Shruti Patni, Pune V. Deputy Commissioner of Income-tax, Circle - 7, Pune

ITA 443/PUN/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 0170 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Assessment Year: 2016-2017
• Appeal Filed On: 19-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 23(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B”, PUNE BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER ITA No.443/PUN/2019 निर्धारण वषा / Assessment Year : 2016-17 Mrs. Shruti Patni S.No.1A, Irani Market Compound, Yerawada, Pune – 411006 PAN : ALSPS5573R Vs. DCIT, Circle-7, Pune Appellant Respondent आदेश / ORDER PER S.S. GODARA, JM : This assessee‟s appeal for AY 2016-17 arises against the CIT(A), Pune-5, Pune‟s order dated 21-01-2019 passed in case No.PN/CIT(A)-5/ITO.Wd-7(2), Pune/10101/2018-19 in proceedings under Section 143(3) of the Income Tax Act, 1961, in short „the Act‟. Heard both the parties. Case file perused. Assessee by Shri C.H. Naniwadekar Revenue by Shri M.G. Jasanani Date of hearing 12-07-2022 Date of pronouncement 27-07-2022 ITA No.443/PUN/2019 Shruti Patni 2 2. The assessee pleads the following twin substantive grounds in the instant appeal: “1. In respect of addition of Rs.42,02,438 under the head „income from house property: a) In confirming the addition of Rs.42,02,438 as deemed income from house property b) In not appreciating that the assessee has taken reasonable efforts to let out the property and hence by applying the provisions of section 23(1)(c) r.w.s. 23(1)(a) the annual value of the property should be taken at „Nil‟. 2. Without prejudice to above, in confirming the computation of annual value @ Rs.52 per sq. feet p.m. and not as per the annual ratable value computed by the Pune Municipal Corporation.” 3. It emerges during the course of hearing that the assessee‟s both substantive grounds raised herein are no more res integra as this tribunal‟s co-ordinate bench‟s order in assessment year 2013- 14 involving the assessee‟s appeal ITA No.2696/PUN/2016 dated 07.06.2022 has upheld the departmental stand regarding the former issue and restored the latter one back to the Assessing Officer as follows: “4.4. Thus, the Hon‟ble High court in para 11 has categorically held as under: (i) the property, or any part thereof, must be let; and (ii) it should have been vacant during the whole or any part of the previous year ; and (iii) owing to such vacancy the actual rent received or receivable by the owner in respect thereof should be less than the sum referred to in clause (a). ITA No.443/PUN/2019 Shruti Patni 3 It is only if these three conditions are satisfied would clause (c) of section 23(1) apply in which event the amount received or receivable, in terms of clause (c) of section 23(1), shall be deemed to be the annual value of the property. Clause (c) does not apply to situations where the property has either not been let out at all during the previous year or, even if let out, was not vacant during the whole or any part of the previous year. 4.5. In this case, there is no doubt that the property was vacant during the year. It was never let out during the year or year earlier to that. Therefore, the conditions mentioned by the Hon‟ble A.P. High Court are applicable in this case, i.e. property was never let out during the year. Therefore, as held by the Hon‟ble A.P. High Court, Section 23(1)(c) will not be applicable in the case of the assessee, as the property was not let out during the year. 4.6. The Ld.AR also submitted that „intention to let out,coupled with efforts‟, is sufficient to invoke provisions of Section 23(1)(c) and actual let out is not required. However, these arguments were also made before the Hon‟ble A.P. High Court in the case of Vivek Jain (supra). In para 12 of the said order, Hon‟ble High Court has categorically held that the words „where the property is let‟ cannot be read as „where the property is intended to be let‟. The provisions of a tax statute must be strictly construed. The words of statute must be understood in their natural, ordinary or popular sense and construed according to their grammatical meaning. 4.7. Similarly, Hon‟ble A.P. High court in the case of Vivek Jain (supra) has observed in para 14 as under: Quote “ 14. The contention that, as clause (c) provides for an eventuality where a property can be vacant during the whole of the relevant previous year, both situations, i.e., "property is let" and "property is vacant for the whole of the relevant previous year" cannot coexist does not merit acceptance. Clause (c) encompasses cases where a property is; let out for more than a year in which event alone would the question of if being vacant during the whole of the previous year arise. A property let out for two or more years can also be vacant for the whole of a previous year bringing it within the ambit of clause (c) of section 23(1) of the Act.” Unquote 4.8. Thus, the contention raised by the LD.AR that a property is let out during the year and the property is also vacant cannot coexist has ITA No.443/PUN/2019 Shruti Patni 4 been considered by the Hon‟ble A.P. High Court. Hon‟ble A.P. High court has categorically stated that this contention does not merit acceptance. Thus, the said contention has been ruled out by the Hon‟ble A.P. High Court. 4.9. Hon‟ble Punjab & Haryana High Court in the case of Susham Singla Vs CIT [2016] 76 taxmann.com 349 (Punjab & Haryana) has held as under: “Thus, the annual value of the properties like the ones in the case in hand which are more than one, owned by the assessee and which admittedly remained vacant throughout the previous year would not be assessed under Section 23(1)(c) but under Section 23(1)(a). The annual value would, therefore, be determined notionally as done in the case in hand by the Assessing Officer and concurrently upheld by the Commissioner and the Tribunal.” 4.10. Thus, there are two Hon‟ble High Courts, i.e. Hon‟ble A.P. High court and Hon‟ble Punjab & Haryana High Court who have held that Section 23(1)(c) will not be applicable if the property was vacant throughout the previous year and it was not let out at all. As per judicial precedents, whenever jurisdictional High Court‟s decision is not available on a particular issue but non-jurisdictional High Court‟s decision are available, then the non-jurisdictional High court‟sdecision are binding on all lower authorities. Therefore, the decision of the Hon‟ble A.P. High Court is a binding precedence and it is binding on us. Hon‟ble A.P. High Court has interpreted Section 23(1)(c), which is a legal issue. In the case under consideration, the issue is interpretation of Section 23(1)(c), the facts are identical to the facts mentioned by the Hon‟ble A.P. High court in the case of Vivek Jain (supra). Therefore, the said decision of the Hon‟ble A.P. High court is binding on us. Therefore, there is no binding force in the order of the Hon‟ble Pune ITAT in the case of Vikas Keshav Garud (supra) and other decisions relied by the Ld.AR. 4.11. Hon‟ble Bombay High Court in the case of Smt.Godavaridevi Saraf Vs CIT,113ITR589(Bom) has held as under : Quote , “ Until contrary decision is given by any other competent High Court, which is binding on a Tribunal in the State of Bombay, it has to proceed on the footing that the law declared by the High Court, though of another State, is the final law of the land. When the Tribunal set aside the order of penalty it did not go into the question of intra vires or ultra ITA No.443/PUN/2019 Shruti Patni 5 vires. It did not go into the question of constitutionality of section 140A(3). That section was already declared ultra vires by a competent High Court in the country and an authority like an Income-tax Tribunal acting anywhere in the country has to respect the law laid down by the High Court, though of a different State, so long as there is no contrary decision of any other High Court on that question.” Unquote 4.12. In this case, it is an admitted undisputed fact that the property was vacant throughout the year and it was not let out. There is no decision available of Hon‟ble Bombay High Court on this issue which is a Jurisdictional High Court. Therefore, weare of the opinion that as held by the Hon‟ble Bombay High Court in the case of Smt. Godavaridevi Saraf (supra), the decision of Hon‟ble High Courts of other States are binding on this Tribunal (Pune Bench). Therefore, respectfully following the Hon‟ble A.P. High Court in the case of Vivek Jain (supra) and the Hon‟ble Punjab & Haryana High Court in the case of Sushma Singla (supra), we hold that the assessee‟s rent for the said property shall be calculated as per provisions of Section 23(1)(a) of the Act and Section 23(1)(c) will not be applicable in the case of assessee for the said property. 5. Thus the Ground No.1 of the Appellant assessee is dismissed. 6. The Ground No.2 is regarding Annual lettable value (ALV) calculation. The AO has calculated ALV based on the fair rent for FY 2013-14. The AR submitted that the ALV shall be calculated based on Municipal lettable value. However, none of the Lower Authorities have discussed whether Rent Control Act is applicable to the relevant property or not!. The Hon‟ble Bombay High Court in the case KokilabenD.Ambani vs. CIT in I.T.Appeal No.625 of 2000 vide order dated 20th March, 2015 has held that “Accordingly, while determining the annual letting value in respect of properties which are subject to rent control legislation and in cases where the standard rent has not been fixed, the Assessing Officer shall determine the same in accordance with the relevant rent control legislation. If the fair rent is less than the standard rent, then it is the fair rent which shall be taken as annual letting value and not the standard rent. This will apply to both, self-acquired properties and general cases where property is let out. While carrying out the exercise under section 23(1) of the Act, the Departmental authorities shall follow these guidelines reproduced above provided in the Full Bench decision of the Delhi High Court and followed by a Division Bench of this court in the case of Tip Top Typography.”. Therefore, this issue is set-aside to the file of the Assessing Officer for verifications. If the property is under Rent ITA No.443/PUN/2019 Shruti Patni 6 Control Act, then the Assessing Officer shall determine the Annual Value as per the guidelines given by the Hon‟ble Bombay High Court in the above referred decision. If the impugned property is not under Rent Control Act, then Municipal Valuation shall be considered as Annual Lettable Value. Accordingly, this Ground No.2 is allowed for statistical purpose.” 4. Mr. Nani Wadekar is fair enough in not disputing all these intervening developments. We thus, adopt judicial consistency to follow the very course of action in the impugned assessment year as well. The assessee fails in his former substantive ground and latter ground of “ALV” determination is restored back to the Assessing Officer in the same terms. Ordered accordingly. 5. This assessee‟s appeal is partly allowed for statistical purposes in above terms. Order pronounced in the Open Court on 27 th July, 2022. Sd/- Sd/- (DIPAK P. RIPOTE) (S.S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER प ु णे Pune; ददिधांक Dated : 27 th July, 2022 GCVSR ITA No.443/PUN/2019 Shruti Patni 7 आदेश की प्रतिलिपि अग्रेपिि/Copy of the Order is forwarded to: 1. अपीऱधर्थी / The Appellant; 2. प्रत्यर्थी / The Respondent; 3. The CIT(A), Pune-5, Pune 4. 5. The Pr.CIT, Pune-4, Pune विभागीय प्रविविवि, आयकर अपीलीय अविकरण, पुणे “B” / DR „B‟, ITAT, Pune 6. गार्ड फाईल / Guard file आदेशान ु सार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अविकरण ,पुणे / ITAT, Pune Date 1. Draft dictated on 12-07-2022 Sr.PS 2. Draft placed before author 20-07-2022 Sr.PS 3. Draft proposed & placed before the second member JM 4. Draft discussed/approved by Second Member. JM 5. Approved Draft comes to the Sr.PS/PS Sr.PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order.