Sukesh Yogendra Sarkar, Ahmedabad V. The Income tax Officer,Ward-8(1), Ahmedabad

ITA 1607/AHD/2012

• Counselvise Citation: 160720514 RSA 2012
• Duration Of Justice: 42 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2012
• Appeal Filed By: Assessee
• Assessment Year: misc
• Appeal Filed On: 01-01-1970
• Court: TRIBUNAL
• Department Lawyers: ALBINAS TIRKEY
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD (BEFORE SHRI MUKUL KUMAR SHRAWAT, JM AND A. K. GARO DIA, AM) ITA NO. 1606/AHD/2012 A. Y.: 2008-09 YOGINIBEN YOGENDRA SARKAR, 9-A, PATIAR SOCIETY, PANCHWATI, ELLISBRIDGE, AHMEDABAD P. A. NO. ACLPS 2672 P VS THE INCOME TAX OFFICER, WARD 8(1), AHMEDABAD (APPELLANT) (RESPONDENT) ITA NO.1607/AHD/2012 A. Y.: 2008-09 SUKESH YOGENDRA SARKAR, 9-A, PATIDAR SOCIETY, PANCHWATI, ELLISBRIDGE, AHMEDABAD P. A. NO. ACLPS 2674 M VS THE INCOME TAX OFFICER, WARD 8(1), AHMEDABAD (APPELLANT) (RESPONDENT) ASSESSEE BY NONE RESPONDENT BY SHRI ALBINAS TIRKEY, SR. DR DATE OF HEARING: 17-09-2012 DATE OF PRONOUNCEMENT: 21-09-2012 O R D E R PER MUKUL KUMAR SHRAWAT: THESE APPEALS HAVE BEEN FILED BY THE ASSESSEES ARISING FROM TWO SEPARATE OR DERS OF THE CIT(A)- XIV, AHMEDABAD DATED 11-05-2012. IN THESE TWO APPEA LS, THE MAIN GROUND IS IDENTICALLY WORDED IS REPRODUCED BELOW: ITA NO.1606 AND 1607/AHD/2012 (AY 2008-09) YOGINIVEN YOGENDRA SARKAR VS ITO, W-8(1), AHMEDABAD SUKESH YOGENDRA SARKAR VS ITO, W-8(1), AHMEDABAD 2 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ORDER OF THE LD. A. O. TO THE EXTENT OF RS.56,0 00/- AS NOTIONAL INCOME FROM PARTLY OWNED RESIDENTIAL HOUSE . 2. AT THE OUTSET, IT IS WORTH TO MENTION THAT ON TH E DATE OF HEARING AN APPLICATION FOR ADJOURNMENT WAS MOVED. HOWEVER, CONSIDERING THE SMALLNESS OF THE ISSUE, WE HAVE DECIDED TO PROCEED WITH THE CASES. WE HAVE HEARD THE LEARNED DR, SHRI ALBINAS TIRKEY. 3. THE FACTS IN BRIEF AS EMERGED FROM THE CORRESPON DING ASSESSMENT ORDERS PASSED U/S 143 OF THE IT ACT DATE D 23/24-11- 2012, WERE THAT THESE APPELLANTS IN INDIVIDUAL CAPA CITY WERE HAVING SHARE IN TWO PROPERTIES STATED TO BE SELF OCCUPIED PROPERTIES. ACCORDING TO THE AO, IN TERMS OF THE PROVISIONS OF SECTION 23(4) (B) OF THE IT ACT, THE ASSESSEES HAVE TO EXERCISE AN OPTIO N IN RESPECT OF ONLY ONE PROPERTY. AFTER TAKING INTO CONSIDERATION THE AREA AND THE LOCALITY, THE OA HAS DETERMINED THE FAIR MARKET VAL UE OF ONE OF THE PROPERTIES SITUATED AT B-18, PATIDAR SOCIETY, PANCH WATI, ELLISBRIDGE, AHMEDABAD AT RS.3,60,000/-. THE ASSESSEES ONE THIR D SHARE IN THE PROPERTY WAS COMPUTED AT RS.1,20,000/- AND AFTER AL LOWING THE DEDUCTION U/S 24 (A) OF THE IT ACT @30%, THE NET AN NUAL VALUE WAS ASSESSED AT RS.80,000/- IN THE HANDS OF THE ASSESSE ES. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. 4. BEFORE THE LEARNED CIT(A) THE MAIN CONTENTION OF THE ASSESSEES WAS THAT AS PER THE MUNICIPAL TAX BILL THE TAX IMPO SED WAS RS.5,336/. IT WAS ARGUED THAT WHILE DETERMINING THE RENTAL VAL UE OF SELF OCCUPIED PROPERTY (SOP), THE STANDARD RENT OF THE PROPERTY S HOULD BE THE RENTAL ITA NO.1606 AND 1607/AHD/2012 (AY 2008-09) YOGINIVEN YOGENDRA SARKAR VS ITO, W-8(1), AHMEDABAD SUKESH YOGENDRA SARKAR VS ITO, W-8(1), AHMEDABAD 3 VALUE OF THE PROPERTY AS ASSESSED BY MUNICIPAL TAX AUTHORITIES. THE STANDARD RENT IS TO BE CALCULATED TWELVE TIMES OF T HE TAX DETERMINED. THE ASSESSEES, THEREFORE, CONTESTED THAT THE PROPER TY COULD BE ESTIMATED AT TWELVE TIMES OF THE TAX OF RS.5,336/- I.E. AMOUNTING TO RS.64,032/-. THE ASSESSEES ONE THIRD SHARE OF THE RENTAL VALUE WAS THUS COMPUTED AT RS.21,344/- AND AFTER THE DEDUCTIO N AS PRESCRIBED U/S 24(A) OF THE IT ACT, THE ASSESSEES NET SHARE I N THE RENTAL VALUE WAS COMPUTED AT RS.14,941/-. CASE LAW CITED WAS CIT VS SATYA CO. LTD., 140 CTR 569. HOWEVER, THE LEARNED CIT(A) WAS NOT CONVINCED AND ADOPTED THE FAIR RENT AT RS.20,000/- PER MONTH AS AGAINST RS.30,000/- PER MONTH ESTIMATED BY THE AO. RESULTAN TLY, ONLY PART RELIEF WAS GRANTED. 5. HAVING CONSIDERED THE SUBMISSIONS AS MADE BY THE SE APPELLANTS BEFORE THE LEARNED CIT(A), WE ARE CONVIN CED THAT IN TERMS OF THE PROVISIONS OF SECTION 23 (4) (B) OF THE IT ACT THE ANNUAL VALUE OF THE IMPUGNED PROPERTY IS TO BE DETERMINED ON THE BASIS OF FAIR MARKET RENT. THE FAIR MARKET RENT CAN BE GUIDED BY THE MUNICIPAL RATEABLE VALUE. IN THE PRESENT CASES, THE ASSESSEE S HAVE FURNISHED THE EVIDENCES IN SUPPORT OF THE MUNICIPAL RATEABLE VALUE. THE ASSESSEES HAVE FURNISHED THE BILLS OF THE MUNICIPAL TAX OF RS.5,336/- BEFORE THE AO, HOWEVER THE SAME WAS IGNORED AND THE AO HAS PROCEEDED TO ESTIMATE THE RENTAL VALUE ON AD HOC BA SIS. EVEN, THE FIRST APPELLATE AUTHORITY HAS GRANTED PART RELIED T HAT TOO BY ESTIMATING THE FAIR MARKET RENT AT RS.20,000/- PER MONTH. UNDI SPUTEDLY, THE PROPERTY IN QUESTION REMAINED UN-OCCUPIED AND THERE WAS NO RENTAL INCOME FROM THE SAID PROPERTY. DUE TO THESE REASON S, THE VEHEMENT ITA NO.1606 AND 1607/AHD/2012 (AY 2008-09) YOGINIVEN YOGENDRA SARKAR VS ITO, W-8(1), AHMEDABAD SUKESH YOGENDRA SARKAR VS ITO, W-8(1), AHMEDABAD 4 CONTENTION OF THE ASSESSEES WAS THAT THE FAIR MARKE T VALUE COULD ONLY BE THE MUNICIPAL VALUATION. WE FIND FORCE IN THE SU BMISSIONS OF THE ASSESSEES WHICH WERE MADE BEFORE THE REVENUE AUTHOR ITIES AND BY PLACING RELIANCE ON DEWAN DAULAT RAI KAPOOR VS NEW DELHI MUNICIPAL COMMITTEE AND ANOTHER, 122 ITR 700, BALBI R SINGH (DR.) VS M. C. D. AND M. V. SONAVALA VS CIT, 177 ITR 246 AS ALSO THE CASE LAW CITED SUPRA, WE HEREBY DIRECT TO SUBSTITUT E FAIR RENTAL VALUE AS OFFERED BY THE ASSESSEES BASED UPON THE MUNICIPA L TAX IMPOSED ON THE PROPERTY IN QUESTION. RESULTANTLY, THIS GROU ND OF BOTH THE APPELLANTS MAY BE TREATED AS PARTLY ALLOWED. 6. IN THE CASE OF SUKESH YOGENDRA SARKAR (ITA NO.1607/AHD/2012), ANOTHER GROUND HAS ALSO BEEN RAI SED BY MAKING THE ADDITION AFTER INVOKING THE PROVISIONS OF SECTI ON 2 (22) (E) OF THE IT ACT. IT WAS NOTICED THAT THE ASSESSEE WAS HOLDING 2 0% SHARE OF M/S. SARKAR JEWELLERS PVT. LTD. IT WAS FURTHER NOTICED THAT THERE WAS A DEBIT BALANCE OF RS.35,551/- IN THE BOOKS OF THE SA ID PRIVATE LIMITED COMPANY. THE AO HAS NOTED THAT AS PER THE BALANCE S HEET OF M/S. SARKAR JEWELLERS PVT. LTD. THERE WERE RESERVES OF R S.85,29,488/-, CREATED FROM THE ACCUMULATED PROFIT OF THE SAID COM PANY. THE AO HAS INVOKED THE PROVISIONS OF SECTION 2 (22) (E) OF THE IT ACT AND MADE AN ADDITION OF RS.35,551/- IN THE HANDS OF THE ASSESSEE. 7. BEFORE THE LEARNED CIT(A), THE CONTENTION OF THE ASSESSEE WAS THAT NO ADVANCE OR LOAN WAS TAKEN FROM THE SAID COM PANY. IT WAS EXPLAINED THAT INITIALLY THERE WAS A CREDIT BALANCE UP TO 26-03-2008 OF RS.6,64,449/- IN THE BOOKS OF THE SAID COMPANY. THE REAFTER, ITA NO.1606 AND 1607/AHD/2012 (AY 2008-09) YOGINIVEN YOGENDRA SARKAR VS ITO, W-8(1), AHMEDABAD SUKESH YOGENDRA SARKAR VS ITO, W-8(1), AHMEDABAD 5 WITHDRAWAL OF RS.7,00,000/- WAS MADE THROUGH A CHEQ UES. THE POSITION AS PER THE CAPITAL ACCOUNT WAS THAT THE AS SESSEE HAS RECEIVED INTEREST ON THE CREDIT BALANCE. THE ASSESS EE HAS ALSO EXPLAINED THAT AFTER CREDITING THE INTEREST INSTEAD OF DEBIT BALANCE IN THE SAID COMPANY, THERE WAS A RESULTANT CREDIT BALA NCE OF RS.70,623/-. IN SUPPORT, A COPY OF THE ACCOUNT HAS ALSO BEEN FURNISHED. HOWEVER, THE LEARNED CIT(A) WAS NOT CONV INCED AND UPHELD THE ACTION OF THE AO PRIMARILY ON THE GROUND THAT THE ASSESSEE HAD SUBSTANTIAL SHAREHOLDING IN THE SAID COMPANY. 8. ON DUE CONSIDERATION OF THOSE FACTS OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE AO HAD PROCEEDED ON WRONG PREMISE BY CONSIDERING A POSITION OF THE ACCOUNT IN THE MIDDLE OF THE ACCOUNTING YEAR WITHOUT TAKING INTO ACCOUNT THE TOTAL CREDITS WHICH WERE MADE I.E. THE CREDIT OF THE INTEREST OF RS.1,28,366/- AS ON 3 1-03-2008. CONSEQUENT THEREUPON, THE OUTSTANDING CREDIT BALANC E WAS RS.70,623/- AS ON 31-03-2008 INSTEAD OF ALLEGED DEB IT BALANCE. WE, THEREFORE, HOLD THAT THE PROVISIONS OF SECTION 2 (2 2) (E) OF THE IT ACT HAVE WRONGLY BEEN INVOKED BECAUSE THERE WAS NO DIST RIBUTION OF ACCUMULATED PROFITS IN THE SHAPE OF DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE. WE, THEREFORE, DIRECT TO DELETE THE A DDITION. ITA NO.1606 AND 1607/AHD/2012 (AY 2008-09) YOGINIVEN YOGENDRA SARKAR VS ITO, W-8(1), AHMEDABAD SUKESH YOGENDRA SARKAR VS ITO, W-8(1), AHMEDABAD 6 9. IN THE RESULT, THESE APPEALS OF THE APPELLANTS A RE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A. K. GARODIA) ACCOUNTANT MEMBER (MUKUL KR. SHRAWAT) JUDICIAL MEMBER LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 17-09-2012 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 17-09-12 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: