Lt. Sh. Ranjan Dhamija, Gurgaon V. ACIT, New Delhi

ITA 2177/DEL/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1497 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 13-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Deemed owner of house property; Opportunity of being heard; Fair market value
• Section: 133(6)

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH G, NEW DELHI BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 2177/DEL/2015 ASSESSMENT YEAR: 2011-12 LT. SH. RANJAN DHAMIJA, THROUGH L/H RITA DHAMIJA, L-1/13, DLF- II, GURGAON. PAN AAFOD5646Q (APPELLANT) VS. ACIT, CIRCLE 38(1), NEW DELHI (RESPONDENT) APPELLANT BY SH. SATYAJIT GOEL, CA RESPONDENT BY SH. PRADEEP SINGH GAUTAM, SR. DR ORDER PER L.P. SAHU, A.M.: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A)-XX, DELHI DATED 15.01.2015 FOR THE ASSESSMENT YEAR 2011 -12 ON THE FOLLOWING GROUNDS : 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, CIT(A) WAS NOT JUSTIFIED IN SUSTAINING ADDITION OF RS. 2,10,000/- UNDER THE HEAD INCOME FROM PROPERTY EVEN THOUGH THE PROPERTY UNDER REFERE NCE WAS USED FOR THE PURPOSE OF BUSINESS AND THERE WAS NO RECEIPT OF ANY RENT. 2. THAT EVEN OTHERWISE, THE ESTIMATION OF RENTAL INC OME AT RS. 25,000/- PER MONTH IS HIGHLY ARBITRARY AND EXCESSIVE AND NOT BASED ON ALV AS PER THE PROVISIONS OF SEC. 23(L)(A) OF THE INCOME TAX AC T, 1961. DATE OF HEARING 30.08.2018 DATE OF PRONOUNCEMENT 07 .09.2018 2177/DEL/2015 2 3. THAT IN THE ABSENCE OF ANY RENTAL INCOME, THE ASS ESSING OFFICER IS REQUIRED TO ALLOW THE VACANCY ALLOWANCE IN TERMS OF PROVISIONS OF SEC. 23(L)(C) OF THE INCOME TAX ACT, 1961. 4. THAT LOWER AUTHORITIES HAVE NOT PROPERLY CONSIDER ED THE PROVISIONS OF SEC. 23 AND RELEVANT LEGAL PRINCIPLES AND CONSID ERED THE RENTAL VALUE ON ILLEGAL AND ARBITRARY BASIS. 5. THAT ORDERS OF THE LOWER AUTHORITIES ARE NOT JUST IFIED ON FACTS AND SAME ARE BAD IN LAW. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED RETURN OF INCOME ON 26.09.2011 DECLARING INCOME OF RS.87,27,300/-. THE CASE WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICES WERE ISSUED TO THE A SSESSEE. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PRODUCT DESIGN, MARKETIN G AND BUSINESS PROMOTION OF WOODWORKING PRODUCTS LIKE DECORATIVE LAMINATES & VENEERS IN INDIA AND INTERNATIONAL MARKET. THE ASSESSING OFFICER MADE AD DITION ONLY UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IN THE STATEMENT OF AFFAIRS FILED BY THE ASSESSEE, IT WAS NOTICED BY THE ASSESSING OFFICER T HAT THE ASSESSEE IS THE OWNER OF MORE THAN ONE HOUSE PROPERTY. THE ASSESSEE WAS A SKED TO EXPLAIN WHY THE PROPERTIES DECLARED BY THE ASSESSEE MAY BE TREATED AS SELF OCCUPIED AND IT IS DEEMED LET OUT. IN THIS REGARD, THE ASSESSEE SUBMIT TED REPLY DATED 19.01.2013 AS UNDER : THROUGH HIS REPLY DATED 19-12-2013 ASSESSEE HAS CL AIMED A FLAT AT MUMBAI (NO. 602, WIMBLEDON CO OPERATIVE HOUSING SOCIETY, P-10, B UNGALOW ANDHERI WEST, MUMBAI-58) IS ALSO BEING INDIRECTLY USED FOR BUSINESS PURPOSE AS AND WHEN ANY SHIPMENT HAS TO REACH MUMBAI OR LEAVE FORM MUMBAI AND ALSO THE SAME IS BEING USED FOR PRE SHIPMENT CHECKING PROCESS AND ALSO FOR HOLD ING CONFERENCE ETC FOR THE CLIENT AND HENCE THIS ALSO CANNOT BE ACCOUNTED FOR THE INCO ME DEEMED TO BE LET OUT FROM THIS PROPERTY . WHEN THE AUTHORIZED REPRESENTATIVE OF THE ASSESS EE WAS CONFRONTED ON THE FACT THAT THE SAID PREMISE WAS NEVER EVER DECLA RED BY THE ASSESSEE FOR THE PURPOSE OF RUNNING THE BUSINESS OF ASSESSEE. HENCE, WHY THIS RESIDENTIAL FLAT MAY NOT 2177/DEL/2015 3 BE TREATED AS DEEMED LET OUT. ASSESSEE THROUGH THE SUBMISSIONS DATED 30-12- 2013 SUBMITTED THAT COPY OF BILL RAISED BY WIMBLEDON CO-OP. HOUSING SOC IETY FOR PAYMENT OF MUNICIPAL TAX & OTHER FUND AND ACCORDING TO RECE IPTS OF HOUSE TAX PAID COMES TO RS. 3,480/- P.A. AS PER THE EXISTING NORMS, MUNICIP AL VALUATION SHOULD BE AROUND RS 35,000/- P.A'. HENCE AGREED THAT THE SAID PROPERTY MAY BE TREATED AS DEEMED LET OUT. HOWEVER TO EVALUATE THE ANNUAL LETTABLE VALUE NOTIC E U/S 133(6) WAS ISSUED TO THE MANAGER, WIMBLEDON CO-OPERATIVE HOUSING SOCIETY LTD . PLOT NO. 10, FOUR BUNGALOW ROAD, ANDHERI (WEST), MUMBAI-400058. IN RESPONSE THROUGH THE REPLY DATED 15-01-2014 FOLL OW REPLY WAS RECEIVED. U A). WHEN MR. RANJAN DHAMIJA WAS ALIVE, HE USED TO S TAY FOR FEW DAYS IN A MONTH. OTHERWISE MOST OF THE PERIOD, THE FLAT USED TO BE VA CANT AND WAS NEVER PUT ON RENT. B). AT PRESENT, THE APPROXIMATE MARKET RENT RATE IN OUR SOCIETY IS IN THE RANGE OF RS. 25,000 TO RS. 30,000/- P.M. DEPENDING UPON THE INTE RIOR FURNISHING IN THE FLAT. 3. THE ASSESSEE SUBMITTED THAT THE SAID PREMISES WA S BEING USED INDIRECTLY FOR THE PURPOSE OF BUSINESS. THE ASSESSING OFFICER DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE APPLIED THE PROVISIONS OF SECTION 23(1A) AND HE CONSIDERED THE FAIR MARKET RENT AT RS.25000/- PER M ONTH OF THE AFORESAID PROPERTY AND AFTER GIVING STATUTORY DEDUCTION, HE M ADE ADDITION OF RS.2,10,000/- AS INCOME FROM HOUSE PROPERTY. AGGRI EVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE APPEALED BEFORE THE LD. CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ORDER OF THE ASSESSING OFFICER UPHELD THE ACTION OF THE ASSESSING OFFICER. 4. THE LD. AR SUBMITTED THAT THE SAID PROPERTY WAS BEING USED INDIRECTLY FOR THE PURPOSE OF BUSINESS AND THAT DURING THE COU RSE OF MUMBAI VISIT, THE ASSESSEE STAYED IN THE AFORESAID BUILDING AND NOMIN AL TRAVELING EXPENSES HAVE BEEN BOOKED IN THE PROFIT AND LOSS ACCOUNT AND THE MANAGER OF THE SOCIETY HAS ALSO CERTIFIED THAT IT IS BEING USED FOR THE RESIDE NTIAL PURPOSE AND MUNICIPAL TAX, WATER CHARGES AND ELECTRICITY BILLS HAVE BEEN PAID AT NORMAL RATES. HE 2177/DEL/2015 4 FURTHER STATED THAT THE MUNICIPAL VALUE OF THE PROP ERTY IS RS.30,000/- PER YEAR INSTEAD OF FAIR MARKET VALUE OF RS.3,00,000/- PER Y EAR TAKEN BY THE ASSESSING OFFICER WITHOUT MAKING ANY ENQUIRY AND THE VACANCY ALLOWANCE HAS ALSO NOT BEEN GRANTED BY THE ASSESSING OFFICER. HE HAS RELIE D ON THE ORDER OF ITAT, SMC DELHI BENCH IN PATILPUTRA CREDIT & SECURITIES LTD. (ITA NO. 1683/DEL/2015) DATED 11.05.2018 . 5. THE LD. DR RELIED ON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE ORDERS OF THE LOWER AUTHORITIES ARE QUITE JUSTIFIED BECAUSE THE ASSESSEE IS UNABLE TO PRODUCE ANY CREDIBLE EVIDENCE REGARDING RUNNING OF ANY BUSINESS IN THE SAID PREMISES AND THE PREMISES WAS USED FOR THE PURPOSE OF BUSINESS. THEREFORE, THE AUTHORITIES BELOW ARE JUST IFIED IN COMPUTING INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 6. AFTER HEARING BOTH THE SIDES AND PERUSING THE EN TIRE MATERIAL AVAILABLE ON RECORD AND THE ORDERS OF THE AUTHORITIES BELOW, WE FIND THAT THE SAID PREMISES WERE BEING USED FOR THE PURPOSE OF BUSINES S AS PER THE LD. AR, BUT HE WAS UNABLE TO PRODUCE ANY CREDIBLE EVIDENCE TO PROV E THE ABOVE FACT. THE BENCH PUT A QUERY TO THE LD. AR WHETHER THERE IS AN Y CREDIBLE EVIDENCE TO PROVE THAT THE SAID PREMISES WAS BEING USED FOR THE PURPOSE OF BUSINESS, HE COULD NOT PRODUCE ANY SUCH EVIDENCE TO SUPPORT THE STAND TAKEN BY THE ASSESSEE. THEREFORE, THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTABLE. HOWEVER, WE OBSERVE FROM THE ORDER OF THE ASSESSING OFFICER THAT HE HAS TAKEN FAIR MARKET RENT AT RS.25000/- PER MONTH WITHOUT ANY BAS IS WHICH IS NOT ACCEPTABLE WHEREAS THE ASSESSEE HAS ALSO SUBMITTED MUNICIPAL VALUATION @ 35000/- PER YEAR, WHICH TOO IS NOT SUPPORTED BY ANY EVIDENCE ON RECORD. THIS MATTER IS, THEREFORE, SENT BACK TO THE ASSESSING OF FICER FOR DETERMINATION OF 2177/DEL/2015 5 ANNUAL VALUE OF THE PROPERTY AS PER SECTION 22 OF T HE IT ACT AS PER MUNICIPAL VALUATION AND GUIDELINES THERE UNDER. NEEDLESS TO S AY THAT THE ASSESSEE SHALL BE GIVEN REASONABLE OPPORTUNITY OF BEING HEARD. 7. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH SEPTEMBER, 2018. SD/- SD/- (BHAVNESH SAINI) (L.P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 7 TH SEPTEMBER, 2018 *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