ASHIT M PATEL, MUMBAI V. ADDL CIT 21(3), MUMBAI

ITA 1570/MUM/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4123 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-02-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 06-03-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G N MAKWANA
• Assessee Lawyers: HARIOM PATEL
• Keywords: Salary income
• Section: 6

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI .. , , , BEFORE, SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI JOGINDER SINGH, JUDICIAL MEMBER ITA NO.1570/MUM/2012 ASSESSMENT YEAR:2008-09 ASHIT M. PATEL, ODYSSEY-11, FLAT NO.2901/ABC, HIRANANDANI GARDEN, POWAI MUMBAI-400076 / VS. ADDL. CIT-21(3), C-11, 5 TH FLOOR, AAYAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA(EAST), MUMBAI-400051 ( !'#$ /ASSESSEE) ( % / REVENUE) PAN. NO. AAAPP7483Q !'#$ / ASSESSEE BY SHRI HARIOM PATEL % / REVENUE BY SHRI G.N. MAKWANA & %'($) / DATE OF HEARING : 01/02/2016 ($) / DATE OF ORDER: 03/02/2016 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER D ATED 05/12/2011 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. ITA NO.1570/MUM/2012 ASHIT M. PATEL 2 THE ONLY GROUND ARGUED/AGITATED BY THE ASSESSEE PER TAINS TO ESTIMATION OF RENTAL INCOME AT RS.5,89,600/- AS AGA INST RS.43,200/- ACTUALLY, RECEIVED BY THE ASSESSEE. 2. DURING HEARING OF THIS APPEAL, SHRI HARIOM PATE L, LD. COUNSEL FOR THE ASSESSEE, ADVANCED ARGUMENTS, WHICH IS IDENTICAL TO THE GROUND RAISED BY ASSERTING THAT TH E ASSESSING OFFICER ESTIMATED THE RENTAL INCOME AT RS.5,89,600/ - OF TWO ROOMS AND THE ASSESSEE LET OUT IDENTICAL TWO ROOMS TO ANOTHER PERSON ON RENT FOR RS.48,000/- ONLY. RELIAN CE WAS PLACED UPON THE DECISION IN CIT VS AKSHAY TEXTILE T RADING AND AGENCIES PVT. LTD. 304 ITR 401 (BOM.) AND ACIT VS MAYUR RECREATIONAL AND DEVELOPMENT LTD. (2008) 301 ITR (AT) 324 (DEL.)(SB). THE CRUX OF THE ARGUMENT IS TH AT ACTUAL RENT WAS RECEIVED ONLY TO THE TUNE OF RS.48,000/-. 2.1. ON THE OTHER HAND, THE LD. DR, SHRI G. N. MAK WANA, STRONGLY DEFENDED THE IMPUGNED ORDER BY CONTENDING THAT ACTUAL RENT RECEIVED BY THE ASSESSEE WAS RS.5,89,60 0/-, THEREFORE, THE LD. ASSESSING OFFICER AS WELL AS THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ARE JUSTIFIED IN THEIR CONCLUSION. 2.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE DECLARED INCOME OF RS.95,43,6 60/- IN HIS RETURN FILED ON 31/07/2008. THE ASSESSEE IS AN INDIVIDUAL, SHOWED SALARY INCOME, INCOME FROM HOUSE ITA NO.1570/MUM/2012 ASHIT M. PATEL 3 PROPERTY, LONG TERM CAPITAL GAIN AND INCOME FROM OT HER SOURCES. THE ASSESSEE FOR THE YEAR UNDER CONSIDERAT ION, IN ITS COMPUTATION OF INCOME ALSO DECLARED RENTAL INCOME O F RS.5,89,600/- FOR M/S WEST COAST CONSTRUCTION PVT. LTD. ON ASKING BY THE LD. ASSESSING OFFICER, THE ASSESSEE F URNISHED THE WRITTEN SUBMISSIONS, WHICH WERE CONSIDERED BY T HE ASSESSING OFFICER. THE ASSESSEE AT THE RELEVANT TI ME WAS OWNER OF PROPERTY NO.31 AND 32 AT STERLING CHS LTD. , WHICH WAS LET OUT TO SIDHARTH PATEL AND KALPANA PATEL FOR ANNUAL LICENSE FEE OF RS.42,300/-. SIMULTANEOUSLY, THE ASS ESSEE ALSO RECEIVED LEASE RENT OF RS.5,89,600/- FROM M/S WEST COAST CONSTRUCTION PVT. LTD. IN RESPECT OF ROOM NO.51 & 5 2 OF THE SAME SIZE AND IN THE SAME BUILDING. THE ASSESSEE W AS ASKED TO EXPLAIN THE REASON OF LOWER LICENSE FEE WITH RES PECT TO ROOM NO.31 & 32 AS COMPARE TO 51 & 52. IT WAS EXPLA INED BY THE ASSESSEE, THAT OWNERS OF ALL INDIVIDUAL FLATS H AVE LICENSED THE COMMERCIAL RIGHTS AMONG THEMSELVES. THE TOTALIT Y OF FACTS CLEARLY INDICATES THAT THE ARRANGEMENT OF CROSS LEA SING OF FLATS WAS TO REDUCE THE INCIDENCE OF TAXES. THE WHOLE ARR ANGEMENT IS DESIGNED TO DEFEAT THE LAW. FACT REMAINS THAT TH E INCOME OF RS.5,89,600/- WAS ACTUALLY RECEIVED AND THE ASSESSE E EXPLOITED THE COMMERCIAL RIGHTS AS BENEFICIAL OWNER . HENCE, THE FACT THAT THE ASSESSEE HAS CHOSEN NOT TO RECEIV E THE FAIR RENT FROM HIS LEGALLY OWNED FLATS IN CONSIDERATION F OR RECEIPT OF RENT FOR SOME OTHER FLATS, WILL NOT ABSOLVE HIM FROM NOT CHARGING THE MARKET RENT OF THE FLAT LEGALLY OWNED BY HIM. IN THE IMPUGNED ORDER, THERE IS UNCONTROVERTED FACT TH AT THE ITA NO.1570/MUM/2012 ASHIT M. PATEL 4 MUNICIPAL RATABLE VALUE AS PER DETAILS FILED BY THE ASSESSEE IS RS.52,410/-, WHICH IS MORE THAN THE ACTUAL RENT DEC LARED BY THE ASSESSEE AT RS.43,200/-. IT MEANS THAT THE RENT DECLARED BY THE ASSESSEE WAS NOT THE FAIR RENT FOR WHICH THE PROPERTY IN QUESTION, REASONABLY BE EXPECTED TO LET OUT. 2.3. BEFORE PROCEEDING FURTHER, WE ARE REPRODUCING HEREUNDER THE PROVISION OF SECTION 23 OF THE ACT, W HICH DEALS AS TO HOW THE ANNUAL VALUE TO BE DETERMINED. 23. (1) FOR THE PURPOSES OF SECTION 22, THE ANNUAL VALU E OF ANY PROPERTY SHALL BE DEEMED TO BE (A) THE SUM FOR WHICH THE PROPERTY MIGHT REASONABL Y BE EXPECTED TO LET FROM YEAR TO YEAR; OR (B) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND THE ACTUAL RENT RECEIVED OR RECEIVABLE 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 (C) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND WAS VACANT DURING THE WHOLE OR ANY PART OF THE PREVIOUS YEAR A ND OWING TO SUCH VACANCY THE ACTUAL RENT RECEIVED OR RECEIVABLE BY T HE OWNER IN RESPECT THEREOF IS LESS THAN THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RECEIVED OR RECEIVABLE : PROVIDED THAT THE TAXES LEVIED BY ANY LOCAL AUTHORITY IN RE SPECT OF THE PROPERTY SHALL BE DEDUCTED (IRRESPECTIVE OF THE PRE VIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH TAXES WAS INCURRED BY THE OWNER ACCORDING TO THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY HIM) IN DETERMINING THE ANNUAL VALUE OF THE PROPERTY OF THAT PREVIOUS Y EAR IN WHICH SUCH TAXES ARE ACTUALLY PAID BY HIM. EXPLANATION.FOR THE PURPOSES OF CLAUSE (B) OR CLAU SE (C) OF THIS SUB- SECTION, THE AMOUNT OF ACTUAL RENT RECEIVED OR RECE IVABLE BY THE OWNER SHALL NOT INCLUDE, SUBJECT TO SUCH RULES 8 AS MAY BE MADE IN THIS BEHALF, THE AMOUNT OF RENT WHICH THE OWNER CANNOT REALISE. (2) WHERE THE PROPERTY CONSISTS OF A HOUSE OR PART OF A HOUSE WHICH (A) IS IN THE OCCUPATION OF THE OWNER FOR THE PURP OSES OF HIS OWN RESIDENCE; OR ITA NO.1570/MUM/2012 ASHIT M. PATEL 5 (B) CANNOT ACTUALLY BE OCCUPIED BY THE OWNER BY RE ASON OF THE FACT THAT OWING TO HIS EMPLOYMENT, BUSINESS OR PROFESSION CAR RIED ON AT ANY OTHER PLACE, HE HAS TO RESIDE AT THAT OTHER PLACE IN A BU ILDING NOT BELONGING TO HIM, THE ANNUAL VALUE OF SUCH HOUSE OR PART OF THE HOUSE SHALL BE TAKEN TO BE NIL. (3) THE PROVISIONS OF SUB-SECTION (2) SHALL NOT APP LY IF (A) THE HOUSE OR PART OF THE HOUSE IS ACTUALLY LET DURING THE WHOLE OR ANY PART OF THE PREVIOUS YEAR; OR (B) ANY OTHER BENEFIT THEREFROM IS DERIVED BY THE OWNER. (4) WHERE THE PROPERTY REFERRED TO IN SUB-SECTION ( 2) CONSISTS OF MORE THAN ONE HOUSE (A) THE PROVISIONS OF THAT SUB-SECTION SHALL APPLY ONLY IN RESPECT OF ONE OF SUCH HOUSES, WHICH THE ASSESSEE MAY, AT HIS OPTI ON, SPECIFY IN THIS BEHALF; (B) THE ANNUAL VALUE OF THE HOUSE OR HOUSES, OTHER THAN THE HOUSE IN RESPECT OF WHICH THE ASSESSEE HAS EXERCISED AN OPTI ON UNDER CLAUSE (A), SHALL BE DETERMINED UNDER SUB-SECTION (1) AS IF SUC H HOUSE OR HOUSES HAD BEEN LET. THE OPERATIVE WORDS IN SECTION 23(1)(A) ARE THAT T HE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET OUT FROM YEAR TO YEAR. THESE PROVIDE SPECIFIC DIRE CTION TO THE REVENUE AUTHORITIES FOR DETERMINING THE FAIR RENT . IN THE PRESENT APPEAL, THE ACTUAL RENT RECEIVED BY THE ASS ESSEE (AS PER ASSESSEES CALCULATION ITSELF) TO THE TUNE OF R S.5,89,600/-, THUS, AS PER THE PROVISIONS ITSELF, THERE IS NO INF IRMITY IN THE CONCLUSION OF THE LD. COMMISSIONER OF INCOME TAX (A PPEALS), BECAUSE, THE DECISION WAS ARRIVED AT ON THE BASIS O F FACTUAL FIGURES OF RENT PROVIDED BY THE ASSESSEE HIMSELF. THE LD. ASSESSING OFFICER, ON THE BASIS OF MATERIAL AVAILAB LE ON RECORD, REASONABLY CONCLUDED ACCORDINGLY. ITA NO.1570/MUM/2012 ASHIT M. PATEL 6 2.4. SO FAR AS, THE RELIANCE PLACED BY THE ASSESSE E UPON THE DECISION IN THE CASE OF AKSHAY TEXTILES AND TRA DING AGENCIES PVT. LTD. (SUPRA), IS CONCERNED, THE HONB LE HIGH COURT WAS DEEMING WITH SECTION 23(1)(A) OF THE ACT USING THE EXPRESSION THE SUM FOR WHICH THE PROPERTY MIGHT RE ASONABLY BE EXPECTED TO BE LET OUT FROM YEAR TO YEAR. IN TH AT CASE, THERE WAS NO EVIDENCE ON RECORD THAT THE TRANSACTIO N WAS NOT GENUINE. IN THAT SITUATION, THE HONBLE HIGH COURT REACHED TO A CONCLUSION, WHEREAS, IN THE PRESENT APPEAL UNDISP UTEDLY, THE ASSESSEE RECEIVED THE AMOUNT OF RS.5,89,600/-, THEREFORE, THIS JUDICIAL PRONOUNCEMENT MAY NOT HELP THE ASSESS EE. LIKEWISE, IN THE CASE OF MAYUR RECREATIONAL AND DEV ELOPMENT LTD., THE QUESTION BEFORE TRIBUNAL WAS WITH RESPECT TO ANNUAL LETTING VALUE AND ITS DETERMINATION AND ACTUAL RENT RECEIVED BY THE ASSESSEE. THE QUESTION WAS AS TO HOW THE STA NDARD RENT IS TO BE DETERMINED. WE HAVE PERUSED THE FACTS OF THE CASE AND FOUND THEM ALTOGETHER DIFFERENT. THE BENC H HELD THAT THE STANDARD RENT OF PROPERTY IS SYNONYMOUS WI TH THE SUM OF WHICH THE PROPERTY MIGHT REASONABLY BE EXPEC TED TO LET FROM YEAR TO YEAR AND THUS, THE LD. ASSESSING O FFICER IS BOUND TO CALCULATE SUCH STANDARD RENT. HOWEVER, ADM ITTEDLY, IN THE PRESENT APPEAL, THE ASSESSEE RECEIVED THE AM OUNT OF RS.5,89,600/- FROM FLATS NO.51 & 52 AS RENT FROM M/ S WEST COAST CONSTRUCTION PVT. LTD. 2.5. SO FAR AS, THE CONTENTION OF THE ASSESSEE THA T THE PROPERTY INCOME MAY BE CONSIDERED AS A WHOLE AND NO T FROM ITA NO.1570/MUM/2012 ASHIT M. PATEL 7 INDIVIDUAL POINT OF VIEW, IS CONCERNED, WE FIND THA T THE PROVISION OF SECTION 23 HAS BEEN EXPLAINED WITH THE INSERTION OF EXPLANATION-1, WHICH MEANS (A) IN CASE, WHERE TH E PROPERTY IS LET OUT THROUGHOUT THE PREVIOUS YEAR, T HE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT OF SUCH YEARS AND (B) IN ANY OTHER CASE, THE AMOUNT WHICH B EARS THE SAME PROPORTION TO THE AMOUNT OF THE ACTUAL RENT RE CEIVED OR RECEIVABLE BY THE OWNER FOR THE PERIOD FOR WHICH TH E PROPERTY IS LET, AS THE PERIOD OF TWELVE MONTHS BEARS TO SUC H PERIOD, THUS, AS PER THE PROVISION ITSELF. THE RATIO LAID D OWN IN CORPORATION OF CALCUTTA VS SMT. PADMA DEVI AIR 1962 SC 151, 153, CED VS RADHA DEVI JALAN (1968) 67 ITR 761 (CAL.), GOVERNMENT SERVANT CO-OPERATIVE HOUSING SOCIETY LTD . VS UOI AIR 1998 SC 2636, 2638 FOLLOWED IN K.P. SONY VS UOI (1999) 153 TAXATION 447, 450 (DEL.) SUPPORTS OUR VI EW. 2.6. BY THE FINANCE ACT, 2001 (14 OF 2001), SUBSTI TUTION WAS MADE IN THE SECTION FOR AND FROM A.Y. 2002-03 I N PLACE OF THAN EXISTING SECTION 23 FOR THE PURPOSES OF DETERM INATION OF ANNUAL VALUE OF THE PROPERTY. AS PER SECTION 23(1), FOR THE PURPOSES OF SECTION 22, THE ANNUAL VALUE OF ANY PRO PERTY SHALL BE DEEMED TO BE :- THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR (SECTION 23(1)(A) OR WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS L ET- ITA NO.1570/MUM/2012 ASHIT M. PATEL 8 (A) AND THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS IN EXCESS OF THE SUM REFERRED TO IN SECTION 23(1)(A), THE AMOUNT SO RECE IVED OR RECEIVABLE (SECTION 23(1)(B) OR XXXXXXXXXXXXXXXX IF THE AFORESAID PROVISION OF THE ACT IS KEPT IN JUXTAPOSITION WITH THE FACTS OF THE PRESENT APPEAL, UNDISPUTEDLY, THE ASSESSEE RECEIVED RENT OF RS.5,89 ,600/- FROM M/S WEST COAST CONSTRUCTION PVT. LTD. IN RESPE CT OF PROPERTY NO. 51 AND 52, WHICH ARE OF THE SAME SIZE AND LOCATED IN THE SAME BUILDING, THUS, THE RECEIPT OF ACTUAL RENT IS NOT IN DISPUTE, THEREFORE, WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). FINALLY, THE APPEAL OF THE ASSESSEE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 01/02/2016. SD/- SD/- ( G.S. PANNU ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER & ' MUMBAI; + DATED : 03/02/2016 F{X~{T? P.S/. .. %$&'()(*& / COPY OF THE ORDER FORWARDED TO : ITA NO.1570/MUM/2012 ASHIT M. PATEL 9 1. , -. / THE APPELLANT 2. /0-. / THE RESPONDENT. 3. 11 & 2$ ( , ) / THE CIT, MUMBAI. 4. 11 & 2$ / CIT(A)- , MUMBAI 5. 4%5/$! , 1, ),!6 , & ' / DR, ITAT, MUMBAI 6. 7'8' / GUARD FILE. / BY ORDER, 04$/$ //TRUE COPY// / (DY./ASSTT. REGISTRAR) , & ' / ITAT, MUMBAI