ITO 12(2)(2), MUMBAI V. HIGHTECH REALITIES PVT. LTD., MUMBAI

ITA 2892/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9104 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 21-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM ITA NO. 2892 / MUM/20 17 ( ASSESSMENT YEAR : 2013 - 14 ) ITO 12(2) (2) ROOM NO.146A, 1 ST FLOOR, AAYAKAR BHAVAN M.K.ROAD, MUMBAI - 400020 VS. M/S. HIGHTECH REALTIES PVT. LTD., 5 A, CHITRA BUILDING WEST AVENUE, SANTACRUZ (W), MUMBAI 400 004 PAN/GIR NO. AAACH0026J APPELLANT ) .. RESPONDENT ) ASSESSEE BY NONE REVENUE BY MS. N. HEMALATHA DATE OF HEARING 03 / 10 /201 7 DATE OF PRONOUNCEME NT 09 / 10 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) - 20, MUMBAI DATED 02/01/2017 FOR THE A.Y.2013 - 14 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE IT ACT. 2. IN THIS APPEAL, ASSESSEE IS AGGRIEVED FOR ADDITION UPHELD BY THE CIT(A) ON ACCOUNT OF ALV U/S.23(1)(A) OF THE IT ACT. 3. NOBODY APPEARED ON BEHALF OF THE ASSESSEE INSPITE OF GIVING OPPORTUNITY. BENCH DECIDED TO DISPOSE THE APPEAL AFTER CONSIDERING THE CONTENTION OF LEARNED DR AND MAT ERIAL PLACED ON RECORD. 4. I HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT ADDITION MADE BY AO BY ESTIMATING ALV U/S.23(1)(A) AT RS.63,95,231/ - WAS REDUCED BY CIT(A) TO RS.25,20,000/ - AFTER OBSERVING AS UNDER: - ITA NO. 2892/MUM/2017 M/S. HIGHTECH REALITIES PVT. LTD., 2 4.3 I HAVE PERUSED THE ASSESSMENT ORDER OF THE A.O. AND THE SUBMISSIONS FILED BY THE APPELLANT. THE FACTS OF THE CASE ARE THAT DURING THE IMPUGNED YEAR UNDER CONSIDERATION THE ASSESSEE. COMPANY HAS NOT CARRIED OUT ANY BUSINESS ACTIVITY. THE ASSESSEE HAD RECEIVED RENTAL INCOME O F RS. 6,00,000/ - P.A. THE A.O. ISSUED A SHOW CAUSE, IN ITS REPLY TO THE SHOW CAUSE THE ASSESSEE SUBMITTED THAT THE REVENUE OF .RENT MAY BE TREATED UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' AS HAS BEEN ASSESSED PREVIOUSLY. AGAIN THE A.O. ISSUED A SHOW CAUS E NOTICE TO THE ASSESSEE BY THE A.O. REQUESTING HIM TO SHOW CAUSE AS TO WHY THE RENTAL INCOME SHOULD NOT BE DETERMINED AS MARKET RENTAL VALUE. THE REPLY FURNISHED BY THE ASSESSEE WAS DULY CONSIDERED BUT THE SAME WAS NOT ACCEPTED BY THE A.O . AND THE A.O. MA DE AN ADDITION OF RS. 63,95,231/ - TO THE TOTAL INCOME OF THE ASSESSEE. THE AR OF THE ASSESSEE HAS VEHEMENTLY OPPOSED THE ADDITIONS MADE AND HAS SUBMITTED THAT THE ASSESSING OFFICER ERRED IN ADDING RS. 63,95,231/ - UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' I N RESPECT OF FLAT NO. 2 SITUATED IN SEA LAND CHS BY ESTIMATING THE ALV BY DISREGARDING VARIOUS SUBMISSIONS MADE FOR EXCLUSION OF THE SAME AS WELL AS OVERLOOKING THE PROVISIONS OF BOMBAY RENT CONTROL ACT. THE APPELLANT IS A COMPANY. THE RETURN OF INCOME WAS FILED ON 25/09/2013 DECLARING TOTAL INCOME OF RS 5,17,190/ - . THE SAME WAS PROCESSED U/S 143(1). THEREAFTER, THE CASE WAS SELECTED FOR SCRUTINY AND NOTICES U/S 143(2) & 142(1) ALONG WITH QUESTIONNAIRE WAS ISSUED AND DULY SERVED UPON THE APPELLANT. IN RESPO NSE TO THE SAME, THE AR OF THE APPELLANT ATTENDED TIME TO TIME AND SUBMITTED DETAILS SUCH AS COMPUTATION OF TOTAL INCOME, PROFIT & LOSS A/C, BALANCE SHEET, AUDIT REPORT, ETC. AS REGARDS THE FLAT NOS 2 AND 10 SITUATED AT SEALAND CO - OPERATIVE HOUSING SOCIETY , THE ASSESSING OFFICER MADE FOLLOWING COMPARISON: SR. NO. FLAT NO. RENT PER MONTH (RS.) SECURITY DEPOSIT (RS.) OWNER 2 50,000/ - 7,50,00, 000 / - APPELLANT 10 8,05,000/ - 84,00,000/ - OUTSIDER HOWEVER, THE ASSESSING OFFICER DID NOT APPRECIATE THE SUBMISSIONS OF THE APPELLANT. THE ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE AS TO WHY THE RENTAL INCOME SHOULD NOT BE ADOPTED AT RS 8,05,000/ - P.M: AS PER ACTUAL RENT RECEIVED BY THE OWNER OF FLAT NO. 10. IN RESPONSE TO THE SAME, IT WAS POIN TED OUT THAT FLAT NO. 2 WAS HAVING 2850 SQ FT OF CARPET AREA, WHEREAS THE FLOOR PLAN OF FLAT NO. 2 WAS SHOWN AS HAVING ITA NO. 2892/MUM/2017 M/S. HIGHTECH REALITIES PVT. LTD., 3 3850 SQ FT OF BUILT UP AREA. THEREFORE, THERE WAS NO CONCEPTUAL DIFFERENCE BECAUSE THE PURCHASE AGREEMENT IS REGISTERED AND ACCEPTED BY T HE BMC AND THE SOCIETY IN APRIL 2008, MORE SO WHEN THERE WAS NO CONCEPT OF CARPET AREA IN THE OLD BUILDING. THEREFORE, CONTENDED THAT THIS COMPARISON IS INCORRECT. . THE ASSESSING OFFICER HAS SI MILARLY ASSESSED AN ALV OF RS. 1 ,60,000/ - PER MONTH DISREGARDIN G VARIOUS SUBMISSIONS MADE BY THE APPELLANT BY NOT PROVIDING ANY BASIS FOR COMPUTATION OF THE ALV OF PROPERTY WHICH IS COVERED BY RENT CONTROL ACT. THEREFORE, THE ASSESSING OFFICER HAS ERRONEOUSLY COMPARED LICENSE FEES WITH RENT WHICH IS NOT PERMITTED AS P ER PRO PERTIES COVERED BY RENT CONTROL ACT. THE ASSESSING OFFICER CANNOT ASSESS THE ALV BE YOND STANDARD RENT WITHOUT PREJUDICE TO THE ABOVE, IT IS SUBMITTED THAT INCOME FROM HOUSE PROPERTY OUGHT TO BE CALCULATED ONLY WITH REFERENCE TO THE RATEABLE VALUE AS FIXED BY THE BMC. IT IS NOTED THAT THE ISSUE PERTAINS TO THE ESTIMATION OF ALV OF THE FLAT NO. 2 SITUATED IN SEA LAND CHS WAS HAVING 2850 SQ FT OF CARPET AREA. THE ASSESSEE HAD DECLAR ED MONTHLY RENTAL OF RS. 50,000/ - WHICH WAS SEEN TO BE ON THE LOWER SIDE BY THE AO. IT IS SEEN THAT WHILE COMPUTING THE ALV ALL THE SURROUNDING FACTORS SHOULD BE LOOKED INTO INCLUDING THE INTEREST FREE DEPOSIT RECEIVED BY THE ASSESSEE. THE QUESTION WOULD, THEREFORE, BE AS TO WHAT WOULD BE CIRCUMSTANCES WHICH CAN BE TAKEN INTO C ONSIDERATION BY THE ASSESSING OFF ICER W HILE DETERMINING THE FAIR RENT. HOWEVER, IT IS OBSERVED THAT NO PARTICULAR TEST CAN BE LAID DOWN AND IT WOULD DEPEND ON FACTS OF EACH CASE. THE HON'BLE SUPREME COURT JUDGMENT IN THE CASE OF MOTICHAND HIRACHAND V. BOMB AY MUNICIPAL CORPORATION, AIR 1968 SC 441, 442 HAS HELD THAT: . 'IT IS WELL - RECOGNIZED PRINCIPLE IN RATING THAT BOTH GROSS VALUE AND NET ANNUAL VALUE ARE ESTIMATED BY REFERENCE TO THE RENT AT WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YE AR TO YEAR. VARIOUS METHODS OF VALUATION ARE APPLIED IN ORDER TO ARRIVE AT SUCH HYPOTHETICAL RENT, FOR INSTANCE, BY REFERENCE TO THE ACTUAL RENT PAID FOR THE PROPERTY OR FOR OTHERS COMPARABLE TO IT OR WHERE THERE ARE NO RENTS BY REFERENCE TO THE ASSESSMENT S OF COMPARABLE PROPERTIES OR TO THE PROFITS CARRIED FROM THE PROPERTY OR TO THE COST OF CONSTRUCTION.' 4.4 IT HAS BEEN HELD IN THE CASE OF SATYA CO. LTD. [1997] 140 CTR (CAL.) 569 BY HON'BLE CALCUTTA HIGH COURT THAT THE ANNUAL VALUE FIXED BY THE MUNICIPAL AUTHORITIES CAN BE A RATIONAL YARDSTICK. HOWEVER, IT WOULD BE SUBJECT TO THE CONDITION THAT THE ANNUAL VALUE FIXED BEARS A CLOSE PROXIMITY WITH THE ASSESSMENT YEAR IN QUESTION IN RESPECT OF WHICH THE ASSESSMENT IS TO BE MADE UNDER THE INCOME - TAX LAWS. IF THERE IS A CHANGE IN CIRCUMSTANCES BECAUSE OF PASSAGE OF TIME, VIZ., THE ANNUAL VALUE WAS FIXED BY THE MUNICIPAL AUTHORITIES MUCH EARLIER IN POINT OF TIME ON THE BASIS OF RENT THAN RECEIVED, THIS MAY NOT PROVIDE A SAFE YARDSTICK IF IN THE ASSESSMENT YEAR I N QUESTION WHEN ASSESSMENT IS TO BE MADE UNDER INCOME - TAX ACT. IN THE ITA NO. 2892/MUM/2017 M/S. HIGHTECH REALITIES PVT. LTD., 4 PRESENT CASE THE AO HAS ESTIMATED THE ALV ON THE BASIS OF 10 AT SEALAND CO - OPERATIVE HOUSING SOCIETY FOR MONTHLY RENT OF RS. 8,05,000/ - AND WHERE THE DEPOSIT MONEY WAS ONLY RS. 84,00,000 / - . IT IS SEEN THAT THE CASE OF THE ASSESSEE IS DIFFERENTIATE ON FACTS SINCE THE SSEE HAD RECEIVED A HUGE SUM OF RS. 7,50,00,000/ - AS INTEREST FREE DEPOSIT FOR THE FLAT. IT IS SEEN FROM THE FACTS OF THE CASE AND JUDICIAL PRECEDENTS AS DISCUSSED THAT THE AS SESSING OFFICER HAS THE RIGHT TO DETERMINE THE ANNUAL LETTING VALUE BUT THE ESTIMATE MADE BY THE AO OF THE ALV @ 91,36,044/ - @ RS. 240.58 PER SQ. FT. BY IGNORING THE INTEREST FREE DEPOSIT OF RS. 7,50,00,000 / - TO BE THE 'FAIR RENT' IS FOUND TO BE MUCH ON TH E HIGHER SIDE AS THE A.O. HAD ASSESSED THE INCOME OF THE SAME PROPERTY AT RS. 24,00,000/ - P.A. IN THE A.Y. 2012 - 13. HAVING REGARD TO THE FACTS OF THE CASE IT WOUL D BE FAIR AND REASONABLE IF THE AS ALV UNDER SECTION 23(L)(A) OF THE ACT IS TAKEN AT RENT DECL ARED OF RS. 6,00,000/ - @ RS. 50,000/ - P.M PLUS ADDITIONAL INCOME @ 4% OF THE INTEREST FREE DEPOSIT OF RS. 7,50,00,000 / - WHICH COMES TO RS. 36,00,000 / - ( 4% OF 7,50,00,000/ - + 6,00,000/ - ). THE ASSESSEE WOULD BE ENTITLED FOR STANDARD DEDUCTION @ 30% OF THIS A MOUNT WHICH COMES TO RS. 10,80,000/ - . THE INCOME FROM HOUSE PROPERTY OF THE ASSESSEE WOULD THUS BE WORKED OUT AT RS, 25,20,000/ - (RS.36,00,000 RS. 10,80,000) AS AGAINST THE VALUE OF RS. 63,95,231/ - WORKED OUT BY THE AO. THE AO IS SO DIRECTED. ACCORDINGLY THIS GROUND OF APPEAL IS PARTLY ALLOWED. 5. REVENUE IS IN APPEAL BEFORE ME. 6. I HAVE CONSIDERED CONTENTIONS OF LEARNED DR AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT AFTER APPRECIATING THE FACTUAL POSITION VIS - - VIS RENT ACCEPTED BY THE AO IN THE EARLIER YEAR, FOR THE VERY SAME PROPERTY, THE CIT(A) REACHED TO THE CONCLUSION THAT RENT OF RS.36,00,000/ - FOR THE YEAR UNDER THE CONSIDERATION WILL SERVE THE PURPOSE OF JUSTICE. THE DETAILED FINDING SO RECORDED BY CIT(A) AT PARA 4.3 HAS NOT BEEN CONTROVERTED BY DR BY BRINGING ANY POSITIVE MATERIAL ON RECORD. ACCORDINGLY, I DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A). ITA NO. 2892/MUM/2017 M/S. HIGHTECH REALITIES PVT. LTD., 5 7. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 09 / 10 /2017 S D/ - ( R.C.SHARMA ) ACCOUNTANT MEMBER MUMBAI ; DATED 09 / 10 /201 7 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//