MOH. HUSSAIN HABIB PATHAN, MUMBAI V. ASST CIT 18(2), MUMBAI

ITA 4058/MUM/2013

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3451 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-03-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 21-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KAVITA P KAUSHIK
• Assessee Lawyers: KIRIT MEHTA
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. C.N. PRASAD, JUDICIAL MEMBER I. T. A. NO. 4058/MUM/2013 ASS ESSMENT YEAR: 2009-10 MD. HUSSAIN HABIB PATHAN, PROP OF RAKSHA CONSTRUCTION, A-9/10, THE PHOENIX MILLS COMPOUND, SENAPATI BAPAT MARG, LOWER PAREL, MUMBAI. [AACPP3071A] VS. ACIT 18(2) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SH. KIRIT MEHTA (CA) RESPONDENT BY: MS. KAVITA P. KAUSHIK (DR) DATE OF HEARING: 03.03.2020 DATE OF PRONOUNCEMENT: 05.03.2020 ORDER PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-29, MUMBAI (C IT(A) FOR SHORT) DATED 13.12.2012, PARTLY ALLOWING THE ASSESSEES APPEAL C ONTESTING HIS ASSESSMENT FOR ASSESSMENT YEAR (AY) 2009-10 VIDE ORDER U/S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) DATED 30.12.2011. 2. AT THE OUTSET, IT WAS OBSERVED THAT THE ASSESSEE S APPEAL IS DELAYED BY A PERIOD OF SIXTY SIX DAYS. IN VIEW OF THE DELAY BEI NG REASONABLY EXPLAINED, WE ARE, AFTER HEARING THE PARTIES, INCLINED TO CONDONE THE DELAY, AND ADMIT THE APPEAL. ITA NO. 4058/MUM/2013 (AY 2009-10) MD. HUSSAIN HABIB PATHA N V. ASST. CIT 2 3. OPENING THE ARGUMENTS FOR AND ON BEHALF OF THE A SSESSEE, IT WAS SUBMITTED BY HIS COUNSEL, SH. MEHTA, THAT HE IS NOT PRESSING THE ASSESSEES GROUND II AS WELL AS THE ADDITIONAL GROUND, MAKING AN ENDORSEMENT TO THAT EFFECT ON FORM 36. NO PLEA WAS ACCORDINGLY ADVANCED TOWARD THE ADMISSION OF THE ADDITIONAL GROUND. THE ONLY ISSUE THEREFORE REQUIRING OUR ADJUDICATION IS THAT RAISED BY THE ASSESSEE PER GROUND I, I.E., IN RESPECT OF HOUSE PROPERTY INCOME QUA THE ASSESSEES RESIDENTIAL HOUSE PROPERTY, I.E., A/1-5, PRITHVI APARTMENTS, AT MUMBAI. THE ASSESSEE HAS CLAIMED A LOSS OF RS.15,32,120 QUA THE SAID PROPERTY ON ACCOUNT OF INTEREST (ON BORROWED CAPITAL) AT RS. 21,62,120, ADJUSTING IT AG AINST THE RENTAL INCOME OF RS. 9 LAKHS. THE SAID RENT WAS, ON THE BASIS OF A FIELD E NQUIRY BY THE ASSESSING OFFICER (AO), FOUND TO BE FROM THE ASSESSEES MAJOR SON, RO MAN PATHAN AND MAJOR DAUGHTER, NEHA PATHAN, RESIDING THEREAT ALONG WITH THE ASSESSEES OTHER FAMILY MEMBERS. NOBODY WOULD, IN THE VIEW OF THE AO, CHARG E RENT (FOR RESIDENCE) FROM HIS OWN SON AND DAUGHTER, PARTICULARLY CONSIDERING THAT BOTH ARE UNMARRIED AND LIVING TOGETHER WITH THEIR FAMILY AT ITS SELF-OWNE D ABODE. THE ARRANGEMENT WAS THEREFORE REGARDED MERELY AS A TAX-REDUCING DEVICE ADOPTED BY THE ASSESSEE, LIABLE TO BE IGNORED. TREATING THE HOUSE PROPERTY AS A SEL F-OCCUPIED PROPERTY, THE AO RESTRICTED THE CLAIM OF INTEREST U/S. 24(B) TO RS. 1,50,000, AND WHICH WAS CONFIRMED BY THE LD. CIT(A) IN APPEAL FOR THE SAME REASON/S. 4. BEFORE US, THE ASSESSEES CLAIM WAS THAT THERE I S NOTHING TO SHOW THAT THE ARRANGEMENT, WHICH IS DULY SUPPORTED BY WRITTEN AGR EEMENTS, FURNISHED IN THE ASSESSMENT PROCEEDINGS, IS FAKE OR A MAKE-BELIEVE. RENTAL INCOME CANNOT BE OVERLOOKED OR DISREGARDED MERELY BECAUSE IT ARISES FROM CLOSE FAMILY MEMBERS. SH. MEHTA WAS, HOWEVER, NOT ABLE TO, ON A QUERY BY THE BENCH, STATE THE STATUS, I.E., SELF-OCCUPIED OR RENTED, OF THE SAID PREMISES FOR T HE EARLIER OR SUBSEQUENT YEARS, THOUGH WOULD SUBMIT THAT THIS IS THE FIRST YEAR OF THE CLAIM OF LOSS. THE RENT ITA NO. 4058/MUM/2013 (AY 2009-10) MD. HUSSAIN HABIB PATHA N V. ASST. CIT 3 AGREEMENTS HAVING NOT BEEN BROUGHT ON RECORD BY THE ASSESSEE, HE WAS ALSO UNABLE TO TELL US OF THE AREA LET, I.E., OUT OF THE TOTAL AREA AVAILABLE, INASMUCH AS OTHER FAMILY MEMBERS, INCLUDING THE ASSESSEE, ARE ALSO RE SIDING IN THE SAME PREMISES. THE REVENUES CASE, ON THE OTHER HAND, WAS OF NO CO GNIZANCE BEING ACCORDED TO AN ARRANGEMENT WHICH IS AGAINST HUMAN PROBABILITIES, A ND CLEARLY A DEVICE TO AVOID TAX. 5. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 5.1 SURELY, THE ARRANGEMENT IS HIGHLY UNUSUAL, PART ICULARLY CONSIDERING THAT THE RENT IS IN RESPECT OF A SELF-OWNED PROPERTY (I.E., FOR WHICH NO RENT IS BEING PAID), WHICH CONSTITUTED THE FAMILYS RESIDENCE, WITH, FUR THER, THE ASSESSEES SON AND DAUGHTER BEING UNMARRIED. THAT, HOWEVER, TO OUR MIN D, MAY NOT BE CONCLUSIVE OF THE MATTER. BEING A PRIVATE ARRANGEMENT, NOT INVOL VING ANY THIRD PARTY, NOT INFORMING THE COOPERATIVE HOUSING SOCIETY MAY ALSO NOT BE OF MUCH CONSEQUENCE. THE REVENUE HAS RESTED MERELY BY DOUBTING THE GENUI NENESS OF THE ARRANGEMENT, WITHOUT PROBING THE FACTS FURTHER. WHAT IS THE TOTA L AREA, AS WELL AS ITS COMPOSITION/ PROFILE? HOW MANY FAMILY MEMBERS, BESIDES THE ASSES SEE (THE OWNER) AND THE TWO TENANTS, ARE RESIDING THEREAT? HAS THE AREA LET BEE N SPECIFIED, ALLOWING PRIVATE SPACE (A SEPARATE BEDROOM EACH) TO SON AND DAUGHTER, WHO WOULD IN ANY CASE BE ALSO PROVIDED ACCESS TO OR USER OF THE COMMON AREA - SPE CIFIED OR NOT SO IN THE AGREEMENT/S, VIZ. KITCHEN, BALCONY, LIVING AREA, BA THROOMS, ETC. HOW HAS THE RENT BEEN RECEIVED, I.E., IN CASH OR THROUGH BANK AND, F URTHER, BEEN SOURCED, I.E., WHETHER FROM THE ASSESSEE (OR ANY OTHER FAMILY MEMBER), OR FROM THE CAPITAL/INCOME OF THE TENANTS. WHY, THERE WAS EVEN NO ATTEMPT TO INQUIRE IF THE ARRANGEMENT WAS A SUBSISTING/CONTINUING ONE, OR CONFINED TO A YEAR OR TWO, STRONGLY SUGGESTIVE OF, IN THAT CASE, A SOLELY TAX MOTIVATED EXERCISE. ITA NO. 4058/MUM/2013 (AY 2009-10) MD. HUSSAIN HABIB PATHA N V. ASST. CIT 4 5.2 IT COULD, HOWEVER, WE ARE CONSCIOUS, WELL BE TH AT THE ASSESSEES MAJOR SON AND DAUGHTER ARE FINANCIALLY INDEPENDENT (OR SUBSTA NTIALLY SO), WITH INDEPENDENT INCOMES, SHARING THE INTEREST BURDEN OF THEIR COMMO N RESIDENCE WITH THEIR FATHER. AND, AS SUCH, INSTEAD OF TRANSFER OF FUNDS TO HIM PER SE , HAVE REGARDED, BY MUTUAL AGREEMENTS, THE SAME AS RENT, AS THAT WOULD, APART FROM MEETING THE INTEREST BURDEN TO THAT EXTENT, ALSO ALLOW TAX SAVING TO THE ASSESS EE-FATHER. A GENUINE ARRANGEMENT CANNOT BE DISREGARDED AS THE SAME RESULTS OR OPERAT ES TO MINIMIZE THE ASSESSEES TAX LIABILITY. REFERENCE IN THIS REGARD MAY BE MADE TO THE DECISION IN UNION OF INDIA V. AZADI BACHAVO ANDOLAN [2003] 263 ITR 706 (SC) AND, MORE RECENTLY, IN VODAFONE INTERNATIONAL HOLDINGS B.V. V. UNION OF INDIA [2012] 314 ITR 1 (SC). WE ARE, ACCORDINGLY, IN PRINCIPLE, IN AGREEMENT WIT H THE ASSESSEES CLAIM INASMUCH AS, AS AFORE-NOTED, THERE IS NOTHING ON RECORD TO F URTHER THE REVENUES CASE OF THE ARRANGEMENT BEING NOT A GENUINE ARRANGEMENT, I.E., APART FROM BEING UNUSUAL. 5.3 ON QUANTUM, HOWEVER, THE ASSESSEES STAND IS IN FIRM. THE HOUSE PROPERTY, A/1-5, PRITHVI APARTMENTS, THE FAMILY RESIDENCE OF THE PATHAN FAMILY, IS, IN VIEW OF THE RENT AGREEMENTS, BOTH A SELF-OCCUPIED AND A LET OUT PROPERTY. THE INTEREST CLAIMED (RS. 21.62 LAKHS) IS QUA THE ENTIRE PROPERTY, WHICH THEREFORE CANNOT BE ALLOWED IN FULL AGAINST THE RENTAL INCOME, WHICH IS QUA A PART OF THE HOUSE PROPERTY. THE ASSESSEES INTEREST CLAIM THEREFORE CANNOT BE A LLOWED IN FULL AND SHALL HAVE TO BE SUITABLE PROPORTIONED, EVEN AS AGREED TO BY SH. MEHTA, RESTRICTING THE INTEREST CLAIM RELATABLE TO THE SELF OCCUPIED PART THEREOF T O, AS ALLOWED, RS. 1.50 LAKHS. THE ASSESSEE SHALL PROVIDE A REASONABLE BASIS FOR SUCH ALLOCATION AS WELL AS THE WORKING OF THE AREA LET. WE SAY SO AS IT MAY WELL, IN VIEW OF THE JOINT RESIDENCE, BE THAT NO AREA (PORTION) IS SPECIFIED IN THE RENT AGREEMENTS. THE NUMBER OF FAMILY MEMBERS LIVING JOINTLY; THEIR LIVING REQUIREMENTS WHICH M AY NOT BE UNIFORM; FAIR RENTAL VALUE OF THE PROPERTY, ETC., ARE SOME OF THE PARAME TERS WHICH COULD BE CONSIDERED ITA NO. 4058/MUM/2013 (AY 2009-10) MD. HUSSAIN HABIB PATHA N V. ASST. CIT 5 FOR THE PURPOSE. THE AO SHALL ADJUDICATE THEREON PE R A SPEAKING ORDER, GIVING DEFINITE REASONS FOR BEING IN DISAGREEMENT, WHERE S O, IN WHOLE OR IN PART, WITH THE ASSESSEES WORKING, WITHIN A REASONABLE TIME. WE DE CIDE ACCORDINGLY. 6. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED ON THE AFORESAID TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON 05.03.2020 SD/- SD/- (C.N PRASAD) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 05.03.2020 KRK, PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) 4. CONCERNED CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . / BY ORDER, //TRUE COPY// / ( ASST. REGISTRAR) , / ITAT, MUMBAI