EUROPA CHEMICALS PRIVATE LIMITED, MUMBAI V. INCOME TAX OFFICER 5(1)(4), MUMBAI

ITA 386/MUM/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1763 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 17-01-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: IN CIRCUMSTANCES OF CA SE
• Section: 142(1); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI B. R. BASKARAN , AM AND SHRI AMARJIT SINGH , JM I.T.A. NO S . 386 /M/ 20 1 8 & 389 /M/201 8 ( ASSESSMENT YEAR S : 2008 - 09 & 20 11 - 12 ) M/S. EUROPA CHEMICALS P. LTD. 3 RD FLOOR, CAMBATTA BUILDING, SOUTH WEST WING, CHURCHGATE, MUMBAI - 400020. VS. ITO 5(1)(4) 5 TH FLOOR, AAYAKAR BHAWAN, MUMBAI - 400020. ./ ./ PAN/GIR NO. : AABCE 3346 D ( APPELLANT ) .. ( RESPONDENT ) DATE OF HEARING : 25.06 .201 8 DATE OF PRONOUNCEMENT : 07.09. 2018 O R D E R PER AMARJIT SINGH, JM: THE ASSESSEE HAS FILED THE ABOVE MENTIONED APPEA LS AGAINST THE DIFFERENT ORDER PASSED BY THE COMMIS S IONER OF INCOME TAX (APPEALS) - 10 , MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE ASSESSMENT YEAR 2008 - 09 & 2011 - 12 . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW: 1. THE LEARNED C1T(A) ERRED IN CONFIRMING REASSESSMENT MADE U/S 147 WHEN THERE WAS NO ESCAPEMENT OF INCOME NOR WAS THERE ANY TANGIBLE, MATERIAL WITH AO TO REOPEN THE CASE FOR THIS YEAR. ASSESSEE BY: SHRI PRAKASH K. JOTWANI DEPARTMENT BY: SHRI N. HEMALATHA (DR) ITA NOS. 386 /MUM/201 8 389/MUM/2018 A.Y. 2008 - 09 & 2011 - 12 2 2. A| THE LEARNED CTT(A) ERRED IN CONFIRMING ADDITION OF RS.3,74,023/ - UNDER THE HEAD INCOME FROM HOUSE PROPERTY WHEN IT WAS A CASE OF SUB - LETTING AND NOT HOUSE PROPERTY. B) THE LEARNED CIT(A) ERRED IN CONFIRMING THE ESTIMATE MADE BY THE AO UNDER THE HEAD INCOME FROM HOUSE PROPERTY WHEN THE ONLY BASIS WAS A MAGAZINE REPORT PUBLISH ED BY 1C1CI AND THE INSPECTOR REPORT WHICH ALSO RELIED ON HEARSAY REPORTS. C) THE LEARNED CIT(A) ERRED IN NOT CONSIDERING THAT THE RENT DISCLOSED BY THE APPELLANT WAS IN EXCESS OF RATABLE VALUE. D) THE LEARNED C1T(A) ERRED IN NOT CONSIDERING THE APPELLANT HAD ALSO RECEIVED A SUBSTANTIAL DEPOSIT WHICH WAS NOT CONSIDERED BY THE AO IN CONSIDERING ANNUAL RATEABLE VALUE AS REASONABLE AND FAIR. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND THE GROUNDS OF APPEAL AT OR BEFORE THE HEARING OF THE APPELLANT. 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING LOSS TO THE TUNE OF RS.1,05,649/ - ON 26 . 0 9 .20 0 8 RELEVANT TO THE A.Y.2007 - 08. THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT ON 20.06.2009. THEREAFTER, THE CASE WAS REOPENED BY ISSUANCE OF NOTICE U/S 148 OF THE ACT DATED 29.03.2015. IN RESPONSE TO THE NOTICE , THE ASSESSEE FILED ITS RETURN OF INCOME ON 1 7.08.2015 DECLARING LOSS TO THE TUNE OF RS.1,05,649/ - WHICH THE ASSESSEE HAD FILED EARLIER . THEREAFTER, NOTICES U/S 143(2) OF THE ACT DATED 31.07.2014 AND 142(1) OF THE ACT DATED 10.09.2015 WERE ISSUED AND SERVED UPON THE ASSESSEE. ON THE REQUEST OF THE AS SESSEE , THE REASONS RECORDED FOR THE REOPENING OF THE CASE WAS GIVEN TO THE ASSESSEE. AO INVOKE D THE PROVISION OF SECTION 27(III)(B) OF THE I.T. ACT AND HELD TH AT THE ASSESSEE WAS DEEMED OWNER OF THE PROPERTY, THEREFORE, ASSESSED THE RENTAL INCOME AS INCO ME FROM HOUSE PROPERTY AND RAISED THE ADDITION TO THE TUNE OF ITA NOS. 386 /MUM/201 8 389/MUM/2018 A.Y. 2008 - 09 & 2011 - 12 3 RS. 374023/ - (ANNUAL RENTED VALUE OF THE PREMISES 334318 - 30%) . T HE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF RS.3,77,990/ - . FEELING AGGRIEVED, T HE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A ) WHO CONFIRMED THE ORDER OF THE AO , THEREFORE, THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 4 . THE LD. REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE ASSESSEE NO DOUBT FILED THE PRESENT APPEAL DELAYED FOR THE PERIOD OF 25 DAYS BUT THE DELAY IS VERY MUCH EXPLAINED AND UNINTENTIONAL AND IN THIS REGARD THE FACTS HAVE ALREADY BEEN FILED. THE DELAY IS LIABLE TO BE CONDONED IN THE INTEREST OF JUSTICE ON APPRAISAL OF THE APPLICATION AN D AFFIDAVIT, WE NOTICED THAT THE APPEAL HAS BEEN F ILED DELAYED ON ACCOUNT OF CHANGE OF COUNSEL AND ON ACCOUNT OF APPOINTMENT OF THE NEW CA AS WELL AS STAFF, THERE FORE, IN THE SAID CIRCUMSTANCES AND SPECIFICALLY CONSIDERED THIS FACT THAT THE DELAY IS NOT SO LONG, WE CONDONE D THE DELAY. ISSUE NO. 1: - 5 . UN DER THIS ISSUE THE ASSESSEE HAS CHALLENGED THE REOPENING OF THE ASSESSMENT U/S 147 OF THE ACT BUT AT THE TIME OF ARG UMENT DID NOT PRESS THIS GROUND, T HEREFORE, WE DECIDE THIS ISSUE IN FAVOUR OF THE REVENUE AGAINST THE ASSESSEE BEING NOT PRESSED. ISSUE NO . 2 : - ITA NOS. 386 /MUM/201 8 389/MUM/2018 A.Y. 2008 - 09 & 2011 - 12 4 6 . UNDER THIS ISSUE THE ASSESSEE HAS CHALLENGED THE CONFIRMATION OF THE ADDITION OF RS. 3,74,023/ - UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IT IS ARGUED THAT THE CASE OF THE ASSESSEE IS THE CASE OF THE SUB - LETTING WHICH HAS DULY BEEN COVERED BY THE ASSESSEE OWN CASE IN ITA. NO. 387, 388 & 390/M/2018 FOR THE A.YS. 2009 - 10, 2010 - 11 & 2012 - 13 RESPECTIVELY DATED 15.06.2018, THEREFORE, IN THE SAID CIRCUMSTANCES, THE GROUND OF THE ASSESSEE IS LIABLE TO BE ALLOWED INTEREST OF JUSTICE. HOWEVER, ON THE OTHER H AND, THE LD. REPRESENTATIVE OF THE DEPARTMENT HAS REFUTED THE SAID CONTENTION. BEFORE GOING FURTHER, WE DEEMED IT NECESSARY TO ADVERT THE FINDING OF THE HONBLE TRIBUNAL ON RECORD: - 11. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. AS OUR AFORESAID DISCUSSION SHOWS, THE SHORT - POINT FOR OUR CONSIDERATION IS AS TO WHETHER THE ASSESSING OFFICER WAS JUSTIFIED IN REJECTING THE VALUE DECLARED BY THE ASSESSEE AND INSTEAD, DETERMINING THE ANNUAL VALUE OF THE PROPERTY FOR THE PURPOSES OF SEC. 23 OF THE ACT B ASED ON ESTIMATION ARRIVED AT BY HIM, HAVING REGARD TO THE TWO INSTANCES NOTED IN THE VICINITY OF ASSESSEES PROPERTY ? 