ACIT 19(3), MUMBAI V. GOPAL V GORWANI, MUMBAI

ITA 422/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100923 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2015
• Appeal Filed By: Department
• Bench Allotted: G
• Next Hearing Date: 02-07-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 14-01-2013
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Notional interest
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G MUMBAI. BEFORE SHRI AMIT SHUKLA , JUDICIAL MEMBER AND SHRI RAMIT KOCHAR , ACCOUNTANT MEMBER ITA NO 422 /MUM/201 3 ASSESSMENT YEAR: - 2009 - 10 ACIT 19(3), ROOM NO. 305, 3 RD FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI 400012. VS.` SMT MADHU GORWANI L/H OF MR. GOPAL V. GORWANI PALATIAL, 21 ST ROAD BANDRA (W) MUMBAI 400 050. PAN/GIR NO. AAYPF4064C APPELLANT RESPONDENT ITA NO 7264/MUM/2012 ASSESSMENT YEAR: - 2009 - 10 SMT MADHU GORWANI L/H OF MR. GOPAL V. GORWANI PALATIAL, 21 ST ROAD BANDRA (W) MUMBAI 400 050. VS.` ACIT 19(3), ROOM NO. 305, 3 RD FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI 400012. PAN/GIR NO. AAYPF4064C APPELLAN T RESPONDENT ORDER PER RAMIT KOCHAR , A CCOUNTANT M EMBER THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER PASSED BY C OMMISSIONER OF I NCOME T AX (A PPEALS ) - 30,MUMBAI DATED 10.10.2012 IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2009 - 10. ASSESSEE BY SHRI K. GOPAL REVENUE BY SHRI VIVEK A. PERAMPURNA DATE OF HEARING 17.08.2015 DATE OF PRONOUNCEMENT 04 .0 9 .2015 2 MR. GOPAL V. GORWANI ITA NO7264/MUM/2012 ITA NO.422/MUM/2013 PAGE 2 OF 13 BEFORE WE TAKE UP THE APPEALS, IT IS IMPORTANT TO MENTION THAT THE ASSESSEE , MR GOPAL V. GOR WANI DIED ON 28 TH APRIL 201 4. THE ASSESSEE WIFE , MRS MADHU GORWANI MOVED AN APPLICATION FOR SUB STITUTION OF HER NAME AS LEGAL H EIR OF LATE MR . GOPAL V GORWANI . SHE MOVED AN APPLICATION ALONG WITH AFFIDAVIT AND ALSO NOC FROM HER THREE SONS AS TO BRINGING HER NAME AS LEGAL HEIR OF LATE MR . GOPAL V GORWANI , THE ASSESSEE ON RECORD . SHE DULY FILED DEATH CERTIFICATE OF LATE MR . GOPAL V GORWANI AND ALSO SUBMITTED FRESH FORM NO 36 IN ACCORDANCE WITH RULES. INTIMATION AL ONG WITH COPIES OF DOCUMENTS WERE SENT TO REVENUE SEEKING THEIR NO - OBJECTION IN THIS REGARD. THE REVENUE HAS GIVEN NO OBJECTION TO THE BRINGING ON RECORD OF THE NAME OF MRS . MADHU GORWANI AS LEGAL HEIR OF THE ASSESSEE , LATE MR. GOPAL V GORWANI IN THE CASE OF APPEAL OF THE ASSESSEE. REVENUE IN IT S APPEAL HAS ALSO FURNISHED REVISED FORM NO 36 W ITH R ESPEC T TO ITS APPEAL FOR THE ASSESSMENT YEAR. WE ALLOW THE SUBSTITUTION OF MRS MADHU GORWANI AS LEGAL HEIR OF HER HUSBAND LATE MR. GOPAL V GORWANI IN RESPECT OF BOTH THE APPEALS . WE ALSO ALLOW FORM NO 36 AND OTHER DOCUMENTS AS STATED ABOVE IN RESPECT OF BOTH THE APPEALS I . E . OF THE ASSESSEE AS WELL OF THE R EVENUE IS TAKEN ON RECORD. WE FIRST TAKE UP THE APPEAL OF REVENUE I . E . ITA NO.422/MUM/2013 , VIDE WHICH FOLLOWING GROUNDS OF APPEAL HAVE BEE N RAISED BY REVENUE : - (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE AMOUNT OF RS. 19,68,486/ - U/S 68 OF THE INCOME TAX ACT IGNORING THAT THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER HAS CLEARLY ESTABLISHED BY EXHAUSTIVELY DI SCUSSING THE FACTS OF THE CASE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FAILED TO DISCHARGE THE ONUS OF EXPLAINING THE SOURCE OF UNSECURED LOAN FOUND TO HAVE BEEN RECEIVED BY THE ASSESSEE. 3 MR. GOPAL V. GORWANI ITA NO7264/MUM/2012 ITA NO.422/MUM/2013 PAGE 3 OF 13 (2) THE APPELLANT PRAYS THAT THE ORDER OF CI T(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE AO BE RESTORED. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A N INDIVIDUAL AND PROPRIETOR OF M/S. G ORWAN I BUILDERS WHICH IS ENGAGED IN THE BUSINESS OF REAL ESTATE AND REDEVELOPMENT OF SOCIETIES . THE ASSESSEE FILED ITS RETURN OF INCOME ON 31.07.2009, DECLARING TOTAL INCOME OF RS. 50,67,550/ - . DURING SCRUTINY PROCEEDINGS U/S 143(3) READ WITH SECTION 143(2) OF THE INCOME TAX ACT,1961(HEREINAFTER CALLED THE ACT ) , T HE A SSESSING O FFICER NOTED THAT ASS ESSEE HAS SHOWN UNSECURED LOAN OF RS. 42 ,10,828 / - FROM M/S FORE VER EXPORTS. THE A SSESSING O FFICER ON PERUSAL OF THE BALANCE - SHEET OF SHRI NIKHIL GORWANI, PROPRIETOR OF M/S FORE VER EXPORTS, OBSER VED THAT THE LOAN ADVANCED TO GO RWANI BUILDES WAS STATED AT R S. 22,42,342/ - WHICH LEFT THE BALANCE OF RS. 19,68,486/ - AS UN - RECONCILED BALANCE. THE A SSESSING O FFICER ASKED THE ASSESSEE TO RECONCILE THE BALANCE AND SHOW - CAUSED THE ASSESSEE AS TO WHY THIS DIFFERENCE SHOULD NOT BE TREATED AS UNEXPLAINED CASH CREDIT WIT HIN THE MEANING OF SECTION 68 OF THE INCOME TAX ACT AND THUS, ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. ASSESSEE IN RESPONSE TO THE SHOW - CAUSE SUBMITTED THE RECONCILIATION STATEMENT VIDE REPLY DATED 21.12.2011 AS UNDER: - 1. YOU HAVE SOUGHT EXPLANATION REGARDING UNSECURED LOANS RECEIVED FROM FOREVER EXPORTS OF RS. 42,10,828/ - AND NIKHIL GORWANI WHO IS PROPRIETOR OF FOREVER EXPORT WHO HAS ADVANCED LOAN TO GORWANI BUILDERS OF RS. 22,42,342/ - AND WIP TO GOPAL GORWANI AT RS. 2,41, 813/ - . I AM FURNISHING THE WORKING DETAILS AS FOLLOWS: - IN THE BALANCE SHEET OF GORWANI BUILDERS - UNSECURED LOANS FROM FOREVER EXPORTS 42,10,828/ - 4 MR. GOPAL V. GORWANI ITA NO7264/MUM/2012 ITA NO.422/MUM/2013 PAGE 4 OF 13 LESS: LOANS & ADVANCES GIVEN TO NIKHIL GORWANI 17,26,673/ - FOR DALAMAL PARK FLAT --------------- CLOSING BALANCE 24,84,155/ - --------------- IN THE BALANCE SHEET OF NIKHIL GORWANI LOANS & ADVANCES GIVEN 22,42,342/ - LESS: LOANS & ADVANCES GIVEN TO NIKHIL GORWANI FOR DALAMAL PARK FLAT + 2,48,813/ - --------------- CLOSING BALANCE 24,84,155/ - ---------------- 3. THE A SSESSING OFFICER AFTER CONSIDERING THE REPLY OF ASSESSEE HELD THAT THE SAME IS NOT ACCEPTABLE AS THE ASSESEE HAS CLAIMED UNSECURED LOAN OF RS. 42,10,828/ - FROM M/S FOREOVER EXPORTS FROM HIS BALANCE SHEET AND IN HIS REPLY, HE HAS CLAIMED LOANS AND ADVANCES GIVEN TO MR. NIKH IL GORWANI FOR DALAMAL PARK FLAT AT RS. 17,26,673/ - . THE A SSESING O FFICER HELD THAT THIS LOAN OF RS. 17,26,673/ - IS NOT REFLECTED IN THE BALANCE SHEET OF MR . NIKHIL GORWANI . THE A SSESSING O FFICER ALSO HELD THAT THE ASSESSEE IS NOW TRYING TO EXPLAIN THE DI FFERENCE OF RS. 19,68,486/ - BY MAKING A STATEMENT THAT SUMS OF RS. 17,26,673/ - AND RS. 2,48,813/ - H AVE BEEN GIVEN TO SHRI NIKHIL GO RWANI, PROPRIETOR OF FOREVER EXPORTS AS ADVANCE FOR PAYMENT TOWARDS DALAMAL PARK FLAT BUT THESE FIGURES ARE NOT APPEARING IN THE BALANCE SHEET OF MR. NIKHIL GORWANI, HENCE HE HELD THAT THE ASSESSEE IS NOT ABLE TO RECONCILE THE DIFFERENCE OF RS. 19,68,486/ - AS ALLEGED UNSECURED LOAN CLAIMED FROM M/S FOREVER EXPORTS BEING NOT GENUINE AND REPRESENTS INCOME OF THE ASSESSEE FROM UNDI SCLOSED SOURCES AND ADDED THE SAME AS UNEXPLAINED CASH CREDIT WITHIN THE MEANING OF SECTION 68 OF THE ACT. 5 MR. GOPAL V. GORWANI ITA NO7264/MUM/2012 ITA NO.422/MUM/2013 PAGE 5 OF 13 4. AGGRIEVED ASSESSEE CARRIED THE MATTER IN APPEAL TO FIRST APPELLATE AUTHORITY ( HEREINAFTER CALLED THE FAA ) AND REITERATED HIS SUBMISSIONS VI DE LETTER DATED 28 - 04 - 2012 AS UNDER: - 'IN THE BALANCE SHEET FOR THE YEAR ENDING 31 - 03 - 2009, THE AP PELLANT HAD SHOWN AN AMOUNT OF R S. 42,10,828/ - AS LOAN FROM M/ S. FOREVER EXPORTS (PROPRIETORSHIP OF HIS SON NIKHIL GOWANI) ASSESSED BY THE SAME ASSESSING OFF ICER. ACCORDING TO THE A.O., IT WAS SEEN FROM THE FILE OF NIKHIL GORWANI THAT NIKHIL HAD SHOWN AN AMOUNT OF RS. 22, 4 2,342/ - ONLY AS ADVANCED TO APPELLANT. A.O. ADDED THE DIFFERENCE OF RS. 19,68,486/ - U/ S. 68 AS UNEXPLAINED CASH CREDIT. IT MAY BE SUBMITTED THAT A.O. HAD FAILED TO TAKE NOTE OF THE FACT THAT NIKHIL HAD SHOWN ANOTHER AMOUNT OF RS. 17,26,673/ - AS DUE FROM APPELLANT. THE FACT WAS BROUGHT TO THE ATTENTION OF THE A. O. IN THE BALANCE SHEET OF APPELLANT WHEREAS LIABILITY OF RS. 42,10,828/ - IS SHOWN AS L OAN FROM HIS SON, ON THE ASSET SIDE AN AMOUNT OF RS. 17,26,673/ - IS SHOWN AS LOAN GIVEN TO THE SON FOR DALAMAL PARK FLA T. THE DIFFERENCE THUS READILY APPARENT FROM APPELLANT'S BALANCE SHEET IS (RS. 42,10,828 LESS RS. 17,26,673) = RS. 24,84,156/ - . A PPELLANT HAD ALREADY SHOWN AN AMOUNT OF RS. 22,42,342/ - IN HIS BALANCE SHEET. THEREFORE, EXCEPT FOR A DIFFERENCE OF RS. 2,48,8 13/ - , THERE IS NO DISCREPANCY. (RS. 24,84,158 LESS RS. 22,42,342). EVEN THIS FIGURE OF CONFIRMATION LETTER IS FILED IN PROOF OF THE CORRECT POSITION. THEREFORE, NO ADDITION U/S. 68 IS CALLED FOR AND THE ADDITIONS OF RS. 19,68,486/ - MADE BY THE A. 0. U/ S. 68 MAY PLEASE BE DELETED . 5. THE FAA AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HELD THAT ASSESSEE HAD DULY RECONCILED THE DIFFERENCE AND HENCE THE ADDITION WERE DELETED. 6. AGGRIEVED BY THE ORDER OF THE FAA, THE REVENUE IS IN APPEAL BEFORE US. 7. THE LD. DR RELIED UPON THE ORDER OF A SSESSING OFFICER AND STATED THAT THE AMOUNT IN QUESTION HAS BEEN RIGHTLY BROUGHT TO TAX BY THE A SSESSING O FFICER . 8. THE ASSESSEE ON THE OTHER HAND, SUBMITTED THAT THE SAID AMOUNTS ARE DULY REFLECTED IN THE BALA NCE SHEET OF MR. NIKHIL GORWANI AND M/S FOREVER 6 MR. GOPAL V. GORWANI ITA NO7264/MUM/2012 ITA NO.422/MUM/2013 PAGE 6 OF 13 EXPORTS (P ROPERIETORY CONCERN OF MR . NIKHIL GORWANI) AS ALSO IN THE BALANCE SHEET OF THE ASSESSEE I . E . MR . GOPAL V GORWANI . THE ASSESSEE DULY EXPLAINED THAT THERE IS A CREDIT BALANCE OF RS. 42,10,828/ - IN FAVOUR OF FOREVER EXPORTS ( PROPRIETOR MR. NIKHIL GORWANI) IN THE BOOKS OF MR. GOPAL V. GORWANI (PROP GORWANI BUILDERS) AND ALSO THERE IS A DEBIT BALANCE OF RS. 17,26,673/ - IN THE BOOKS OF THE ASSESSEE I . E . MR. GOPAL V. GORWANI (PROP GORWANI BUILDERS) BEING RECOVERABLE FROM MR. NIKHIL GORWANI, WHICH GIVES A NET BALANCE OF RS. 24,84,155/ - BEING PAYABLE TO SHRI NIKHIL GORWANI (PROP. FOREVER EXPORTS) . THE ASSESSEE ALSO EXPLAINED TO US AND REFERRED TO BALANCE - SHEET OF NIKHIL GORWANI WHICH SHOWED THE DEBIT BALANC E OF RS. 2,41,813/ - TOWARDS WIP GOPAL GORWANI AND ALSO DEBIT BALANCE OF RS. 22,42,342/ - TOWARDS GORWANI BUILDERS MAKING A TOTAL DEBIT BALANCE OF RS. 24,84,155/ - . THE ASSESSEE ALSO RELIED UP O N THE ORDER OF FAA TO SUBMIT THAT THIS ADDITION IS RIGHTLY D ELETED BY THE FAA . 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD . WE HAVE OBSERVED THAT THE NET CREDIT BALANCE TOWARDS MR . NIKHIL GORWANI (PROP. FOREVER EXPORTS) AS APPEARING IN THE BOOKS OF ASSESSEE OF RS. 24,84,155/ - AS AT 31 ST MARCH 2009 IS MATCHING WITH THE NET DEBIT BALANCE OF RS. 24,84,155/ - AS AT 31 ST MARCH 2009 TOWARDS MR . GOPAL V GORWANI (PROP GORWANI BUILDERS) IN THE BOOKS OF MR. NIKHIL GORWANI AND HENC E ASSESSEE HAS DULY EXPLAINED AND RECONCILED THE DIFFERENCE ON THE BASIS OF WHICH THE ASSESSING OFFICER MADE THE ADDITION . T HE FAA HAS RIGHTLY DEL ETED THE ADDITION MADE BY THE ASSESSING OFFICER . WE UPHELD THE DELETION MADE BY FAA. WE ORDER ACCORDINGLY. 7 MR. GOPAL V. GORWANI ITA NO7264/MUM/2012 ITA NO.422/MUM/2013 PAGE 7 OF 13 10. NOW WE TAKE UP THE APPEAL OF THE ASSESSEE IN ITA NO. 7264 /MUM / 2012 , VIDE WHICH THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. THE ORDER PASSED BY THE LEARNED CIT (A) IS BAD IN LAW. 2. THE LEARNED CIT (A) ERRED IN NOT DELETING THE NET ADDITION OF RS.7,56,000/ - MADE BY THE A.O. BY ESTIMATING NOTIONA L RENT IN RESPECT OF FLAT NO.301 LET OUT TO TAT A SONS @ RS.90,000 / - PER MONTH BY ESTIMATING THE RENT OF RS.1,80,000/ - IN RESPECT OF ANOTHER FLAT NO.501. 3. THE LEARNED CIT (A) FAILED TO APPR ECIATE THAT THE A.O. HAD NOT STATED THAT THE RENT AGREEMENT WITH TATA SONS IS SHAM ONE OR THAT TAT A SONS PAID ANY AMOUNT TO THE APPELLANT OVER AND ABOVE THE SORTED CONSIDERATION IN THE AGREEMENT. 4. THE LEARNED CI T (A) ERRED IN NOT TAKING NOTE OF THE DEC ISION IN JOHN TUISON V. CIT 298 ITR 407 DEL. HOLDING THAT THE A.O. SHOULD NOT PROCEED TO OBTAIN INFORMATION OF RENT PREVAILING IN MARKET AND A PERSON SHOULD NOT BE TAXED BEYOND THE INCOME ACTUALLY RECEIVED BY HIM. 5. IT IS PRAYED THAT THE NET ADDITION OF RS.7,56,000/ - AFTER ALLOWING DEDUCTION AT 30% FROM THE GROSS ADDITION OF RS.1O,80,000/ - MAY BE DELETED. 11. THE A SSESSING OFFICER ALSO OBSERVED THAT THE ASSESSEE HAD RENTED OUT ITS OWNED BEARING NUMBER FLAT NO. 301 , 3 RD FLOOR, PALATIAL , 21 ST ROAD , BANDRA(WEST),MUMBAI - 400050 TO M/S TATA SONS LTD FOR A MONTHLY RENT OF RS. 90,000/ - AND DEPOSIT OF RS. 1 CRORE WHEREAS A SIMILAR FLAT AGAIN OWNED BY THE ASSESSEE BARING NUMBER 501, 5 TH FLOOR, PALATIAL , 21 ST ROAD , BANDRA(WEST),MUMBAI - 400050 WAS LET OUT TO ANOTHER ENTITY M/S WESTERN GE C O INTERNATIONAL LIMITED FOR A MONTHLY RENT OF RS. 1,80,000/ - WITH MARGINAL SECURITY DEPOSIT. THE AO OBSERVED THAT BOTH THE FLATS ARE ON SAME BUILDING WITH ONE FLAT ON EACH FLOOR AND CONCLUDED THAT THE ANNUAL VA LUE OF THE FLAT WHICH WAS LET OUT TO M/S TATA SONS LTD AS PER SECTION 23 OF THE ACT SHOULD BE 8 MR. GOPAL V. GORWANI ITA NO7264/MUM/2012 ITA NO.422/MUM/2013 PAGE 8 OF 13 TAKEN AS RS. 1,80,000/ - PER MONTH AND ACCORDINGLY DETERMINED THE ANNUAL VALUE FOR THE ASSESSMENT YEAR AT RS. 21,60 ,000/ - WRT TO THE FLAT LET OUT TO M/S TATA SONS LIMITED AND THEREAFTER A LLOWED THE DEDUCTION OF RS. 6,48 ,000/ - U/S 24 OF THE ACT. THE A SESSING O FFICER ALSO OBSERVED THAT THE SIMILAR ADDITION WAS MADE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. 12. AGGRIEVED , THE ASESSEE FILED THE FIRST APPEAL BEF ORE THE FAA AND SUBMITTED THAT A SSESSING O FFICER HAS FAILED TO SHOW THAT THE AGREEMENT ENTERED INTO BY THE LESSEE OF THE FLAT I.E. TATA SONS WAS SHAM. THE ASSESSEE ALSO CONTENDED THAT TATA SONS LIMITED HAS GIVEN INTEREST FREE DEPOSIT OF RS. 1 CRORE WHEREAS DEPOSIT FROM THE OTHER PARTY WAS TO THE TUNE OF RS. 5,35,500/ - ONLY. HE HAS RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF JOHN TIN SON & CO. PRIVATE LIMITED V . CIT 298 ITR 407 , WHEREBY, THE HONBLE DELHI HIGH COURT HELD THAT THE A SSESSING O FFICER SHOULD NOT PROCEED TO OBTAIN INFORMATION OF RENT PREVAILING IN MARKET & A PERSON SHOULD NOT BE TAXED BEYOND THE INCOME ACTUALLY RECEIVED BY HIM. AFTER CONSIDERING THE SUBMISSIONS, THE FAA HELD THAT THE SIMILAR ADDITION HAS BEEN MADE IN THE EARLIER YEAR WHICH HAS NOT BEEN CONTESTED BY THE ASSESSEE IN APPEAL. THE FAA ALSO HELD THAT SINCE THE LOCATION OF BOTH THE PROPERTIES IS THE SAME AND IT WILL FETCH THE SAME RENT AND HENCE THE ADDITION M ADE BY THE A O WAS UPHE LD. 13. AGGRIEVED BY THE ORDER OF FAA, THE ASSESSEE IS IN APPEAL BEFORE US. 14. BEFORE US, THE ASSESSEE CONTENDED THAT THE ASSESSEE HAS ENTERED INTO AN AGREEMENT WITH TATA SONS LIMITED WHEREBY THEY HAVE GIVEN DEPOSIT OF RS. 1 9 MR. GOPAL V. GORWANI ITA NO7264/MUM/2012 ITA NO.422/MUM/2013 PAGE 9 OF 13 CRO RE AND HENCE THE ASSESSEE HAS GIVEN THE FLAT NO. 301 ON 3 RD FLOOR ADMEASURING AREA OF 2150 SQ. FT. IN THE BUILDING KNOWN AS PALATIAL APARTMENT SITUATED AT PLOT NO. 330, 21 ST ROAD, BANDRA (W), MUMBAI 400 0 50 BEARING CTS NO. F/ 10, OF BANDRA VILLAGE BANDRA DIVISION ALONG WITH FIXTURES AND ONE RESERVED CAR PARKING VIDE LEAV E AND LICENSE AGREEMENT DATED 15 .10.2007 ON LOWER RENT OF RS.90000 PER MONTHS . 15. ON THE OTHER HAND, AS S ESSEE SUBMITTED ANOTHER LEAVE & LICENSE AGREEMENT WITH M/S WESTERN GE C O INTERNATIONAL LIMITED FOR THE FLAT NO. 501, PALATIAL, 5 TH FLOOR 21 ST ROAD, BANDRA (W), MUMBAI 40050 CTS NO. F - 10, VILLAGE BANDRA PLOT NO. 330 PALI VILLAGE, BANDRA (W) ADMEASURING 1975 SQUARE FEET ALONG WITH FIXTURES AND RESERVED CAR PARKING VIDE LEAV E AN D LICENSE AGREEMENT DATED 28.09 .2007 WAS ENTERED ON A MONTHLY RENT OF RS. 1,80,000/ - WHEREBY THE SECURITY DEPOSIT WAS RS. 1, 65,000/ - ONLY. THE ASSESSEE SUBMITTED THAT SINCE ASSESSEE HAS GOT A DEPOSIT OF RS. 1 CRORE WITH RESPECT TO FLAT NO 301 , IT HAS GIVEN THE FLAT TO TATA SONS LTD AT A LOWER RATE BEING HIGHLY REPUTABLE GROUP HENCE THE LOWER RATE OF RENT WAS CHARGED. THE ASSESSEE RELIED UPON THE DECISION OF JOHN TIN SON V. CIT (SUPRA) AND ALSO ON THE DECISION OF JURISDICTIONAL BOMBAY HIGH COURT IN THE CASE OF CIT V. TIP TOP TYPOGRAPHY (2014) 368 ITR 330 TO CONTEND THAT THE REVENUE CANNOT BRING TO CHARGE THE TAX THE AMOUNT HIGHER THAN THE ACTUAL RENT RECEIVED BY THE ASSESSEE. THE ASSESSEE ALSO CONTENDED THAT THE NOTIONAL INTEREST ON THE SECURITY DEPOSI T CANNOT BE BROUGHT TO TAX AND HENCE RELYING UPON SECTION 23 OF THE ACT, THE ASSESSEE CONTENDED THAT ONLY ACTUAL RENT CAN BE BROUGHT TO TAX WHILE THE MUNICIPAL RATABLE VALUE IS MUCH LOWER. ASSESSEE ALSO SUBMITTED THAT THERE IS 10 MR. GOPAL V. GORWANI ITA NO7264/MUM/2012 ITA NO.422/MUM/2013 PAGE 10 OF 13 NO EVIDENCE BROUGHT ON RECOR D BY THE A SSESSING O FFICER TO ESTABLISH THAT ANY RENT HIGHER THAN WHAT IS RECEIVED HAS BEEN ACTUALLY RECEIVED BY THE ASSESSEE. 16. THE LD. DR ON THE OTHER HAND STATED THAT AS PER SECTION 23 OF THE ACT, THE AMOUNT FOR WHICH THE PROPERTY IS REASONABLY LIKELY TO BE LET OUT SHOULD BE BROUGHT TO TAX. THE LD. DR CONTENDED THAT BOTH THE FLATS ARE IN THE SAME BUILDING AND HENCE THE AUTHORITIES BELOW HAVE RIGHTLY MADE THE ADDITION BY HOLDING THAT THE FLAT LET OUT TO TATA SONS BE BROUGHT TO TAX AT THE ANNUAL R ATABLE VALUE COMPUTED AT THE RATE OF RS. 1,80,000 PER MONTH AND THERE IS A COGENT EVIDENCE WHEREBY THE ASSESSEE HAS LET OUT THE SIMILAR FLAT ON ACTUAL RENT OF RS. 1,80,000/ - PER MONTH. 17. IN REJOINDER, THE ASSESSEE RELIED UPON THE DECISION OF HONBLE BO MBAY HIGH COURT IN THE CASE OF CIT VS. J.K. INVESTORS (BOMBAY) LTD. 248 ITR 723 AND CONTENDED THAT SECTION 23 STIPULATES THAT THE RENT RECEIVED OR RECEIVABLE IN CASE OF PROPERTY ACTUALLY LET OUT AND HENCE THE RENT ACTUALLY RECEIVED CAN ONLY BE BROUGHT TO T AX AS INCOME FROM HOUSE PROPERTY AND NOTIONAL INTEREST ON SECURITY DEPOSIT CAN NOT BE BROUGHT TO TAX. 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE HAVE OBSERVED THAT THE ASSESSEE OWNS TWO FLATS IN THE BUILDING PALATIAL APARTMENT BEARING FLAT NO. 301 AND 501 AT 21 ST ROAD, BANDRA (W), MUMBAI 40050 . THE FLAT BEARING NUMBER 501 IS AT 5 TH FLOOR HAVE AN AREA OF 1975 SQ . FT. WHICH IS LET OUT AT RS. 1,80,000 PER MONTH VIDE LEAVE & LICENSE AGREEMENT DATED 28.09.2007. THE ASSESSEE HAS RECEIVED THE ENTIRE AMOUN T OF RENT FOR TWENTY FOUR MONTHS IN ADVANCE 11 MR. GOPAL V. GORWANI ITA NO7264/MUM/2012 ITA NO.422/MUM/2013 PAGE 11 OF 13 AMOUNTING TO RS. 43,20,000.00 VIDE AFORE - STATED LEAVE & LICENSE AGREEMENT FOR FLAT NO 501 . ON THE OTHER HAND THE ASSESSEE OWNS ANOTHER FLAT BEARING NO 301 IN THE SAME BUILDING AT 3 RD FLOOR WHICH HAS AN AREA OF 2150 SQ FT. WHICH IS A LARGER FLAT AS COMPARED TO FLAT NO. 501 AND IS LET OUT AT A LOWER RENT OF RS. 90,000 PER MONTH VIDE LEAVE A ND LICENSE AGREEMENT DATED 15.10 .2007. HOWEVER THE LICENSEE M/S TATA SONS HAVE GIVEN THE SECURITY DEPO SIT OF RS. 1 CRORE TO THE ASSESSE W . R . T . TO FLAT NO 301 AND IN THE CASE OF OTHER FLAT I . E . FLAT NO 501, THE LICENSEE HAS GIVEN ADVANCE RENT OF RS 43,20,000.00 FOR THE NEXT TWENTY FOUR MONTHS AT THE TIME OF SIGNING OF THE LEAVE AND LICENSE AGREEMENT . WE HA VE OBSERVED THAT BOTH THE AGREEMENTS HAVE BEEN ENTERED INTO WITHIN A GAP OF 18 DAYS (AGREEMENT WITH TATA SONS LIMITED WAS SIGNED ON15 - 10 - 2007 WHILE OTHER AGREEMENT WITH WESTERN GE C O INTERNATIONAL LIMITED WAS SIGNED ON 28 - 09 - 2007) AND THE DIFFERENCE IN THE RENT IS ALMOST 100%. WE HAVE ALSO CAREFULLY GONE THROUGH CASE LAWS RELIED UPON BY THE ASSESSEE. WE FIND THAT HONBLE BOMBAY HIGH COURT IN THE CASE OF TIP TOP TYPOGRAPHY (SUPRA) HAS CLEARLY HELD THAT MUNICIPAL RATABLE VALUE IS NOT BINDING ON THE A SSESSING O FFICER AND WHERE THE A SSESSING O FFICER HAS SUSPICION THAT THERE IS TOTAL MISMATCH BETWEEN THE PREVAILING MARKET RATE OF RENT AND THE ACTUAL RENT RECEIVED OR IF AN ATTEMPT IS MADE TO INFLATE OF DEFLATE THE RENT BY METHODS OF RECEIVING SECURITY DEPOSIT ETC A ND IF THERE IS A POSITIVE AND DEFINITE MATERIAL TO INDICATE THAT PARTIES HAVE SUPPRESSED THE PREVAILING RATE, THE A SSESSING O FFICER CAN MA KE COMPARATIVE STUDY AND ANALYSIS OF TRANSACTION OF IDENTICAL OR SIMILAR NATURE BY OBTAINING THE REQUISITE DETAIL TO A RRIVE AT THE CORRECT ANNUAL RATABLE VALUE TO BRING THE SAME TO TAX. THE HONBLE BOMBAY HIGH COURT HAS ALSO STIPULATED THAT THE ASSESSING OFFICER HAS TO DISCLOSE THE MATERIAL IN HIS 12 MR. GOPAL V. GORWANI ITA NO7264/MUM/2012 ITA NO.422/MUM/2013 PAGE 12 OF 13 POSSESSION TO THE PARTIES IN ACCORDANCE WITH THE PRINCIPLES OF FAIRNESS AN D JUSTICE. THE HONBLE BOMBAY HIGH COURT THUS CLEARLY HELD THAT WHERE THERE IS A COGENT MATERIAL IN POSSESSION OF THE A SSESSING O FFICER , HE CAN PROCEED TO DETERMINE ANNUAL RATABLE VALUE UNDER THE CIRCUMSTANCES MENTIONED ABOVE. IN THE INSTANT CASE, THE ASS ESSEE HAS ENTERED INTO TWO LEAVE & LICENSE AGREEMENT OF SIMILAR FLATS IN THE SAME BUILDING ALTHOUGH AT DIFFERENT FLOORS WHEREBY IN ONE FLAT IE FLAT NO 301 WHICH IS OF HIGHER AREA IS GIVEN ON RENT OF RS. 90,000 PER MONTH WITH SECURITY DEPOSIT OF RS. 1 CRORE WHILE SIMILAR FLAT IE FLAT NO 501 IS GIVEN ON A MONTHLY RENT OF RS. 1,80,000/ - RECEIVED IN ADVANCE FOR 24 MONTHS I.E. RS. 43,20,000/ - WITH A SECURITY DEPOSIT OF RS. 1,65,000 ONLY. THESE TWO AGREEMENTS ARE ENTERED WITH IN A GAP OF 18 DAYS ONLY . THUS THE RE IS A COGENT MATERIAL IN POSSESSION OF THE A SSESSING O FFICER BEING THE TWO LEAVE AND LICENSE AGREEMENTS ENTERED INTO BY THE ASSESSEE WITH IN A GAP OF 18 DAYS WITH RESPECT TO SIMILAR FLATS IN THE SAME BUILDING ALTHOUGH AT DIFFERENT FLOORS . THE ASSESSEE HAS BEEN GIVEN DUE OPPORTUNITY TO EXPLAIN ITS STAND BEFORE THE AUTHORITIES BELOW AND ALSO BEFORE US. WE HAVE CONSIDERED THE CASE LAWS RELIED UPON BY THE ASSESSEE AND A FTER CONSIDERING THE MATERIAL ON RECORD, RIVAL CONTENTION AND CASE LAWS, WE COME TO THE CONCLUSION THAT THE A SSESSING O FFICER HAS RIGHTLY BROUGHT TO TAX ANNUAL RATABLE VALUE CALCULATED AT THE RATE OF 1,80,000/ - PER MONTH AMOUNTING TO RS. 21,60,000/ - FOR THE SAID FLAT I . E . FLAT NO 301 LET OUT TO TATA SONS LIMITED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 23 OF THE ACT WHICH HAS BEEN AFFIRMED BY THE FAA . T HE A SSESSING O FFICER HAS ALSO RIGHTLY GIVEN THE DEDUCTION AT THE RATE OF 30% U/S 24 OF THE ACT WHICH HAS BEEN UPHELD BY THE FAA. ACCORDINGLY, WE DO NOT FIND ANY ERROR OR ILL EGALITY IN THE IMPUGNED ORDER OF FAA AND THE SAME IS HEREBY AFFIRMED. 13 MR. GOPAL V. GORWANI ITA NO7264/MUM/2012 ITA NO.422/MUM/2013 PAGE 13 OF 13 19. IN THE RESULT APPEAL OF THE REVENUE AS WELL AS THAT BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 4 T H DAY OF S E P T E M B E R 2015. S D / - S D / - ( AMIT SHUKLA ) ( RAMIT KOCHAR ) (JUDICIAL MEMBER ) (ACCOUNTANT MEMBER ) MUMBAI DATED 4 - 0 9 - 2015 SKS SR. P.S, COPY TO: THE APPELLANT THE RESPONDENT THE CONCERNED CIT(A) THE CONCERNED CIT THE DR, G BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI