YASMIN K SETHNA, MUMBAI V. ITO 12(2)(3), MUMBAI

ITA 7010/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78688 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2005-2006
• Appeal Filed On: 02-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Notional interest

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI . . , !' #$%& , !' () ! BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI N.K. BILLAIYA, AM ./I.T.A. NO.7010 & 7011/MUM/2013 ( * * * * / ASSESSMENT YEAR : 2005-06 & 2006-07 MRS. YASMIN K. SETHNA, JAIJI TERRACE, PLOT NO. 9, NAUSHIR BHARUCHA MARG, MUMBAI-400 007 THE ITO-12(2)(3), AAYAKAR BHAVAN, MUMBAI-400 020 )+ !' ./ ,- ./PAN/GIR NO. : AMNPS 3065N ( +. /APPELLANT ) .. ( /0+. / RESPONDENT ) +. 1 ! / APPELLANT BY : ` SHRI MAYUR KISNADWALA /0+. 2 1 ! /RESPONDENT BY : SHRI PRATIK SHAH 2 3' / DATE OF HEARING :16.4.2014 45* 2 3' / DATE OF PRONOUNCEMENT :16.4.2014 (!6 / O R D E R PER N.K. BILLAIYA, AM: THESE TWO APPEALS BY THE ASSESSEE ARE PREFERRED AGA INST TWO SEPARATE ORDERS OF THE LD. CIT(A)-10, MUMBAI DT. 27 .8.2013 PERTAINING TO ASSESSMENT YEARS 2005-06 & 2006-07. AS COMMON ISSU ES ARE INVOLVED IN BOTH THESE APPEALS, THEY WERE HEARD TOGETHER AND DI SPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVIT Y. ITA NO. 7010/M/2013 A.Y. 2005-06 2. THE ASSESSEE HAS RAISED THREE SUBSTANTIVE GROUND S. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSESSEE STATED THA T UNDER INSTRUCTION, HE IS ITA NOS. 7010 & 7011/M/13 2 NOT PRESSING GROUND NO. 3. GROUND NO. 3 OF A.Y. 2 005-06 IS ACCORDINGLY DISMISSED AS NOT PRESSED. 3. GROUND NO. 1 & 2 OF BOTH YEARS HAVE COMMON ISSUE S THOUGH QUANTUM MAY DEFER. THE GRIEVANCE FOR A.Y. 2005-06 READ AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN CONFIRMING THE AOS STAND OF TR EATING AS INCOME FROM HOUSE PROPERTY OF RS. 3,00,000/- WHICH IS 10% OF SECURITY DEPOSIT RECEIVED OF RS. 30,00,000/-. 2. THE LD. CIT(A) ERRED IN RESTRICTING ADDITION MADE BY THE LD. AO OF RS. 8,50,000/- OUT OF CLOSING STOCK O F COFFEE BEANS (AGRICULTURAL PRODUCE) AS INCOME FROM OTHER S OURCES. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT(A) ERRED IN CONFIRMING THE AOS STAND OF DISALLOWING HIRING CHARGES OF RS. 6,900/- ON THE BA SIS OF NO PURCHASE MADE DURING THE YEAR 4. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PRO CEEDINGS, ON GOING THROUGH THE DETAILS, THE AO NOTICED THAT THE ASSESS EE HAS DECLARED ACTUAL RENT RECEIPT AT RS. 48,000/- IN RESPECT OF THE PREM ISES LEASED TO M/S. TELCO CONSTRUCTION EQUIPMENT CO. LTD VIDE DEED OF L EASE DT. 1.9.2001. THE PROPERTY IS SITUATED AT BANGALORE HAVING A TOTA L AREA OF 3500 SQ. FT. THE AO ALSO NOTICED THAT THE ASSESSEE HAS TAKEN INT EREST FREE DEPOSITS AMOUNTING TO RS. 30,00,000/- 4.1. CONSIDERING THE AMOUNT OF RENT SHOWN BY THE AS SESSEE, THE AO WAS OF THE FIRM BELIEF THAT THE RENT SHOWN IS VERY LOW AND THE MAJOR BENEFIT OBTAINED BY THE ASSESSEE IS IN THE FORM OF INTEREST FREE DEPOSIT OF RS. 30 LAKHS. THE ASSESSEE WAS ASKED TO FURNISH THE DETAI LS RELATING TO RENT. ON RECEIVING NO SUCH WORKING, THE AO PROCEEDED TO ESTI MATE 10% OF THE INTEREST FREE DEPOSITS AND ADDED 3LACS TO THE ACTUA L RENT RECEIVED BY THE ASSESSEE , 48000.00 , AND COMPUTED THE INCOME FROM HOUSE PROPERTY AT ITA NOS. 7010 & 7011/M/13 3 RS. 3,48,000/- U/S. 23(1)(A) OF THE ACT AFTER ALLOW ING STATUTORY DEDUCTION OF 30% U/S. 24 OF THE ACT. 5. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A). IT WAS STRONGLY CONTENDED THAT THE NOTIONAL INTEREST ON SE CURITY DEPOSIT CANNOT BE ADDED TO THE VALUE OF THE ACTUAL RENT RECEIPT TO D ETERMINE THE ANNUAL LET OUT VALUE U/S. 23(1)(A) OF THE ACT. 5.1. THE LD. CIT(A) WAS CONVINCED WITH THIS SUBMIS SION OF THE ASSESSEE. HOWEVER, ON OTHER ISSUE THE LD. CIT(A) W AS OF THE OPINION THAT THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE IN RESPE CT OF THE RATEABLE VALUE. THE LD. CIT(A) DID NOT ACCEPT THE CONTENTIO N THAT ANNUAL RENT RECEIVED BY THE ASSESSEE IS MORE THAN THE VALUE AS PER SEC. 23(1)(A) OF THE ACT AND CONFIRMED THE ADDITION MADE BY THE AO. 6. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. T HE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN SUBMITTED BE FORE THE LOWER AUTHORITIES. THE LD. COUNSEL ALSO DREW OUR ATTENTI ON TO THE DECISION OF THE CO ORDINATE BENCH IN ITA NO. 1401 & 1402/M/2010 IN THE CASE OF M/S. MARCHON TEXTILES INDUSTRIES PVT. LTD AND STATE D THAT THE CO ORDINATE BENCH HAS HELD THAT NO ADDITION CAN BE MADE ON ACCO UNT OF NOTIONAL INTEREST ON SECURITY DEPOSIT. IT IS THE SAY OF THE LD. COUNSEL THAT WHILE DECIDING THE APPEAL, CO ORDINATE BENCH HAS CONSIDER ED THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S. ADVACADO PROPERTIES & TRDG (I) PVT. LTD. IN ITA NOS. 2347 & 2348/M/2010, THE LD. COUNSEL FURTH ER STATED THAT THE ACTUAL RENT RECEIVED BY THE ASSESSEE IS HIGHER THAN THE RATEABLE VALUE AND THEREFORE THE SAME SHOULD BE ASSESSED TO TAX U/S. 2 3(1)(A) OF THE ACT. 7. THE LD. DEPARTMENTAL REPRESENTATIVE RELYING ON T HE FINDINGS OF THE AO DREW OUR ATTENTION TO THE DECISION OF THE CO ORD INATE BENCH IN ITA NO. 1293 & 1294/M/2011 IN THE CASE OF M/S. BOHEA PR OPERTIES PVT. LTD. . ITA NOS. 7010 & 7011/M/13 4 IT IS THE SAY OF THE DR THAT ON IDENTICAL FACTS THE CO ORDINATE BENCH HAS RESTORED THE ISSUE BACK TO THE FILES OF THE AO FOR THE DETERMINATION OF FAIR RENT. THE LD. DR ALSO RELIED UPON THE DECISION OF THE HONBLE HIGH COURT OF DELHI FULL BENCH IN THE CASE OF CIT VS MONI KU MAR SUBBA 333 ITR 38. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE DECISIONS R ELIED UPON BY BOTH SIDES. U/S. 23(1)(A) OF THE ACT FOR THE PURPOSE OF SEC. 22, THE ANNUAL VALUE OF ANY PROPERTY IS DEEMED TO BE - THE SUM FO R WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YE AR. CLAUSE (B) OF SEC. 23(1) PROVIDES THAT IF THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IS IN EXCESS OF THE SUM REFERRED TO IN CLAUSE (A) T HEN THE RENT SO RECEIVED OR RECEIVABLE SHALL BE DEEMED TO BE THE ACTUAL VALU E OF ANY PROPERTY FOR THE PURPOSE OF SEC. 22 OF THE ACT. THE FACTS BEFO RE US SHOW THAT THE ASSESSEE HAS CLAIMED RS. 48,000/- AS ACTUAL RENT RE CEIVED. IT IS THE CLAIM OF THE ASSESSEE THAT THE ACTUAL RENT RECEIVED IS H IGHER THAN THE RATEABLE VALUE WHICH WAS AT RS. 26,500/-. TO SUBSTANTIATE T HIS CLAIM, THE ASSESSEE HAS RELIED UPON THE CERTIFICATE ISSUED BY BANGALO RE MAHA NAGAR PALIKA. THE FACTS ON RECORD ALSO SHOW THAT THE AO HAS NOT D ONE ANY EXERCISE TO DETERMINE THE FAIR RENT OF THE SAID PROPERTY TO SHO W THAT THE FAIR RENT IS HIGHER THAN THE ACTUAL RENT RECEIVED BY THE ASSESSE E. FURTHER, THE CERTIFICATE RELIED UPON BY THE ASSESSEE WAS NOT BEF ORE THE AO. THIS ISSUE NEEDS FRESH CONSIDERATION. WE, THEREFORE, RESTORE THIS ISSUE BACK TO THE FILES OF THE AO. THE AO IS DIRECTED TO DETERMINE T HE REASONABLE FAIR MARKET RENT U/S. 23(1)(A) OF THE ACT FOR THE PURPOS E OF COMPUTING THE ALV. THE ASSESSEE IS DIRECTED TO SUBSTANTIATE ITS CLAIM THAT THE ACTUAL RENT RECEIVED BY IT IS HIGHER THAN THE MUNICIPAL RATEABL E VALUE BY BRINGING COGENT MATERIAL EVIDENCE ON RECORD. ITA NOS. 7010 & 7011/M/13 5 8.1 THE DECISIONS RELIED UPON BY BOTH SIDES RELATE TO THE ADDITION ON ACCOUNT OF NOTIONAL INTEREST ON DEPOSIT. HOWEVER, A PERUSAL OF THE ORDER OF THE LD. CIT(A) CLEARLY SHOWS THAT THE LD. CIT(A) WAS CONVINCED THAT NO NOTIONAL INTEREST CAN BE ADDED FOR DETERMINING T HE ALV U/S. 23(1)(A) OF THE ACT AND THE REVENUE IS NOT IN APPEAL THEREFO RE THIS ISSUE HAS ATTAINED FINALITY AND NEED NO FURTHER ADJUDICATION. THE ISSUE RAISED VIDE GROUND NO. 1 OF BOTH THE YEARS ARE SET ASIDE FOR FRESH ADJUDICATION AS PER OUR DIRECTIONS MENTIONED HEREINABOVE. ACCORDINGLY, GROUND NO. 1 OF BOTH THE YEARS ARE ALLOWED FOR STATISTICAL PURPOSE. 9. THE COMMON GRIEVANCE QUA GROUND NO. 2 OF BOTH TH E YEARS RELATE TO THE PARTIAL CONFIRMATION OF THE ADDITION MADE BY THE AO ON ACCOUNT OF CLOSING STOCK OF COFFEE BEANS (AGRICULTURAL PRODUC E) AS INCOME FROM OTHER SOURCES. 10. IN A.Y. 2005-06 ADDITION OF RS. 10 LAKHS ON THI S ACCOUNT WAS RESTRICTED TO RS. 8,50,000/- AND IN A.Y. 2006-07, T HE ADDITION OF RS. 12 LAKHS ON THIS ACCOUNT WAS RESTRICTED TO 10 LAKHS. WE ARE CONSIDERING THE FACTS OF A.Y. 2005-06. 11. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS , THE AO NOTICED THAT THE ASSESSEE HAS DECLARED GROSS AGRICULTURAL I NCOME AT RS. 27,24,688/- WHICH HAS BEEN CLAIMED TO BE DERIVED FR OM SALE OF COFFEE BEANS THAT WERE GROWN ON THE AGRICULTURAL LAND BELO NGING TO THE ASSESSEE. THE ASSESSEE WAS ASKED TO FURNISH VARIOUS DETAILS R ELATING TO AGRICULTURAL INCOME. THE NECESSARY DETAILS WERE FILED. THE AO OBSERVED THAT THE ASSESSEE HAS NOT FILED ANY PROOF RELATING TO DELIV ERY OF GOODS. THE INVOICES WERE ALSO WITHOUT ANY AUTHENTICATION. NO DOCUMENT WAS FILED RELATING TO STOCK SHOWN AT RS. 18,09,800/-. AFTER COMPARING THE QUANTUM OF AGRICULTURAL INCOME SHOWN BY THE ASSESSEE FOR PA ST 4 YEARS AND ITA NOS. 7010 & 7011/M/13 6 CONSIDERING THE INSUFFICIENT DOCUMENTS FURNISHED BY THE ASSESSEE, THE AO ESTIMATED RS. 10 LAKHS OUT OF THE TOTAL AGRICULTURA L INCOME OF RS. 27,24,688/- AS EARNED FROM NON AGRICULTURAL SOURCES . 12. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A). BEFORE THE LD. CIT(A) ALSO NO EVIDENCE WAS FILED TO SHOW THAT THE CLOSING STOCK AT THE END OF THIS YEAR WHICH IS STATED TO BE VALUED AT MARKET PRICE WAS ACTUALLY SOLD AT THE HIGHER RATES IN THE SUBSEQUENT PERIODS. THE LD. CIT(A) FURTHER OBSERVED THAT THE VALUATION OF CLOSI NG STOCK AT HIGHER RATES IS NOT SUBSTANTIATED BY ANY EVIDENCE. AFTER CONSID ERING ALL THE FACTS AND CIRCUMSTANCES, THE LD. CIT(A) DIRECTED THE AO TO RE STRICT THE ADDITION TO RES. 8.5 LAKHS. 13. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN SUBMITTED BEF ORE THE LOWER AUTHORITIES. IT IS THE SAY OF THE LD. COUNSEL THAT THE CLOSING STOCK AS ON 31.3.2005 WAS SOLD AT A MUCH HIGHER VALUE IN A.Y. 2 006-07 WHICH IS EVIDENCED BY INVOICE DT. 26.7.2005 FOR RS. 21 LAKHS . THE LD. COUNSEL STRONGLY CONTENDED THAT THE ADDITIONS MADE BY THE AO AND PARTLY SUSTAINED BY THE LD. CIT(A) IS UNWARRANTED AND DESE RVES TO BE DELETED. 14. THE LD. DR STRONGLY SUPPORTED THE FINDINGS OF T HE LOWER AUTHORITIES. 15. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOW ER AUTHORITIES. IT IS NOT IN DISPUTE THAT THE ASSESSEE COULD NOT SUBSTANT IATE ITS VALUATION OF CLOSING STOCK THOUGH AN INVOICE HAS BEEN PLACED ON RECORD TO SHOW THAT THE STOCK AS ON 31.3.2005 WAS SOLD AT RS. 21 LAKHS , BUT A PERUSAL OF THE ASSESSMENT ORDER OF A.Y. 2006-07 , WHICH IS ALSO U NDER APPEAL , SHOWS THAT THE AO HAS NOT ACCEPTED THE GENUINENESS OF THI S INVOICE STATING THAT THE PAYMENT WAS RECEIVED IN CASH WHEN THE SAME PARTY ON PREVIOUS ITA NOS. 7010 & 7011/M/13 7 OCCASION HAS MADE THE PAYMENT BY CHEQUE FOR SALE OF RS. 4,51,200/-. AFTER GIVING A THOUGHTFUL CONSIDERATION TO THE FACT S OF THE CASE AND ALSO THE AGRICULTURAL INCOME SHOWN BY THE ASSESSEE IN PA ST 4 YEARS, IN OUR HUMBLE OPINION, RESTRICTING THE ADDITION TO 50% OF THE ADDITIONS MADE BY THE AO WOULD MEET THE ENDS OF JUSTICE. WE, ACCORDI NGLY DIRECT THE AO TO RESTRICT THE ADDITION TO RS. 5 LAKHS IN A.Y. 2005-0 6 AND RS. 6 LAKHS IN A.Y. 2006-07. THE ASSESSEE WILL GET PART RELIEF IN BOTH YEARS. GRIEVANCE RAISED VIDES GROUND NO. 2 FOR BOTH THE YEARS ARE PA RTLY ALLOWED. 16. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E ARE ALLOWED IN PART FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 16.4.2014 . (!6 2 5* '! 7 8( 9 16.4.2014 5 2 : SD/- SD/- (H.L. KARWA ) (N.K . BILLAIYA ) / PRESIDENT !' () / ACCOUNTANT MEMBER MUMBAI; 8( DATED 16.4.2014 . . ./ RJ , SR. PS ITA NOS. 7010 & 7011/M/13 8 (!6 (!6 (!6 (!6 2 22 2 /3# /3# /3# /3# ;!#*3 ;!#*3 ;!#*3 ;!#*3 / COPY OF THE ORDER FORWARDED TO : 1. +. / THE APPELLANT 2. /0+. / THE RESPONDENT. 3. < ( ) / THE CIT(A)- 4. < / CIT 5. #=: /3 , , / DR, ITAT, MUMBAI 6. : > / GUARD FILE. (!6 (!6 (!6 (!6 / BY ORDER, 0#3 /3 //TRUE COPY// ? ?? ? / @ @ @ @ , , , , (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI