MRS. RAKSHA R. SIPPY, MUMBAI V. ITO 11(1)(3), MUMBAI

ITA 1992/MUM/2011

• Counselvise Citation: 199219914 RSA 2011
• Duration Of Justice: 3 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 21-08-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 10-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHAMMED RIZWAN
• Assessee Lawyers: M SUBRAMANIAN
• Keywords: Reopening of assessment; Notional interest; Reason to believe
• Section: 143(3); 147; 2

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL J , BENCH MUMBAI , BEFORE : SHRI R.C.SHARMA , A M & SHRI SANJAY GARG, J M ITA NO. 1992 / MUM/20 1 1 ( ASSESSMENT YEAR : 200 3 - 0 4 ) MRS. RAKSHA R. SIPPY, 41, ANJALI, NR. RADIO CLUB, COLABA, MUMBAI - 400 005 VS. ITO - 11(1)( 3), MUMBAI PAN/GIR NO. : AA DPS 1572 N ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : SHRI M. SUBRAMANIAN /REVENUE BY : SHRI MOHAMMED RIZWAN DATE OF HEARING : 2 1 ST AUGUST , 201 4 DATE OF PRONOUNCEMENT : 27 TH AUGUST, 201 4 O R D E R PER R.C.SHARMA ( A .M.) : TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A ) FOR THE ASSESSMENT YEAR 2003 - 04 IN THE MATTER OF ORDER PASSED U/S. 143(3) R.W.S147 OF TH E ACT . 2 . INITIALLY THE ASSESSEE HAS RAISED FOL LOWING GROUNDS OF APPEAL : THE LEARNED CIT(A) - 3, MUMBAI SERIOUSLY ERRED IN SUSTAINING THE FOLLOWING ADDITION MADE BY THE ITO WARD 11(1)(3) WHICH THE APPELLANT PRAYS BE DELETED IN APPEAL ON THE FOLLOWING FACTS AND CIRCUMSTANCES OF THE CASE. THE ADDITION B EING ARBITRARILY CALCULATED INTEREST @13.5% ON INTEREST FREE SECURITY DEPOSIT OF RS. 87,50,000/ - RECEIVED BY THE APPELLANT ON LEAVE & LICENSE AGREEMENT WHICH STIPULATES RENT OF RS. 36,000/ - PER MONTH : RS. 11,81,250 / - . ITA NO. 1992 /1 1 2 THEREAFTER VIDE LETTER DATED 14 - 8 - 2014 , THE ASSESSEE HAS RAISED THE FOLLOWING ADDITIONAL GROUNDS : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE & IN LAW, THE REOPENING PROCEEDINGS INITIATED U/S. 147 OF THE I.T. ACT IS INVALID AND BAD IN LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE & IN LAW, THE LEARNED ASSESSMENT ORDER PASSED U/S. 143(3) R.W.S. 147 OF THE I.T. ACT IS INVALID AND BAD IN LAW. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE & IN LAW, THE HOUSE PROPERTY INCOME OUGHT TO HAVE BEEN COMPUTED AS PER THE PROVI SIONS OF SECTIONS 22 TO 27 OF THE ACT AND THE LEARNED C.I.T. (A) ERRED IN NOT DIRECTING SO. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE & IN LAW, THE LEARNED A.O. ERRED IN COMPUTING THE HOUSE PROPERTY INCOME AT RS. 3,96,500/ - AND THE LEARNED C.I.T .(A) ERRED IN CONFIRMING THE SAME. 3 . RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. THE FACTS IN BRIEF ARE THAT ASSESSEE IS AN INDIVIDUAL FILED RETURN OF INCOME AT RS. 6,64,497/ - . THE ASSESSMENT WAS COMPLETED U/S. 143(3) ON 31 - 10 - 2005 DETERMINING TOTAL INCOME AT RS. 7,30,150/ - . THEREAFTER ASSESSMENT WAS REOPENED BY ISSUANCE OF NOTICE U/S. 148. THE REASONS FOR REOPENING WAS COMMUNICATED TO THE ASSESSEE. THE ASSESSEE OWNS HOUSE PROPERTY FOR WHICH INTEREST FREE DEPOSIT OF RS. 87,50,000/ - HAS BEEN TAKEN. ON THE BASIS OF THE DECISION OF THE TRIBUNAL IN THE CASE OF TIVOLI INVESTMENTS TRADING CO. PVT. LTD., (2004) 90 ITD 163 , THE ASSESSMENT WAS REOPENED, WHEREIN IT WAS HELD THAT HOUSE PROPERTY INCOME IS TO BE DETERMINED AFTER CONSIDERING INTEREST RECEIVABLE @ 18% P.A. ON INTEREST FREE DEPOSIT OF RS. 87,50,000/ - . ACCORDINGLY, ADDITION ITA NO. 1992 /1 1 3 WAS MADE BY THE AO BY COMPUTING INTEREST AT 18@ ON INTEREST FREE DEPOSIT, UNDER THE HEAD INCOME FROM HOUSE PROPERTY. BY THE IMPUGNED ORDER, THE CIT(A) CONFIRMED THE ACTION OF THE AO AND ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4 . IT WAS ARGUED BY THE LEARNED AR THAT REASONS SUPPLIED BY THE AO WAS NOT SUFFICIENT TO REOPEN THE ASSESSMENT. HE FURTHER CONTENDED THAT ASSESSEE WAS IN RECEIPT OF ACTUAL RENT MORE THAN MUNICIPAL RATABLE VAL UE FOR WHICH CERTIFICATE OF MUNICIPAL RATABLE VALUE ISSUED BY BMC DATED 15 - 4 - 2014 WAS ALSO PLACED ON RECORD. ACCORDINGLY, IT WAS CONTENDED THAT ACTUAL RENT OFFERED BY THE ASSESSEE AS INCOME FROM HOUSE PROPERTY WAS MORE THAN MUNICIPAL RATABLE VALUE, THEREFO RE, THE AO WAS NOT JUSTIFIED IN ADDING THE NOTIONAL INTEREST ON INTEREST FREE DEPOSIT RECEIVED BY THE ASSESSEE. HE PLACED RELIANCE ON THE DECISION OF THE FULL BENCH OF THE HONBLE DELHI HIGH COURT IN THE CASE OF MANIKUMAR SUBBA, 333 ITR 38 AND ALSO THE DEC ISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF TIP TOP TYPOGRAPHY , DATED 8 - 8 - 2014 , WHEREIN THE OBSERVATION OF THE FULL BENCH OF THE DELHI HIGH COURT WAS CONCURRED WITH. 5 . ON THE OTHER HAND, LEARNED DR RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 6 . WE HAVE CONSIDERED RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT ASSESSMENT WAS REOPENED BY THE AO ON THE PLEA THAT INCOME FROM HOUSE PROPERTY HAS ITA NO. 1992 /1 1 4 ESCAPED ASSESSMENT BECAUSE OF NON INCLUSION OF INTEREST ON INTEREST FREE DEPOSIT RECEIVED BY ASSESSEE. AFTER SUPPLYING THE REASONS THE AO FRAMED ASSESSMENT U/S. 147. WE FOUND THAT REASONS SO RECORDED WAS SUFFICIENT TO REOPEN THE ASSESSMENT SO FRAMED INSOFAR AS AT THE TIME OF ISSUE OF NOTICE U/S.148, IT IS SUFFIC IENT THAT AO SHOULD HAVE A REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. ACCORDINGLY, GROUND TAKEN BY THE ASSESSEE WITH REGARD TO VALIDITY OF THE REOPENING OF ASSESSMENT IS HEREBY DISMISSED. 7 . NOW COMING TO THE GROUND RAISED BY THE ASSESSEE IN RE GARD TO ADDITION MADE BY THE AO UNDER THE HEAD INCOME FROM HOUSE PROPERTY BY NOTIONALLY COMPUTING INTEREST ON THE INTEREST FREE DEPOSIT. THIS ISSUE HAS BEEN DEALT BY THE FULL BENCH OF HONBLE DELHI HIGH COURT IN THE CASE OF MANIKUMAR SUBBA , 333 ITR 38 , WHE REIN IT WAS HELD THAT BY NO STRETCH OF IMAGINATION, THE NOTIONAL INTEREST ON THE INTEREST FREE SECURITY CAN BE TAKEN AS A DETERMINATIVE FACTOR TO ARRIVE AT FAIR RENT. LEARNED AR HAS ALSO PLACED ON RECORD, THE DECISION HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF TIP TOP TYPGRAPHY, PASSED IN ITA NO. 1213/2011 ALONG WITH OTHER CONNECTED APPEALS, VIDE ORDER DATED 8 - 8 - 2014, WHEREIN THE JURISDICTIONAL HIGH COURT AT PARA 46 HELD AS UNDER : - 46. WE HAVE AND AFTER CAREFUL READING OF THE PROVISION IN QUESTIO N AND THE CONCLUSION OF THE FULL BENCH OF THE DELHI HIGH COURT CONCLUDED THAT A DIFFERENT VIEW CANNOT BE TAKEN. WE RESPECTFULLY CONCUR WITH THE VIEW TAKEN IN THIS FULL BENCH DECISION OF THE DELHI HIGH COURT. ITA NO. 1992 /1 1 5 FU R THER , IN THE LAST PORTION OF PARA 52, THE H ONBLE HIGH COURT HAS OBSERVED AS UNDER : - MERELY BECAUSE THE RENT HAS NOT BEEN FIXED UNDER THAT ACT DOES NOT MEAN THAT ANY OTHER DETERMINATION AND CONTRARY THERETO CAN BE MADE BY THE ASSESSING OFFICER. ONCE AGAIN HAVING RESPECTFULLY CONCURRED WITH THE JU DGMENT OF THE FULL BENCH OF THE DELHI HIGH COURT, WE NEED NOT SAY ANYTHING MORE ON THIS ISSUE. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY MERIT IN THE ACTION OF THE AO FOR DETERMINING THE INCOME FROM HOUSE PROPERTY BY ADDING NOTIONAL INTEREST ON INTEREST F REE DEPOSIT TAKEN BY THE ASSESSEE. 8 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN TERMS INDICATED HEREINABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27/08/ 201 4 . 2014 SD/ - SD/ - ( ) ( SANJAY GARG ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 27/08 /2014 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) - X, MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBA I 6. GUARD FILE. //TRUE COPY//