASONS BEYOND THE CONTROL OF THE APPELLANT AND THEREFORE THE APPELLANT HUMBLY REQUESTS THE HON'BLE TRIBUNAL TO KINDLY CONDONE THE DELAY IN FILING THIS APPEAL IN THE SPIRIT OF THE JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF COLLECTOR, LAND ACQUISITION V. MST. KATIJI [1987] I671TR471 (SC). 5. YOUR APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY GROUND OF APPEAL AT THE TIME OF HEARING OF THE APPEAL. 2. BRIEFLY FACTS OF THE CASE ARE THAT BEFORE WILL DECIDE MATTER ON MERIT. THERE IS A DELAY OF 51 DAYS WHEREIN ASSESSE HAS FILED AFFIDAVIT AND HAS GIVEN COGENT REASON. THEREFORE, WE ARE SATISFIED WITH THE CAUSE OF THE DELAY AND WE CONDONE THE DELAY AND PROCEED WITH THE APPEAL ON MERIT. 3. IN THIS CASE, ASSESSE LET OUT A PROPERTY TO M/S. BHARTI WALLMART PVT. LTD. @ 13,60,000/- PER MONTH. THEREAFTER BECAUSE OF CONSTRUCTION OF A RAILWAY BRIDGE, ASSESSE GIVEN 40% DISCOUNT TO THE TENANT. AND FOR THAT PURPOSE, ADDENDUM LEASE DEED WAS FILED AND SAME WAS APPLICABLE FROM OCTOBER 2013 TO MARCH 2014. AND DURING THIS PERIOD, ASSESSE RECEIVED LESS RENT TO THE TUNE OF RS. 30,86,510/-. BUT LOWER AUTHORITIES FAILED TO APPRECIATE THE FACT AND REFUSE TO FAVORABLY CONSIDER ATTENDUM LEASE DEED DATED 05/11/2012. ITA NO. 1151/AHD/2018 . A.Y. 2014-15 3 4. THEREAFTER ASSESSE HAS COME BEFORE US BY WAY OF SECOND STATUTORY APPEAL. 5. AT THE OUTSET, LD. A.R. STATED THIS MATTER IS SQUARELY COVERED BY THE ORDER OF THE ITAT IN ASSESSEES OWN CASE IN IMMEDIATE PRECEDING YEAR. ON SAME FACTS AND CIRCUMSTANCES AND FILED COPY OF THE TRIBUNAL ORDER AND WE REPRODUCE THE RELEVANT PORTION OF THE ITAT ORDER IS AS UNDER: 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS E-FILED ITS RETURN OF INCOME ON 14.10.2013 DECLARING TOTAL INCOME AT RS.11,08,100/-. AFTER PROCESSING THE RETURN UNDER SECTION 143(1), THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED ON THE ASSESSEE COMPANY, WHICH WAS DULY SERVED. ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT, AND HAVING A PROPERTY SITUATED AT KARAMSAD, R.S.NO.385/2/B, 385/5, 385/4/P, 385/3 KHA TA NO.385, ANAND. DURING THE ASSESSMENT PROCEEDINGS, THE LD.AO NOTICED THAT THE ASSESSEE HAS RENTED OUT THIS PROPERTY TO M/S.BHARATI WALLMART LTD. (BWL), AND OFFERED RENTAL INCOME OF RS.18,95,226/- IN THE RETURN OF INCOME FROM THIS PROPERTY. THE AO CALLED FOR RENT AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND BWL, AND ON PERUSAL OF THE SAME, IT WAS NOTICED BY THE AO THAT, THE AGREEMENT WAS EXECUTED ON 5.11.2012 AND THE RENT WAS DUE FROM 22.1.2013. THE RENT OF THE PROPERTY WAS DECIDED AT RS.13,60,000/- PER MONTH. ACCORDING TO THE AO, THE RENT RECEIVABLE WOULD BE RS.31,17,129/- WHEREAS THE ASSESSEE HAS OFFERED RENTAL INCOME OF RS.18,95,226/-. AO PROPOSED TO ADD THE DIFFERENTIAL AMOUNT. TO THE SHOW CAUSE OF THE AO, IT WAS EXPLAINED BY THE ASSESSEE THAT AFTER ORIGINAL LEASE AGREEMENT, THE ASSESSEE HAS ENTERED ANOTHER ADDENDUM LEASE DEED, BECAUSE OF THE FACT THAT JUST OPPOSITE TO THE LEASED PROPERTY, THE INDIAN RAILWAY PROPOSED TO CONSTRUCT A FLYOVER, DUE TO WHICH, THERE WAS IMPEDIMENT IN BUSINESS OPERATION OF THE LEASEHOLDER. AFTER THE DISCUSSION, THE ASSESSEE HAD AGREED TO GRANT 40% REDUCTION IN THE RATE OF RENT PAID BY THE BWL TO THE ASSESSEE. THIS AMOUNT OF RENT WAS REFLECTED IN THE PROFIT & LOSS ACCOUNT AND OFFERED TO TAX. A COPY OF ADDENDUM LEASE AGREEMENT WAS ALSO FURNISHED TO THE AO. THE LD.AO DID NOT ACCEPT EXPLANATION OF THE ASSESSEE. HE MAINLY DOUBTED THE AUTHENTICITY AND ENFORCEABILITY OF THE SAID AGREEMENT. ACCORDINGLY, HE WORKED OUT THE DIFFERENTIAL AMOUNT OF RS.12,19,612/- AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESSEE FILED DETAILED EXPLANATION, HOWEVER, THE SAME DID NOT YIELD ANY RELIEF TO THE ASSESSEE. THE ASSESSEE IS NOW BEFORE THE TRIBUNAL. 4. BEFORE ME, THE LD.COUNSEL FOR THE ASSESSEE REITERATED HIS SUBMISSIONS MADE BEFORE THE LD.REVENUE AUTHORITIES THAT THE AO HAS NOT DOUBTED LEASING OUT OF THE PROPERTY TO BWL, WHAT OVERWEIGHED TO PERSUADE THEM IS THAT, THE DATE OF ITA NO. 1151/AHD/2018 . A.Y. 2014-15 4 AGREEMENT WAS NOT MENTIONED IN THE ADDENDUM LEASE AGREEMENT, AND THE SIGNATURE OF BWL WAS NOT PUT IN THE AGREEMENT. IT IS CLEARLY STIPULATED IN THE AGREEMENT THAT THE TERMS OF AGREEMENT SHALL BE APPLICABLE FROM THE BEGINNING OF THE RENT COMMENCEMENT DATE, AND ACCORDINGLY, THE TERMS OF ADDENDUM AGREEMENT IS TO BE CONSIDERED AS APPLICABLE FROM THE DATE OF ORIGINAL AGREEMENT, AND THEREFORE, NO ADVERSE INFERENCE CAN BE DRAWN ON THE GROUND THAT THE DATE OF AGREEMENT WAS NOT MENTIONED IN THE DEED. IT IS FURTHER SUBMITTED THAT SITUATION OF THE LEASE PROPERTY AND THE FACTORS HINDERING THE PROPERTY IN FETCH HIGHER RENTAL INCOME HAS NOT BEEN DOUBTED BY THE REVENUE AUTHORITIES. ADDENDUM AGREEMENT WAS NECESSITATED DUE TO THE FACT THAT THE CONSTRUCTION ACTIVITIES CARRIED OUT BY THE INDIAN RAILWAYS HAS HINDERED BUSINESS OPERATION OF LEASEHOLDER, AND THEREFORE RENTAL VALUE OF THE PROPERTY GOT DIMINISHED. IN SUCH SCENARIO, IT WAS MUTUALLY AGREED TO GRANT DISCOUNT AT 40% FROM THE BASE RENT. EVEN OTHERWISE ALSO, THE ADDENDUM AGREEMENT IS TO BE CONSIDERED AS A PART OF ORIGINAL RENT AGREEMENT, AND THE INCOME AS PER SUCH AGREEMENT IS TO BE CONSIDERED, UNLESS SHOWED ANY COMPARABLE INSTANCES BY THE REVENUE, IN THE GIVEN SCENARIO THE PROPERTY COULD FETCH HIGHER RENT THAN THE ONE SHOWN BY THE ASSESSEE IN THE RETURN OF INCOME. EVEN THE AO HAS NOT WORKED OUT FAIR MARKET VALUE OF THE PROPERTY IN THE GIVEN CONDITION TO NEGATE CLAIM OF THE ASSESSEE. 5. ON THE OTHER HAND, THE LD.DR SUPPORTED ORDERS OF THE REVENUE AUTHORITIES. HE SUBMITTED THAT BOTH THE AUTHORITIES HAVE CONCURRENTLY FOUND THAT THE CLAIM OF THE ASSESSEE WAS NOT SUBSTANTIATED BY EVIDENCE. THEREFORE, BOTH THE REVENUE AUTHORITIES ARE JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE. 6. I HAVE CONSIDERED SUBMISSIONS OF BOTH THE PARTIES AND GONE THROUGH THE RECORD CAREFULLY. THE LD.CIT(A) HAS AGREED WITH THE AO AND RECORDED FOLLOWING FINDING: '3.8 I HAVE CONSIDERED THE ASSESSMENT ORDER, REMAND REPORT AND REJOINDER FILED BY THE APPELLANT. HOUSE PROPERTY INCOME IS CHARGED U/S.22 OF THE INCOME TAX ACT ON THE BASIS OF THE ANNUAL VALUE OF PROPERTY. THE ANNUAL VALUE IS DETERMINED AS PER SECTION 23 WHICH IS DEEMING SECTION AND STATES THAT FOR THE PURPOSE OF SECTION 22 THE ANNUAL VALUE OF ANY PROPERTY SHALL BE DEEMED TO BE THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR. IN THIS CONTEXT, IT IS NOT THE ACTUAL RENT RECEIVED BUT THE ANNUAL VALUE OF THE PROPERTY IS TO BE CHARGED U/S.22 OF THE I.T.ACT, 1961. IN THE PRESENT CASE, ANNUAL VALUE OF PROPERTY AS SIGNED IN THE ORIGINAL AGREEMENT IS RS.1,63,20,000/- (I.E. @ RS.13,60,000/- X 12). THE APPELLANT HAS SUBSEQUENTLY GRANTED DISCOUNT @ 40%. THERE IS NO EVIDENCE FIELD BY THE APPELLANT THAT LETTABLE VALUE OF THE PROPERTY HAS BEEN REDUCED BY 40%. CONSIDERING THE ABOVE FACTS, ANNUAL VALUE OF PROPERTY AS DETERMINED BY AO @ RS.13,60,000/- PER MONTH IS FOUND TO BE JUSTIFIED. THE ROUND OF APPEAL IS ACCORDINGLY DISMISSED.' ITA NO. 1151/AHD/2018 . A.Y. 2014-15 5 7. AS OBSERVED BY THE LD.CIT(A), THE HOUSE PROPERTY IS CHARGED UNDER SECTION 22 OF THE INCOME TAX ACT ON THE BASIS OF ANNUAL VALUE OF THE PROPERTY. THE ANNUAL VALUE IS TO BE DETERMINED AS PER SECTION 23 OF THE ACT. THE AO WAS REQUIRED TO FOLLOW THE PROCEDURE LAID DOWN IN SECTION 23 OF THE ACT. HE HAS TO CALL FOR THE EVIDENCE AND PROVE THAT THIS PROPERTY COULD FETCH THIS MUCH RENT INSTEAD OF UNNECESSARILY POINTING OUT PERIPHERAL DEFECTS IN THE AGREEMENT OF THE ASSESSEE. HE COULD HAVE DETERMINED ANNUAL LETTING VALUE OF THE PROPERTY. BOTH THE REVENUE AUTHORITIES HAVE MISERABLY FAILED TO FOLLOW PROCEDURE CONTEMPLATED IN SECTION 23. THE ASSESSEE HAS GIVEN A CONCESSION IN RENT TO ITS TENANT ON THE BASIS OF SOME HARD FACTS. IT HAS BEEN BROUGHT TO MY NOTICE THAT THIS PROJECT NEVER MATERIALIZED, AND M/S.BHARTI WALLMART PVT.LTD. COULD NOT OPEN THE BUSINESS CENTRE. INSPITE OF THAT, THEY HAVE PAID RENT FOR FIVE YEARS ON THE BASIS OF THIS AGREEMENT. I COULD APPRECIATE THE CASE OF THE AO, IF HE HAS MADE REFERENCE TO THE RENT DEED OF ADJOURNING PROPERTIES AND POINTED OUT THAT THIS LEASED PROPERTY COULD BE FETCH THIS MUCH RENT, AND THEREFORE, THE ANNUAL LETTING VALUE OF THE ASSESSEE'S HOUSE PROPERTY IS TO BE DETERMINED EQUIVALENT TO THE AMOUNT ON WHICH ORIGINAL RENT FIXED BETWEEN THE ASSESSEE AND BWP. AFTER GOING THROUGH ALL THE DETAILS, I AM OF THE VIEW THAT NO ADDITION IS REQUIRED TO BE MADE BY THE AO. RENTAL INCOME SHOWN BY THE ASSESSEE DESERVES TO BE ACCEPTED IN THE ABSENCE OF ANY OTHER MATERIAL COLLECTED BY THE AO. THE ADDITION BY THE AO IS HEREBY DELETED, AND THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. 6. SINCE MATTER HAS ALREADY BEEN DECIDED BY THE CO-ORDINATE BENCH IN FAVOUR OF THE ASSESEE, THUS, IN PARITY WITH THE AFORESAID ORDER, WE ALLOW THE APPEAL OF THE ASSESSE. 7. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLOWED. . ORDER PRONOUNCED IN OPEN COURT ON 19- 01- 2021 SD/- SD/- (WASEEM AHMED) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 19/01/2021 RAJESH