JATIN M. SHETH, MUMBAI V. ITO WD 12(1)(1), MUMBAI

ITA 7037/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9402 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 04-09-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 11-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V KRISHNAMOORTHY
• Assessee Lawyers: PRAKASH BOHRA
• Keywords: Cost of acquisition

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI . . , , ! '#$% , & ' BEFORE S/SHRI DINESH KUMAR AGARW AL, AND N.K. BILLAIYA, AM ./I.T.A. NO.7037/MUM/2010 ( ( ( ( ( / ASSESSMENT YEAR : 2006-07 SHRI JATIN M. SHETH, C/O P. BOHRA & CO., 207, COMMERCE HOUSE, 140 N.M. ROAD, FORT, MUMBAI-400 023 / VS. THE ITO, WARD-12(1)(1), MUMBAI ) & ./ *+ ./PAN/GIR NO. : AAHPS 7588Q ( ), /APPELLANT ) .. ( -.), / RESPONDENT ) ), / / APPELLANT BY: SHRI PRAKASH BOHRA -.), 0 / / RESPONDENT BY : SHRI V.KRISHNAMOORTHY 0 1& / DATE OF HEARING : 08.11.2012 23( 0 1& / DATE OF PRONOUNCEMENT : 21.11.2012 4 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-23, MUMBAI DT.6.8.2010 PERTAINING TO A.Y. 2 006-07. 2. THE SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE L D. CIT(A) ERRED IN CONFIRMING THE ADDITION OF GROSS RENT INCOME OF RS. 7,96,308/- ON ERRONEOUSLY ESTIMATING THE RENT OF SUMER APARTMENTS @ 10% OF TH E COST OF ACQUISITION. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT DU RING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSER VED THAT THE ASSESSEE ITA NO. 7037/M/2010 2 HAS PURCHASED THE PROPERTY TO DERIVE RENT/LEASED IN COME FROM SHAMAN MOTORS PVT. LTD. THE VALUE OF THE PROPERTY HAS BEEN SHOWN AT RS. 95,55,570/- IN THE BALANCE SHEET. THE SAID PROPERTY WAS PURCHA SED BY THE ASSESSEE ON 27.5.2005 FOR A CONSIDERATION OF RS. 1,81,00,000/- JOINTLY WITH HIS WIFE SMT. PURNA JATIN SHETH BEING PART OWNER OF THE SAID PROP ERTY, THE VALUE OF THE PROPERTY WAS SHOWN ACCORDINGLY. 4. DURING THE COURSE OF THE PROCEEDINGS, THE AO ASK ED THE ASSESSEE WHY INCOME FROM HOUSE PROPERTY SHOULD NOT BE CALCULATED IN TERMS OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF DEEVAN DAULAT KAPUR VS NDMC 122 ITR 700 WHEREIN THE PERCENTAGE OF COST OF ACQUI SITION AS NET INCOME RECEIVABLE FROM THE PROPERTY FOR THE YEAR CONSIDERI NG THE LOCATION OF THE PROPERTY. THE AO FURTHER ASKED THE ASSESSEE WHY 10 % OF THE VALUE OF INVESTMENT SHOULD NOT BE ADOPTED AS ALV OF THE PROP ERTY. IN RESPONSE TO THE AFORESAID QUERY, THE ASSESSEE FILED A DETAILED REPL Y WHICH IS EXHIBITED AT PARA- 5 OF THE ASSESSMENT ORDER. 5. THE AO REJECTED THE SUBMISSIONS OF THE ASSESSEE AND DEPUTED HIS INSPECTOR TO VERIFY WHETHER THE OFFICE PREMISE WAS I NDEED PUT TO USE BY THE ASSESSEE FOR HIS OWN PURPOSE. THE INSPECTOR SUBMITT ED HIS REPORT AS UNDER: AS DIRECTED BY YOU, I VISITED THE PLACE CAPTIONED ABOVE. THE ENTIRE PREMISES I.E. GALA NO. 1 &2 ARE OCCUPIED BY M/S. SHAMAN MOTORS PVT. LTD. ON ENQUIRY WITH MR. DINESH SHIVAS, WHO IS ACCOUNTING MANAGER OF THE SAID COMPANY, IT W AS REVEALED THAT MR. JATIN M. SHETH & MRS. PUMA J. SHE TA ARE THE DIRECTORS OF THE COMPANY. THE PREMISES IS IN POSSE SSION OF THE SAID COMPANY SINCE LAST THREE YEARS. THE PREMISES IS USED AS SHOW ROOM-CUM-SALES OFFICE OF THE FORD CARS. 6. AFTER CONSIDERING THE REPORT OF THE WARD INSPECT OR REPRODUCED HEREINABOVE, THE AO WENT ON TO ASSESS THE ALV OF TH E PROPERTY AT THE RATE OF 10% OF THE VALUE OF THE PROPERTY AND CALCULATED ONL Y RATEABLE VALUE FOR A PERIOD OF 10 MONTHS I.E. FROM 1.6.2005 TO 31.3.2006 WHICH WORKS OUT TO RS. 7,96,208/- AND ADDED BACK TO THE TOTAL INCOME OF TH E ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. ITA NO. 7037/M/2010 3 7. THE ASSESSEE QUESTIONED THIS ADDITION BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. AFTER CONSIDERING THE FACTS A ND SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) HELD AT PARA 2.3. AS UNDER : I HAVE CAREFULLY CONSIDERED THE APPELLANTS SUBMIS SIONS AND THE ASSESSMENT ORDER. THE COPY OF LEASE & LICENCE AGRE EMENT FILED AND LETTER OF FORD INDIA PVT. LTD. DT. 26.8.2008 GRA NTING APPROVAL FOR SHIFTING THE SHOWROOM PREMISES ONLY INDICATE TH AT A FORMAL ARRANGEMENT FOR USING THE PREMISES OF SHOP NO. 1 & SHOP NO. 2 CAME INTO BEING COMMENCING FROM 1.9.2008. THIS DOE S NOT RULE OUT THE FACT OF THE PREMISES BEING USED BY THE COMP ANY PRIOR TO 1.9.2008 WITHOUT A FORMAL AGREEMENT, ESPECIALLY IN THE LIGHT OF THE FACT THAT THE APPELLANT IS A DIRECTOR OF M/S. S HAMAN MOTORS PVT. LTD. THE WARD INSPECTORS REPORT CONFIRMS THAT THE PREMISES WERE IN THE POSSESSION OF THE SAID COMPANY FOR THE LAST THREE YEARS. THUS, THE ADDITION MADE BY THE A O IS IN ORDER AND IS CONFIRMED. 8. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE SAID PROPERTY WAS PURCHASED ON 27.5.2005 BUT THE LEASE & LICENCE AGREEMENT EXECUTED WITH M/S. SHAMAN MOTORS PVT. LTD. WAS ENTE RED ON 8.8.2008 TO BE EFFECTIVE FROM 1.9.2008. THE LD. COUNSEL FURTHER S UBMITTED THAT EVEN IF FOR THE SAKE OF ARGUMENT THE REPORT OF THE WARD INSPECTO R IS ACCEPTED THEN ALSO THE ALV HAS TO BE COMPUTED ONLY FOR 3 MONTHS I.E. J ANUARY 2006 TO 31.3.2006. 9. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE FINDINGS OF THE LOWER AUTHORITIES. 10. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOW ER AUTHORITIES. WE FIND THAT THE ENTIRE ASSESSMENT HAS BEEN MADE SOLELY ON THE BASIS OF THE REPORT OF THE WARD INSPECTOR. THE CIT[A] ON ONE HAND ADMITS THE EXISTENCE OF THE LEASE AND LICENSE AGREEMENT AND THE LETTER GRANTING OF APPROVAL BY FORD INDIA PVT LTD , AND ON THE OTHER HAND DISAPPROVING THE CO NTENTS OF THE AGREEMENT AND THE LETTER ON THE SURMISE THAT THE PROPERTY MUS T HAVE BEEN USED BY SOMEONE OR THE OTHER IN THE INTERVENING PERIOD . AS SESSMENTS CANNOT BE FRAMED ON SURMISES AND CONJUCTURES. IT IS ALSO AN U NDISPUTED FACT THAT THE REPORT OF THE WARD INSPECTOR WAS NEVER CONFRONTED T O THE ASSESSEE. THEREFORE ITA NO. 7037/M/2010 4 IN THE INTEREST OF JUSTICE AND FAIR PLAY THIS ISSUE IS RESTORED BACK TO THE FILES OF THE AO. THE AO IS DIRECTED TO EXAMINE THE CONTENTS OF THE LEASE & LICENSE AGREEMENT CAREFULLY FOR WHICH HE MAY MAKE NECESSARY ENQUIRIES FROM RESPECTIVE PARTIES. THE AO IS ALSO DIRECTED TO VERI FY THE CONTENTS OF THE LETTER ISSUED BY FORD INDIA PVT. LTD., BEFORE COMING TO ANY CONCLUSIONS. IF THE AO IS SATISFIED, THAN THE ALV SHALL BE DETERMINED ACCORDI NG TO THE LEASE AND LICENSE AGREEMENT. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. 5 16 51 0 7 80 9:; <1 ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST NOVEMBER, 2012 . 4 0 3( & 7 = 6 21.11.2012 3 0 > SD/- SD/- (DINESH KUMAR AGARWAL) (N.K. BILLAI YA) / JUDICIAL MEMBER & / ACCOUNTANT MEMBER MUMBAI; = DATED 21.11.2012 . . ./ RJ , SR. PS 4 4 4 4 0 00 0 -1' -1' -1' -1' '(1 '(1 '(1 '(1 / COPY OF THE ORDER FORWARDED TO : 1. ), / THE APPELLANT 2. -.), / THE RESPONDENT. 3. ? ( ) / THE CIT(A)- 4. ? / CIT 5. '@> -1 , , / DR, ITAT, MUMBAI 6. > A / GUARD FILE. 4 4 4 4 / BY ORDER, .'1 -1 //TRUE COPY// 9 99 9 / B B B B * * * * (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI