AC, UDAIPUR V. Shri Vijay Kumar Sharma, UDAIPUR

ITA 208/JODH/2010

• Counselvise Citation: 20823314 RSA 2010
• Duration Of Justice: 2 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-07-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 06-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G R KOKANI
• Keywords: Cost of acquisition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO.208/JU/2010 ASSESSMENT YEAR: 2006-07 ASST. COMMISSIONER OF INCOME TAX, VS. SHRI VIJAY KU MAR SHARMA, CIRCLE-2, UDAIPUR. 21, POLO GROUND, UDAIPUR. (PAN: AHNPS 4186 M). (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI G.R. KOKANI, D.R. RESPONDENT BY : SHRI AMIT KOTHARI, A.R. DATE OF HEARING : 04.07.2012 DATE OF PRONOUNCEMENT OF ORDER : 13.07.2012 ORDER PER A.L. GEHLOT, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 28.01.2010 PASSED BY THE LD. CIT(A), UDAIPUR FOR THE ASSESSMEN T YEAR 2006-07 ON THE FOLLOWING GROUNDS :- ON THE FACTS AND IN THE PRESENT CIRCUMSTANCES OF T HE CASE, THE LEARNED CIT(A) HAS ERRED IN 1. DELETING THE ADDITION OF RS.4,23,684/- MADE BY T HE AO UNDER THE HEAD HOUSE PROPERTY ON ACCOUNT OF HOUSE AND SHOP AT AMET. ITA NO.208/JU/2010 A.Y. 2006-07 . 2 2. DELETING THE ADDITION OF RS.1,41,240/- MADE BY T HE AO ON ACCOUNT OF SHOP AT MUMBAI. 3. REDUCING THE ADDITION OF RS.40,800/-MADE BY THE AO FROM RS.1,08,000/- TO RS.67,200/- ON ACCOUNT OF TWO FLAT S AT MUMBAI. 4. DELETING THE ADDITION OF RS.1,71,802/- MADE BY T HE AO ON ACCOUNT OF SHOP AT MUMBAI. 5. DELETING THE ADDITION OF RS.3,88,780/- MADE BY T HE AO ON ACCOUNT OF HOUSE AT BANGALORE. THAT THE APPELLANT CRAVES TO ADD, AMEND, ALTER, DEL ETE OR MODIFY ANY OR ALL THE ABOVE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 2. THE BRIEF FACTS, COMMON TO ALL THE GROUNDS OF AP PEAL, ARE THAT THE ASSESSEE IS THE SOLE PROPRIETOR OF M/S. SAINATH MARBLE SUPPLIER S WHICH IS ENGAGED IN THE MINING OF MARBLE STONE. THE ASSESSEE FILED HIS RET URN OF INCOME ON 27.10.2006 DECLARING TOTAL INCOME AT RS.3,35,23,410/-, WHICH W AS PROCESSED U/S. 143(1)(A) OF THE INCOME-TAX ACT, 1961 (THE ACT HEREINAFTER) ON 17.07.2007. THEREAFTER, THE CASE WAS SELECTED FOR SCRUTINY. DURING THE ASSESSM ENT PROCEEDINGS, ON PERUSAL OF THE BALANCE-SHEET OF ASSESSEE FOR THE YEAR ENDED 31 .03.2006, THE ASSESSING OFFICER (A.O.) NOTICED THAT THE ASSESSEE OWNED FOLLOWING HO USE PROPERTIES VALUED AS UNDER:- (I). HOUSE AT UDAIPUR 4,67,970/- (II). HOUSE AT AMET 57,37,644/- (III). SHOP AT AMET 2,71,084/- (IV). SHOP AT MUMBAI 13,87,620/- (V). HOUSE AT BANGALORE 46,28,330/- ITA NO.208/JU/2010 A.Y. 2006-07 . 3 (VI). SHOP AT JAWAHAR NAGAR 2,71,084/- (VII). ATERNET ACCOMMODATION 52,435/ - (VIII). CO-OWNERSHIP FLAT NO. A-303 2,80 ,900/- AT MUMBAI (IX). SHOP AT MUMBAI 1,34,08,795/- 3. OUT OF ABOVE PROPERTIES OWNED, THE ASSESSEE HAD SHOWN GROSS RENTAL INCOME OF RS.2,04,832/- PER ANNUM ONLY IN RESPECT OF TWO S HOPS AT MUMBAI ON THE BASIS OF ACTUAL RENT RECEIVED, BUT NO INCOME HAS BEEN SHOWN AGAINST REMAINING HOUSE PROPERTIES. THE A.O., THEREFORE, OBSERVED THAT INC OME FROM HOUSE PROPERTIES HAS TO BE CALCULATED ON THE BASIS OF ANNUAL LETTING VALUE IN TERMS OF SECTION 23(1) OF THE ACT, WHICH HAS TO BE ASSESSED ON THE BASIS OF REASO NABLE EXPECTED RENT OR ACTUAL RENT RECEIVED WHICHEVER IS HIGHER. IN ORDER TO SUBS TANTIATE HIS OBSERVATIONS, THE A.O. ALSO REPRODUCED THE RELEVANT PART OF SECTION D EALING WITH THE TAXABILITY OF INCOME FROM PROPERTY. AFTER CONSIDERING VARIOUS EX PLANATIONS OF ASSESSEE IN RESPECT OF EACH OF THE PROPERTIES GIVEN IN RESPONSE TO THE SHOW CAUSE NOTICE, THE A.O. MADE ADDITIONS AGGREGATING TO RS.12,72,815/- O N ACCOUNT OF INCOME FROM HOUSE PROPERTIES AS UNDER : NAME OF PROPERTY ADDITION (I). SHOP AND HOUSE AT AMET RS.4,23,684/- (II). SHOP AT MUMBAI RS.1,41,240/- (III). TWO FLATS AT MUMBAI RS.1,08,000/- (IV). SHOP AT MUMBAI RS.1,71,802/- (V). HOUSE AT BANGALORE RS.3,88,780/- (VI). HOUSE AT UDAIPUR RS. 39,309/- ------------------ ITA NO.208/JU/2010 A.Y. 2006-07 . 4 TOTAL : RS.12,72,815/- ------------------- 4. THE CIT(A) DELETED THE ADDITION OF RS.11,66,306 /- OUT OF THE ADDITIONS MADE BY THE A.O. IN RESPECT OF VARIOUS PROPERTIES OWNED BY ASSESSEE. HOWEVER, THE CIT(A) HAS SUSTAINED THE ADDITION OF RS.1,06,509/- (RS.39,309/- IN RESPECT OF HOUSE AT UDAIPUR AND RS.67,200/- IN RESPECT OF TWO FLATS AT MUMBAI). THE REVENUE HAS CHALLENGED THE DELETION OF ADDITION BY MEANS OF VAR IOUS GROUNDS OF APPEAL, WHICH ARE DISPOSED OF AS UNDER : 5. THE BRIEF FACTS RELATING TO GROUND NO.1, WHICH C HALLENGES THE DELETION OF ADDITION OF RS.4,23,684/- UNDER THE HEAD HOUSE PROP ERTY ON ACCOUNT OF HOUSE AND SHOP AT AMET, ARE THAT IN RESPONSE TO THE SHOW CAUS E NOTICE THE ASSESSEES CONTENTION WAS THAT THE ASSESSEE WAS THE WORKING DI RECTOR OF THE COMPANY M/S. SHARMA MARMO ASSOCIATES PVT. LIMITED WHICH HAD EARL IER ITS REGISTERED OFFICE AT AMET. HOWEVER, AFTER SHIFTING OF REGISTERED OFFICE OF THE COMPANY TO UDAIPUR THE DIRECTOR WAS ALLOTTED A HOUSE AT UDAIPUR WHERE HE W AS RESIDING AND PAYING RENT. THEREFORE, IN VIEW OF SECTION 23(2)(C) OF THE ACT T HE ANNUAL VALUE OF SUCH HOUSE SHOULD BE TAKEN AT NIL. ALTERNATIVELY IT WAS CONTE NDED THAT THE IMPUGNED HOUSE WAS BEING USED BY THE ASSESSEE FOR THE PURPOSE OF BUSIN ESS OF THE ASSESSEES PROPRIETARY CONCERNED M/S. SAINATH MARBLE SUPPLIERS AND THEREFO RE, SUCH PROPERTY IS NOT ITA NO.208/JU/2010 A.Y. 2006-07 . 5 INCLUDIBLE UNDER THE HEAD HOUSE PROPERTY AS PER SEC TION 22 OF THE ACT. THE A.O. REJECTED THE CONTENTION OF THE ASSESSEE OBSERVING T HAT FIRSTLY THE ASSESSEE DID NOT OCCUPY THE HOUSE AT AMET AS HE WAS PROVIDED WITH A HOUSE AT UDAIPUR BY THE COMPANY IN WHICH HE IS ONE OF THE DIRECTORS. SECON DLY, THERE WAS NO COMPULSION FOR THE DIRECTOR TO RESIDE AT UDAIPUR BECAUSE THE C OMPANY IN WHICH THE ASSESSEE IS ONE OF THE DIRECTORS, IS OPERATING ITS MINING BUSIN ESS IN THE AREA AROUND AMET. THE CONTENTION OF THE ASSESSEE THAT THE HOUSE AT AMET W AS BEING USED FOR BUSINESS OF M/S SAINATH MARBLE SUPPLIERS WAS ALSO REJECTED BY T HE A.O. FOR WANT OF ANY EVIDENCE TO THIS EFFECT. THE A.O., THEREFORE, TOOK THE ANNUAL LETTING VALUE OF HOUSE AT 12% OF ITS COST OF RS.57,37,644/- AND OF SHOP AT RS.2,71,084/- AT AMET, WHICH CAME TO RS.7,21,047/- AND RS.35,530/- RESPECTIVELY. HOWEVER, TAKING INTO ACCOUNT THE FACT THAT THE ABOVE HOUSE AND SHOP WERE SITUATE D AT A SMALL TOWN NAMELY AMET, THEREFORE, THE INCOME FROM THESE PROPERTIES WAS TAK EN TO THE EXTENT OF 80% OF THE ANNUAL LETTING VALUE AND THUS, THE SAME WAS COMPUTE D AT RS.6,05,262/-. AFTER GIVING DEDUCTION UNDER SECTION 24 OF THE ACT, AN AD DITION OF RS.4,23,684/- WAS MADE TO THE TOTAL INCOME OF THE ASSESSEE. 6. IN APPEAL THE CIT(A) DELETED THE ADDITION ON THE GROUND THAT SHIFTING OF REGISTERED OFFICE OF THE COMPANY, M/S. SHARMA MARMO ASSOCIATES PVT. LTD. AT UDAIPUR AND PROVIDING ACCOMMODATION TO THE ASSESSEE DIRECTOR BY THE COMPANY AT ITA NO.208/JU/2010 A.Y. 2006-07 . 6 UDAIPUR IS NOT DISPUTED AND, THEREFORE, IT CAN BE S AFELY SAID THAT THE ASSESSEE COULD NOT OCCUPY THE HOUSE AT AMET DUE TO HIS EMPLOYMENT AT UDAIPUR. HENCE, THE ANNUAL LETTING VALUE OF THE PROPERTY AT AMET SHOULD BE TAKEN AS NIL IN VIEW OF THE PROVISIONS OF SECTION 23(2)(B) OF THE ACT. THE CIT (A) ALSO OBSERVED THAT THE FACT THAT THE FIRM M/S SAINATH MARBLE SUPPLIERS IS HOUSE D IN THE PROPERTY AT AMET IS VERIFIABLE FROM THE SALE BILLS OF THE FIRM. THEREF ORE, THE ANNUAL LETTING VALUE OF THE PROPERTY IS REQUIRED TO BE TAKEN AT NIL AS PER PROV ISIONS OF SECTION 22 OF THE ACT, AS THERE IS NO EVIDENCE ON RECORD TO SUBSTANTIATE THAT THE PROPERTY OWNED BY THE ASSESSEE AT AMET WAS GIVEN ON RENT TO SOME OTHER PE RSON. 7. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PAR TIES AND RECORDS PERUSED. THE CIT(A) RECODED THE FACT THAT THERE IS NO DISPUT E THAT THE REGISTERED OFFICE OF THE COMPANY NAMELY SHARMA MARMO ASSOCIATES (P) LTD., IN WHICH THE ASSESSEE IS ONE OF THE DIRECTOR, HAS SHIFTED FROM AMET TO UDAIPUR W.E.F. 22.08.2004 AND THE ADDRESS GIVEN IN FORM NO.18 IS 19 POLO GROUND, UDA IPUR. THE CIT(A) HAS ALSO NOTED THE FACT THAT THERE IS ALSO NO DISPUTE THAT T HE COMPANY HAS PROVIDED A HOUSE TO THE ASSESSEE AT UDAIPUR ON RENT. THE CIT(A) CAM E TO THE CONCLUSION THAT THE ASSESSEE BEING ONE OF THE MAJOR DIRECTOR IS SUPPOSE D TO STAY AT UDAIPUR IN PLACE OF AMET TO LOOK AFTER THE DAY-TO-DAY AFFAIRS OF THE CO MPANY EFFECTIVELY. THE CIT(A) HELD THAT ACCORDING TO THE PROVISIONS OF SECTION 23 (2)(B) THE ANNUAL LETTING VALUE OF ITA NO.208/JU/2010 A.Y. 2006-07 . 