Sri. BOMAN M. MIRZA, MUMBAI V. ACITCIR 11(2), MUMBAI

ITA 3506/MUM/2005

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92544 (ITAT-MUMBAI)
• Duration Of Justice: 10 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 21-10-2014
• Assessment Year: 2001-2002
• Appeal Filed On: 10-05-2005
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: GOVIND ZAVERI
• Keywords: Depreciation; Question of law; Tangible material; Wrong claim; Corroborative evidences; Notional interest; Onus to prove
• Section: 234B

Judgement Text

SHRI BOMAN M MIRZA ITA NO. 2060 / M UM /2 00 4 ITA NO. 3506 /MUM/200 5 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E , MUMBAI , . , BEFORE SHRI VIJAY PAL RAO , JUDICIAL MEMBER AND SHRI D. KARUN AKARA RAO , ACCOUNTANT MEMBER ITA NO. : 2060 /MUM/20 04 (ASSESSMENT YEAR: 1998 - 99 ) ITA NO. : 3506 /MUM/20 05 (ASSESSMENT YEAR: 2001 - 02 ) SHRI BOMAN M MIRZA, C/O. S S PHADKAR, SHOP NO. 1, WAMAN CHS, M G ROAD, PARLESHWAR TEMPLE, VILE PARLE (EAST), MUMBAI - 400 0 57 .: PAN: AA EPM 9098 G VS INCOME TAX OFFICER - 14(2), MUMBAI NOW ACIT - 11(2), AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI HARSH KOTHARI SHRI RAJNIKANT CHANI YANI RESPONDENT BY : SHRI GOVIND ZAVERI /DATE OF HEARING : 13 - 0 5 - 201 5 / DATE OF PRONOUNCEMENT : 22. - 05 - 201 5 ORDER , : PER VIJAY PAL RAO , JM: TH ESE TWO APPEAL S FILE D BY THE ASSESSEE ARE DIRECTED AGAINST TWO SEPARATE ORDERS OF THE CIT(A) FOR THE ASSESSMENT YEAR 1998 - 99 & 2001 - 02 RESPECTIVELY. FOR THE ASSESSMENT YEAR 1998 - 99, THE ASSESSEE HAS RAISED THE FOREGOING GROUNDS: I ) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED C.I.T. (A) ERRED IN CONFIRMING THE FINDING OF THE ASSESSING OFFICER IN DETERMINING THE ANNUAL LETTING VALUE OF THE FLAT AT RS. 10,56.666/ - AS AGAINST RS. 1 ,40,000/ - RETURNED BY THE APPELLANT. II) ON THE FACTS AND I N THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED C I T(A) ERRED IN CONFIRMING THE FINDING OF THE ASSESSING OFFICER THAT THE NOTIONAL INTEREST ON INTEREST FREE DEPOSIT OF RS.2,50,00,000/ - RECEIVED FROM THE TENANT HAS TO BE CONSIDERED TO DETERMINE THE A .L.V. OF SHRI BOMAN M MIRZA ITA NO. 2060 / M UM /2 00 4 ITA NO. 3506 /MUM/200 5 2 THE FLAT IGNORING THE FACT THAT THE APPELLANT HAD RETURNED THE INTEREST / INCOME OF RS.9,92,081/ - EARNED ON DEPOSIT OF RS.2,50,00,000/ - SEPARATELY UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED C.I.T. (A) ERRED IN CONFIRMING THE FINDING OF THE ASSESSING OFFICER IN DETERMINING THE PROPERTY INCOME AT RS. 8,43,235/ - AS AGAINST RS.45,512/ - RETURNED BY THE APPELLANT. IV) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) OUGHT TO HAVE DELETED THE ENTIRE DISALLOWANCE OF RS.4,00,018/ - MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THE CAR WAS NOT USED FOR THE PURPOSE OF PROFESSION DURING THE YEAR UNDER REFERENCE AND THEREBY ERRED IN CONFIRMING THE DISALLOWANCE OF EXPENDITURE OF RS.1,83,630/ - AS AGAINST RS.63,403/ - OUT OF TOTAL EXPENDITURE OF RS.4,63,421/ - MADE BY THE APPELLANT. V ) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED C.I.T. (A) ERRED IN CONFIRMING THE FINDING OF THE ASSESSING OFFICER THAT TRADING LOSS OF RS.3,21,247 / - IS NOT ALLOWABLE AS THE APPELLANT FAILED TO PRODUCE BOOKS OF ACCOUNTS. VI) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) OUGHT TO HAVE HELD THAT THE ASSESSING OFFICER OUGHT NOT TO HAVE DISALLOWED THE LOSS UNDER THE HEADS 'PROFESSION' & 'TRADING' WHEN THE APPELLANT HAD PRODUCED ALL DETAILS REGARDING THE RECEIPT OF INCOME AND EXPENSES INCURRED IN THE COURSE OF CARRYING ON BOTH PROFESSION & TRADING BUSINESS. VII ) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) ERRED IN CONFIRMING THE LEVY OF INTEREST U/S. 234 B WHEN THE APPELLANT WAS NOT LIABLE TO PAY ADVANCE TAX U/S. 208 AS THE APPELLANT HAD INCURRED NET LOSS IN THE ACCOUNTING Y EAR RELEVANT TO THE ASSESSMENT YEAR 1998 - 99 AND THEREFORE, NO TAX WAS PAYABLE BY THE APPELLANT AND, THEREFORE, THE PROVISIONS OF SECTION 234 B & 234 C ARE NOT ATTRACTED IN THE APPELLANT'S CASE. VIII) THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELET E ANY GROUND(S) OF APPEAL EITHER BEFORE OR DURING THE COURSE OF HEARING OF THE APPEAL . 2. GROUND NO. 1 TO 3 ARE REGARDING ADDITION ON ACCOUNT OF NOTIONAL INTEREST WHILE COMPUTING AN ANNUAL LETTING VALUE U/S 23(1)(A) OF THE INCOME TAX ACT. 3. THE ASSES SEE IS A OWNER OF FLAT AT IL - PALAZZO, RIDGE ROAD, MUMBAI. THE FLAT WAS LET OUT AT LICEN C E FEE OF RS. 25,000/ - PER MONTH PLUS AN AMOUNT OF RS. 10,000/ - PER MONTH AS REIMBURSEMENT OF REPAIRS, MAINTENANCE AND RENOVATION OF THE PREMISES. THE ASSESSEE HAS ALSO RECEIVED INTEREST FREE DEPOSIT OF RS. 2.5 CRORES, WHICH WAS TO BE REFUNDED TO THE BANK ON THE EXPIRY OF LEAVE & LICEN C E PERIOD. IN THE RETURN OF SHRI BOMAN M MIRZA ITA NO. 2060 / M UM /2 00 4 ITA NO. 3506 /MUM/200 5 3 INCOME, THE ASSESSEE ADOPTED THE ANNUAL LETTING VALUE D AT RS.1,40,000/ - , WHICH IS ACTUAL RENT RECEIVED BY THE A SSES S EE ALONG WITH REIMBURSEMENT OF REPAIR EXPENSES. 4. THE AO DID NOT ACCEPT THE WORKING GIVEN BY THE ASSESSEE ON THE GROUND THAT THE DEPOSIT IN QUESTION HAS INFLUENCED THE MONTHLY RENT FIXED BY THE ASSESSEE. THE AO NOTED THAT THE ASSESSEE HAS KEPT THE S AID AMOUNT IN THE BANK AS FDR, WHICH FETCHED YIELD OF INTEREST @ 11 TO 12% TO THE ASSESSEE. ACCORDINGLY, THE AO WHILE COMPUTING THE ANNUAL LETTING VALUE OF THE PROPERTY MADE AN ADDITION ON ACCOUNT OF INTEREST @ 11% ON THE INTEREST FREE DEPOSIT RECEIVED BY THE ASSESSEE OF RS. 2.5 CRORES. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE CIT(A) BUT COULD NOT SUCCEED. 5. BEFORE US, THE LD. AR OF THE ASSE S SEE HAS SUBMITTED THAT THE AO HAS NOT GIVEN ANY FINDING AS TO HOW THE ACTUAL RENT RECEIVED BY THE A SSESSEE IS LESS THAN THE FARE RENT OF THE PROPERTY IN QUESTION. THE AO HAS MADE AN ADDITION ON ACCOUNT OF NOTIONAL INTEREST, WHICH IS NOT PERMISSIBLE. HE HAS RELIED UPON THE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF TIP TOP TYPOGRAPHY, 368 ITR 330 AS WELL AS THE DECISION OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL DATED 16.01.2015 IN THE CASE OF ACIT VS MRS. BHARATI ANIRUDH KILACHAND IN ITA 1417 OF 2011. ON THE OTHER HAND, THE LD. DR HAS RELIED ON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT IT HAS BEEN OBSERVED BY THE AO AS WELL AS CIT(A) THAT THE ASSESSEE HAS RECEIVED THE INTEREST FREE DEPOSIT OF RS. 2.5 CRORES WHICH HAS INFLUENCED THE MONTHLY RENT FIXED BY THE ASSESSEE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE GONE THROUGH M ATERIALS PLACED ON RECORD. THERE IS NO DISPUTE AS FAR AS THE AGREED RENT IN RESPECT OF PREMISES RECEIVED BY THE ASSESSEE AS WELL AS INTEREST FREE DEPOSITS OF RS. 2.5 CRORES. THE AO HAS MADE AN ADDITION ON ACCOUNT OF NOTIONAL INTEREST WHILE COM P UTING THE AN NUAL LETTING VALUE U/S 23(1)(A) @ 11% ON THE INTEREST FREE DEPOSIT SHRI BOMAN M MIRZA ITA NO. 2060 / M UM /2 00 4 ITA NO. 3506 /MUM/200 5 4 R ECEIVED BY THE ASSESSEE. WE FIND THAT THE AO HAS NOT CONDUCTED ANY ENQUIRY TO FIND OUT WHETHER THE ACTUAL RENT RECEIVED BY THE ASSESSEE IS LESS THAN THE SUM FOR WHICH THE PROPERTY MIGHT R EASONABLY BE EX P EC TED TO FETCH THE RENT FROM YEAR TO YEAR AS PER SECTION 23(1)(A) OF THE INCOME TAX ACT. IN THE ABSENCE OF ANY ENQUIRY AND FINDING ON THE PART OF THE AO THAT DUE TO RECEIPT OF INTEREST FREE DEPOSITS, THE ACTUAL RENT OF THE PROPERTY IS DEFLA TED IN COMPARISON TO THE FARE MARKET RENT OF THE PROPERTY IN QUESTION BY LETTING OUT YEAR TO YEAR. THUS, THE AO IS NOT PERMITTED TO MAKE AN ADDITION ON ACCOUNT OF NOTIONAL INTEREST UNTIL AND UNLESS SOME TANGIBLE MATERIAL HAS BEEN BROUGHT ON RECORD TO SHOW THAT THE AGREED RENT HAS BEEN DEFLATED DUE TO THE INTEREST FREE DEPOSITS RECEIVED BY THE ASSESSEE. THIS ISSUE IS NOW COVERED BY THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS TIP TOP TYPOGRAPHY ( SUPRA ). THE CO - ORDINATE BENCH OF THIS TRIBU NAL IN THE CASE OF ACIT VS. MRS. BHARATI ANIRUDH KILACHAND ( SUPRA ) HAS CONSIDERED AN IDENTICAL ISSUE BY FOLLOWING THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF TIP TOP TYPOGRAPHY AS WELL AS THE FULL BENCH JUDGMENT OF DELHI HIGH COURT IN THE CASE OF CIT VS M O NIKUMAR SUBBA, IN PARA 6 TO 8 OF THE TRIBUNALS ORDER AS UNDER: 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. FOR THE PURPOSE OF COMPUTATION OF ANNUAL VALUE OF THE PROPERTY, THE PROCEDURE IS STIPULATED U/S 23(1) OF THE INCOME TAX ACT. AS PER THE PRESCRIBED PROCEDURE, THE ASSESSING OFFICER HAS TO FIRST DETERMINE THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO FETCH THE RENT FROM YEAR TO YEAR AS PER CLAUSE (A) OF SUB - SECTION 1 AND THEN IF THE PROPERTY IS LET OUT, COMPARE THE SAME WITH THE ANNUAL/ACTUAL RENT RECEIVED OR RECEIVABLE. THEREFORE, THE REASONABLE RENT EXPECTED TO BE FETCHED BY THE PROPERTY BY LETTING OUT YEAR TO YEAR HAS TO BE DETERMINED AS PER SECTION 23(1)(A) AND IN THE CASES WHERE THE PROPERTY IS ACTUALLY LET OUT THEN COMPARED THE SAME WITH THE REASONABLE EXPECTED RENT TO BE FETCHED AS DETERMINED IN CLAUSE (A) OF THIS SECTION. IF THE REASONABLE EXPECTED RENT IS FOUND TO BE MORE THAN THE ANNUAL RENT RECEIVED OR RECEIV ABLE BY THE OWNER THEN THE REASONABLE RENT EXPECTED FROM THE LETTING OUT THE PROPERTY FROM YEAR TO YEAR DETERMINED UNDER CLAUSE (A) TO THIS SECTION WOULD BE THE ANNUAL VALUE FOR THE PURPOSE OF SECTION 22 OF THE ACT. TO DETERMINE THE REASONABLE RENT TO BE F ETCHED BY THE PROPERTY, THE ASSESSING OFFICER HAS TO CONDUCT THE PROPER ENQUIRY AND TAKE THE NECESSARY STEPS TO FIND OUT THE PREVAILING FAIR MARKET RENT. IN THE CASE IN HAND, THE ASSESSING OFFICER HAS NOT CARRIED OUT ANY ENQUIRY OR MADE ANY ATTEMPT TO DETE RMINE THE FAIR MARKET RENT U/S 23(1)(A). THE ASSESSING OFFICER HAS SHRI BOMAN M MIRZA ITA NO. 2060 / M UM /2 00 4 ITA NO. 3506 /MUM/200 5 5 MADE THE ADDITION BY ADOPTING 12% INTEREST RATE ON THE INTEREST FREE DEPOSITSAND DETERMINED THE ANNUAL VALUE OF THE PROPERTY BY ADDING THE SAID NOTIONAL INTEREST IN THE ACTUAL RENT RECEIVE D BY THE ASSESSEE. THERE IS NO QUARREL ON THIS POINT THAT IF THE ASSESSING OFFICER FINDS THAT THE INTEREST FREE DEPOSITS HAS THE EFFECT TO DEFLATE OR INFLATE THE RENT AGREED BETWEEN THE PARTIES THEN THE ASSESSING OFFICER IS FREE TO CARRY OUT THE NECESSARY INVESTIGATION AND ENQUIRY. HOWEVER, HE MUST HAVE COGENT AND SATISFACTORY MATERIAL IN HIS POSSESSION AND WHICH WILL INDICATE THAT THE PARTIES HAVE CONCEALED THE REAL POSITION AS OBSERVED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. TIP TO P TYPOGRAPHY (SUPRA) IN PARA 47 AS UNDER: - 47. WE ARE OF THE VIEW THAT WHERE RENT CONTROL LEGISLATION IS APPLICABLE AND AS IS NOW URGED THE TREND IN THE REAL ESTATE MARKET SO ALSO IN THE COMMERCIAL FIELD IS THAT CONSIDERING THE DIFFICULTIES FACED IN EIT HER RETRIEVING BACK IMMOVABLE PROPERTIES IN METRO CITIES AND TOWNS, SO ALSO THE TIME SPENT IN LITIGATION, IT IS EXPEDIENT TO EXECUTE A LEAVE AND LICENSE AGREEMENTS. THESE ARE USUALLY FOR FIXED PERIODS AND RENEWABLE. IN SUCH CASES AS WELL, THE CONCEDED POSI TION IS THAT THE ANNUAL LETTING VALUE WILL HAVE TO BE DETERMINED ON THE SAME BASIS AS NOTED ABOVE. IN THE EVENT AND AS URGED BEFORE US, THE SECURITY DEPOSIT COLLECTED AND REFUNDABLE INTEREST FREE AND THE MONTHLY COMPENSATION SHOWS A TOTAL MISMATCH OR DOES NOT REFLECT THE PREVAILING RATE OR THE ATTEMPT IS TO DEFLATE OR INFLATE THE RENT BY SUCH METHODS, THEN, AS HELD BY THE DELHI HIGH COURT, THE ASSESSING OFFICER IS NOT PREVENTED FROM CARRYING OUT THE NECESSARY INVESTIGATION AND ENQUIRY. HE MUST HAVE COGENT A ND SATISFACTORY MATERIAL IN HIS POSSESSION AND WHICH WILL INDICATE THAT THE PARTIES HAVE CONCEALED THE REAL POSITION. HE MUST NOT MAKE A GUESS WORK OR ACT ON CONJECTURES AND SURMISES. THERE MUST BE DEFINITE AND POSITIVE MATERIAL TO INDICATE THAT THE PARTIE S HAVE SUPPRESSED THE PREVAILING RATE. THEN, THE ENQUIRIES THAT THE ASSESSING OFFICER CAN MAKE, WOULD BE FOR ASCERTAINING THE GOING RATE. HE CAN MAKE A COMPARATIVE STUDY AND MAKE A ANALYSIS. IN THAT REGARD, TRANSACTIONS OF IDENTICAL OR SIMILAR NATURE CAN B E ASCERTAINED BY OBTAINING THE REQUISITE DETAILS. HOWEVER, THERE ALSO THE ASSESSING OFFICER MUST SAFEGUARD AGAINST ADOPTING THE RATE STATED THEREIN STRAIGHTWAY. HE MUST FIND OUT AS TO WHETHER THE PROPERTY WHICH HAS BEEN LET OUT OR GIVEN ON LEAVE AND LICENS E BASIS IS OF A SIMILAR NATURE, NAMELY, COMMERCIAL OR RESIDENTIAL. HE SHOULD ALSO SATISFY HIMSELF AS TO WHETHER THE RATE OBTAINED BY HIM FROM THE DEALS AND TRANSACTIONS AND DOCUMENTS IN RELATION THERETO CAN BE APPLIED OR WHETHER A DEPARTURE THEREFROM CAN B E MADE, FOR EXAMPLE, BECAUSE OF THE AREA, THE MEASUREMENT, THE LOCATION, THE USE TO WHICH THE PROPERTY HAS BEEN PUT, THE ACCESS THERETO AND THE SPECIAL ADVANTAGES OR BENEFITS. IT IS POSSIBLE THAT IN A HIGH RISE BUILDING BECAUSE OF SPECIAL ADVANTAGES AND BE NEFITS AN OFFICE OR A BLOCK ON THE UPPER FLOOR MAY FETCH HIGHER RETURNS OR VICE VERSA. THEREFORE, THERE IS NO MAGIC FORMULA AND EVERYTHING DEPENDS UPON THE FACTS AND CIRCUMSTANCES IN EACH CASE. HOWEVER, WE EMPHASIZE THAT BEFORE THE ASSESSING OFFICER DETERM INES THE RATE BY THE ABOVE EXERCISE OR SIMILAR PERMISSIBLE PROCESS HE IS BOUND TO DISCLOSE THE MATERIAL IN HIS POSSESSION TO THE PARTIES. HE MUST NOT PROCEED TO RELY UPON THE MATERIAL IN HIS POSSESSION AND DISBELIEVE THE PARTIES. THE SATISFACTION OF THE AS SESSING OFFICER THAT THE BARGAIN REVEALS AN INFLATED OR DEFLATED RATE BASED ON FRAUD, EMERGENCY, RELATIONSHIP AND OTHER CONSIDERATIONS MAKES IT UNREASONABLE MUST PRECEDE THE UNDERTAKING OF THE ABOVE EXERCISE. AFTER THE ABOVE ASCERTAINMENT IS DONE BY THE OF FICER HE MUST, THEN, COMPLY WITH THE PRINCIPLES OF FAIRNESS AND JUSTICE AND MAKE THE DISCLOSURE TO THE ASSESSEE SO AS TO SHRI BOMAN M MIRZA ITA NO. 2060 / M UM /2 00 4 ITA NO. 3506 /MUM/200 5 6 OBTAIN HIS VIEW. 7. SINCE IN THE CASE IN HAND, THE ASSESSING OFFICER HAD NOT CONDUCTED ANY ENQUIRY OR INVESTIGATION TO FIND OUT THE E FFECT OF INTEREST FREE DEPOSITS AND TO DETERMINE THE FAIR MARKET RENT EXPECTED TO BE FETCHED BY THE PROPERTY IN QUESTION AS PER CLAUSE (A) OF SECTION 23 THEN THE ASSESSING OFFICER CANNOT BE ALLOWED TO MAKE THE ADDITION ON ACCOUNT OF NOTIONAL INTEREST. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. TIP TOP TYPOGRAPHY (SUPRA) WHILE CONSIDERING THE JUDGMENT OF FULL BENCH OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS.MONI KUMAR SUBBA (SUPRA) HAS HELD IN PARA 51 TO 54 AS UNDER: - 51. WE Q UITE SEE THE FORCE IN THE ARGUMENTS OF MS. VISSANJEE THAT ORDINARILY THE LICENSE FEE AGREED BETWEEN THE WILLING LICENSOR OR A WILLING LICENSEE UNINFLUENCED BY ANY EXTRANEOUS CIRCUMSTANCES WOULD AFFORD RELIABLE EVIDENCE OF WHAT THE LANDLORD MIGHT REASONABLY BE EXPECT TO GET FROM A HYPOTHETICAL TENANT. SHE HAS IN MAKING THIS SUBMISSION, ANSWERED THE ISSUE AND SUMMED UP THE CONCLUSION AS WELL. THEN, IT IS BUT NATURAL AND LOGICAL THAT IN THE EVENT, THE TRANSACTION IS INFLUENCED BY ANY EXTRANEOUS CIRCUMSTANCES O R VITIATED BY FRAUD, OR THE LIKE THAT THE ASSESSING OFFICER CAN ADOPT A 'FAIR RENT' BASED ON THE OPINION OBTAINED FROM RELIABLE SOURCES. THERE AS WELL, WE DO NOT SEE AS TO HOW WE CAN UPHOLD THE SUBMISSIONS OF MR. CHHOTARAY THAT THE NOTIONAL RENT ON THE SEC URITY DEPOSIT CAN BE TAKEN INTO ACCOUNT AND CONSIDERATION FOR THE DETERMINATION. IF THE TRANSACTION ITSELF DOES NOT REFLECT ANY OF THE AFORE STATED ASPECTS, THEN, MERELY BECAUSE A SECURITY DEPOSIT WHICH IS REFUNDABLE AND INTEREST FREE HAS BEEN OBTAINED, TH E ASSESSING OFFICER SHOULD NOT PRESUME THAT THIS SUM OR THE INTEREST DERIVED THEREFROM AT BANK RATE IS THE INCOME OF THE ASSESSEE TILL THE DETERMINATION OR CONCLUSION OF THE TRANSACTION. THE ASSESSING OFFICER OUGHT TO BE AWARE OF SEVERAL ASPECTS AND MATTER S INVOLVED IN SUCH TRANSACTIONS. IT IS NOT NECESSARY THAT IF THE LICENSE IS FOR THREE YEARS THAT IT WILL OPERATIVE AND CONTINUING TILL THE END. THERE ARE TERMS AND CONDITIONS ON WHICH THE LEAVE AND LICENSE AGREEMENT IS EXECUTED BY PARTIES. THESE TERMS AND CONDITIONS ARE WILLINGLY ACCEPTED. THEY ENABLE THE LICENSE TO BE DETERMINED EVEN BEFORE THE STATED PERIOD EXPIRES. EQUALLY, THE LICENSEE CAN OPT OUT OF THE DEAL. A LEAVE AND LICENSE DOES NOT CREATE ANY INTEREST IN THE PROPERTY. THEREFORE, IT IS NOT AS IF T HE SECURITY DEPOSIT BEING MADE, IT WILL BE NECESSARILY REFUNDABLE AFTER THE THIRD YEAR AND NOT OTHERWISE. EVERYTHING DEPENDS UPON THE FACTS AND CIRCUMSTANCES IN EACH CASE AND THE NATURE OF THE DEAL OR TRANSACTION. THESE ARE NOT MATTERS WHICH ABIDE BY ANY F IXED FORMULA AND WHICH CAN BE UNIVERSALLY APPLIED. TODAY, IT MAY BE COMMERCIALLY UNVIABLE TO ENTER INTO A LEASE AND, THEREFORE, THIS MODE OF INDUCTING A 'THIRD PARTY' IN THE PREMISES IS ADOPTED. THIS MAY NOT BE THE TREND TOMORROW, THEREFORE, WE DO NOT WISH TO CONCLUDE THE MATTER BY EVOLVING ANY RIGID TEST. 52. WE HAVE ALSO NOTED THE SUBMISSIONS OF SHRI AHUJA. WE ARE OF THE OPINION THAT EVEN IN THE CASES AND MATTERS BROUGHT BY HIM TO OUR NOTICE, IT IS EVIDENT THAT THE ASSESSING OFFICER CANNOT BRUSH ASIDE T HE RENT CONTROL LEGISLATION, IN THE EVENT, IT IS APPLICABLE TO THE PREMISES IN QUESTION. THEN, THE ASSESSING OFFICER HAS TO UNDERTAKE THE EXERCISE CONTEMPLATED BY THE RENT CONTROL LEGISLATION FOR FIXATION OF STANDARD RENT. THE ATTEMPT BY THE ASSESSING OFFI CER TO OVERRIDE THE RENT CONTROL LEGISLATION AND WHEN IT BALANCES THE RIGHTS BETWEEN THE PARTIES HAS RIGHTLY BEEN INTERFERED WITH IN THE GIVEN CASE BY THE APPELLATE AUTHORITY. THE ASSESSING OFFICER EITHER MUST UNDERTAKE THE EXERCISE TO SHRI BOMAN M MIRZA ITA NO. 2060 / M UM /2 00 4 ITA NO. 3506 /MUM/200 5 7 FIX THE STANDARD REN T HIMSELF AND IN TERMS OF THE MAHARASHTRA RENT CONTROL ACT, 1999 IF THE SAME IS APPLICABLE OR LEAVE THE PARTIES TO HAVE IT DETERMINED BY THE COURT OR TRIBUNAL UNDER THAT ACT. UNTIL, THEN, HE MAY NOT BE JUSTIFIED IN APPLYING ANY OTHER FORMULA OR METHOD AND DETERMINE THE 'FAIR RENT' BY ABIDING WITH THE SAME. IF HE DESIRES TO UNDERTAKE THE DETERMINATION HIMSELF, HE WILL HAVE TO GO BY THE MAHARASHTRA RENT CONTROL ACT, 1999. MERELY BECAUSE THE RENT HAS NOT BEEN FIXED UNDER THAT ACT DOES NOT MEAN THAT ANY OTHER D ETERMINATION AND CONTRARY THERETO CAN BE MADE BY THE ASSESSING OFFICER. ONCE AGAIN HAVING RESPECTFULLY CONCURRED WITH THE JUDGMENT OF THE FULL BENCH OF THE DELHI HIGH COURT, WE NEED NOT SAY ANYTHING MORE ON THIS ISSUE. 53. THUS, APART FROM THE THREE ASPE CTS NAMELY OF A MUNICIPAL VALUATION, OF OBTAINING INTEREST FREE SECURITY DEPOSIT AND THE PROPERTIES BEING COVERED BY THE MAHARASHTRA RENT CONTROL ACT BUT NO STANDARD RENT THEREUNDER IS FIXED, OUR ATTENTION HAS NOT BEEN INVITED TO ANY OTHER CASE. SUFFICE IT TO HOLD THAT IN THOSE CASES AND TO WHICH OUR ATTENTION IS NOT INVITED THE PRINCIPLES LAID DOWN IN THE DECISIONS OF THE HON'BLE SUPREME COURT AND REFERRED TO BY THE FULL BENCH OF THE DELHI HIGH COURT WOULD GOVERN THE ENQUIRY. 54. AS A RESULT OF THE ABOVE DISCUSSION, WE ARE OF THE OPINION THAT WHEREVER THE ASSESSING OFFICER HAS NOT ADHERED TO THE ABOVE PRINCIPLES, AND HIS FINDING AND CONCLUSION HAS BEEN INTERFERED WITH, BY THE HIGHER APPELLATE AUTHORITIES, THE REVENUE CANNOT BRING THE MATTER TO THIS COURT AS NO SUBSTANTIAL QUESTION OF LAW CAN BE ARISING FOR DETERMINATION AND CONSIDERATION OF THIS COURT. THEN, THE FINDINGS BY THE LAST FACT FINDING AUTHORITY, NAMELY THE TRIBUNAL AND AGAINST THE REVENUE SHALL HAVE TO BE UPHELD AS THEY ARE CONSISTENT WITH THE F ACTS AND CIRCUMSTANCES BROUGHT BEFORE IT. IF THEY ARE NOT VITIATED BY ANY PERVERSITY OR ERROR OF LAW APPARENT ON THE FACE OF THE RECORD, THE APPEALS OF THE REVENUE CANNOT BE ENTERTAINED. THEY WOULD HAVE TO BE ACCORDINGLY DISMISSED. 8. HAVING REGARD TO T HE FACTS AND CIRCUMSTANCES OF THE CASE, WHERE THE ASSESSING OFFICER HAS NOT CONDUCTED ANY ENQUIRY OR INVESTIGATION AND BY FOLLOWING THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. TIP TOP TYPOGRAPHY (SUPRA), WE DO NOT FIND ANY REAS ON TO INTERFERE WITH THE ORDER OF CIT(A) QUA THIS ISSUE . 9. WE FIND THAT THE FACTS OF THE PRESENT CASE ARE IDENTICAL TO THE FAC TS IN THE CASE OF MRS. BHARATI ANIRUDH KILACHAND (SUPRA) AND AS THE AO HAS NOT CONDUCTED ANY ENQUIRY OR INVESTIGATION TO FIND OUT THAT THE ACTUAL RENT RECEIVED BY THE ASSESSEE IS LESS THAN THE FARE MARKET RENT REASONABLY EXPECTED TO BE FETCHED BY THE PROPERTY AND BECAUSE OF THE INTEREST FREE DEPOSITS RECEIVED BY THE ASSES S EE IT IS DEFLATED. ACCORDINGLY, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW ON THIS ISSUE AND DELETE THE ADDITION MADE BY THE AO IN THIS REGARD. 10. GROUND NO. 4 IS REGARDING DISALLOWANCE OF CAR EXPENSES ON ACCOUNT OF PERSONAL USE. SHRI BOMAN M MIRZA ITA NO. 2060 / M UM /2 00 4 ITA NO. 3506 /MUM/200 5 8 11. THE ASSE S SEE IS STATED TO BE THE FINANCIAL CONSULTANT BY PROFESSION A ND CLAIMED NET LOSS OF RS. 4,00,018/ - IN THE PROFIT AND LOSS ACCOUNT FOR THE PROF ESSION. THE ASSESSEE HAS INCURRED TOTAL EXPENDITURE OF RS. 4,63,421/ - AFTER SUO MOTTO DISALLOW ING AMOUNT OF RS. 63,403/ - BEING 20% OF CAR EXPENSES AND DEPRECIATION AS WELL AS 50% EXPENSES ON TELEPHONE TOWARDS PERSONAL USE AND ACCORDINGLY A NET LOSS OF RS. 4,00,018/ - WAS CLAIMED. 12. THE AO HAS DISALLOWED ENTIRE CLAIM OF EXPENSES ON THE GROUND THAT THE ASSESSEE HAS FAILED TO PRODUCE BOOKS OF ACCOUNT OR OTHER RELEVANT DETAILS OR EVIDENCE IN SUPPORT OF THE EXPENSES. 13. ON APPEAL, THE CIT(A) HAS RESTRICTED THE DISALLOWANCE ON ACCOUNT OF CAR EXPENSES TO 8 0% AS AGAINST 20% SUO MOT T O MADE BY THE ASSESSEE. AS REGARDS THE DISALLOWANCE OF 50% OF TELEPHONE EXPENSES, IT WAS ACCEPTED BY T HE CIT(A). THUS, PART RELIEF WAS GRANTED BY THE CIT(A). 14. WE HAVE HEARD THE LD. AR AS WELL AS DR AND CONSIDERED RELEVANT MATERIAL ON RECORD. THE LD. AR OF THE ASSES S EE HAS SUBMITTED THAT 60% OF THIS AMOUNT OF CAR EXPENSES IS TO BE DELETED WHEN THE ASSES SEE H I M SELF HAS SUO MOT T O MADE 20% ON ACCOUNT OF PERSONAL USE. THUS, HE HAS PLEADED THAT THE ADDITION CONFIRMED BY THE CIT(A) MAY BE DELETED. 15. ON THE OTHER HAND, LD. DR HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT ASSESSEE HAS FAILED TO PRODUCE THE SUPPORTING EVIDENCE AND THEREFORE THE ASSESSEE HAS NOT DISCHARGED ITS ONUS TO PROVE THE CLAIM OF EXPENDITURE. 16. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ASSES S EE HAS SUO MOTTO DISALLOWED 50% OF TELEPHONE EXPENSES, WHICH HAS BEEN ACCEPTED BY THE CIT(A). T HE REVENUE HAS NOT CHALLENGED THE ORDER OF THE CIT(A). AS REGARDS THE CAR EXPENSES, THE CIT(A) HAS CONFIRMED THE DISALLOWANCE TO THE 80% OF THE EXPENSES. IN OUR VIEW WH EN THE ASSESSEE HAS SUO MOT T O DISALLOWED 50% OF TELEPHONE EXPENSES ON ACCOUNT OF PERSONAL USE THEN SHRI BOMAN M MIRZA ITA NO. 2060 / M UM /2 00 4 ITA NO. 3506 /MUM/200 5 9 ON THE SAME ANALOGY THE CAR EXPENSES SHALL ALSO BE DISALLOWED @ 50% ON ACCOUNT OF PERSONAL USE. ACCORDINGLY, WE MODIFY THE ORDERS OF THE AUTHORITIES BELOW AND RESTRICT THE DISALLOWANCE OF CAR EXPENSES @ 50%. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 17. GROUND NO. 5 AND 6 REGARDING DISALLOWANCE OF TRADING LOSS OF RS. 3,21,2 4 7/ - . 18. THE ASSE S SEE HAS DECLARED LOSS OF RS. 3,21,2 4 7/ - ON ACCOUNT OF TRADIN G IN SHARES. THE AO DISALLOWED THE CLAIM OF THE ASSES S EE ON THE GROUND THAT THE ASSESSEE HAS NOT PRODUCED THE BOOK OF ACCOUNTS AS WELL AS OTHER RECORDS IN SUPPORT OF THE CLAIM. 19. O N APPEAL FILED BEFORE THE CIT(A), THE ASSESSEE CONTENDED THAT THERE WAS NET LOSS OF RS. 1, 14 ,478/ - IN THE TRADING. THE EXPENSES OF RS. 2,48,858/ - WERE INCURRED IN THE COURSE OF CARRYING ON BUSINESS. THUS, THE NET LOSS WAS REDUCED DUE TO RECEIPT OF INTEREST ON FDR AND DIVIDEND, WHICH WAS NOT CREDITED IN THE TRADING ACCOUNT. THE CIT(A) HAS CONFIRMED THE DISALLOWANCE MADE BY THE AO ON THE SIMILAR REASONING THAT THE BOOK OF ACCOUNTS OF THE ASSESSEE WERE NOT PRODUCED AND THEREFORE, THE CLAIM OF THE ASSESSEE CANNOT BE VERIFIED. 20. BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE DISALLOWANCE OF ENTIRE TRADING LOSS IS NOT JUSTIFIED WHEN THE ASSESSEE HAS CARRIED OUT THE TRANSACTION OF TRADING AND SOME EXPENDITURE IS BOUND TO OCCUR . HE HAS REFERRED THE DETAILS OF THE TRADING ACCOUNT AND SUBMITTED THAT THE MAJOR PART OF THE TRADING LOSS IS ON ACCOUNT OF INTEREST ON OVERDRAFT AS WELL AS THE PURCHASE PRICE OF THE SHARES. ON THE OTHER HAND, LD. DR HAS RELIED ON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT WHEN THE ASSESSEE HAS FAILED TO PRODUCE THE BOOK OF ACCOUNTS AN D OTHER DETAILS IN SUPPORT OF THE CLAIM THEN THE AO WAS JUSTIFIED IN DISALLOWING THE CLAIM OF THE ASSESSEE. 21. HAVING CONSIDERED THE RIVAL SUBMISSION S AND PERUSING THE MATERIAL PLACED ON RECORD, WE NOTE THAT THE ASSESSEE HAS BOOK ED VARIOUS EXPENSES SHRI BOMAN M MIRZA ITA NO. 2060 / M UM /2 00 4 ITA NO. 3506 /MUM/200 5 10 IN T HE TRADING ACCOUNT INCLUDING THE EXPENSES ON ACCOUNT OF INTEREST ON OVERDRAFT FACILITY, TELEPHONE, BANK CHARGES LEGAL EXPENSES. IN THE ABSENCE OF BOOKS OF ACCOUNT, THE AO HAS DISALLOWED THE CLAIM OF THE ASSESSEE. HOWEVER, IT IS PERTINENT TO NOTE THAT THE E XPENSES ON ACCOUNT OF INTEREST ON OVERDRAFT , TELEPHONE AND BANK CHARGES ARE MATTER OF RECORD AND CAN BE VERIFIED EVEN IN THE ABSENCE OF BOOKS OF A CCOUNTS. ACCORDINGLY, TO THE EX TENT OF THE EXPENSES ON ACCOUNT OF TELEPHONE, BANK CHARGES AND INTEREST ON OVER DRAFTS, THE CLAIM OF THE ASSESSEE CANNOT BE DISALLOWED WHEN THE SAME CAN BE VERIFIED FROM INDEPENDENT SOURCES , BEING MATTER OF RECORD AND THERE IS NO SCOPE OF ANY MANIPULATION OR MAKING A FALSE CLAIM. HENCE, WE ALLOW THE CLAIM OF TRADING LOSS TO THE EXTEN T OF THESE EXPENSES. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 22. GROUND NO. 7 IS REGARDING LEVY OF INTEREST U/S 234B AND 234 C, IN THE ABSENCE OF APPLICABILITY OF TWO PRIMARY PRE - CONDITIONS OF SECTION 234B(1), THE IMPUGNED GROUND BECOME CONSEQUENTIAL AN D DOES NOT STAND AS SAME IS ACADEMIC AND WE DISMISS THE SAME AS SUCH. ASSESSMENT YEAR 2001 - 02 : 23. THE ONLY ISSUE RAISED BY THE ASSESSEE IS WITH REGARD TO ADDITION ON ACCOUNT OF NOTIONAL INTEREST WHILE COMPUTING AN ANNUAL LETTING VALUE U/S 23(1) (A) OF THE INCOME TAX ACT. 24. THIS ISSUE IS COMMON TO THE ISSUE RAISED IN GROUND NO. 1 TO 3 FOR AY 1998 - 99 IN VIEW OF OUR FINDING ON THIS ISSUE FOR THE AY 1998 - 99, THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. SHRI BOMAN M MIRZA ITA NO. 2060 / M UM /2 00 4 ITA NO. 3506 /MUM/200 5 11 25. IN THE RESULT, APPEAL FOR THE AY 1998 - 99 IS PARTLY ALLOWED AND FOR THE AY 2001 - 02 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22ND MAY , 2015. SD S D ( . ) ( ) ( D. KARUNAKARA RAO ) ( VIJAY PAL RAO ) ACCOUNTANT MEMB ER JUDICIAL MEMBER MUMBAI, DATE: 22ND MAY , 2015 / COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3) THE CIT (A) - 8 , MUMBAI. 4 ) THE CIT - 4 , MUMBAI/CIT - 4 , MUMBAI . 5 ) , , / THE D.R. E BENCH, MUMBAI. 6 ) COPY TO GUARD FILE. / BY ORDER TRUE COPY / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI SRL: