SMT. JAISHRI CHANDEL, Mumbai V. ITO 19 (2)(1), Mumbai

ITA 5700/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1769 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 04-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Initiation of penalty proceedings; Fair market value
• Section: 271(1)(c)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI , BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER . 5700 //2019 (. . 2014-15 ) ITA NO.5700/MUM/2019 (A.Y.2014-15) SMT. JAISHRI CHANDEL 104 B, MIRAMAR CHS 3, NEPEAN SEA ROAD, MUMBAI-400036. PAN: ADSPC4506A ...... ) / APPELLANT VS. ITO-19(2)(1) ROOM NO. 221, MATRU MANDIR, TARDEO ROAD, MUMBAI-400007 ..... *,/ RESPONDENT ) -/ APPELLANT BY : SH. VIMAL PUNMIYA *, -/ RESPONDENT BY : SH. SUSHIL KUMAR MISHRA . / DATE OF HEARING : 01/04/2021 . / DATE OF PRONOUNCEMENT : 15/06/2021 / ORDER PER VIKAS AWASTHY, J.M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-53, MUMBAI [HE REINAFTER REFERRED TO AS THE CIT(A)] DATED 20.06.2019 FOR THE ASSESSMENT Y EAR (AY) 2014-15. 2 . 5700 //2019 (. .2014-15 ) ITA NO.5700/MUM/2019 (A.Y.2014-15) 2. SHRI VIMAL PUNMIYA APPEARING ON BEHALF OF THE AS SESSEE SUBMITTED THAT THE ASSESSEE IN RETURN OF INCOME HAS OFFERED INCOME FROM HOUSE PROPERTY RS. 9,00,000/-. DURING THE PERIOD RELEVANT TO AY UNDER APPEAL, THE ASSESSEE HAD RENTED OUT HER PROPERTY LOCATED AT 41A, MIRAMAR CHS , 3 NEPEANSEA ROAD, MUMBAI. A LEAVE AND LICENSE AGREEMENT DATED 10.04.2 013 WAS EXECUTED BETWEEN THE ASSESSEE AND CONSULATE GENERAL OF THE I SLAMIC REPUBLIC OF IRAN. THE SAID AGREEMENT IS AT PAGE 20 TO 33 OF PAPER BOO K (PB). THE LD. AR REFERRED TO CLAUSE-7 OF THE AGREEMENT TO SHOW THAT THE PROPE RTY WAS LET OUT ON MONTHLY RENT OF RS. 1,25,000/-. MUNICIPAL TAXES AND SOCIETY CHARGES WERE TO BE PAID BY THE ASSESSEE. THE LD. AR POINTED THAT THE AO MADE A DDITION IN RESPECT OF THE HOUSE PROPERTY BY TAKING INTO CONSIDERATION SENT RE CEIVED IN PREVIOUS AYS I.E. AY 2012-13 & 2013-14. IN IMMEDIATE PROCEEDING AYS T HE PROPERTY WAS LET OUT ON MONTHLY RENT OF RS. 2,50,000/-. THE LD. AR POINT ED THAT IN PRECEDING AYS, THE ASSESSEE HAD LET OUT PROPERTY TO HER SPOUSE AT AN I NFLATED RENT. THE ACTUAL RENTAL VALUE OF THE PROPERTY WAS FAR LESS. THE LD. AR ASSERTED THAT THE AO INSTEAD OF PLACING RELIANCE ON THE RENT RECEIVED IN THE PRECEDING AYS, SHOULD HAVE DETERMINED FAIR RENTAL VALUE AFTER MAKING ENQU IRIES FROM THE LOCAL MARKET OR THE SOCIETY OR AFTER CONSIDERING THE MUNI CIPAL VALUE. THE LD. AR REFERRED TO LETTER DATED 05.09.2019 FROM THE SOCIET Y (AT PAGE 34 OF PAPER BOOK) INDICATING THAT THE CAPITAL VALUE OF THE FLAT FOR T HE YEAR 2013-14 IS RS. 1,93,40,510/- AND THE PROPERTY TAX PAID FOR THE FLA T IN 2013-14 IS RS. 7,736/- P.A. THE LD. AR SUBMITTED THAT THE ISSUE CAN BE RES TORED BACK TO THE FILE OF AO FOR FRESH DETERMINATION OF FAIR MARKET VALUE (FMV) FOR LETTING OUT THE PROPERTY. 3 . 5700 //2019 (. .2014-15 ) ITA NO.5700/MUM/2019 (A.Y.2014-15) 3. ON THE CONTRARY, SHRI SUSHIL KUMAR MISHRA REPRES ENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE IMPUGNED ORDER AND PRAYED F OR DISMISSING THE APPEAL OF ASSESSEE. THE LD. DR SUBMITTED THAT IN PR ECEDING AYS, THE ASSESSEE HAD RENTED THE PROPERTY ON MONTHLY RENT OF RS. 2,50 ,000/-, IT IS HIGHLY IMPROBABLE THAT THE RENTAL VALUE OF THE PROPERTY IN SUBSEQUENT AY IS HALF THE VALUE. 4. BOTH SIDE HEARD, ORDERS OF AUTHORITIES BELOW EXA MINED. THE PRIMARY ISSUE RAISED BY THE ASSESSEE IN APPEAL IS AGAINST D ETERMINATION OF RENTAL VALUE OF PROPERTY LOCATED AT 41A, MIRAMAR CHS, 3 NEPEANSE A ROAD, MUMBAI. THE ASSESSEE HAS OFFERED TO TAX ACTUAL RENT RECEIVED I. E. RS. 1,25,000/-. TO SUBSTANTIATE RENT RECEIVED, THE ASSESSEE HAS PLACED ON RECORD LEAVE AND LICENSE AGREEMENT ENTERED INTO WITH CONSULATE GENERAL OF TH E ISLAMIC REPUBLIC OF IRAN. A PERUSAL OF THE SAID AGREEMENT REVEALS THAT THE MO NTHLY RENT HAS BEEN MUTUALLY FIXED AT RS. 1,25,000/- P.M. FOR A PERIOD OF 24 MONTHS STARTING FROM APRIL 2013. THE AO HAS BRUSHED ASIDE LEAVE AND LICE NSE AGREEMENT WHICH WAS IN FORCE DURING THE RELEVANT PERIOD AND HAS GIVEN M ORE CREDENCE TO THE AGREEMENT IN PRECEDING AYS. AS PER PROVISIONS OF SE CTION 23 OF THE ACT, THE AO WAS REQUIRED TO DETERMINE FMV, IF IN HIS OPINION, T HE ACTUAL RENT RECEIVED WAS LESS THAN THE FMV. OSTENSIBLY, NO ENQUIRIES WERE CO NDUCTED BY THE AO FOR DETERMINING FMV AND NO REFERENCE WAS MADE TO MUNICI PAL RECORDS. I AM OF CONSIDERED VIEW THAT DETERMINATION OF RENTAL VALUE BY THE AO IN THE PRESENT CASE IS NOT IN ACCORDANCE WITH THE PROVISIONS ENVIS AGED UNDER THE ACT. THE CIT(A) HAS ALSO ERRED IN UPHOLDING THE SAME WITHOUT GIVING DUE CONSIDERATION TO THE FACTORS NECESSARY FOR DETERMINATION OF FMV. THE FINDINGS OF THE CIT(A) ON THIS ISSUE ARE SET-ASIDE. THE ISSUE IS RESTORED BACK TO THE FILE OF AO FOR 4 . 5700 //2019 (. .2014-15 ) ITA NO.5700/MUM/2019 (A.Y.2014-15) DETERMINATION OF FMV OF THE PROPERTY, IN ACCORDANCE WITH LAW. CONSEQUENTLY, GROUND NO. 1 & 2 OF THE APPEAL ARE ALLOWED FOR STAT ISTICAL PURPOSE. 5. THERE IS NO GROUND NO.3 IN THE GROUNDS OF APPEAL . 6. IN GROUND NO.4 OF APPEAL, THE ASSESSEE HAS ASSAI LED CHARGING OF INTEREST UNDER SECTION 234A, 234B, 234C & 234D OF THE ACT. C HARGING OF INTEREST UNDER THE AFORESAID SECTIONS IS CONSEQUENTIAL AND MANDATO RY, THEREFORE, THE GROUND RAISED BY THE ASSESSEE IS WITHOUT ANY MERIT, HENCE, DISMISSED. 7. IN GROUND NO.5 OF APPEAL, THE ASSESSEE HAS ASSAI LED INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. CHA LLENGE TO PENALTY PROCEEDINGS AT THIS STAGE IS PRE-MATURE, THEREFORE, GROUND NO.5 OF THE APPEAL IS DISMISSED, AS SUCH. 8. GROUND NO.6 OF THE APPEAL IS GENERAL IN NATURE, HENCE, REQUIRE NO ADJUDICATION. 9. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLO WED FOR STATISTICAL PURPOSE IN THE TERMS AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON THURSDAY , THE 15 TH DAY OF JUNE, 2021. SD/- (VIKAS AWASTHY) / JUDICIAL MEMBER / MUMBAI, 3/ DATED: 15/06/2021 SK, PS * 4 * 4 * 4 * 4 COPY OF THE ORDER FORWARDED TO : 5 . 5700 //2019 (. .2014-15 ) ITA NO.5700/MUM/2019 (A.Y.2014-15) 1. ) / THE APPELLANT , 2. *, / THE RESPONDENT. 3. 5 ( )/ THE CIT(A)- 4. 5 CIT 5. * , . . . , / DR, ITAT, MUMBAI 6. 9 / GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI