H.S. Buildcon Pvt Ltd., Ahmedabad V. ITO, Ward-2(1)(3), Ahmedabad

ITA 2933/AHD/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 1127 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 23-03-2020
• Assessment Year: 2013-2014
• Appeal Filed On: 27-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Fair market value
• Section: 143(2); 22

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH SMC [CONDUCTED THROUGH VIRTUAL COURT] BEFORE SHRI RAJPAL YADAV, VICE-PRESIDENT ./ ITA NO. 2933/AHD/2017 / ASSESSMENT YEAR: 2013-14 H S BUILDCON P.LD. 6, SARTHI-III, SURTHARA BUNGALOWS, THALTEJ AHMEDABAD 380 052 PAN : AABCH 9666B VS ITO, WARD-2(1)(3) AHMEDABAD. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI VARTIK CHOKSHI, AR REVENUE BY : SHRI VINOD TANWANI, SR.DR / DATE OF HEARING : 01/06/2020 /DATE OF PRONOUNCEMENT : 02/06/2020 O R D E R ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST O RDER OF THE LD.CIT(A)-2, AHMEDABAD DATED 16.11.2017 PASSED FOR THE ASSTT.YEAR 2013-14. 2. ASSESSEE IN ITS APPEAL HAS RAISED MAINLY TWO GRO UNDS FOR ADJUDICATION. IT READS AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) ERRED IN CONFIRMING THE ADDITION OF RS. 12,19,612 MADE BY THE ASSESSING OFFICER ON THE ALLEGED GROUND OF SUPPRESSI ON OF RENTAL INCOME BY THE ASSESSEE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LEARNED CIT(APPEALS) ERRED IN NOT CONSIDERING AND RECORDING A FINDING ON THE ALTERNATIVE CLAIM OF THE ASSESSEE THAT EVEN IF THE IMPUGNED ADDITION OF RS. 12,19,612 IS TO BE MADE, THE ASSESSEE IS STATUTORIL Y ENTITLED TO DEDUCTION OF ITA NO.2933/AHD/2017 - 2 - STANDARD DEDUCTION @30% U/S. 24 OF THE INCOME-TAX AC T FROM THE AFORESAID ALLEGED SUPPRESSED RENTAL INCOME. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S E-FILED ITS RETURN OF INCOME ON 14.10.2013 DECLARING TOTAL INCOME AT RS.1 1,08,100/-. AFTER PROCESSING THE RETURN UNDER SECTION 143(1), THE CAS E OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE UNDER S ECTION 143(2) OF THE ACT WAS ISSUED ON THE ASSESSEE COMPANY, WHICH WAS D ULY SERVED. ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT, AND HAVING A PROPERTY SITUATED AT KARA MSAD, R.S.NO.385/2/B, 385/5, 385/4/P, 385/3 KHA TA NO.385 , ANAND. DURING THE ASSESSMENT PROCEEDINGS, THE LD.AO NOTICE D THAT THE ASSESSEE HAS RENTED OUT THIS PROPERTY TO M/S.BHARATI WALLMAR T LTD. (BWL), AND OFFERED RENTAL INCOME OF RS.18,95,226/- IN THE RETU RN OF INCOME FROM THIS PROPERTY. THE AO CALLED FOR RENT AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND BWL, AND ON PERUSAL OF THE SAME, IT WA S NOTICED BY THE AO THAT, THE AGREEMENT WAS EXECUTED ON 5.11.2012 AND T HE RENT WAS DUE FROM 22.1.2013. THE RENT OF THE PROPERTY WAS DECID ED AT RS.13,60,000/- PER MONTH. ACCORDING TO THE AO, THE RENT RECEIVABL E WOULD BE RS.31,17,129/- WHEREAS THE ASSESSEE HAS OFFERED REN TAL INCOME OF RS.18,95,226/-. AO PROPOSED TO ADD THE DIFFERENTIA L AMOUNT. TO THE SHOW CAUSE OF THE AO, IT WAS EXPLAINED BY THE ASSES SEE THAT AFTER ORIGINAL LEASE AGREEMENT, THE ASSESSEE HAS ENTERED ANOTHER ADDENDUM LEASE DEED, BECAUSE OF THE FACT THAT JUST OPPOSITE TO THE LEASED PROPERTY, THE INDIAN RAILWAY PROPOSED TO CONSTRUCT A FLYOVER, DUE TO WHICH, THERE WAS IMPEDIMENT IN BUSINESS OPERATION OF THE LEASEHO LDER. AFTER THE DISCUSSION, THE ASSESSEE HAD AGREED TO GRANT 40% RE DUCTION IN THE RATE OF RENT PAID BY THE BWL TO THE ASSESSEE. THIS AMOUNT OF RENT WAS REFLECTED ITA NO.2933/AHD/2017 - 3 - IN THE PROFIT & LOSS ACCOUNT AND OFFERED TO TAX. A COPY OF ADDENDUM LEASE AGREEMENT WAS ALSO FURNISHED TO THE AO. THE LD.AO DID NOT ACCEPT EXPLANATION OF THE ASSESSEE. HE MAINLY DOUB TED THE AUTHENTICITY AND ENFORCEABILITY OF THE SAID AGREEMENT. ACCORDIN GLY, HE WORKED OUT THE DIFFERENTIAL AMOUNT OF RS.12,19,612/- AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESSEE FILED DETAILED EXPLANATION, HOWEVER, THE S AME DID NOT YIELD ANY RELIEF TO THE ASSESSEE. THE ASSESSEE IS NOW BEFORE THE TRIBUNAL. 4. BEFORE ME, THE LD.COUNSEL FOR THE ASSESSEE REITE RATED HIS SUBMISSIONS MADE BEFORE THE LD.REVENUE AUTHORITIES THAT THE AO HAS NOT DOUBTED LEASING OUT OF THE PROPERTY TO BWL, WHAT OV ERWEIGHED TO PERSUADE THEM IS THAT, THE DATE OF AGREEMENT WAS NO T MENTIONED IN THE ADDENDUM LEASE AGREEMENT, AND THE SIGNATURE OF BWL WAS NOT PUT IN THE AGREEMENT. IT IS CLEARLY STIPULATED IN THE AGR EEMENT THAT THE TERMS OF AGREEMENT SHALL BE APPLICABLE FROM THE BEGINNING OF THE RENT COMMENCEMENT DATE, AND ACCORDINGLY, THE TERMS OF AD DENDUM AGREEMENT IS TO BE CONSIDERED AS APPLICABLE FROM TH E DATE OF ORIGINAL AGREEMENT, AND THEREFORE, NO ADVERSE INFERENCE CAN BE DRAWN ON THE GROUND THAT THE DATE OF AGREEMENT WAS NOT MENTIONED IN THE DEED. IT IS FURTHER SUBMITTED THAT SITUATION OF THE LEASE PROPE RTY AND THE FACTORS HINDERING THE PROPERTY IN FETCH HIGHER RENTAL INCOM E HAS NOT BEEN DOUBTED BY THE REVENUE AUTHORITIES. ADDENDUM AGREE MENT WAS NECESSITATED DUE TO THE FACT THAT THE CONSTRUCTION ACTIVITIES CARRIED OUT BY THE INDIAN RAILWAYS HAS HINDERED BUSINESS OPERATION OF LEASEHOLDER, AND THEREFORE RENTAL VALUE OF THE PROPERTY GOT DIMINISH ED. IN SUCH SCENARIO, IT WAS MUTUALLY AGREED TO GRANT DISCOUNT AT 40% FROM T HE BASE RENT. EVEN OTHERWISE ALSO, THE ADDENDUM AGREEMENT IS TO BE CON SIDERED AS A PART OF ITA NO.2933/AHD/2017 - 4 - ORIGINAL RENT AGREEMENT, AND THE INCOME AS PER SUCH AGREEMENT IS TO BE CONSIDERED, UNLESS SHOWED ANY COMPARABLE INSTANCES BY THE REVENUE, IN THE GIVEN SCENARIO THE PROPERTY COULD FETCH HIGHER RENT THAN THE ONE SHOWN BY THE ASSESSEE IN THE RETURN OF INCOME. EVE N THE AO HAS NOT WORKED OUT FAIR MARKET VALUE OF THE PROPERTY IN THE GIVEN CONDITION TO NEGATE CLAIM OF THE ASSESSEE. 5. ON THE OTHER HAND, THE LD.DR SUPPORTED ORDERS OF THE REVENUE AUTHORITIES. HE SUBMITTED THAT BOTH THE AUTHORITIE S HAVE CONCURRENTLY FOUND THAT THE CLAIM OF THE ASSESSEE WAS NOT SUBSTA NTIATED BY EVIDENCE. THEREFORE, BOTH THE REVENUE AUTHORITIES ARE JUSTIFI ED IN REJECTING THE CLAIM OF THE ASSESSEE. 6. I HAVE CONSIDERED SUBMISSIONS OF BOTH THE PARTIE S AND GONE THROUGH THE RECORD CAREFULLY. THE LD.CIT(A) HAS AG REED WITH THE AO AND RECORDED FOLLOWING FINDING: 3.8 I HAVE CONSIDERED THE ASSESSMENT ORDER, REMAND REPORT AND REJOINDER FILED BY THE APPELLANT. HOUSE PROPERTY INCOME IS C HARGED U/S.22 OF THE INCOME TAX ACT ON THE BASIS OF THE ANNUAL VALUE OF PROPERTY . THE ANNUAL VALUE IS DETERMINED AS PER SECTION 23 WHICH IS DEEMING SECTI ON AND STATES THAT FOR THE PURPOSE OF SECTION 22 THE ANNUAL VALUE OF ANY PROPE RTY SHALL BE DEEMED TO BE THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPE CTED TO LET FROM YEAR TO YEAR. IN THIS CONTEXT, IT IS NOT THE ACTUAL RENT R ECEIVED BUT THE ANNUAL VALUE OF THE PROPERTY IS TO BE CHARGED U/S.22 OF THE I.T.ACT, 1961. IN THE PRESENT CASE, ANNUAL VALUE OF PROPERTY AS SIGNED IN THE ORIGINAL AGREEMENT IS RS.1,63,20,000/- (I.E. @ RS.13,60,000/- X 12). THE APPELLANT HAS SUBSEQUENTLY GRANTED DISCOUNT @ 40%. THERE IS NO EVIDENCE FIELD BY THE APPELLANT THAT LETTABLE VALUE OF THE PROPERTY HAS BEEN REDUCED BY 40%. CONSIDERING THE ABOVE FACTS, ANNUAL VALUE OF PROPERTY AS DETERMINED BY AO @ RS.13,60,000/- PER MONTH IS FOUND TO BE JUSTIFIED. THE ROUND OF APPEA L IS ACCORDINGLY DISMISSED. 7. AS OBSERVED BY THE LD.CIT(A), THE HOUSE PROPERTY IS CHARGED UNDER SECTION 22 OF THE INCOME TAX ACT ON THE BASIS OF ANNUAL VALUE OF THE PROPERTY. THE ANNUAL VALUE IS TO BE DETERMINED AS PER SECTION 23 OF ITA NO.2933/AHD/2017 - 5 - THE ACT. THE AO WAS REQUIRED TO FOLLOW THE PROCEDUR E LAID DOWN IN SECTION 23 OF THE ACT. HE HAS TO CALL FOR THE EVID ENCE AND PROVE THAT THIS PROPERTY COULD FETCH THIS MUCH RENT INSTEAD OF UNNE CESSARILY POINTING OUT PERIPHERAL DEFECTS IN THE AGREEMENT OF THE ASSE SSEE. HE COULD HAVE DETERMINED ANNUAL LETTING VALUE OF THE PROPERTY. B OTH THE REVENUE AUTHORITIES HAVE MISERABLY FAILED TO FOLLOW PROCEDU RE CONTEMPLATED IN SECTION 23. THE ASSESSEE HAS GIVEN A CONCESSION IN RENT TO ITS TENANT ON THE BASIS OF SOME HARD FACTS. IT HAS BEEN BROUGHT TO MY NOTICE THAT THIS PROJECT NEVER MATERIALIZED, AND M/S.BHARTI WALLMART PVT.LTD. COULD NOT OPEN THE BUSINESS CENTRE. INSPITE OF THAT, THEY HA VE PAID RENT FOR FIVE YEARS ON THE BASIS OF THIS AGREEMENT. I COULD APPR ECIATE THE CASE OF THE AO, IF HE HAS MADE REFERENCE TO THE RENT DEED OF AD JOURNING PROPERTIES AND POINTED OUT THAT THIS LEASED PROPERTY COULD BE FETCH THIS MUCH RENT, AND THEREFORE, THE ANNUAL LETTING VALUE OF THE ASSE SSEES HOUSE PROPERTY IS TO BE DETERMINED EQUIVALENT TO THE AMOUNT ON WHI CH ORIGINAL RENT FIXED BETWEEN THE ASSESSEE AND BWP. AFTER GOING TH ROUGH ALL THE DETAILS, I AM OF THE VIEW THAT NO ADDITION IS REQUI RED TO BE MADE BY THE AO. RENTAL INCOME SHOWN BY THE ASSESSEE DESERVES T O BE ACCEPTED IN THE ABSENCE OF ANY OTHER MATERIAL COLLECTED BY THE AO. THE ADDITION BY THE AO IS HEREBY DELETED, AND THE GROUND OF APPEAL OF T HE ASSESSEE IS ALLOWED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . PRONOUNCED IN THE OPEN COURT ON 2 ND JUNE, 2020. SD/- (RAJPAL YADAV) VICE-PRESIDENT AHMEDABAD; DATED, 02/06/2020