Sh. Sudhir Kumar Chaudhary, New Delhi V. ADIT, New Delhi

ITA 2062/DEL/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97984 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 21-10-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 26-04-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH G NEW DELHI BEFORE : SHRI C.M. GARG , JUDICIAL MEMBER & SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 2062/DEL./2011 ASSTT. YEAR : 2005 - 06 SUDHIR KUMAR CHAUDHARY, VS. ADIT, CIRCLE 1(1), T - 4 & T - 5, PLOT NO. 06, NEW DELHI. SECTOR - 6, SWARKA, NEW DELHI [PAN: ACSPC 0470C] (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SATISH AGGARWAL, ADVOCATE RESPONDENT BY : SH. SUJIT KUMAR, SR. DR DATE OF HEARING : 21.10.2015 DATE OF PRONOUNCEMENT : 08 .12.2015 ORDER PER L.P. SAHU, ACCOUNTANT MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 01.12.2010 OF LD. CIT(A) - XXIX, NEW DELHI FOR THE ASSESSMENT YEAR 2005 - 06 ON THE FOLLOWING GROUNDS : 1. THE LEARNED CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ADDITIONS MADE BY ASSESSING OFFICER ON NOTIONAL BASIS. 2. THE LEARNED CIT(A) HAS ERRED IN NOT CONSIDERING THE RENTAL VALUATION SUBMITTED AND IGNORED AFFIDAVIT FILED BY THE APPELLANT. 3. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ORDER. 4. THE ORDER OF LEARNED CIT(A) IS BAD IN LAW AND AGAINST NATURAL JUSTICE. ITA NO. 2062/DEL./2011 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS OWNER OF FOUR COMMERCIAL PROPERTIES SIT UATED AT S - 4 & 5 AND T - 4 & 5 IN SAGAR PLAZA, SECTOR - 6, DWARKA. THE ABOVE FOUR UNITS WERE BEING USED BY S.K.C. MANAGEMENT CONSULTANTS PVT. LTD.. SHRI SUDHIR KUMAR CHAUDHARY WAS A DIRECTOR IN THE SAID COMPANY AND WAS MAJOR SHARE HOLDER OF THIS COMPANY. DURIN G THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE A S SESSEE HAS NOT SHOWN INCOME FROM HOUSE PROPERTY FROM THE AFORESAID PROPERTIES. HE EXPLAINED BEFORE THE AO THAT NO RENTAL INCOME IS BEING RECEIVED AND MAINTENANCE & REPAIR S ARE BORN BY THE COMPANY. THE ASSESSING OFFICER DEPUTED THE INSPECTOR FOR ASCERTAINING THE DEEMED RENT FOR THAT LOCATION. HE SUBMITTED HIS REPORT THAT FOR THE SIMILAR PROPERTIES IN THAT LOCALITY, THE RENT IS FROM RS.45,000/ - TO 60,000/ - PER MONTH. THUS, AFTER INDEXATI ON FOR 2004 - 05, THE RENTAL INCOME WAS CALCULATED BY THE AO AT RS.4 0 ,000/ - PER MONTH AND HE ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE ASKING THAT WHY THE ANNUAL LETTING VALUE SHOULD NOT BE DETERMINED AT RS.48,000/ - PER MONTH. IN RESPONSE TO SHOW CAUSE NOTICE , THE ASSESSEE REPLIED THAT HE IS A DIRECTOR AND MAJOR SHARE HOLDER OF THE COMPANY, WHICH IS SUFFERING LOSS. THE REPAIR AND MAINTENANCE EXPENSES ARE BORN BY THE COMPANY. THE AO FOUND AFTER SCRUTINY OF PROFIT & LOSS ACCOUNT THAT THERE WAS NO ANY SINGLE ENTR Y DEBITED REGARDING THE SAID ITA NO. 2062/DEL./2011 3 PROPERTY. AFTER ALL, THE ASSESSING OFFICER AND THE AR OF THE ASSE SSEE (CA UMESH KUMAR, OM PRAKASH & ASSOCIATES, DELHI) AGREED TO ASSESS RS.25,000/ - PER MONTH PER SHOP AS NOTIONAL ANNUAL VALUE OF THE PROPERTY . THIS AGREEMENT WAS RECORDED ON A NOTE SHEET, SIGNED BY BOTH, WHICH IS REPRODUCED AS UNDER : .ASSESSEE S AR HAS AGREED TO THE ANNUAL VALUE OF RS.25,000/ - PER MONTH FOR EACH SHOP (FOR 4 SHOPS). THE ASSESSEE S ARGUMENT OF ASSESSING THE ANNUAL VALUE OF ALL FOUR SHOPS AT RS. 25,000/ - PER MONTH PER SHOP IS HEREBY ACCEPTED AND THE ASSESSEE HAS AGREED TO PAY THE DEMAND PROMPTLY AND NOT TO FILE APPEAL. 3. ON THE BASIS OF ABOVE AGREED ANNUAL VALUE, THE AO DETERMINED ANNUAL VALUE OF FOUR PROPERTIES AT RS.12,00,000/ - AND ALLOWING STATUTORY DEDUCTION OF RS.3,60,000/ - , MADE ADDITION OF RS.8,40,000/ - TO THE TOTAL INCOME OF THE ASSESSEE. AGAINST THIS ORDER, THE ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY, WHO CONFIRMED THE ORDER OF THE AO VIDE THE IMPUGNED ORDER. AGA INST THIS ORDER, THE ASSESSEE HAS COME UP IN THIS APPEAL BEFORE US. 4. THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS A DIRECTOR IN THE COMPANY AND THE PROPERTY WAS GIVEN ON RENT FREE BASIS AND THE COMPANY WAS MAINTAINING IT FREE OF COST. THE ASSESSEE HAS GOT THE VALUATION OF THIS PROPERTY DONE FROM THE REGISTERED VALUER , PARAMJEET ARCHITECT ASSOCIATES ON 26.03.2008, WHEREBY THE REGISTERED VALUER CERTIFIED THE VALUE OF RS.24,000/ - FOR PROPERTY NO. S - 4 & 5 AND RS.22,000/ - FOR T - 4 & 5. THE SAID BUILDING WAS ITA NO. 2062/DEL./2011 4 OCCUPIED BY THE COMPANY IN WHICH THE ASSESSEE IS DIRECTOR AND CARRYING ON BUSINESS OF SUPPLY OF MANPOWER AND IS REGISTERED WITH GOVT. OF INDIA. THE COMPANY IS SUFFERING LOSS. HE SUBMITTED THAT UNDER SECTION 22 OF THE IT ACT, THE PROPERTY WHICH IS OCCUPIED FOR OWN BUSINESS IS NOT CHARGEABLE TO TAX AS THE PROFIT OF SUCH BUSINESS IS CHARGEABLE TO TAX. IN THIS CASE, THE COMPANY IS PAYING TAX. IN FEW CASES OF PARTNERSHIP AND HUF, THE EXEMPTION IS GIVEN FOR CHARGING NOTIONAL RENT. IN SUPPORT OF THIS HE PLACED RELIANCE ON THE FOLLOWING JUDGMENTS : (I). CIT V. RABINDRANATH BHOL(1995) 211 ITR 799 (ORI . ) (II) CIT V. H.S. SINGHAL & SONS (2002) 253 ITR 655(DEL.) (III). CIT V. MODI INDUSTRIES LTD. (1994) 73 TAXMAN 691 (DEL.) . HE ALSO SUBMITTED THAT THE ASSESSMENT PROCEEDINGS W ERE ATTENDED BY THE PART TIME ACCOUNTANT AND THE ASSESSEE COULD NOT UNDERSTAND THE COMMUNICATION AS STATED ABOVE. AGAINST THIS, HE PLACED RELIANCE ON THE DECISION OF ITAT MADRAS (SMC) IN THE CASE OF R.T. BALASUBRAMANIAM V. ITO DATED 28.01.1994 ON THE PROPOSITION OF RIGHT OF ASSESSEE TO APPEAL. 5. THE LD. DR, ON THE OTHER HAND, HAS RELIED UPON THE ORDER OF THE LOWER AUTHORITIES. HE OBJECTED ON THE VALUATION MADE BY THE REGISTERED VALUER WHO HAS CALCULATED ANNUAL VALUE WITHOUT ANY DES CRIPTION AS TO HOW HE ARRIVED AT SUCH VALUATION. HE ALSO CONTENDED THAT THE COMPANY AND DIRECTOR BOTH ARE ITA NO. 2062/DEL./2011 5 SEPARATE AND THE COMPANY IS A LEGAL ENTITY. BOTH SHOULD NOT BE ONE AND THE SAME. THE TAX SHOULD BE CHARGED AS PER PROVISIONS OF THE ACT. THE CASE LAWS , RELIED UPON BY THE ASSESSEE , ARE DISTINGUISHABLE ON FACTS AND THE VALUATION REPORT HAS BEEN SUBMITTED WITHOUT APPLICATION OF MIND. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS NOTABLE THAT THE INSPECTOR DEPUTED FOR R EPORTING THE ANNUAL VALUE OF THE PROPERTY, REPORTED THE VALUE AT RS.45,000/ - TO 60,000/ - PER MONTH. IT IS ALSO BORN OUT ON RECORD THAT THE ASSESSEE GOT THE ANNUAL VALUE OF THE PROPERTY THROUGH REGISTERED VALUER WHO ASCERTAINED THE ANNUAL VALUE OF THE PROPE RTY AT RS.24,000/ - AND RS. 22,000/ - RESPECTIVELY, AS STATED ABOVE. BESIDES THE AR OF THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS CANDIDLY AGREED TO DETERMINE THE ANNUAL VALUE OF PROPERTY AT RS.25,000/ - AS CAN BE SEEN FROM THE NOTE SHEET REPROD UCED ABOVE. A PERUSAL OF NOTE SHEET SHOWS THAT THE ANNUAL VALUE OF THE PROPERTY WAS AGREED AT RS.25,000/ - PER MONTH ON BEHALF OF THE ASSESSEE. THE AR OF THE ASSESSEE WHO AGREED THE ANNUAL VALUE ON BEHALF OF THE ASSESSEE WAS A QUALIFIED CHARTERED ACCOUNTANT AND THE CONTENTION OF THE ASSESSEE THAT THERE WAS MISUNDERSTANDING IN THE COMMUNICATION BETWEEN THE AR AND ASSESSEE, CANNOT BE ACCEPTED WITHOUT ANY COGENT MATERIAL ON RECORD. HERE, WE DO NOT GO TO FORFEIT THE RIGHT OF ASSESSEE TO APPEAL, BUT THE ITA NO. 2062/DEL./2011 6 FACT REMA INS THAT THE ASSESSEE WAS IN CANDID AGREEMENT WITH THE NOTIONAL ANNUAL VALUE OF RS.25,000/ - PER MONTH. THEREFORE, KEEPIN G IN VIEW THE NOTIONAL ANNUAL VALUE, REPORTED BY THE INSPECTOR, AGREED BY THE AR/ASSESSEE, THE VALUE ASCERTAINED BY THE REGISTERED VALUE R OF THE ASSESSEE AND THE CALCULATION OF INDEXED VALUE, WE ARE NOT INCLINED TO INTERFERE WITH THE AGREED NOTIONAL VALUE OF THE PROPERTY ADOPTED BY THE AUTHORITIES BELOW FOR THE PURPOSE OF COMPUTATION OF INCOME FROM HOUSE PROPERTY . WE, THEREFORE, FIND NO IN FIRMITY IN THE CONCLUSIONS ARRIVED AT BY THE AUTHORITIES BELOW. ACCORDINGLY, THE APPEAL OF THE ASSESSEE, BEING DEVOID OF MERITS, IS LIABLE TO BE DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 08.12.2015 . SD/ - SD/ - ( C.M. GARG ) (L.P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 08.12.2015 *AKS/ - COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT. REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI