SANJAY KANTILAL PATEL, MUMBAI V. ITO 5(2)(4), MUMBAI

ITA 2194/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8817 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 16-01-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 15-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: ANUPAMA SINGHLADR
• Section: 143(3); 27

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, G MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NO.2194/MUM/2015 ASSESSMENT YEAR: 2010-11 SHRI SANJAY KANTILAL PATEL, SUNRISE, 91, WALKESHWAR ROAD, WALKESHWAR, MUMBAI-400006 / VS. INCOME TAX OFFICER, WARD-5(2)(4), MUMBAI ( !'# $ /ASSESSEE) ( / REVENUE) PAN. NO . AADPP0822G % & $ ' / DATE OF HEARING : 16/01/2017 & $ ' / DATE OF ORDER: 16/01/2017 ! / REVENUE BY SHRI RAKESH JOSHI !'# $ ! / ASSESSEE BY MS. ANUPAMA SINGHLA-DR ITA NO.2194/MUM/2015 SHRI SANJAY KANTILAL PATEL 2 / O R D E R PER JOGINDER SINGH(JUDICIAL MEMBER) 1. THE CAPTIONED APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2010-2011 ASSAILS THE ORDER DATED 03/02/2015 P ASSED BY LD. COMMISSIONER OF INCOME TAX (APPEALS) -10 [CI T(A)], MUMBAI ON THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL S:- 1. ON THE FACT AND CIRCUMSTANCES OF THE CASE AS WELL A S IN LAW , THE LEARNED CIT(A) HAS ERRED I N CONFIRMING THE ACTION OF LEARNED ASSESSING OFFICER IN CONSIDERING THE RENTAL INCOME FROM CLEAR CHANNEL COMMUNICATION INDIA PVT LTD AT RS . 67 , 80 , 000/- INSTEAD OF ACTUAL AMOUNT RECEIVED OF RS.53 , 03 , 720 / - WITHOUT CONSIDERING FACTS AND CIRCUMSTANCES OF THE CASE. 2. ON THE FACT AND CIRCUMSTANCES OF THE CASE AS WELL A S I N LAW , THE LEARNED CIT(A) HAS ERRED IN DISALLOWING THE CLASSIF ICATION OF HOUSE PROPERTY INCOME OF RS.37 , 96,604/- WITHIN THE MEANING OF SECTION 23(2) OF THE INCOME TAX ACT BEING RENT RECEIVED FR OM CLEAR CHANNEL & BHARAT PATEL AS INCOME FROM OTHER SOURCES , W I THOUT CONSIDERING FACTS AND CIRCUMSTANCES OF THE CASE. 2. BRIEFLY, STATED THE ASSESSEE IS A RESIDENT INDI VIDUAL AND EARNED INCOME FROM VARIOUS SOURCES. HE FILED ITS RE TURN OF INCOME FOR IMPUGNED AY ON 31/07/2010 DECLARING TOTA L INCOME OF RS.4,57,73,720/-. THE SAME WAS PICKED UP FOR SCRUTINY ASSESSMENT U/S 143(3) WHEREIN TOTAL INCOME WAS DETERMINED AT RS.5,09,02,470/- AFTER MAKING CERTAIN ADJUSTMENTS VIDE ASSESSING OFFICER [AO] ORDER DATED 28/03/2013. THE ASSESSEE DERIVED RENTAL INCOME FROM SUB- LETTING OF A PROPERTY SITUATED AT 52, FILM CENTER B UILDING WHICH WAS LET OUT TO M/S CLEAR CHANNEL COMMUNICATIONS INDIA PVT. LTD. . THE ASSESSEE REFLECTED RENT OF RS. 53,03,720/- (NET OF SERVICE TAX) FROM THIS PROPERTY IN THE FOLLOWING MANNER:- ITA NO.2194/MUM/2015 SHRI SANJAY KANTILAL PATEL 3 NO. PERIOD NO. OF MONTHS RENT PER MONTH TOTAL RENT 1. APRIL 20 0 9 TO JULY 2009 4 5 , 65 , 000/ - 22,60,000/ - 2. AUGUST 2009 TO MARCH 2010 8 3 , 80 , 465/ - 30,43,720/ - TOTAL 53,03,720/- AO DISREGARDED THE REDUCTION IN RENT FROM AUGUST, 2 009 AND COMPUTED TOTAL RENT AT RS.67,80,000/- BY TAKING MON THLY RENTAL AT RS.5,65,000/- AND TREATED THE SAME AS IN COME FROM OTHER SOURCES ON THE PREMISES THAT THE ASSESS EE WAS NOT THE OWNER OF THE PROPERTY AND ALSO THE ASSESSEE WAS NOT IN THE BUSINESS OF LEASING OUT OF PROPERTIES. THE A SSESSEE ASSAILED THE SAME BEFORE CIT(A) WHO AFFIRMED THE ST AND OF AO AFTER FINDING NO JUSTIFICATION FOR SUCH DRASTIC DECREASE IN RENT AND ALSO FINDING SHORTCOMING IN THE SUPPLEMENT ARY LEAVE AND LICENSE AGREEMENT. AGGRIEVED, THE ASSESSE E IS IN APPEAL BEFORE US. 3. THE LD. COUNSEL FOR ASSESSEE, SHRI RAKESH JOSHI [AR] CONTENDED THAT NOTIONAL RENTAL INCOME COULD NOT BE TAXED BY REVENUE. THE RENT WAS DECREASED DUE TO ADVERSE MARK ET CONDITIONS AND RENTAL INCOME DERIVED BY ASSESSEE DU LY MATCHES WITH FORM 26AS AND SERVICE TAX RETURNS FILE D BY THE ASSESSEE. A PAPER-BOOK CONTAINING THE RELEVANT LEDGER ITA NO.2194/MUM/2015 SHRI SANJAY KANTILAL PATEL 4 ACCOUNT OF THE TENANT, LEAVE AND LICENSE AGREEMENT, POWER OF ATTORNEY, SUPPLEMENTARY AGREEMENT TO LEAVE AND LIC ENSE BESIDES OTHER DOCUMENTS HAS BEEN PLACED BEFORE US. PER CONTRA , THE LD. DR, MS. ANUPAMA SINGHLA, STRONGLY DEFENDED THE IMPUGNED ORDER BY CONTENDING THAT THE SUPPLEMENTARY AGREEMENT WAS NEITHER REGISTERED DOCU MENT NOR THERE ARE SIGNATURES OF WITNESSES WHICH CAST DO UBT ON THE GENUINENESS OF THE DOCUMENTS AND HENCE COULD NO T BE RELIED UPON. SHE FURTHER PLEADED THAT THE SAID AGRE EMENT WAS NEVER FILED BEFORE THE ASSESSING OFFICER, THERE FORE, THE LD. ASSESSING OFFICER COULD NOT EXAMINE THE GENUINE NESS OF THE SAME. PER QUERY FROM THE BENCH, THE LD. AR EXP LAINED THAT SUPPLEMENTARY AGREEMENT WAS FILED BEFORE THE L D. COMMISSIONER OF INCOME TAX (APPEAL) BUT REMAND REPO RT WAS SOUGHT FROM THE ASSESSING OFFICER. 4. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RELEVANT DOCUMENTS AND FOUND THAT THE SUPPLEMENTARY AGREEMENT (AVAILABLE ON PAGES 36 TO 38 OF THE PAPER BOOK) IS ON PLAIN PAPER WHICH IS NEITHER REGISTERED NOR SIGN ED BY THE WITNESSES. IT IS ALSO NOTED THAT THE SUPPLEMENTARY AGREEMENT WAS MADE IN AUGUST, 2009 WHICH WAS BETWEE N SHRI SANJAY KANTILAL PATEL AND M/S CLEAR CHANNEL COMMUNICATIONS INDIA PVT. LTD. WHEREAS IT IS SIGNED BY POWER OF ATTORNEY HOLDER, SHRI GURUNATH R. KORGAONK AR. THIS SUPPLEMENTARY AGREEMENT WAS ALSO NOT FILED BEF ORE THE ASSESSING OFFICER, THEREFORE, WITHOUT GOING INTO MU CH DELIBERATION, THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE ITA NO.2194/MUM/2015 SHRI SANJAY KANTILAL PATEL 5 GENUINENESS OF THE VARIOUS DOCUMENTS FILED BY THE A SSESSEE LIKE LEAVE AND LICENSE AGREEMENT, SUPPLEMENTARY LEA VE AND LICENSE AGREEMENT, POWER OF ATTORNEY, DECLARATION O F POWER OF ATTORNEY BEFORE REGISTRAR, BY ENSURING PERSONAL ATT ENDANCE OF ALL THE SIGNATORIES INCLUDING WITNESSES, IF ANY. TH E ASSESSING OFFICER IS ALSO DIRECTED TO COMPARE THE FILED DOCUM ENTS WITH ORIGINAL DOCUMENTS. THE ASSESSING OFFICER IS DIREC TED TO EXAMINE THE OWNERSHIP RIGHTS OF SANJAY KANTILAL PAT EL, S/O SHRI KANTILAL AMBALAL PATEL AND AFTER SATISFYING HI MSELF WITH RESPECT TO GENUINENESS OF THE DOCUMENTS, RIGHTFUL O WNERSHIP OF THE TENANTED PROPERTY AND AFTER PROVIDING DUE OP PORTUNITY OF BEING HEARD, DECIDE IN ACCORDANCE WITH LAW. THE ASSESSEE IS AT LIBERTY TO FURNISH NECESSARY EVIDENCE, IN SUP PORT OF HIS CLAIM, THUS, THIS GROUND OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 5. GROUND NO.2 IS RELATED WITH CLASSIFICATION OF RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PRO PERTY. THE ASSESSEE IS AGGRIEVED BY THE ACTION OF AO IN TR EATING RENTAL INCOME UNDER THE HEAD INCOME FROM OTHER SOU RCES AS AGAINST INCOME FROM HOUSE PROPERTY CLAIMED BY THE ASSESSEE. THE ASSESSEE REFLECTED RENTAL INCOME FROM TWO PROPERTIES AS PER THE DETAILS GIVEN BELOW:- NO. PROPERTY RENTAL INCOME NAME OF TENANT 1. 52, FILM CENTER BUILDING (SAME 53,03,720/ - M/S CLEAR CHANNEL COMMUNICATIONS INDIA PVT. ITA NO.2194/MUM/2015 SHRI SANJAY KANTILAL PATEL 6 BUILD ING AS IN GROUND NO. 1) LTD. 2. SUNRISE BUNGLOW FLAT NO.1A 1,20,000/ - BHARAT PATEL TOTAL 54,23,720/- AFTER CLAIMING STATUTORY DEDUCTION OF 30%, THE INCO ME WAS OFFERED AT RS.37,96,604/-. THE AO NOTED THAT THE AS SESSEE WAS NOT THE OWNER OF THE SAID BUILDINGS AND THUS, F AILED TO FULFILL PRECONDITION FOR CHARGEABILITY OF INCOME UN DER THE HEAD INCOME FROM HOUSE PROPERTY. FURTHER, THE ASSES SEE WAS NOT IN THE BUSINESS OF LEASING OF PROPERTY AND HENCE, CONCLUDED THAT THE SAME WAS CHARGEABLE UNDER THE HE AD INCOME FROM OTHER SOURCES. THE ACTION OF AO WAS C ONFIRMED BY THE CIT(A) AND AGGRIEVED BY CHANGE OF HEAD OF IN COME, THE ASSESSEE HAS RAISED SECOND GROUND OF APPEAL. BE FORE US, THE LD. AR CONTENDED THAT THE ASSESSEE HAS ORAL LEA SE OF PROPERTY FROM THE ORIGINAL OWNER BUT NEVERTHELESS D EEMED OWNER WITHIN THE MEANING OF SECTION 27 (IIIB) AND H ENCE, THE IMPUGNED INCOME IS RIGHTLY OFFERED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE LD. DR SUPPORTED THE STAND OF LOWER AUTHORITIES. 6. WE HAVE HEARD THE RIVAL CONTENTIONS. FIRST OF AL L, IT WOULD BE PRUDENT TO REPRODUCE RELEVANT EXTRACT OF SECTION 27 WHICH IS AS FOLLOWS:- ITA NO.2194/MUM/2015 SHRI SANJAY KANTILAL PATEL 7 27. FOR THE PURPOSES OF SECTIONS 22 TO 26 (I) (II) (III) (IIIA) (IIIB) A PERSON WHO ACQUIRES ANY RIGHTS (EXCLUDING ANY RIGHTS BY WAY OF A LEASE FROM MONTH TO MONTH OR FOR A PERIOD NOT EXC EEDING ONE YEAR) IN OR WITH RESPECT TO ANY BUILDING OR PART THEREOF, BY VIRTUE OF ANY SUCH TRANSACTION AS IS REFERRED TO IN CLAUSE (F) OF SECTION 269UA, SHALL BE DEEMED TO BE THE OWNER OF THAT BUILDING OR PART THEREOF; THUS, A PERSON WHO ACQUIRES ANY RIGHT IN OR WITH RE SPECT TO ANY BUILDING OR PART THEREOF, BY VIRTUE OF ANY TRAN SACTION AS IS REFERRED TO IN SEC. 269UA(F), I.E., TRANSFER BY WAY OF LEASE FOR NOT LESS THAN 12 YEARS SHALL BE DEEMED TO BE TH E OWNER OF THAT BUILDING OR PART THEREOF. THIS WILL NOT COV ER THE CASE WHERE ANY RIGHT BY WAY OF LEASE IS ACQUIRED ON MONT H-TO- MONTH BASIS OR FOR A PERIOD NOT EXCEEDING ONE YEAR. PER QUERY FROM THE BENCH, THE LD. AR FAIRLY CONCEDED TH AT THE ASSESSEE WAS NOT THE LEASE HOLDER OF THE ABOVE PROP ERTIES FOR A TERM OF NOT LESS THAN TWELVE YEARS AS PER REQUIRE MENT OF SECTION 27 & SECTION 269UA(F) OF THE ACT. THE PROPE RTIES IN QUESTION WERE UNDER ORAL AGREEMENTS AND ON MONTH TO MONTH BASIS. THEREFORE, WE HAVE NO HESITATION IN CO NFIRMING THE ACTION OF THE LOWER AUTHORITIES AND DISMISS THI S GROUND OF ASSESSEES APPEAL. ITA NO.2194/MUM/2015 SHRI SANJAY KANTILAL PATEL 8 7. FINALLY, THE APPEAL OF THE ASSESSEE IS PARTLY AL LOWED FOR STATISTICAL PURPOSE. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF THE LD. REPRESENTATIVES FROM BOTH SIDES AT THE C ONCLUSION OF THE HEARING ON 16/01/2017. SD/- SD/- (MANOJ KUMAR AGGARWAL) (JOGINDER SINGH) '!# / ACCOUNTANT MEMBER $!# /JUDICIAL MEMBER % MUMBAI; ) DATED : 16/01/2017 F{X~{T? P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. +,- / THE APPELLANT (RESPECTIVE ASSESSEE) 2. ./,- / THE RESPONDENT. 3. 1$ ( + ) / THE CIT, MUMBAI. 4. 1$ / CIT(A)- , MUMBAI, 5. 34 .$! , +' ! 5 , % / DR, ITAT, MUMBAI 6. 6' 7% / GUARD FILE. ! / BY ORDER, /3+$ .$ //TRUE COPY// /! (DY./ASSTT. REGISTRAR) , % / ITAT, MUMBAI