SUDHER OMPRAKASH BAHL, Mumbai V. ITO 1(2)(2), Mumbai

ITA 3987/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7911 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2013-2014
• Appeal Filed On: 04-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T S KHALSA
• Keywords: Notional interest
• Section: 143(3); 142(1); 143(1); 201; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI MAHAVIR SINGH (VICE PRESIDENT) AND SHRI S. RIFAUR RAHMAN (ACCOUNTANT MEMBER) ITA NO. 3987/MUM/2019 ASSESSMENT YEAR: 2013-14 & ITA NO. 3988/MUM/2019 ASSESSMENT YEAR: 2014-15 SUDHEER OMPRAKASH BAHL, 41-B, JOLLY MAKER APARTMENT, CUFFE PARADE, COLABA, MUMBAI - 400 005. VS. INCOME TAX OFFICER-1(2)(2), AAYAKAR BHAVAN, ROOM NO. 527 MUMBAI-400020 PAN NO. AAMPB 8549 F APPELLANT RESPONDENT ASSESSEE BY : NONE REVENUE BY : MR. T.S. KHALSA, DR DATE OF HEARING : 29/04/2021 DATE OF PRONOUNCEMENT : 21/06/2021 ORDER PER S. RIFAUR RAHMAN, A.M. THE CAPTIONED APPEALS FILED BY THE ASSESSEE ARE DIR ECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-2, MUMBAI AND ARISE OUT OF THE ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT 1961 (THE ACT). AS COMMON ISSUES ARE INVOLVED, WE ARE PROCEEDING TO DISPOSE T HEM OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. FACTS BEING IDEN TICAL, WE BEGIN WITH THE AY 2013-14. SUDHEER OMPRAKASH ITA NOS. 3987 & 3988/M/2019 2 ITA NO. 3987/MUM/2019 ASSESSMENT YEAR: 2013-14 2. THE BRIEF FACTS OF THE CASE ARE, THE ASSESSEE FI LED HIS RETURN OF INCOME ON 23.09.2013 DECLARING TOTAL INCOME OF RS.17,83,640/- . THE RETURN WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (IN SHORT A CT). SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND NOTICES U/S 143(2) AN D 142(1) AND SERVED ON THE ASSESSEE. IN RESPONSE, THE AR OF THE ASSESSEE ATTEN DED AND FILED THE RELEVANT INFORMATION AS CALLED FOR. THE ASSESSEE ENGAGED IN THE BUSINESS OF CATERING AN D FOOD PROCESSING RESTAURANTS, PUBS AND BANQUET HALLS AND PROPRIETOR OF M/S KHYBER RESTAURANT. THE RELEVANT FACTS RELATING TO THE GROUNDS OF APPEA L RAISED BY THE ASSESSEE ARE, ASSESSEE IS THE OWNER OF FLAT NO. 91-B, MAKER TOWER A&B CO-OP HOUSING SOCIETY LTD. CUFFE PARADE, COLABA. THE AREA OF FLAT IS 3000 SQ. FT. THE ASSESSEE LET OUT THE ABOVE SAID FLAT ON LEAVE AND LICENSE AGREEMENT DATE D 13.10.2010 FROM 01.11.2010 TO 31.07.2013 ALONG WITH ONE RESERVED CO VERED CAR PARKING IN THE COMPOUND TO INDSIND BANK LTD. ON A MONTHLY RENT OF RS.18,150/- AND INTEREST FREE SECURITY DEPOSIT OF RS.6,95,75,000/-. THE ASSE SSEE HAS DISCLOSED ANNUAL RENTAL VALUE OF THE ABOVE SAID FLAT U/S 23 OF THE A CT AT RS.1,52,460/-. THE ASSESSING OFFICER OBSERVED THAT ON THE ISSUE OF APP LICABILITY OF U/S 23(A) OF THE ACT, THERE HAS BEEN ADDITIONS DURING THE PRECEDING ASSESSMENT YEAR INCLUDING AYS 2010-11 & 2012-13 AFTER TAKING INTO VARIOUS FAC TORS I.E. LOCATION OF THE BUILDING, QUALITY OF CONSTRUCTION OF BUILDING, AREA OF THE FLAT AND PREVAILING RENT OF THE PROPERTY IN THE LOCALITY. THE ASSESSING OFFI CER HAS HELD THAT THE RENT ON WHICH ASSESSEE LET OUT THE PROPERTY DOES NOT REPRES ENT A FAIR MARKET RENT AND AFTER MAKING NECESSARY ENQUIRIES CAME TO THE CONCLU SION THAT THE RENT OFFERED BY SUDHEER OMPRAKASH ITA NOS. 3987 & 3988/M/2019 3 THE ASSESSEE WAS MEAGRE AND DEPOSIT WAS EXORBITANTL Y HIGH. ACCORDINGLY, THE PRESENT ASSESSING OFFICER PROCEEDED TO MAKE THE ASS ESSMENT IN THE ABOVE SAID LINE. WHEN THE ASSESSEE WAS ASKED WHY RENTAL INCOME SHOULD NOT BE TAKEN AS PER MARKET RENT AS PER U/S 23(1)(A) OF THE ACT. IN RESP ONSE THE ASSESSEE FILED THE FOLLOWING REPLY READ AS UNDER: THE RECORDS SHOW THAT THE SAID AMOUNT I.E. THE SEC URITY DEPOSIT HAS BEEN USED TO REPLACE THE BORROWING FROM THE BANK WHICH WAS TAKEN FOR BUSINESS PURPOSES. THE RESULT HAS BEEN THAT THE HUGE INTEREST THAT WAS PAI D AND ALLOWED AS A BUSINESS EXPENSE TO THE ASSESSES HAS BEEN REDUCED AND AS A CONSEQUEN CE THE INCOME OF THE ASSESSES HAS GONE UP SUBSTANTIALLY. THE INTEREST SAVED AS AN EXP ENSE BY THIS USE OF THE SECURITY DEPOSIT HAS LED TO YOUR ASSESSES HAVING HAD TO PAY SUBSTANTIALLY HIGHER TAXES THAN HE WOULD HAVE PAID HAD THE SAID DEPOSIT BEEN KEPT IN A FIXED DEPOSIT ONLY. IT IS RESPECTFULLY SUBMITTED THAT THIS ASPECT WAS DULY EXAMINED THOROU GHLY IN THE PAST AND THE DEPARTMENT HAS DULY ACCEPTED THE FACT THAT THE INCR EASE IN INCOME SHOWN BY THE ASSESSEE DUE TO REDUCTION IN BANK INTEREST OUTGO HA S RESULTED IN PROPER TAXATION OF THE INCOME FROM SECURITY DEPOSIT. ACCORDINGLY, NO ADDIT ION ON ANY DEEMED BASIS OF INTEREST ON SECURITY DEPOSIT WAS CALLED FOR. ACCORDINGLY, TH E HON. CIT(A) HAD DELETED THE ADDITION ON THIS ACCOUNT, AND WHICH ORDER HAS BEEN UPHELD BY THE HON. ITAT IN THE DEPARTMENTAL APPEAL. WE THEREFORE REQUEST YOU TO KI NDLY ACCEPT THE SAME. (COPY OF CIT ORDER FOR ASSTT. YEAR 1999-2000, 2000-2001, 2001-02 & 2002-03 DARED 30/04/2007 IS ENCLOSED). A REGARDS ADDITIONS TO HOUSE PROPERTY INCOME IN THE PAST ARE CONCERNED, A DETAILED EXPLANATION IS ALREADY FILED AND ON RECORD. YOU WIL L READILY APPRECIATE THAT ALL ADDITIONS HAVE BEEN DELETED BY THE HONBLE ITAT, MUMBAI IN TH E CASE OF YOUR ASSESSEE, AS PER ORDERS ON RECORD. FURTHER, THE DEPARTMENT APPEAL AG AINST THE DELETION OF THE ADDITIONS MADE HAS BEEN DISMISSED BY THE BOMBAY HIGH COURT. T HE COPY OF THE ORDER OF THE HON. MUMBAI HIGH COURT IS ALREADY FILED AND IS ON RECORD . IN VIEW OF THE ABOVE, NO ADDITION WHATSOEVER IS CALLED FOR AS REGARDS THE HOUSE PROPE RTY INCOME DULY DISCLOSED, FULLY AND TRULY BY THE ASSESSEE IN HIS RETURN. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE T HE ASSESSING OFFICER OBSERVED THAT THE SUBMISSIONS OF THE ASSESSEE WAS C ONSIDERED CAREFULLY AND IT WAS FOUND THAT THE HONBLE BOMBAY HIGH COURT HAS DI SMISSED THE ORDER OF THE REVENUE VIDE ORDER DATED 22.08.2014 FOR AYS. 1999-2 000 TO 2005-06. THE AO HOWEVER OBSERVED THAT WITH DUE RESPECT IT WAS SUBMI TTED THAT THE REVENUE IS IN SUDHEER OMPRAKASH ITA NOS. 3987 & 3988/M/2019 4 PROCESS OF FILING REVIEW PETITION ON THE ORDER OF T HE HONBLE BOMBAY HIGH COURT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10, THE REVENUE HAS FILED MISCELLANEOUS APPLICATION BEFORE THE ITAT, MUMBAI O N THE SAME ISSUE. TO KEEP THE ISSUE ALIVE, HE PROCEEDED TO REJECT THE ANNUAL VALUE OF RS.1,52,460/- DISCLOSED BY THE ASSESSEE FOR LETTING OF HIS FLAT AND OBSERVE D THAT IT DOES NOT REPRESENT THE REASONABLE EXPECTED RENT AS PROVIDING U/S 23(1)(A) OF THE ACT. BY FOLLOWING THE PREVIOUS ASSESSMENT YEAR I.E. 2012-13 ORDER HE PROC EEDED TO ESTIMATE THE RENTAL INCOME AT RS.73,01,440/- (BY CONSIDERING 10% INFLAT ION ON THE SUM OF RS.66,37,673/- I.E. RENT DETERMINED FOR AY 2012-13) . 3. AGGRIEVED WITH THE ABOVE ORDER, ASSESSEE PREFERR ED APPEAL BEFORE CIT(A). AFTER CONSIDERING THE DETAILED SUBMISSIONS OF THE A SSESSEE AND HE PARTLY ALLOWED THE APPEAL OF THE ASSESSEE WITH THE FOLLOWING OBSER VATION : 5.1 I FIND THAT THE APPELLANT HAS DISCLOSED THE AC TUAL RENT RECEIVED OF RS.217,800/- DURING THE YEAR U/S. 23(1)(B). THE AO HAS TREATED T HAT THE APPELLANT'S CASE IS TO BE CONSIDERED U/S 23(1)(A) AND HAS ESTIMATED THE SUM F OR WHICH THE PROPERTY IS EXPECTED TO LET, AT RS.73,01,440/-. THIS HAS BEEN D ONE BY THAT THE ACTUAL RENT RECEIVED AT RS.217,800/- IS MUCH LESS THAN THE SUM FOR WHICH THE SAID PROPERTY MIGHT REASONABLY BE EXPECTED TO BE LET FROM YEAR TO YEAR SINCE THE APPELLANT HAS BEEN DERIVING ADDITIONAL BENEFIT OUT OF THE SECURITY DEP OSIT OF RS.695,75,000/- RECEIVED ON ACCOUNT OF THE RENTED PROPERTY FIND SIMILAR PROPERT Y IN THE SAME BUILDING, WHERE HUGE DEPOSITS WAS TAKEN HAD EARNED HIGHER RENTAL VALUE. 5.2. THE APPELLANT HAS SUBMITTED THAT NOMINAL ADDIT ION OF 5% PER ANNUM OVER THE ACTUAL RENT RECEIVED WAS SUSTAINED FROM A.Y. 1999-2 000 TO 2010-11, EXCEPT FOR A.Y. 2010-11 AND A.Y. 2012-13 IN WHICH THE RETURN INCOME WAS ACCEPTED. IN THIS REGARD, I FIND THAT THE ADDITION FOR A.YS. 1999-2000 TO 2002- 03 WAS MADE BY THE AO BY TAKING FAIR RENT OF APPELLANT'S PROPERTY AT RS.250,000/- P ER MONTH BY TAKING INTO CONSIDERATION MAINLY THE NOTIONAL INTEREST ON INTER EST FREE DEPOSIT. THIS WAS NOT FOUND TO BE CORRECT BY THE ITAT IN THEIR ORDER DATE D 18.11.2011 IN THE APPELLANT'S CASE FOR A.Y. 1999-2000 TO 2002-03 AND 2005-06, IN VIEW OF DECISION OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF MONI KUMAR SUBBA 333 ITR 38, FURTHER, IT HAS BEEN OBSERVED BY THE ITAT THAT THE FAIR RENT WAS DETERMI NED BY THE CIT(A) AT RS.28,000/- PER MONTH FOR A.Y. 1999-2000 TO 2002-03 ON THE BAS IS OF THE COMPARABLE INSTANCES SUDHEER OMPRAKASH ITA NOS. 3987 & 3988/M/2019 5 GATHERED BY THE AO AND THE SAME HAS BEEN UPHELD. FU RTHER, THE FAIR RENT HAS BEEN ESTIMATED FOR A.Y. 2005-06 AT RS.28,000/- PER MONTH AS AGAINST THE DIFFERENT STAND TAKEN BY THE CIT(A) DIRECTING THE AO TO DETERMI NE THE ALV OF THE APPELLANTS PROPERTY ON THE BASIS OF RENT OF RS.15,000/- PER MO NTH ACTUALLY RECEIVED. I FIND THAT IN THE ORDER DATED 22.08.2014 IN THE APPELLANT'S CASE THE HON'BLE BOMBAY HIGH COURT HAVE OBSERVED THAT 'IN FACT IN SOME OF THE APPEALS, THE TRIBUNAL HAS DETERMINED THE LETTING VALUE AT A RATE MORE THAN THE MUNICIPAL VAL UATION. IN SUCH CIRCUMSTANCES, THE QUANTUM OF RENT DETERMINED CAN BE SAFELY TERMED AS FAIR. 5.3 I FIND THAT IN THE APPELLANT'S CASE FOR A.Y 201 2-13, THE CIT(A)-2, MUMBAI, VIDE ORDER DATED 30.12.2016, HAS DELETED THE ADDITION MA DE BY THE AO ON THIS ISSUE AND ACCEPTED THE RENT ACTUALLY RECEIVED BY THE APPELLAN T AS THE CORRECT ALV. HOWEVER, THIS APPEARS TO BE CONTRARY TO THE FINDING OF THE ITAT M UMBAI FOR A.Y. 2005-06 IN THE APPELLANT'S CASE WHEREIN THE FAIR RENT HAS BEEN EST IMATED FOR A.Y. 2005-06 AT RS.28,000/- PER MONTH AS AGAINST THE STAND TAKEN BY THE CIT(A) DIRECTING THE AO TO DETERMINE THE ALV OF THE APPELLANT'S PROPERTY ON TH E BASIS OF RENT OF RS.15,000/- PER MONTH ACTUALLY RECEIVED. FURTHER. I FIND THE IN AY 2011-12, THE CIT(A), VIDE ORDER DATED 01.10.2014, HAS DETERMINED THE ALV AT RS.36,9 60/- PER MONTH BY ENHANCING IT BY 10% ON THE MONTHLY RENT OF RS.33,600/- FOR A Y. 2009-10. 5.3.1 IN VIEW OF ABOVE DISCUSSION, I AM INCLINED TO DETERMINE THE FAIR RENTAL OF THE SAID PROPERTY AT RS.40,660/- AFTER ENHANCING THE RENT DE TERMINED FOR A.Y. 2011-12 BY 10%. THE AO IS DIRECTED TO ADOPT THE ANNUAL VALUE OF THE SAID PROPERTY AT RS.487,920/-, RE- COMPUTE THE INCOME FROM HOUSE PROPERTY AND ALLOW AP PROPRIATE RELIEF TO THE APPELLANT. GROUND NO. 1 IS PARTLY ALLOWED, GROUND NO. 2 IS DIS MISSED AND GROUND NO. 3, WHICH IS WITHOUT PREJUDICE GROUND IS DISMISSED. 4. AGGRIEVED WITH THE ABOVE ORDER, ASSESSEE PREFERR ED AN APPEAL BEFORE US RAISING FOLLOWING GROUND OF APPEAL : 1. THE LD. CIT(A) HAS ERRED IN VIEW OF THE FACTS, CIRC UMSTANCES AND LAW, IN NOT ACCEPTING THE ACTUAL RENT RECEIVED OF RS.2,17,800/- AS TRULY DECLARED, AND WHICH IS IN ANY CASE, MORE THAN THE MUNICIPAL RATEABLE VALUE AND ESTIMATI NG THE RENTAL INCOME ON A PURE GUESSWORK BASIS OF RS.4,87,920/-. 5. CONSIDERED THE SUBMISSIONS OF THE LEARNED DEPART MENTAL REPRESENTATIVE AND PERUSED THE MATERIAL ON RECORD. WE NOTICED THAT IN ASSESSEES OWN CASE IN THE AY 2011-12, THE CO-ORDINATE BENCH DECIDED THE I SSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY FOLLOWING THE D ECISIONS OF EARLIER AYS VIZ. SUDHEER OMPRAKASH ITA NOS. 3987 & 3988/M/2019 6 AY 1999-2000 TO 2002-03 AND AY 2005-06. FURTHER, CO -ORDINATE BENCH RELIED ON THE HONBLE HIGH COURT DECISION IN ASSESSEES OW N CASE. THEREFORE, THE PRESENT ISSUE IS DECIDED IN FAVOUR OF ASSESSEE BY T HE CO-ORDINATE BENCHES AND HONBLE HIGH COURT. WE HAVE ALSO INCLINED TO FOLLOW THE SETTLED ISSUE IN FAVOUR OF THE ASSESSEE. FOR THE SAKE OF CLARITY, THE DECIS ION OF CO-ORDINATE BENCH IN AY 2011-12 IS REPRODUCED BELOW : 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE FIND THAT THE GROUNDS OF APPEAL RAISED B Y THE REVENUE IN THE IMPUGNED ASSESSMENT YEAR WERE SAME AS THE GROUNDS RAISED BEF ORE THE TRIBUNAL FOR ASSESSMENT YEAR 2009-10 IN ITA NO. 1839/MUM/2013. THE TRIBUNAL HELD AS UNDER: 4. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFU LLY GONE THROUGH THE ORDER OF THE AUTHORITIES BELOW AND FOUND THAT SIMILAR ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1999 -2000 TO 2002-03 AND THE ASSESSMENT YEAR 2005-06 VIDE ORDER DATED 18.11.2011 . AS THE FACTS AND CIRCUMSTANCES OF THE CASE ARE SAME, THE CIT(A) HAD TAKEN THE MONTHLY RENT OF RS.28,000/- AS TAKEN BY THE TRIBUNAL IN THE AY 2005 -06 AND THEREAFTER INCREASED IT BY 20% AND THUS COMPUTED ALV AT RS.33,6000/- PER MONTH . RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. 5.1 ON SIMILAR FACTS, THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SHRI SUDHIR BEHL (SUPRA) IN ITA NO. 515, 517, 518, 519, 520, 1080 AN D 1107 OF 2012 HAS DISMISSED THE APPEAL FILED BY THE REVENUE. RESPECTFULLY FOLLOWING THE SAME, WE DIRECT THE AO TO FOLLOW THE ABOVE DIRECTION AND ACCORDINGLY GROUND RAISED BY ASSESSEE IS ALLOWED. SUDHEER OMPRAKASH ITA NOS. 3987 & 3988/M/2019 7 6. IN AY 2014-15, THE FACTS ARE EXACTLY SIMILAR, WE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND DIRECT THE AO TO FOLLOW THE DIRECTION AS PER PARA 5 ABOVE. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE FOR BOTH THE AYS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21/06/2021. SD/- SD/- ( MAHAVIR SINGH ) ( S. RIFAUR RAHMAN ) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI; DATED: 21/06/2021 RAHUL SHARMA, SR. P.S. 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./ASSISTANT REGISTRAR) ITAT, MUMBAI