INCOME TAX OFFICER, WARD-3-2, Jaipur V. SILVER SAND BUILDERS PVT. LTD., Jaipur

ITA 1242/JPR/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5672 (ITAT-JAIPUR)
• Duration Of Justice: 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 01-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S R SHARMA; R K BHATRA CA DH RKJ
• Keywords: Capital asset; Deemed owner of house property; Tangible material; Difference of opinion; Reason to believe; Bonafide mistake; Change of opinion; Reassessment proceedings
• Section: 143(3); 147; 148; 2

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH B, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; ,OA JH FOE FLAG ;K NO ] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM AND SHRI VIKRAM SING H YADAV, AM VK;DJ VIHY LA-@ ITA NOS. 1240, 1241 & 1242/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2008-09, 09-10 & 10-11. THE INCOME TAX OFFICER, WARD 3(2), JAIPUR. CUKE VS. M/S. SILVER SAND BUILDERS PVT. LTD., C-3A/1A, SAWAI JAI SINGH HIGHWAY, BANI PARK, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAECS 7851 E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SMT. NEENA JEPH (JCIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI S.R. SHARMA (CA) & SHRI R.K. BHATRA (CA) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 18.07.2019. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 02/08/2019. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THESE THREE APPEALS BY THE REVENUE ARE DIRECTED AGA INST THREE SEPARATE ORDERS OF THE LD. CIT (APPEALS)-1, JAIPUR ALL DATED 20 TH AUGUST, 2018 FOR THE ASSESSMENT YEARS 2008-09, 09-10 AND 10-11 RESPECTIV ELY. THE REVENUE HAS RAISED COMMON GROUNDS EXCEPT QUANTUM OF DELETION OF ADDITI ON IN THESE APPEALS AS UNDER :- ITA NO. 1440/JP/2018 : WHETHER IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) WAS JUSTIFIED IN DELETING THE ADDIT ION OF RS. 2 ITA NOS. 1240,1241 & 1242/JP/2018 M/S. SILVER SAND BUILDERS PVT. LTD., JAIPUR. 1,20,39,569/- MADE BY THE AO ON THE BASIS OF HONBL E DELHI HIGH COURTS DECISION IN CIT VS. ANSAL HOUSING FINANCE & LEASING CO. LTD. IN ITA NO. 18/1999 DATED 31.10.2012 AGAINST WHICH ASSE SSEES SLP HAS BEEN ADMITTED BY THE APEX COURT IN (2018) 95 TAXMAN .COM 17 (SC) AND DECISION IS PENDING ON THE ISSUE ? APART FROM THE GROUND RAISED IN FORM NO. 36, THE RE VENUE HAS ALSO RAISED A COMMON ADDITIONAL GROUND FOR ALL THE THREE YEARS WHICH REA DS AS UNDER :- WHETHER IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) WAS JUSTIFIED IN QUASHING THE REASS ESSMENT PROCEEDINGS HOLDING THAT THE CONDITIONS REQUIRED FOR INITIATION OF REASSESSMENT PROCEEDINGS AS STIPULATED IN THE PROVISO TO SEC. 14 7 OF THE ACT WERE NOT SATISFIED IGNORING EXPLANATION-1 TO SEC. 147 WHICH STATES THAT PRODUCTION BEFORE THE ASSESSING OFFICER OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD WITH DU E DILIGENCE HAVE BEEN DISCOVERED BY THE ASSESSING OFFICER WILL NOT N ECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE FOREGOING PROV ISO. 2. WE HAVE HEARD THE LD. D/R AS WELL AS THE LD. A/R ON THE ADMISSION OF ADDITIONAL GROUND AS IT IS APPARENT FROM THE ADDITI ONAL GROUND ITSELF THAT THE REVENUE HAS CHALLENGED THE FINDING OF THE LD. CIT (A) ON TH E ISSUE OF VALIDITY OF REOPENING WHEREBY THE LD. CIT (A) HAS QUASHED THE REASSESSMEN T. THUS IT IS CLEAR THAT THE ADDITIONAL GROUND RAISED BY THE REVENUE IS NOT A NE W PLEA WHICH OTHERWISE CANNOT BE RAISED BY THE AO BUT IT IS AN ISSUE EMANATING FROM THE IMPUGNED ORDERS OF THE LD. CIT (A) AND, THEREFORE, IF THE SAID GROUND IS NOT T AKEN IN FORM NO. 36 DUE TO THE OVERSIGHT OR BONAFIDE MISTAKE, THE SAME CAN BE RAIS ED EVEN BY WAY OF ADDITIONAL GROUND. THUS WHEN THE ADDITIONAL GROUND IS NOT RAI SING A NEW ISSUE OR PLEA, THEN IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ADMIT T HE ADDITIONAL GROUND RAISED BY THE REVENUE FOR ADJUDICATION ON MERIT. SINCE THE A DDITIONAL GROUND RAISED BY THE 3 ITA NOS. 1240,1241 & 1242/JP/2018 M/S. SILVER SAND BUILDERS PVT. LTD., JAIPUR. REVENUE IS PURELY LEGAL IN NATURE AND GOES TO THE R OOT OF THE MATTER, THEREFORE, FIRST WE TAKE UP FOR ADJUDICATION OF THE ADDITIONAL GROUN D. 3. THE ASSESSEE COMPANY IS A BUILDER AND DEVELOPER AND THE DISPUTE IS REGARDING COMMERCIAL COMPLEX, NAMELY, SILVER SQUARE DEVELOP ED BY THE ASSESSEE AT C-18 BHAGWAN DAS ROAD, JAIPUR. THE ASSESSEE FILED ITS O RIGINAL RETURNS OF INCOME UNDER SECTION 139(1) OF THE IT ACT FOR THESE THREE ASSESS MENT YEARS AND SCRUTINY ASSESSMENTS UNDER SECTION 143(3) WERE PASSED BY THE AO. SUBSEQUENTLY THE AO HAS REOPENED THE ASSESSMENTS BY RECORDING THE REASO NS WHICH ARE COMMON FOR ALL THESE YEARS EXCEPT THE RELEVANT DATE OF FILING OF T HE RETURNS AND COMPLETION OF THE ASSESSMENTS UNDER SECTION 143(3) TO ASSESS THE INCO ME FROM HOUSE PROPERTY IN RESPECT OF THE CLOSING STOCK IN THE SAID COMMERCIAL COMPLEX IN VIEW OF THE FINDING OF HONBLE DELHI HIGH COURT IN CASE OF CIT VS. M/S. AN SAL HOUSING FINANCE & LEASING CO. LTD. 354 ITR 180 (DEL.). THE AO COMPLETED THE REASSESSMENTS UNDER SECTION 147 READ WITH SECTION 143(3) FOR ALL THE THREE YEAR S AND MADE THE ADDITIONS ON ACCOUNT OF INCOME FROM HOUSE PROPERTY BY DETERMININ G THE ANNUAL LETTING VALUE OF THE CLOSING STOCK BEING THE 4 TH FLOOR OF THE SAID COMMERCIAL COMPLEX. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT (A) AND ALSO OBJECTED TO THE VALIDITY OF THE REOPENING OF THE ASSESSMENTS. THE LD. CIT (A) HELD THAT REOPENING IS NOT VALID AND QUASHED THE REASSESSMENTS. THE LD. C IT (A) HAS ALSO DECIDED THE ISSUE OF ASSESSMENT OF INCOME FROM HOUSE PROPERTY B Y APPLYING NOTIONAL RENT ON THE CLOSING STOCK IN FAVOUR OF THE ASSESSEE BY FOLLOWIN G THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2012-13 . 4. BEFORE US, THE LD. D/R HAS SUBMITTED THAT AS IT IS CLEAR FROM THE REASONS RECORDED BY THE AO THAT THE ASSESSING OFFICER HAS R EOPENED THE ASSESSMENT IN VIEW 4 ITA NOS. 1240,1241 & 1242/JP/2018 M/S. SILVER SAND BUILDERS PVT. LTD., JAIPUR. OF THE DECISION OF HONBLE DELHI HIGH COURT IN CASE OF CIT VS. M/S. ANSAL HOUSING FINANCE & LEASING CO. LTD. (SUPRA) AND, THEREFORE, A SUBSEQUENT DECISION OF HONBLE HIGH COURT WOULD CONSTITUTE A TANGIBLE MATERIAL FOR FORMING THE BELIEF THAT INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT. THE LD. D/R HAS ALSO RELIED UPON THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN CASE OF KARTIKEYA INTERNATIONAL VS. CIT, 329 ITR 539 (ALL.) AND SUBMITTED THAT THE HONBLE H IGH COURT HAS HELD THAT COURT DECLARES THE LAW AS IT STOOD RIGHT FROM THE BEGINNI NG. THE INTERPRETATION OF A PROVISION RELATES BACK TO THE DATE OF LAW ITSELF AN D CANNOT BE PROSPECTIVE OF THE JUDGMENT. THEREFORE, SUCH DECLARATION OF LAW BY TH E HONBLE HIGH COURT ITSELF CONSTITUTES MATERIAL TO REOPEN THE ASSESSMENT UNDER SECTION 147 OF THE IT ACT. THE LD. D/R HAS ALSO RELIED UPON THE DECISION OF THE HO NBLE DELHI HIGH COURT IN CASE OF 67 DTR 356 (DEL.). ACCORDINGLY, THE LD. D/R HAS SU BMITTED THAT WHEN THE PROVISIONS OF SECTIONS 22 AND 23 HAVE BEEN INTERPRETED BY THE HONBLE HIGH COURT WHEREBY IT WAS HELD THAT THE UNSOLD CLOSING STOCK OF BUILDER A ND DEVELOPER IS ASSESSABLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY, THE VACA NT SPACE IS ACCORDINGLY LIABLE TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY IN TER MS OF PROVISIONS OF SECTION 23(1)(C) OF THE IT ACT. 5. ON THE OTHER HAND, THE LD. A/R OF THE ASSESSEE H AS SUBMITTED THAT THE REOPENING OF THE ASSESSMENT FOR ALL THE THREE YEARS IS AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, THERE FORE, IN THE ABSENCE OF ANY ALLEGATION THAT THE INCOME ASSESSABLE TO TAX HAS ES CAPED ASSESSMENT DUE TO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND T RULY ALL RELEVANT FACTS NECESSARY FOR THE ASSESSMENT, SUCH REOPENING AFTER EXPIRY OF FOUR YEARS IS NOT VALID. THE LD. A/R 5 ITA NOS. 1240,1241 & 1242/JP/2018 M/S. SILVER SAND BUILDERS PVT. LTD., JAIPUR. HAS SUBMITTED THAT THE REOPENING IN THE CASE OF THE ASSESSEE IS HIT BY THE PROVISO TO SECTION 147 OF THE IT ACT AND, THEREFORE, THE LD. C IT (A) HAS RIGHTLY QUASHED THE REASSESSMENT BY TREATING THE SAME AS INVALID. THE ASSESSEE HAS DISCLOSED ALL THE RELEVANT FACTS IN THE RETURN OF INCOME AS WELL AS I N THE STATEMENT OF INCOME, THE CLOSING STOCK IS NOT IN DISPUTE AS IT WAS PART OF T HE RECORD AND ALSO PART OF THE COMPUTATION OF INCOME OF THE ASSESSEE. THEREFORE, WHEN THE ASSESSEE DISCLOSED ALL MATERIAL FACTS IN THE ORIGINAL RETURN OF INCOME FIL ED UNDER SECTION 139(1) AS WELL AS DURING THE SCRUTINY ASSESSMENT FRAMED UNDER SECTION 143(3) BY THE AO, THEN THE SUBSEQUENT REOPENING IS NOTHING BUT BASED ON CHANGE OF OPINION. HE HAS SUPPORTED THE IMPUGNED ORDER OF THE LD. CIT (A) AND SUBMITTED THAT THE ASSESSEE RELIED ON VARIOUS DECISIONS BEFORE THE LD. CIT (A) WHICH HAVE BEEN FOLLOWED BY THE LD. CIT (A) WHILE DECIDING THE ISSUE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE ORIGINAL RETURN OF INCOME FILED UNDER SECTION 139(1) FOR ALL THE THREE YEARS WERE SUBJECTED TO SCRUTINY ASSESSMENT UNDER S ECTION 143(3). SUBSEQUENTLY THE AO HAS PROPOSED TO ASSESS THE INCOME BEING NOTIONAL RENT IN RESPECT OF THE CLOSING STOCK IN THE COMMERCIAL COMPLEX, NAMELY, SILVER SQU ARE. THE SAID SPACE WHICH WAS TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY IS AT 4 TH FLOOR OF THE SAID COMMERCIAL COMPLEX. THE AO HAS RECORDED IDENTICAL REASONS FOR ALL THE THREE YEARS. THE RECORDED REASONS FOR THE ASSESSMENT YEAR 2007-08 AR E AS UNDER :- RETURN OF INCOME FOR THE A.Y. 2008-09 WAS FILED O N 20.07.2009 AT AN INCOME OF RS. 1,83,170/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y. 6 ITA NOS. 1240,1241 & 1242/JP/2018 M/S. SILVER SAND BUILDERS PVT. LTD., JAIPUR. 2012-13 IT IS FOUND THAT THE ASSESSEE IS A BUILDER AND DEVELOPER AND HAS DEVELOPED A COMMERCIAL COMPLEX SILVER SQUARE AT C-1 8, BHAGWAN DAS ROAD, JAIPUR. THE PROJECT WAS STARTED ON 15.08.2003 AND W AS COMPLETED ON 10.08.2005. THE ASSESSEE WAS REQUESTED TO FILE THE DETAILS OF TOTAL AREA CONSTRUCTED AND YEAR-WISE AREA SOLD. IN RESPONSE, T HE ASSESSEE FILED DETAILS OF OPENING STOCK AS ON 1.4.2011 AND CLOSING STOCK AS O N 31.03.2012. ONE MORE REQUEST WAS MADE VIDE LETTER DATED 17.03.2015 TO FI LE YEAR-WISE DETAILS OF AREA SOLD FROM THE DATE OF COMPLETION OF PROJECT BU T NO COMPLIANCE WAS MADE. ASSESSMENT FOR A.Y. 2012-13 HAS BEEN COMPLETED U/S 143(3) OF THE I.T. ACT, TREATING THE INCOME FROM UNSOLD PORTION O F PROJECT UNDER THE HEAD INCOME FROM HOUSE PROPERTY KEEPING IN VIEW THE FIND ING OF HONBLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. M/S. ANSAL HOUSING FINANCE & LEASING CO. LTD. IN ITA 18/1999 DATED 31. 10.2012 WHEREIN IT IS HELD THAT THE INCOME FROM UNSOLD PORTION OF STOCK I N TRADE IS ALSO ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. ON EXAMINATION OF DETAILS FILED, IT IS FOUND THAT T HE ASSESSEE WAS HAVING 12722.82 SQ. FT. UNSOLD AREA AS ON 1.4.2011, MEANING THEREBY THAT AT LEAST THIS PORTION OF STOCK 12722.82 SQ. FT. WAS UN SOLD DURING THE F.Y. 2007-08 ALSO. FURTHER, AS PER THE RENT AGREEMENT DATED 27.06.2006 ENTERED BY THE ASSESSEE WITH M/S. DOMINOS PIZZA INDIA LTD. AS REGA RDS 447.32 SQ. FT. OF THE GROUND FLOOR OF THE PROJECT, RENT OF RS. 70 PER SQ. FT. PER MONTH IS SHOWN TO BE RECEIVABLE ON THE LET OUT PORTION. SINCE NO DETAILS OF UNSOLD PORTION FOR THE F.Y. 200 7-08 HAVE BEEN FILED BY THE ASSESSEE, AND UNSOLD PORTION OF 12722.82 SQ. FT. WAS AVAILABLE WITH THE ASSESSEE AS ON 01.04.2011, IT IS CLEAR THAT AT LEAS T AREA OF 12722.82 SQ. FT. WAS UNSOLD DURING THE F.Y. 2007-08 ALSO. KEEPING I N VIEW THE ABOVE FACTS, I 7 ITA NOS. 1240,1241 & 1242/JP/2018 M/S. SILVER SAND BUILDERS PVT. LTD., JAIPUR. HAVE REASON TO BELIEVE THAT INCOME TO THE TUNE OF R S. 1,06,87,168 (12722.82 SQ. FT. X 70 PER SQ. FT. PER MONTH X 12 MONTHS) HAS ESCAPED ASSESSMENT TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY FOR THE A.Y. 2008-09 WITHIN THE MEANING OF PROVISIONS OF SEC. 147 OF THE I.T. ACT. THEREFORE, PERMISSION IS BEING SOUGHT FOR ISSUE OF NOTICE U/S 148 OF THE I.T . ACT. ACCORDINGLY, THE AO ISSUED NOTICES UNDER SECTION 14 8 OF THE IT ACT FOR THE ASSESSMENT YEAR 2008-09 ON 30 TH MARCH, 2015, FOR THE ASSESSMENT YEAR 2009-10 ON 22 ND MARCH, 2016 AND FOR THE ASSESSMENT YEAR 2010-11 ON 29 TH MARCH, 2017. THUS THE NOTICES ISSUED UNDER SECTION 148 FOR ALL THE TH REE YEARS ARE AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RESPECTIVE ASSESSMEN T YEAR. THE REVENUE HAS NOT DISPUTED THIS FACT THAT THE REOPENING IN RESPECT OF ALL THE THREE YEARS IS AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. IT IS APPARENT FROM THE REASONS RECORDED BY THE AO THAT THE AO PROPOSED TO ASSESS THE NOTIONAL RENT AFTER DETERMINING THE ALV OF THE UNSOLD SPACE AT 4 TH FLOOR OF THE COMMERCIAL COMPLEX IN QUESTION IN VIEW OF THE DECISION OF HONBLE DELHI H IGH COURT IN CASE OF CIT VS. M/S. ANSAL HOUSING FINANCE & LEASING CO. LTD. (SUPRA). THE REASONS DO NOT INDICATE THAT THE AO HAS RECEIVED ANY FRESH FACTUAL INFORMATION B UT ALL THE RELEVANT FACTS, INFORMATION AND RECORD WERE AVAILABLE WITH THE AO A T THE TIME OF FRAMING THE SCRUTINY ASSESSMENT FOR ALL THESE THREE ASSESSMENT YEARS. THOUGH THE ASSESSMENT UNDER SECTION 143(3) FOR THE ASSESSMENT YEAR 2012-1 3 WAS COMPLETED PRIOR TO THE REOPENING OF THESE ASSESSMENTS AND THEREFORE, THE S AID ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2012-13 MAY CONSTITUTE TANGIBLE MAT ERIAL APART FROM THE DECISION OF THE HONBLE DELHI HIGH COURT IN CASE OF CIT VS. M/S . ANSAL HOUSING FINANCE & 8 ITA NOS. 1240,1241 & 1242/JP/2018 M/S. SILVER SAND BUILDERS PVT. LTD., JAIPUR. LEASING CO. LTD. (SUPRA) FOR FORMING THE BELIEF THA T INCOME ASSESSABLE TO TAX ON ACCOUNT OF NOTIONAL RENT IN RESPECT OF UNSOLD STOCK OF THE ASSESSEE ESCAPED ASSESSMENT. HOWEVER, EVEN IF THE DECISION OF HONB LE DELHI HIGH COURT AND THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) FOR TH E ASSESSMENT YEAR 2012-13 MAY CONSTITUTE TANGIBLE MATERIAL FOR FORMING THE BE LIEF, THE SAME SHALL BE SUBJECT TO THE FULFILLMENT OF THE CONDITIONS AS PRESCRIBED IN THE FIRST PROVISO TO SECTION 147 OF THE IT ACT. THERE IS NO ALLEGATION BY THE ASSESSIN G OFFICER IN THE REASONS RECORDED THAT THE INCOME PROPOSED TO BE ASSESSED IN THE REAS SESSMENT PROCEEDINGS HAS ESCAPED ASSESSMENT DUE TO THE FAILURE ON THE PART O F THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSME NT. EVEN OTHERWISE, WE FIND THAT ALL THE RELEVANT MATERIAL IN RESPECT OF THE ISSUE O F ASSESSMENT OF RENTAL INCOME OF THE UNSOLD STOCK WAS ALREADY AVAILABLE WITH THE ASSESSI NG OFFICER AT THE TIME OF SCRUTINY ASSESSMENT. HENCE, WHEN THE ORIGINAL ASSESSMENT WA S FRAMED UNDER SECTION 143(3) AND THE REOPENING IS AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR THEN THE ASSESSING OFFICER IS NOT P ERMITTED TO REOPEN THE ASSESSMENT UNTIL AND UNLESS THE CONDITIONS PRESCRIB ED IN THE PROVISO TO SECTION 147 ARE SATISFIED. THE ASSESSING OFFICER HIMSELF HAS N OT ALLEGED THAT THE INCOME PROPOSED TO ASSESS HAS ESCAPED ASSESSMENT FOR WANT OF DISCLOSURE OF ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. THE LD. COMMISSION ER OF INCOME TAX (APPEALS) HAS CONSIDERED THIS ISSUE IN PARA 3.1.2 AS UNDER :- 9 ITA NOS. 1240,1241 & 1242/JP/2018 M/S. SILVER SAND BUILDERS PVT. LTD., JAIPUR. 10 ITA NOS. 1240,1241 & 1242/JP/2018 M/S. SILVER SAND BUILDERS PVT. LTD., JAIPUR. 11 ITA NOS. 1240,1241 & 1242/JP/2018 M/S. SILVER SAND BUILDERS PVT. LTD., JAIPUR. 12 ITA NOS. 1240,1241 & 1242/JP/2018 M/S. SILVER SAND BUILDERS PVT. LTD., JAIPUR. 13 ITA NOS. 1240,1241 & 1242/JP/2018 M/S. SILVER SAND BUILDERS PVT. LTD., JAIPUR. 14 ITA NOS. 1240,1241 & 1242/JP/2018 M/S. SILVER SAND BUILDERS PVT. LTD., JAIPUR. 15 ITA NOS. 1240,1241 & 1242/JP/2018 M/S. SILVER SAND BUILDERS PVT. LTD., JAIPUR. 16 ITA NOS. 1240,1241 & 1242/JP/2018 M/S. SILVER SAND BUILDERS PVT. LTD., JAIPUR. 17 ITA NOS. 1240,1241 & 1242/JP/2018 M/S. SILVER SAND BUILDERS PVT. LTD., JAIPUR. 18 ITA NOS. 1240,1241 & 1242/JP/2018 M/S. SILVER SAND BUILDERS PVT. LTD., JAIPUR. 19 ITA NOS. 1240,1241 & 1242/JP/2018 M/S. SILVER SAND BUILDERS PVT. LTD., JAIPUR. 20 ITA NOS. 1240,1241 & 1242/JP/2018 M/S. SILVER SAND BUILDERS PVT. LTD., JAIPUR. 21 ITA NOS. 1240,1241 & 1242/JP/2018 M/S. SILVER SAND BUILDERS PVT. LTD., JAIPUR. 22 ITA NOS. 1240,1241 & 1242/JP/2018 M/S. SILVER SAND BUILDERS PVT. LTD., JAIPUR. THUS IT IS CLEAR THAT THE LD. CIT (A) HAS FOLLOWED VARIOUS DECISIONS INCLUDING THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN CA SE OF CIT VS. HINDUSTAN ZINC LTD. 393 ITR 264 (RAJ.) ACCORDINGLY, IN VIEW OF THE ABO VE FACTS AND CIRCUMSTANCES AS WELL AS THE BINDING PRECEDENTS ON THE ISSUE, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDER OF THE LD. CIT (A) QUA THIS ISSU E. ON MERITS : 7. NOW WE TAKE UP THE GROUND RAISED BY THE REVENUE ON THE MERITS OF THE ADDITION DELETED BY THE LD. CIT (A). 8. WE HAVE HEARD THE LD. D/R AS WELL AS THE LD. A/R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. WE NOTE THAT THE AO HAS MADE T HE ADDITION OF THE RESPECTIVE AMOUNTS BY DETERMINING THE ALV IN RESPECT OF UNSOLD STOCK OF THE ASSESSEE AT 4 TH FLOOR OF THE COMMERCIAL COMPLEX IN QUESTION. THERE IS NO DISPUTE THAT THE SPACE AT 4 TH FLOOR WAS VACANT EXCEPT FOR ONE OFFICE SPACE GIVEN TO THE COUNTRY CLUB FOR A SHORT PERIOD AND SUBSEQUENTLY THE SAID TENANT ALSO VACATED THE PREMISES WHEN THE AUTHORITIES INITIATED THE PROCEEDINGS TO DEMOLISH T HE 4 TH FLOOR OF THE COMMERCIAL COMPLEX CONSTRUCTED IN VIOLATION OF THE SANCTIONED PLAN. THE LD. CIT (A) HAS DECIDED THIS ISSUE BY FOLLOWING THE DECISION OF THIS TRIBUN AL IN THE ASSESSEES OWN CASE ON THE ISSUE FOR THE ASSESSMENT YEAR 2012-13. AT THE OUTS ET, WE NOTE THAT THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2012-13 IN ITA NO. 284/JP/2017 VIDE ORDER DATED 27 TH APRIL 2018 HAS CONSIDERED AND DECIDED THIS ISSUE I N PARA 7 TO 7.2 AS UNDER :- 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE T HAT THE ASSESSEE HAS SHOWN THE UNSOLD SPACE IN THE COMMERCIAL COMPLEX, N AMELY, SILVER 23 ITA NOS. 1240,1241 & 1242/JP/2018 M/S. SILVER SAND BUILDERS PVT. LTD., JAIPUR. SQUARE AS STOCK-IN-TRADE. THE AO PROPOSED TO DETER MINE THE ALV OF THE UNSOLD SPACE WHICH IS NOT LET OUT BY TAKING INT O CONSIDERATION THE RENT IN RESPECT OF THE PORTION LET OUT AT GROUND FL OOR OF THE COMPLEX. AS REGARDS THE QUESTION OF TAXABILITY OF NOTIONAL R ENTAL INCOME IN RESPECT OF UNSOLD SPACE HELD AS STOCK-IN-TRADE, THE RE ARE DIVERGENT VIEWS ON THIS ISSUE. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL HOUSING FINANCE AND LEASING PVT. LTD. (SU PRA) HAS TAKEN A VIEW AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVE NUE BY HOLDING THAT THE INCIDENT OF CHARGES OF TAX UNDER SECTION 22 AND 23 IS BECAUSE OF THE FACT OF OWNERSHIP AND NOT BECAUSE OF THE NATURE OF THE PROPERTY AS STOCK-IN-TRADE OR CAPITAL ASSET. WHEREAS THE HONBL E GUJARAT HIGH COURT IN CASE OF CIT VS. NEHA BUILDERS PVT. LTD. (SUPRA) HAS TAKEN A CONTRARY VIEW AND HELD THAT THE INCOME DERIVED FROM THE PROP ERTY WOULD ALWAYS BE TERMED AS INCOME FROM PROPERTY BUT IF THE PROPER TY IS USED AS STOCK-IN-TRADE, THEN THE SAID PROPERTY WOULD BECOME OR PARTAKE THE CHARACTER OF STOCK AND ANY INCOME DERIVED FROM THE STOCK WOULD BE INCOME FROM BUSINESS AND NOT INCOME FROM PROPERTY. 7.1. THEREFORE, IN VIEW OF THE CONTRARY DECISIONS O N THIS ISSUE, WE WOULD FIRST CONSIDER THE FACTUAL ASPECT OF THE MATT ER WHETHER THE UNAUTHORIZED CONSTRUCTION AT 4 TH FLOOR WHICH IS ALSO TEMPORARY IN NATURE CAN BE CONSIDERED AS PROPERTY CONSISTING OF ANY BUI LDING AS PER SECTION 22 OF THE ACT AND CONSEQUENTLY THE ANNUAL VALUE OF SUCH AN UNAUTHORIZED CONSTRUCTION CAN BE DETERMINED UNDER S ECTION 23(1) OF THE ACT. THE REVENUE HAS NOT DISPUTED THIS FACT TH AT THE 4 TH FLOOR OF THE PROPERTY IS UNAUTHORIZED CONSTRUCTION AS BEYOND TH E SANCTIONED PLAN AND, THEREFORE, THE MUNICIPAL AUTHORITIES HAVE ALRE ADY PROPOSED ACTION FOR DEMOLITION OF THE SAID PROPERTY AGAINST WHICH T HE ASSESSEE HAS APPROACHED THE HONBLE HIGH COURT FOR PROTECTION OF THE PROPERTY IN QUESTION. FURTHER, IT IS ALSO NOT DISPUTED THAT TH E SOLITARY TENANT AT THE 4 TH FLOOR HAD ALREADY VACATED THE PREMISES AFTER THE L OCAL AUTHORITIES HAVE PROPOSED TO DEMOLISH THE SAID CONSTRUCTION. TH US IN VIEW OF THE 24 ITA NOS. 1240,1241 & 1242/JP/2018 M/S. SILVER SAND BUILDERS PVT. LTD., JAIPUR. FACT THAT THE 4 TH FLOOR OF THE PROPERTY IS FACING THE DEMOLITION ACT ION BY THE LOCAL AUTHORITIES FOR BEING UNAUTHORIZED, THE A LV OF SUCH PROPERTY CANNOT BE DETERMINED BY CONSIDERING THE RENT FOR WH ICH THE GROUND FLOOR OF THE PROPERTY OR THE OTHER PORTION OF THE S AID COMPLEX WAS LET OUT. THE INCOME FROM HOUSE PROPERTY IS MEASURED AS ANNUAL VALUE OF THE PROPERTY AND SECTION 23(1) CONTEMPLATES THE MAN NER IN WHICH ANNUAL VALUE OF THE PROPERTY HAS TO BE DETERMINED. SINCE THE PROPERTY IN QUESTION IS NEWLY CONSTRUCTED PROPERTY AND HAS N EVER BEEN LET OUT, THEREFORE, THE PROVISIONS OF SECTION 23(1)(A) ENVIS AGES THE METHOD FOR DETERMINING THE ALV OF SUCH PROPERTY. THE AO HAS T O DETERMINE THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPE CTED TO FETCH THE RENT FROM YEAR TO YEAR. THUS THE FAIR MARKET RENT A S EXPECTED TO BE FETCHED BY THE PROPERTY BY LETTING OUT FROM YEAR TO YEAR IS THE RELEVANT FACTS TO BE TAKEN INTO CONSIDERATION. THERE IS NO M ETHOD PROVIDED IN THE INCOME TAX ACT FOR DETERMINATION OF THE REASONA BLE RENT EXPECTED TO BE FETCHED BY THE PROPERTY. HOWEVER, THERE ARE J UDICIAL PRECEDENTS ON THIS ISSUE WHEREIN THE HONBLE SUPREME COURT IN A SERIES OF DECISIONS HAS HELD THAT THE STANDARD RENT OF THE PR OPERTY IS A RELEVANT CRITERIA AND BASIS FOR DETERMINATION OF THE ANNUAL LETTING VALUE. IN CASE OF MRS. SHEELA KAUSHIK VS. CIT, 131 ITR 435 (SC), T HE HONBLE SUPREME COURT HAS HELD THAT FOR DETERMINATION OF AN NUAL VALUE STANDARD RENT SHOULD BE THE BASIS AND THE ANNUAL RE NT RECEIVED BY THE LANDLORD IS NOT RELEVANT. FURTHER, IN CASE OF DEEW AN DAULAT RAI KAPOOR VS. NDMC, 122 ITR 700 (SC), THE HONBLE SUPREME COU RT HAS AGAIN WHILE DECIDING THE ISSUE OF COMPUTATION OF RATEABLE VALUE OF THE PROPERTY HELD THAT EVEN IF THE STANDARD RENT WAS NO T FIXED, THE ANNUAL VALUE OF THE BUILDING SHOULD BE DETERMINED FOR THE PURPOSE OF LEVY OF HOUSE TAX AS PER THE PROVISIONS OF RENT CONTROL ACT AS THE LANDLORD CANNOT REASONABLY EXPECT TO RECEIVE RENT FROM HYPOT HETICAL TENANT ANYTHING MORE THAN THE STANDARD RENT DETERMINABLE U NDER THE PROVISIONS OF RENT CONTROL ACT. THE HONBLE CALCUT TA HIGH COURT IN THE 25 ITA NOS. 1240,1241 & 1242/JP/2018 M/S. SILVER SAND BUILDERS PVT. LTD., JAIPUR. CASE OF CIT VS. SMT. PRABHABATI BANSALI, 141 ITR 41 9 (CAL.) AS WELL AS THE HONBLE BOMBAY HIGH COURT IN CASE OF M.V. SONAV ALA VS. CIT, 177 ITR 246 (BOM.) HAVE TAKEN A CONSISTENT VIEW THAT AN NUAL VALUE OF THE PROPERTY FOR THE PURPOSE OF MUNICIPAL TAXES SHOULD BE COMPUTED AS PER THE PROVISIONS OF RENT CONTROL ACT FOR COMPUTING TH E STANDARD RENT. THEREFORE, IT IS MANDATE THAT THE AO HAS TO DETERMI NE THE ANNUAL LETTING VALUE BY CONSIDERING THE REASONABLE RENT EX PECTED TO BE FETCHED BY THE PROPERTY ON THE BASIS OF THE METHOD PROVIDED FOR FIXATION OF STANDARD RENT OR COMPUTATION OF RATEABLE VALUE. SI NCE IN THE CASE IN HAND THE 4 TH FLOOR OF THE PROPERTY IS NOT ELIGIBLE FOR FIXATION OF STANDARD RENT BEING UNAUTHORIZED CONSTRUCTION AND SUBJECTED TO DEMOLITION ACTION OF THE MUNICIPAL AUTHORITIES, THEREFORE, IN THE NORMAL CIRCUMSTANCES THE REASONABLE RENT EXPECTED TO BE FE TCHED BY SUCH PROPERTY WOULD BE NIL. 7.2. THERE IS ANOTHER ASPECT IN THE MATTER THAT SIN CE THE PROPERTY IN QUESTION IS NEWLY CONSTRUCTED AND HELD AS STOCK-IN- TRADE, THEREFORE THE VACANCY OF THE PROPERTY BEING NOT LET OUT IS NOT IN TENTIONAL OR DELIBERATE ACT ON THE PART OF THE ASSESSEE BUT IT I S BEYOND THE CONTROL OF THE ASSESSEE TO FIND A TENANT FOR SUCH UNAUTHORI ZED CONSTRUCTION. ONCE THE NON-LETTING OF THE PROPERTY IS NOT DUE TO THE REASON OF INTENTIONALLY KEEPING VACANT BY THE ASSESSEE BUT IT IS BECAUSE OF THE FACT AND CIRCUMSTANCES THAT THE SAID SPACE COULD NO T BE LET OUT DESPITE THE BEST EFFORTS OF THE ASSESSEE, THE BENEFIT OF VA CANCY UNDER SECTION 23(1)(C) WOULD BE AVAILABLE TO THE ASSESSEE. FOR R EADY REFERENCE, WE QUOTE THE PROVISIONS OF SECTION 23(1) AS UNDER :- 23. (1) FOR THE PURPOSES OF SECTION 22 , THE ANNUAL VALUE OF ANY PROPERTY SHALL BE DEEMED TO BE ( A ) THE 57 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 L ET 57 AND THE ACTUAL RENT 57 RECEIVED OR RECEIVABLE 57 BY THE OWNER IN RESPECT THEREOF IS IN EXCESS OF THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RE CEIVED OR RECEIVABLE; OR 26 ITA NOS. 1240,1241 & 1242/JP/2018 M/S. SILVER SAND BUILDERS PVT. LTD., JAIPUR. ( C ) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS L ET AND WAS VACANT DURING THE WHOLE OR ANY PART OF THE PREVIOUS YEAR AND OWIN G TO SUCH VACANCY THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS LESS THAN THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RE CEIVED OR RECEIVABLE THERE IS NO DISPUTE ON THE POINT THAT THE PROPERTY WAS VACANT DURING THE WHOLE OF THE PREVIOUS YEAR AND, THEREFORE, OWIN G TO SUCH VACANCY THE SUM REFERRED IN CLAUSE (1) OF SECTION 23 SHALL BE THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE ASSESSEE WHICH NO DOU BT IS NIL. THERE IS NO DENIAL OF THE FACT THAT THE PROCESS OF LETTING O UT MAY TAKE SOME TIME IN SEARCHING THE SUITABLE TENANT AND FOR SETTL ING THE TERMS AND CONDITIONS OF LETTING OUT. THEREFORE, EVEN IF FOR T HE SAKE OF ARGUMENT IT IS PRESUMED THAT THE HOUSE WAS READY FOR OCCUPATION , IF THE SAME IS NOT KEPT VACANT INTENTIONALLY BY THE ASSESSEE THEN VACANCY ALLOWANCE UNDER SECTION 23(1)(C) WOULD BE AVAILABLE TO THE AS SESSEE. THE REVENUE WOULD ARGUE THAT THE BENEFIT OF SECTION 23( 1)(C) IS AVAILABLE ONLY WHEN THE PROPERTY WAS LET OUT AT FIRST PLACE A ND THEN REMAIN VACANT. HOWEVER, AS PER THE PROVISIONS OF SECTION 2 3(1)(C) THE PROPERTY CAN BE VACANT DURING THE WHOLE OF RELEVANT PREVIOUS YEAR AND, THEREFORE, BOTH SITUATION CANNOT CO-EXIST THAT THE PROPERTY IS ACTUALLY LET OUT AND ALSO THE SAME IS VACANT DURING THE WHOL E YEAR. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE WHEN IT WAS NOT POSSIBLE FOR THE ASSESSEE TO LET OUT THE PROPERTY, THEN THE BENE FIT OF SECTION 23(1)(C) WOULD BE AVAILABLE TO THE ASSESSEE. HENCE THE INITIAL DELAY IN LETTING OUT THE PROPERTY FIRST TIME CANNOT BE CONSI DERED AS DEEMED LET OUT AS PER THE PROVISIONS OF SECTION 23 OF THE ACT. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE ALV OF THE PROPERTY IN QUESTION WOULD BE N IL AS IT WAS NOT POSSIBLE TO LET OUT THE PROPERTY DURING THE YEAR UN DER CONSIDERATION AND FURTHER THE UNAUTHORIZED CONSTRUCTION OF THE PR OPERTY IS OTHERWISE NOT ELIGIBLE FOR DETERMINATION OF STANDARD RENT OR RATEABLE VALUE AND CONSEQUENTLY THERE IS NO BASIS FOR DETERMINATION OF ALV OF THE PROPERTY 27 ITA NOS. 1240,1241 & 1242/JP/2018 M/S. SILVER SAND BUILDERS PVT. LTD., JAIPUR. UNDER SECTION 23(1)(A) OF THE ACT. HENCE WE DELETE THE ADDITION MADE BY THE AO. THUS THE FACTS AND THE ISSUE FOR ALL THESE THREE YE ARS ARE IDENTICAL TO THE FACTS AND ISSUE INVOLVED FOR THE ASSESSMENT YEAR 2012-13. AC CORDINGLY, FOLLOWING THE EARLIER ORDER OF THIS TRIBUNAL, WE DECIDE THIS ISSUE AGAINS T THE REVENUE AND IN FAVOUR OF THE ASSESSEE AND CONSEQUENTLY THE ORDER OF THE LD. CIT (A) QUA THIS ISSUE IS UPHELD. 9. IN THE RESULT, ALL THE THREE APPEALS OF THE REVE NUE ARE DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 02/08/2019 . SD/- SD/- ( FOE FLAG ;KNO ) ( FOT; IKY JKWO (VIKRAM SINGH YADAV ) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 02/08/2019. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- THE ITO WARD 3(2), JAIPUR. 2. THE RESPONDENT M/S. SILVER SAND BUILDERS PVT. LTD., JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 1240, 1241 & 1242/JP/2018) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 28 ITA NOS. 1240,1241 & 1242/JP/2018 M/S. SILVER SAND BUILDERS PVT. LTD., JAIPUR.