Aruna Agarwal, Hyderabad V. DCIT., Central Circle-4, Hyderabad, Hyderabad

ITA 1961/HYD/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1918 (ITAT-HYDERABAD)
• Duration Of Justice: 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 05-08-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 31-12-2014
• Court: TRIBUNAL
• Department Lawyers: S K GUPTA
• Assessee Lawyers: S RAMA RAO
• Keywords: Search and seizure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. ASST. YEAR APPELLANT RESPONDENT 11/HYD/2015 2007-08 ABHISHEK AGARWAL, HYDERABAD [PAN: AFVPA9492L] DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-4, HYDERABAD 12/HYD/2015 2008 - 09 13/HYD/2015 2009-10 14/HYD/2015 2010-11 15/HYD/2015 2011-12 ITA NO. ASST. YEAR APPELLANT RESPONDENT 16/HYD/2015 2007-08 ASHISH KUMAR AGARWAL, HYDERABAD [PAN: ADWPA8141M] DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-4, HYDERABAD 17/HYD/2015 2008-09 18/HYD/2015 2009-10 19/HYD/2015 2010-11 20/HYD/2015 2011 - 12 ITA NO. ASST. YEAR APPELLANT RESPONDENT 4/HYD/2015 2007-08 AJAY KUMAR AGARWAL, HYDERABAD [PAN: AFVPA9491B] DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-4, HYDERABAD 5/HYD/2015 2008-09 6/HYD/2015 2009-10 7/HYD/2015 2010-11 8/HYD/2015 2011-12 ITA NO. ASST. YEAR APPELLANT RESPONDENT 1960/HYD/2014 2007-08 ARUNA AGARWAL, HYDERABAD [PAN: AFNPA5184R] DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-4, HYDERABAD 1961/HYD/2014 2007-08 1962/HYD/2014 2009-10 1963/HYD/2014 2010-11 1964/HYD/2014 2011-12 FOR ASSESSEE : SHRI S. RAMA RAO, AR FOR REVENUE : SHRI S.K. GUPTA, DR DATE OF HEARING : 23-09-2015 DATE OF PRONOUNCEMENT : 14-10-2015 O R D E R PER BENCH : THESE ARE BATCH OF APPEALS BY DIFFERENT ASSESSEES, WHO WERE CO-OWNERS OF A PROPERTY WHICH WAS LET OUT. THE APPEALS ARISE AGAINST THE ORDERS OF THE ABHISHEK AGARWAL, ASHISH KUMAR AGARWAL, AJAY KUMAR AGARWAL, ARUNA AGARWAL, :- 2 -: COMMISSIONER OF INCOME TAX (APPEALS)-I, HYDERABAD DT. 27-10-2014 IN EACH CASE, BUT COMMON FOR ALL ASSESSMENT YEARS INVOLVED IN PARTICULAR ASSESSEES CASE. SINCE ISSUES ARE COMMON AND ARISE OUT OF SIM ILAR ORDERS BY ASSESSING OFFICER (AO), THESE BATCH OF APPEALS ARE HEARD TOGE THER AND DISPOSED-OFF BY THIS COMMON ORDER. 2. BRIEFLY STATED, ASSESSEES HEREIN ARE FIVE CO-OWN ERS OF COMMERCIAL PROPERTY (ENTIRE GROUND FLOOR) IN VISHNU CALSSIC AT H.NO. 8-3-945/A, AMEER PET, HYDERABAD. THE SHARE IN THE PROPERTY IS AS UNDER: I. MAHENDRA KUMAR AGARWAL (HUF) - 1/10 II. ABHISHEK AGARWAL - 3/10 III. AJAY AGARWAL - 2/10 IV. SMT. ARUNA AGARWAL - 1/10 V. ASHISH AGARWAL - 3/10 THE ABOVE ASSESSEES HAVE RETURNED THE RENTS RECEIVE D IN THE IMPUGNED AYS. 2007-08 TO 2011-12. 3. CONSEQUENT TO SEARCH AND SEIZURE OPERATIONS IN S HRI SURESH CHAND AGARWAL AND OTHERS ON 29-10-2010, ASSESSEES CASES WERE CENTRALIZED AND NOTICES U/S. 153C OF THE INCOME TAX ACT [ACT] DT. 2 2-10-2012 WAS ISSUED TO ASSESSEES IN THE IMPUGNED ASSESSMENT YEARS. IN THE COURSE OF SEARCH PROCEEDINGS, CERTAIN LOSE SHEETS VIDE PAGE NOS. 131 TO 141 OF ANNEXURE- A/SCA/02 WERE SEIZED. THE DOCUMENTS AT PAGE NOS. 131 TO 137 RELATE TO THE LEASE DEED DT. 05-09-2006 AND DOCUMENTS AT PAGE NOS . 138 TO 141 RELATE TO UN- SIGNED SUPPLEMENTARY LEASE DEED DT. 09-09-2006. UPO N PERUSAL OF ABOVE MENTIONED DOCUMENTS, AS THEY REFERRED TO LEASING OF THE GROUND FLOOR PROPERTY STATED ABOVE TO M/S. M. NARASIMHA NARAYANA & SONS, AO CAME TO THE CONCLUSION ABHISHEK AGARWAL, ASHISH KUMAR AGARWAL, AJAY KUMAR AGARWAL, ARUNA AGARWAL, :- 3 -: THAT THE RENTS WERE SUPPRESSED IN THE LEASE DEED DT . 05-09-2006. IT WAS NOTICED THAT THERE WERE ADDITIONAL CLAUSES IN SUPPLEMENTARY LEASE DEED SPECIFYING THAT THERE WAS A MISTAKE IN MONTHLY RENT SHOWN AT RS. 2, 25,000/- WHICH SHOULD BE RS. 3,85,000/-. IT WAS FURTHER NOTICED THAT AMOUNT OF DEPOSIT OF RS. 26 LAKHS WAS NOT MENTIONED. IT WAS NOTICED THAT SUPPLEMENTA RY DEED MENTIONS PAYMENT OF RENT TO THE EXTENT OF RS. 1,60,000/- IN CASH OVE R AND ABOVE THE MONTHLY RENT MENTIONED IN THE PRINCIPAL LEASE DEED OF RS. 2,25,0 00/-. IT WAS ALSO NOTICED THAT SUPPLEMENTARY DEED MENTIONS SECURITY DEPOSIT OF RS. 26 LAKHS BY CASH, WHICH IS REFUNDABLE FREE OF INTEREST AT THE TIME OF VACATING THE PREMISES. BASED ON THE TERMS OF LEASE AS STATED IN THE SUPPLEMENTARY LEASE DEED, ASSESSEE WAS ASKED WHY THE RENTAL INCOME CANNOT BE INCREASED ON THE BA SIS OF THE SUPPLEMENTARY LEASE DEED. ASSESSEE SUBMITTED THAT SUPPLEMENTARY LEASE DEED WAS NOT IN EXISTENCE AND THE SAME WAS ALSO NOT SIGNED OR IMPLE MENTED, THERE WAS NO RECEIPT OF RENT IN CASH NOR THERE WAS ANY DEPOSIT B Y WAY OF CASH AND THE ORIGINAL LEASE DEED WAS ONLY IMPLEMENTED AND THEY HAVE RECEI VED AN AMOUNT OF RS. 25 LAKHS AS DEPOSIT MUCH BEFORE THE LEASE DEED WAS ENT ERED INTO BY ONE OF THE PARTIES. 3.1. NECESSARY ENQUIRIES WERE CONDUCTED WITH THE LE SSEE AND STATEMENT ON OATH U/S. 131 OF THE ACT WAS RECORDED FROM SHRI RAJ ENDRA MALVE ON 21-03-2013. EVEN THOUGH AO STATES THAT SHRI RAJENDRA MALVE ADVA NCED AN AMOUNT OF RS. 26 LAKHS VIDE CHEQUE NO. 326951 DT. 15-07-2006 DRAWN O N DENA BANK, M.G. ROAD, SECUNDERABAD BRANCH, THE RECEIPT ENCLOSED INDICATE THAT THE SAID PARTY HAS ADVANCED AN AMOUNT OF RS. 25 LAKHS, WHICH WAS SIGNE D BY THE ABOVE LESSOR PARTIES AND TWO WITNESSES. IT WAS ASSESSEES CONTE NTION THAT SUPPLEMENTARY DEED WAS NOT SINGED AND THERE IS ONLY ONE WITNESS S IGNATURE WHOSE SIGNATURE IS COMMON IN BOTH THE DEEDS, BUT LESSORS SIGNATURES AL ONG WITH LESSEE SIGNATURE WAS MISSING. IT WAS SUBMITTED THAT SUPPLEMENTARY L EASE DEED WAS NEVER IMPLEMENTED AND THEREFORE ONE SHOULD NOT TAKE COGNI ZANCE OF THE SAME. ABHISHEK AGARWAL, ASHISH KUMAR AGARWAL, AJAY KUMAR AGARWAL, ARUNA AGARWAL, :- 4 -: 4. AO HOWEVER, DID NOT AGREE. HE WAS OF THE OPINIO N THAT IN THE PROCESS OF GIVING PROPERTIES ON RENT, ADVANCES ARE BEING ACCEP TED AND SOMETIMES RENT IN CASH WAS ALSO ACCEPTED. THEREFORE, RELYING ON THE SUPPLEMENTARY LEASE DEED, HE BROUGHT TO TAX THE ADDITIONAL AMOUNT OF RS. 1,60,00 0/- PM AND MADE ADDITION OF RS. 2,68,800/- AFTER ALLOWING THE NECESSARY STATUTO RY DISALLOWANCES AT 1/5 TH OF ASSESSEES SHARE. SIMILAR ADDITIONS WERE MADE IN O THER YEARS IN ALL ASSESSEES CASES. 4.1. APART FROM ADDITION OF THE ENHANCED RENT, AO A LSO TREATED 1/5 TH DEPOSIT RECEIVED IN CASH OF RS. 26 LAKHS AS INCOME OF THE Y EAR AT RS. 5,20,000/-. THIS ADDITION WAS MADE ONLY IN THE FIRST YEAR I.E., AY. 2007-08 BEING THE YEAR OF RECEIPT. THUS, AO MADE AN ADDITION OF RS. 7,88,800 /- IN EACH CASE IN THE FIRST YEAR OF AY. 2007-08 AND ADDITION OF RS. 2,68,800/- IN ALL OTHER FOUR ASSESSMENT YEARS IN THE FOUR ASSESSEES IN THE GROUP EQUALLY. 5. BEFORE THE LD. CIT(A), ASSESSEE HAS MADE DETAILE D SUBMISSIONS THAT IT HAS RECEIVED ONLY AN AMOUNT OF RS. 25 LAKHS BY WAY OF C HEQUE AS SUPPORTED BY THE ENTRIES IN THE BANK A/CS AND FURTHER, NO ADDITIONAL RENT WAS RECEIVED WHICH WAS ALSO CONFIRMED BY THE LESSEE. IT WAS FURTHER SUBMI TTED THAT SUPPLEMENTARY DEED WAS NOT SIGNED AND THE WITNESS SIGNATURE THERE ON OF SHRI GULAB T. LALWANE AS STATED BY LESSEE IN HIS STATEMENT, DOES NOT MAKE THE SUPPLEMENTARY DEED AS A VALID ONE IN THE ABSENCE OF AGREEMENT BETWEEN THE PARTIES DULY SIGNED. LD. CIT(A) AFTER DETAILED ANALYSIS NOT ONLY AGREED WITH THE AO IN CONFIRMING THE RENT BUT ALSO DIRECTED TO ENHANCE THE RENT IN LATER YEAR S AS PER CLAUSE-3A OF THE PRINCIPAL LEASE DEED DT. 05-09-2006, WHEREIN INCREM ENT OF 6% PER YEAR OF THE LEASE AMOUNT PAYABLE BY THE LESSEE WAS AGREED. HOW EVER, THE LD. CIT(A) DIRECTED THE AO TO ADOPT THE INCOMES AS PER THE OWN ERSHIP RATIO RATHER THAN 1/5 TH ADOPTED BY THE AO EQUALLY AMONG ASSESSEES. WITH T HAT MODIFICATION, LD.CIT(A) NOT ONLY CONFIRMED ADDITION OF ENHANCED R ENT AS WELL AS PROPORTIONATE ABHISHEK AGARWAL, ASHISH KUMAR AGARWAL, AJAY KUMAR AGARWAL, ARUNA AGARWAL, :- 5 -: AMOUNT OF THE SECURITY DEPOSIT AS INCOME BUT MADE FURTHER ENHANCEMENT BY 6% PER YEAR IN LATER ASSESSMENT YEARS. 6. ASSESSEE IS AGGRIEVED AND RAISED THE FOLLOWING G ROUNDS WHICH ARE COMMON IN ALL ASSESSEES CASES. FOR THE SAKE OF RE CORD, THE GROUNDS IN AY. 2007-08 ARE EXTRACTED. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN H OLDING THAT THE APPELLANT ALONGWITH CO-OWNERS WAS IN RECEIPT OF ADDITIONAL RE NTAL INCOME OF RS. 1,60,000/- PER MONTH AND FURTHER ERRED IN CONFIRMIN G THE ADDITION OF RS. 2,68,800/- MADE BY THE ASSESSING OFFICER. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN DIRECTING THE ASSESSING OFFICER TO WORK OUT INCREAS E IN THE RENTS AT THE RATE OF 6% PER YEAR AND ERRED IN DIRECTING THE ASSE SSING OFFICER TO RECALCULATE THE INCOME FROM PROPERTY. 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) ERRED IN HOLDING THAT THE APPELLANT ALONG WITH THE OTHER CO- OWNERS WAS IN RECEIPT OF RS. 26 LAKHS TOWARDS SECURITY DEPOSIT AND FURTHE R ERRED IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER OF RS. 5 ,20,000/-. THE COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE CONSIDERED THE FACT THAT THE AMOUNT OF RS. 2,60,000/- RECEIVED BY THE C O-OWNERS DOES NOT REPRESENT THE INCOME. 7. BOTH THE PARITIES REITERATED RESPECTIVE STANDS. AFTER CONSIDERING THE RIVAL CONTENTIONS AND PERUSING THE DOCUMENTS PLACED ON RE CORD, WE ARE UNABLE TO ACCEPT THE CONTENTIONS OF THE REVENUE. FIRST OF AL L, ANNUAL VALUE OF PROPERTY HAS TO BE DETERMINED ON THE BASIS OF PROVISIONS OF SECTION 22 & 23 OF THE ACT. FOR THE SAKE OF ANALYSIS, THE PROVISIONS OF SECTION 22 & 23 ARE EXTRACTED: SEC.22. INCOME FROM HOUSE PROPERTY.- THE ANNUAL VA LUE OF PROPERTY CONSISTING OF ANY BUILDINGS OR LANDS APPURTENANT TH ERETO OF WHICH THE ASSESSEE IS THE OWNER , OTHER THAN SUCH PORTIONS OF SUCH PROPERTY AS HE MAY OCCUPY FOR THE PURPOSES OF ANY BUSINESS OR PROF ESSION CARRIED ON BY ABHISHEK AGARWAL, ASHISH KUMAR AGARWAL, AJAY KUMAR AGARWAL, ARUNA AGARWAL, :- 6 -: HIM THE PROFITS OF WHICH ARE CHARGEABLE TO INCOME-T AX, SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD INCOME FRO M HOUSE PROPERTY 23. (1) FOR THE PURPOSES OF SECTION 22, THE ANNUAL VALUE OF ANY PROPERTY SHALL BE DEEMED TO BE (A) THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY 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 OWN ER ACCORDING TO THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY HIM) IN DETERMINING THE ANNUAL VALUE OF THE PROPERTY OF THAT PREVIOUS YEAR 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 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 PURPO SES OF HIS OWN RESIDENCE; OR (B) CANNOT ACTUALLY BE OCCUPIED BY THE OWNER BY REA SON 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 O WNER. ABHISHEK AGARWAL, ASHISH KUMAR AGARWAL, AJAY KUMAR AGARWAL, ARUNA AGARWAL, :- 7 -: (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 OPTION, 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.] AS CAN BE SEEN, ANNUAL VALUE OF PROPERTY SHALL BE C HARGEABLE TO INCOME TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY UNDER S ECTION 22 OF THE ACT. HOWEVER, AS PER SECTION 23, ANNUAL VALUE HAS TO BE DETERMINED AS PRESCRIBED. SUB-SECTION 1 OF SECTION 23 DEEMS ANNUAL VALUE OF P ROPERTY : A) THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR; B) WHERE THE PROPERTY OR ANY PART OF PROPERTY IS LET A ND THE ANNUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT TO T HEREOF IS IN EXCESS OF A SUM REFERRED TO IN CLAUSE-A, THE AMOUNT SO REC EIVED OR RECEIVABLE. 8. HERE IN THIS CASE, ASSESSEES STATE THAT THEY HAV E RECEIVED ONLY RENT OF RS. 2,25,000/- IN ALL THE IMPUGNED ASSESSMENT YEARS. T HE REVENUE DID NOT ESTABLISH THAT ASSESSES HEREIN ARE RECEIVABLE MORE THAN THE A MOUNT RECEIVED BY THEM. THE ONUS IS ON THE DEPARTMENT TO ESTABLISH THAT THE RECEIVABLE RENT IS MORE THAN WHAT ACTUALLY ASSESSEE STATED TO HAVE BEEN RECEIVED . IN THIS CASE, EVEN THOUGH THERE WAS SOME UN-SINGED SUPPLEMENTARY DEED, THE TE RMS OF WHICH ARE AT VARIANCE WITH THE PRINCIPAL LEASE DEED, REVENUE IS NOT ABLE TO ESTABLISH THE RECEIPT OF EITHER CASH DEPOSIT OR ENHANCED RENT BY THE PARTIES. JUST BECAUSE THE UN-SIGNED SUPPLEMENTARY DEED WAS SEIZED AS A PART O F SEIZED MATERIAL, IT DOES NOT ESTABLISH THAT THE LESSEE AND LESSOR HAVE AGREE D TO RECEIVE ENHANCED RENT. AO ALSO MENTION THAT THE LESSEE WAS QUESTIONED U/S. 131 AND HAS ONLY STATED THAT HE HAS ADVANCED AN AMOUNT OF RS. 26 LAKHS (RS. 25 LAKHS, BUT WRONGLY ABHISHEK AGARWAL, ASHISH KUMAR AGARWAL, AJAY KUMAR AGARWAL, ARUNA AGARWAL, :- 8 -: STATED BY AO AS 26 LAKHS). AS STATED EARLIER, SRI RAJENDRA MALVE HAS ISSUED A CHEQUE WHICH WAS ACCEPTED BY PARTIES BY WAY OF SIGN ED RECEIPT DT. 15-07-2006 TO AN EXTENT OF RS. 25 LAKHS ONLY. AS SEEN FROM TH E DOCUMENTS, LESSEE IS A PARTNERSHIP FIRM AND HAVING BUSINESS IN THE COMMERC IAL PROPERTY. IT IS NOT UNDERSTANDABLE WHY A BUSINESS PERSON WANT TO PAY RE NT IN CASH WHEN IT CAN CLAIM DEDUCTION OF THE ENTIRE AMOUNT DIRECTLY IN IT S P&L A/C OF THE RENT PAID/PAYABLE. MAY BE THE SUPPLEMENTARY DEED MUST H AVE BEEN PREPARED IN AND AROUND THE SAME POINT OF TIME BUT THAT WAS NOT SIGN ED OR IMPLEMENTED BY EITHER OF THE PARTIES. JUST BECAUSE THERE IS A WITNESS SI GNATURE, IT CANNOT BE STATED THAT THE SUPPLEMENTARY LEASE DEED IS AN AGREED LEAS E DEED BETWEEN THE PARTIES. REVENUE HAS TO ESTABLISH THAT THE PARTIES HAVE ACTE D ACCORDING TO THE SUPPLEMENTARY LEASE DEED. 9. AS SEEN FROM THE FACTS AVAILABLE ON RECORD, THE LESSEE HAS CONFIRMED THAT HE HAS PAID RS. 25 LAKHS AS DEPOSIT ON 15-07-2006 A ND ENTERED INTO A LEASE DEED WHICH IS CALLED PRINCIPAL LEASE DEED BY THE RE VENUE ON 05-09-2006 FOR OCCUPATION OF COMMERCIAL BUSINESS UPTO AN AREA OF 4 ,800 SQ. FT., W.E.F. 01-10- 2006. THEREFORE, UNDER THE PROVISIONS OF SECTION 2 3, THE RENT ACTUALLY RECEIVED CAN ONLY BE CONSIDERED FOR THE PURPOSE OF DETERMINI NG THE ACTUAL VALUE. IF THE MARKET VALUE OF RENT IS MORE AND NECESSARY EVIDENCE S ARE AVAILABLE, THEN AO IS WELL WITHIN HIS RIGHTS TO DETERMINE ANNUAL VALUE OF THE PROPERTY U/S. 23(1)(A). NOTHING OF THAT SORT WAS DONE BY THE AO AND UNFORTU NATELY, LD. CIT(A) ALSO CONFIRMED THE SO CALLED ADDITION, WITHOUT EXAMINING THE PROVISIONS OF THE ACT. MOREOVER, IT IS ALSO NOT CORRECT ON THE PART OF THE CIT(A) TO IGNORE RS. 25 LAKHS, CHEQUE RECEIVED BY THE PARTIES BUT STATING THAT LES SEE MIGHT HAVE PAID RS. 26 LAKHS CASH, WHEN NEITHER PARTY ACCEPTED THE SAME AN D THERE IS NO EVIDENCE IN ANY FORM. MOREOVER, WE ARE UNABLE TO UNDERSTAND HO W THE SECURITY DEPOSIT CAN BE INCOME TO ASSESSEE? SECURITY DEPOSIT IS FOR SECU RING THE RENT AND PROPERTY DURING THE PERIOD OF LEASE AND GENERALLY REFUNDABLE ON TERMINATION OF LEASE, AFTER ADJUSTING DUES IF ANY. THIS CAN NOT BE TREATED AS I NCOME. IN THE EVENT OF UNUSUALLY HIGH AMOUNT OF DEPOSIT WITH NOMINAL RENT, THEN THE SECURITY DEPOSIT ABHISHEK AGARWAL, ASHISH KUMAR AGARWAL, AJAY KUMAR AGARWAL, ARUNA AGARWAL, :- 9 -: COMPONENT IS CONSIDERED FOR DETERMINING ANNUAL LETT ING VALUE. BUT IN NO CASE THE DEPOSIT CAN BE TREATED AS INCOME OF THE YEAR OF REC EIPT. IF THE STAND OF REVENUE IS TO BE ACCEPTED, THEN OFFICIALLY RECEIVED CHEQUE RS. 25 LAKHS DEPOSIT WAS ALSO TO BE BROUGHT TO TAX, AS REVENUE STAND WAS THAT RS. 26 LAKHS WAS PAID IN CASH AS DEPOSIT OVER AND ABOVE THE 25 LAKHS RECEIVED BY PARTIES. WE ARE OF THE OPINION THAT THERE IS ONLY ONE SECURITY DEPOSIT OF RS. 25 LAKHS WHICH WAS ACCEPTED BY WAY OF CHEQUE, DULY CREDITED IN THE BAN K A/C OF THE PARTY MUCH BEFORE THE LEASE DEED WAS ENTERED AND ALSO ACKNOWLE DGED AND ACCEPTED BY THE LESSEE. THEREFORE, THE ADDITION OF 1/5 TH OF SECURITY DEPOSIT OF RS. 26 LAKHS IN THE YEAR OF RECEIPT CANNOT BE ACCEPTED AS IT IS AGAINST THE FACTS AND ALSO AGAINST THE PROVISIONS OF LAW. THEREFORE, AS FAR AS THE ADDITI ON OF 1/5 TH OF RS. 26 LAKHS IS CONCERNED IN AY. 2007-08, THE SAME IS DELETED AND A SSESSEES GROUND NO. 4 IS ALLOWED. 10. WITH REFERENCE TO ENHANCEMENT OF 6% CONTESTED I N GROUND NO.2 IS CONCERNED, IT IS TRUE THAT LEASE DEED MENTIONS INCR EASE OF RENT BY 6%. IT IS TO BE VERIFIED WHETHER THE PARTIES HAVE IMPLEMENTED TH IS CLAUSE. THEN ONLY THE ACTUAL RENT RECEIVED CAN BE CONSIDERED. WE ARE SUR PRISED TO NOTE THAT WHILE ADDITION WAS CONFIRMED ON THE BASIS OF THE SUPPLEME NTARY LEASE DEED, CIT(A) RELIES ON PRINCIPLE LEASE DEED DT. 05-09-2006 FOR T HE PURPOSE OF ENHANCEMENT OF RENT, THAT TO WITHOUT GIVING PROPER OPPORTUNITY TO ASSESSEE WHEN INCOME IS BEING ENHANCED. THE ACTION OF CIT(A) CANNOT BE SUPPORTED ON FACTS OR LAW. THEREFORE, GROUND NO.3 OF ASSESSEE IS ALLOWED. 11. COMING TO GROUND NO.2, AS ALREADY STATED, T THE RE IS NO EVIDENCE THAT ASSESSEE HAS RECEIVED THE ENHANCED RENT AND SUPPLEM ENTARY DEED CANNOT BE TAKEN INTO CONSIDERATION AS IT IS NOT A VALID DOCUM ENT ON WHICH ONE CAN RELY. HOWEVER, SINCE THE AO HAS NOT DETERMINED THE ANNUAL VALUE OF THE PROPERTY BY INVOKING THE PROVISIONS OF SECTION 23, WE ARE OF TH E OPINION THAT VALUATION UNDERTAKEN BY AO IS TO BE SET ASIDE AND ENTIRE MATT ER IS TO BE RESTORED TO THE ABHISHEK AGARWAL, ASHISH KUMAR AGARWAL, AJAY KUMAR AGARWAL, ARUNA AGARWAL, :- 10 - : FILE OF AO TO CONSIDER THE PROVISIONS OF SECTION 23 (1) AND THEN DETERMINE THE ANNUAL LETTING VALUE EITHER UNDER THE PROVISIONS OF (A) OR (B), AFTER GIVING DUE OPPORTUNITY TO ASSESSEE IN THE YEARS UNDER CONSIDER ATION. THE AO ALSO CAN KEEP IN MIND THE TERMS OF THE DEED DT. 05-09-2006, WITH REFERENCE TO ENHANCEMENT OF RENT IN LATER YEARS AND SEEK ASSESSEES EXPLANATION WITH REFERENCE TO THAT. AO CAN KEEP THAT IN MIND WHILE DETERMINE THE ANNUAL LE TTING VALUE IF SO REQUIRED. WITH THESE DIRECTIONS/OBSERVATIONS, THE ENHANCEMENT OF RENT AS WAS DONE BY THE AO IS SET ASIDE AND ENTIRE ISSUE OF DETERMINING HOU SE PROPERTY INCOME UNDER THE PROVISIONS IS RESTORED TO THE FILE OF AO FOR FRESH ADJUDICATION. ASSESSEES SHOULD BE GIVEN DUE OPPORTUNITY IN THE PROCEEDINGS BEFORE AO. IN THE RESULT, GROUND NO. 2 IS CONSIDERED PARTLY ALLOWED FOR STATISTICAL PURPOSES. 12. IN THE RESULT, ALL THE APPEALS ARE PARTLY ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 14 TH OCTOBER, 2015 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER AC COUNTANT MEMBER HYDERABAD, DATED 14 TH OCTOBER, 2015 TNMM ABHISHEK AGARWAL, ASHISH KUMAR AGARWAL, AJAY KUMAR AGARWAL, ARUNA AGARWAL, :- 11 - : COPY TO : 1. SHRI ABHISHEK AGARWAL, 8-2-684/4/26, ANAND BANJA RA COLONY, ROAD NO. 12, BANJARA HILLS, HYDERABAD. C/O. SHRI S. RAMA RAO, ADVOCATE, FLAT NO. 102, SHRIYAS ELEGANCE, 3-6-643, STREET NO . 9, HIMAYATNAGAR, HYDERABAD. 2. SHRI ASHISH KUMAR AGARWAL, 8-2-684/4/26, ANAND B ANJARA COLONY, ROAD NO. 12, BANJARA HILLS, HYDERABAD. C/O. SHRI S. RAMA RAO, ADVOCATE, FLAT NO. 102, SHRIYAS ELEGANCE, 3-6-643, STREET NO. 9, HIMAYATNAGAR, HYDERABAD. 3. SHRI AJAY KUMAR AGARWAL, 8-2-684/4/26, ANAND BAN JARA COLONY, ROAD NO. 12, BANJARA HILLS, HYDERABAD. C/O. SHRI S. RAMA RAO, ADVOCATE, FLAT NO. 102, SHRIYAS ELEGANCE, 3-6-643, STREET NO. 9, HIMAYATNAGAR, HYDERABAD. 4. SMT. ARUNA AGARWAL, 8-2-684/4/26, ANAND BANJARA COLONY, ROAD NO. 12, BANJARA HILLS, HYDERABAD. C/O. SHRI S. RAMA RAO, ADVOCATE, FLAT NO. 102, SHRIYAS ELEGANCE, 3-6-643, STREET NO . 9, HIMAYATNAGAR, HYDERABAD. 5. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCL E-4, CHURCH BUILDING, RAMKOTE, HYDERABAD. 6. CIT(APPEALS)-I, HYDERABAD. 7. CIT-(CENTRAL), HYDERABAD. 8 . D.R. I TAT, HYDERABAD . 9. GUARD FILE.