AKER POWERGA SYSTEMS P. LTD, MUMBAI V. DCIT 10(1), MUMBAI

ITA 393/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75766 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 24-02-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 14-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SINGH; S D SRIVASTAVA
• Assessee Lawyers: MAHAV KHANDELWAL
• Keywords: Opportunity of being heard; Principle of natural justice; Notional interest
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ./I.T.A. NO.394/M/2011 ( AY: 200 5 - 200 6 ) ./I.T.A. NO.393/M/2011 ( AY: 2006 - 2007 ) ./I.T.A. NO.1529/M/2011 ( AY: 2005 - 2006 ) AKER POWERGAS SYSTEMS PVT.LTD., (EARLIER KNOWN AS POWERGAS INFORMATION TECHNOLOGY SERVICES PVT. LTD.) POWERGAS HOUSE, 83, I THINK TECHNO CAMPUS, KANJUR MARG (E), MUMBAI 400 042. / VS. THE DCIT - 10(1), MUMBAI. ./ PAN : AAACP 3857 D ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI GIRISH DAVE & MR. MAHAV KHANDELWAL / RESPONDENT BY : SHRI S.D. SRIVASTAVA & MR. O.P. SINGH, DR / DATE OF HEARING :24 .2.2014 / DATE OF PRONOUNCEMENT : 28 .2.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE THREE APPEALS UNDER CONSIDERATION. ALL THE THREE FILES ARE FILED BY THE ASSESSEE FOR THE ASSESSMENT YEARS 2005 - 2006, 2006 - 2007 AND 2007 - 2008. ALL THESE APPEALS AR E RAISED AGAINST THE SEPARATE ORDERS OF THE CIT (A) - 21, MUMBAI. SINCE, THE ISSUES RAISED IN ALL TH ESE THREE APPEALS ARE IDENTICAL, THEREFORE, FOR THE SAKE OF CONVENIENCE, THEY ARE CLUBBED, HEARD COMBINEDLY AND DISPOSED OF IN THIS CONSOLIDATED ORDER. APPEAL WISE AND GROUND WISE ADJUDICATION IS GIVEN IN THE SUCCEEDING PARAGRAPHS. 2 2. SINCE, THE GROUNDS RAISED IN ALL THE THREE APPEALS ARE IDENTICAL, THE ONLY DIFFERENCE IS IN FIGURES, THEREFORE, FOR THE SAKE OF REFERENCE, THE GROUNDS RAISED IN THE APPEAL ITA NO.394/M/2011 (AY:2005 - 2006) ARE TAKEN FOR ADJUDICATION WHICH READ AS UNDER: 1. THE LD CIT (A) ERR ED IN CONFIRMING THE ADDITION OF NOTIONAL INTEREST OF RS. 23,42,532/ - ON SECURITY DEPOSIT WHILE COMPUTING I NCOME FROM HOUSE PROPERTY UNDER SECTION 23(1)(A) OF THE ACT. 2. THE LD CIT (A) ERRED IN NOT APPRECIATING THAT THE APPELLANT RECEIVED RS. 1.32 CRS PER YEAR AS COMPENSATION FOR LETTING OUT THE PREMISES VIS - - VIS SECURITY DEPOSIT OF RS. 2 CRS AS ON 31 ST MARCH, 2005, WHICH CANNOT BE SAID TO BE NOMINAL BY ANY STANDARDS. 3. THE LD CIT (A) ERRED IN PLACING RELIANCE ON THE JUDGMENT OF THE DELHI HIGH COURT IN THE CASE OF CIT VS. MONI KUMAR SUBBA (ITA NO.499 OF 2008) WITHOUT APPRECIATING THAT THE FACTS IN APPELLANTS CASE ARE DIFFERENT. 4. WITHOUT PREJUDICE TO THE ABOVE, THE LD CIT (A) ERRED IN NOT APPRECIATING THE FACT THAT THE SECURITY DEPOSIT RECEIVED BY THE APPELLANT HAS BEEN INVESTED IN ITS BUSINESS, THE PROFITS DERIVED FROM THE BUSINESS HAVE BEEN OFFERED FOR TAX AND ACCORDINGLY, THE APPELLANT HAS ALREADY PAID TAX DUE ON THE EARNINGS FROM THE SECURITY DEPOSIT AND ADDITION ON ACCOUNT OF NOTIONAL INTEREST WOU LD AMOUNT ON DOUBLE TAXATION. 5. WITHOUT PREJUDICE TO THE ABOVE, THE LD CIT (A) ERRED IN CONFIRMING THE INCORRECT COMPUTATION OF THE NOTIONAL INTEREST OF RS. 23,42,532/ - , WHICH HAS BEEN COMPUTED BY LEVYING INTEREST ON INTEREST. 6. EACH OF THE ABOVE GROUNDS OF APPEAL IS WITHOUT PREJUDICE TO THE OTHER. 3. AT THE VERY OUTSET, IT IS NOTICED FROM THE RECORD THAT T HE ASSESSEES NAME WAS REPEATEDLY CHANGED AND THE SAME IS WITH DIFFERENT NAMES. AT THE TIME OF INCORPORATION, THE ASSESSEES NAME IS BOMBAY BRUSH CO . PVT.LTD., AND THE SAME WAS CHANGED TO POWERGAS INFORMATION TECHNOLOGY SERVICES PRIVATE LIMITED IN 2003 . IN THE YEAR 2006, IT WAS CHANGED TO AKER KVAERNER POWERGAS SYSTEMS PRIVATE LIMITED. AGAIN, IN THE YEAR 2008 THE ASSESSEES NAME WAS CHANGED TO AKER POWERGAS SYSTEMS PRIVATE LIMITED. 4. REFERRING TO THE ABOVE MENTIONED GROUNDS, AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE GROUNDS RAISED IN ALL THESE THREE APPEALS ARE IDENTICAL AND THE ISSUES IS ONE AND THE SAME FOR ALL THESE ASSESSMENT YEARS I.E., THE SUSTAINABILITY OF ADDITION OF NOTIONAL INTEREST ON SECURITY DEPOSITS FOR THE PURPOSE OF COMPUTING THE INCOME FROM HOUSE PROPERTY U/S 23(1)(A) OF THE INCOME TAX ACT, 1961 . ASSESSEE ALSO RAISED OTHER GROUNDS WITHOUT PREJUDICE TO THE EARLIER ONE. IT IS ALSO MENTIONED THAT THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF MONI KUMAR SU BBA VIDE ITA NO.499 OF 2008 IS DISTINGUISHABLE ON FACTS. IN 3 CONNECTION WITH THE ABOVE ISSUE, ASSESSEE SUBMITTED THE FOLLOWING FACTS OF THE CASE THAT LED TO ADDITION ON ACCOUNT OF NOTIONAL INTEREST IN ALL THE THREE ASSESSMENTS YEARS UNDER CONSIDERATION. 5. BRIEFLY STATED, ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF ENGINEERING CONSULTANCY. ASSESSEE FILED THE RETURN OF INCOME FOR THE YEAR 2005 - 2006 D ECLARING THE INCOME OF RS. 1,59,54,360/ - . AO COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT DETERMINING THE ASSESSED INCOME AT RS.1,75,94,133/ - . DURING THE ASSESSMENT PROCEEDINGS, AO NOTICED THAT THE ASSESSEE GIVEN ITS OFFICE SPACE ON LEAVE AND LICENSE B ASIS TO KVAERNER POWERGAS INDIA PRIVATE LIMITED (KNOWN AS AKER KVAERNER POWERGAS PRIVATE LIMITED) AS PER THE AGREEMENT DATED 16.10.2003, WHEREIN IT WAS PROVIDED FOR A MONTHLY RENT OF RS. 11 LAKHS AND A SECURITY DEPOSIT OF RS. 4.40 CRS. IN THE ASSESSMENT, AO COMPUTED THE NOTIONAL INTEREST OF RS. 23,42,532/ - @ 8% PER ANNUM ON THE REDUCING BALANCE OF DEPOSIT AND WORKED OUT THE GROSS ANNUAL LETTING VALUE (ALV) AT RS. 1,56,77,090/ - BY ADDING NOTIONAL INTEREST OF RS. 23,42,532/ - TO THE RENTAL INCOME OF RS. 1,33, 34,558/ - , DISCLOSED IN THE RETURN. AGGRIEVED WITH THE DECISION OF THE AO, ASSESSEE FILED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 6. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, IT IS THE SUBMISSION OF THE ASSESSEE THAT THE RENT REC EIVED BY THE APPELLANT AT RS. 1.32 CRS PER YEAR COULD NOT BE SAID TO BE NOMINAL BY ANY STANDARDS. IT WAS FURTHER SUBMITTED THAT UNDER CLAUSE (B) OF SECTION 23(1) OF THE ACT, ONLY THE ACTUAL RENT RECEIVED OR RECEIVABLE COULD BE TAKEN INTO CONSIDERATION AND NOT ANY NOTIONAL ADVANTAGE. SIMILARLY, UNDER CLAUSE (A) OF SECTION 23(1), THERE IS NO PROVISION FOR ADDING THE NOTIONAL INTEREST ON SECURITY DEPOSIT FOR THE PURPOSE OF DETERMINING THE ANNUAL VALUE. IN SUPPORT OF HIS CLAIM THAT THE NOTIONAL INTEREST ON IN TEREST FREE DEPOSIT SHOULD NOT BE CONSIDERED FOR DETERMINING THE ALV, THE ASSESSEE RELIED UPON VARIOUS DECISIONS I.E., (I) CIT VS. SATYA COMPANY LTD 75 TAXMAN 193 (CAL); (II) CIT VS. ASIAN HOTELS LTD 168 TAXMAN 59 (DEL); (III) CIT VS. HEMARAJ MAHAVIR PRASA D LTD 279 ITR 522 (CAL); (IV) CIT VS. J.K. INVESTORS (BOMBAY) LTD 248 ITR 723 (BOM) AND ALSO THE DECISION OF THE TRIBUNAL IN THE CASE OF TRIVOLI INVESTMENT AND TRADING COMPANY 90 ITD 163. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CIT (A) DISMISSE D THE APPEAL BY HOLDING THAT THE FACT OF NOTIONAL INTEREST ON INTEREST FREE DEPOSIT RECEIVED 4 CANNOT BE COMPLETELY IGNORED FOR THE PURPOSE OF DECIDING THE ALV OF THE PROPERTY. IN SUPPORT OF HIS DECISION THAT NOTIONAL INTEREST ON INTEREST FREE DEPOSITS IS RE QUIRED TO BE CONSIDERED FOR DETERMINING THE ALV, CIT (A) RELIED ON CERTAIN DECISIONS OF THE TRIBUNAL I.E., (I) BAKER TECHNICAL (2009) 31 DTR (MUM) (TM) (TRIB) DATED 12.8.2009; (II) SMT. RITA A. PAREKH (2006) 10 SOT 779 (MUM) AND (III) REEBOK INDIA CO 209 C TR 458 (DEL). FURTHER, CIT (A) DISTINGUISHED THE JUDGMENTS RELIED ON BY THE ASSESSEE BY STATING THAT THE SAID JUDGMENTS COULD NOT REACH TO A CONCLUSION THAT THE NOTIONAL INTEREST ON INTEREST FREE DEPOSITS SHOULD BE COMPLETELY IGNORED FOR THE PURPOSE OF DET ERMINING THE ALV OF THE PROPERTY. FINALLY, CIT (A) CAME TO A CONCLUSION THAT THE ALV WAS REQUIRED TO BE CONSIDERED U/S 23(1)(A) OF THE ACT BY CONSIDERING THE FACT OF NOTIONAL INTEREST ON SUCH INTEREST FREE DEPOSITS RECEIVED BY THE ASSESSEE AND UPHELD THE DECISION OF THE AO. AGGRIEVED WITH THE DECISION OF THE CIT (A), ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUNDS. 7. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THIS IS THE CASE WHERE THE RA TABLE VALUE OF THE PROPERTY FOR THE AY 2005 - 2006 IS RS. 33, 44,595/ - . HOWEVER, ASSESSEE, IN COMPLIANCE TO THE RENTAL AGREEMENT DATED 16.10.2003, DISCLOSED MONTHLY RENTAL INCOME OF RS. 11 LAKHS (CLAUSE 4.1 OF THE AGREEMENT IS RELEVANT). THUS, THE GROSS RE NTAL INCOME WORKS OUT TO 1.32 CRS. AS PER THE LD COUNSEL, THIS IS THE RENTAL VALUE OF THE PROPERTY IN THE OPEN MARKET. IN CONNECTION WITH THE ADDITION MADE BY THE AO ON ACCOUNT OF NOTIONAL INTEREST, LD COUNSEL ARGUED VEHEMENTLY STATING THAT THE AO IS BAR RED FROM MAKING SUCH ADDITIONS ON THIS ACCOUNT. IN THIS REGARD, LD COUNSEL FILED VARIOUS DECISIONS TO SUPPORT HIS AVERMENTS. FILING A COPY OF THE JUDGMENT OF THE HONBLE DELHI HIGH COURT (FULL BENCH) IN THE CASE OF CIT VS. MONI KUMAR SUBBA [2011] 333 ITR 38 (DELHI) (FB) , LD COUNSEL BROUGHT OUR ATTENTION TO VARIOUS PARAS OF THE SAID JUDGMENT AND READ OUT PARA 17 TO 20 WHICH READ AS UNDER: 17. THUS THE RATEABLE VALUE, IF CORRECTLY DETERMINED, UNDER THE MUNICIPAL LAWS CAN BE TAKEN AS ALV UNDER SECTION 23(1)( A ) OF THE ACT. TO THAT EXTENT WE AGREE WITH THE CONTENTION OF THE LEARNED COUNSEL OF THE ASSESSEE. HOWEVER, WE MAKE IT CLEAR THAT RATEABLE VALUE IS NOT BINDING ON THE ASSESSING OFFICER. IF THE ASSESSING OFFICER CAN SHOW THAT RATEABLE VALUE UNDER MUNICIPAL LAWS DOES NOT REPRESENT THE CORRECT FAIR RENT, THEN HE MAY DETERMINE THE SAME ON THE BASIS OF MATERIAL/EVIDENCE PLACED ON RECORD. THIS VIEW IS FORTIFIED BY THE DECISION OF PATNA HIGH COURT IN THE CASE OF KASHI PRASAD KATARUKA V. CIT [1975] 101 ITR 810 . 18. THE ABOVE DISCUSSION LEADS TO THE FOLLOWING CONCLUSIONS : 5 '( I )ALV WOULD BE THE SUM AT WHICH THE PROPERTY MAY BE REASONABLY LET OUT BY A WILLING LESSOR TO A WILLING LESSEE UNINFLUENCED BY ANY EXTRANEOUS CIRCUMSTANCES, ( II )AN INFLATED OR DEFLATED RENT BASED ON EXTRANEOUS CONSIDERATION MAY TAKE IT OUT OF THE BOUNDS OF REASONABLENESS, ( III )ACTUAL RENT RECEIVED, IN NORMAL CIRCUMSTANCES, WOULD BE A RELIABLE EVIDENCE UNLESS THE RENT IS INFLATED/DEFLATED BY REASON OF EXTRANEOUS CONSIDERATION, ( IV )SUCH ALV, HOWEVER , CANNOT EXCEED THE STANDARD RENT AS PER THE RENT CONTROL LEGISLATION APPLICABLE TO THE PROPERTY, ( V )IF STANDARD RENT HAS NOT BEEN FIXED BY THE RENT CONTROLLER, THEN IT IS THE DUTY OF THE ASSESSING OFFICER TO DETERMINE THE STANDARD RENT AS PER THE PROVISIO NS OF RENT CONTROL ENACTMENT, ( VI )THE STANDARD RENT IS THE UPPER LIMIT, IF THE FAIR RENT IS LESS THAN THE STANDARD RENT, THEN IT IS THE FAIR RENT WHICH SHALL BE TAKEN AS ALV AND NOT THE STANDARD RENT.' 19. WE MAY ALSO ADD THAT IN PLACE LIKE DELHI, THIS HAS NOW BECOME REDUNDANT INASMUCH AS THE VERY BASIS OF FIXING PROPERTY TAX HAS UNDERGONE A TOTAL CHANGE WITH AMENDMENT OF THE MUNICIPAL LAWS BY AMENDMENT ACT, 2003. NOW THE PROPERTY TAX IS ON UNIT METHOD BASIS. 20. IN THE PRESENT CASE, THE ASSESSING OFFICER ADDED NOTIONAL INTEREST ON THE INTEREST FREE SECURITY FOR ARRIVING AT ANNUAL LETTING VALUE. SINCE THAT WAS NOT PERMISSIBLE, THE EFFECT WOULD BE THAT SUCH ASSESSMENT WAS RIGHTLY SET ASIDE BY THE CIT(A) AND THE TRIBUNAL. THEREFORE, THE ORDERS WOULD NOT CALL FOR ANY INTERFERENCE. THESE APPEALS ARE, THUS, DISMISSED ON THIS GROUND. ONCE WE HOLD THIS, THE VERY BASIS ADOPTED BY THE ASSESSING OFFICER TO FIX ANNUAL LETTING VALUE WAS WRONG AND THEREFORE, NO FURTHER EXERCISE IN FACT IS REQUIRED BY US IN THESE APPEALS. 8. RELYING ON THE ABOVE, LD COUNSEL ARGUED STATING THAT THE AO IS BARRED FROM MAKING ADDITIONS ON ACCOUNT OF NOTIONAL INTEREST ON THE SECURITY DEPOSIT. HOWEVER, THE CONCLUSIONS OF THE JUDGMENTS ARE ALREADY DISCUSSED ABOVE. HE ALSO MENTIONED THAT, WHIL E DISMISSING THE APPEAL OF THE ASSESSEE, CIT (A) RELIED HEAVILY ON THE DIVISION BENCH JUDGMENT OF THE DELHI HIGH COURT IN THE CASE OF MONI KUMAR SUBBA (SUPRA), WHERE THERE IS A REFERRAL FOR FULL BENCH WAS MENTIONED. THE CIT (A) DID NOT HAVE THE ADVANTAGE OF THE FULL BENCH DECISION REFERRED ABOVE. 9. REFERRING TO THE ORDER OF THE TRIBUNAL IN THE CASE OF ITO VS. SPEARTHEAD PRO PERTIES (P) LTD [2011] 12 TAXMANN.COM 14 (MUM.) , LD COUNSEL MENTIONED THAT NO ADDITION COULD HAVE BEEN MADE ON ACCOUNT OF NOTIONAL INT EREST ON INTEREST FREE DEPOSITS WHILE DETERMINING THE ALV OF THE PROPERTY U/S 23(1)(A) OF THE ACT. THIS DECISION WAS TAKEN BY THE ITAT BASED ON THE JUDGMENT OF THE DELHI HIGH COURT (FB) IN THE CASE OF MONI KUMAR SUBBA (SUPRA). LD COUNSEL FURTHER ARGUED ST ATING THAT THE DECISION OF THE TRIBUNAL IN THE CASE OF SPEARTHEAD PROPERTIES (P) LTD (SUPRA) IS BINDING. HOWEVER, THE SIMILARITY OF THE FACTS OF THE CASE WITH THAT OF THE PRESENT 6 CASE IS NOT DEMONSTRATED BY THE LD COUNSEL. FURTHER, LD COUNSEL AL SO BROU GHT OUR ATTENTION TO THE ANOTHER ORDER OF THE TRIBUNAL IN THE CASE OF GANGA TRADING CO. LTD VS. ACIT [2012] 28 TAXMANN.COM 78 (MUM.) FOR IDENTICAL PROPOSITION. FURTHER, A COPY OF THE JUDGMENT IN THE CASE OF CIT VS. SASTHA PHARMA LABORITIES (P) LTD [2013] 34 TAXMANN.COM 167 (KARNATAKA) WAS FILED BY THE LD COUNSEL FOR SIMILAR RATIOS. IN RESPONSE TO THE QUERY FROM THE BENCH ON THE REASONABLENESS OF THE RENT OF RS. 11 LAKHS PER MONTH, LD COUNSEL STRONGLY RELIED ON THE RENTAL AGREEMENT AND MENTIONED THAT THE F ACT OF RECEIVING THE SECURITY DEPOSIT WAS ALSO TAKEN INTO ACCOUNT WHILE FIXING THE RENT OF RS. 11 LAKHS PER MONTH. HE ALSO MENTIONED THAT THE PART OF THE PREMISES WAS OCCUPIED BY THE LESSOR. 10. ON THE OTHER HAND, LD DR HEAVILY RELIED ON THE ORDERS OF TH E AO AND THE CIT (A). BRINGING OUR ATTENTION TO PARA 4.3 OF THE RENTAL AGREEMENT, LD DR MENTIONED THAT WHILE FIXING THE RENTALS, THE FACT OF HAVING INTEREST FREE SECURITY DEPOSIT OF RS. 4.4 CRS WAS ALSO TAKEN INTO ACCOUNT THEREBY IMPLICATING THE EXTRANEOU S CIRCUMSTANCES SPECIFIED IN THE FULL BENCH DECISION OF THE HONBLE HIGH COURT OF DELHI. FURTHER, HE ARGUED STATING THAT THE AO QUANTIFIED THE NOTIONAL INTEREST @ 8% ON THE SECURITY DEPOSITS, DETAILS OF WHICH ARE DISCUSSED IN PARAS 3 - 6 OF THE ASSESSMENT O RDER. REFERRING TO THE FULL BENCH DECISION OF THE DELHI HIGH COURT, LD DR STATED THAT THIS IS A CASE OF EXTRANEOUS CONSIDERATION. THE RENT IS DEFLATED AND ACCORDINGLY JUSTIFIED ON ACCOUNT OF NOTIONAL INTEREST APPLYING THE RATE OF 8% OF REDUCING BALANCE OF THE INTEREST FREE SECURITY DEPOSIT. FURTHER, HE MENTIONED THAT THE AO IS OF COURSE NOT BARRED FROM MAKING ADDITIONS ON ACCOUNT OF NOTIONAL INTEREST, WHEN THERE IS A MATERIAL AND EVIDENCE FOR ASCERTAINING THAT THE ALV OF THE PROPERTIES IS MUCH HIGHER THAN THE DISCLOSED ONES. HE ALSO MENTIONED THAT THIS IS THE CASE WHERE THE RATABLE VALUES OR MUNICIPAL VALUES ARE INAPPLICABLE BECAUSE RENT OFFERED BY THE ASSESSEE IS MUCH HIGHER. NOW IT IS THE QUESTION ON REASONABLENESS OF THE MARKET VALU E OF THE RENT OF THE PROPERTY. FURTHER, HE MENTIONED THAT IN THE ABSENCE OF NON - FURNISHING OF THE BASIS FOR ARRIVING AT RS. 11 LAKHS PER MONTH, THE AOS ADDITION APPLYING THE RATE OF 8% ON THE REDUCING BALANCES OF THE INTEREST FREE SECURITY DEPOSITS IS JU STIFIED. WITHOUT PREJUDICE, LD DR ARGUED STATING THAT FOR WANT OF WORKING OF THE 7 REASONABLENESS AND THE VERIFICATION OF THE FACTS RELATING TO THE RENT OF RS. 11 LAKHS PER MONTH, THE MATTER CAN BE REMANDED TO THE FILES OF THE AO. 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE PRECEDENTS PLACED BEFORE US. THIS IS THE CASE WHERE THE ASSESSEE RECEIVED RS. 11 LAKHS PER MONTH AS RENT AND THE ASSESSEE OFFERED THE SUM OF A R O U N D RS. 1.3 3 CRS AS A GROSS ALV OF THE ASSES SE E, INCLUDING 1,34,558/ - FROM HUGHES TELECOM / TATA TELESERVICES. THE MAIN ISSUE IN THIS CASE FOR DECISION IS IF THE RENTAL INCOME OFFERED BY THE ASSESSEE @ RS. 11 LAKHS PER MONTH IS REASONABLE OR NOT? THIS ASPECT OF REASONABLENESS WAS NOT EXAMINED BY T HE AUTHORITIES BELOW. THE ADDITION MADE BY THE AO ON ACCOUNT OF NOTIONAL INTEREST APPLYING THE RATE OF 8% ON THE REDUCING INTEREST FREE SECURITY DEPOSITS IS WIDELY ON AD - HOC BASIS AND LACK OF MATERIAL OR EVIDENCE TO SUPPORT. THERE IS NO INFORMATION BROUGH T ON TO THE RECORD TO DEMONSTRATE THAT THE RENTAL INCOME FOR SIMILAR PROPERTY IN SIMILAR LOCATION IS HIGHER THAN WHAT IS OFFERED BY THE ASSESSEE IN THE RENTAL INCOME. WE CANNOT APPRECIATE THE ATTEMPTS OF THE ASSESSING OFFICER IN MAKING ADDITIONS WITHOUT T HE STRENGTH OF MATERIAL OR EVIDENCES. APPLYING THE RATE OF 8% WITHOUT EXAMINING THE FACTS OF THE PRESENT CASE AND WITHOUT GIVING THE FINDINGS, IT IS NOT APPROPRIATE TO SAY THAT THAT THE SECURITY DEPOSIT HAS EARNED INTEREST INCOME FROM THE BANK. AT THE SAM E TIME, WE CANNOT APPRECIATE THE ASSESSEES FAILURE TO FILE THE BASIS SHOWING THE JUSTIFICATION FOR ARRIVING AT THE MONTHLY RENT OF RS. 11 LAKHS FOR THE PREMISES. IN THAT SENSE OF THE MATTER, CERTAIN BASIC THINGS ARE MISSING AND IT IS REQUIRED TO REMAND T HE MATTER TO THE FILES OF THE AO. BY INFERENCE, THE ASSESSEE REJECTED THE APPLICABILITY OF MUNICIPAL RATABLE VALUES WHICH HAPPENED TO BE SUBSTANTIALLY LOWER IN THIS CASE I.E., THE MUNICIPAL RATABLE VALUE IS RS. 33,44,595/ - AND RENT OFFERED BY THE ASSESSEE IS 1.32 CRS PER YEAR. THEREFORE, THE ISSUE FOR DECISION BEFORE US IS WHETHER THE SAID SUM OF RS. 1.32 CRS IS A REASONABLE ALV AS OFFERED BY THE ASSESSEE OR RS. 1.32 CRS, INCREASED BY THE NOTIONAL INTEREST ON THE REDUCING BALANCES OF THE SECURITY DEPOSIT CALCULATED THE NOTIONAL INTEREST RATE OF 8%. LOWER AUTHORITIES HAVE NOT PROVIDED ANY DISCUSSION ON WHETHER THE SAID SUM OF RS. 1.32 CRS INCLUDES PORTION ATTRIBUTABLE TO THE INTEREST SEGMENT ON THE SECURITY DEPOSIT. EVEN BEFORE US , DESPITE THE ENQUIRIES F ROM THE BENCH, LD COUNSEL COULD NOT CONCLUSIVELY ASCERTAINED THE MANNER OF 8 WORKING OF THE ALV OF RS. 1.32 CRS. SIMPLY MENTIONED THAT THE TRIBUNAL NEED NOT GO INTO THE ISSUE CONSIDERING THE DECISIONS RELIED UPON BY HIM. IN THIS REGARD, LD DR FILED A COPY OF THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANIL KUIMAR BHATIA [2013] 352 ITR 493 (DELHI) AND READ OUT THE OBSERVATION OF THE HONBLE DELHI HIGH COURT ON THE ROLE OF THE TRIBUNAL WHICH IS RELEVANT FOR THE PROPOSITION THAT THE TR IBUNAL OUGHT TO HAVE EXAMINED THE CASE SET UP BY THE ASSESSEE WITHOUT PUTTING ON BLINKERS AND SHOULD HAVE SCRATCHED THE SURFACE INSTEAD OF SIMPLY ACCEPTING THE ASSESSEE'S STAND. ON LEGAL FRONT, CIT (A) CONFIRMED THE ADDITION MADE BY THE ASSESSEE MERELY R ELYING ON THE DIVISION BENCH DECISION IN THE CASE OF MONI KUMAR (SUPRA) WITHOUT AWAITING THE FULL BENCH JUDGMENT OF THE SAME COURT IN THE SAME CASE. THE OTHER DECISIONS RELIED UPON BY THE LD COUNSEL WERE ALSO SUBSEQUENT IN TIME, THEREFORE, WE REMAND ALL TH ESE THREE APPEALS TO THE FILES OF THE AO FOR A LIMITED PURPOSE OF EXAMINING THE REASONABLENESS OF THE COMPUTATION OF THE MONTHLY RENT OF RS. 11 LAKHS PER MONTH AS OFFERED BY THE ASSESSEE AND IN WHAT WAY THE SAME AMOUNTS TO DEFLATION OF RENT QUA THE OTHER P REMISES IN THE VICINITY. AO SHOULD CONSIDER ALL THE RELEVANT FACTORS WILE COMING TO THE REASONABLE CONCLUSIONS ON THE REASONABLENESS OF THE RENT. FURTHER, WE REJECT THE BASIS OF THE AO IN THRUSTING NOTIONAL INTEREST APPLYING THE RATE OF 8% ON THE INTERES T FREE SECURITY DEPOSITS. AO ALSO DIRECTED TO AFFORD A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH THE PRINCIPLES OF NATURAL JUSTICE. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . 13. REGARDING THE APPEALS FILED BY THE ASSESSEE FOR THE AYS 2006 - 2007 AND 2007 - 2008 , SINCE, THE IDENTICAL GROUNDS RAISED BY THE ASSESSEE TO THAT OF THE GROUNDS RAISED FOR THE AY 200 5 - 06 VIDE APPEAL ITA NO.394/M/2011, WHICH IS ADJUDICATED BY US IN THE ABOVE PARAGRAPHS OF THIS ORDER, THEREFORE, BEING THE ISSUE INVOLVED IS IDENTICAL, THE ABOVE SAID DIRECTIONS AS WELL AS THE ADJUDICATION GIVEN BY US APPLY WITH EQUAL FORCE TO THESE APPEAL S ALSO. ACCORDINGLY, ALL THE GROUNDS RAISED IN THE TWO APPEALS OF THE ASSESSEE, FOR THE AY 2006 - 07 & 2007 - 08, ARE ALLOWED FOR STATISTICAL PURPOSES. 9 14. IN THE RESULT , ALL THE THREE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PUROPOSES. ORDER PRON OUN CED IN THE OPEN COURT ON 2 8 T H DAY OF FEBRUARY, 2014. S D / - S D / - (VIVE K VARMA) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 28 .2 .2014 . . ./ OKK , SR. PS / 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 . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI