AKBAR HASANALI PADAMSEE, MUMBAI V. ACIT CIR. 21(2), MUMBAI

ITA 6169/MUM/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7195 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2010-2011
• Appeal Filed On: 19-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Assessee Lawyers: ISHWAR P RATHI
• Keywords: Deemed owner of house property; Deemed to accrue or arise in india; Set aside
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI C.N. PRASAD (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 6169/MUM/2016 ASSESSMENT YEAR: 2010 - 11 AKBAR HASANALI PADAMSEE, 802, VINAYAKAANGAN APTS. 93 - A OLD PRABHADEVI ROAD, PRABHADEVI, MUMBAI - 400025. VS. ASST. COM. OF INCOME TAX CIR 18(2), MUMBAI PIRAMAL CHAMBERS, PAREL, MUMBAI - 400012. PAN NO. AHFPP9512N APPELLANT RESPONDENT ASSESSEE BY : MR. ISHWAR P. RATHI , AR REVENUE BY : MR CHAUDHARY ARUNKUMAR SINGH , DR DATE OF HEARING : 25 /0 1 /2019 DATE OF PRONOUNCEMENT: 12/04/2019 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2010 - 11 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF T HE COMMISSIONER OF INCOME TAX - 33 , MUMBAI [IN SHORT CIT(A)] AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME TAX ACT 1961, (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ANNUAL LETTING VALUE OF FLAT AT BANGALORE AT AKBAR HASANALI ITA NO. 6169/MUM/2016 2 RS.1,62,000/ - AND HAS FURTHER ERRED IN NOT ALLOWING OTHER DEDUCTIONS CLAIMED AGAINST THE DECLARE D ALV OF SUCH PROPERTY. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ANNUAL LETTING VALUE OF FLAT AT 3 RD FLOOR IN PIROJA COURT, JUHU AT RS.6,46,986/ - AND HAS FURTHER ERRED IN NOT ALLOWING OTHER DEDUCTIONS CLAIMED AGAINST THE DECLARED ALV OF SUCH PROPERTY. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ANNUAL LETTING VALUE OF FLAT AT HR ISHIKESH SOCIETY AT RS.14,52,744/ - AND HAS FURTHER ERRED IN NOT ALLOWING OTHER DEDUCTIONS CLAIMED AGAINST THE DECLARED ALV OF SUCH PROPERTY. 4. IN ADDITION TO ABOVE GROUNDS OF APPEAL NO. 1 TO 3, SINCE THE AFORESAID PROPERTIES WERE VACANT FOR WHOLE OR PART OF THE YEAR, THE ASSESSING OFFICER HAS ERRED IN NOT ALLOWING VACANCY ALLOWANCE AS PER THE PROVISIONS OF INCOME TAX ACT, 1961. 3. BRIEFLY STATED, THE FACTS ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2010 - 11 ON 27.09.2010 DE CLARING TOTAL INCOME OF RS.4,77,25,290/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (AO) FOUND THAT AS PER THE BALANCE SHEET, UNDER THE HEAD ASSETS (IMMOVABLE PROPERTY) THE ASSESSEE HAS SHOWN 10 HOUSE PROPERTY, THE DETAILS BEING AS UNDER: SL NO. PARTICULARS HOUSE PROPERTY INCOME REMARKS 1. BADRUDDIN HOUSE SHARE 20,928 RENTED 2. SADRUDDIN HOUSE 7/12 SHARE 14,336 RENTED AKBAR HASANALI ITA NO. 6169/MUM/2016 3 3. AKBAR HOUSE 1/3 SHARE 8,400 DEEMED INCOME 4. FLAT AT BANGALORE 9,263 RENTED FOR 01 MONTH 5. FLAT AT NILKANTH THANE ---- USED FOR PROFESSION 6. FLAT AT PIROZA COURT WITH GARAGE 6T 925 DEEMED LET OUT 7. FLAT AT HRISHIKESH SOCIETY (1,180) DEEMED LET OUT 8. FLAT AT GOA 11,200 DEEMED LET OUT 9. FLAT AT PIROZA COURT (6 TH FLOOR) ---- USED FOR PROFESSION 10. FLAT AT VINAYAK AANGAN ---- SOP/PROFESSION AL USE. IN RESPONSE TO A QUERY RAISED BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FILED A REPLY DATED 01.06.2012 STATING THAT IN 6 TH FLOOR PIROJA COURT AND 1401, NEELKANTH HEIGHT, THE ASSESSEE HAS FULL - FLEDGED STUDIO AND THESE WERE MAINLY USED TO CARRY OUT HIS BUSINESS ACTIVITY. HOWEVER, THE AO WAS NOT CONVINCED WITH THE ABOVE EXPLANATION OF THE ASSESSEE FOR THE REASON THAT IN RESPECT OF FLAT AT PIROZA COURT (6 TH FLOOR), THE ASSESSEE NEVER SUBMITTED ANY DOCUMENT IN SUPPORT OF HIS CLAIM. THE ASSESSEE PURCHASED THE PROPERTY AT RS.5,40,000/ - . THE ASSESSEE HAS ANOTHER FLAT IN THE SAME BUILDING WHICH COSTS RS.76,11,600/ - . THE AO RELIED ON THE ORDER OF THE ITAT IN ITO V. CHEM ME CH PVT. LTD. 83 ITD 427 AND ESTIMATED THE ANNUAL LETTING VALUE (ALV) AKBAR HASANALI ITA NO. 6169/MUM/2016 4 @ 8.5% OF THE INVESTMENT. IN VIEW OF THE ABOVE FACTS, THE AO ESTIMATED THE VALUE OF PROPERTY TO RS.60,00,000/ - AND ESTIMATED THE ANNUAL LETTING VALUE (ALV) AT RS.5,10,000/ - (8.5% OF RS.60 ,00,000/ - ). IN RESPECT OF THE PROPERTY AT PIROJA COURT, JUHU, (3 RD FLOOR), THE ASSESSEE HAD OFFERED RS.925/ - AS DEEMED RENT. THE AO REJECTED THE WORKING OF THE ASSESSEE ON RATABLE VALUE BECAUSE OF THE CIRCUMSTANCE THAT THE SAID PROPERTY IS LOCATED IN A POSH LOCALITY IN MUMBAI. THEREFORE, THE AO ESTIMATED THE ALV @ 8.5% O F RS.76,11,600/ - AND IT COMES TO RS.6,46,986/ - . IN RESPECT OF FLAT AT NILKANTH , THANE, THE AO NOTED THAT THE ASSESSEE NEVER SUBMITTED ANY DOCUMENT IN SUPPORT OF HIS CLAIM. ALSO IN THIS CASE, THE AO ESTIMATED THE ALV @ 8.5% OF THE INVESTMENT OF RS.29,21,976/ - AND IT COMES TO RS.2,48,368/ - . IN RESPECT OF THE FLAT AT HRISHIKESH SOCIET Y, THE ASSESSEE HAS OFFERED LOSS OF RS.1180/ - AS DEEMED RENT FOR THIS PROPERTY. THE PURCHASE PRICE OF THE FLAT IS RS.1,70,91,100/ - TAKING INTO ACCOUNT OF THE FACT THAT THE ABOVE PROPERTY IS SITUATED AT DADAR , WHERE FAIR MARKET RENT IS VERY HIGH, THE AO REJ ECTED THE RATABLE VALUE WORKED OUT BY THE ASSESSEE AND ESTIMATED THE ALV @ 8.5% OF RS.1,70,91,100/ - AND IT COMES TO RS.14,52,744/ - . IN RESPECT OF THE FLAT AT GOA, THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE LETTING OUT THE PROPERTY IS SEASONAL AND NOT ON CONTINUOUS BASIS AND THEREFORE, THE DEEMED INCOME OF RS.16,000/ - BE CONSIDERED. THE AO NOTED THAT THE RATE OFFERED BY THE ASSESSEE IS AS PER THE ASSESSMENT AKBAR HASANALI ITA NO. 6169/MUM/2016 5 ORDER FOR AY 2001 - 02. THE FACTOR OF DEEMED INCOME DURING AY 2001 - 02 AND CONDITIONS OF REAL ESTATE C ANNOT BE HELD CONSTANT OVER THE YEARS. THUS, THE AO ESTIMATED THE ALV AT 8.5% OF RS.7,40,000/ - AND IT COMES TO RS.62,900/ - . IN RESPECT OF THE PROPERTY AT BANGALORE, THE ASSESSEE CLAIMED BEFORE THE AO THAT IT IS A RENTED PROPERTY HAVING A RENT OF RS.27,000 / - AND OFFERED HOUSE PROPERTY INCOME OF RS.9,263/ - . THE AO OBSERVED THAT THE PROPERTY IS RENTED FOR ONLY ONE MONTH I N THE CONCERNED ASSESSMENT YEAR. RELYING ON THE DECISION IN VIVEK JAIN V. ACIT 202 TAXMAN 499 (AP), WHEREIN IT HAS BEEN HELD THAT THE PERIOD FOR WHICH A LET OUT PROPERTY MAY REMAIN VACANT CANNOT EXCEED FOR WHICH PROPERTY HAS BEEN LET OUT. THE AO TREATED AN AMOUNT OF RS.1,62,000/ - (RS.27,000 X 6) AS RENT RECEIVABLE. 4. IN APPEAL, THE LD. CIT(A) CONFIRMED THE ADDITION MADE BY THE AO FOR THE BANGALORE PROPERTY, PIROJA COURT, 3 RD FLOOR JUHU, HRISHIKESH SOCIETY. HOWEVER, HE DELETED THE ALV ESTIMATED FOR THE FLATS AT NILKANTH, THANE AND PIROJA COURT, 6 TH FLOOR, JUHU. IN RESP ECT OF THE FLAT AT GOA, THE LD. CIT(A) FOLLOWED THE FOLLOWING FINDING OF THE FIRST APPELLATE AUTHORITY FOR AYS 2006 - 07, 2007 - 08 AND 2008 - 09: AFTER CONSIDERING THE RELEVANT FACTS, I FIND THAT RS.16,000/ - IS A REASONABLE AMOUNT FOR THE ALV OF THE PROPERTY. AS HAS BEEN STATED THE PROPERTY DOES NOT HAVE ANY MARKETABILITY AND ALSO COULD NOT BE LET OUT. RETURN OF INVESTMENT MAY BE CORRECT YARDSTICK TO DETERMINE THE ANNUAL VALUE. AO IS DIRECTED TO ADOPT RS.16,000/ - AS ALV FOR THIS PROPERTY. AKBAR HASANALI ITA NO. 6169/MUM/2016 6 ACCORDINGLY, T HE LD. CIT(A) DIRECTED THE AO TO TAKE THE ALV OF THE GOA PROPERTY AT RS.16,000/ - INSTEAD OF RS.62,900/ - . 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT DURING THE RELEVANT PERIOD, THE FLAT AT BANGALORE WAS LET OUT PARTLY AND ALSO WAS VACANT FO R THE REMAINING PART OF THE YEAR. AS PER SECTION 23(1)(B) OF THE ACT, IN RESPECT OF PROPERTY, WHICH IS LET OUT PARTLY AND PARTLY BEING VACANT, BONA FIDE LETTING VALUE OF SUCH PROPERTY WILL BE TAKEN TO BE THE ANNUAL MUNICIPAL RATABLE VALUE OR ACTUAL REN T RECEIVED , WHICHEVER IS HIGHER. IT IS STATED THAT SINCE IN THE GIVEN CASE, RENT RECEIVED WAS HIGHER THAN THE MUNICIPAL RATABLE VALUE, ACTUAL RENT RECEIVED I.E. RS.27,000/ - WAS CONSIDERED TO BE ANNUAL VALUE OF THE SAID PROPERTY. REGARDING THE FLAT AT PIROJA COURT, JUHU (3 RD FLOOR), IT IS STATED THAT THE SAID FLAT WAS VACANT DURING THE YEAR UNDER CONSIDERATION. DEEMED INCOME IN RESPECT OF THE SAID FLAT IS BASED ON MUNICIPAL RATABLE VALUE. AS PER THE CERTIFICATE ISSUED BY THE BMC AND THE SOCIETY, THE RATABLE V ALUE OF THE SAID FLAT IS RS.2,061/ - . THE ASSESSEE HAS CONSIDERED THE MUNICIPAL VALUATION BASED ON THE RATABLE VALUE FOR DETERMINING BONA FIDE LETTING VALUE OF THE SAID VACANT FLAT. IT IS ARGUED THAT THE APPELLATE COMMISSIONER HAS ACCEPTED THE CONTENTION OF THE ASSESSEE WHILE PASSING THE ORDER FOR THE AYS 2006 - 07, 2007 - 08 AND 2008 - 09 AND DETERMINED THE ANNUAL VALUE AT MUNICIPAL RATABLE VALUE RESPECTIVELY. ALSO IT IS STATED THAT IN AY 2009 - 10, THE AO HAS ALSO CONSIDERED THE ANNUAL VALUE AT MUNICIPAL RATABLE V ALUE ONLY. IT IS STATED THAT THE ANNUAL LETTING VALUE AS DETERMINED BY THE AO BASED ON THE ESTIMATED PERCENTAGE OF THE MARKET VALUE OF THE SAID FLAT IS ABSURD AND HAS TO BE SET ASIDE. AKBAR HASANALI ITA NO. 6169/MUM/2016 7 REGARDING THE POSSESSION OF FLAT AT HRISHIKESH, THE LD. COUNSEL SUBMIT S THAT THE SAID FLAT WAS TAKEN DURING THE YEAR UNDER CONSIDERATION AND IT WAS VACANT THROUGHOUT THE YEAR. THE ANNUAL MUNICIPAL RATABLE VALUE OF THE SAID FLAT AS DETERMINED FOLLOWING THE MUNICIPAL RECORD IS RS.16,852/ - AND ACCORDINGLY, THE SAME HAS BEEN CON SIDERED AS BONA FIDE LETTING VALUE OF THE SAID VACANT FLAT. IN THIS CASE ALSO, IT IS STATED THAT THE ALV AS DETERMINED BY THE AO BASED ON THE ESTIMATED PERCENTAGE OF THE MARKET VALUE OF THE SAID FLAT IS ABSURD AND HAS TO BE SET ASIDE. 6. ON THE OTHER HAND , THE LD. DR SUPPORTS THE ORDER OF THE LD. CIT(A) CONFIRMING THE ADDITION MADE BY THE AO IN RESPECT OF FLAT AT PIROJA COURT, JUHU, (3 RD FLOOR), FLAT AT HRISHIKESH AND FLAT AT BANGALORE. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE REASONS FOR OUR DECISIONS ARE GIVEN BELOW. IN RESPECT OF THE FLAT AT BANGALORE THERE IS NO DISPUTE THAT ALL THE FACTS WERE BEFORE THE AO. THIS IS EVIDENT FROM PAGE 3 - 4 OF THE ASSESSMENT ORDER DATED 22.03.2013 . DURING THE RELEVANT YEAR, THE FLAT WAS LET OUT PARTLY AND WAS ALSO VACANT FOR THE REMAINING PART. AS PER SECTION 23(1)(B) OF THE ACT, IN RESPECT OF PROPERTY WHICH IS LET OUT PARTLY AND VACANT PARTLY, BONA FIDE LETT ING VALUE OF SUCH PROPERTY WILL BE TAKEN TO BE THE ANNUAL MUNICIPAL RATABLE VALUE OR ACTUAL RENT RECEIVED WHICHEVER IS EARLIER. SINCE IN THE ABOVE CASE, THE RENT RECEIVED BY THE ASSESSEE WAS HIGHER THAN THE MUNICIPAL RATABLE VALUE, THE APPELLANT HAS RIGHTL Y TAKEN THE ACTUAL RENT RECEIVED OF RS.27,000/ - AS ANNUAL VALUE OF THE SAID PROPERTY. THEREFORE, WE ALLOW THE 1 ST GROUND OF APPEAL. AKBAR HASANALI ITA NO. 6169/MUM/2016 8 IN RESPECT OF THE FLAT AT PIROJA COURT, JUHU (3 RD FLOOR), THERE IS NO DISPUTE THAT ALL THE FACTS WERE BEFORE THE AO. THIS IS EVIDENT FROM PAGE 4 OF THE ASSESSMENT ORDER DATED 22.03.2013. THE SAID FLAT WAS VACANT DURING THE YEAR UNDER CONSIDERATION. DEEMED INCOME IN RESPECT OF THE SAID FLAT IS BASED ON THE MUNICIPAL RATABLE VALUE. AS PER THE CERTIFICATE ISSUED BY BMC AND THE S OCIETY, THE RATABLE VALUE OF THE SAID FLAT IS RS.2061/ - . THERE IS NO BASIS FOR ADOPTING A UNIFORM YARDSTICK OF 8.5% OF THE INVESTMENT TO ARRIVE AT THE ALV AS DONE BY THE AO IN THE PRESENT CASE. WE FIND THAT THE MUNICIPAL RATABLE VALUE AS ADOPTED BY THE ASS ESSEE FOR DETERMINING BONA FIDE LETTING VALUE OF THE SAID FLAT IS A REASONABLE ONE. THEREFORE, THE 2 ND GROUND OF APPEAL IS ALLOWED. IN RESPECT OF THE FLAT AT HRISHIKESH, THERE IS NO DISPUTE THAT ALL THE FACTS WERE BEFORE THE AO. THIS IS EVIDENT FROM PAGE 4 OF THE ASSESSMENT ORDER DATED 22.03.2013. THE POSSESSION OF THE SAID FLAT WAS TAKEN DURING THE YEAR UNDER CONSIDERATION AND IT WAS VACANT THROUGHOUT THE YEAR. THE ANNUAL MUNICIPAL RATABLE VALUE AS PER THE MUNICIPAL RECORD IS RS. 16,852/ - . THERE IS NO BASIS FOR ADOPTING A UNIFORM YARDSTICK OF 8.5% OF THE INVESTMENT TO ARRIVE AT THE ALV AS DONE BY THE AO IN THE PRESENT CASE. WE FIND THAT THE MUNICIPAL RATABLE VALUE AS ADOPTED BY THE ASSESSEE FOR DETERMINING BONA FIDE LETTING VALUE O F THE SAID FLAT IS A REASONABLE ONE. THEREFORE, THE 3 RD GROUND OF APPEAL IS ALLOWED. IN VIEW OF THE ABOVE DECISION, WE ALLOW THE 4 TH GROUND OF APPEAL AND DIRECT THE AO TO ALLOW THE VACANCY ALLOWANCE TO THE ASSESSEE AS PER THE PROVISIONS OF THE ACT. AKBAR HASANALI ITA NO. 6169/MUM/2016 9 8. IN T HE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12/04/2019. SD/ - SD/ - ( C.N. PRASAD ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 12/04/2019 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (SR. PRIVATE SECRETARY) ITAT, MUMBAI