RINA VIRENDRA JAIN, MUMBAI V. ASST CIT CEN CIR 398, MUMBAI

ITA 3893/MUM/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4518 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 26-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D G
• Keywords: Deemed to accrue or arise in india; Question of law; Set aside
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NOS.3893 & 3844/M/2017 ASSESSMENT YEARS: 2011-12 & 2012-13 ITA NO.445/M/2018 ASSESSMENT YEAR: 2013-14 SHRI RINA VIRENDRA JAIN, 82, MAKER CHAMBERS III, NARIMAN POINT, MUMBAI 400 021 PAN: AABPJ 1883F VS. THE ACIT, CENTRAL CIRCLE 6(4), AIR INDIA BUILDING, 19 TH FLOOR, MUMBAI - 400021 (APPELLANT) (R ESPONDENT) ITA NOS.3663 & 3664/M/2017 ASSESSMENT YEARS: 2011-12 & 2012-13 ITA NO.685/M/2018 ASSESSMENT YEAR: 2013-14 DCIT, CENTRAL CIRCLE 6(4), R.NO.1925, 19 TH FLOOR, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI - 400021 VS. SHRI RINA VIRENDRA JAIN, SMT. LAXMI SATYAPAL JAIN, 82, MAKER CHAMBERS III, NARIMAN POINT, MUMBAI 400 021 PAN: AABPJ 1883F (APPELLANT) (R ESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI ANUJ KISNADWALA, A.R. REVENUE BY : SHRI D.G. PANSARI, D.R. DATE OF HEARING : 20.02.2019 DATE OF PRONOUNCEMENT : 22.03.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE ABOVE TITLED CROSS APPEALS HAVE BEEN PREFERRED AGAINST THE ORDERS EVEN DATED 27.02.2017 RELEVANT TO ASSESSMENT YEARS 2011-12 & 2012-13 AND ORDER DATED 15.09.2017 FOR A SSESSMENT ITA NOS.3893 & 3844/M/2017 & ORS. SHRI RINA VIRENDRA JAIN 2 YEAR 2013-14 OF THE COMMISSIONER OF INCOME TAX (APP EALS) [HEREINAFTER REFERRED TO AS THE CIT(A)]. ITA NO.3664/M/2017 (REVENUES APPEAL A.Y. 2012-13) 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: '(I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE RATABLE VALUE OF THE PROP ERTIES AS DETERMINED BY THE MUNICIPAL AUTHORITIES IS THE YARDSTICK WHILE FAILIN G TO CONSIDER THAT SECTION 23(L)(A) MANDATES THAT THE ANNUAL VALUE IS DEEMED TO BE THE SUM FOR WHICH THE PROPERTY MIGHT BE EXPECTED TO BE LET FROM YEAR TO YEAR.? (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW ,THE LD. CIT(A) ERRED IN IGNORING THE FACT THAT THE ASSESSING OFFIC ER HAD MADE LOCAL ENQUIRIES TO DETERMINE THE SUM FOR WHICH THE PROPERTIES COULD BE EXPECTED TO BE LET FOR THE YEAR AS PER SECTION 23(L)(A)OF THE IT ACT,1961? (III) ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN IGNORING THE FACTS AS BROUGHT ON RECORD BY THE ASSE SSING OFFICER REGARDING THE ESTIMATED RENT FOR THE PROPERTIES FOR THE PURPOSES OF COMPUTING INCOME U/S 23(L)(A) OF THE I T ACT,1961?' THE APPELLANT PRAYS THAT THE ORDER OF COMMISSIONER OF INCOME TAX (APPEAL) ON THE ABOVE GROUND BE SET ASIDE AND THAT THE AC/DC BE RES TORED. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GR OUND, WHICH MAY BE NECESSARY. 3. THE ONLY COMMON ISSUE RAISED IN ALL THE THREE GR OUNDS OF APPEAL IS AGAINST THE ORDER OF LD. CIT(A) HOLDING T HAT ALV OF THE PROPERTY AS DETERMINED BY MUNICIPAL AUTHORITY IS TH E YARDSTICK FOR DETERMINING ANNUAL VALUE FOR THE PURPOSE OF DET ERMINING THE INCOME FROM HOUSE PROPERTY AS AGAINST THE ALV COMPU TED BY THE AO AT A SUM AT WHICH THE PROPERTY IS EXPECTED TO LE T OUT FROM YEAR TO YEAR. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS DERI VING INCOME FROM HOUSE PROPERTY, SALARY, CAPITAL GAIN AND OTHER SOURCES. DURING THE YEAR, THE ASSESSEE FILED THE RETURN OF I NCOME ON 29.02.2012 DECLARING INCOME OF RS.4,32,93,320/-. T HE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND STATUTOR Y NOTICES ITA NOS.3893 & 3844/M/2017 & ORS. SHRI RINA VIRENDRA JAIN 3 WERE DULY ISSUED AND SERVED UPON THE ASSESSEE. DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THA T THE ASSESSEE HAS CALCULATED THE ALV ON THE BASIS OF MUN ICIPAL RATEABLE VALUE. IN PARA 3.6 OF THE ASSESSMENT ORDER , THE AO OBSERVED THAT IN A.Y. 2009-10 THE INSPECTOR CONDUCT ED A FIELD ENQUIRY AND FILED DETAILED REPORT DATED 23.12.2010 ON THE BASIS OF WHICH THE RENTAL OF RS.42 PER SQ. FT. WAS TAKEN BY THE AO AND THE ALV WAS WORKED OUT FOR THE FLAT AT RS.1,61,57,1 24/- IN A.Y. 2009-10. THE AO PROPOSED THE SAME BASIS TO BE TAKE N IN THE A.Y. 2010-11 SUBJECT TO NORMAL INCREASE OF 10% IN T HE RENTAL VALUE. THE LD. A.R. OF THE ASSESSEE OBJECTED TO TH E INCREASE @ 10% IN THE RENTAL VALUE ON THE GROUND THAT THIS IS JUST AN ESTIMATION OF RENT AND INCREASE MAY NOT BE POSSIBLE IN EVERY YEAR. HOWEVER, WITHOUT PREJUDICE ADMITTED THAT THE AMOUNT ADOPTED IN A.Y. 2009-10, 2010-11 AND 2011-12 MAY BE ADOPTED IN A.Y. 2012-13. THE AO ALSO REFERRED TO THE RENTA L RATES AS PER VARIOUS WEBSITES IN THE NEARBY AREAS FOR THE MONTH OF MARCH 2015 AND CALCULATED THE AVERAGE RATE @ RS.51 DURING THE FINANCIAL YEAR 2014-15. BESIDES, THE INSPECTOR OF INCOME TAX ALSO CONDUCTED A FIELD ENQUIRY AND FILED A REPORT D ATED 13.03.2015 WHICH IS REPRODUCED AT PAGE NO.6 OF THE ASSESSMENT ORDER. THE AO ON THE BASIS OF AVERAGE RATE BY VARI OUS WEBSITES AND INSPECTORS REPORT CALCULATED THE ALV FOR A.Y. 2014-15 AT RS.56 PER SQ. FT. BY TREATING THE SAME AS MOST RELI ABLE AND THEN DID BACKWARD CALCULATION TO DETERMINE THE RENTAL RA TES FOR THE YEAR ENDED 31.03.2012 AT RS.46 PER SQ. FT. THEREBY DETERMINING THE PREVAILING MARKET RENT AT RS.2,77,17,360/- AS ALV IN RESPECT OF CENTRAL GARDEN COMPLEX FLAT AT TOWER NO. 4 & 5 FOR A.Y. 2012-13 UNDER SECTION 23(1)(A) BY TAKING ALV OF ITA NOS.3893 & 3844/M/2017 & ORS. SHRI RINA VIRENDRA JAIN 4 RS.2,51,97,600/- IN A.Y. 2011-12 WHICH IS THE ALV I N A.Y. 2009-10 AND 2010-11 AS INCREASED BY 10% FROM A.Y. 2009-10 AND BY FRAMING ASSESSMENT UNDER SECTION 143(3) DATE D 20.03.2015. 5. IN THE APPELLATE PROCEEDINGS, LD. CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE BY DIRECTING THE AO TO TAKE ALV AT RS.20,81,895/- AS AGAINST RS.2,77,17,360/-. WHILE A RRIVING AT THIS AMOUNT OF RS.18,73,706/- THE LD. CIT(A) OBSERV ED THAT THE RATABLE VALUE FIXED FOR A.Y. 2006-07 BY MUNICIPAL A UTHORITIES IS TAKEN AS BASE AND HAD FURTHER HELD 5% ANNUAL INCREA SE IN THE SUBSEQUENT YEARS AS REASONABLE AND THUS COMPUTED TH E REASONABLE RATABLE VALUE FOR THE FINANCIAL YEAR UND ER CONSIDERATION. THE LD. CIT(A) FURTHER OBSERVED THA T MY PREDECESSOR HELD THAT RATABLE VALUE SO ARRIVED AT S HOULD BE ENHANCED BY 1/9 TH OF THE SAID VALUE AND THE RESULTANT VALUE WILL BE THE ALV OF THESE PROPERTIES IN THE RELEVANT ASSES SMENT YEARS. THUS THE EARLIER LD. CIT(A) DETERMINED THE ALV OF TH E FLAT AT CENTRAL GARDEN COMPLEX FOR A.Y. 2010-11 AT RS.17,0 3,369/- AS INCREASED BY 10% (5% ANNUALLY) AND THUS CALCULATED THE PRESENT ALV AT RS.18,73,706/-. 6. NOW THE REVENUE IS IN APPEAL BEFORE US AGAINST T HE ORDER OF LD. CIT(A) REDUCING THE ALV FROM RS.2,77,17,360/- BY AO AND THE ASSESSEE IS IN APPEAL BEFORE US CHALLENGING THE ALV AT RS.20,81,895/- COMPUTED BY THE LD. CIT(A). PARA 7. 4.12 OF THE LD. CIT(A)S ORDER IS REPRODUCED HEREIN UNDER: 7.4.12 THE RECORDS REVEAL THAT MY LD. PREDECESSOR, VIDE HIS ORDER DATED 28.02.2014 IN APPEAL NO. CIT(A)-41 7DCCC-39/1T-409/2012-13 IN APPELLANT'S OWN CASE FOR A.Y. 2010-11, AFTER CONSIDERING VARIOUS DECISIONS HAD DI RECTED THE LD. AO TO ADOPT THE MUNICIPAL RATEABLE VALUE AS ALV. THE LD. C1T(A) OBS ERVED THAT THE RATEABLE VALUE WAS FIXED BY THE MUNICIPAL AUTHORITIES IN THE YEAR 2006-07 AND HAD FURTHER HELD ITA NOS.3893 & 3844/M/2017 & ORS. SHRI RINA VIRENDRA JAIN 5 THAT 5% ANNUAL INCREASE THEREOF IN SUBSEQUENT YEARS AS REASONABLE AND HAD THEN COMPUTED THE REASONABLE RATEABLE VALUE FOR THE FINA NCIAL YEAR UNDER CONSIDERATION. MY LD. PREDECESSOR HAS FURTHER HELD THAT RATEABLE V ALUE SO ARRIVED IN THE RELEVANT FINANCIAL YEAR SHOULD BE ENHANCED BY 1 /9 TH OF SAID VALUE, AND THE RESULTANT VALUE WILL BE THE ALV OF THESE PROPERTIES FOR THE RELEVAN T ASSESSMENT YEAR. RESPECTFULLY FOLLOWING THE SAME IT IS HELD THAT THE ALV OF THE F LATS/PROPERTIES UNDER CONSIDERATIONS NEED TO BE DETERMINED ACCORDINGLY. S INCE MY LD. PREDECESSOR HAS DETERMINED THE ANNUAL RATEABLE VALUE OF FLATS AT CE NTRAL GARDEN COMPLEX FOR A.Y. 2010-11 AT RS. 17,03,3697-, SO FOR THE RELEVANT ASS ESSMENT YEAR THE SAME NEED TO BE INCREASED BY 10% (ANNUAL 5% INCREASE) AND THEREB Y WORKS OUT BE RS. 18,73,7067-. THE SAID RATEABLE VALUE FOR THE FINANC IAL YEAR 2011-12 NEED TO BE FURTHER INCREASED BY 179 TH OF SAID VALUE TO ARRIVE AT THE ALV OF F.Y. 2011-12 WHICH IS RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION. TH E LD. AO IS DIRECTED TO SUBSTITUTE THE ALV OF SAID FLATS AT RS. 18,73,706/- (AS ENHANCED BY 179 1H OF SAID VALUE) AS AGAINST RS. 2,77,17,3607-CONSIDERED BY HI M IN THE IMPUGNED ORDER. THE LD. AO IS DIRECTED TO RE-COMPUTE THE INCOME FORM HO USE PROPERTY AS PER ABOVE DIRECTIONS. HENCE, THE GROUND NO. 2 RAISED IN APPEA L IS PARTLY ALLOWED, AS INDICATED ABOVE. 7. THE LD. A.R., AT THE OUTSET, SUBMITTED BEFORE TH E BENCH THAT THE ISSUE INVOLVED IN THE PRESENT CASE IS SQUA RELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY T HE VARIOUS DECISIONS OF THE CO-ORDINATE BENCHES OF THE TRIBUNA L AND ALSO THE JURISDICTIONAL HIGH COURT. THE LD. A.R. SUBMITTED THAT WHERE THE PROPERTY IS NOT OCCUPIED OR RENTED OUT, IN THAT CASE THE ALV HAS TO BE DETERMINED ON THE BASIS OF RATABLE VALUE BY THE MUNICIPAL AUTHORITIES AND NOT AT THE MARKET RENT. THE LD. A.R. RELIED ON A SERIES OF DECISIONS AS UNDER: 1. DCIT V. LAXMI JAIN IN ITA NO. 2118/MUM/2012 FOR A.Y. 2009-10. 2. PCIT V. LAXMI JAIN IN INCOME TAX APPEAL NO. 1285 OF 2015 FOR A.Y. 2009-10. 3. HARSH JAIN V. DCIT IN ITA NO. 2710/MUM/2013 FOR A.Y. 2009-10 4. PCIT V. HARSH JAIN IN INCOME TAX APPEAL NO. 1438 OF 2016 FOR A.Y. 2009-10 THE LD. A.R. THEREFORE PRAYED BEFORE THE BENCH THA T THE APPEAL OF THE ASSESSEE MAY BE ALLOWED AND THAT OF T HE REVENUE MAY BE DISMISSED IN VIEW OF THE RATIO LAID DOWN BY THE CO- ORDINATE BENCHES OF THE TRIBUNAL AND JURISDICTIONAL HIGH COURT IN THE AFORESAID DECISIONS. ITA NOS.3893 & 3844/M/2017 & ORS. SHRI RINA VIRENDRA JAIN 6 8. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE O RDER OF AO BY SUBMITTING THAT THE ALV OF THE VACANT FLAT WHICH WAS NOT LET OUT DURING THE YEAR HAS TO BE CALCULATED ON THE BA SIS OF MARKET RENT AS DETERMINED BY THE AO ON THE BASIS OF THE CO MPARABLE RENT IN THE MARKET AND ENQUIRY MADE DURING THE COU RSE OF ASSESSMENT. THE LD. D.R. THEREFORE RELIED HEAVILY ON THE ORDER OF AO. 9. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT ASSESSEE IS HAVING FLAT IN CEN TRAL GARDEN COMPLEX WHICH WAS VACANT DURING THE YEAR AND OFFERE D THE ALV OF THE FLAT AS PER MUNICIPAL RATABLE VALUE AT RS.15 ,06,201/- . THE SAID ALV WAS SUBSTITUTED BY THE AO BY RS.2,77,17, 360/- ON THE BASIS OF ENQUIRES MADE IN THE FIELD BY THE INSP ECTOR OF INCOME TAX RESULTING INTO AN ADDITION OF RS.1,83,47 ,811/-. 10. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) HE LD THAT THE ALV OF THE FLAT WHICH WAS VACANT DURING THE YEAR HA S TO BE DETERMINED ON THE BASIS OF MUNICIPAL RATABLE VALUE BY MUNICIPAL AUTHORITIES IN A.Y. 2006-07 AS INCREASED BY 5% EVER Y YEAR. THEREAFTER, THE LD. CIT(A) FOLLOWING THE ORDER OF H IS PREDECESSOR IN A.Y. 2010-11 TOOK THE ALV AT RS.17,03,369/- AND F INALLY THE DETERMINED THE CURRENT ALV AT RS.20,81,895/- AFTER M AKING NECESSARY ADJUSTMENTS FOR THE ANNUAL INCREASE. THU S THE DISPUTE BEFORE US IS ONLY WITH REGARD TO THE ASCERT AINMENT OF ALV WHERE THE FLAT WAS VACANT DURING THE YEAR. IN THE CASE OF DCIT VS. LAXMI JAIN IN ITA NO.2118/M/2012 A.Y. 2009 -10 THE CO-ORDINATE BENCH OF THE TRIBUNAL BY FOLLOWING THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SM ITABEN N. AMBANI VS. CWT, 323 ITR 104 HIGH COURT HELD THAT TH E ALV OF ITA NOS.3893 & 3844/M/2017 & ORS. SHRI RINA VIRENDRA JAIN 7 THE VACANT FLAT HAS TO BE MADE ON THE BASIS OF MUNI CIPAL RATABLE VALUE AND THUS DISMISSED THE APPEAL OF THE REVENUE. THE SAID DECISION OF THE TRIBUNAL WAS AFFIRMED BY THE HONBL E BOMBAY HIGH COURT IN THE CASE OF PR. CIT VS. LAXMI JAIN VI DE ORDER DATED 16.04.2018 ON THE GROUND THAT THERE IS NO SUBSTANTI AL QUESTION OF LAW ARISING FROM THE REVENUES APPEAL. IN THE C ASE OF HARSH JAIN VS. DCIT IN ITA NO.2710/M/2013 A.Y. 2009-10, T HE CO- ORDINATE BENCH OF THE TRIBUNAL HAS HELD THAT THE AL V OF THE PROPERTY HAS TO BE COMPUTED AS PER MUNICIPAL RATABL E VALUE AS DEEMED INCOME FROM THE HOUSE PROPERTY. THE SAID DEC ISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL WAS AFFIRMED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF PR. CIT VS . HARSH JAIN VIDE ORDER DATED 05.02.2019 WHERE THE APPEAL OF THE REVENUE WAS DISMISSED. 11. AFTER TAKING INTO ACCOUNT, THE FACTS OF THE CAS E AND THE RATIO LAID DOWN BY THE DECISIONS AS DISCUSSED HEREINABOVE , WE ARE OF THE VIEW THAT THE ALV OF THE VACANT FLAT HAS TO BE D ETERMINED ON THE BASIS OF MUNICIPAL RATABLE VALUE FOR THE PURPOS E OF ASSESSING THE INCOME UNDER THE HEAD HOUSE PROPERTY. ACCORD INGLY, WE ARE INCLINED TO ALLOW THE APPEAL FILED BY THE ASSES SEE AND DISMISS THE APPEAL OF THE REVENUE. ITA NO.3844/M/2017 (ASSESSEES APPEAL A.Y. 2012-13) 12. THE ISSUE INVOLVED IN THIS APPEAL IS ALREADY DE CIDED BY US IN REVENUES APPEAL IN ITA NO.3664/M/2017 FOR A.Y. 2012-13 IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE, FOL LOWING THE SAME RATIO, THIS APPEAL OF THE ASSESSEE IS ALLOWED. ITA NOS.3893 & 3844/M/2017 & ORS. SHRI RINA VIRENDRA JAIN 8 ITA NO.3893/2107 & 3663/M/2017 AY 2011-12 (CROSS APPEALS OF ASSESSEE AND REVENUE) 13. SINCE WE HAVE ALREADY DECIDED THE ISSUE IN ITA NO.3664/M/2017 AND 3844/M/2017 (SUPRA) WHEREIN WE H AVE HELD THAT THE ALV OF THE VACANT FLAT HAS TO BE COMPU TED ON THE BASIS OF MUNICIPAL RATABLE VALUE THEREBY DISMISSING THE APPEAL OF THE REVENUE AND ALLOWING THE APPEAL OF THE ASSESSEE . FOLLOWING OUR DECISION IN ITA NO.3664 & 3844/M/2017, WE DISMI SS THE APPEAL OF THE REVENUE AND ALLOW THE APPEAL OF THE A SSESSEE. ITA NO.445/M/2018 AND ITA NO.6885/2017 AY 2013-14 14. SINCE WE HAVE ALREADY DECIDED THE ISSUE IN ITA NO.3664/M/2017 AND 3844/M/2017 (SUPRA) WHEREIN WE H AVE HELD THAT THE ALV OF THE VACANT FLAT HAS TO BE COMPU TED ON THE BASIS OF MUNICIPAL RATABLE VALUE THEREBY DISMISSING THE APPEAL OF THE REVENUE AND ALLOWING THE APPEAL OF THE ASSESSEE . FOLLOWING OUR DECISION IN ITA NO.3664 & 3844/M/2017, WE DISMI SS THE APPEAL OF THE REVENUE AND ALLOW THE APPEAL OF THE A SSESSEE. 15. IN THE RESULT, APPEALS OF THE REVENUE ARE DISMI SSED AND THAT OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22.03.2019. SD/- SD/- ( RAM LAL NEGI) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 22.03.2019. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI ITA NOS.3893 & 3844/M/2017 & ORS. SHRI RINA VIRENDRA JAIN 9 THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASS TT. REGISTRAR, ITAT, MUMBAI.