Shri Jayvadan Ramniklal Kapadia, Surat V. The Dy.CIT.,Cent.Circle-3, Surat

ITA 1580/AHD/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1842 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 10-12-2009
• Assessment Year: 1999-2000
• Appeal Filed On: 18-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Fair market value

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH DAHMEDABAD BEFORE S/SHRI T. K. SHARMA, J.M. AND D.C. AGRAWAL, A.M. SHRI JAYVADAN RAMNIKLAL KAPADIA, 9/464, STORE SHERI, WADIFALIA, SURAT. V/S . DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-3, SURAT. PAN NO.ACHPK 3121D (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI MANISH J. SHAH, AR RESPONDENT BY:- SHRI ANIL KUMAR, CIT, DR O R D E R PER T.K. SHARMA, JUDICIAL MEMBER. THESE FIVE APPEALS BY THE ASSESSEE ARE DIRECTED AGA INST THE ORDERS OF CIT(A)-II, AHMEDABAD, FOR THE ASST. YEARS 1999-2000 TO 2002-03, 2004- 05 & 2005-06. ALL THESE APPEALS INVOLVE ONE COMMON ISSUE, THEREFORE, THESE ARE BEING DECIDED BY THIS COMMON ORDER. 2. THE ONLY CONTROVERSY INVOLVED IN ALL THESE APPE ALS IS THAT THE LD. CIT(A) ERRED IN UPHOLDING THE ADDITION IN RESPECT OF INCOME FROM HOUSE PROPERTY COMPUTED BY THE ASSESSING OFFICER ON THE B ASIS OF RENT RECEIVABLE IF THE PROPERTIES ARE LET OUT AND NOT TH E MUNICIPAL VALUATION AS SHOWN BY THE ASSESSEE. YEAR-WISE ADDITIONS MADE BY ASSESSING OFFICER ARE SHOWN AS BELOW:- ITA NOS.1580-1582, 1584 & 1585/AHD/2009 ASST. YEARS: 1999-00 TO 2002-03, 2004-05 & 2005-06 2 ASSESSMENT YEAR AMOUNT (RS) 1999-00 54,000/- 2000-01 54,000/- 2002-03 1,26,000/- 2004-05 75,600/- 2005-06 75,600/- 3. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S AN INDIVIDUAL. HE IS RESIDING IN 9/464, WADIFALIA, STORE SHERI, SURAT. I N ADDITION TO THIS, THE ASSESSEE WAS HAVING TWO OTHER PROPERTIES IN ASSESSM ENT YEARS 1999-00 & 2000-01, 2004-05 & 2005-06 AND THREE OTHER PROPERTI ES IN ASSESSMENT YEAR 2002-03. THE ASSESSEE CLAIMED THAT THESE ADDIT IONAL PROPERTIES ARE LYING VACANT HENCE, THERE WOULD NOT BE ANY INCOME F ROM HOUSE PROPERTY. FURTHER IF ANYTHING HAS TO BE TAKEN, THE MUNICIPAL VALUATION SHOULD BE TAKEN AT RS.500/- AS FAIR MARKET VALUE. IN THE ASSE SSMENT ORDER THE ASSESSING OFFICER HAS TAKEN THE RENT ON EACH BUILDI NG @ RS.3,000/- P.M. AND AFTER DEDUCTING ALLOWANCE U/S 24(2) OF THE ACT, HAD MADE ADDITION OF RS.54,000/- IN ASSESSMENT YEARS 1999-2000 & 2000-01 . IN ASSESSMENT YEAR 2002-03 ON SIMILAR BASIS THE ASSESSING OFFICER MADE ADDITION OF RS.1,26,000/- AND RS.75,600/- IN REMAINING TWO ASSE SSMENT YEARS I.E. 2004-05 & 2005-06. IN APPEAL BEFORE LD. CIT(A) THE ASSESSEE CONTENDED THAT ADDITIONAL HOUSES WERE VACANT IN THE PREVIOUS YEAR RELEVANT TO ALL THE ASSESSMENT YEARS UNDER APPEAL. THERE WAS NO INCOME FROM THE HOUSE PROPERTY. THEREFORE, THE INCOME FROM THESE HOUSE PR OPERTIES SHOULD BE TAXED AT MUNICIPAL VALUATION AT RS.500/- AS FAIR MA RKET VALUE. IN THE IMPUGNED ORDER LD. CIT(A) UPHELD THE ACTION OF ASSE SSING OFFICER FOR THE REASONS WHICH ARE REPRODUCED HEREUNDER :- 3 4. I HAVE CONSIDERED THE FACTS AND THE SUBMISSIONS . I DO NOT AGREE WITH THE APPELLANTS VIEW. AS PER CLAUSE (C) OF SUB -SECTION (1) OF SECTION 23, THE DEDUCTION OUT OF ANNUAL VALUE ON ACCOUNT OF VACANCY IS TO BE ALLOWED WHEN THE PROPERTY IS LET OUT AND REMAINED V ACANT FOR PART OF THE YEAR. IN THE APPELLANTS CASE THE PROPERTIES HAVE N OT ACTUALLY BEEN LET OUT DURING THE ENTIRE YEAR. THE APPELLANT HAS CLAIMED T HAT THE PROPERTIES HAVE REMAINED VACANT THROUGHOUT THE YEAR. HENCE THE CASE OF THE APPELLANT IS NOT COVERED AS PER THE SAID CLAUSE. THE ANNUAL VALU E OF THE PROPERTY HAS TO BE TAKEN AS THE SUM WHICH THE PROPERTIES MIGHT R EASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR OR THE RENT RECEIVED IF TH E PROPERTIES ARE LET OUT AND NOT THE MUNICIPAL VALUATION AS SHOWN BY THE APP ELLANT. THE ASSESSING OFFICER HAS RIGHTLY ESTIMATED THE FAIR RENT AT RS.3 ,000/- P.M. FOR EACH BUILDING. THE APPELLANT HAS NOT GIVEN ANY EVIDENCE FOR FAIR RENT FOR RS.500/-. HENCE, THE ACTION OF THE ASSESSING OFFICE R IS CONFIRMED AND THE GROUND IS REJECTED. AGGRIEVED BY THE IMPUGNED ORDER OF CIT(A), THE ASSE SSEE IS IN APPEAL BEFORE US. 4. AT THE TIME OF HEARING BEFORE US ON BEHALF OF AS SESSEE, SHRI MANISH J. SHAH LD. COUNSEL APPEARED AND CONTENDED THAT THE CONTROVERSY INVOLVED IN THESE APPEALS IS SQUARELY COVERED IN FAVOUR OF T HE ASSESSEE BY THE DECISION OF ITAT MUMBAI D BENCHIN THE CASE OF PA RKPAPER INDUSTRIES (P) LTD. VS. ITO (2008) 25 SOT 406 (MUMBAI) FOR THE ASSESSMENT YEARS 1999-2000, 2001-02, 2002-03 AND 2004-05. IN THAT CA SE IT WAS HELD INCOME FROM HOUSE PROPERTY IS ON THE ANNUAL VALUE OF THE PROPERTY. WHEN THE PROPERTY HAS NOT BEEN LET OUT, WHAT WOULD BE RELEVANT IS ONLY PROVISIONS OF S.23(1)(A). READING OF THE PROVISIONS OF S.23(1)(A) WOULD SHOW THAT ONE HAS TO IMAGINE A SITUATION WHERE THE PROPERTY IN QUESTION IS LET OUT, THOUGH IT IS SELF-OCCUPIED. FROM CBDT CIRC ULAR NO.204 DT.24 TH JULY, 1976, IT IS CLEAR THAT THE LAW PRIOR TO INTRO DUCTION OF S.23(1)(B) WAS THAT ANNUAL VALUE WAS EQUAL TO MUNICIPAL VALUATION OF THE PROPERTY. THE ABOVE CIRCULAR GIVES AN INDICATION AS TO HOW THE EX PRESSION THE SUM FOR WHICH, THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO 4 YEAR USED IN S.23(1)(A) HAS TO BE INTERPRETED. CHA RGE UNDER SEC.22 IS NOT ON THE MARKET RENT; BUT IS ON THE ANNUAL VALUE AND IN THE CASE OF PROPERTY WHICH IS NOT LET OUT, MUNICIPAL VALUE WOULD BE A PR OPER YARDSTICK FOR DETERMINING THE ANNUAL VALUE. MUNICIPAL VALUATION S HOULD BE THE BASIS OF DETERMINING ANNUAL VALUE IN THE PRESENT CASE. ACTIO N OF THE REVENUE AUTHORITIES IN ADOPTING ANNUAL VALUE ON THE BASIS O F INQUIRIES CONDUCTED REGARDING MARKET RENT IN THE VICINITY OF THE PROPER TY IS NOT IN ACCORDANCE WITH LAW. THEREFORE, THE ASSESSING OFFICER IS DIREC TED TO ACCEPT THE INCOME FROM HOUSE PROPERTY ON THE BASIS OF MUNICIPA L VALUATION. 5. ON THE OTHER HAND, SHRI ANIL KUMAR, CIT, SR.DR A PPEARING ON BEHALF OF THE REVENUE SUPPORTED THE ORDERS OF AUTHO RITIES BELOW. 6. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND THE DECISION OF ITAT MUMBAI D BENCH IN THE CASE OF PARKAPER INDUSTRIES (P) LTD. V S. ITO (SUPRA). IN THE CASE BEFORE US, THE PROPERTIES ARE NOT LET OUT. THE REFORE, IS PRESUMED THAT THESE ARE SELF-OCCUPIED AND THE DECISION OF THE ITA T MENTIONED ABOVE IS SQUARELY APPLICABLE TO THE FACTS OF ASSESSEES CASE . THE ITAT MUMBAI D BENCH IN THE AFORESAID DECISION AFTER EXAMINING THE PROVISIONS CONTAINED IN SECTION 22 & 23 OF THE IT ACT, ALL THE RELEVANT CASE LAWS AND CIRCULAR OF CBDT CITED SUPRA HELD THAT CHARGE UNDER SEC.22 IS N OT ON THE MARKET RENT; BUT IS ON THE ANNUAL VALUE AND IN THE CASE OF PROPE RTY WHICH IS NOT LET OUT, MUNICIPAL VALUE WOULD BE A PROPER YARDSTICK FOR DET ERMINING THE ANNUAL VALUE. MUNICIPAL VALUATION SHOULD BE THE BASIS OF D ETERMINING ANNUAL VALUE IN THE PRESENT CASE. ACTION OF THE REVENUE AU THORITIES IN ADOPTING ANNUAL VALUE ON THE BASIS OF INQUIRIES CONDUCTED RE GARDING MARKET RENT IN THE VICINITY OF THE PROPERTY IS NOT IN ACCORDANCE W ITH LAW. WE, THEREFORE, FOLLOWING THE DECISION OF ITAT MUMBAI D BENCH (SU PRA) DIRECT THE 5 ASSESSING OFFICER TO ADOPT THE MUNICIPAL VALUATION OF ALL THE PROPERTIES IN ALL THE ASSESSMENT YEARS UNDER APPEAL. FOR THIS PUR POSE THE ASSESSEE SHALL FURNISH NECESSARY EVIDENCE, THE ASSESSING OFFICER W ILL EXAMINE THE SAME AND RECOMPUTED THE INCOME OF HOUSE PROPERTIES KEEPI NG IN VIEW THE DECISION OF ITAT MUMBAI D BENCH IN THE CASE OF PA RKPAPER INDUSTRIES (P) LTD. (SUPRA). 7. IN THE RESULT, FOR STATISTICAL PURPOSES, ALL THE APPEALS ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 18 /12 /2009 SD/- SD/- (D.C.AGRAWAL) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD, DATED : 18/12/2009 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD