Mrs. Mohni Bindra, New Delhi V. ACIT, New Delhi

ITA 4663/DEL/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4029 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 02-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 10-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KISHORE B
• Assessee Lawyers: P N CHAWLA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA ACCOUNTANT MEMBER I.T.A NO. 4663/DEL/09 ASSTT. YEAR 2006-07 MOHNI BINDRA, E-4, GREATER KAILASH-1, NEW DELHI. AAKPB0681L VS. ACIT CIRCLE-23(1) NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI P.N. CHAWLA, ADVOCATE RESPONDENT BY: SHRI KISHORE B, SR. DR ORDER PER RAJPAL YADAV, JM: THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LD. CIT(A) DATED 13 TH OCTOBER, 2009 PASSED FOR ASSTT. YEAR 2006-07. SHE HAS RAISED FIVE GROUNDS OF APPEAL. OUT OF THAT, THR EE ARE GENERAL. IN TWO SUBSTANTIAL GROUNDS OF APPEAL, SHE HAS PLEADED THAT LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF INTERES T EXPENSES AT ` 19,75,049/- AND HAS ERRED IN CONFIRMING THE ADDITIO N OF ` 5,25,000/-. ITA NO. 4663/DEL/09 ASSTT. YEAR 2006-07 2 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HA S FILED HER RETURN OF INCOME ON 4 TH OCTOBER, 2006 DECLARING AN INCOME OF ` 21,02,830/-. ON 11 TH FEBRUARY, 2002, SHE HAS ENTERED INTO A COLLABORATI ON AGREEMENT WITH ONE SHRI AJAY BHARTI FOR CONSTRUCTIO N OF A BUILDING ON A PLOT BEARING NO. E-4, GREATER KAILASH, PART 1, NEW DELHI. THE ASSESSEE IS THE OWNER IN POSSESSION OF THIS HOUSE P ROPERTY. IT WAS PURCHASED ON 18 TH JUNE1971. ACCORDING TO THE ASSESSEE, AS PER COLLABORATION AGREEMENT, THE BUILDER WILL DEMOLISH THE BUILDING AND GOT SANCTIONED THE NEW CONSTRUCTION PLAN FROM THE MCD. HE WOULD CONSTRUCT BASEMENT, GROUND FLOOR, FIRST FLOOR, SECO ND AND THIRD FLOOR. THE BUILDER WOULD BE GIVEN FIRST FLOOR OF THE BUILD ING IN LIEU OF CONSTRUCTION TO BE DONE BY HIM. ACCORDING TO THE AS SESSEE, AFTER THE CONSTRUCTION, FIRST FLOOR WAS GIVEN TO THE BUILDER BUT HE INTEND TO START A RESTAURANT ON THE FIRST FLOOR. THE ASSESSEE DID NOT AGREE WITH THIS PROPOSAL AND SHE REFUNDED THE AMOUNT SPENT ON THE C ONSTRUCTION. SHE RAISED A LOAN OF ` 2 CRORE FROM VIJAYA BANK. SHE HAS GIVEN ` 1,10,00,000/- TOWARDS THE COST OF CONSTRUCTION AND ` 90 LAC AS INTEREST ON SUCH LOAN. THE ASSESSEE HAS RENTED OUT PROPERTY. SHE CLAIMED THE INTEREST EXPENSES OF ` 21,25,049/- TOWARDS INTEREST PAID BY HER ON THE LOANS. THE AO DISALLOWED HER CLAIM ON THE GROUND TH AT SHE HAS RENTED ITA NO. 4663/DEL/09 ASSTT. YEAR 2006-07 3 OUT BASEMENT, FIRST FLOOR AND GROUND FLOOR. SHE WAS STAYING ON THE SECOND FLOOR OF THE HOUSE AND SHE TOOK THE LOAN FOR CONSTRUCTION OF THE THIRD FLOOR. THUS AS PER SECTION 24(B), ASSESSEE IS ENTITLED TO ` 1.5 LACS ONLY, BECAUSE THE HOUSE IN DISPUTE IS A SELF OCCUPI ED PROPERTY. IN THIS WAY, LD. AO HAS MADE A DISALLOWANCE OF ` 19,75,041/-. HE FURTHER MADE AN ADDITION OF ` 5,25,000/- BY ESTIMATING THE NOTIONAL RENT FOR THE FIRST FLOOR. THE ASSESSEE HAS ALSO CLAIMED DEDUCTIO N ON ACCOUNT OF INSURANCE EXPENSES AND BROKERAGE AGAINST THE INCOME FROM HOUSE PROPERTY. THE AMOUNT OF ` 1,37,588/- CLAIMED BY THE ASSESSEE HAS BEEN DISALLOWED. 3. APPEAL TO THE LD. CIT(A) DID NOT BRING ANY RELIE F TO THE ASSESSEE. 4. LD. COUNSEL FOR THE ASSESSEE, AT THE VERY OUTSET SUBMITTED THAT LD. FIRST APPELLATE AUTHORITY HAS DISMISSED THE APP EAL EX PARTE. NO PROPER OPPORTUNITY OF HEARING WAS PROVIDED TO THE A SSESSEE. HE FURTHER CONTENDED THAT AO HAS MISREAD AND MISCONSTR UED THE FACTS ON RECORD. THE LOAN WAS NOT RAISED FOR CONSTRUCTING TH E BUILDING WHICH IS SELF OCCUPIED BY THE ASSESSEE. THE LOAN WAS UTILIZE D FOR CONSTRUCTING A BUILDING WHICH WAS GIVEN ON RENT AND WHICH WAS GE NERATED A RENT OF MORE THAN ` 50 LACS TO THE ASSESSEE, NOT ONLY IN THIS YEAR BUT IN THE SUBSEQUENT YEARS ALSO. THE LD. COUNSEL FURTHER PLA CED ON RECORD OF ITA NO. 4663/DEL/09 ASSTT. YEAR 2006-07 4 THE ASSTT ORDER DATED 9.12.2009 PASSED IN ASSTT. YE AR 2007-08. HE SUBMITTED THAT IN THIS ASSTT. YEAR, ASSESSEE HAS C LAIMED PAYMENT OF INTEREST ON THE LOAN AT ` 21,24,187/-. THIS CLAIM OF THE ASSESSEE HAS BEEN ALLOWED BY THE AO IN A SCRUTINY ASSESSMENT. HE FURTHER POINTED OUT THAT AO HAS APPLIED THE PROVISIO APPENDED TO SE CTION 24 SUB SECTION (B) OF THE INCOME TAX ACT. THESE PROVISOS A RE IN RELATION TO SELF OCCUPIED PROPERTY. THEY ARE NOT APPLICABLE IN THE CASE IN HAND. HE PRAYED THAT SINCE LD. CIT(A) HAS DECIDED THE APP EAL EX PARTE AND DID NOT CONSIDER RELEVANT FACTS AND CIRCUMSTANCE, M ATTER MAY BE SET ASIDE TO THE FILE OF LD. REVENUE AUTHORITY BELOW FO R VERIFICATION AND RECONSIDERATION. THE FINDING OF THE AO THAT BUILDIN G IS USED FOR SELF RESIDENCE IS FACTUALLY INCORRECT. HE PLACED ON RECO RD COPY OF THE COLLABORATION AGREEMENT, COPY OF THE PLAN SANCTIONE D, COPY OF THE SITE PLAN EXHIBITING AREA COVERED FOR EACH FLOOR, COPIE S OF THE LEASE AGREEMENT EXHIBITING THE FACT THAT ASSESSEE HAS GI VEN THE MAJOR PREMISES ON RENT. 5. LD. DR ON THE OTHER HAND SUBMITTED THAT AO IN TH E SUBSEQUENT ASSTT. YEAR DID NOT DISCUSS THE ISSUE ELABORATELY. THOUGH IT APPEARS THAT INTEREST EXPENSES HAVE BEEN ALLOWED TO ASSESSE E. AS FAR AS THE ARGUMENT OF ASSESSEE THAT NO PROPER OPPORTUNITY OF HEARING WAS ITA NO. 4663/DEL/09 ASSTT. YEAR 2006-07 5 GRANTED TO HER IS CONCERNED, HE POINTED OUT THAT LD . CIT(A) HAS GIVEN A NUMBER OF OPPORTUNITY BUT ASSESSEE DID NOT AVAIL. HE FURTHER CONTENDED THAT AO HAS CONSIDERED ALL THE FACTS AVAI LABLE ON THE RECORD AND THEN ARRIVED AT A CONCLUSION THAT BUILDI NG IS UNDER SELF OCCUPATION AND INTEREST EXPENSES INCURRED ON LOANS FOR RAISING CONSTRUCTION CAN BE ALLOWED TO THE EXTENT ` 1.5 LAC ONLY. IN THIS WAY, LD. DR RELIED UPON THE ORDERS OF REVENUE AUTHORITY BELOW AND PRAYED THAT APPEAL MAY BE DISMISSED. 6. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AND GONE THROUGH THE RECORD CAREFULLY. THERE IS NO DISPUTE WITH REGA RD TO THE FACT THAT PLOT OF LAND BEARING NO. E-4, GREATER KAILASH PART II IS OWNED BY THE ASSESSEE. IT IS ALSO NOT IN DISPUTE THAT OLD BUILDI NG STANDING ON THIS PLOT WAS DEMOLISHED AS PER THE COLLABORATIVE AGREE MENT AND A NEW BUILDING HAS BEEN CONSTRUCTED. TOWARDS THE COST OF CONSTRUCTION, FIRST FLOOR OF THE BUILDING WAS TO BE GIVEN TO THE BUILDE R IN LIEU OF THE COST OF CONSTRUCTION. WHEN THE BUILDER INTENDED TO START A RESTAURANT, ASSESSEE OBJECTED TO IT AND ULTIMATELY PAID THE COS T OF CONSTRUCTION BY RAISING A LOAN FROM THE BANK. THE MAJOR PART OF THE BUILDING HAS BEEN LET OUT BY THE ASSESSEE AND SHE HAS BEEN SHOWING SU BSTANTIAL RENTAL INCOME. THE ASSESSEE HAS PLACED ON RECORD COPIES OF THE LEASE ITA NO. 4663/DEL/09 ASSTT. YEAR 2006-07 6 AGREEMENT. IN THIS BACKGROUND, WE ARE OF THE OPINIO N THAT AO HAS ERRED IN OBSERVING THAT LOAN RAISED BY THE ASSESSEE PERTAINS TO THE CONSTRUCTION OF THE PORTION WHICH IS UNDER SELF OCC UPATION AND FOR WHICH SHE CAN CLAIM THE DEDUCTION OF INTEREST EXPEN SE TO THE EXTENT OF ` 1.5 LACS ONLY, AS PER THE PROVISO APPENDED TO SECT ION 24(B) OF THE INCOME TAX ACT. TO OUR MIND, IT IS TOTAL MISREADING AND MISAPPRECIATION OF THE FACTS AND CIRCUMSTANCES AT T HE END OF THE AO. IN THE NEXT ASSTT. YEAR, INTEREST EXPENSES HAVE BEE N ALLOWED TO THE ASSESSEE IN A SCRUTINY ASSESSMENT. THE ESTIMATION O F NOTIONAL RENTAL INCOME IS ALSO LINKED TO THIS ISSUE. LD. FIRST APPE LLATE AUTHORITY COULD NOT CONSIDER THESE FACTS AND CIRCUMSTANCES BECAUSE ASSESSEE FAILED TO APPEAR BEFORE HIM. TAKING INTO CONSIDERATION ALL THESE FACTS AND CIRCUMSTANCES AND THE EVIDENCE ON RECORD COUPLED WI TH THE CONTRARY STAND OF THE AO IN THE SUBSEQUENT ASSESSMENT YEAR, WE DEEM IT FIT THAT ENDS OF JUSTICE WOULD MEET IF WE SET ASIDE THI S ISSUE TO THE FILE OF AO FOR REINVESTIGATION AND READJUDICATION. IT IS N EEDLESS TO SAY THAT OBSERVATIONS MADE BY US STILL NOT IMPAIR OR INJURE THE CASE OF AO OR IT WILL NOT CAUSE ANY PREJUDICE TO THE DEFENCE / EXPLA NATION OF THE ASSESSEE. THE ASSESSEE WILL BE AT LIBERTY TO SUBMIT ANY OTHER EVIDENCE IN SUPPORT OF HER EXPLANATION. THE TWO ISS UES RAISED IN THE ITA NO. 4663/DEL/09 ASSTT. YEAR 2006-07 7 GROUND OF APPEAL ARE BEING REMITTED BACK TO THE FIL E OF AO FOR READJUDICATION. AS FAR AS DISALLOWANCE OF INSURANCE AND BROKERAGE TO AGENTS ARE CONCERNED, THE ASSESSEE FAILED TO TAKE A NY SUBSTANTIAL GROUND IN THE GROUNDS OF APPEAL CHALLENGING THE FIN DING OF LD. CIT(A). HENCE, THERE IS NO OCCASION FOR US TO GIVE ANY FIND ING ON THAT ISSUE. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 6.5.2011. SD/- SD/- [SHAMIM YAHYA] [RAJPAL YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 6.5.2011P VEENA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT