EMPIRE CAPITAL PVT. LTD., MUMBAI V. ACIT - CIRCLE 2(1)(2), MUMBAI

ITA 6204/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5180 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 31-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHOOPATHI
• Assessee Lawyers: NIMESH CHOTANI
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.6204/MUM/2018(A.Y. 2014-15) EMPIRE CAPITAL PVT. LTD. 609, MAKER CHAMBER V, NARIMAN POINT, MUMBAI 400021 PAN:AABCG3540M ...... APPELLANT VS. ACIT CIRCLE 2(1)(2) MUMBAI ..... RESPONDENT APPELLANT BY : SHRI NIMESH CHOTANI RESPONDENT BY : SHRI BHOOPATHI DATE OF HEARING : 12/09/2019 DATE OF PRONOUNCEMENT : 30/10/2019 ORDER PER VIKAS AWASTHY, JM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF CIT(A) - 4, MUMBAI DATED 30/08/2018 FOR ASSESSMENT YEAR 20 14-15. 2. THE SOLITARY ISSUE RAISED IN THE APPEAL BY THE A SSESSEE IS AGAINST ADDITION OF RS.11,37,878/- ON ACCOUNT OF NOTIONAL R ENT IN RESPECT OF VACANT PROPERTY OF THE ASSESSEE SITUATED AT ANNA SALAI, CH ENNAI. 3. THE BRIEF FACTS GERMANE TO THE PRESENT APPEAL AR E: THE ASSESSEE/APPELLANT COMPANY IS ENGAGED IN THE BUSINE SS OF TRADING IN SHARES AND COMMODITIES. THE ASSESSEE OWNS A PROPER TY SITUATED AT ANNA SALAI, CHENNAI. IN THE RETURN OF INCOME FOR THE IM PUGNED ASSESSMENT YEAR THE ASSESSEE DID NOT DISCLOSE ANY RENTAL INCOME FRO M THE AFORESAID 2 ITA NO.6204/MUM/2018(A.Y. 2014-15) PROPERTY. DURING THE ASSESSMENT PROCEEDINGS THE AS SESSEE EXPLAINED THAT SINCE THE PROPERTY WAS LYING VACANT DURING THE RELE VANT PERIOD, NO RENTAL INCOME WAS DISCLOSED. THE ASSESSING OFFICER ESTIMA TED RENTAL INCOME OF THE PROPERTY AT 6% OF THE CAPITAL VALUE AND MADE AD DITION OF RS.11,37,878/- AS NOTIONAL RENT. AGGRIEVED AGAINST THE ASSESSMENT ORDER DATED 29/12/2016, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE AND CONFIRMED THE ADDITION. 3. NOW THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL ASSAILING THE FINDINGS OF CIT(A) BY RAISING FOLLOWING GROUNDS :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFICER IN COMPUTING THE ANNUAL LETTING VALUE OF THE PROPERTY SITUATED AT ANNA SALAI, CHENNAI AT 11,37,8787- ALTHOUGH THE SAME OUGHT TO BE TAKEN AS NIL UNDER SECTION 23(1 )(C) OF THE ACT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFICER WITHOUT APPRECIATING THE FACT THAT THE APPELLANT CO ULD NOT LET OUT THE SAID PROPERTY AS IT WAS BEYOND THE CONTROL OF THE APPELLANT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN STATING THAT THE APPE LLANT WAS NOT ABLE TO DEMONSTRATE THAT IT MADE EFFORTS TO LET OUT THE PROPERTY BUT WA S UNABLE TO DO SO. 4. SHRI NIMESH CHOTANI APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE PROPERTY AT ANNA SALAI, CHENNAI WAS LET OU T TO BANK OF PUNJAB ( LATER MERGED WITH HDFC BANK) IN THE YEAR 2001 FOR A PERIOD OF 13 YEARS. SUBSEQUENTLY, METRO RAIL PROJECT CAME UP IN CHENNAI AND THE CONSTRUCTION WORK ON METRO PROJECT STARTED JUST OPPOSITE TO THE PROPERTY OF THE ASSESSEE. DUE TO ON GOING METRO PROJECT WORK, HDFC BANK LTD. VACATED THE PREMISES IN THE YEAR 2010. THE LD.AUTHORIZED R EPRESENTATIVE OF THE 3 ITA NO.6204/MUM/2018(A.Y. 2014-15) ASSESSEE FURNISHED COPY OF TERMINATION OF TENANCY N OTICE DATED 01/05/2010 BY HDFC BANK LTD. 4.1 THE LD.AUTHORIZED REPRESENTATIVE OF THE ASSESSE E CONTENDED THAT AFTER THE PROPERTY FELL VACANT, THE ASSESSEE MADE E FFORTS TO FIND NEW TENANT BUT FAIL TO GET ANY TENANT DUE TO OBSTRUCTIO N CAUSED BY ONGOING METRO PROJECT JUST BEFORE THE ENTRANCE OF THE PREMI SES. THE METRO PROJECT GOT DELAYED FOR MORE THAN FIVE YEARS, CONSE QUENTLY THE APPELLANT ALSO COULD NOT FIND SUITABLE TENANT FOR THE PREMISE S. THEREAFTER, IN THE YEAR 2015-16 THE ASSESSEE COULD FIND A TENANT AND H ENCE, THE PREMISES WAS AGAIN LET OUT. THE ASSESSEE IN ITS RETURN OF I NCOME DISCLOSED THE RENTAL INCOME OF RS.2,10,000/- FROM THE PREMISES AN D THE SAME WAS ACCEPTED BY THE ASSESSING OFFICER . THE LD.AUTHORIZ ED REPRESENTATIVE OF THE ASSESSEE FURNISHED COPY OF THE ASSESSMENT ORDER DATED 18/12/2018 PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT) FOR THE ASSESSMENT YEAR 2016-17 AND THE STATE MENT OF PROFIT AND LOSS ACCOUNT FOR YEAR ENDED 31/03/2016. 4.2 THE LD.AUTHORIZED REPRESENTATIVE OF THE ASSESSE E SUBMITTED THAT ASSESSEE HAD INTENTION RIGHT THROUGH TO LET OUT THE PROPERTY, HOWEVER, FOR THE REASONS BEYOND CONTROL OF THE ASSESSEE, THE ASS ESSEE COULD NOT FIND SUITABLE TENANT FOR THE PREMISES. THE ASSESSEE MADE ALL POSSIBLE EFFORTS TO FIND A SUITABLE TENANT. THE ASSESSEE WAS IN CONSTA NT TOUCH WITH SEVERAL BROKERS. THE LD.AUTHORIZED REPRESENTATIVE OF THE A SSESSEE REFERRING TO THE PROVISIONS OF SECTION 23(1)(C) OF THE ACT CONTENDED THAT WHERE PROPERTY IS LYING VACANT AND NO RENTAL INCOME IS RECEIVED FOR E VEN PART OF THE YEAR, NO ADDITION ON ACCOUNT OF RENTAL INCOME IS TO BE MADE. TO FURTHER BUTTRESS 4 ITA NO.6204/MUM/2018(A.Y. 2014-15) HIS CONTENTIONS, LD.AUTHORIZED REPRESENTATIVE OF TH E ASSESSEE RELIED ON THE DECISION OF SACHIN R. THANDULKAR VS. DCIT REPOR TED AS 96 TAXMANN.COM 253 (MUM)(TRIB). 4.3 ON THE OTHER HAND, SHRI R.BHOOPATHI REPRESENTI NG THE DEPARTMENT VEHEMENTLY DEFENDED THE IMPUGNED ORDER. THE LD.DEP ARTMENTAL REPRESENTATIVE SUBMITTED THAT THE CONTENTIONS RAIS ED BY THE ASSESSEE BEFORE THE TRIBUNAL ARE THE SAME AS WERE MADE BEFOR E THE FIRST APPELLATE AUTHORITY. THE CIT(A), AFTER CONSIDERING THE SUBMI SSIONS AND THE DECISION IN THE CASE OF SACHIN R. TANDULKAR(SUPRA) HAS CONFI RMED THE ADDITION. THE ASSESSEE HAS NOT PLACED ON RECORD ANY DOCUMENT TO S HOW THAT ASSESSEE TOOK SOME STEPS FOR LETTING OUT THE PROPERTY. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY RIVAL SIDE S AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW. THE ASSES SEE IN APPEAL HAS ASSAILED THE ADDITION OF RS.11,37,878/- ON ACCOUNT OF NOTIONAL RENT IN RESPECT OF VACANT PROPERTY. IT IS AN UNDISPUTED FACT THAT THE PROPERTY OF THE ASSESSEE AT ANNA SALAI, CHENNAI WAS LET OUT IN THE PAST AND THE RENTAL INCOME FROM THE SAID PROPERTY WAS OFFERED TO TAX BY THE ASSESSEE UNDER THE HEAD, INCOME FROMHOUSE PROPERTY. IT WAS DURI NG THE PERIOD RELEVANT TO ASSESSMENT YEAR UNDER APPEAL THAT THE PROPERTY OF THE ASSESSEE WAS LYING VACANT AND THE ASSESSEE DID NOT OFFER ANY REN TAL INCOME IN THE RETURN OF INCOME. THE ASSESSEE HAS GIVEN REASONS EXPLAINI NG AS TO WHY THE PROPERTY IN QUESTION COULD NOT BE LET OUT. 6. BEFORE PROCEEDING FURTHER, IT WOULD BE RELEVANT TO REFER TO THE PROVISIONS OF SECTION 23 OF THE ACT DEALING WITH DE TERMINATION OF ANNUAL VALUE OF THE PROPERTY. FOR THE SAKE OF READY REFER ENCE, THE RELEVANT 5 ITA NO.6204/MUM/2018(A.Y. 2014-15) EXTRACT OF PROVISIONS OF SECTION 23 OF THE ACT ARE REPRODUCED HEREIN BELOW:- 23. (1) FOR THE PURPOSES OF SECTION 22, THE ANNUAL VALUE OF ANY PROPERTY SHALL BE DEEMED TO BE (A) THE SUM FOR WHICH THE PROPERTY MIGHT REASONABL Y BE EXPECTED TO LET FROM YEAR TO YEAR; OR (B) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THER EOF IS IN EXCESS OF THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RECEIVED O R RECEIVABLE; OR (C) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND WAS VACANT DURING THE WHOLE OR ANY PART OF THE PREVIOUS YEAR A ND OWING TO SUCH VACANCY THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS LESS THAN THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RECEIVED OR RECEIVABLE. THE PROVISIONS OF CLAUSE (C) OF SECTION 23(1) OF T HE ACT ARE ATTRACTED IF FOLLOWING CONDITIONS ARE SATISFIED: (I) THE PROPERTY WAS LET OUT IN THE PAST; (II) THE PROPERTY WAS VACANT DURING WHOLE OR ANY P ART OF THE PREVIOUS YEAR; (III) ON ACCOUNT OF VACANCY THE ACTUAL RENT RECE IVED OR RECEIVABLE BY THE OWNER IS LESS THAN THE RENT DETERMINED UNDER CLAUSE(A) OF SECTION 23(1) OF THE ACT. IF ALL ABOVE CONDITIONS ARE MET THE ACTUAL RENT REC EIVED/NIL RENT, AS THE CASE MAY BE WOULD BE ANNUAL RENTAL VALUE OF PROPERT Y. 6.1 IN THE PRESENT CASE IT IS AN UNDISPUTED FACT TH AT THE PROPERTY IN QUESTION WAS LET OUT IN THE PAST, DURING THE PERIOD RELEVANT TO ASSESSMENT YEAR UNDER APPEAL THE PROPERTY WAS LYING VACANT FOR THE ENTIRE YEAR AND HENCE, NO ACTUAL RENT WAS RECEIVED BY THE ASSESSEE. CONSEQUENTLY, THE 6 ITA NO.6204/MUM/2018(A.Y. 2014-15) ASSESSEE DID NOT OFFER ANY RENTAL INCOME TO TAX. I N THE GIVEN FACTS, THE PROVISIONS OF SECTION 23(1)(C) OF THE ACT GET ATTR ACTED. 7. IN SO FAR AS THE OBSERVATION OF THE LOWER AUTHO RITIES AND THE ARGUMENTS OF THE LD. DEPARTMENTAL REPRESENTATIVE TH AT THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE INDICATING EFFORTS MAD E FOR LETTING OUT THE PREMISES, WE DO NOT FIND FORCE IN THE SAME. THE ASSESSEE DURING THE FINANCIAL YEAR 2015-16 HAS PURPORTEDLY RENTED OUT T HE PREMISES AND HAS OFFERED THE RENTAL INCOME TO TAX. A PERUSAL OF THE STATEMENT OF PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31/03/2016 FURNISHE D BY THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE REVEAL TH AT THE ASSESSEE HAS RECEIVED RENTAL INCOME OF RS.2,10,000/-. THE LD.AU THORIZED REPRESENTATIVE OF THE ASSESSEE HAS ALSO FURNISHED COPY OF THE ASSESSMENT ORDER DATED 18/12/2018 PASSED UNDER SECTION 143(3) OF THE ACT FOR ASSESSMENT YEAR 2016-17. NO ADDITION ON ACCOUNT OF RENTAL INCOME/ NOTIONAL RENTAL INCOME HAS BEEN MADE BY THE ASSESSI NG OFFICER IN THE ASSESSMENT ORDER. THUS, RENTAL INCOME OFFERED TO T AX HAS BEEN ACCEPTED BY THE ASSESSING OFFICER. IN THE PAST AS WELL THE P ROPEPRPTY UNDER QUESTION WAS LET OUT. IT WAS DURING THE PERIOD REL EVANT TO ASSESSMENT YEAR UNDER APPEAL THAT THE PROPERTY WAS LYING VACAN T FOR WHICH REASONS WERE GIVEN BY THE ASSESSEE. IN THE PECULIAR FACTS OF THE CASE WE ARE OF THE CONSIDERED OPINION THAT NO ADDITION ON ACCOUNT OF N OTIONAL RENT IS WARRANTED. 8. THE CO-ORDINATE BENCH IN THE CASE OF SACHIN R. T ANDULKAR(SUPRA) IN SOMEWHAT SIMILAR CIRCUMSTANCES AFTER APPLYING PROVI SIONS OF SECTION 7 ITA NO.6204/MUM/2018(A.Y. 2014-15) 23(1)(C) OF THE ACT ACCEPTED RENTAL INCOME FROM THE VACANT PROPERTY AS NIL. IN VIEW OF THE SIMILARITY OF FACTS, WE F IND MERIT IN THE SUBMISSIONS OF THE ASSESSEE. ACCORDINGLY, THE IMPUGNED ORDER IS S ET-ASIDE AND THE APPEAL OF ASSESSEE IS ALLOWED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON WEDNESDAY THE 30 TH DAY OF OCTOBER, 2019. SD/- SD/- (RAJESH KUMAR) (VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 30/10/2019 VM , SR. PS(O/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// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI