AJAY BUILDERS, MUMBAI V. ITO WD 12(1)(2), MUMBAI

ITA 6986/MUM/2008

• Counselvise Citation: 698619914 RSA 2008
• Duration Of Justice: 2 year(s) 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 10-08-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 08-12-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K B MENON
• Assessee Lawyers: CHETAN A KALIA
• Keywords: Fair market value

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'A' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 6986/MUM/2008 (ASSESSMENT YEAR: 2005-06) M/S. AJAY BUILDERS INCOME TAX OFFICER - 12(1)(2) ASIAN BUILDING, 4TH FLOOR AAYAKAR BHAVAN, M.K. ROAD R. KAMANI MARG, BALLARD ESTATE VS. MUMBAI 400020 MUMBAI 400001 PAN - AABCA 2881 K APPELLANT RESPONDENT APPELLANT BY: SHRI CHETAN A. KALIA RESPONDENT BY: SHRI P.K.B. MENON DATE OF HEARING: 17.10.2011 DATE OF PRONOUNCEMENT: 25.10.2011 O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)- XII, MUMBAI DATED 05.09.2008. 2. THE BRIEF ISSUE IN THIS APPEAL IS WITH REFERENCE TO ADDITION ON THE BASIS OF ANNUAL LETTING VALUE OF ONE APARTMENT STATED TO HAVE BEEN OCCUPIED BY THE PARTNER. 3. ASSESSEE IS A FIRM CARRYING ON THE BUSINESS OF BUIL DER AND HAS KEPT TWO APARTMENTS AS UNSOLD AND SHOWN ` 27,03,997/- AS STOCK IN TRADE IN THE BOOKS OF ACCOUNT. THE A.O. NOTICED THAT EVEN THOUGH ONE APARTMENT WAS KEPT VACANT THE OTHER WAS OCCUPIED BY THE PARTNER F OR OWN RESIDENCE. SINCE THE APARTMENT IS NOT USED FOR THE PURPOSE OF FIRMS BUSINESS A.O. MADE ENQUIRIES WITH REFERENCE TO THE MARKET RENT AND ACC ORDINGLY CONSIDERED THAT THE FLATS WERE BEING LET OUT AT ` 85,000/- TO ` 1,00,000/- PER MONTH. ASSESSEE VIDE LETTER DATED 24.12.2007 CONFIRMED THAT SHRI NI LESH VAGHANI, PARTNER IS ITA NO. 6986/MUM/2008 M/S. AJAY BUILDERS 2 STAYING IN FLAT NO. 502/602 (DUPLEX). THE A.O. WITH OUT ANY FURTHER OPPORTUNITY ESTIMATED THE MONTHLY RENT AT ` 90,000/- PER MONTH AND ARRIVED AT THE ANNUAL LETTING VALUE AT ` 7,42,770/-. ASSESSEE CONTESTED THE SAME BEFORE THE CIT(A) AND ON VARIOUS FACTS AND ISSUES, WHICH THE CIT(A) REJECTED. ASSESSEE FILED A BMC CERTIFICATE SHOWING THE RATEAB LE VALUE WHICH THE CIT(A) RECORDED IN PARA 2.3 BUT REJECTED THE CONTENTIONS O N THE REASON THAT A.O. ARRIVED AT THE AMOUNT ON THE BASIS OF MARKET ENQUIR IES. 4. THE LEARNED COUNSEL SUBMITTED THAT THE A.O. HAS NOT GIVEN OPPORTUNITY TO CONTEST THE ISSUE AND ONLY ENQUIRED WHETHER THE PARTNER WAS OCCUPYING THE PROPERTY, WHICH THE ASSESSEE HAS CONF IRMED VIDE LETTER DATED 24.12.2007. THE ASSESSMENT ORDER WAS PASSED WITHOUT GIVING ANY OPPORTUNITY ON 28.12.2007. IT WAS FURTHER SUBMITTED THAT THE ENQUIRY MADE THROUGH THE WARD INSPECTOR REGARDING THE MARKET REN T WERE NOT PUT TO THE ASSESSEE NOR IT WAS PLACED ON RECORD SO THAT ASSESS EE COULD EXAMINE WHAT IS THE MARKET RENT. IT WAS FURTHER SUBMITTED THAT ASSE SSEE FURNISHED BMC RATEABLE VALUE VIDE LETTER DATED 22.04.2008 FILED B EFORE THE CIT(A) WHICH THE CIT(A) HAS NOT CONSIDERED. IT WAS FURTHER SUBMITTED THAT ASSESSEES PARTNER IS STILL IN OCCUPATION OF THE FLAT AND SINCE THERE IS NO AGREEMENT, RENT CONTROL ACT DOES NOT APPLY TO THIS TRANSACTION. IT WAS HIS SUBMISSION THAT ANNUAL LETTING VALUE IS TO BE EXAMINED ON THE BASIS OF FAIR MARKET RENT FOR WHICH MUNICIPAL RATEABLE VALUE IS ONE OF THE INDICA TION AND ACCORDINGLY THE ADDITION SHOULD BE RESTRICTED TO THE ANNUAL LETTING VALUE AS PER THE BMC RECORDS. HE ALSO FILED THE WORKING OF HOUSE PROPERT Y INCOME CONSIDERING THE MUNICIPAL RATEABLE VALUE AT ` 28,662/- STATED TO HAVE BEEN FILED BEFORE THE CIT(A) AS WELL. 5. THE LEARNED D.R. WHILE ADMITTING THAT COPY OF THE W ARD INSPECTORS REPORT WAS NOT ON RECORD, RELIED ON THE ORDERS OF T HE A.O. AND CIT(A) TO SUBMIT THAT THE PARTNER WAS KEEPING THE FLAT AND MA RKET VALUE ARE CONSIDERABLY HIGH AND SUPPORTED THE ORDER OF THE A. O. 6. WE HAVE CONSIDERED THE ISSUE AND RIVAL CONTENTIONS. THE ASSESSING OFFICER ORDER DOES NOT INDICATE THE SIZE OF THE FL AT FOR THE PURPOSE OF ARRIVING AT THE FAIR MARKET VALUE FOR ADOPTING INCOME FROM H OUSE PROPERTY. EVEN ITA NO. 6986/MUM/2008 M/S. AJAY BUILDERS 3 THOUGH ASSESSEE HAS NOT DISPUTED INVOCATION OF PROV ISIONS OF SECTION 23(1)(A) IT IS THE CONTENTION THAT A.O. HAS NOT GIVEN PROPER OPPORTUNITY BEFORE ESTIMATING THE INCOME AT ` 90,000/- PER MONTH. IT IS ALSO THE CONTENTION THAT THE WARD INSPECTORS REPORT WAS ALSO NOT PLACED ON RECORD AND WAS NOT MADE AVAILABLE TO ASSESSEE. AS SEEN FROM THE ORDER OF TH E A.O. THESE CONTENTIONS ARE CORRECT. BEFORE THE CIT(A) ASSESSEE FILED FAIR MARKET RENT REPORT FROM THE BMC AND ARRIVED AT ITS OWN WORKING WHICH THE CIT(A) EVEN THOUGH ACKNOWLEDGES, REJECTED THE SAME WITHOUT GIVING ANY PROPER REASON. 7. LAW ON INVOKING PROVISIONS OF SECTION 23(1)(A) AND ARRIVING AT ALV HAS BEEN VERY CLEARLY ESTABLISHED IN VARIOUS JUDICIAL P RINCIPLES. WITHOUT GOING INTO THESE PRINCIPLES AND APPLICABILITY OF FAIR MAR KET VALUE FOR THE PURPOSE OF ESTIMATING ANNUAL LETTING VALUE WE ARE OF THE OPINI ON THAT SINCE ASSESSEE WAS NOT GIVEN PROPER OPPORTUNITY DURING THE ASSESSM ENT PROCEEDINGS THE MATTER CAN BE RE-EXAMINED BY THE A.O. AFRESH GIVING PROPER OPPORTUNITY TO THE ASSESSEE. FOR THIS REASON THE ORDERS OF THE A.O . AND THE CIT(A) ON THIS ISSUE ARE SET ASIDE AND THE MATTER OF ESTIMATING AN NUAL LETTING VALUE UNDER SECTION 23(1)(A) IS RESTORED TO THE FILE OF THE A.O . THE A.O. IS DIRECTED TO GIVE PROPER OPPORTUNITY TO ASSESSEE BEFORE ESTIMATING TH E INCOME CONSIDERING THE OBJECTIONS RAISED BY THE ASSESSEE AND THE PRINCIPLE S OF LAW ON THE SUBJECT, IN DETAIL. ACCORDINGLY, THE GROUNDS ARE CONSIDERED ALL OWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PU RPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH OCTOBER 2011. SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED: 25 TH OCTOBER 2011 ITA NO. 6986/MUM/2008 M/S. AJAY BUILDERS 4 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XII, MUMBAI 4. THE CIT XII, MUMBAI CITY 5. THE DR, A BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.