AHMED SOPHIE, MUMBAI V. ADDL CIT RG 19(3), MUMBAI

ITA 1381/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88129 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 21-01-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 15-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SACCHIDANAND DUBEY
• Assessee Lawyers: JITENDRA SINGH
• Keywords: Notional interest
• Section: 234B; 12; 144

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, M UMBAI BEFORE S/SHRI D. KARUNAKAR RAO, (AM) AND AMIT SHUKLA, (JM) . , , ./I.T.A. NO.1381/MUM/2011 ( ! '! / ASSESSMENT YEAR :2003-04) MRS.AHMED SOPHIE, 3, CONCORDE APARTMENTS, BULLOCK ROAD, BANDRA (W), MUMBAI-400050 / VS. ADDL. COMMISSIONER OF INCOME TAX, RANGE 19(3), MUMBAI-400020 ( #$ / APPELLANT) .. ( %&#$ / RESPONDENT) # ./ '( ./PAN/GIR NO. :ADBPA3045P #$ ) / ASSESSEE BY SHRI JITENDRA SINGH %&#$ * ) / REVENUE BY SHRI SACCHIDANAND DUBEY * + / DATE OF HEARING : 22.1.2015 ,-' * + /DATE OF PRONOUNCEMENT : 22.1.2015 / O R D E R PER AMIT SHUKLA, (JM) THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGA INST ORDER DATED 18.11.2010, PASSED BY THE LD. CIT(A)-30, MUM BAI, FOR THE QUANTUM ASSESSMENT PASSED UNDER SECTION 144 OF THE INCOME TAX ACT, 1961 (THE ACT) FOR THE ASSESSMENT YEAR 2003-04 . 2. THE ASSESSEE HAS FILED THE FOLLOWING CONCISE GR OUNDS OF APPEAL: 1) THE COMMISSIONER OF INCOME-TAX (APPEALS)-30 E RRED IN PASSING THE ORDER DATED 18.11.2010 UPHOLDING THE ASSESSMENT ORDER PASSED UNDER SECTION 144 OF THE A CT WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE. THE APPELLANT, THEREFORE, PRAYS THAT THE ORD ER 1381/MUM/2011 2 PASSED BY THE LD. CIT(A) AGAINST THE PROVISIONS OF LAW, HENCE, THE SAME MAY BE QUASHED AND SET ASIDE. 2) THE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO IN ESTIMATING THE HOUSE PROPERTY INCOME AT RS. 300, 000/- WITH RESPECT TO THE APPELLANTS 1/4 TH SHARE IN CONCORDE APARTMENT FLAT AT BANDRA (W) WITHOUT APPRECIATING THE FACT THAT THE ANNUAL RATABLE VALUE AS DETERMINED B Y THE MUNICIPAL AUTHORITIES IS RS.7,957/- HENCE, THE AD HOC ADDITION OF RS.3,00,000/- IS UNJUSTIFIED AND THE S AME MAY BE DELETED. 3) THE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO IN ESTIMATING THE HOUSE PROPERTY INCOME AT RS. 900, 000/- WITH RESPECT TO THE APPELLANTS FLAT IN THE THE W OODS, KOREGAON PARK, PUNE WITHOUT APPRECIATING THE FACT T HAT THE ANNUAL RATABLE VALUE AS DETERMINED BY THE MUNI CIPAL AUTHORITIES IS RS.4750/-. HENCE, THE ADHOC ADDITION OF RS.9,00,000/- IS UNJUSTIFIED AND THE SAME MAY BE DE LETED. 4. THE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO IN ESTIMATING THE HOUSE PROPERTY INCOME AT RS. 12,00,000/- WITH RESPECT TO THE APPELLANTS FLAT IN CUMBALLA CREST, PEDDER ROAD, MUMBAI WITHOUT APPRECIATING THE FACT THAT THE ANNUAL RATABLE VALU E AS DETERMINED BY THE MUNICIPAL AUTHORITIES IS RS.2915 /-. HENCE, THE ADHOC ADDITION OF RS.12,00,000/- IS UNJ USTIFIED AND THE SAME MAY BE DELETED. 5. THE APPELLANT DENIES ANY LIABILITY TO PAY INTERE ST UNDER SECTION 234A, 234B AND SECTION 234C OF HTE ACT. H ENCE THE SAME ARE NOT LEVIABLE. 3. AT THE OUTSET, THE LD.COUNSEL OF THE ASSESSEE SU BMITED THAT THE GROUND NO.1 IS NOT PRESSED. HENCE, THE SAME IS DISM ISSED AS NOT PRESSED. 4. REGARDING THE ISSUE RAISED IN OTHER GROUNDS OF A PPEAL, THE BRIEF FACTS ARE THAT THE ASSESSEE IS AN INDIVIDUAL WHO H AS FILED HER RETURN OF INCOME AT RS.2,67,08,840/-. UNDER THE HEAD INC OME FROM HOUSE 1381/MUM/2011 3 PROPERTY, THE ASSESSEE HAD SHOWN FOLLOWING INCOME FROM HOUSE PROPERTY: 1 SO FLAT (1/4 TH SHARE) AT BANDRA MUMBAI AS PER ASSESSMENT YEAR 1986-87 RATABLE VALUE ADD: 1/9 TH RATEABLE VALUE LESS: MUNICIPAL TAXES (295 X 12) 3570 RS. 1,770 195 1,965 (1,605) RS NIL . 2 SO FLAT AT BABULNATH, MUMBAI ANNUAL VALUE IS TAKEN AS NIL UNDER SECTION 23(2)(A)(I) NIL 3 FLAT AT POONA PROPERTY AT THE WOOD FLAT NO.B-14 RATABLE VALUE ADD: 1/9 TH RATEABLE VALUE LESS: MUNICIPAL TAXES (126.67 X 12) LESS: DEDUCTION 30% OF RS.2718 U/S 24 4,750 528 4,238 1,520 2,718 815 1,903 4 CUMBALLA CREST PROPERTY 35,000 36,903 OUT OF THE ABOVE SAID FOUR PROPERTIES, THE ASSESSEE STATED THAT THE FLAT AT BABULNATH WAS SELF OCCUPIED PROPERTY AND H ENCE THE VALUE OF THE SELF OCCUPIED PROPERTY WAS TAKEN AS NIL. REGAR DING OTHER THREE FLATS, THE SAME WERE NOT LET OUT, HENCE, THE ASSESS EE HAS TAKEN THE STANDARD RENT IN ACCORDANCE WITH MUNICIPAL RATABLE VALUATIONS. THE AO REQUIRED THE ASSESSEE TO FILE THE VALUE OF INVE STMENTS MADE IN THE PROPERTIES; SPECIFY THE RENTAL VALUE IN RESPECT OF SIMILAR PROPERTIES AND TO JUSTIFY THE ANNUAL LETTING VALUE SHOWN IN TH E RETURN. IN 1381/MUM/2011 4 RESPONSE, THE ASSESSEE SUBMITTED THE DETAILS BEFOR E THE AO, HOWEVER, HE HELD THAT THE MONTHLY RENT SHOWN BY THE ASSESSEE WAS TOO LOW AND VALUATION DONE BY THE MUNICIPAL AUTHORI TY CANNOT BE CONSIDERED AS A DECISIVE FACTORS, BECAUSE THE VALUA TION HAS BEEN DONE LONG TIME AGO. HE, THUS ESTIMATED THE ANNUAL LETTING VALUE ON ADHOC BASIS FOR ALL THE PROPERTIES VIZ :- (I) 1/4 TH SHARE IN FLAT IN CONCORDE APARTMENTS, BULLOCK ROAD, BANDRA (W), MUMBAI. HE ESTIMATED RENTAL VALUE RS.1 LAKH PER MONTH AND THE ASSESSEES SHARE BEING 1/4 TH , HENCE RS.25,000/- PER MONTH WHICH WORKED OUT RS.3 LAKH PER ANNUM. (II) FLAT AT PUNE THE WOOD, FLAT NO.B-14,9, KO REGAON PARK, PUNE, THE AO ESTIMATED RS,.75,000/- PER MONTH WHI CH WAS WORKED OUT TO RS.9 LAKHS PER ANNUM. (III) FLAT IN CUMBALLA CREST, PEDDER ROAD, MUMBAI, THE AO ESTIMATED THE ANNUAL VALUE OF THE FLAT AT RS.1 LA KH PER MONTH WHICH WORKED OUT TO RS.12 LAKHS PER ANNUM. 5. THE LD. CIT(A) CONFIRMED THE ACTION OF THE AO ON THE GROUND, SINCE THE PROPERTIES WERE NOT ACTUALLY LET OUT AND BY DEEMING FICTION IT IS TO BE TREATED AS PROPERTIES, WHICH WERE LET OUT AND THE PROVISIONS OF SECTION 23(1)(D) OF THE ACT ARE NOT APPLICABLE, THEREFORE, AS PER SECTION 23(1)(A), THE VALUE OF THE PROPERTY SHALL B E TAKEN TO BE THE SAME FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXP ECTED TO BE LET 1381/MUM/2011 5 OUT FROM YEAR TO YEAR. THE MUNICIPAL VALUATION IS O NLY ONE OF THE FACTOR, HOWEVER, OTHER FACTORS LIKE AREA IN WHICH T HE FLAT IS LOCATED AND OTHER MARKET CONDITIONS ARE EQUALLY IMPORTANT AND H ENCE THE SAME SHOULD BE ADOPTED. ACCORDINGLY, HE CONFIRMED THE ESTIMATION MADE BY THE AO, THOUGH WHICH DID NOT HAD ANY PROPER B ASIS OR MATERIAL BROUGHT ON RECORD THROUGH INQUIRY. 6. BEFORE US, THE LD. COUNSEL SUBMITTED THAT, FIRST OF ALL, THE ANNUAL LETTING VALUE (ALV) ESTIMATED BY THE AO IS WITHOUT ANY BASIS AND IS PURELY ON ADHOC ESTIMATION, AND SECOND LY, THE ISSUE WHETHER THE ALV OF THE PROPERTY WHICH HAS NOT BEE N LET OUT CAN BE VALUED AT MUNICIPAL RATEABLE VALUE, HAS NOW BEEN UP HELD BY THE CATENA OF DECISIONS, NOT ONLY BY THE MUMBAI BENCHE S OF THE TRIBUNAL BUT ALSO BY HONBLE HIGH COURTS, INCLUDING JURISDICTIONAL HIGH COURT. HE SPECIFICALLY REFERRED TO THE DECISION OF MUMBAI BENCH TRIBUNAL IN THE CASE OF VEENA D MUNGANZAHALLI V/ S ITO IN ITA NO.1903/MUM/2010 (AY-2008-09), ORDER DATED 11.7.201 2 AND LATEST DECISION OF THE JURISDICTIONAL HIGH COURT IN THE C ASE OF CIT V/S. TIP TOP TYPOGRAPHY. [(2014) 368 ITR 330 (BOM)]. 7. ON THE OTHER HAND, THE LD. DR STRONGLY RELIED O N THE ORDER OF CIT(A). 8. AFTER CAREFULLY CONSIDERING THE RIVAL SUBMISSION S AND ALSO THE RELEVANT FINDINGS GIVEN IN THE IMPUGNED ORDER, WE F IND THAT IT HAS NOT 1381/MUM/2011 6 BEEN DISPUTED THAT THE THREE PROPERTIES WHICH ARE SUBJECT MATTER OF THIS APPEAL BEFORE US, HAVE NOT BEEN LET OUT AND TH EREFORE, THE ALV HAS TO BE DETERMINED ON THE BASIS OF THE PROVISIONS OF SECTION 23(1)(A) OF THE ACT. THE ISSUE, WHETHER IN SUCH C ASES THE MUNICIPAL VALUATION SHOULD BE TAKEN AS FAIR BASIS FOR THE D ETERMINATION OF THE ANNUAL LETTING VALUE, HAS BEEN SETTLED BY THE CATEN A OF DECISIONS INCLUDING THAT OF JURISDICTIONAL HIGH COURT. THE GIST OF SOME OF THE CASE LAWS ARE AS UNDER : I) M V SONAVALA V/S CIT, 177 ITR 246(BOM). IN THIS CASE THE HONBLE HIGH COURT AFTER RELYING UPON THE DECISION OF CALCUTTA HIGH COURT IN THE CASE OF CIT V/S PRABHABATI BANSALI, (1983) 141 ITR 419, HELD AS UNDER: HOWEVER, THE QUESTIONS POSED TO US ARE NOT WHETHER THE ANNUAL VALUE OF THE PROPERTY FOR THE PURPOSE OF SEC TION 23(1)(A) SHOULD BE TAKEN AT THE ACTUAL COMPENSATION RECEIVED OR ON THE BASIS OF STANDARD RENT. THE QUESTION IS WHETHER THE ANNUAL VALUE SHOULD BE TAKEN AT THE AMOUNT WHICH IS THE AC TUAL COMPENSATION RECEIVED OR AT THE AMOUNT WHICH IS THE ACTUAL COMPENSATION RECEIVED OR AT THE AMOUNT FIXED AS MUN ICIPAL RATABLE VALUE CANNOT BE EQUATED TO STANDARD RENT. IN THIS CONTEXT, IT MAY BE DESIRABLE TO REFER TO TH E CALCUTTA HIGH COURT'S DECISION IN THE CASE OF CIT V. PRABHABATI B ANSALI [1983] 141 ITR 419. ONE OF THE QUESTIONS INVOLVED IN THAT CASE WAS WHETHER THE TRIBUNAL WAS JUSTIFIED IN DIRECTING THE INCOME-TAX OFFICER TO REDETERMINE THE ANNUAL VALUE OF THE PROP ERTY UNDER SECTION 23(1) AFRESH WITH REFERENCE TO ITS RATABLE VALUE AS DETERMINED BY THE MUNICIPAL CORPORATION. THE QUESTI ON WAS ANSWERED IN THE AFFIRMATIVE AND THE COURT HELD THAT THE INCOME FROM HOUSE PROPERTY HAD TO BE COMPUTED ON THE BASIS OF THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE LET FROM YEAR TO YEAR AND THE ANNUAL MUNICIPAL VALUE 1381/MUM/2011 7 II) PARKPAPER INDUSTRIES P LTD 25 SOT 406 (MUM): IN THIS CASE, THE HONBLE TRIBUNAL AFTER RELYING UPON THE DECISION O F BOMBAY HIGH COURT IN THE CASE OF M V SONAVALA V/S CIT, 177 ITR 246(BOM) AND THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF DEWAN DAULAT RAI KAPOOR V/S NEW DELHI MUNICIPAL COMMITTE E (1980) 122 ITR 700 (SC) AND IN THE CASE OF MRS. SHEILA KAUSH ISH V/S CIT (1981) 131 ITR 435 (SC), HAS OBSERVED AND HELD AS U NDER : 12. LEARNED COUNSEL FOR THE ASSESSEE RELIED ON SEVERAL OTHER JUDICIAL PRONOUNCEMENTS IN SUPPORT OF HIS CONTENTIO N THAT THE MUNICIPAL VALUE SHOULD BE THE BASIS OF DETERMINING THE ANNUAL VALUE. WE ARE NOT MAKING REFERENCE TO THOSE DECISIO NS, SINCE, IN OUR OPINION THE AFORESAID PRONOUNCEMENT OF HONB LE BOMBAY HIGH COURT CONSIDERS THE DECISIONS OF HONBLE CALCU TTA HIGH COURT WHICH IN TURN HAS CONSIDERED THE LAW LAID DOW N BY THE HONBLE APEX COURT ON THE ISSUE. IT IS CLEAR FROM T HE AFORESAID EXPOSITION OF LAW THAT CHARGE UNDER SECTION 22 IS N OT ON THE MARKET RENT; BUT IS ON THE ANNUAL VALUE AND IN THE CASE OF PROPERTY WHICH IS NOT LET OUT, MUNICIPAL VALUE WOUL D BE A PROPER YARDSTICK FOR DETERMINING THE ANNUAL VALUE. DECISIO N IN THE CASE OF MRS. SHEILA KAUSHISH ( SUPRA ) MENTIONS STANDARD RENT UNDER THE RENT CONTROL ACT AS ONE OF THE YARDSTICKS. THIS DOES NOT MEAN THAT STANDARD RENT ALONE IS TO BE CONSIDERED. IN THE PRESENT CASE, WE ALSO NOTICE THAT THE ASSESSING OFF ICER HAS NOT CHOSEN TO ADOPT THE STANDARD RENT AS PER THE RENT C ONTROL ACT AS YARDSTICK FOR DETERMINING THE ANNUAL VALUE. WE A LSO FIND FROM THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF SMT. PRABHABATI BANSALI ( SUPRA ) THAT STANDARD RENT, IF IT DOES NOT EXCEED THE MUNICIPAL VALUATION ALONE CAN BE ADOPTED IN PLACE OF MUNICIPAL VALUATION. FOR ALL THE ABOVE REASONS, WE HOLD THAT THE MUNICIPAL VALUATION SHOULD BE THE BASIS OF DETE RMINING ANNUAL VALUE IN THE PRESENT CASE. ACTION OF THE REV ENUE AUTHORITIES IN ADOPTING ANNUAL VALUE ON THE BASIS O F INQUIRIES CONDUCTED REGARDING MARKET RENT IN THE VICINITY OF THE PROPERTY IS NOT IN ACCORDANCE WITH LAW. THE ASSESSING OFFICER I S DIRECTED TO ACCEPT THE INCOME FROM HOUSE PROPERTY ON THE BASIS OF MUNICIPAL VALUATION. 1381/MUM/2011 8 III) SMITABEN AMABANI, 323 ITR 104(BOM) : IN THIS CASE, THE HONBLE HIGH COURT HAS HELD AS UNDER : IN THE CASE OF SELF OCCUPIED PROPERTY, THE VALUATI ON OF A HOUSE FOR THE PURPOSE OF WEALTH-TAX IS TO BE CALCULATED O N THE BASIS OF GROSS MAINTAINABLE RENT WHICH IS THE SUM FOR WHICH THE HOUSE MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YE AR. AS FAR AS RATABLE VALUE IS CONCERNED, UNDER THE VARIOUS ACTS THAT GOVERN MUNICIPALITIES/MUNICIPAL CORPORATIONS RATABLE VALUE IS ALSO CALCULATED ON THE BASIS OF REASONABLE RENT THAT THE PROPERTY MAY FETCH IV) DCIT V/S RECLAMATION REALTY INDIA PVT.LTD ITA NO.1411/MUM/2007: 25. FOR THE REASONS GIVEN ABOVE, WE HOLD THAT THE ANNUAL VALUE (ALSO REFERRED TO AS MUNICIPAL VALUATION/ RATEABLE VALUE) ADOPTED BY THE MUNICIPAL AUTHORITIES IN RESPECT OF THE PROP ERTY AT RS.27,50,835 SHOULD BE THE DETERMINING FACTOR FOR A PPLYING THE PROVISIONS OF SEC.23(1)(A) OF THE ACT. SINCE THE RE NT RECEIVED BY THE ASSESSEE WAS MORE THAN THE SUM FOR WHICH THE PR OPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YE AR, THE ACTUAL RENT RECEIVED SHOULD BE THE ANNUAL VALUE OF THE PROPERTY U/S.23(1)(B) OF THE ACT. NOTIONAL INTEREST ON INTER EST FREE SECURITY DEPOSIT/RENT RECEIVED IN ADVANCE SHOULD NOT BE ADDE D TO THE SAME IN VIEW OF THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF J.K.INVESTORS (BOMBAY) LTD. (SUPRA). WE HOLD ACCORDINGLY. THE APPEAL OF THE REVENUE IS DISMISSED . 9. NOW, IN THE LATEST DECISION, THE HONBLE JURISDI CTIONAL HIGH COURT IN THE CASE OF CIT V/S. TIP TOP TYPOGRAPHY(S UPRA) AFTER DISCUSSING THIS ISSUE AT LENGTH AND CONSIDERING AL L THE JUDGMENTS AVAILABLE ON THE SUBJECT HAS HELD THAT, UNDER SEC TION 23(1)(A), THE RATEABLE VALUE UNDER THE MUNICIPAL LAWS CAN BE TAKE N AS ALV, UNLESS AO CAN DEMONSTRATE OR SHOW THAT IT DOES NOT REPRE SENT THE FAIR RENT. FURTHER, IF STANDARD RENT HAS BEEN FIXED BY RENT CONTROLLER, THEN 1381/MUM/2011 9 SAME HAS TO BE FOLLOWED. THUS, RESPECTFULLY FOLLOWI NG THE AFORESAID DECISIONS, WE HOLD THAT THE ALV IN TERMS OF SEC TION 23(1)(A) CAN BE ON THE BASIS OF MUNICIPAL RATEABLE VALUE AS DETERMI NED BY THE MUNICIPAL AUTHORITIES. ACCORDINGLY, AO IS DIRECTED TO ADOPT THE MUNICIPAL VALUATION /RATABLE VALUE ADOPTED BY THE M UNICIPAL AUTHORITIES ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE TREATED AS ALLOWED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 22 ND JAN, 2015 . ,-' . /0 22ND JAN, 2015 - * 1 2 SD SD ( . / D. KARUNAKAR RAO) ( / AMIT SHUKLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER 4 MUMBAI: 22 ND JAN,2015. . . ./ SRL , SR. PS ' # $%& '&($ / COPY OF THE ORDER FORWARDED TO : 1. #$ / THE APPELLANT 2. %&#$ / THE RESPONDENT. 3. ( ) / THE CIT(A)- CONCERNED 4. / CIT CONCERNED 5. 561 %7 , + 7 , 4 / DR, ITAT, MUMBAI CONCERNED 6. 1! 8 / GUARD FILE. / BY ORDER, TRUE COPY 9 ' (ASSTT. REGISTRAR) + 7 , 4 /ITAT, MUMBAI