SILVER SAND BUILDERS PVT. LTD., Jaipur V. ITO, Jaipur

ITA 284/JPR/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6125 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 12-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SEEMA MEENA JCIT DHK
• Assessee Lawyers: S R SHARMA
• Keywords: Capital asset; Deemed owner of house property; Business income; Corroborative evidences

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; ,OA JH FOE FLAG ;K NO ] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM AND SHRI VIKRAM SING H YADAV, AM VK;DJ VIHY LA-@ ITA NO. 284/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13. M/S. SILVER SAND BUILDERS PVT. LTD., C-3A/1A, SAWAI JAI SINGH HIGHWAY, BANI PARK, JAIPUR. CUKE VS. THE INCOME TAX OFFICER, WARD 3(2), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAECS 7851 E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI S.R. SHARMA (CA) JKTLO DH VKSJ LS@ REVENUE BY : SMT. SEEMA MEENA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 26.03.2018 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 27/04.2018. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 21 ST FEBRUARY, 2017 OF LD. CIT (A)-1, JAIPUR FOR THE ASSESSMENT YEAR 2012-13. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS :- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT (A) IS WRONG, UNJUST AND HAS ERRED IN LAW IN UP HOLDING DISALLOWANCE OF RS. 2,40,804/- MADE BY THE ASSESSIN G OFFICER OUT OF EMPLOYEES EXPENSES (RS. 3,31,260) AND OTHER EXPE NSES (RS. 872761) ON ACCOUNT OF ALLEGED UNVERIFIABILITY THERE OF. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD. CIT (A) IS WRONG, UNJUST AND HAS ERRED IN LAW IN CO NFIRMING FINDING RECORDED BY THE ASSESSING OFFICER THAT NOTI ONAL INCOME FROM UNSOLD STOCK OF COMMERCIAL COMPLEX SILVER SQU ARE AT JAIPUR HELD BY THE APPELLANT COMPANY IN RESPECT OF WHICH COMPLETION CERTIFICATE IS ALSO NOT RECEIVED FROM LO CAL MUNICIPAL 2 ITA NO. 284/JP/2017 M/S. SILVER SAND BUILDERS PVT. LTD. AUTHORITIES IS ASSESSABLE UNDER THE HEAD INCOME FR OM HOUSE PROPERTY. 3. THAT WITHOUT PREJUDICE TO THE GROUND NO. (2) ABO VE THE LD. CIT (A) IS WRONG AND HAS ERRED IN LAW IN NOT ACCEPTING PLEA OF THE APPELLANT COMPANY THAT 2355.50 SQ. FT. AREA OF FOUR TH FLOOR WAS UNAUTHORIZED CONSTRUCTED AREA AND THEREFOR CANNOT B E LET OUT. 4. THAT THE LD. CIT (A), IS FURTHER WRONG AND HAS E RRED IN LAW IN ARBITRARILY WORKING OUT AVERAGE MONTHLY RENT OF RS. 77.22 SQ. FT. IN RESPECT OF UNSOLD AREA AND THEREBY CONFIRMING DE TERMINATION OF ALV OF SAID AREA AT RS. 1,16,79,435/-. 5. THAT THE APPELLANT CRAVES THE PERMISSION TO ADD TO OR AMEND TO ANY OF THE ABOVE GROUNDS OF APPEAL OR TO WITHDRAW A NY OF THEM. GROUND NO. 1 IS REGARDING DISALLOWANCE OF EXPENSES . 2. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT. THE ASSESSEE IN COLLABORATION HAS DEVELOPED A COMME RCIAL COMPLEX AT BHAGWAN DASS ROAD, JAIPUR KNOWN AS SILVER SQUARE WHICH IS HELD AS STOCK-IN-TRADE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ASKED THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNT ALONG WITH VOUCHERS TO VERIFY THE GENUINENESS OF THE EXPENSES CLAIMED. SINCE THE ASSESSEE DID NOT FILE THE REQUIS ITE DETAILS AND BOOKS OF ACCOUNT, THEREFORE, THE AO MADE A DISALLOWANCE OF 20% OF EXP ENSES OF RS. 12,04,021/- AMOUNTING TO RS. 2,40,804/-. THE ASSESSEE CHALLENG ED THE ACTION OF THE AO BEFORE LD. CIT (A) BUT COULD NOT SUCCEED. 3. BEFORE US, THE LD. A/R OF THE ASSESSEE HAS SUBMI TTED THAT ALL THESE EXPENSES ARE FULLY VERIFIABLE AND WERE INCURRED FOR THE PURP OSES OF BUSINESS. FURTHER, THE AO DID NOT FIND THE EXPENSES IN QUESTION AS EXCESSIVE IN COMPARISON TO THE BUSINESS ACTIVITY OF THE ASSESSEE AND TURNOVER OF THE ASSESS EE. HENCE THE DISALLOWANCE OF 3 ITA NO. 284/JP/2017 M/S. SILVER SAND BUILDERS PVT. LTD. 20% MADE BY THE AO AND SUSTAINED BY THE LD. CIT (A) IS NOT JUSTIFIED. IN SUPPORT OF HIS CONTENTION HE ALSO RELIED UPON THE DECISION OF HONBLE P & H HIGH COURT IN CASE OF CIT VS. S.S.P. PVT. LTD. 202 TAXMAN 386 (P&H) AS WELL AS DECISION OF MUMBAI BENCH OF THE TRIBUNAL DATED 8.8.2012 IN CASE OF M/S . NISHOTECH SYSTEMS PVT. LTD. VS. ACIT IN ITA NO. 6116/M/11. THE LD. A/R HAS THUS SU BMITTED THAT WHEN THE BOOKS OF ACCOUNTS OF THE ASSESSEE HAVE BEEN DULY AUDITED AND THE EXPENSES ARE NOT FOUND TO BE EXCESSIVE AND FURTHER HAS BEEN INCURRED WHOLLY A ND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS THEN THE DISALLOWANCE MADE BY THE AO IS NO T JUSTIFIED. THE LD. A/R HAS ALSO RELIED UPON THE DECISION OF HONBLE DELHI HIGH COUR T IN CASE OF FRIENDS CLEARING AGENCY PVT. LTD. VS. CIT, 332 ITR 269 AND SUBMITTED THAT THE HONBLE HIGH COURT HAS HELD THAT WHEN A PARTICULAR EXPENDITURE HAS BEE N ALLOWED IN FULL IN THE EARLIER YEAR THEN THE SAME CANNOT BE DISALLOWED IN THE LATE R YEAR ON ESTIMATE BASIS. 3.1. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED T HAT THERE IS NO COMPLIANCE BY THE ASSESSEE TO PRODUCE THE RELEVANT EVIDENCE AS WE LL AS BOOKS OF ACCOUNTS AS CALLED BY THE AO. THE AO ISSUED VARIOUS SHOW CAUSE NOTICE S AND REMINDERS TO THE ASSESSEE BUT THE ASSESSEE DID NOT COMPLY WITH THE N OTICES ISSUED BY THE AO. FURTHER, EVEN BEFORE THE LD. CIT (A) THE ASSESSEE D ID NOT FILE ANY SUPPORTING EVIDENCE. 3.2. IN RE-JOINDER, THE LD. A/R HAS SUBMITTED THAT EVEN OTHERWISE DISALLOWANCE OF 20% HAS NO BASIS AND THE SAME IS EXCESSIVE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOTE THAT THE AO ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNTS ALONG WI TH VOUCHERS FOR VERIFICATION OF GENUINENESS OF THE EXPENDITURE CLAIMED. THE ASSESSE E FAILED TO PRODUCE THE 4 ITA NO. 284/JP/2017 M/S. SILVER SAND BUILDERS PVT. LTD. REQUISITE SUPPORTING EVIDENCE. EVEN BEFORE THE LD. CIT (A), THE ASSESSEE DID NOT PRODUCE THE VOUCHERS IN SUPPORT OF THE CLAIM OF EXP ENDITURE. HOWEVER, WE FIND THAT IT IS NOT THE CASE OF THE AO THAT THE EXPENDITURE I S EXCESSIVE. KEEPING IN VIEW THE NATURE OF BUSINESS ACTIVITY OF THE ASSESSEE AND FUR THER THE NATURE OF EXPENDITURE AS CLAIMED BY THE ASSESSEE IS ALSO NOT DISPUTED TO BE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE, THEREF ORE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE DISALLOWANCE ON ACCOUNT OF NOT FILING THE PROPER VOUCHERS IN SUPPOR T OF THE CLAIM SHALL BE RESTRICTED TO 10% INSTEAD OF 20%. WE DIRECT THE AO ACCORDINGLY T O RESTRICT THE DISALLOWANCE TO 10% OF THE EXPENDITURE. GROUND NO. 2 IS REGARDING NOTIONAL INCOME ASSESSED BY THE AO UNDER SECTION 23(1)(A) IN RESPECT OF UNSOLD STOCK-IN-TRAD E. 5. THE ASSESSEE AFTER CONSTRUCTION OF THE COMMERCIA L COMPLEX HAD LET OUT A PORTION AT GROUND FLOOR. HOWEVER, THE REMAINING PAR T OF THE CONSTRUCTED COMPLEX REMAINED UN-LET OUT AND WAS HELD AS STOCK-IN-TRADE FOR THE PURPOSE OF SALE. THE AO IN THE ASSESSMENT PROCEEDINGS PROPOSED TO DETERMINE THE NOTIONAL ANNUAL LETTING VALUE OF THE UNSOLD SPACE IN THE COMPLEX UNDER SECT ION 22 AND 23 OF THE IT ACT. THE AO TOOK THE RENT IN RESPECT OF THE PORTION GIVEN TO M/S. DOMINIOS PIZZA AT GROUND FLOOR FOR THE PURPOSE OF DETERMINING THE ALV OF THE REMAINING PART OF THE UNSOLD SPACE OF THE COMPLEX. HENCE THE AO COMPUTED THE INC OME UNDER THE HEAD INCOME FROM HOUSE PROPERTY AT RS. 1,49,43,385/- AND AFTER ALLOWING THE DEDUCTION UNDER SECTION 24(A) OF THE IT ACT, THE NET ADDITION WAS M ADE OF RS. 1,04,60,370/-. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE LD. CIT (A) BUT COULD NOT SUCCEED 5 ITA NO. 284/JP/2017 M/S. SILVER SAND BUILDERS PVT. LTD. EXCEPT THE RATE FOR DETERMINATION OF THE ALV WAS CO NSIDERED BY THE LD. CIT (A) AT RS. 77.22 PER SQ. FT. 6. BEFORE THE TRIBUNAL, THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT WHEN THE UNSOLD STOCK WOULD BE PART OF THE BUSINESS INCOME O F THE ASSESSEE THEN ALV OF SUCH SPACE CANNOT BE SUBJECTED TO TAX UNDER THE HEAD INC OME FROM HOUSE PROPERTY. HE HAS RELIED UPON THE DECISION OF HONBLE GUJARAT HIG H COURT IN CASE OF CIT VS. NEHA BUILDERS PVT. LTD. 296 ITR 661 (GUJ.) AND SUBMITTED THAT IF THE PROPERTY IS USED AS STOCK-IN-TRADE THEN SUCH PROPERTY WOULD BECOME OR P ARTAKE THE CHARACTER OF STOCK AND ANY INCOME DERIVED FROM SUCH STOCK-IN-TRADE WOU LD BE INCOME FROM BUSINESS AND NOT INCOME FROM HOUSE PROPERTY. THE LD. A/R HA S ALSO RELIED UPON THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL DATED 13 TH MAY, 2015 IN CASE OF C.R. DEVELOPERS PVT. LTD. VS. JCIT IN ITA NO. 4277/MUM/2013 AND SUB MITTED THAT THE TRIBUNAL HAS CONSIDERED AND DECIDED AN IDENTICAL ISSUE BY HOLDIN G THAT IN CASE OF PROPERTY HELD AS STOCK-IN-TRADE, THE INCOME SHOULD BE ASSESSABLE UND ER THE HEAD INCOME FROM BUSINESS AND NO INCOME SHALL BE BROUGHT TO TAX AS N OTIONAL ANNUAL LETTING VALUE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE LD. A/R HAS ALSO RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN CASE OF M/S. C HENNAI PROPERTIES & INVESTMENTS LTD. VS. CIT, 373 ITR 673 (SC) AND SUBMITTED THAT T HE HONBLE SUPREME COURT HAS REVERSED THE ORDER OF THE HIGH COURT AND RESTORED T HE ORDER OF THE TRIBUNAL BY HOLDING THAT THE RENTAL INCOME WOULD BE ASSESSED AS INCOME FROM BUSINESS AND CANNOT BE TREATED AS INCOME FROM HOUSE PROPERTY. A LTERNATIVELY, THE LD. A/R HAS SUBMITTED THAT THE AO HAS ASSESSED THE NOTIONAL INC OME IN RESPECT OF THE AREA AT 4 TH FLOOR MEASURING 2355.5 SQ. FT. WHICH IS TEMPORARY S TRUCTURE HAVING ROOF OF TIN SHED/FIBRE SHEET. FURTHER, IT IS AN UNAUTHORIZED S TRUCTURE AS IT IS BEYOND THE 6 ITA NO. 284/JP/2017 M/S. SILVER SAND BUILDERS PVT. LTD. SANCTIONED PLAN AND NAGAR NIGAM HAS NOT REGULARIZED THE SAID CONSTRUCTION AT 4 TH FLOOR OF THE COMPLEX. THEREFORE, THE ANNUAL LETTING VALUE CANNOT BE DETERMINED IN RESPECT OF SUCH UNAUTHORIZED CONSTRUCTION AS THE SA ME CANNOT BE LET OUT IN THE ABSENCE OF THE COMPLETION CERTIFICATE OF THE AUTHOR ITY. RATHER, A LITIGATION IS GOING ON IN RESPECT OF THE SAID CONSTRUCTION AS THE MUNIC IPAL AUTHORITIES HAVE PROPOSED TO DEMOLISH THE SAID CONSTRUCTION AT 4 TH FLOOR. HE HAS FURTHER CONTENDED THAT AFTER THIS DEVELOPMENT OF UNAUTHORIZED CONSTRUCTION AND SUBSEQ UENT DEMOLITION ACTION BY THE LOCAL AUTHORITIES, THE TENANT M/S. COUNTRY CLUB (IN DIA) LTD. AT THE 4 TH FLOOR HAD VACATED THE PREMISES AND THUS THE 4 TH FLOOR PART OF THE COMPLEX CANNOT BE CONSIDERED FOR THE PURPOSE OF DETERMINATION OF ALV AND CONSEQUENT INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 6.1. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED T HAT THE AO AS WELL AS THE LD. CIT (A) HAS DECIDED THIS ISSUE BY FOLLOWING THE DEC ISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL HOUSING FINANCE AND LE ASING PVT. LTD., 354 ITR 180 (DELHI). HE HAS ALSO RELIED UPON THE DECISION OF TH E COORDINATE BENCH OF THE TRIBUNAL DATED 21 ST APRIL, 2017 IN THE CASE OF SHRI RADHEY CONSTRUCTIO N PVT. LTD. VS. ITO IN ITA NO. 822/JP/2016. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE ASSESSEE HAS SHOWN THE UNSOLD SPACE IN THE COMMERCIAL COMPLEX, NAMELY, SILVER SQUARE AS STOCK- IN-TRADE. THE AO PROPOSED TO DETERMINE THE ALV OF THE UNSOLD SPACE WHICH IS NOT LET OUT BY TAKING INTO CONSIDERATION THE RENT IN RESPECT OF THE PORTION LE T OUT AT GROUND FLOOR OF THE COMPLEX. AS REGARDS THE QUESTION OF TAXABILITY OF NOTIONAL RENTAL INCOME IN RESPECT OF UNSOLD SPACE HELD AS STOCK-IN-TRADE, THERE ARE DIVE RGENT VIEWS ON THIS ISSUE. THE 7 ITA NO. 284/JP/2017 M/S. SILVER SAND BUILDERS PVT. LTD. HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANS AL HOUSING FINANCE AND LEASING PVT. LTD. (SUPRA) HAS TAKEN A VIEW AGAINST THE ASSE SSEE AND IN FAVOUR OF THE REVENUE BY HOLDING THAT THE INCIDENT OF CHARGES OF TAX UNDE R SECTION 22 AND 23 IS BECAUSE OF THE FACT OF OWNERSHIP AND NOT BECAUSE OF THE NATURE OF THE PROPERTY AS STOCK-IN- TRADE OR CAPITAL ASSET. WHEREAS THE HONBLE GUJARAT HIGH COURT IN CASE OF CIT VS. NEHA BUILDERS PVT. LTD. (SUPRA) HAS TAKEN A CONTRAR Y VIEW AND HELD THAT THE INCOME DERIVED FROM THE PROPERTY WOULD ALWAYS BE TERMED AS INCOME FROM PROPERTY BUT IF THE PROPERTY IS USED AS STOCK-IN-TRADE, THEN THE SA ID PROPERTY WOULD BECOME OR PARTAKE THE CHARACTER OF STOCK AND ANY INCOME DERIV ED FROM THE STOCK WOULD BE INCOME FROM BUSINESS AND NOT INCOME FROM PROPERTY. 7.1. THEREFORE, IN VIEW OF THE CONTRARY DECISIONS O N THIS ISSUE, WE WOULD FIRST CONSIDER THE FACTUAL ASPECT OF THE MATTER WHETHER T HE UNAUTHORIZED CONSTRUCTION AT 4 TH FLOOR WHICH IS ALSO TEMPORARY IN NATURE CAN BE CON SIDERED AS PROPERTY CONSISTING OF ANY BUILDING AS PER SECTION 22 OF THE ACT AND CO NSEQUENTLY THE ANNUAL VALUE OF SUCH AN UNAUTHORIZED CONSTRUCTION CAN BE DETERMINED UNDER SECTION 23(1) OF THE ACT. THE REVENUE HAS NOT DISPUTED THIS FACT THAT T HE 4 TH FLOOR OF THE PROPERTY IS UNAUTHORIZED CONSTRUCTION AS BEYOND THE SANCTIONED PLAN AND, THEREFORE, THE MUNICIPAL AUTHORITIES HAVE ALREADY PROPOSED ACTION FOR DEMOLITION OF THE SAID PROPERTY AGAINST WHICH THE ASSESSEE HAS APPROACHED THE HONBLE HIGH COURT FOR PROTECTION OF THE PROPERTY IN QUESTION. FURTHER, I T IS ALSO NOT DISPUTED THAT THE SOLITARY TENANT AT THE 4 TH FLOOR HAD ALREADY VACATED THE PREMISES AFTER THE L OCAL AUTHORITIES HAVE PROPOSED TO DEMOLISH THE SAID CONS TRUCTION. THUS IN VIEW OF THE FACT THAT THE 4 TH FLOOR OF THE PROPERTY IS FACING THE DEMOLITION ACT ION BY THE LOCAL AUTHORITIES FOR BEING UNAUTHORIZED, THE ALV OF SUCH PROPERTY CANNOT BE DETERMINED 8 ITA NO. 284/JP/2017 M/S. SILVER SAND BUILDERS PVT. LTD. BY CONSIDERING THE RENT FOR WHICH THE GROUND FLOOR OF THE PROPERTY OR THE OTHER PORTION OF THE SAID COMPLEX WAS LET OUT. THE INCOM E FROM HOUSE PROPERTY IS MEASURED AS ANNUAL VALUE OF THE PROPERTY AND SECTIO N 23(1) CONTEMPLATES THE MANNER IN WHICH ANNUAL VALUE OF THE PROPERTY HAS TO BE DETERMINED. SINCE THE PROPERTY IN QUESTION IS NEWLY CONSTRUCTED PROPERTY AND HAS NEVER BEEN LET OUT, THEREFORE, THE PROVISIONS OF SECTION 23(1)(A) ENVIS AGES THE METHOD FOR DETERMINING THE ALV OF SUCH PROPERTY. THE AO HAS TO DETERMINE THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO FETCH THE RENT FROM YEAR TO YEAR. THUS THE FAIR MARKET RENT AS EXPECTED TO BE FETCHED BY THE PROPER TY BY LETTING OUT FROM YEAR TO YEAR IS THE RELEVANT FACTS TO BE TAKEN INTO CONSIDE RATION. THERE IS NO METHOD PROVIDED IN THE INCOME TAX ACT FOR DETERMINATION OF THE REASONABLE RENT EXPECTED TO BE FETCHED BY THE PROPERTY. HOWEVER, THERE ARE JUDI CIAL PRECEDENTS ON THIS ISSUE WHEREIN THE HONBLE SUPREME COURT IN A SERIES OF DE CISIONS HAS HELD THAT THE STANDARD RENT OF THE PROPERTY IS A RELEVANT CRITERI A AND BASIS FOR DETERMINATION OF THE ANNUAL LETTING VALUE. IN CASE OF MRS. SHEELA KAUSH IK VS. CIT, 131 ITR 435 (SC), THE HONBLE SUPREME COURT HAS HELD THAT FOR DETERMINATI ON OF ANNUAL VALUE STANDARD RENT SHOULD BE THE BASIS AND THE ANNUAL RENT RECEIV ED BY THE LANDLORD IS NOT RELEVANT. FURTHER, IN CASE OF DEEWAN DAULAT RAI KAPOOR VS. ND MC, 122 ITR 700 (SC), THE HONBLE SUPREME COURT HAS AGAIN WHILE DECIDING THE ISSUE OF COMPUTATION OF RATEABLE VALUE OF THE PROPERTY HELD THAT EVEN IF TH E STANDARD RENT WAS NOT FIXED, THE ANNUAL VALUE OF THE BUILDING SHOULD BE DETERMINED F OR THE PURPOSE OF LEVY OF HOUSE TAX AS PER THE PROVISIONS OF RENT CONTROL ACT AS TH E LANDLORD CANNOT REASONABLY EXPECT TO RECEIVE RENT FROM HYPOTHETICAL TENANT ANY THING MORE THAN THE STANDARD RENT DETERMINABLE UNDER THE PROVISIONS OF RENT CONT ROL ACT. THE HONBLE CALCUTTA 9 ITA NO. 284/JP/2017 M/S. SILVER SAND BUILDERS PVT. LTD. HIGH COURT IN THE CASE OF CIT VS. SMT. PRABHABATI B ANSALI, 141 ITR 419 (CAL.) AS WELL AS THE HONBLE BOMBAY HIGH COURT IN CASE OF M.V. SO NAVALA VS. CIT, 177 ITR 246 (BOM.) HAVE TAKEN A CONSISTENT VIEW THAT ANNUAL VAL UE OF THE PROPERTY FOR THE PURPOSE OF MUNICIPAL TAXES SHOULD BE COMPUTED AS PE R THE PROVISIONS OF RENT CONTROL ACT FOR COMPUTING THE STANDARD RENT. THEREFORE, IT IS MANDATE THAT THE AO HAS TO DETERMINE THE ANNUAL LETTING VALUE BY CONSIDERING T HE REASONABLE RENT EXPECTED TO BE FETCHED BY THE PROPERTY ON THE BASIS OF THE METH OD PROVIDED FOR FIXATION OF STANDARD RENT OR COMPUTATION OF RATEABLE VALUE. SI NCE IN THE CASE IN HAND THE 4 TH FLOOR OF THE PROPERTY IS NOT ELIGIBLE FOR FIXATION OF STANDARD RENT BEING UNAUTHORIZED CONSTRUCTION AND SUBJECTED TO DEMOLITION ACTION OF THE MUNICIPAL AUTHORITIES, THEREFORE, IN THE NORMAL CIRCUMSTANCES THE REASONAB LE RENT EXPECTED TO BE FETCHED BY SUCH PROPERTY WOULD BE NIL. 7.2. THERE IS ANOTHER ASPECT IN THE MATTER THAT SIN CE THE PROPERTY IN QUESTION IS NEWLY CONSTRUCTED AND HELD AS STOCK-IN-TRADE, THERE FORE THE VACANCY OF THE PROPERTY BEING NOT LET OUT IS NOT INTENTIONAL OR DELIBERATE ACT ON THE PART OF THE ASSESSEE BUT IT IS BEYOND THE CONTROL OF THE ASSESSEE TO FIND A TEN ANT FOR SUCH UNAUTHORIZED CONSTRUCTION. ONCE THE NON-LETTING OF THE PROPERTY IS NOT DUE TO THE REASON OF INTENTIONALLY KEEPING VACANT BY THE ASSESSEE BUT IT IS BECAUSE OF THE FACT AND CIRCUMSTANCES THAT THE SAID SPACE COULD NOT BE LET OUT DESPITE THE BEST EFFORTS OF THE ASSESSEE, THE BENEFIT OF VACANCY UNDER SECTION 23(1 )(C) WOULD BE AVAILABLE TO THE ASSESSEE. FOR READY REFERENCE, WE QUOTE THE PROVIS IONS OF SECTION 23(1) AS UNDER :- 23. (1) FOR THE PURPOSES OF SECTION 22 , THE ANNUAL VALUE OF ANY PROPERTY SHALL BE DEEMED TO BE ( A ) THE 57 SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FR OM YEAR TO YEAR; OR 10 ITA NO. 284/JP/2017 M/S. SILVER SAND BUILDERS PVT. LTD. ( B ) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS L ET 57 AND THE ACTUAL RENT 57 RECEIVED OR RECEIVABLE 57 BY THE OWNER IN RESPECT THEREOF IS IN EXCESS OF THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RE CEIVED OR RECEIVABLE; OR ( C ) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS L ET AND WAS VACANT DURING THE WHOLE OR A NY PART OF THE PREVIOUS YEAR AND OWING TO SUCH VACA NCY THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS LESS THAN THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RE CEIVED OR RECEIVABLE THERE IS NO DISPUTE ON THE POINT THAT THE PROPERTY WAS VACANT DURING THE WHOLE OF THE PREVIOUS YEAR AND, THEREFORE, OWING TO SUCH VAC ANCY THE SUM REFERRED IN CLAUSE (1) OF SECTION 23 SHALL BE THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE ASSESSEE WHICH NO DOUBT IS NIL. THERE IS NO DENIAL OF THE F ACT THAT THE PROCESS OF LETTING OUT MAY TAKE SOME TIME IN SEARCHING THE SUITABLE TENANT AND FOR SETTLING THE TERMS AND CONDITIONS OF LETTING OUT. THEREFORE, EVEN IF FOR T HE SAKE OF ARGUMENT IT IS PRESUMED THAT THE HOUSE WAS READY FOR OCCUPATION, IF THE SAM E IS NOT KEPT VACANT INTENTIONALLY BY THE ASSESSEE THEN VACANCY ALLOWANCE UNDER SECTIO N 23(1)(C) WOULD BE AVAILABLE TO THE ASSESSEE. THE REVENUE WOULD ARGUE THAT THE BENEFIT OF SECTION 23(1)(C) IS AVAILABLE ONLY WHEN THE PROPERTY WAS LET OUT AT FIR ST PLACE AND THEN REMAIN VACANT. HOWEVER, AS PER THE PROVISIONS OF SECTION 23(1)(C) THE PROPERTY CAN BE VACANT DURING THE WHOLE OF RELEVANT PREVIOUS YEAR AND, THEREFORE, BOTH SITUATION CANNOT CO-EXIST THAT THE PROPERTY IS ACTUALLY LET OUT AND ALSO THE SAME IS VACANT DURING THE WHOLE YEAR. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES O F THE CASE WHEN IT WAS NOT POSSIBLE FOR THE ASSESSEE TO LET OUT THE PROPERTY, THEN THE BENEFIT OF SECTION 23(1)(C) WOULD BE AVAILABLE TO THE ASSESSEE. HENCE THE INITI AL DELAY IN LETTING OUT THE PROPERTY FIRST TIME CANNOT BE CONSIDERED AS DEEMED LET OUT A S PER THE PROVISIONS OF SECTION 23 OF THE ACT. ACCORDINGLY, IN THE FACTS AND CIRCUMST ANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE ALV OF THE PROPERTY IN QUE STION WOULD BE NIL AS IT WAS NOT 11 ITA NO. 284/JP/2017 M/S. SILVER SAND BUILDERS PVT. LTD. POSSIBLE TO LET OUT THE PROPERTY DURING THE YEAR UN DER CONSIDERATION AND FURTHER THE UNAUTHORIZED CONSTRUCTION OF THE PROPERTY IS OTHERW ISE NOT ELIGIBLE FOR DETERMINATION OF STANDARD RENT OR RATEABLE VALUE AND CONSEQUENTLY THERE IS NO BASIS FOR DETERMINATION OF ALV OF THE PROPERTY UNDER SECTION 23(1)(A) OF THE ACT. HENCE WE DELETE THE ADDITION MADE BY THE AO. 8. SINCE GROUND NO. 2 IS DECIDED IN FAVOUR OF THE A SSESSEE, THEREFORE, GROUND NOS. 3 & 4 OF THE ASSESSEES APPEAL HAS BECOME INFR UCTUOUS. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 27/04/2 018. SD/- SD/- ( FOE FLAG ;KNO ) ( FOT; IKY JKWO (VIKRAM SINGH YADAV ) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 27/04/2018. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S. SILVER SAND BUILDERS PVT. LT D., JAIPUR. 2. THE RESPONDENT THE ITO WARD 3(2), JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 284/JP/2017) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 12 ITA NO. 284/JP/2017 M/S. SILVER SAND BUILDERS PVT. LTD.