PRAKASH AUTO, ULHASNAGAR V. DCIT CIR. 23(3), MUMBAI

ITA 5244/MUM/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0468 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 22-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABI RAMA KARTIKIYEN
• Assessee Lawyers: M N NANDGAWLKAR
• Keywords: Business income; Revision of order; Question of law; Fair market value; Notional interest; Condonation of delay; Revised return
• Section: 143(3); 142(1); 139(5); 63

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE HONBLE SH. R. C. SHARMA, A M & HONBLE SH. SANDEEP GOSAIN, JM ./ I.T.A. NO . 5244/MUM/2016 (ASSESSMENT YEAR : 2008 - 09) PRAKASH AUTO PLOT NO. 4, BEHIND SAIBABA MANDIR, KALYAN AMBERNATH ROAD, ULHASNAGAR, PIN - 421003 / VS. D CIT CIR 23 (3 ) PRATYAKSHKAR BHAVAN, BANDRA (EAST) MUMBAI - 400 051 ./ ./ PAN NO. AA A FP6436H ( / ASSESSEE ) : ( / RESPONDENT ) / ASSESSEE BY : SHRI M. N. NANDGAWLKAR , A R / RESPONDENTBY : SHRI ABI RAMA KARTIKIYEN, D R / DATE OF HEARING : 04.10 .2018 / DATE OF PRONOUNCEMENT : 28.11.2018 / O R D E R PER SANDEEP GOSAIN, J UDICIAL MEMBER : THE P RESENT APPE AL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF LD. CIT (A ) - 40, MUMBAI DATED 17.05 .16 FOR AY 2008 - 09 IN THE MATTER OF ORDER PASSED U/S 143(3) R.W.S. 263 OF THE ACT ON THE GROUNDS MENTIONED HEREIN BELOW: - 2 I.T.A. NO. 5244 /MUM/201 6 PRAKASH AUTO GROUND OF APPEAL NO. L 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE & IN LAW THE LEARNED AO HAS ERRED IN ADOPTING RS. 2545058/ - AS THE BUSINESS LOSS OF THE APPELLANT WHILE PASSING THE ORDER U/S. 143(3) R.W.S 263 AND THE CIT(A) 40, ERRED CONFIRMING THE SAME AS AGAINST THE CORRECT LOSS OF RS. 10089133/ - ADOPTED BY THE AO IN T HE ORIGINAL ASSESSMENT ORDER U/S. 143(3). GROUND OF APPEAL NO.2 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE & IN LAW THE ASSESSING OFFICER HAS ERRED IN ADDING RS. 465268/ - AS NOTIONAL INTEREST CALCULATED @10% ON DEPOSITS RECEIVED FROM LICENSEE'S AS INCOME FROM HOUSE PROPERTY OF THE APPELLANT WHICH HAS RESULTED INTO TAXING THE NET NOTIONAL INTEREST OFRS. 32S688/ - UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER, DELETE OR SUBSTITUTE ANY OF THE ABOVE GROUNDS OF AP PEAL. 2. AT THE VERY OUTSET, LD. AR APPEARING ON BEHALF OF THE ASSESSEE DRAWN OUR ATTENTION TO LETTER DATED 04.06. 2018 FILED BY THE ASSESSEE FOR SEEKING ADMISSION OF ADDITIONAL GROUND, WHICH ARE REPRODUCED BELOW: - 3 I.T.A. NO. 5244 /MUM/201 6 PRAKASH AUTO 1 . 'WITHOUT PREJUDICE TO THE GROUNDS OF APPEAL NO. 1 & 2 AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE BUSINESS LOSS OF THE APPELLANT FOR AY 2008 - 09 BE ADOPTED AT RS. 1 , 00 , 89 ,133/ - BY YOUR HONORS, AS ADOPTED AND DETERMINED BY THE AO IN THE ORDER U/S. 143(2) DATED 28.12.20 10.' 3. LD. AR SUBMITTED BEFORE US THAT THE ADDITIONAL GROUNDS OF APPEAL SPECIFICALLY BRINGS OUT THE ISSUES AND RAISED PURE QUESTION OF LAW. IT WAS SUBMITTED THAT IT WILL BRING OUT ERROR IN QUANTIFYING PENALTY AND GOES TO THE ROOTS OF THE MATTER. THE NEC ESSARY FACTS REQUIRED FOR ADJUDICATION OF THE ADDITIONAL GROUNDS OF APPEAL AND FOR ISSUE OF QUANTIFICATION ARE ALREADY ON RECORD AND HENCE NO NEW FACTS ARE REQUIRED TO BE BROUGHT ON RECORD. 4 . ON THE OTHER HAND LD. DR REQUESTED FOR DISMISSAL OF APPLICATION DATED 19.03.18 FOR ADMISSION OF ADDITIONAL GROUNDS. 5 . WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES ON THIS APPLICATION FOR ADMISSION OF ADDITIONAL GROUNDS, KEEPING IN VIEW THE CONTENTS O F THE APPLICATION AND THE JUDGMENTS RELIED UPON AND 4 I.T.A. NO. 5244 /MUM/201 6 PRAKASH AUTO ALSO THE FACTS OF THE CASE, WE ARE OF THE VIEW THAT ADDITIONAL GROUNDS RAISED BY THE ASSESSEE IS LEGAL IN NATURE AND NO NEW EVIDENCE IS REQUIRED FOR ITS ADJUDICATION, THEREFORE WE ALLOW THE APPLICATION OF ASSESSEE AND ADMI T THE ADDITIONAL GROUNDS MOVED BY THE ASSESSEE. 6 . LD. AR ALSO DRAWN OUR ATTENTI ON TOWARDS LETTER DATED 19.08.16 WHICH RELATES TO CONDONATION OF DELAY IN FILING APPEAL BEFORE HONBLE ITAT. LD. AR SUBMITTED THAT THE PRESENT APPEAL COULD NOT BE FILED WITHIN TIME BECAUSE HIS CHARTERED ACCOUNT WAS NOT WELL AND IN THIS REGARD MEDICAL CERTIFICATE IS ATTACHED FOR RECORDS AND THUS THERE WAS A SHORT DE LAY OF 13 DAYS IN FILING THE PRESENT APPEAL. 7 . ON THE OTHER HAND, LD. DR REQUESTED FOR DISMISSAL OF THE SAID APPLICATION. 8 . WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES ON THE APPLICATION FOR SEEKING CONDONATION OF DELAY AND WHILE TAKING INTO CONSI DERATION THE CONTENTS OF APPLICATION FILED BY THE 5 I.T.A. NO. 5244 /MUM/201 6 PRAKASH AUTO ASSESSEE ALONGWITH MEDICAL CERTIFICATE FOR NOT FILING THE APPEAL WITHIN LIMITATION, AND KEEPING IN VIEW THE REASONS MENTIONED IN THE AFFIDAVIT AND WHILE FOLLOWING THE PRINCIPLES LAID DOWN BY HONBLE SUPREME COURT IN CASE OF LAND ACQUISITION COLLECTOR VRS. MSTKITZI, AIR 1987 S.C. 1353 /(1987) 167 ITR 471 (SC), WE CONDONE THE DELAY OF 13 DAYS IN FILING THE APPEAL. RESULTANTLY, THIS APPLICATION IS ALLOWED AND APPEAL IS ADMITTED TO BE HEARD ON MERITS. 9 . THE BRIEF FACTS OF THE CASE ARE THAT ASSESSMENT U/S. 143(3) WAS MADE FOR A.Y.2008 - 09 BY DCIT - 23(3), MUMBAI VIDE ORDER DATED 28.12.2010. SUBSEQUENTLY THE CIT - 23 PASSED AN ORDER U/S. 263 ON 28.03.2013 SETTING ASIDE THE ORIGINAL ASSESSMENT PASSED ON 28.12.20 10 AND MAKE ASSESSMENT ON THE ISSUES MENTIONED IN THE SAID ORDER U/S. 263 IN THE LIGHT OF OBSERVATIONS MADE THEREIN & THE INCOME WAS SUBSEQUENTLY ASSESSED AT RS. 51,51,120/ - VIDE ORDER U/S. 143(3) R.W.S. 263 ON 21.2.2014. 6 I.T.A. NO. 5244 /MUM/201 6 PRAKASH AUTO AGGRIEVED BY THE ORDER OF AO, A SSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERING THE CASE OF BOTH THE PARTIES, PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. NOW BEFORE US, THE ASSESSEE HAS PREFERRED THE PRESENT APPEAL ON THE GROUNDS MENTIONED ABOVE. GROUND NO. 1 & ADDITIONAL GROUND 10 . THESE GROUND S RAISED BY THE ASSESSEE ARE INTER CONNEC TED AND INTER RELATED AND RELATES TO CHALLENGING THE ORDER OF LD. CIT(A) IN CONFIRMING THE ACTION OF AO IN ADOPTING RS. 2545058/ - AS THE BUSINESS LOSS OF THE ASSESSEE WHILE PASSING THE ORDER U/S. 143(3) R.W.S 263 AGAINST THE CORRECT LOSS OF RS. 10089133/ - ADOPTED BY THE AO IN THE ORIGINAL ASSESSMENT ORDER U/S. 143(3), THEREFORE WE THOUGHT IT FIT TO DISPOSE O F THE SAME BY THIS COMMON ORDER. 11 . LD. AR APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED BEFORE US THAT AS PER THE FACTS OF THE PRESENT CASE, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT IN THE 7 I.T.A. NO. 5244 /MUM/201 6 PRAKASH AUTO COMPUTATION OF INCOME, ON THE BASIS OF WHICH A RETURN OF INCOME WAS FILED, SOME CLERICAL ERRORS HAD OCCURRED RESULTING IN A CLAIM OF LOSS AT RS. 25,45,057/ - AS AGAINST LOSS OF RS. 78,45,058. AS PER LD. AR, THE SAID ERRORS WERE DETECTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THEREFORE ON THE BASIS OF AUDITED BOOKS OF ACCOUNT, REVISED COMPUTATION O F INCOME WAS FURNISHED BY THE A SSESSEE . IT WAS ALSO SUBMITTED THAT BOTH THE COMPUTATIONS W ERE FILED BEFORE THE AO AND THEREFORE WHILE GOING THROUGH BOTH THE COMPUTATIONS, IT IS CLEAR THAT BOTH THE C OMPUTATION SHOWS THE SAME INCOME AND LOSS. THE ONLY ERROR IS OCCURRED THAT THE RENT AL INCOME WAS SHOWN AS OTHER BUSINESS INCOME AND THE LOSS WHICH WAS RS. 78,45,058 SHOWN CORRECTLY IN RETURN, BUT WHILE ENTERING THE SAME IN SET OFF COLUMN AMOUNT ENTERED WAS R S. 25,45,058/ - . AS PER THE LD. AR, THE SAID CLERICAL ERROR OCCURRED WHILE KEYING THE FIGURE OF LINE 36 OF RS. 78,45,057/ - TO LINE NO. 37, WHERE THE FIGURE WAS KEYED AT RS. 25,45,057/ - . THE SAID FIGURE IS CARRIED TO THE PART B - TI OF ITR WHICH IS COMPUTATION OF TOTAL INCOME. IN LINE - 6, THE LOSS OF CURRENT YEAR AS REFLECTED IN LINE 37 AND THE SAME WAS ADOPTED AS THE FIGURE OF LOSS, FOR WORKING OUT THE TOTAL INCOME OF AN ASSESSEE, IN FORM ITR - 5. THE ITEM WISE DETAILS OF 8 I.T.A. NO. 5244 /MUM/201 6 PRAKASH AUTO ALL THE INCOMES AND EXPENSES ARE OTHERWIS E CORRECTLY KEYED IN PART A P & L. IT WAS ALSO SUBMITTED THAT THE AO DURING THE COURSE OF ORIGINAL ASSESSMENT HAD ACCEPTED THE BUSINESS LOSS AT RS. 78,450,58/ - IN THE ASSESSMENT ORDER PASSED U/S 143(3) DATED 28.12.10 AND AFTER CONSIDERING THE RENT INCOME SEPARATELY ARRIVED AT THE FIGURE OF LOSS AT RS. 1,00,89,133/ - BEFORE OTHER DISALLOWANCES MADE BY HIM DURING THE COURSE OF ASSESSMENT. IT WA S ALSO SUBMITTED THAT LD. CIT HAD WRONGLY INVOKED THE PROVISION U/S 263 OF THE I.T. ACT AND THEREFORE THE AO WRONGLY FOLL OWED THE DIR ECTION OF LD. CIT A ND PASSED ORDER U/S 143(3) R.W.S. 263 OF THE I.T. ACT . HENCE, THE ORDER OF LD. CIT MAY BE SET ASIDE AND THE BUSINESS LOSS OF THE ASSESSEE AT RS. 1,00,89,133/ - AS DETERMINED BY THE AO IN THE ORIGINAL ASSESSMENT BE UPHELD. 12 . ON THE OTHER HAND LD. DR R ELIED UPON T HE ORDERS PASSED BY AO U/S 143(3) R.W.S. 263 OF THE I.T. ACT. 9 I.T.A. NO. 5244 /MUM/201 6 PRAKASH AUTO 13 . WE HAVE HEARD COUNSELS FOR BOTH THE PARTIES AT LENGTH AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD , JUDGMENT CITED BY THE PARTIES AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. WE FIND FROM THE RECORDS THAT DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, THE ASSESSEE NOTICED SOME CLERICAL ERRORS RESULTING IN A CLAIM OF LOSS AT RS. 25,45,057/ - AS AGAINST LOSS OF RS. 1,00,89,133/ - AND SINCE THE SAI D ERRORS WERE DETECTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FILED REVISED COMPUTATION WHICH WAS RECEIVED BY THE AO WHILE PASSING ORIGINAL ASSESSMENT ORDER U/S 143(3) OF TH E I.T. ACT. LATER ON, LD. CIT INVOKED THE PROVISION OF SEC TION 2 63 OF THE I.T. ACT AND HEL D THAT AO HAD COMMITTED AN ERROR BY CONSIDERING THE REVISED COMPUTATION FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS DISREGARDING THE PROVISIONS OF SECTION 139(5) . THE CIT ALSO HELD THAT ASSESSEE SHOULD HAVE FILED THE REVISED RETURN OF INCOME ON OR BEFORE 31.03.10, SINCE AS PER THE PROVISION OF SECTION 139(5), IF ANY PERSON HAVING FURNISHED A RETURN U/S 139(1) OR PURSUANCE OF NOTICE U/S 142(1) DISCOVERS ANY OMISSION OR WRONG STATEMENT THEREIN, THE N THE ASSESSEE COULD FURNISH A REVISED RETURN IN ANY TIME BEFORE EXPIRY OF ONE YEAR 10 I.T.A. NO. 5244 /MUM/201 6 PRAKASH AUTO FROM THE END OF THE RELEVANT ASSESSMENT YEAR OR BEFORE THE COMPLETION OF ASSESSMENT, WHICHEVER IS EARLIER. WE FURTHER NOTICE D THAT SUBSEQUE NT TO THE ORDER OF LD. CIT, AO PASSED ASSESSMENT ORDER U/S 14 3(3) R.W.S. 263 THEREBY FOLLOWING THE DIRECTION S AND COMPUTED THE BUSINESS INCOME BY ADOPTING LOSS AT RS. 25,45,0 58/ - . ON APPEAL, LD. CIT(A) ALSO MAINTAINED THE ORDERS PASSED BY AO U/S 143(3) R.W.S. 263 OF THE I.T. ACT. AFTER ANALYZING THE ENTIRE FACTS OF THE PRESENT CASE AND AFTER METICULOUSLY GOING THROUGH THE ORDERS PASSED BY THE REVENUE AUTHORITIES, WE FIND THAT THE CLAIM OF T HE ASSESSEE WAS REJECTED BY THE REVENUE AUTHORITIES ON HYPOTHETICAL BASIS . FROM THE RECORDS, WE NOTICE D THAT INITIALLY THERE WAS SOME CLERICAL ERRORS RESULTING IN A CLAIM OF LOSS AT RS. 25,45,057/ - AS AGAINST LOSS OF RS. 1,00,89,133/ - AND SINCE THE SAID ERRORS WERE DETECTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THEREFORE ASSESSEE CORRECTED THE ERROR BY FILING THE REVIS ED COMPUTATION AND THE REVISED COMPUTATION WAS BASED ON THE BOOKS OF ACCOUNTS REGULARLY MAINTAINED AND DULY TAX AUDITED. AO IN THE ORIGINAL 11 I.T.A. NO. 5244 /MUM/201 6 PRAKASH AUTO ASSESSMENT PROCEEDINGS HAD ACCEPT ED THE SAID REVISED COMPUTATION, BUT THE LD. CIT HAD SET ASIDE THE ORDER OF ORIGINA L ASSESSMENT BY HOLDING THAT AO HAD COMMITTED ERROR BY CONSIDERING REVISED COMPUTATION FILED DURING THE COURSE OF ASSESSMENT PROCEEDING DISREGARDING THE PROVISIONS OF SECTION 139(5) OF THE I.T. ACT. AS PER THE FACTS OF THE PRESENT CASE, LD. CIT HAD NEVER DISPUTED THE CORRECTNESS OF THE AUDITED BOOKS OF ACCOUNTS OF THE ASSESSEE AND MOREOVER BOTH THE COMPUTATIONS HAD SHOWN SAME INCOME AND LOSS AND THERE WAS NO DISPUTE REGARDING THE FIGURE OF LOSS. THE HONBLE DELHI HIGH COURT IN THE CASE OF DELHI COM MISSIONER OF INCOME TAX VRS. BHARAT ALUMINIUM COMPANY, ITA NO. 160/2005, HAS CATEGORICALLY HELD THE ORDERS PASSED BY AO IN ACCEPTING THE REVISED COMPUTATION OF INCOME WAS NOT ERRONEOUS OR PREJUDICIAL TO REVENUE AND TH E REVISED COMPUTATION OF INCOME, IF THE REVISED COMPUTATION OF INCOME IS ACCEPTED WITHIN THE PRESCRIBED PERIOD. SINCE THE CLERICAL ERROR WAS DETECTED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THEREFORE ON THE BASIS OF 12 I.T.A. NO. 5244 /MUM/201 6 PRAKASH AUTO AUDITED BOOKS OF ACCOUNTS, REVISED COMPUTATION WAS FURNISHED. IT IS A SETTLED LAW THAT THE PROVISIONS OF INCOME TAX IS TO BE CONSTRUED TO TAX REAL INCOME OF THE ASSESSEE AS PER THE PROVISIONS OF I.T. ACT AND IN ORDER TO ACHIEVE THE VERY PURPOSE OF THE PROVISIONS OF I.T. ACT, IT IS NECESSARY TO IGNORE TH E HYPER TECHNICAL OBJECTION S RAISED BY THE REVENUE. AS PER ASSESSEE, THE C LERICAL ERROR HAD OCCURRED WHILE KEYING THE FIGURE OF LINE NO. 36 OF RS. 78,45,057/ - TO LINE NO. 37 WHERE THE FIGURE WAS KEYED AT RS. 25,45,057/ - FOR WORKING OUT THE TOTAL INCOME OF THE AS SESSEE IN FORM ITR - 5. THE ITEM WISE DETAILS OF ALL THE INCOMES AND EXPENSES WERE OTHERWISE CORRECTLY KEYED IN PART A OF PROFIT AND LOSS ACCOUNT WHICH IS AT PAGE NO. 23 OF THE PAPER BOOK , THEN IN OUR VIEW, CORRECTING THE SAME BY THE ASSESSEE ON THE B ASIS OF AUDITED BOOKS OF ACCOUNTS DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IS NOT BAD IN LAW. SECTION 139(5) OF THE ACT STIPULATES FILING OF REVISED RETURN BUT IN THE PRESENT CASE REVISED COMPUTATION WAS FILED. IN OUR VIEW AFTER DETECTING THE CLER ICAL ERROR DURING THE COURSE OF ASSESSMENT, THE ASSESSEE HAD NO OTHER OPTION, BUT TO FILE THE REVISED COMPUTATION WHICH CANNOT BE EQUATED WITH REVISED RETURN. EVEN OTHERWISE AS PER 13 I.T.A. NO. 5244 /MUM/201 6 PRAKASH AUTO THE FACTS OF THE PRESENT CASE, THERE WAS NO DISPUTE WITH REGARD TO TH E FIGURES OF LOSS AND BOTH THE COMPUTATIONS, SHOW SAME INCOME AND LOSSES. SO THEREFORE, IN SUCH CIRCUMSTANCES, THE ORDER PASSED BY AO U/S 143(3) R.W.S 263 OF THE ACT AND UPHELD BY LD. CIT(A) ARE NOT SUSTAINABLE IN THE EYES OF LAW. THEREFORE , CONSIDERING TH E FACTS OF THE PRESENT CASE AS WELL AS KEEPING IN VIEW THE INTEREST OF JUSTICE, WE SET ASIDE THE ORDER OF LD. CIT(A) AND RESTORE THE ORIGINAL ORDER OF ASSESSMENT PASSED BY AO U/S 143(3) OF THE I.T. ACT. WE ORDER ACCORDINGLY. RESULTANTLY, THESE GROUNDS RAI SED BY THE ASSESSEE ARE ALLOWED . GROUND NO. 2 . 14 . THIS GROUND RAISED BY THE ASSESSEE RELATES TO CHALLENGING THE ORDER OF LD. CIT(A) IN CONFIRMING THE ACTION OF AO IN ADDING RS. 465268/ - AS NOTIONAL INTEREST CALCULATED @10% ON DEPOSITS RECEIVED FROM LICENSEE'S AS INCOME FROM HOUSE PROPERTY OF THE A SSESSEE WHICH HAS RESULTED INTO TAXING THE NET NOTIONAL INTEREST OF RS. 3,25,688/ - UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 14 I.T.A. NO. 5244 /MUM/201 6 PRAKASH AUTO 15 . LD. AR SUBMITTED BEFORE US THAT ASSESSEE HAD RECEIVED INTEREST FREE SECURITY DEPOSITS FROM THE TENANTS AT THE TIME TO EXECUTING LEASE AGREEMENTS AND THE AO WHILE FRAMING THE ORIGINAL ASSESSMENT U/S 143(3) OF THE I.T. ACT, HAD NOT MADE ANY ADDITIONS ON ACCOUNT OF NOTIONAL INTEREST, BUT LD . CIT WHILE PASSING ORDER U/S 263 OF THE I.T. ACT HAD HELD THAT THE NOTIONAL INTEREST ACCRUED ON THE REFUNDABLE DEPOSITS AND ARE LIABLE TO BE TAXED AS ANNUAL LETTING VALUE AS PER THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF DIRECTOR OF INCOME TAX V RS. TRANSMARINE CORP (SUPRA) AND CONSEQUENTLY, AO WHILE FRAMING ORDER OF ASSESSMENT U/S 143(3) R.W.S 263 OF I.T ACT HAD MADE ON THIS COUNT, WHICH WAS ALSO UPHELD BY LD. CIT(A). IT WAS SUBMITTED THAT ASSESSING OF NOTIONAL INTEREST ON INTEREST FREE DEPOSI T GOES ABSOLUTELY COUNTER TO THE REAL INCOME THEORY AND WITHOUT A SPECIFIC EXPLICIT PROVISION OF LAW, NO NOTIONAL INCOME CAN EVER BE SOUGHT TO BE TAXED. IT WAS ALSO SUBMITTED THAT THE AMOUNT OF DEPOSIT RECEIVED WAS UTILIZED BY THE ASSESSEE IN THE BUSINES S AND THE RESULTANT BUSINESS INCOME WAS OFFERED TO TAX AND THEREFORE, PROPOSITION TO TAX NOTIONAL INTEREST 15 I.T.A. NO. 5244 /MUM/201 6 PRAKASH AUTO WILL RESULT INTO DOUBLE TAXATION. THEREFORE, IT WAS SUBMITTED THAT THE ORDER OF LD. CIT(A) MAY BE SET ASIDE AND THE ORDER OF AO WHILE FRAMING ORIGINA L ASSESSMENT MAY BE RESTORED. 16 . ON THE OTHER HAND LD. DR RELIED UPON THE ORDERS PASSED BY REVENUE AUTHORITIES. 17 . WE HAVE HEARD COUNSELS FOR BOTH THE PARTIES AT LENGTH AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD, JUDGMENT CITED BY BOTH TH E PARTIES AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. WE DRAW STRENGTH FROM THE JUDGMENTS RELIED UPON BY LD. AR PASSED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VRS. J. K. INVESTORS (BOMBAY) LTD (2008) 68 CCH 0288 (MUM HC) WHEREIN IT WAS HE LD AS UNDER: - APPEAL (HIGH COURT) SUBSTANTIAL QUESTION OF LAW INCOME FROM HOUSE PROPERTY - CATEGORICAL FINDING OF FACT RECORDED BY TRIBUNAL THAT ACTUAL RENT RECEIVED BY ASSESSEE WAS MORE THAN THE FAIR RENT SEC. 23(L)(B) PROVIDED THAT WHERE THE ACTUAL RENT IS MORE THAN THE FAIR RENT, ACTUAL RENT WOULD BE THE ANNUAL VALUE OF THE PROPERTY VALUE OF NOTIONAL ADVANTAGE LIKE NOTIONAL INTEREST N DEPOSIT DOES NOT FORM PART OF ACTUAL RENT AS 16 I.T.A. NO. 5244 /MUM/201 6 PRAKASH AUTO CONTEMPLATED BY S. 23(L)(B) TRIBUNAL, THEREFORE, RIGHTLY HELD THAT NOTIONAL INTEREST ON DEPOSIT COULD NOT BE TAKEN INTO ACCOUNT NO SUBSTANTIAL QUESTION OF LAW ARISES. AND JUDGMENT IN THE CASE OF CIT VRS. TIP TOP TYPOGRAPHY (2014) 90 CCH 0007 (MUM HC), WHEREIN IT WAS HELD AS UNDER: - INCOME FROM HOUSE PROPERTY ANNUAL LETTING VALUE ASSESSEE HAD LET OUT COMMERCIAL PREMISES TO A RELATED CONCERN FOR CERTAIN RENTAL VALUE AND CERTAIN AMOUNT WAS RECEIVED AS INTEREST FREE SECURITY DEPOSIT AO OBSERVED THAT RENT RECEIVED BY ASSES SES WAS NOMINAL AND CIRCUMSTANTIAL EVIDENCE INDICATED THAT FAIR MARKET VALUE WAS HIGHER AND OBTAINED INSTANCES OF RENTAL AMOUNT PREVAILING IN MARKET AND CONFIRMED THAT PROPERTY WAS NOT COVERED BY RENT CONTROL ACT AO DETERMINED ANNUAL LETTING VALUE AS PROVI DED U/S 23(L)(A) AT MUCH HIGHER VALUE THAN SHOWN BY ASSSESSEE - CIT(A) AFFIRMED FINDINGS OF AO TRIBUNAL REMITTED MATTER TO AO ASSESSING TO VERIFY THE RATEABLE VALUE FIXED BY MUNICIPAL AUTHORITIES AND IF THE SAME WAS LESS THAN VALUE SHOWN BY ASSESSEE THEN, ACTUAL RENT RECEIVED SHOULD BE TAXED HIGH COURT CONSIDERED ISSUE WHETHER AO WAS BOUND BY MUNICIPAL VALUATION OF PROPERTY, WHERE PROPERTIES BEING COVERED BY RENT CONTROL ACT BUT NO STANDARD RENT, AO CAN 17 I.T.A. NO. 5244 /MUM/201 6 PRAKASH AUTO DISREGARD STANDARD RENT AND WHETHER NOTIONAL INTEREST ON INTERESTFREE SECURITY DEPOSIT CAN BE TAKEN INTO ACCOUNT FOR DETERMINATION OF ANNUAL VALUE HELD, ALV WOULD BE SUM AT WHICH PROPERTY MAY BE REASONABLY LET OUT BY A WILLING LESSOR TO A WILLING LESSEE UNINFLUENCED BY ANY EXTRANEOUS CIRCUMSTANCES - ACTUAL REN T RECEIVED, IN NORMAL CIRCUMSTANCES, WOULD BE A RELIABLE EVIDENCE UNLESS THE RENT IS INFLATED/DEFLATED BY REASON OF EXTRANEOUS CONSIDERATION SUCH ALV, HOWEVER, CANNOT EXCEED THE STANDARD RENT AS PER RENT CONTROL LEGISLATION APPLICABLE TO PROPERTY MU NICIPAL RATEABLE VALUE THOUGH NOT BINDING ON AO IS AN APPROVED METHOD FOR DETERMINING FAIR RENTAL VALUE AND IT IS ONLY WHEN AO IS CONVINCED THAT CASE BEFORE HIM IS SUSPICIOUS, DETERMINATION BY PARTIES IS DOUBTFUL THAT HE CAN RESORT TO ENQUIRE ABOUT THE PRE VAILING RATE IN THE LOCALITY, AO CAN REJECT RATABLE VALUE FURTHER, AO CANNOT BRUSH ASIDE RENT CONTROL LEGISLATION, IN EVENT, IT IS APPLICABLE TO PREMISES IN QUESTION AO HAS TO UNDERTAKE EXERCISE CONTEMPLATED BY THE RENT CONTROL LEGISLATION FOR FIXATION OF STANDARD RENT ATTEMPT BY AO TO OVERRIDE RENT CONTROL LEGISLATION AND WHEN IT BALANCES RIGHTS BETWEEN PARTIES HAS RIGHTLY BEEN INTERFERED BY TRIBUNAL MERELY BECAUSE RENT HAS NOT BEEN FIXED UNDER THAT ACT DOES NOT MEAN THAT ANY OTHER DETERMINATION AND CONTRA RY THERETO CAN BE MADE BY AO IN EVENT SECURITY DEPOSIT COLLECTED AND REFUNDABLE 18 I.T.A. NO. 5244 /MUM/201 6 PRAKASH AUTO INTEREST FREE AND MONTHLY COMPENSATION SHOWS A TOTAL MISMATCH OR DOES NOT REFLECT PREVAILING RATE OR ATTEMPT IS TO DEFLATE OR INFLATE RENT BY SUCH METHODS, THEN, AO IS NOT PREV ENTED FROM CARRYING OUT NECESSARY INVESTIGATION AND ENQUIRY AO CAN MAKE A COMPARATIVE STUDY AND MAKE A ANALYSIS BEFORE AO DETERMINES RATE, HE IS BOUND TO DISCLOSE MATERIAL IN HIS POSSESSION TO THE PARTIES CONTENTION THAT NOTIONAL RENT ON SECURITY DEPOSIT C AN BE TAKEN INTO ACCOUNT AND CONSIDERATION FOR DETERMINATION OF ALV WAS REJECTED REVENUES APPEAL DISMISSED. AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE, WE FIND THAT AS PER SECTION 23(1)(B) OF THE I.T. ACT, IT IS EVIDENT THAT WHETHER THE ACT UAL RENT IS MORE THAN FAIR RENT, THEN THE ACTUAL RENT WOULD BE ANNUAL VALUE OF PROPERTY, THEREFORE VALUE OF NOTIONAL ADVANTAGE LIKE NOTIONAL INTEREST ON DEPOSIT, DOES NOT FORM PART OF ACTUAL RENT. SINCE IN THE PRESENT CASE, THE AO HAS FAILED TO DEMONSTRAT E THAT THE ACTUAL RENT RECEIVED BY THE ASSESSEE IS LESS THAN THE FAIR RENT. THEREFORE, WE ARE OF THE VIEW THAT NOTIONAL INTEREST ON DEPOSIT COULD NOT BE TAKEN INTO ACCOUNT WHILE CALCULATING ACTUAL RENT AS PER SECTION 23(1)(B) OF THE I.T. ACT. RESULTANTLY , THIS GROUND RAISED BY THE ASSESSEE IS ALLOWED. 19 I.T.A. NO. 5244 /MUM/201 6 PRAKASH AUTO 18 . IN THE NET RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED WITH NO ORDER AS TO COST . ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH NOV , 2018 SD/ - SD/ - ( R. C. SHARMA ) (SANDEEP GOSAIN) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 28 . 11 .201 8 SR.PS . DHANANJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE ASSESSEE 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI