ASSTT. COMM. OF INCOME TAX-17(2), MUMBAI V. MR. JAIKISHAN S, VASWANI, MUMBAI

ITA 3112/MUM/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 8502 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2010-2011
• Appeal Filed On: 02-05-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANOJ KUMAR SINGH LD
• Assessee Lawyers: H S RAHEJA LD
• Keywords: Principle of natural justice
• Section: 143(3)

Judgement Text

JAIKISHAN SHYAMSUNDER VASWANI AY: 2010-11 1 IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI , , BEFORE HONBLE SHRI MANOJ KUMAR AGGARWAL, AM AND HONBLE SHRI RAVISH SOOD, JM ./I.T.A. NO.3112/MUM/2016 ( / ASSESSMENT YEAR: 2010-11) ASS ISTANT C OMMISSIONER OF INCOME TAX-17(2) ROOM NO.134, AAYKAR BHAVAN M.K. ROAD, MUMBAI-400 020. / VS. JAIKISHAN SHYAMSUNDER VASWANI 71 MAKER TOWERS CUFFE PARADE MUMBAI-400 005 ./ ./PAN/GIR NO. ADZPV-0486-F ( ! /APPELLANT ) : ( '# ! / RESPONDENT ) & ./I.T.A. NO.3275/MUM/2016 ( / ASSESSMENT YEAR: 2010-11) JAIKISHAN SHYAMSUNDER VASWANI 71 MAKER TOWERS CUFFE PARADE MUMBAI-400 005 / VS. DEPUTY C OMMISSIONER OF INCOME TAX-17(1) 1 ST FLOOR, AAYKAR BHAVAN M.K. ROAD, MUMBAI-400 020. ./ ./PAN/GIR NO. ADZPV-0486-F ( ! /APPELLANT ) : ( '# ! / RESPONDENT ) ASSESSEE BY : SHRI H.S. RAHEJA- LD.AR REVENUE BY : SHRI MANOJ KUMAR SINGH-LD.-DR / DATE OF HEARING : 30/11/2018 / DATE OF PRONOUNCEMENT : 03/01/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID CROSS-APPEALS FOR ASSESSMENT YEAR [AY] 2010-11 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEAL S)-28, MUMBAI JAIKISHAN SHYAMSUNDER VASWANI AY: 2010-11 2 [CIT(A)], APPEAL NO. CIT(A)-28/IT-135/DC-12(2)/2013 -14 DATED 22/02/2016. THE GROUNDS URGED BY THE ASSESSEE READS AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING THE ADDITION OF INCOME FROM HOUSE PROPERTY IN RESPECT OF FLAT NO. 72, L BLOCK, IN MAKER TOWER, CUFFE PARADE, MUMBAI 400006 AT RS.2,00,000/- PER MONTH. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING THE ADDITION OF INCOME FROM HOUSE PROPERTY IN RESPECT OF OFFICE PREMISES A T NARIMAN POINT, MUMBAI AT RS.2,00,000/- PER MONTH WHICH WAS BEING SUED BY A C OMPANY IN WHICH THE APPELLANT IS A DIRECTOR. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING THE ADDITION OF INCOME FROM HOUSE PROPERTY IN RESPECT OF SELF-OCCUPIED FLA T AT SEA WOODS ESTATE CI-OP HOUSING SOCIETY LTD, AT NERUL, NAVI MUMBAI AT RS.35 ,000/- PER MONTH. THE GROUNDS URGED BY THE REVENUE READS AS UNDER: - 1. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE A.O. UNDER THE HEAD INCOME FROM HOUSE PROPERTY BY ESTIMATING THE ALV OF THE SHOPS AT HIL TON CENTRE, NAVI MUMBAI FOR RS.67,20,000/-. 2. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE , AND IN LAW, THE LD.CIT(A) HAS ERRED IN HOLDING THAT A FIRM RUNNING A BUSINESS ON THE PR EMISES OF THE ASSESSEE (A PARTNER OF FIRM) IS AKIN TO THE PARTNER, BEING RUNNING HIS OWN BUSINESS FROM THE SAID PREMISES. THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. DE PUTY COMMISSIONER OF INCOME TAX-CIRCLE 12(2), MUMBAI [AO ] IN SCRUTINY ASSESSMENT U/S 143(3) ON 28/03/2013 WHEREIN THE INC OME OF THE ASSESSEE WAS DETERMINED AT RS.449.23 LACS AFTER CER TAIN ADDITIONS / ADJUSTMENTS AS AGAINST RETURNED INCOME OF RS.43.75 LACS FILED BY THE ASSESSEE ON 30/09/2010. THE ASSESSEE BEING NON-RESIDENT INDIVIDUAL REFLECTED INCOME UNDER THE HEAD HOUSE PROPERTY, SALARY, CAPITAL GAINS AND INCOME FROM OTHER SOURCES. AS EVIDENT FROM GROUNDS OF APPEAL, THE SUBJECT MATTER OF CROSS APPEALS IS CERTAIN ADDITION S UNDER THE HEAD HOUSE PROPERTY. JAIKISHAN SHYAMSUNDER VASWANI AY: 2010-11 3 2.1 DURING ASSESSMENT PROCEEDINGS, THE INCOME FROM SEVERAL PROPERTIES OWNED BY THE ASSESSEE WAS ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY IN THE FOLLOWING MANNER: - NO. DETAILS OF PROPERTY RENTAL INCOME REFLECTED BY THE ASSESSEE INCOME ASSESSED 1. FLAT NO. 72, L- BLOCK, MAKER TOWER, CUFFE PARADE RS.25,000/- PER MONTH RS.2 LACS PER MONTH 2. GALA NOS. 52 & 53, INDUSTRIAL UNIT, SUBMILL COMPOUND, LOWER PAREL RS.5000/- PER MONTH RS.3.39 LACS PER MONTH 3. OFFICE PREMISES AT RAHEJA CENTRE, NARIMAN POINT NIL RS.2 LACS PER MONTH 4. SHOPS / UNITS AT HILTON CENTRE, BELAPUR, NAVI MUMBAI NIL RS.5.60 LACS PER MONTH 5. FLAT AT SEAWOOD ESTATE CO-OP HOUSING SOCIETY LTD, NERUL, NAVI MUMBAI NIL RS.0.35 LACS PER MONTH 2.2 BRIEF FACTS LEADING TO ENHANCED ESTIMATION ARE THAT THE PROPERTY SITUATED AT FLAT NO.72, L BLOCK, MAKER TOWER, CUFFE PARADE, MUM BAI WAS LET OUT TO BANK OF AMERICA DURING AY 2007-08 @ RS.2 LACS PER MONTH. HOWEVER, THE ASSESSEE RECEIVED INTEREST FREE SECURITY DEPOSIT OF RS.4 CRORES FROM BANK OF AMERICA AND REFLECTED LESSER RENT OF RS.0.25 LACS IN AY 2009-10 AS WELL AS IN IMPUGNED AY. THE I NCOME AGAINST THE SAME WAS ASSESSED AT RS.2 LACS PER MONTH IN AY 2009 -10 WHICH WAS ACCEPTED BY THE ASSESSEE BY NOT FILING SECOND APPEA L. FOLLOWING THE SAME, THE INCOME IN THE IMPUGNED AY WAS ESTIMATED O N SIMILAR LINES. ON THE BASIS OF FACTUAL MATRIX, LD. AO FORMED AN OP INION THAT THE ASSESSEE WAS COMPENSATED FOR LOSS OF RENT BY WAY OF INTEREST FREE SECURITY DEPOSIT FROM THE TENANT AND IT WAS MERELY A TAX REDUCTION DEVICE TO GIVE LOSS TO THE EXCHEQUER. IT FURTHER TRANSPIRE D THAT THE INTEREST FREE DEPOSIT RECEIVED BY THE ASSESSEE WAS ADVANCED TO FA MILY MEMBERS WITHOUT INTEREST AND NO INCOME WAS REFLECTED AGAINS T THE SECURITY DEPOSIT RECEIVED BY THE ASSESSEE. JAIKISHAN SHYAMSUNDER VASWANI AY: 2010-11 4 2.2 THE SECOND PROPERTY VIZ. GALA NOS. 52 & 53 AT INDUSTRIAL UNIT AT A-2 BUILDING, SUBMILL COMPOUND, LOWER PAREL, MUMBAI WAS STATED TO BE LEASED TO A SISTER CONCERN, A CORPORATE ENTITY NAME LY POOJAX BUSINESS LINKS PRIVATE LIMITED. A RENTAL INCOME OF RS.5000/- PER MONTH WAS REFLECTED AGAINST THE SAME WHICH WORKED OUT TO RS.2 .25 PER SQUARE FEETS. FINDING THE SAME TO BE TOO LOW, THE RENT WAS ESTIMATED @ RS.153 PER SQUARE FEETS WHICH WORKED OUT TO RS.3.39 LACS P ER MONTH. SIMILARLY, THE OFFICE PREMISE SITUATED AT RAHEJA CENTRE, NARIMAN POINT WAS STATED TO BE LEASED TO THE SAME CORPORATE ENTIT Y WITHOUT ANY RENT. THE LD. AO WORKED OUT RENTAL INCOME OF RS.2 LACS PE R MONTH AGAINST THIS PROPERTY. 2.3 THE VARIOUS SHOPS / UNITES SITUATED AT HILTON CENTRE, BELAPUR, NAVI MUMBAI WERE CLAIMED BY THE ASSESSEE TO BE USED FOR THE PU RPOSE OF HIS PARTNERSHIP BUSINESS. HOWEVER, THE SAID FACT COULD NOT BE SUBSTANTIATED. ACCORDINGLY, THE INCOME AGAINST THE SAME WAS ESTIMA TED AT RS.5.60 LACS PER MONTH. 2.4 NO INCOME WAS REFLECTED AGAINST PROPERTY LISTED AT SERIAL NUMBER-5. HOWEVER, FINDING THAT THE POSSESSION OF THE SAME WA S ALREADY OBTAINED BY THE ASSESSEE DURING JANUARY, 2009, THE INCOME AG AINST THE SAME WAS ESTIMATED AT RS.0.35 LACS PER MONTH. 2.5 THE ABOVE ESTIMATED RENTAL INCOMES WERE ADDED T O THE INCOME OF THE ASSESSEE AFTER PROVIDING FOR STATUTORY DEDUCTIO N OF 30%. 3. AGGRIEVED, THE ASSESSEE AGITATED THE SAME WITH P ARTIAL SUCCESS BEFORE LD. CIT(A) VID IMPUGNED ORDER DATED 22/02/20 16 WHEREIN THE ASSESSEE DEFENDED ITS STAND. THE LD. CIT(A) UPHELD THE STAND OF LD. AO IN ESTIMATING RENTAL VALUE OF PROPERTY LISTED AT SERIAL NUMBER-1 BY JAIKISHAN SHYAMSUNDER VASWANI AY: 2010-11 5 OBSERVING THAT SIMILAR ESTIMATION WAS ACCEPTED BY T HE ASSESSEE FOR AY 2009-10 BY ACCEPTING THE VERDICT OF FIRST APPELLATE AUTHORITY. IT WAS ALSO OBSERVED THAT ESTIMATION WAS JUSTIFIED SINCE ASSESS EE REDUCED RENT IN LIEU OF HUGE INTEREST FREE SECURITY DEPOSIT OF RS.4 CRORE AND THE DECISION OF THIS TRIBUNAL RENDERED IN TIVOLI INVESTMENT & TRADING PRIVATE LIMITED SQUARELY APPLIED TO THE FACTS OF THE CASE, THE OPER ATIVE PORTION OF WHICH HAS ALREADY BEEN EXTRACTED IN THE IMPUGNED ORDER. T HE ESTIMATION AGAINST PROPERTY LISTED AT SERIAL NUMBER-2 , BEING GALA NUMBERS 52 & 53 WAS DELETED BY OBSERVING THAT THE ASSESSEE DERIVED RENTAL INCOME OF RS.5000/- FROM THE SAME AND SINCE THE RENTAL INCOME WAS MORE THAN THE RATEABLE VALUE, THE ENHANCEMENT WAS NOT JUSTIFIED. SINCE, THE REVENUE HAS NOT AGITATED THIS STAND OF LD. CIT(A), THE SAME IS NOT THE SUBJECT MATTER OF THIS APPEAL. THE ADDITION AGAINST OFFICE PREMISES SITUATED AT RAHEJA CENTRE, NARIMAN POINT WAS CONFIRMED BY OBSERVING THAT THE PREMISES WAS RENTED OUT TO A CORPORATE ENTITY IN WH ICH THE ASSESSEE WAS DIRECTOR AND THE SAID PROPERTY WAS NOT OUT OF PURVI EW OF SECTION 22 IN TERMS OF JUDGMENT OF THIS TRIBUNAL RENDERED IN INDIRA S.JAIN [21 TAXMANN.COM 471]. HOWEVER, RELYING UPON THE SAME DECISION, IT WAS HELD THAT ADDITION AGAINST SHOPS SITUATED AT HILTON CENTRE, NAVI MUMBAI WERE NOT JUSTIFIED SINCE THE SHOPS WERE LEASED OUT TO A PARTNERSHIP FIRM NAMELY PRAJAX HOSPITALITY AND THEREFORE, THE SAME COULD BE SAID TO BE USED FOR THE PURPOSE OF ASSESSEES BUSINESS. THE AD DITION AGAINST PROPERTY LISTED AT SERIAL NUMBER-5 WAS CONFIRMED SINCE THE SAME WAS NOT, AT ALL, LET OUT DURING IMPUGNED AY AND THEREFO RE, NOT ELIGIBLE FOR VACANCY ALLOWANCE IN TERMS OF SECTION 23(1)(C). AGG RIEVED, THE ASSESSEE AS WELL AS REVENUE IS UNDER APPEAL BEFORE US. JAIKISHAN SHYAMSUNDER VASWANI AY: 2010-11 6 4. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [ AR], SHRI H.S.RAHEJA, ON THE STRENGTH OF CERTAIN JUDICIAL PRONOUNCEMENTS AGITATED THE STAND OF FIRST APPELLATE AUTHORITY WHICH HAS BE EN CONTROVERTED BY LD. DEPARTMENTAL REPRESENTATIVE, SHRI MANOJ KUMAR SINGH. 5.1 WE HAVE CAREFULLY HEARD THE RIVAL CONTENTIONS A ND PERUSED RELEVANT MATERIAL ON RECORD INCLUDING DOCUMENTS PLACED IN TH E PAPER-BOOK AND JUDICIAL PRONOUNCEMENTS AS CITED BEFORE US BY RESPE CTIVE REPRESENTATIVES. 5.2 IT IS NOTED THAT PROPERTY SITUATED AT FLAT NO.72, L BLOCK, MAKER TOWER, CUFFE PARADE, MUMBAI WAS ACTUALLY LET OUT TO BANK OF AMERICA DURING AY 2007-08 @ RS.2 LACS PER MONTH. HOWEVER, T HIS RENT HAS DRASTICALLY BEEN REDUCED TO RS.25,000/- PER MONTH U PON RECEIPT OF INTEREST FREE SECURITY DEPOSIT OF RS. 4 CRORE FROM THE TENANT. NO PLAUSIBLE / COGENT EXPLANATION REGARDING DRASTIC REDUCTION HA S BENE PLACED ON RECORD. SECONDLY, SIMILAR ADDITION IN IMMEDIATELY P RECEDING AY 2009-10 WAS ACCEPTED BY THE ASSESSEE BY NOT PREFERRING SECO ND APPEAL AND THE MATTER HAD ALREADY ATTAINED FINALITY IN PRECEDING Y EAR. ANOTHER IMPORTANT FACTOR TO BE NOTED THAT INTEREST FREE SECURITY DEPO SIT RECEIVED BY THE ASSESSEE WAS ADVANCED TO SISTER CONCERNS WITHOUT AN Y INTEREST AND NO INCOME HAS BEEN REFLECTED BY THE ASSESSEE AGAINST T HE SAME. THE TOTALITY OF THE ABOVE FACTS LENDS CREDENCE TO THE R EASONING OF BOTH THE LOWER AUTHORITIES AND THEREFORE, THE CONCLUSION THA T THE WHOLE EXERCISE WAS A COLOURABLE DEVICE TO REDUCE OVERALL TAX BURDE N, COULD NOT BE SAID TO BE WITHOUT ANY SOUND BASIS. WE CONCUR WITH THE S AME. ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE, IN THIS REGARD, STAND DISMISSED. JAIKISHAN SHYAMSUNDER VASWANI AY: 2010-11 7 5.3 THE OFFICE PREMISE SITUATED AT RAHEJA CENTRE, NARIMAN POINT WAS STATED TO BE LEASED OUT TO A CORPORATE ENTITY IN WH ICH THE ASSESSEE WAS A DIRECTOR. NO RENTAL INCOME WAS REFLECTED BY THE ASS ESSEE AGAINST THE SAME. IT IS SETTLED LAW THAT CORPORATE ENTITY IS A SEPARATE LEGAL ENTITY IN THE EYES OF LAW AND THE BUSINESS CARRIED OUT BY THE CORPORATE ENTITY COULD NOT BE SAID TO BE THE BUSINESS OF SHAREHOLDER S / DIRECTORS. THEREFORE, THE REASONING THAT THE PREMISE WAS BEING USED FOR ASSESSEES BUSINESS, HOLD NO WATER. THE LD. AR HAS SUBMITTED T HAT THE ASSESSEE WAS NOT PROVIDED AN OPPORTUNITY TO REBUT THE ESTIMA TED RENTAL RATES ADOPTED BY LD. AO IN VIOLATION OF PRINCIPLE OF NATU RAL JUSTICE. IT HAS BEEN SUBMITTED THAT THE PROPERTY WAS COVERED BY STATE RE NT CONTROL ACT AND THE NOTIONAL RENT COULD NOT EXCEED THE STANDARD REN T FIXED UNDER THE ACT IN TERMS OF CERTAIN JUDICIAL PRONOUNCEMENTS. KEEPIN G IN VIEW THE SAME, WHILE UPHOLDING THE STAND OF LOWER AUTHORITIES IN B RINGING TO TAX THE NOTIONAL RENTAL VALUE, THE MATTER OF ESTIMATION STA ND REMITTED BACK TO THE FILE OF LD. AO TO CONSIDER THE VALUATION PROPOSED B Y THE ASSESSEE, WHO, IN TURN, IS DIRECTED TO SUBSTANTIATE HIS STAND. THE GROUND STAND PARTLY ALLOWED. 5.4 THE SHOPS / UNITS SITUATED AT HILTON CENTER, BELAPUR, NAVI MUMBAI ARE STATED TO BE USED BY THE ASSESSEE BY ONE OF HIS PARTNERSHIP FIRM. THE FIRST APPELLATE AUTHORITY CONCURRED WITH THE ST AND OF ASSESSEE THAT USE OF PREMISE BY ASSESSEES PARTNERSHIP FIRM COULD BE SAID TO BE USE OF PREMISE BY THE ASSESSEE FOR OWN BUSINESS. WE CONCUR WITH THE SAME SINCE A FIRM IS CONSTITUTED, COLLECTIVELY BY ITS PA RTNERS AND THE BUSINESS OF THE FIRM COULD BE SAID TO BE THE BUSINESS OF ITS PA RTNER. HOWEVER, UPON PERUSAL OF QUANTUM ASSESSMENT ORDER, IT TRANSPIRE T HAT THE ASSESSEE JAIKISHAN SHYAMSUNDER VASWANI AY: 2010-11 8 FAILED TO SUBSTANTIATE THE FACT THAT THE PREMISE WA S BEING USED BY THE FIRM. THEREFORE, FOR LIMITED PURPOSE OF VERIFICATIO N, THE MATTER STAND REMITTED BACK TO THE FILE OF LD. AO WITH A DIRECTIO N TO THE ASSESSEE TO DEMONSTRATE THE SAME. THE REVENUES APPEAL STANDS A LLOWED FOR STATISTICAL PURPOSES. 5.5 REGARDING FLAT AT SEAWOOD, IT IS UNDISPUTED FACT THAT THE ASSESSEE HAD ALREADY TAKEN THE POSSESSION OF THE SAME DURING JANUARY, 2009 AND THE FLAT WAS NEVER LET OUT AT ANY POINT OF TIME SIN CE INCEPTION. IN SUCH A CASE, THE PROVISIONS OF SECTION 23(1)(C) COULD NOT APPLY TO THE FACT OF THE CASE SINCE FOR THE APPLICABILITY OF THE SAME, THE P ROPERTY SHOULD HAVE ACTUALLY BEEN LET OUT AT SOME POINT OF TIME, WHICH IS NOT THE CASE HERE. THEREFORE, THE NOTIONAL RENTAL VALUE OF THE SAME WA S REQUIRED TO BE BROUGHT TO TAX SINCE UNDER LAW ONLY ONE PROPERTY, A T THE OPTION OF THE ASSESSEE, COULD BE TERMED AS SELF-OCCUPIED PROPERTY WHEREAS ALL THE OTHER PROPERTIES ARE DEEMED TO BE LET OUT. THEREFOR E, WHILE UPHOLDING THE STAND OF LOWER AUTHORITIES IN ASSESSING THE NOTIONA L VALUE OF THIS PROPERTY, THE MATTER STAND REMITTED BACK TO THE FILE OF LD. A O TO CONSIDER THE VALUATION THEREOF AS PROPOSED BY THE ASSESSEE SINCE A PLEA OF VIOLATION OF NATURAL JUSTICE HAS BEEN RAISED BEFORE US. THE A SSESSEE IS DIRECTED TO SUBSTANTIATE HIS STAND, IN THIS REGARD. THIS GROUND STAND PARTLY ALLOWED. 6. RESULTANTLY, THE ASSESSEES APPEAL STAND PARTLY ALLOWED WHEREAS THE REVENUES APPEAL STAND ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 03 RD JANUARY, 2019. SD/- SD/- (RAVISH SOOD) (MANOJ KUMAR AGGARWAL) / // / JUDICIAL MEMBER MEMBER MEMBER MEMBER / / / / ACCOUNTANT ACCOUNTANT ACCOUNTANT ACCOUNTANT MEMBER JAIKISHAN SHYAMSUNDER VASWANI AY: 2010-11 9 , MUMBAI; , DATED : 03/01/2019 SR.PS., JAISY VARGHESE / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.