ITO 12(1)(3), MUMBAI V. SETH PROPERTIES, MUMBAI

ITA 1192/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88543 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 06-08-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 11-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR BORADR
• Assessee Lawyers: GIRISH S PIKALE
• Keywords: Rule of consistency; Additional evidence

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO.6701/MUM/2011 ASSESSMENT YEAR:2003-04 AND ITA NO. 1190 TO 1192/MUM/2013 ASSESSMENT YREARS-2004-05 TO 2006-07 INCOME TAX OFFICER-12(1)(4), ROOM NO.115, 1 ST FLOOR, AAYKAR BHAVAN, MUMBAI-400020 / VS. M/S SETH PROPERTIES, 2 ND FLOOR, SADHANA RAYON HOUSE, D.N. ROAD, FORT, MUMBAI-400001 ( / REVENUE) ( /ASSESSEE) P.A. NO. ABIFS2476F / REVENUE BY SHRI VIJAY KUMAR BORA-DR / ASSESSEE BY): SHRI GIRISH S. PIKALE / DATE OF HEARING : 04/02/2015 /DATE OF ORDER 04/03/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) : THIS BUNCH OF FOUR APPEALS IS BY THE REVENUE CHALLE NGING THE RESPECTIVE IMPUGNED ORDERS DATED 08/07/2011(ASS ESSMENT YEAR 2003-04) AND 19/11/2012(ASSESSMENT YEARS 2004- 05 TO 2006-07) OF THE LD. FIRST APPELLATE AUTHORITY, MUMB AI, ON THE M/S SETH PROPERTIES. 2 GROUND IN DELETING THE ADDITION OF RS.3,00,31,873/- BEING RENTAL INCOME FROM THE PROPERTY. THE CRUX OF ARGUMENT ADVA NCED BY SHRI VIJAY KUMAR BORA, LD. DR, IS THAT THE LD. COMM ISSIONER OF INCOME TAX (APPEALS) WHILE GRANTING THE RELIEF DID NOT APPRECIATE THE FACTS, AS THE ASSESSEE SUPPRESSED ITS INCOME FR OM HOUSE PROPERTY BY NOT OFFERING TRUE AND CORRECT RENTAL IN COME FROM ALL TENANTS IN ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2003-04, IDENTICAL ASSERTIONS WERE MADE FOR REMAINING ASSESS MENT YEARS, BY SUBMITTING THAT THE LD. FIRST APPELLATE AUTHORIT Y WRONGLY DELETED THE ADDITION OF RS. 3,67,96,393/- (ASSESSME NT YEAR 2004-05), RS.3,95,69,419/- (ASSESSMENT YEAR 2005- 06) AND RS.4,26,06,757/- (ASSESSMENT YEAR 2006-07). 2. SINCE IDENTICAL GROUNDS ARE RAISED IN ALL THE AP PEALS, THESE CAN BE DISPOSED OFF BY A COMMON AND CONSOLIDATED OR DER FOR THE SAKE OF BREVITY. THE FACT, IN BRIEF, ARE THAT THE ASSESSEE IS OWNER OF SHOPS IN CANNAUGHT PLACE, NEW DELHI AND DECLARED RS.33,19,541/- AS RENTAL INCOME FROM THE SHOPS, WHE REAS THE LD. ASSESSING OFFICER CALCULATED THE INCOME AT RS. 31,5 6,251/-. THE ASSESSEE CLAIMED IT A TYPOGRAPHICAL ERROR/CALCULATI ON MISTAKE. HOWEVER, THE MATTER TRAVELLED TO THE HONBLE HIGH COURT, WHEREIN, THE RENT WAS DETERMINED AT THE RATE OF RS. 1,42,200/- PER MONTH, PAYABLE BY BANK OF PUNJAB. HOWEVER, THE ASS ESSEE CLAIMED RS.7,331/- PER MONTH, AS RENT RECEIVED. TH E ASSESSING OFFICER CALCULATED THE DEEMED RENTAL INCOME FROM TH ESE PROPERTIES AND THUS THE MARKET VALUE WAS ADOPTED AT RS.15,64,2 01/- FOR DETERMINING THE RENTAL INCOME IN RESPECT OF OTHER U NITS APART FROM L-40. FACT REMAINS THAT THE ENTIRE AMOUNT WAS RECE IVED IN A. Y. 2007-08 AND 2008-09 FOR THE PERIOD COMMENCING FROM AUGUST, M/S SETH PROPERTIES. 3 2003, THE RENT FOR PRIOR PERIOD OF FOUR MONTHS, I.E . APRIL 2003, MAY 2003, JUNE 2003 AND JULY 2003 WAS DETERMINED AT THE RATE OF RS.1,42,2001 - ONLY. ACCORDINGLY, THE ASSESSING OFFICER WORKED OUT RENTAL INCOME OF HEMKUNT IBOP AS UNDER: DETAILS OF OFFICE/ SHOPS AS PER ASSESSEE RENT ( RS ) PER MONTH AS PER HONBLE HIGH COURT PER MONTH (RS.) FOR F.Y.2003-04 DEEMED VALUE PER MONTH (IN RS.) RENTAL INCOME OF BALANCE PROPERTIES (RS.24,502 RS.733) 23,769 (EXCLUDING -733) 733=1,56,420 50,72,233 RENTAL INCOME FOR THE YEAR [RS.50,72,233X12] RS.6,08,66,796 2.1. IN VIEW OF THE ABOVE, ASSESSING OFFICER WORKE D OUT THE DEEMED RENTAL INCOME AT RS.6,08,66,796/-. AFTER ALL OWING DEDUCTION U/S.24(A) @ 30% TOTAL INCOME WAS ASSESSED AT RS.4,26,06,757/-. WE NOTE THAT, AS OBSORBED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ALSO THAT THE ASSESSING OFFICER WRONGLY PROCEEDED ON THE PREMISE THAT HON'B LE DELHI HIGH COURT HAS RETROSPECTIVELY DETERMINED AND FIXED RS.1 ,42,000/ - AS MONTHLY RENT FOR THE PREMISES OCCUPIED BY M/S. BANK OF PUNJAB, AND THE SAID ORDER OPERATED AS A FORMULA TO RETROSP ECTIVELY ENHANCE THE RENTS BEING PAID BY ALL THE 39 PROTECTE D TENANTS OF APPELLANT BY 19000% I.E. FROM RS. 23,769/- PER MONT H TO RS.50,72,233/- PER MONTH, I.E. (RS.6,08,66, 796/ - P.A.). THE REST OF THE BUILDING (OTHER THAN PREMISES ON 1ST FLOOR O CCUPIED BY BANK OF PUNJAB) IS OCCUPIED BY STATUTORY TENANTS AN D THEY WERE PAYING STATUTORY RENT FOR THE LAST 25 YEARS. IT IS ALSO NOTED THAT THE ASSESSING OFFICER UNJUSTIFIABLY ENHANCED THE RE NTAL INCOME OF THE ASSESSEE WITHOUT ANY DOCUMENTARY EVIDENCE/PRESU MPTIVE BASIS AS THE PRESUMPTIVE RENT WAS NEVER RECEIVED/RE CEIVABLE BY M/S SETH PROPERTIES. 4 THE ASSESSEE. THERE IS UNCONTROVERTED FINDING IN T HE IMPUGNED ORDER THAT THE ADDITIONAL RENT CONTROL TRIBUNAL DIR ECTED PUNJAB NATIONAL BANK TO DEPOSIT THE AMOUNT OF RS.1,42,000/ - (AS MESNE PROFIT/OCCUPATION CHARGES/DAMAGES) IN THE COURT AND NOT HONBLE DELHI HIGH COURT, WHICH BANK OF PUNJAB WAS PAYING TO M/S. HEMKUNT CHEMICALS VIDE ITS ORDER DATED 05/07/2 003. THE HONBLE DELHI COURT IN ITS ORDER DATED 29/07/2003 D ID NOT MENTION ANY AMOUNT, OR FIX/DETERMINE ANY ENHANCED R ENT FOR M/S. BANK OF PUNJAB OR THE ASSESSEE'S 39 OTHER TENA NTS AS ERRONEOUSLY ASSUMED BY THE ASSESSING OFFICER. THE SPECIAL BENCH OF THE ITAT IN THE CASE OF NARANG OVERSEAS(P )LTD. V. ACIT 111 ITD 1, HELD THAT THE AMOUNT WAS RECEIVED AGAINS T WRONGFUL POSSESSION OF THE PROPERTY AND THEREFORE THE MESNE PROFIT RECEIVED BY THE ASSESSEE UNDER THE CONSENT DECREE A WARDED BY THE APEX COURT AT THE RATE OF RS. 10 LAKHS WAS ON A CCOUNT OF DAMAGES FOR DEPRIVATION OF USE AND OCCUPATION FOR T HE PROPERTY AND, THEREFORE, THE SUM SO RECEIVED WAS CAPITAL IN NATURE AND NOT CHARGEABLE TO TAX WAS NOT CONSIDERED BY THE ASSESSI NG OFFICER IN PROPER PROSPECTIVE AND HE DELIBERATELY CHOSE TO IGN ORE THAT THE ASSESSEE'S 39 PROTECTED TENANTS WERE NOT A PARTY TO THE PROCEEDING BETWEEN THE ASSESSEE AND BANK OF PUNJAB/ HEM KUNT CHEMICALS AT ANY STAGE, THUS, THE ORDERS THEREIN HA D NO, AND COULD NOT HAVE ANY APPLICATION UPON THEM. THE ANNUA L VALUE TO BE ASSESSED IN THE HANDS OF THE LANDLORD/OWNER IS A STATUTORY RENT AMOUNT ONLY AND NOT THE ENHANCED AMOUNT RECEIV ED BY THE TENANT FROM THE SUB-TENANTS/ OCCUPANT. THE ASSESSIN G OFFICER HAD COMMITTED AN ERROR IN CONSIDERING THE AMOUNT OF MONEY DEPOSITED, IN COURT, BY BANK OF PUNJAB IN THE SUBSE QUENT ASSESSMENT YEARS AS RENT DUE TO THE ASSESSEE INSTEA D OF M/S SETH PROPERTIES. 5 COMPENSATION/OCCUPATION CHARGES, WHICH IS DIRECTED BY THE COURT TO BE PAID BY PARTY (IN THIS CASE BANK OF PUNJAB) A GAINST WHOM EVICTION ORDER HAD BEEN PASSED, WHICH IS IN DIRECT CONTRADICTION OF THE ASSESSING OFFICER'S OWN FINDING IN PAGE-2 OF THE ASSESSMENT ORDER, WHEREIN THE ASSESSING OFFICER HAS ADMITTED THAT IN JULY,2003, BANK OF PUNJAB WAS DIRECTED TO P AY COMPENSATION OF RS.1,42,000/- PER MONTH BY DELHI HI GH COURT. THIS AMOUNT (DEPOSITED BY BANK OF PUNJAB) WHICH THE ASSESSING OFFICER TREATS AS RENTAL INCOME IS IN REALITY COMPE NSATION FOR WRONGFUL POSSESSION WHICH WAS DEPOSITED ONLY IN THE SUBSEQUENT ASSESSMENT YEARS BY BANK OF PUNJAB, AND WAS RECEIVE D BY THE ASSESSEE ONLY IN A.Y.2007-2008, AND A.Y.2008-09. T HERE IS WRONG PRESUMPTION BY THE ASSESSING OFFICER THAT BANK OF PUNJAB AND NOT HEM KUNT CHEMICALS WAS THE ASSESSEES TENAN T WITHOUT APPRECIATING THAT AS PER SEC. 16(A) AND (B) OF THE DELHI RENT ACT NO TENANT WITHOUT THE PREVIOUS CONSENT IN WRITING O F THE LAND LORD HAS THE RIGHT TO SUBLET OR ASSIGN THE PREMISES OCCU PIED BY HIM. ONCE EVICTION ORDERS ARE PASSED THE RELATIONSHIP OF LAND LORD/TENANT COMES TO AN END. THEREAFTER, THE LAND L ORD CAN BE AWARDED ONLY COMPENSATION BY THE COURT TILL POSSESS ION IS HANDED BACK TO THE LAND LORD BY THE TENANT. THUS, T HERE WAS A GROSS ERROR IN THE ASSESSMENT ORDER IN INCREASING T HE RENTS OF ALL THE APPELLANT'S REMAINING 39 PROTECTED TENANTS (BEI NG RS.23,769/- PER MONTH PAID TO THE APPELLANT BY ITS LAWFUL/ PROTECTED TENANTS) BY 19000% I.E. TO RS.50, 72,233/ - PER MONTH BECAUSE THESE LAWFUL TENANTS ARE ,PROTECTED TENANT S WHO ENJOY PROTECTION UNDER THE DELHI RENT CONTROL ACT,1958. S EC 6A OF THE DELHI RENT ACT 1958 HAS RESTRICTED THE POWER OF LAN D LORDS (I.E. M/S SETH PROPERTIES. 6 THE APPELLANT HEREIN) TO INCREASE RENTS BEYOND 10% AND THAT TOO ONLY AFTER EVERY 3 YEARS. 2.2. SECTION 105 AND 107 OF THE TRANSFER OF TRANSF ER OF PROPERTY ACT DOES NOT CONFER ANY RIGHT ON ANY CIVIL COURT TO FIX THE RENT OF ANY PREMISES, WHICH IS A MATTER BETWEEN THE LESSOR AND THE LESSEE SUBJECT TO PROVISIONS OF THE RENT AC T. THE APPELLANT IS EXPRESSLY BARRED FROM RECEIVING ANY CO NSIDERATION FOR CREATION OF A SUB-TENANT OR THE TENANTS AS PER SEE 16(4) OF THE DELHI RENT ACT. SIMILAR ISSUE WITH IDENTICAL FACTS IN ASSESSEE'S OWN CASE WAS DECIDED BY THE LD. COMMISSIONER OF INC OME TAX (APPEALS) FOR A. Y. 2003-04, WHEREIN, CIT(A) VIDE O RDER NO.CIT(A)- 23/ITO-12(1 )(4)/IT-448/201 0-11 DATED 08/07/2011 H ELD AS UNDER: 'THE ASSESSING OFFICER HAS COMPUTED INCOME FROM HOU SE PROPERTY IN RESPECT OF ALL THE TENANTED PREMISES, INCLUDING L-40, 1ST FLOOR PREMISES IN RESPECT OF WHICH THERE WAS A DISPUTE BE FORE THE TRIBUNAL! COURT, AND IN RESPECT OF WHICH THE APPELL ANT HAS BEEN ALLOWED TO WITHDRAW MONEYS DEPOSITED UNDER COURT OR DER. THE ASSESSING OFFICER ON THE BASIS OF THE AMOUNT DETERM INED BY THE HIGH COURT IN RESPECT OF L-40 WHICH WAS IN DISPUTE, HAS TREATED THE SAME AS RENTAL FOR THE BALANCE PROPERTIES AS RE CEIVABLE AND THE DIFFERENCE AMOUNT (I. E., DIFFERENCE BETWEEN RE NTAL INCOME AS PER HIGH COURT ORDER AND AS DECLARED BY THE APPELLA NT) HAS BEEN BROUGHT TO TAX. FOR THE PROPERTIES OTHER THAN L-40, DEEMED VALUE OF RENTAL OF RS.34,61 ,623 PER MONTH HAS BEEN TAKEN . WITH REGARD TO L-40 ON SIMILAR BASIS (AFTER ALLOWING FOR COST I NFLATION @ 20%), AMOUNT OF RS.1, 13,600/- PER MONTH HAS BEEN TAKEN A S THE DEEMED RENTAL VALUE. IT IS FOUND, FIRSTLY THAT THE ORDER OF DELHI HIGH COURT WAS ONLY SPECIFIC TO L-40 PREMISES, WHIC H WERE LET OUT TO HEMKUNT CHEMICALS FURTHER SUBLET TO 8ANK OF PUNJ AB. THE PROPERTIES WERE UNDER THE DELHI RENT CONTROL ACT. T HE ITAT MUMBAI IN ITA NO. 35241MI2008 A.Y.2002-03 IN SHRI D EEPAK VASWANI V ITO WARD 12(2)(40 MUMBAI HAS LAID DOWN PR INCIPLES ON HOW THE DETERMINATION OF ALV IS TO BE MADE. IT H AS BEEN HELD THAT IN CASE THE PROPERTY IS COVERED BY THE RENT CO NTROL ACT, THE ANNUAL VALUE U/S 23(1) (A) CANNOT EXCEED THE STANDA RD RENT DETERMINED UNDER THE RENT CONTROL ACT BECAUSE OF TH E RESTRICTION M/S SETH PROPERTIES. 7 ON THE VALUE OF RENT AS HELD BY THE SUPREME COURT I N THE CASE OF SHEELA KAUSHIK (113 ITR 435). THUS WITHOUT ANY SPEC IFIC ORDER IN RESPECT OF OTHER PROPERTIES, THE ASSESSING OFFICER COULD NOT HAVE EXTRAPOLATED THE RENT USING THE BASIS OF THE COURT DECISION IN RESPECT OF THE L-40 PROPERTY. THE ASSESSING OFFICER IS THUS DIRECTED TO RESTRICT THE RENTAL INCOME IN RESPECT O F PROPERTIES OTHER THAN L-40 TO THE STANDARD RENT DETERMINED UNDER THE RENT CONTROL ACT. AS REGARDS THE L-40 PROPERTY (UNDER DISPUTE), PROVI SIONS OF SECTION 25AA AND 258 HAVE TO BE TAKEN INTO CONSIDER ATION. SECTION 25AA OF THE ACT PROVIDES THAT WHERE THE ASS ESSEE CAN NOT REALIZE RENT FROM A PROPERTY LET OUT TO A TENANT, A ND SUBSEQUENTLY ANY AMOUNT IN RESPECT OF SUCH RENT IS REALIZED, SUC H RECEIPT SHALL BE DEEMED TO BE CHARGEABLE UNDER THE HEAD 'INCOME F ROM HOUSE PROPERTY' AS INCOME OF THE PREVIOUS YEAR IN WHICH I T IS RECEIVED. SECTION 258 OF THE ACT MAKES A SPECIAL PROVISION FO R ARREARS OF RENT RECEIVED, AND STATES THAT WHERE AN ASSESSEE HA S RECEIVED AN AMOUNT BY WAY OF ARREARS OF RENT FROM SUCH PROPERTY , WHICH IS NOT CHARGED TO TAX IN ANY PREVIOUS YEAR, THE AMOUNT SO RECEIVED SHALL BE DEEMED TO BE CHARGEABLE UNDER THE HEAD 'IN COME FROM HOUSE PROPERTY' AS INCOME OF THE PREVIOUS YEAR IN W HICH IT IS RECEIVED, WHETHER THE ASSESSEE CONTINUES TO REMAIN THE OWNER OF SUCH PROPERTY IN THE PREVIOUS YEAR IN WHICH ARREARS ARE RECEIVED OR NOT. (DEDUCTION OF 30% WOULD ALSO BE ALLOWABLE A GAINST SUCH RECEIPT). IN THE PRESENT CASE SINCE THE APPELLANT H AS NOT RECEIVED ANY AMOUNT EITHER BY WAY OF UNREALIZED RENT OR BY W AY OF ARREARS IN AY 2003-04, WHICH IS EVIDENT FROM THE CO URT ORDERS (THE AMOUNT IS STATED TO HAVE BEEN RECEIVED AFTER DIRECT IONS OF THE COURT DATED 2910712007) AND AMOUNTS WERE RELEASED T O THE APPELLANT FROM 2810712006. IN POINT OF FACT EVEN TH E ORDER OF COURT DIRECTING DEPOSIT OF MONTHLY AMOUNT OF RS. 1, 42,0001 - IS DATED 2910712003, WHICH IS AFTER THE END OF THE PRE VIOUS YEAR RELEVANT TO AY 7003-04. THUS IN VIEW OF THE PROVISI ONS OF SECTIONS 25AA AND 258, THE INCOME (RECEIPT) IS TO BE TAXED I N THE YEAR OF RECEIPT AND CANNOT BE SUBJECTED TO TAX IN AY 2003-0 4. THE RENTAL INCOME FOR AY 2003-04 WOULD BE RESTRICTED TO THE ST ANDARD RENT DETERMINED UNDER THE RENT CONTROL ACT. THE ADDITION MADE BY THE ASSESSING OFFICER IS THUS DELETED. ' 2.3. BEFORE US, NO CONTRARY DECISION WAS BROUGHT ON RECORD BY EITHER SIDE REVERSING THE AFORESAID ORDER, THUS, ON THE RULE OF CONSISTENCY ALSO THE ASSESSEE IS HAVING A GOOD CASE , THUS, THE STAND OF THE CIT(A) DESERVES TO BE UPHELD. THE ASSE SSMENT YEAR 2003-04 IS THE LEAD YEAR, WHEREIN, WE HAVE UPHELD T HE STAND OF M/S SETH PROPERTIES. 8 THE LD. COMMISSIONER OF INCOME TAX (APPEALS), WHERE AS, THE REMAINING ASSESSMENT YEARS, ON IDENTICAL FACT, THE GROUND RAISED BY THE REVENUE IS THAT THE CASE OF ASSESSMENT YEAR 2003-04 IS PENDING BEFORE THE TRIBUNAL. HOWEVER, WE HAVE UPHEL D THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) FOR ASSESSMENT YEAR 2003-04, THEREFORE, THE IDENTICAL ISSUE FOR TH E LATER ASSESSMENT YEARS IS AUTOMATICALLY DISPOSED OF IN FA VOUR OF THE ASSESSEE. 3. SO FAR AS, GROUND NO.1A (ITA NO.6701/MUM/2011) I S CONCERNED NO SUBMISSIONS WERE MADE BY LD. DR AND GR OUND NO. 3 WITH RESPECT TO ADDITIONAL EVIDENCE AND VIOLATION OF RULE 46A IS NOT GERMANE OUT OF THE IMPUGNED ORDER, THEREFORE, B OTH THESE GROUNDS ARE DISMISSED. 4. GROUNDS NO. 4 & 5 ARE GENERAL IN NATURE, REQUIRE S NO DELIBERATION. FINALLY, THE APPEALS OF THE REVENUE ARE DISMISSE D. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDE, AT THE CONCLUSION OF THE HEARING, ON 04/03/2015. SD/ - (RAJENDRA) SD/ - (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER MUMBAI; # DATED : 04/03/201 5 F{X~{T? P.S/. .. %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. %& '( / THE APPELLANT 2. )*'( / THE RESPONDENT. 3. + + , ( %& ) / THE CIT, MUMBAI. M/S SETH PROPERTIES. 9 4. + + , / CIT(A)- , MUMBAI 5. ./0 )1 , + %& %12 , / DR, ITAT, MUMBAI 6. 03 4 / GUARD FILE. / BY ORDER, *.& ) //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI