Gajendra D Pawar, Pune V. Deputy Commissioner of Income-tax, Central Circle -1(1), Pune

ITA 1359/PUN/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4920 (ITAT-PUNE)
• Duration Of Justice: 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 23-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K VERMA
• Keywords: Deemed to accrue or arise in india; Fair market value
• Section: 143(3)

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE BEFORE SHRI ANIL CHATURVEDI, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.1359/PUN/2018 / ASSESSMENT YEAR : 2012-13 SHRI GAJENDRA D. PAWAR, 1641, SADASHIV PETH, MADHAV HERITAGE, TILAK ROAD, PUNE 411 030. PAN : AFEPP7678E. . / APPELLANT V/S THE DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1(1), PUNE. . / RESPONDENT ASSESSEE BY : SHRI SUHAS BORA. REVENUE BY : SHRI M.K. VERMA. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE O RDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) PUNE - 11 D ATED 29.05.2018 FOR THE ASSESSMENT YEAR 2012-13. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- ASSESSEE IS AN INDIVIDUAL AND IS ENGAGED IN THE BUSINESS O F CIVIL ENGINEERS, BUILDERS, PROMOTERS, CONTRACTORS ETC. UNDER TH E NAME AND STYLE OF M/S. PINNACLE CONSTRUCTIONS. ASSESSEE ELECTRONICALL Y FILED HIS RETURN OF INCOME FOR A.Y. 2011-12 ON 29.09.2012 DECLARING TO TAL / DATE OF HEARING : 24.01.2019 / DATE OF PRONOUNCEMENT: 14.02.2019 2 INCOME OF RS.19,59,688/-. THEREAFTER, THE CASE WAS SELECTED FOR SCRUTINY AND SUBSEQUENTLY THE ASSESSMENT WAS FRAMED U /S 143(3) OF THE ACT VIDE ORDER DT27.03.2015 AND THE TOTAL INCOME WAS DETERMINED AT RS.22,28,490/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DT.31.05.2018 (IN APP EAL NO.PN/CIT(A)-11/DCIT, CEN. CIR.1(1)/PN/22/2015-16) DISMISSED T HE APPEAL OF ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASS ESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS : 1. T H E L EA RN E D CIT(A) ERRED IN CONFIRMING THE A DDITION O F R S.2, 6 8,8 00/- U / S 23 (4 ) O F TH E A CT M A D E B Y TH E A 0 B Y ES T I M A TIN G R E NT O N 4 UN SO LD F L ATS @ R S.8000/- P E R M O N T H ON TH E G R O UND TH A T L EVY OF N O TI O N A L T AX U/S 24 I S D E P E ND E NT ON OW N E R S HIP OF TH E PR O P E RT Y A ND N O T O N TH E FACT TH A T TH E A P PE LL A N T CA RRI ES ON HI S BU S IN ESS AS L E TTIN G , OUT O F S U C H PR O P E RT Y, W I T H OU T AP PR EC I A TIN G T HE S UBMI SS I O N S G I VE N B Y TH E A P PE LL A N T A ND REL YING ON T HE DEC I S I O N OF TH E HONBLE HIGH COURT. 2. THE LD.CIT(A) FAILED TO APPRECIATE THE FACT THAT THE UNSOLD FLATS ARE STOCK IN TR A D E OF TH E A PP E LL A N T, W H E N TH EY ARE SO LD T H EY A R E ASSESSA BL E UN DE R TH E H EA D ' IN C OM E F R OM BU S IN ESS' A ND THER E FOR E IT IN C OR RE C T IN BRIN G I NG TO TAX N O TI O N A L AN NU A L L E T T IN G VA LU E IN R ES P E CT O F THO SE UN SO LD F L A T S UND E R TH E H EAD I N CO M E FRO M H O U SE P R O P E RT Y W HI C H ARE H E LD AS STOCK I N T R A D E A T TH E E N D OF T H E YEAR. 3. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT( A) FURTHER ERRED IN NOT APPRECIATING THE CONTENTION OF THE APPELLANT THAT E VEN IF DEEMED RENT IS TO ASSESSED U/S 23(4), IT IS TO BE ASSESSED ON THE BASIS OF FAIR VALUE ADOPTED BY THE MUNI C IP A L CORPORAT I O N A ND N O T O N ES TI MA T E D B AS I S O N T HE G R O U ND THAT NO DOC UM ENTARY EVI D ENCE WAS P ROV ID E D IN SU P PO R T OF THE SAME AS TO HOW ESTIMATED VALUE IS INCORRECT/HIGHER THAN MUNICIPAL VALUE AND ALSO THE APPELLANT FAILED TO PROVIDE ANY SPECIFIC ALTERNATE RENT ON ANY BASIS WITHOUT APPRECIATING THE SUBMISSIONS G IVEN BY THE APPELLANT. 3. ALL THE GROUNDS BEING INTER-CONNECTED ARE CONSIDERED TOGETHE R. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON PERUS ING THE PROFIT AND LOSS ACCOUNT, AO NOTICED THAT ASSESSEE HAVING FOUR FLATS / GODOWNS WHICH WERE VACANT. AO WAS OF THE VIEW THAT AS PER THE PROVISIONS OF SEC.23(4) OF THE ACT, IF ASSESSEE IS OWNER OF TW O OR MORE, HOUSES, THEN THE ANNUAL VALUE OF THE HOUSE OTHER THAN T HE HOUSE IN 3 RESPECT OF WHICH ASSESSEE HAS EXERCISED OPTIONS, WOULD B E DEEMED THAT THE PROPERTY IS BEING LET OUT. THE ASSESSEE WAS T HEREFORE ASKED TO EXPLAIN WHY THE DEEMED INCOME SHOULD NOT BE BROUGHT TAX . ASSESSEE MADE SUBMISSION INTER-ALIA STATING THAT FLATS / GODOWNS AR E HELD AS STOCK IN TRADE AND THEY WERE NOT LET OUT. WITHOUT PRE JUDICE TO THE CONTENTION OF THE ASSESSEE THAT NO DEEMED RENT IS LEVIAB LE, IT WAS FURTHER SUBMITTED THAT ANNUAL LETTING VALUE (ALV) AS PER T HE CORPORATION TAX WAS RS.3,565/- AND THE ANNUAL VALUE CAN NOT EXCEED THE MUNICIPAL VALUATION. THE SUBMISSION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE TO THE AO. AO NOTED THAT NO DOCUMENT ARY EVIDENCE WAS FURNISHED BY THE ASSESSEE IN SUPPORT OF HIS CONTENTI ON THAT THE ALV OF THE UNSOLD FLATS WAS RS.3,565/-. HE, ON THE BASIS OF THE ENQUIRY MADE FOUND THAT THE MUNICIPAL RENTAL VALUE ON THE FOUR FLATS / GODOWNS WAS AROUND RS.8,000/- PER MONTH. HE, ACCORDINGL Y DETERMINED THE ANNUAL VALUE OF THE FOUR PROPERTIES AT R S.3,84,000/- AND AFTER ALLOWING STANDARD DEDUCTION OF RS.1,15,200/- DET ERMINED THE ALV AT RS.2,68,800/- AND MADE ITS ADDITION. AGGRIEVE D BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO UPHELD THE ORDER OF AO BY OBSERVING AS UNDER : 8. THE FACTS AND JUDGMENT OF THE HON'BLE DELHI HIG H COURT ARE SQUARELY APPLICABLE IN THE APPELLANT'S OWN CASE. TH E LEVY OF NOTIONAL TAX U/S 24 IS DEPENDENT NOT ON WHETHER THE ASSESSEE CARRIES ON HIS BUSINESS AS LETTING OUT OF SUCH PROPERTY, BUT ON HI S OWNERSHIP OF THE SAME. THIS FACT IS NOT DISPUTED, AS THE VACANT FLAT S WERE NOT BEING OCCUPIED / USED BY THE APPELLANT FOR THE PURPOSE OF HIS BUSINESS. THIS VIEW ALSO FINDS SUPPORT FROM THE JUDGMENT OF T HE HON'BLE SUPREME COURT IN EAST INDIA HOUSING PROVISION OF SEC 23(4) OF THE ACT IS CLEARLY CHARGEABLE ON THE FLATS HELD AS STOCK-IN -TRADE BY THE APPELLANT. HENCE, CONSIDERING THE ABOVE FACTS AND CIRCUMSTANCE S AND RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE HIGH COURT, I T IS HELD THAT THE ESTIMATION OF DEEMED RENT FROM FLATS HELD AS STOCK- IN-TRADE IS CORRECT. NOW COMING TO NEXT GROUND OF APPEAL REGARDING THE D ETERMINATION OF ARV THE VACANT FLATS, IT WAS THE CONTENTION OF T HE APPELLANT THAT THE SAME SHOULD BE ON THE BASIS OF THE MUNICIPAL VALUAT ION. HOWEVER, NEITHER DURING ASSESSMENT, NOR BEFORE ME HAS ANY DO CUMENTARY EVIDENCE BEEN GIVEN AS TO HOW THE ESTIMATED VALUE I S INCORRECT / HIGHER THAN THE MUNICIPAL VALUATION. THE ASSESSING OFFICER , ON THE OTHER HAND, 4 HAS BASED HIS ESTIMATION BY CONDUCTING FIELD ENQUIR IES AND FINDING THE MONTHLY FAIR MARKET RENT. SINCE NO SPECIFIC ALTERNA TE RENT HAS BEEN GIVEN BY THE APPELLANT ON ANY BASIS, I SEE NO REASON TO I NTERFERE WITH THE ESTIMATE BY THE AO. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US. 5. BEFORE US, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFOR E AO AND LD.CIT(A) AND FURTHER SUBMITTED THAT THE ISSUE OF DEE MED RENT IS COVERED IN ASSESSEES FAVOUR BY THE DECISION OF M/S. COS MOPOLIS CONSTRUCTION (IN ITA NOS.230 AND 231/PUN/2018 DT.12.09.201 8). HE ALSO RELIED ON THE DECISION OF MUMBAI TRIBUNAL IN THE CASE O F C.R. DEVELOPMENTS PVT. LTD. VS. CIT (ITA NO.4277 OF 2012 ORDER DT.13.05.2015) AND THE DECISION IN THE CASE OF MS. RUNWAL CONSTRUCTIONS VS. ACIT ORDER DT.22.02.2018. WITH RESPECT TO ALTERNATE CONTENTION OF THE DETERMINATION OF FAIR MARKET V ALUE (FMV), HE SUBMITTED THAT IT HAS TO BE DETERMINED ON THE BASIS OF VALUE ADOPTED BY THE MUNICIPAL CORPORATION AND NOT ON ESTIMATED BASIS. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO ADDITION UNDER THE HEAD INCOME FROM HOUSE PROPERTY ON THE FOU R UNSOLD FLATS/ GODOWNS BY THE ASSESSEE. IT IS AN UNDISPUTED FACT THA T ASSESSEE IS IN THE BUSINESS OF CIVIL ENGINEERS, BUILDERS AND DEVELOPERS AND HAD IN THE CLOSING STOCK THE FOUR UNSOLD FLATS. IT IS ALSO AN U NDISPUTED FACT THAT THESE FOUR FLATS WERE VACANT THROUGHOUT THE YEA R UNDER CONSIDERATION AND NO RENTAL INCOME WAS DERIVED BY THE A SSESSEE DURING THE YEAR. WE FIND THAT ON IDENTICAL ISSUE, THE CO-OR DINATE BENCH OF MUMBAI TRIBUNAL IN THE CASE OF RUNWAL CONSTRUCTION S 5 (SUPRA) AFTER CONSIDERING THE DECISION OF HONBLE GUJARAT H IGH COURT IN THE CASE OF CIT VS. NEHA BUILDERS (P) LTD., REPORTED IN [200 7] 164 TAXMANN 342, THE DECISION OF MUMBAI TRIBUNAL IN THE CASE O F C.R. DEVELOPMENTS PVT. LTD., (ITA NO.4277 OF 2012 ORDER DT.13.05. 2015) THE DECISION IN THE CASE OF CIT VS. ANSAL HOUSING AND CONSTRUC TION REPORTED IN [2013] 29 TAXMANN.COM 303 AND OTHER DECISIONS CITED IN THE ORDER HAS HELD THAT WHEN THE UNSOLD FLATS WHICH ARE HELD AS STOCK- IN-TRADE AND WHEN THE INCOME FROM SUCH UNSOLD FLATS ON IT S SALE IS TREATED AS INCOME FROM BUSINESS, THEN NO NOTIONAL ANNUA L LETTING VALUE IN RESPECT OF UNSOLD FLATS CAN BE TAXED UNDER THE H EAD OF INCOME FROM HOUSE PROPERTY. THE RELEVANT FINDINGS OF THE CO-ORDINATE BEN CH OF THE TRIBUNAL IS AS UNDER : 10. IN THE CASE ON HAND BEFORE US IT IS AN UNDISPU TED FACT THAT BOTH ASSESSEES HAVE TREATED THE UNSOLD FLATS AS STOCK IN TRADE IN THE BOOKS OF ACCOUNT AND THE FLATS SOLD BY THEM WERE ASSESSED UN DER THE HEAD INCOME FROM BUSINESS. THUS, RESPECTFULLY FOLLOWIN G THE ABOVE SAID DECISIONS WE HOLD THAT THE UNSOLD FLATS WHICH ARE S TOCK IN TRADE WHEN THEY WERE SOLD THEY ARE ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS WHEN THEY ARE SOLD AND THEREFORE THE AO I S NOT CORRECT IN BRINGING TO TAX NOTIONAL ANNUAL LETTING VALUE IN RE SPECT OF THOSE UNSOLD FLATS UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THUS, WE DIRECT THE AO TO DELETE THE ADDITION MADE UNDER SECTION 23 OF THE ACT AS INCOME FROM HOUSE PROPERTY. 7. BEFORE US, REVENUE HAS NOT BROUGHT ANY MATERIAL ON RE CORD TO DEMONSTRATE THAT THE AFORESAID DECISION OF MUMBAI TRIBUN AL IN THE CASE OF M/S. RUNWAL CONSTRUCTION (SUPRA) HAS BEEN SET A SIDE / STAYED BY HIGHER JUDICIAL FORUM. IN VIEW OF THE AFORESAID FACTS, WE FOLLOWING THE DECISION OF CO-ORDINATE BENCH OF THE MUMBAI TRIBUNAL IN THE CASE OF M/S. RUNWAL CONSTRUCTION (SUPRA) HOLD THAT IN THE PRES ENT CASE AO WAS NOT CORRECT IN BRINGING TO TAX NOTIONAL ANNUAL LETTING VALUE OF FOUR UNSOLD FLATS UNDER THE HEAD INCOME FROM HOUSE PROPERTY . WE 6 THEREFORE SET ASIDE THE ADDITION MADE BY AO. THUS, THE GROUND OF THE ASSESSEE IS ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED ON 14 TH DAY OF FEBRUARY, 2019. SD/- SD/- ( VIKAS AWASTHY ) ( ANIL CHATURVEDI ) / JUDICIAL MEMBER ' / ACCOUNTANT MEMBER PUNE; DATED : 14 TH FEBRUARY, 2019. YAMINI #$%&'(' % / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4 5. 6. CIT(A), PUNE-11, PUNE. PR.CIT, CENTRAL, PUNE. '#$ %%&',) &', *+ / DR, ITAT, SMC PUNE; $-.// GUARD FILE. / BY ORDER // TRUE COPY // 012%3&4 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.