ANI ANU DEVELOPERS P.LTD, MUMBAI V. ITO 4(1)(3), MUMBAI

ITA 2905/MUM/2012

• Counselvise Citation: 290519914 RSA 2012
• Duration Of Justice: 2 year(s) 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 01-12-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 30-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RUDOLPH N DSOUZA
• Assessee Lawyers: HIMANK D ESAI
• Keywords: Business income; Opportunity of being heard; Principle of natural justice; Fair market value

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A , BENCH MUMBAI , BEFORE SHRI R.C.SHARMA , A M & SHRI SANJAY GARG , J M ITA N O. 2905, 2906 &7728 / MUM/20 1 2 ( ASSESSMENT YEAR : 2007 - 08 , 2008 - 09 & 2009 - 10 ) ANI ANU DEVELOPERS PVT. LTD., 18, SURTI CHAMBERS, 2 ND DHOBHI TALAO LANE, MUMBAI - 400 002 VS. ITO 4(1)(3) , MUMBAI PAN/GIR NO. : A A CCA 59 17 B ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : SHRI HIMANK DESAI /REVENUE BY : SHRI RUDOLPH N. DSOUZA DATE OF HEARING : 1 ST DECEMBER , 201 4 DATE OF PR ONOUNCEMENT 17/12/ 201 4 O R D E R PER R.C.SHARMA (A.M) : TH ESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) FOR THE ASSESSMENT YEAR S 2007 - 08 TO 2009 - 10 , IN THE MATTER OF ORDER PASSED U/S. 143 ( 3 ) OF THE I.T. ACT . 2. COMMON ISSUE IN ALL THE YEARS PERTAINS TO DETERMINATION OF ALV OF HOUSING PROPERTY OWNED BY THE ASSESSEE. IN THE ASSESSMENT YEAR 2007 - 08, ASSESSEE HAD NOT SHOWN ANY INCOME FROM PROPERTY OF AKSHAT INDUSTRIAL ESTATE, WHICH WAS RENTED TO WESTEND GYMKHANA TRUST WHICH RUNS THE SCHOOL IN THE SAID PREMISES UNDER THE NAME AND STYLE OF BALAJI INTERNATIONAL SCHOOL & PINNACLE HIGH WORLD SCHOOL. THE AO ALSO OBSERVED THAT THIS SCHOOL IS CONTROLLED AND MAINTAINED BY THE FAMILY MEMBERS OF THE ASSESSEE. BEFORE THE AO, ASSESSEE CLAIMED TO ADOPT ITA NO. 2905,2906 & 7728/ 1 2 2 ANNUAL RATABLE VALUE OF THE SAID PREMISES AND FOR WHICH ASSESSEE HAS ALSO FURNISHED A COPY OF THE LETTER DATED 11 - 1 - 2007 OF ASSISTANT ASSESSOR AND COLLECTOR P/S WARD BRIHAN MUMBAI MAHANAGARPALIKA, MUMBAI . THE AO REJECTED THE SAME BY OBSERVING THAT IT WAS TOO LOW FOR BUILDING IN AN AREA LIKE MALAD (W), THEREFORE, ASSESSEES CLAIM WAS NOT ACCEPTED AND ANNUAL LETTING VALUE OF THE PROPERTY WAS DETERMINED AT THE EXPECTED VALUE AT WHICH IT CAN BE LET OUT FROM YEAR TO YEAR. ACCOR DINGLY, THE AO TAKEN THE FAIR MARKET VALUE OF PROPERTY AT RS. 1,15,16,736/ - . AFTER ALLOWING CLAIM FOR STANDARD DEDUCTION OF 30% THE BALANCE OF RS.80,61,716/ - WAS ADDED BY THE AO TO IN THE INCOME FROM THE HOUSE PROPERTY. 3. BY THE IMPUGNED ORDER, THE CIT(A) CONFIRMED THE ACTION OF THE AO . 4. AGAINST THE ABOVE ORDER OF CIT(A), ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5. IT WAS ARGUED BY THE LEARNED AR THAT ASSESSMENT ORDER WAS PASSED BY AO WITHOUT GIVING PROPER OPPORTUNITY OF BEING HEARD AND WITHOUT FOLLOWING THE PRINCIPLE OF NATURAL JUSTICE. IT WAS ALSO SUBMITTED THAT THE BUILDING UNDER CONSIDERATION WAS NOT COMPLETE AND WAS INCAPABLE OF LETTING OUT, HOWEVER, THIS FACT WAS NOT CONSIDERED BY THE AO WHILE DETERMINING ALV. OUR ATTENTION WAS ALSO INVITED TO THE VA LUATION OF THE PROPERTY ARRIVED AT BY THE ASSISTANT ASSESSOR AND COLLECTOR P/S WARD BRIHAN MUMBAI MAHANAGARPALIKA, MUMBAI VIDE LETTER DATED 11 - 1 - 2007. AS PER LEARNED AR THE ANNUAL RATABLE VALUE OF THE PROPERTY WAS RS. 3,05,719/ - FOR THE ASSESSMENT YEAR 2002 - 03, THEREFORE, SAME VALUE SHOULD HAVE BEEN TAKEN INTO ACCOUNT WHILE DETERMINING THE ANNUAL LETTING VALUE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. IT WAS ALSO CONTENTION OF THE ITA NO. 2905,2906 & 7728/ 1 2 3 LEARNED AR THAT INCOME SHOULD BE DETERMINED AS BUSINESS INCOME INSTEAD OF I NCOME FROM HOUSE PROPERTY AND THAT ALV BE DETERMINED WITH REFERENCE TO THE STANDARD RENT. IT WAS ALSO CONTENTION OF THE LEARNED AR THAT REPORT OF THE ENQUIRY CONDUCTED BY AO WAS NOT DELIVERED TO THE ASSESSEE FOR CONTROVERTING THE FINDINGS ARRIVED AT FOR DE TERMINING THE ANNUAL LETTING VALUE OF THE PROPERTY. 6. ON THE OTHER HAND, LEARNED DR RELIED ON THE ORDER OF THE LOWER AUTHORITIES AND CONTENDED THAT ASSESSEE HAD NOT SHOWN ALV OF THE PROPERTY GIVEN TO THE SCHOOL. THEREFORE, THE AO WAS JUSTIFIED IN DETERMIN ING THE SAME. 7. WE HAVE CONSIDERED RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT PRIMARY ACTIVITY OF THE ASSESSEE COMPANY WAS CONSTRUCTION AND DEVELOPMENT OF REAL ESTATE PROJECTS. DURING THE COURSE OF SCRUTINY ASSESSMENT THE AO FOUND THAT CONSTRUCTION WORK IN RESPECT OF MALAD PROPERTY WAS IN PROGRESS AS PER THE LAST SIX YEARS AND ASSESSEE HAD NOT SHOWN ANY INCOME FROM ITS PROPERTY. ACCORDINGLY, WARD INSPECTOR WAS DEPUTED TO MAKE ENQUIRY WITH R EGARD TO THE CONSTRUCTION ACTIVITIES AND OCCUPYING THE PROPERTY AT AKSHAT INDUSTRIAL ESTATE MALAD BY BALAJI INTERNATIONAL SCHOOL AND PINNACLE HIGH WORLD SCHOOL IN WHICH THE DIRECTOR OF THE COMPANY IS TRUSTEE. IT WAS REPORTED BY WARD INSPECTOR OF I.T. DEPAR TMENT THAT THE PREMISES AT 1067 CHINCHOLI BUNDER ARE OCCUPIED BY TWO SCHOOLS NAMELY M/S BALAJI INTERNATIONAL SCHOOL AND PINNACLE HIGH INTERNATIONAL SCHOOL, JR. COLLEGE UNIVERSITY OF C AMBRIDGE, INTERNATIONAL EXAMINATION, CAMBRIDGE INTERNATIONAL EXAMINATION CENTRE. BOTH SCHOOLS ARE UNDER THE ITA NO. 2905,2906 & 7728/ 1 2 4 MANAGEMENT OF WEST END GYMKHANA, A TRUST WHEREIN MR. ASHOK GUPTA, DIRECTOR OF THE COMPANY IS ONE OF THE TRUSTEES. OTHER TRUSTEES ARE FROM SAME FAMILY. THE BUILDING OF SCHOOL IS OF 3 STORYED BUILDING. ON GROUND FLOOR, THER E ARE EIGHT ROOMS 5 ROOMS FOR DANCE AND 3 ROOMS FOR NURSERY, JR/SR.KG. ON THE FIRST FLOOR IN HALF PORTION THERE ARE EIGHT ROOMS FOR LIBRARY, SCHOOLS, LAB, STD.I TO IV CLASS. ON ENQUIRY BY THE AO, THE ASSESSEE REPLIED AS UNDER : - THE ASSESSEE COMPANY HAS SHOWN CONSTRUCTION WORK IN PROGRESS AT MALAD PROPERTY I.E. PREMISES AT M/S AKSHAT INDL. ESTATE WITH INVESTMENT OF RS. 3,11,71,002/ - . THE CONSTRUCTION HAS BEEN COMPLETED IN F.Y.2001 - 02 AND SINCE THEN THE PREMISES ARE GIVEN TO WESTEND GYMKHANA TRUST WHICH RU NS THE SCHOOL NAMELY M/S BALAJI INTERNATIONAL SCHOOL AND PINNACLE HIGH WORLD SCHOOL. THERE IS NO INCOME OFFERED FOR SALE OF MALAD (W) PROPERTY AND THE PROPERTY IS STILL SHOWN AS A WORK IN PROGRESS. M/S ASHOK GUPTA, THE FOUNDER DIRECTOR OF THE ASSESSEE COMP ANY IS A TRUSTEE OF THE SAID SCHOOL. THE ASSESSEE HAS FORMED A FAMILY TRUST IN WHICH MOST OF THE FAMILY MEMBERS OF DIRECTORS OF THE COMPANY ARE ALSO THE TRUSTEE MEMBERS WHICH RUNS THE SCHOOL IN THE NAME AND STYLE OF M/S BALAJI INTERNATIONAL SCHOOL AND PINN ACLE HIGH WORLD SCHOOL. FROM THE RECORD, IT IS CLEAR THAT ASSESSEE HAS GIVEN THE BUILDING SO CONSTRUCTED TO THE SCHOOL WITHOUT CHARGING ANY RENT, HOWEVER, SINCE ASSESSEE HAS NOT DONATED THE BUILDING TO THE SCHOOL AND CONTINUED TO BE OWNED BY THE ASSESSEE , THEREFORE, ASSESSEE IS LIABLE TO TAX AT THE FAIR MARKET VALUE OF RATABLE PROPERTY. THE ASSESSEE IS LIABLE TO PAY TAX ON THE ANNUAL VALUE OF THE PROPERTY WHICH SHALL BE THE SAME FOR WHICH THE PROPERTY MIGHT REASONABLE BE EXPECTED TO LET OUT FROM YEAR TO Y EAR. WHILE DETERMINING THE SAME FOR WHICH PROPERTY MIGHT REASONABLE BE EXPECTED TO BE LET OUT FROM YEAR TO YEAR, THE AO IS TO KEEP INTO ACCOUNT, THE ASSESSABLE RENT OF THE PROPERTY BY BRIHAN MUMBAI MAHANAGARPALIKA, MUMBAI , AREA WHERE THE BUILDING IS SITUAT ED AND THE FACT THAT ASSESSEE IS NOT CHARGING ANY RENT FROM THE SCHOOL USING THE BUILDING . WE FOUND THAT ITA NO. 2905,2906 & 7728/ 1 2 5 THE AO HAS NOT GIVEN ANY BASIS FOR DETERMINING THE ANNUAL LETTING VALUE NOR THE COPY OF THE ENQUIRY CONDUCTED BY THE WARD INSPECTOR WAS FURNISHED TO TH E ASSESSEE BEFORE ARRIVING AT THE ANNUAL RATABLE VALUE OF THE PROPERTY. IN THE INTEREST OF JUSTICE AND FAIR PLAY, WE RESTORE ALL THE APPEAL S BACK TO THE FILE OF THE AO FOR DETERMINING THE ANNUAL RATABLE VALUE AS PER PROVISIONS OF SECTION 22 & 23 OF THE ACT . THE AO IS ALSO DIRECTED TO SUPPLY COPY OF THE ENQUIRY REPORT TO THE ASSESSEE FOR ITS REPLY. NEEDLESS TO SAY THAT DUE OPPORTUNITY SHOULD BE GIVEN TO THE ASSESSEE BEFORE DECIDING THE APPEAL. 8. THE FACTS AND CIRCUMSTANCES DURING THE ASSESSMENT YEAR 2008 - 09 & 2009 - 2010 ARE SAME, WE, THEREFORE, RESTORE THESE ASSESSMENT YEARS ALSO TO THE FILE OF THE AO IN TERMS OF OUR ABOVE OBSERVATION. 9 . IN THE RESULT, ALL APPEAL S OF THE ASSESSEE ARE ALLOWED IN PART FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN C OURT ON THIS 17/12 / 201 4 . 17/1 2 / 2014 SD/ - SD/ - ( ) ( SANJAY GARG ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 17/12 /2014 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASST T. 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//