12. SEC. 23 OF THE ACT PRESCRIBES THE MANNER IN WHICH THE ANNUAL VALUE OF ANY PROPERTY IS TO BE ARRIVED AT FOR THE PURPOSE OF ASSESSMENT UNDER THE HEAD INCOME FROM HOUSE PROPERTY. SEC. 23(1)(A) OF THE ACT RELATES TO THE DETERMINATION OF ANNUAL VALUE OF A PROPERTY FOR A SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE LET FROM YEAR TO YEAR. THUS, WHAT IS ENVISAGED IN SEC. 23(1)(A) OF THE AC T IS THE PROBABLE RENT WHICH THE PROPERTY IS EXPECTED TO EARN. SEC. 23(1)(B) OF THE ACT DEALS WITH A CASE WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS IN EXCESS OF THE S UM REFERRED TO IN CLAUSE (A) TO SEC. 23(1), THEN THE AMOUNT SO RECEIVED OR RECEIVABLE SHALL BE TREATED AS THE ANNUAL VALUE OF THE PROPERTY. IN THE PRESENT CASE, THE ACTUAL RENT DECLARED BY THE ASSESSEE IS RS.7,500/ - PER MONTH, WHEREAS THE MUNICIPAL VALUATI ON IS STATED TO BE RS.225.38 PER MONTH. IN THIS FACTUAL BACKGROUND, THE CLAIM OF THE ASSESSEE IS THAT THE ACTUAL RENT BE TAKEN AS THE 8 EUROPA CHEMICALS ITA NOS. 387, 388 & 390/MUM/2018 ANNUAL ITA NOS. 386 /MUM/201 8 389/MUM/2018 A.Y. 2008 - 09 & 2011 - 12 5 VALUE OF THE PROPERTY AS IT EXCEEDS THE MUNICIPAL RATABLE VALUE . THE ASSESSING OFFICER DOES NOT ACCEPT RS.7,500/ - PER MONTH AS THE VALUE FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO BE LET. IN SUCH A SITUATION, AS HELD BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF TIP TOP TYPOGRAPHY (SUPRA), THE ASSESSING OFFICER IS REQUIRED TO CARRY OUT NECESSARY INVESTIGATIONS AND INQUIRIES. IT IS FURTHER PRESCRIBED THAT THE ASSESSING OFFICER SHALL HAVE COGENT AND SATISFACTORY MATERIAL IN HIS POSSESSION WHICH INDICATE THAT THE PARTIES HAVE CONCEALED THE REAL POSITION. I T HAS BEEN FURTHER EXPLAINED THAT THERE MUST BE DEFINITE AND POSITIVE MATERIAL TO INDICATE THAT THE PARTIES HAVE SUPPRESSED THE PREVAILING RATE. IF WE WERE TO EXAMINE THE CASE MADE OUT BY THE ASSESSING OFFICER IN THE INSTANT IN THE BACKGROUND OF THE ABOV E REASONING LAID DOWN BY THE HONBLE BOMBAY HIGH COURT, IT IS FOUND THAT THERE IS NO ALLEGATION, MUCH LESS ANY POSITIVE MATERI AL 47. ............................HE MUST HAVE COGENT AND 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 DEF INITE AND POSITIVE MATERIAL TO INDICATE THAT THE PARTIES 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 RE GARD, TRANSACTIONS OF IDENTICAL OR SIMILAR NATURE CAN BE 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 PROPE RTY WHICH HAS BEEN LET OUT OR GIVEN ON LEAVE AND LICENSE 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 THERET O CAN BE APPLIED OR WHETHER A DEPARTURE THEREFROM CAN BE 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 BENEFITS 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 DETERMINES 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 ASSESSING OFFICER THAT THE BARGAIN REVEALS AN INFLATED OR DEFLATED RATE BASED ON FRAUD, EMERGENCY, RELATIONSHIP AND OTHER ITA NOS. 386 /MUM/201 8 389/MUM/2018 A.Y. 2008 - 09 & 2011 - 12 6 CONSIDERATIONS MAKES IT UNREASONABLE MUST PRECEDE THE UNDERTAKING OF THE ABOVE EX ERCISE.................... THEREFORE, ON THE AFORESAID REASONING, THE ACTION OF THE ASSESSING OFFICER IS LIABLE TO BE SET - ASIDE. APART THEREFROM, WE FIND THAT THE ASSESSING OFFICER HAS STRAIGHTAWAY BASED HIS ESTIMATION ON THE RATES FOUND ON HIS INQUIRY WI THOUT ESTABLISHING THE SIMILARITY OF THE ARRANGEMENT. AS POINTED OUT BY THE LEARNED REPRESENTATIVE WITH REGARD TO THE RENTAL ARRANGEMENT OF GALAXY AVIATION, THE SAME IS INCOMPARABLE WITH ASSESSEES ARRANGEMENT BECAUSE OF THE TIMING DIFFERENCE. THE ARRANGE MENT OF GALAXY AVIATION IS OF THE YEAR 2012 WHEREAS ASSESSEES ARRANGEMENT IS OF 2007. EVEN WITH REGARD TO THE RENTAL ARRANGEMENT OF BANK OF INDIA, THERE ARE NO DETAILS BROUGHT OUT BY THE ASSESSING OFFICER TO SHOW AS TO HOW THE SAME ARE COMPARABLE TO THE A SSESSEES ARRANGEMENT. THEREFORE, ON THIS GROUND ALSO, THE ESTIMATION MADE BY THE ASSESSING OFFICER CANNOT BE STRAIGHTAWAY ACCEPTED. 7 . THE FACTS OF THE ABOVE MENTIONED CASE IS QUITE IDENTICAL TO THE FACTS OF THE PRESENT CASE, THE ACTUAL RENT IS NOT ABOVE THE RENT OF MUNICIPAL VALUATION. THERE IS NO REASON TO DENY THE RENT ASSESS ED BY ASSESSEE. THE HONBLE ITAT HAS DECIDED THE MATTER OF CONTROVERSY ON THE BASIS OF THE DECISION OF CIT VS. TIP TOP TYPOGRAPHY, 368 ITR 330 (BOM). NO DISTINGUISHABLE MATERIAL H AS BEEN PRODUCED . SINCE THE PRESENT CASE IS SQUARELY COVERED BY THE DECISION OF THE ITAT IN THE ASSESSEES OWN CASE MENTIONED ABOVE. THEREFORE, BY HONORING THE SAID DECISION , WE SET ASIDE THE FINDING OF THE CIT(A) ON THIS ISSUE AND RESTORED THE MATTER BACK TO THE FILE OF THE AO WHO SHALL RE - COMPUTE THE INCOME ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY IN TERMS OF THE DIRECTION OF THE ABOVE SAID CASE. ITA NOS. 386 /MUM/201 8 389/MUM/2018 A.Y. 2008 - 09 & 2011 - 12 7 ITA NO.389/M/2018 8. THE FACTS OF THE PRESENT CASE ARE QUITE SIMILAR TO THE FACTS OF THE CASE MENTIONED ABOVE IN ITA NO.386/M/2018. THE FIGURE IS DIFFERENT. THE MATTER OF CONTROVERSY WAS ALSO THE SAME. THE FINDING IN ITA NO.386/M/2018 IS QUITE APPLICABLE TO THE FACTS OF THIS CASE ALSO. ACCORDINGLY, THE PRESENT CASE IS ALSO REMANDED TO THE AO WH O SHALL RE - COMPUTE THE INCOME ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY IN TERMS OF THE DIRECTIONS GIVEN BY THE HONBLE ITAT IN THE ASSESSEES OWN CASE IN ITA NO.387,388 & 390/M/2018 FOR THE ASSESSMENT YEAR OF 2009 - 10, 2010 - 11 & 2012 - 13. THE PR ESENT APPEAL IS ALSO HEREBY ALLOWED ACCORDINGLY. 8 . IN THE RESULT BOTH THE APPEALS FILED BY THE ASSESSEE ARE HEREBY ORDERED TO BE PARTLY ALLOWED . ORDER P RONOUNCED IN THE OPEN COURT ON 07.09. 201 8 . SD/ - SD/ - ( B. R. BASKARAN ) (AMARJIT SINGH) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; DATED : 07.09 . 2 018 . V IJAY ITA NOS. 386 /MUM/201 8 389/MUM/2018 A.Y. 2008 - 09 & 2011 - 12 8 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI