SANDEEP SUKHTANKAR, MUMBAI V. ITO 10(2)(2), MUMBAI

ITA 2690/MUM/2012

• Counselvise Citation: 269019914 RSA 2012
• Duration Of Justice: 2 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 09-06-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 20-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ADGIRI
• Assessee Lawyers: DEVENDRA JAIN
• Keywords: Deemed owner of house property; Salary income; Cost of acquisition; Capital receipt

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - E BENCH. .. , ! , BEFORE S/SH.I.P.BANSAL, JUDICIAL MEM BER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.2690/MUM/2012, ' ' ' ' # # # # / ASSESSMENT YEAR-2009-10 SANDEEP SUKHTANKAR, 1302-1302, HURRY CITY OF JOY, JST ROAD, MULUND (W), MUMBAI-400080 VS ITO 8(3)2, R.NO.202, 2 ND FLOOR, AAYAKAR BHAVAN, MUMBAI-400020 PAN: ABAPS6948N ( $% / APPELLANT) ( &'$% / RESPONDENT) '() '() '() '() * * * * / ASSESSEE BY : SHRI DEVENDRA JAIN + * / REVENUE BY : SHRI B. YADGIRI ' ' ' ' + ++ + ), ), ), ), / DATE OF HEARING : 09-06-2014 -.# + ), / DATE OF PRONOUNCEMENT : 18-06-2014 ' ' ' ' , 1961 + ++ + 254 )1( )/) )/) )/) )/) 0 0 0 0 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM ! ! ! ! ' ' ' ' : CHALLENGING THE ORDER DT.27.02.2012 OF THE CIT(A)-2 2,MUMBAI,ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1.ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW , THE LD. CIT(A) HAS ERRED IN CONFIRMING INC ADDITION OF RS. 3,76,740/- AS RENTAL INCOME FROM OF FICE PREMISES TO THE INCOME OF THE ASSESSEE. 2.ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW , THE LD. CIT(A) HAS ERRED IN CONFIRMING ADDITION OF RS. 1,94,745/- BEING ANNUAL LETTING VAL UE OF THE ADJACENT SELF OCCUPIED HOUSE PROPERTY TREATING IT AS A SEPARATE HOUSE PROPERTY. 3.ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW , THE LD.CIT(A) HAS ERRED IN CONFIRMING ADDITION OF RS. 3,36,000/- AS ANNUAL VALUE OF THE S ELF OCCUPIED HOUSE PROPERTY. 4.WITH OUT PREJUDICE TO GROUND NO. 2 AND 3, THE LD CIT (A) ERRED IN CONFIRMING THE ACTION OF A.O IN ADOPTING THE NOTIONAL RENTAL INCOME @ 12% OF THE CO ST OF ACQUISITION WHICH IS UNREALISABLE AND MUCH ON HIGHER SIDE AS COMPARED TO THE ACTUAL RENT RECEIVED IN THE MARKET 5.ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW , THE LD, CIT(A) HAS ERRED CONFIRMING ADDITION OF NET RECEIPTS OF RS. 1,02,886/-ON SURRENDER OF LI C PENSION POLICY AGAINST WHICH NO DEDUCTION IS CLAIMED U/S 80CCC IN SPITE OF IT BEING A CAPITAL RE CEIPT. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, SUPPLEMEN T, ALTER AND/OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. ASSESSEE AN INDIVIDUAL,FILED HIS RETURN OF INCOME O N 29.03.2011DECLARING TOTAL INCOME AT RS. 2, 51,320/-.ASSESSING OFFICER(AO)FINALISED THE ASSESSM ENT U/S.143(3)OF THE ACT ON 07.12.2011 DETERMINING THE INCOME OF THE ASSESSEE AT RS. 16,41 ,490/-. 2. DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT THE ASSESSEE WAS A DIRECTOR IN M/S. CALIBRE PERSONNEL SERVICES PVT. LTD.(CPSPL)AND HAD SHOWN INCOME FROM SALARY AND OTHER SOURCES IN RETURN OF INCOME.AO NOTED THAT ASSESSEE WAS OWNE R OF THREE RESIDENTIAL PROPERTIES BUT HAD NOT OFFERED ANY INCOME FROM THE SAID PROPERTIES.AO. OBS ERVED THAT ASSESSEE HAD RENTED OFFICE PREMISES LOCATED AT OBEROI GARDENS TO M/S.KIRLOSKER CHILLERS PVT. LTD AND THE RENTAL INCOME WAS OFFERED TO TAX IN THE RETURN OF CPSPL.AO HELD THAT THE ASSESSEE WAS THE OWNER OF THE PROPERTY AND HENCE THE INCOME ARISING FROM THE SAID PROPERTY WAS TAXABLE IN THE HANDS OF ASSESSEE AND NOT IN 2 ITA NO. 2690/MUM/2012 SANDEEP SUKHTANKAR. THE HANDS OF THE COMPANY, AND THAT THE AGREEMENT HA D BEEN ENTERED INTO BETWEEN ASSESSEE AND THE COMPANY WHICH HAD TAKEN IT ON RENT.HE CALCULATED TH E NET ANNUAL VALUE OF THE PROPERTY AT RS.3, 76,740/-. 2.1. DURING THE COURSE OF APPELLATE PROCEEDINGS,BEFORE T HE FIRST APPELLATE AUTHORITY(FAA),IT WAS SUBMITTED,REGARDING OBEROI GARDENS,THAT THE SAID PR EMISES WAS RENTED OUT TO M/S KIRLOSKAR CHILLERS PVT.LTD AND THERE WAS A REQUIREMENT OF THE LESSEE THAT THE LESSOR SHOULD BE A CORPORATE ENTITY,THAT THE PREMISES WERE RENTED THROUGH CPSPL, THAT THE RENTAL INCOME WAS DULY OFFERED TO TAX AT MAXIMUM RATE IN COMPANYS RETURN.AFTER CONSIDERI NG THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER,FAA HELD THAT THE ASSESSEE WAS THE OWNER OF THE HOUSE PROPERTY THAT WAS LET OUT TO M/S KIRLOSKAR CHILLERS PVT.LTD M/S KIRLOSKAR CHI LLERS PVT.LTD,THAT THE INCOME HAD TO BE ASSESSED IN THE HANDS OF THE ASSESSEE AND NOT IN TH E HANDS OF CPSPL. 2.2. BEFORE US,AUTHRORISED REPRESENTATIVE(AR)STATED THAT THE RENT WAS SHOWN IN THE ACCOUNT OF CPSPL,THAT M/S.KIRLOSKER CHILLERS PVT. LTD. HAD INS ISTED THAT RENT WOULD BE PAID TO CORPORATE ENTITY ONLY,THAT CPSPL HAD PAID TAX ON IT.DEPARTMEN TAL REPRESENTATIVE(DR)SUPPORTED THE ORDERS OF THE AO AND THE FAA. 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.AS FAR AS THE PREMISES OBEROI GARDENS,THAT WAS LET OUT TO M/S.KIRLOSKER CH ILLERS PVT. LTD.,IS CONCERNED,IT IS CLEAR THAT THE ASSESSEE HAD NOT PRODUCED ANY EVIDENCE BEFORE ANY A UTHORITY INCLUDING US TO PROVE THAT HE WAS COMPELLED TO RECEIVE THE RENT IN THE NAME OF A CORP ORATE ENTITY.IT IS A FACT THAT THE PREMISES BELONGED TO THE ASSESSEE AND BEING THE OWNER HE WAS ENTITLED TO RECEIVE THE RENT FROM THE TENANT.IT IS ALSO A FACT THAT HE HAD ALLOWED CPSPL TO SHOW TH E RENTAL INCOME BELONGING TO THE ASSESSEE AS ITS OWN INCOME. WE ARE UNABLE TO UNDERSTAND AS TO HOW A CORPORATE ENTITY HAS SHOWN INCOME FROM A PREMISES THAT WAS NEITHER OWNED BY IT NOR WAS IT TA KEN ON RENT BY IT.TAX LAW EXPECT EVERY ASSESSEE TO SHOW HIS CORRECT INCOME IN THE RETURN.NOBODY IS PERMITTED TO CLAIM OTHERS INCOME AS HIS OWN INCOME.IN THESE CIRCUMSTANCES RETURNS FILED BY BOTH THE PARTIES DO NOT DEPICT THEIR TRUE INCOMES. IN THE CASE UNDER CONSIDERATION,THE ASSESSEE HAD NOT S HOWN THE INCOME ACCRUED TO HIM IN THE RETURN.THEREFORE,THE AO AND THE FAA WERE JUSTIFIED IN HOLDING THAT INCOME FROM THE OBEROI GARDENS PROPERTY WAS TO BE ASSESSED IN HIS HANDS.CO NFIRMING THE ORDERS OF THE FAA,WE DECIDE GROUND NO.1 AGAINST THE AO. 3. SECOND GROUND OF APPEAL IS ABOUT ADDITION OF RS.1,9 4,745/- BEING ANNUAL LETTING VALUE(ALV) OF THE SELF OCCUPIED HOUSE PROPERTY.DURING THE ASSESSM ENT PROCEEDINSGS,THE AO FOUND THAT THE ASSESSEE HAD TWO RESIDENTIAL FLATS AT HURRAH NIRMAL LIFESTYLE I.E. FLAT NO.1301 AND 1302 AND VALUE OF EACH FLAT WAS RS.23,18,400/-.HE HELD THAT AS PER PROVISIONS OF ACT ASSESSEE COULD TAKE ONLY ONE FLAT AS SOP AND ANOTHER FLAT HAD TO BE CONSIDERED A S DEEMED LET OUT.ASSESSEE SUBMITTED THAT THOUGH THERE WERE TWO AGREEMENTS HOWEVER BOTH WERE JOINT PROPERTY AND SAME WERE BEING USED AS SINGLE UNIT.BUT,THE AO DID NOT ACCEPT THE CONTENTIO N OF THE ASSESSEE AND HELD THAT EXISTENCE OF TWO AGREEMENTS CONFIRMED THAT BOTH WERE SEPARATE PROPER TIES,THAT IN ONE PROPERTY FIRST NAME WAS OF ASSESSEE WHEREAS IN ANOTHER PROPERTY FIRST NAME WAS OF ASSESSEES WIFE. CONSIDERING THE LOCATION OF THE PROPERTY HE WORKED OUT ITS ALV BY TAKING 12% OF THE VALUE OF ONE PROPERTY AT AT RS. 1,94,745/- BY TREATING IT TO BE DEEMED LET OUT INCOME. 3.1. IN THE APPELLATE PROCEEDINGS FAA HELD THAT THE AGRE EMENTS STOOD IN ASSESSEES NAMES,THAT PAYMENT FOR THE FLAT WAS MADE FROM BANK ACCOUNT OF THE ASSESSEE,THAT HE COULD CLAIM ONLY ONE FLAT AS SOP,THAT THE CASE LAWS RELIED UPON BY THE ASSESS EE RELATED TO THE DEDUCTION U/S.54F AND WERE NOT RELEVANT. 3.2. BEFORE US,AR ARGUED THAT THE ASSESSEE EXCLUSIVELY O WNED TWO ADJACENT FLATS THOUGH THE NAME OF HIS WIFE WAS ADDED FOR CONVENIENCE,THAT THE PAYM ENTS FOR THE FLATS WERE ALSO MADE FROM BANK ACCOUNT OF THE ASSESSEE,THAT IT WAS A JOINT PROPERT Y WITH COMMON ENTRANCE AND COMMON KITCHEN,THAT BOTH THE FLATS SHOULD BE CONSIDERED AS ONE HOUSE PROPERTY.DR STATED THAT THERE WERE TWO AGREEMENTS FOR THE PROPERTY IN QUESTION,THAT AO HAD RIGHTLY ALLOWED ALLOWANCE FOR ONE UNIT. 3 ITA NO. 2690/MUM/2012 SANDEEP SUKHTANKAR. 3.3. WE HAVE HEARD THE RIVAL SUBMISSIONS.IT IS A FACT TH AT THERE WERE TWO AGREEMENT FOR THE FLATS NO.1301 AND 1302 FOR THE RESIDENTIAL PROPERTY SITUA TED AT HURRAY NIRMAL LIFESTYLE.BUT,THE ASSESSEE HAS MADE A CLAIM THAT THEY WERE BEING USED A SINGLE UNIT,THAT THE HAD COMMON ENTRANCE.WE FIND THAT AO HAD MADE NO INQUIRY IN THIS REGARD AT THE T IME OF ASSESSMENT.THEREFORE,IN THE INTEREST OF JUSTICE,WE ARE REMITTING BACK THE MATTER TO THE FIL E OF THE AO FOR FRESH ADJUDICATION.HE IS DIRECTED TO MAKE PHYSICAL VERIFICATION OF THE PROPERTY THROU GH HIS INSPECTOR TO FIND OUT AS TO WHETHER THE RESIDENTIAL UNIT IS ONE OR NOT.HE WOULD DECIDE THE ISSUE AFTER HEARING THE ASSESSEE. GROUND NO.2 IS DECIDED IN FAVOUR OF THE ASSESSEE,IN PART. 4. NEXT GROUND OF APPEAL PERTAINS TO ADDITION OF RS. 3 ,36,000/- AS ANNUAL VALUE OF THE SELF OCCUPIED HOUSE PROPERTY.DURING THE ASSESSMENT PROCEEDINGS,AO FOUND THAT THE ASSESSEE HAD ALSO OFFERED INCOME FROM A RESIDENTIAL PROPERTY AT SUN GLOW LOCA TED AT POWAI AT RS.14,698/- BY TAKING MUNICIPAL RATABLE VALUE OF THE PROPERTY AT RS.35,01 0/-.AO WAS OF THE OPINION THAT THE ANNUAL VALUE HAD TO BE COMPUTED ACCORDING TO SECTION 22 AS THE S AID PROPERTY WAS NOT LET OUT DURING THE YEAR. CONSIDERING THE LOCATION OF THE PROPERTY,THE AO WO RKED OUT ITS ALV,BY TAKING 12% OF THE VALUE OF THE PROPERTY,AT RS.3,36,000/- BY TREATING IT TO BE DEEMED LET OUT INCOME. 4.1. ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA.AFTER C ONSIDERING THE SUBMISSIONS OF THE ASSESSEE,HE HELD THAT HE DID NOT AGREE WITH THE CON TENTION OF THE ASSESSEE.REFERRING TO THE CASE OF RADHADEVI DALMIYA (125 ITR 134)OF THE HONBLE ALLA HABAD HIGH COURT HE HELD THAT ALV CALCULATION @ PERCENTAGE OF THE INVESTMENT IN PROPE RTY WAS JUSTIFIED. 4.2. BEFORE US,AR SUBMITTED THAT THE AO HAD ERRED IN CO NSIDERING RS.3,36,000/- AS ALV OF THE PROPERTY IN QUESTION BY TAKING 12% OF COST OF ACQUI SITION,THAT AS PER THE PROVISIONS OF SECTION 23(4),THE ANNUAL VALUE OF HOUSE PROPERTY OTHER THAN THE ONE CLAIMED BY THE ASSESSEE AS SELF OCCUPIED AT THE OPTION OF THE ASSESSEE SHOULD BE DE TERMINED AS PER SUB-SECTION (1) OF SECTION 23 AS IF THE PROPERTY IS LET OUT,THAT IF IN CASE THE PROP ERTY WAS NOT LET OUT AND ACTUAL RENT RECEIVED WAS N IL THEN THE ANNUAL VALUE WOULD BE MUNICIPAL VALUE OF T HE PROPERTY,THAT THE PROPERTY REMAINED VACANT FOR THE YEAR UNDER CONSIDERATION.DR SUPPORTED THE O RDERS OF THE AO AND THE FAA. 4.3. WE HAVE HEARD THE RIVAL SUBMISSIONS.WE FIND THAT TH E AO AND THE FAA HAVE NOT DENIED THE FACT THE PROPERTY REMAINED VACANT FOR THE YEAR UNDE R APPEAL,THAT THE AO HAD ADOPTED ALV BASED ON COST OF ACQUISITION OF THE PROPERTY,THAT THE ASS ESSEE HAD TAKEN MUNICIPAL RATABLE VALUE FOR ALV PURPOSES.IN OUR OPINION,METHOD ADOPTED BY THE ASSES SEE WAS AS PERT LAW.AS THE PROPERTY REMAINED VACANT ,SO,ADOPTING MUNICIPAL RATABLE CANNOT BE TER MED INCORRECT METHOD OF CALCULATING HOUSE PROPERTY INCOME.THEREFORE,REVERSING THE ORDER OF TH E FAA,WE DECIDE GROUND NO.3 IN FAVOUR OF THE ASSESSEE. 5. LAST GROUND OF APPEAL IS ABOUT ADDITION OF RS.1.02 LAKHS ON SURRENDER OF LIC PENSION POLICY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO OB SERVED THAT ASSESSEE HAD RECEIVED AN AMOUNT OF RS.L,08,044/-BY SURRENDERING LIFETIME PENSION PO LICY AND LIFE INSURANCE POLICY FROM ICICI PRUDENTIAL LIFE INSURANCE.AS PER DETAILS FILED,AO NOTED THAT IN CASE OF LIFE INSURANCE PREMIUM ANNUAL PREMIUM WAS LESS THAN 20% OF THE SUM ASSURED AND PREMIUMS HAD BEEN MADE FOR MORE THAN THREE YEARS,THAT THAT THE ASSESSEE HAD NOT CLA IMED DEDUCTION U/S.80CCC FOR PENSION POLICY.HE HELD THAT THE DIFFERENCE OF AMOUNT OF THE INVESTMEN T MADE AND PAYMENT RECEIVED HAD TO BE TAXED AS INCOME FROM OTHER SOURCES IN THE HANDS OF THE AS SESSEE. 5.1. DURING THE COURSE OF APPELLATE PROCEEDINGS,IT WAS S UBMITTED BEFORE THE FAA THAT THE ASSESSEE HAD HAD SURRENDERED HIS ICICI LIFETIME PENSION POLI CY,THAT ON SUCH SURRENDER HE RECEIVED AN AMOUNT OF RS.12,12,886/-,THAT THE ASSESSEE HAD INVE STED RS.11,10,000/- AS PREMIUM,THAT HE HAD NOT CLAIMED ANY DEDUCTION U/S.80CCC IN RESPECT OF P REMIUM PAID,THAT AO HAD ACCEPTED THE FACT,THAT THE RECEIPT FROM THE SURRENDER OF THE POL ICY WAS A CAPITAL RECEIPT AND HENCE NOT TAXABLE.AFTER CONSIDERING THE ARGUMENTS OF THE ASSE SSEE,FAA HELD THAT THE WAS AMOUNT RECEIVED ON INVESTMENT,THAT IT WAS IN THE NATURE OF INTEREST ,THAT SAME WAS RIGHTLY BEEN TAXED AS INCOME FROM 4 ITA NO. 2690/MUM/2012 SANDEEP SUKHTANKAR. OTHER SOURCES. 5.2. BEFORE US,AR STATED THAT NO CLAIM WAS MADE U/S.80C CC WHEN MONEY WAS DEPOSITED,THAT ANNUAL PREMIUM WAS LESS THAN 20% OF THE SUM ASSURED ,THAT PAYMENT RECEIVED BY THE ASSESSEE COULD NOT BE TAXED AS INCOME FROM OTHER SOURCES.DR SUPPORTED THE ORDER OF THE FAA. 5.3. WE HAVE HEARD THE RIVAL SUBMISSIONS.AO HAD ADMITTED THAT THE ASSESSEE HAD NOT CLAIMED DEDUCTION UNDER THE PROVISIONS OF CHAPTER VI A OF T HE ACT,THAT HE HAD HAD RECEIVED AN AMOUNT IN DISPUTE BY SURRENDERING LIFETIME PENSION POLICY AND LIFE INSURANCE POLICY FROM ICICI PRUDENTIAL LIFE INSURANCE.THESE TWO FACTORS IN THEMSELVES ARE SUFFICIENT TO HOLD THAT MONEY RECEIVED BY THE ASSESSEE IS A CAPITAL RECEIPT AND NOT TAXABLE.PROVI SIONS OF SECTION 2 OF THE SECTION 80CCC ARE VERY CLEAR.IN LIGHT OF THE SAID SUB SECTION WE DECIDE GR OUND NO.4 IN FAVOUR OF THE ASSESSEE. AS A RESULT,APPEAL FILE D BY THE ASSESSEE STANDS PARTLY ALLOWED. 1)2 '() + VAKR% VAKR% VAKR% VAKR% 3 + ) 45. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH JUNE,2014 . 0 + -.# 6 7' 18 TWU , 201 4 . + / 8 SD/- SD/- ( .. / I.P. BANSAL) ( ! ! ! ! / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, 7' /DATE: 18.06 . 2014. SK 0 0 0 0 + ++ + &)9 &)9 &)9 &)9 : 9#) : 9#) : 9#) : 9#) / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / $% 2. RESPONDENT / &'$% 3. THE CONCERNED CIT(A)/ ; < , 4. THE CONCERNED CIT / ; < 5. DR E BENCH, ITAT, MUMBAI / 9=/ &)' , . . . 6. GUARD FILE/ / 1 '9) '9) '9) '9) &) &)&) &) //TRUE COPY// 0' / BY ORDER, > / 4 DY./ASST. REGISTRAR , /ITAT, MUMBAI