7 THE PROPERTY AT AMET IS TO BE TAKEN AT NIL. SECTIO N 23(2)(B) PROVIDES THAT WHERE PROPERTY CONSISTS OF HOUSE OR PART OF HOUSE WHICH C ANNOT ACTUALLY BE OCCUPIED BY THE OWNER BY REASON OF THE FACT THAT OWING TO HIS E MPLOYMENT BUSINESS OR PROFESSION CARRIED ON AT ANY OTHER PLACE, HE HAS TO RESIDE AT OTHER PLACES IN A BUILDING NOT BELONGING TO HIM. THE ANNUAL VALUE OF SUCH HOUSE OR PART OF THE HOUSE SHOULD BE TAKEN AS NIL. IN THE LIGHT OF THE FACTS RECORDED BY THE CIT(A), AND IN THE LIGHT OF PROVISIONS OF SECTION 23(2)(B) OF THE ACT, WE FIND THAT THE CIT(A) HAS RIGHTLY HELD THAT THE ANNUAL LETTING VALUE OF THE P ROPERTY AT AMET IS TO BE TAKEN AT NIL. THE CIT(A) HAS ALSO EXAMINED THE ISSUE WITH R EGARD TO THE FACT THAT OFFICE OF THE FIRM M/S SAINATH MARBALE SUPPLIERS IN THE SAID HOUSE IS ALSO VERIFIABLE FROM THE SALE BILL OF THE FIRM, TELEPHONE BILL ETC. THEREFO RE, THE ANNUAL VALUE OF THE PROPERTY IS ALSO REQUIRED TO BE TAKEN AS NIL AS PER THE PROV ISIONS OF SECTION 22 OF THE ACT. IT HAS ALSO NOTED BY THE CIT(A) THAT IT IS NOT THE CAS E OF THE A.O. THAT THE PROPERTY AT AMET OWNED BY THE ASSESSEE WAS GIVEN ON RENT BUT TO SOME OTHER CONCERN. SINCE THE REVENUE HAS FAILED TO POINT OUT ANY CONTRARY MA TERIAL TO THE FINDING OF THE CIT(A) NOR THE SAME IS AVAILABLE ON RECORD, WE THE REFORE, CONFIRM THE ORDER OF THE CIT(A) ON THE ISSUE. 8. THE BRIEF FACTS RELATING TO GROUND NO.2, WHICH C HALLENGES THE DELETION OF ADDITION OF RS.1,41,240/- ON ACCOUNT OF SHOP AT MUM BAI, ARE THAT THE A.O. TOOK THE ITA NO.208/JU/2010 A.Y. 2006-07 . 8 ANNUAL LETTING VALUE OF THIS PROPERTY AT 12% OF ITS COST OF RS.13,87,620/- BASED ON INTEREST CAPITALIZATION METHOD WHICH WORKS OUT TO R S.1,66,514/-. HOWEVER, KEEPING IN VIEW THE SITUATION OF PROPERTY IN PRIME LOCATION AT SANTA CRUZ AREA AND HIGHER FAIR MARKET RENT IN MUMBAI, THE A.O. TOOK 15 0% OF THE ANNUAL LETTING VALUE WHICH WORKS OUT TO RS.2,49,772/-. AFTER REDUCING T HE AMOUNT OF RS.48,000/- RECEIVED BY ASSESSEE AS RENT FROM THIS PROPERTY AND GIVING DEDUCTION @ 30% UNDER SECTION 24 OF THE ACT, THE ADDITION OF RS.1,41,240/ - WAS MADE TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF THIS PROPERTY. THE CON TENTION OF THE ASSESSEE WAS THAT THE SHOP IN QUESTION WAS LET OUT TO SHRI OM PRAKASH LEHARI LAL JOSHI @ RS.4,000/- PER MONTH ON THE BASIS OF LEAVE AND LICENCE AGREEME NT AND THE ANNUAL RENT RECEIVED OF RS.48,000/- HAS BEEN DECLARED BY THE ASSESSEE. H E, THEREFORE, CONTENDED THAT THE A.O. COULD NOT BRING ANY EVIDENCE ON RECORD TO SUBS TANTIATE THE ADDITION MADE ON THE BASIS OF PRESUMPTION ONLY. 9. THE CIT(A) DELETED THE ADDITION ON THE GROUND T HAT THE RENT DECLARED BY THE A.O. IS BASED ON LEAVE AND LICENCE AGREEMENT ENTERE D INTO BETWEEN THE ASSESSEE AND THE TENANT AND THAT THE A.O. FAILED TO BRING AN Y EVIDENCE ON RECORD TO SUGGEST THAT THE PROPERTY IN QUESTION CAN FETCH RENTAL INCO ME MUCH MORE THAN THAT DECLARED BY THE ASSESSEE. ITA NO.208/JU/2010 A.Y. 2006-07 . 9 10. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES AND RECORDS PERUSED. WE FIND THAT THE CIT(A) AFTER EXAMINING THE AGREEME NT EXECUTED ON 01.05.2004 FOUND THAT THE PROPERTY WAS LET OUT TO OMPRAKASH LE HARILAL JOSHI @ RS.4,000/- PER MONTH. THE CIT(A) BEFORE DELETING THE ADDITION HEL D THAT THE A.O. DID NOT BRING ANY EVIDENCE ON RECORD TO SUGGEST THAT THE PROPERTY CAN BE FETCHED RENTAL INCOME MUCH MORE THAN RENTAL INCOME DECLARED BY THE ASSESS EE. SECTION 23 OF THE ACT PROVIDES THAT FOR THE PURPOSE OF SECTION 22, THE AN NUAL VALUE OF ANY PROPERTY SHALL BE DEEMED TO BE THE SUM FOR WHICH THE PROPERTY MIGH T REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR; OR WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEROF IS IN EXCESS OF THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RE CEIVED OR RECEIVABLE. IN THE CASE UNDER CONSIDERATION, IT IS ADMITTED FACT THAT THE A SSESSEE RECEIVED RENT OF RS.4,000/- PER MONTH. THE A.O. HAS FAILED TO BRING ON RECORD ANY MARTIAL TO SUPPORT THAT THE SAID PROPERTY WAS EXPECTED MORE AMOUNT THAN THE ACT UAL AMOUNT RECEIVED. THE A.O. HAS NOT MADE ANY SUCH COMPARISON. THE A.O. HA S SIMPLY TAKEN 12% OF THE COST BASED ON INTEREST CAPITALIZATION METHOD AND CO NSIDERING LOCATION ANNUAL VALUE WAS TAKEN AT RS.150/- AND THE ANNUAL VALUE COMPUTED ON THE BASIS OF 12% OF THE COST WHICH CANNOT BE SAID TO BE A SUM MORE THAN THE ACTUAL AMOUNT RECEIVED BY THE ASSESSEE AS REQUIRED U/S 23 OF THE ACT. IN THE LIG HT OF THE FACT, WE DO NOT FIND ANY ITA NO.208/JU/2010 A.Y. 2006-07 . 10 INFIRMITY IN THE ORDER OF THE CIT(A). ORDER OF THE CIT(A) IS CONFIRMED ON THE ISSUE. 11. THE BRIEF FACTS RELATING TO GROUND NO.3, WHICH CHALLENGES THE DELETION OF ADDITION OF RS.40,800/-, RESTRICTING THE ADDITION FROM RS.1,08,000/- TO RS.67,200/- ON ACCOUNT OF TWO FLATS AT MUMBAI, ARE THAT THE ASS ESSEE DID NOT SHOW ANY ANNUAL LETTING VALUE OF THESE FLATS FOR THE REASON THAT TH ESE FLATS ARE VERY OLD AND REQUIRE HEAVY REPAIR AND MAINTENANCE. HE FURTHER SUBMITTED THAT THESE FLATS COULD NOT BE LET OUT TO ANY ONE AND NO RENT HAS BEEN RECEIVED DU RING THE YEAR. THE A.O. CONSIDERING FACTS THAT THESE FLATS HAVE BEEN SITUAT ED AT MUMBAI, THE BUSINESS CAPITAL OF THE COUNTRY, WHERE THE PROPERTY APPRECIATION IS QUITE HIGH, WORKED OUT THE ANNUAL LETTING VALUE OF THESE PROPERTIES AT RS.1,20 ,000/- @ RS.5,000/- PER MONTH EACH. AFTER ALLOWING DEDUCTION @30% UNDER SECTION 24 OF THE ACT, A SUM OF RS.1,08,000/- WAS ADDED TO THE INCOME OF THE ASSESS EE. 12. THE CIT(A) THOUGH REJECTED THE CONTENTION OF TH E ASSESSEE REGARDING THE FLATS BEING OLD AND LYING VACANT FOR WANT OF EVIDENCE, BU T KEEPING IN VIEW THE COST OF ACQUISITION OF THE PROPERTIES IN QUESTION, ESTIMATE D THE ANNUAL LETTING VALUE OF THESE TWO FLATS AT RS.96,000/- @ RS.4000/- PER MONTH EACH AND GIVING DEDUCTION OF 30% UNDER SECTION 24 OF THE ACT, RESTRICTED THE ADDITIO N TO RS.67,200/-. ITA NO.208/JU/2010 A.Y. 2006-07 . 11 13. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES AND RECORDS PERUSED. WE NOTICE THAT THE CIT(A) AFTER CONSIDERING THE A.O .S ORDER AND AFTER CONSIDERING THE ASSESSEES SUBMISSION, THE CIT(A) HELD THAT THE RENT AT RS.4000/- PER MONTH FOR EACH FLAT AS AGAINST RENT OF RS.5000/- P.M. PER FLA T TAKEN BY THE A.O., WILL BE REASONABLE AND HE ACCORDINGLY CALCULATED ANNUAL LET TING VALUE OF RS.96,000/- AND AFTER ALLOWING DEDUCTION UNDER SECTION 24 ADDITION OF RS.67,200/- HAS BEEN SUSTAINED. WE NOTICE THAT THE FINDING OF THE CIT(A ) IS REASONABLE AFTER CONSIDERING THE A.O.S ORDER AND THE ASSESSEES SUBMISSION. THE IS A CASE OF REASONABLE ESTIMATION OF RENT. THE A.O. ESTIMATED THE RENT AT RS.5,000/- PER MONTH FOR EACH FLAT WHEREAS THE CIT(A) WAS OF THE VIEW THAT THE RE NT AT RS.4,000/- PER MONTH FOR EACH FLAT IS REASONABLE. THERE IS NO MATERIAL ON R ECORD NOR IT HAS BEEN POINTED OUT BY THE LD. DEPARTMENTAL REPRESENTATIVE AT THE TIME OF HEARING BEFORE US BASED ON WHICH A DIFFERENT ESTIMATION OF RENT PER MONTH PER FLAT CAN BE DONE AT THIS STAGE. IN THE LIGHT OF THE FACT, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). ORDER OF THE CIT(A) IS CONFIRMED ON THE ISSUE. 14. THE BRIEF FACTS RELATING TO GROUND NO.4, WHICH CHALLENGES THE DELETION OF ADDITION OF RS.1,71,802/- ON ACCOUNT OF SHOP AT MUM BAI, ARE THAT THE A.O. NOTICED THAT THE PROPERTY WAS PURCHASED IN THE MONTH OF DEC EMBER 2005 AND JANUARY 2006 WHICH WAS LET OUT TO M/S CITI FINANCIAL LIMITED FOR WHICH TWO MONTHS RENT OF ITA NO.208/JU/2010 A.Y. 2006-07 . 12 RS.1,56,832/- WAS RECEIVED AND DECLARED BY THE ASSE SSEE. THE CONTENTION OF THE ASSESSEE WAS THAT THE ACTUAL RENT RECEIVED IS SUPPO RTED BY AGREEMENT AND THE TDS CERTIFICATE ISSUED BY THE TENANT. IN ALTERNATE IT WAS SUBMITTED THAT THE SERVICE AND MAINTENANCE CHARGES RECEIVED ON ACCOUNT OF AMENITIE S PROVIDED BY THE ASSESSEE IN THIS PROPERTY SHOULD ALSO BE CONSIDERED WHILE ESTIM ATING THE VALUE OF THE SHOP, AS THE ASSESSEE HAS SHOWN SEPARATE INCOME FROM AMENITI ES PROVIDED WITH THE PROPERTY. IT WAS FURTHER SUBMITTED THAT COST OF 15 0% OF THE GROSS ANNUAL LETTING VALUE IS HIGHLY EXCESSIVE. HOWEVER, THE A.O. TAKIN G INTO ACCOUNT THE COST OF SHOP AT RS.1,34,08,795/-, TOOK THE GROSS ANNUAL LETTING VALUE OF THE PROPERTY AT 12% OF THE COST BASED ON INTEREST CAPITALIZATION METHOD FO R THE WHOLE YEAR WHICH CAME TO RS.16,09,055/-. ACCORDINGLY THE GROSS ANNUAL LETTI NG VALUE OF TWO MONTHS WORKED OUT TO RS.2,68,176/-. THE A.O. KEEPING IN VIEW THE LOCATION OF THE SHOP IN PRIME AREA SANTACRUZ AND HIGHER FAIR MARKET RENT AT MUMBA I, TOOK THE ANNUAL VALUE AT 150% OF THE ANNUAL LETTING VALUE WHICH CAME TO RS.4 ,02,264/-. AFTER DEDUCTING THE DECLARED AMOUNT OF RENT RECEIVED OF RS.1,56,832/- F ROM THE ABOVE SHOP AND ALLOWING DEDUCTION @ 30% UNDER SECTION 24 OF THE AC T, THE REMAINING AMOUNT OF RS.1,71,802/- WAS ADDED TO THE INCOME OF THE ASSESS EE. 15. IN APPEAL, THE CIT(A) DELETED THE ADDITION OBSE RVING THAT THE PROPERTY IN QUESTION WAS PURCHASED BY THE ASSESSEE AT THE FAG E ND OF THE PREVIOUS YEAR; THAT THE ITA NO.208/JU/2010 A.Y. 2006-07 . 13 SAME WAS LET OUT W.E.F. 01.02.2006 FOR A MONTHLY RE NT OF RS.78,416/- VIDE LEAVE AND LICENCE AGREEMENT EXECUTED ON 17.12.2005 WHICH WAS VALID FOR THREE MONTHS COMMENCING FROM 01.02.2006 AND THAT ANY UNDERSTATEM ENT IN MONTHLY RENT MENTIONED IN THE AGREEMENT IS NOT PROVED. THE CIT( A), THEREFORE, CONCLUDED THAT THERE IS NO JUSTIFICATION FOR CALCULATING THE INCOM E FROM PROPERTY AS DONE BY THE A.O. 16. THE FACTS OF GROUND NOS.4 & 5 ARE COMMON, THERE FORE, BOTH THESE GROUNDS OF APPEAL ARE DECIDED TOGETHER AS UNDER :- 17. THE BRIEF FACTS RELATING TO LAST GROUND NO.5, W HICH CHALLENGES THE DELETION OF ADDITION OF RS.3,88,780/- ON ACCOUNT OF HOUSE AT BA NGALORE, ARE THAT SINCE THE ASSESSEE DID NOT DECLARE ANY RENTAL INCOME FROM TH IS PROPERTY, THEREFORE, THE A.O. TAKING THE ANNUAL LETTING VALUE AT 12% OF ITS COST OF RS.46,28,330/-, ESTIMATED THE SAME AT RS.5,55,400/- ON INTEREST CAPITALIZATION ME THOD. AFTER GIVING DEDUCTION @ 30% UNDER SECTION 24 OF THE ACT THE A.O. ESTIMATED THE INCOME FROM THIS PROPERTY AT RS.3,88,780/- AND ADDED THE SAME TO THE TOTAL IN COME OF THE ASSESSEE. THE CONTENTION OF THE ASSESSEE BEFORE THE AUTHORITIES B ELOW HAS BEEN THAT THE A.O. HAS ADOPTED THE VALUE OF THIS OLD HOUSE ON BASELESS MET HOD. IT WAS SUBMITTED THAT OUT OF 4200 SQ FT AREA OF LAND THE CONSTRUCTED AREA IS ONLY 245 SQ. FT. THE STRUCTURE WAS ITA NO.208/JU/2010 A.Y. 2006-07 . 14 DEMOLISHED IN THE A.Y. 2007-08, WHICH STOOD SUPPOR TED BY FORM OF SANCTION OF LICENSEE ISSUED BY COMMISSIONER BANGALORE MAHANAGAR PALIKA VIDE HIS LETTER DATED 30.10.2006. IT WAS SUBMITTED THAT THE METHOD OF VA LUATION, WHATSOEVER, ADOPTED BY THE A.O. SHOULD BE ADOPTED ON THE COST OF PORTION O F HOUSE AND NOT ON THE ENTIRE LAND. IT WAS FURTHER SUBMITTED THAT THE HOUSE BE ING VERY OLD WAS NOT FIT TO BE LET OUT AND DID NOT FETCH ANY RENT IN THE MARKET. IN A LTERNATE, THE ASSESSEE PLEADED THAT THE VALUE ADOPTED @ 12% OF THE COST IS HIGHLY EXCES SIVE 18. IN APPEAL, THE CIT(A) DELETED THE ADDITION FOR THE REASON THAT CONSTRUCTION OF ONLY 245 SQ. FT. OF AREA WAS MADE IN 1962 AND THE C ONSTRUCTION WAS MORE THAN 40 YEARS OLD. HOWEVER, THE A.O. HAS NOT APPRECIATED T HE FACTS IN RIGHT PERSPECTIVE WHILE WORKING OUT THE VALUE OF THE PROPERTY. HE AL SO OBSERVED THAT THE PROPERTY IN QUESTION WAS DEMOLISHED IN THE YEAR 2007 AND THE A. O. WITHOUT MAKING ANY ENQUIRY OR BRINGING ANY EVIDENCE ON RECORD TO SUGGE ST THAT THE ASSESSEE HAD EARNED INCOME FROM SUCH PROPERTY BY GIVING IT ON RENT, HAS WRONGLY ESTIMATED THE INCOME FROM THIS PROPERTY WHICH IS LIABLE TO BE DELETED. HE, THEREFORE, DELETED THE ADDITION MADE BY THE A.O. 19. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES AND RECORDS PERUSED. THE CIT(A) BEFORE DELETING THE ADDITION OF GROUND N O.4 RECORDED THE FACT THAT THE ITA NO.208/JU/2010 A.Y. 2006-07 . 15 ASSESSEE HAS PURCHASED PROPERTY AT THE FAG END OF T HE PREVIOUS YEAR RELEVANT TO THE A.Y. UNDER CONSIDERATION AND THE SAME HAS BEEN LET OUT TO FINANCIAL INSTITUTION NAMELY M/S. CITI FINANCIAL LIMITED W.E.F. 01.02.200 6 FOR A MONTHLY RENT OF RS.78,416/- VIDE LEAVE AND LICENCE AGREEMENT EXECUT ED ON 17.12.2005. THE CIT(A) FOUND THAT THE PROPERTY UNDER CONSIDERATION HAS BEEN LET OUT AT THE FAG END OF THE RELEVANT F.Y. THIS FACT IS SUPPORTED BY THE AGREEMENT. THE CIT(A) FOUND THAT UNDER THE FACTS AND CIRCUMSTANCES, THERE IS NO JUSTIFICATION FOR CALCULATING THE INCOME FROM THIS PROPERTY AS DONE BY THE A.O. BEFO RE DELETING THE ADDITION OF GROUND NO.5, THE CIT(A) NOTED THE FACT THAT THE IMP UGNED HOUSE WAS MORE THAN 40 YEARS OLD AND SUCH OLD BUILDING WHICH WAS DEMOLISHE D IN THE YEAR 2007 CANNOT FETCH SUCH A HIGH RENT AS ESTIMATED BY THE A.O. TH E CIT(A) HELD THAT THE A.O. IS NOT JUSTIFIED IN ESTIMATING THE INCOME FROM SUCH PR OPERTY. THE A.O. HAS SIMPLY CALCULATED THE ANNUAL LETTING VALUE BY APPLYING 12% OF THE COST BASED ON INTEREST CAPITALIZATION METHOD. WE FIND THAT IN RESPECT OF BOTH THE PROPERTIES PERTAINING TO GROUND NO.4 & 5 OF THE APPEAL, THE CIT(A) DELETED T HE ADDITION ON THE GROUND THAT THERE IS NO JUSTIFICATION OF ESTIMATION OF INCOME/R ENT AS CALCULATED BY THE A.O. WE AGREE WITH THE CIT(A) THAT THE METHOD OF CALCULATIO N OF ALV OF BOTH PROPERTIES BY THE AO IS NOT IN ACCORDANCE WITH SECTION 23 OF THE ACT. SIMULTANEOUSLY, WE HAVE ALSO NOTICED THAT THE CIT(A) IS NOT CORRECT IN DELE TING THE ENTIRE ADDITIONS ON THE BASIS THAT THERE WAS NO INCOME OR ALV IS NIL. WE F IND THAT SOME MATERIAL IN THE ITA NO.208/JU/2010 A.Y. 2006-07 . 16 FORM OF AGREEMENT ETC. IS AVAILABLE ON RECORD WHICH SHOWS THAT THE ALV CAN BE CALCULATED AS REQUIRED UNDER SECTION 23 OF THE ACT. AS STATED ABOVE THAT ALV DETERMINED BY THE A.O. AND FINDING GIVEN BY THE CIT (A) IS ALSO NOT IN ACCORDANCE WITH SECTION 23 OF THE ACT. WE, THEREFORE, THINK I T PROPER TO SEND BACK THIS MATTER TO THE FILE OF CIT(A) TO DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW CONSIDERING SECTION 23 OF THE ACT. THE CIT(A) WILL DECIDE THE ISSUE AFRESH AFTER PROVIDING REASONABLE OPPORTUNITY OF HEARING TO BOTH THE SIDES . 20. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. (ORDER PRONOUNCED IN THE OPEN COURT) SD/- SD/- (BHAVNESH SAINI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, JODHPUR BENCH, JODHPUR 6. GUARD FILE. BY ORDER ASSISTANT REGISTRAR INCOME-TAX APPELLAT E TRIBUNAL, JODHPUR TRUE COPY