MANISH DHIRAJLAL POPAT, MUMBAI V. ADDL CIT 26(1), MUMBAI

ITA 7717/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9045 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 15-12-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 26-12-2014
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Keywords: Source of fund
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI JOGINDER SINGH (JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA (ACCOUNTANT MEMBER) I.T.A. NO.7717/MUM/2014 (ASSESSMENT YEAR: 2011-12) MANISH DHIRAJLAL POPAT 116A/8, GITANJALI, SION WEST MUMBAI-22 VS ADDL. CIT 26(1) MUMBAI PAN : AAIPP9936C (APPELLANT) (RESPONDENT) APPELLANT BY SHRI MEHUL SHAH RESPONDENT BY SHRI SUMAN KUMAR (DR) DATE OF HEARING : 10-01-2017 DATE OF ORDER : 13 -01-2017 O R D E R PER ASHWANI TANEJA, AM: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-28, MUMBAI [HE REINAFTER CALLED CIT(A)] DATED 13-11-2014 PASSED AGAINST THE ASSESSM ENT ORDER OF THE AO U/S 143(3) DATED 16-01-20-14 FOR A.Y 2010-11 ON THE FOLLOWING GROUNDS:- 1. ON THE FACTS, AND IN CIRCUMSTANCES OF THE CASE, AND IN LAW, LEARNED COMMISSIONER OF INCOME-TAX (APPEAL) ERRED I N UPHOLDING ORDER OF THE ASSESSING OFFICER IN TREATING THE ASHR IWAD PROPERTY OWNED BY THE APPELLANT AS DEEMED TO BE LET OUT PROP ERTY WITHOUT APPRECIATING THAT THE GITANJALI PROPERTY WAS UNDER REPAIR AND 2 I.T.A. NO.7717/MUM/2014 RENOVATION, AND WAS NOT HABITABLE FOR HUMAN STAY WH ICH WAS EVENTUALLY REPAIRED AND RENOVATED IN OCTOBER 2011, I.E., AFTER END OF THE RELEVANT PREVIOUS YEAR, AND IN VIEW OF THAT, TH E GITANJALI PROPERTY COULD NOT BE TREATED AS 'HOUSE PROPERTY' WITHIN THE MEANING OF SECTION 22 AND 23 OF THE INCOME-TAX ACT 1961. 2. ON THE FACTS, AND IN CIRCUMSTANCES OF THE CASE, AND IN LAW, LEARNED COMMISSIONER OF INCOME-TAX (APPEAL) ERRED I N UPHOLDING ORDER OF THE ASSESSING OFFICER IN NOT ADOPTING MUNI CIPAL RATABLE VALUE OF RS. 9,548 PER ANNUM AS ANNUAL VALUE OF THE ASHIR WAD PROPERTY WITHIN THE MEANING OF SECTION 23 OF THE INCOME-TAX ACT 1961, AND ADOPTING RS. 35 PER SQUARE FEET AS RENT AS ANNUAL V ALUE UNDER SECTION 23. 3. ON THE FACTS, AND IN CIRCUMSTANCES OF THE CASE, AND IN LAW, LEARNED COMMISSIONER OF INCOME-TAX (APPEAL) ERRED I N UPHOLDING ORDER OF THE ASSESSING OFFICER IN NOT APPRECIATING THAT THE LOAN GIVEN BY THE APPELLANT TO HIS WIFE MRS. APARANA MANISH PO PAT WAS NOT AN 'ASSETS TRANSFERRED' WITHIN THE MEANING OF SECTI ON 64 OF THE INCOME-TAX ACT 1961; AND EVEN OTHERWISE, THE LOAN W AS PREDOMINANTLY USED FOR ACQUIRING A RESIDENTIAL HOUS E AND NOT FOR MAKING INVESTMENT TO EARN INCOME CAPABLE OF BEING C LUBBED UNDER SECTION 64 OF THE INCOME-TAX ACT 1961. 2. GROUNDS 1 & 2 RAISE THE COMMON ISSUE WHEREIN ASSESSEE IS AGGRIEVED WITH THE ACTION OF LOWER AUTHORITIES THAT AO BROUGHT TO TAX DEEMED ANNUAL VALUE U/S 23 OF THE ACT OF THE RESIDE NTIAL FLAT PURCHASED BY THE ASSESSEE AT GITANJALI BUILDING. 3. THE BRIEF BACKGROUND AS CULLED OUT FROM THE ORDERS OF THE LOWER AUTHORITIES IS THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT ASSESSEE OWNED TWO HOUSE PROPERTIES. IN THE RETURN OF INCOME, ASSESSEE DID NOT OFFER ANY INCOME FROM THE HOUSE PROPERTY. THE 3 I.T.A. NO.7717/MUM/2014 AO CONFRONTED THE ASSESSEE THAT DEEMED RATEABLE VAL UE OF ONE OF THE RESIDENTIAL FLATS SHOULD BE BROUGHT TO TAX. IN RES PONSE, IT WAS SUBMITTED BY THE ASSESSEE THAT ONE OF THE HOUSES WAS SELF-OCCUPI ED AND THE OTHER ONE, LOCATED AT GITANJALI BUILDING (SION, MUMBAI) WAS NE WLY ACQUIRED AND THE SAME WAS PUT THROUGH RENOVATION AND REPAIRS AND WAS NOT INHABITABLE DURING THE YEAR, THEREFORE, IT SHOULD NOT BE TREATE D AS DEEMED TO BE LET OUT. HOWEVER, THE AO WAS OF THE VIEW THAT THE ASSE SSEE HAD ACQUIRED FLAT READY FOR POSSESSION. THEREFORE, IT WAS IN INHABIT ABLE CONDITION AND THUS ITS DEEMED RENTAL VALUE IS TO BE BROUGHT TO TAX U/ S 23 OF THE ACT. ACCORDINGLY, HE COMPUTED INCOME FROM HOUSE PROPERTY AT RS.1,13,268/- AS PER DETAILS GIVEN IN THE ASSESSMENT ORDER. IN APPE AL BEFORE LD. CIT(A), THE ASSESSEE REITERATED HIS SUBMISSIONS IN DETAIL AND A LSO BROUGHT TO ATTENTION OF THE CIT(A) A CERTIFICATE ISSUED FROM ITS INTERIO R CONSULTANT TO THE FACT THAT THE FLAT WAS UNDER REPAIRS AND RENOVATION AND WAS NOT IN INHABITABLE CONDITION DURING THE YEAR UNDER CONSIDERATION. BUT LD. CIT(A) DID NOT AGREE WITH THE SUBMISSIONS OF THE ASSESSEE ON THE G ROUND THAT INCOMPLETE EVIDENCE HAVE BEEN BROUGHT ON RECORD IN SUPPORT OF THE ARGUMENT OF THE ASSESSEE AND THUS, HE CONFIRMED THE ADDITION MADE B Y THE AO. DURING THE COURSE OF HEARING BEFORE US, LD. COUNSEL OF THE ASS ESSEE DREW OUR ATTENTION UPON THE CERTIFICATE OF THE CONSULTANT AN D ALSO PRODUCED BEFORE US COPY OF THE SALE DEED OF THE FLAT. 4. PER CONTRA, THE LD. DR SUBMITTED THAT PROPER FACTS AND EVIDENCES HAVE NOT BEEN BROUGHT BY THE ASSESSEE BEFORE THE LO WER AUTHORITIES. THE LD. COUNSEL IS NOT ABLE TO CLARIFY WHETHER THE CERT IFICATE OF THE INTERIOR CONSULTANT DATED 18-12-2013 WAS SUBMITTED TO THE AO ALSO. UNDER THESE 4 I.T.A. NO.7717/MUM/2014 CIRCUMSTANCES, HIS ISSUE SHOULD BE SENT BACK TO THE AO FOR PROPER EXAMINATION OF FACTS AND EVIDENCES. 5. WE HAVE GONE THROUGH THE SUBMISSIONS MADE BY BOTH S IDES. THOUGH, LD. COUNSEL WAS ABLE TO SHOW US THAT PLEADI NG OF RENOVATION AND UN-INHABITABLE CONDITION OF THE HOUSE WAS TAKEN BEF ORE THE AO BUT HE WAS NOT ABLE TO SHOW IF ANY DOCUMENTARY EVIDENCE IN SUP PORT OF THIS ARGUMENT WAS SUBMITTED BEFORE THE AO. WITH THE ASSISTANCE O F THE PARTIES, WE HAVE GONE THROUGH THE SALE DEED OF THE SAID FLAT, BUT NO THING IS COMING OUT FROM THE SAID DOCUMENT. LD. COUNSEL WAS NOT ABLE TO EVE N CONFIRM THIS FACT THAT THE CERTIFICATE OF INTERIOR CONSULTANT WAS PLA CED BEFORE THE AO. THUS, COMPLETE FACTS AND EVIDENCES ARE NOT ON RECORD WITH REGARD TO THE REAL CONDITION OF THE FLAT EXISTING AT THE TIME WHEN IT WAS ACQUIRED BY THE ASSESSEE. NONETHELESS, LD. COUNSEL RELIED UPON THE FOLLOWING DECISIONS BEFORE US: 1. SHRI RAJKUMAR MANCHANDA VS DCIT (ITA NO.4919/MU M/2014) 2. S.M. CHANDRASHEKAR VS INCOME TAX OFFICER 76 TAXM ANN.COM 278 (BANG) 3. SHAKUNTALADEVI VS DCIT ITA NO.1524/BANG/2010 DT 20 TH DECEMBER, 2011 (BANG ITAT) 5.1. WE HAVE GONE THROUGH THESE JUDGEMENTS ALSO AND FIN D THAT THESE JUDGEMENTS HAVE BEEN DELIVERED IN ACCORDANCE WITH F ACTS OF THESE CASES. IN THE CASE BEFORE US, THE CRUCIAL FACTS ARE NOT CL EAR AND CRYSTALLISED, AS DISCUSSED ABOVE. THEREFORE, WE FIND IT APPROPRIATE TO SEND THIS ISSUE BACK TO THE FILE OF THE AO WHERE ADEQUATE OPPORTUNITY OF HEARING SHALL BE GIVEN TO THE ASSESSEE TO FURNISH THE REQUISITE DETAILS AN D DOCUMENTARY EVIDENCES TO BRING ON RECORD FACTS AND EVIDENCES ABOUT THE CO NDITION OF THE FLAT 5 I.T.A. NO.7717/MUM/2014 WHEN IT WAS ACQUIRED BY THE ASSESSEE. THE AO SHALL DECIDE THIS ISSUE AFTER TAKING INTO ACCOUNT ALL THESE FACTS AND CIRCUMSTANC ES OF THE CASE. THE AO SHALL ALSO KEEP IN MIND THE AFORESAID JUDGEMENTS RE LIED UPON BY THE ASSESSEE AND OTHER JUDGEMENTS AS MAY BE BROUGHT BEF ORE HIM IN SUPPORT OF HIS CONTENTION OF THE ASSESSEE THAT IN CASE THE RESIDENTIAL HOUSE PROPERTY IS NOT IN INHABITABLE CONDITION, THEN, ITS DEEMED ANNUAL RATEABLE VALUE CANNOT BE BROUGHT TO TAX BY APPLYING PROVISIO NS OF SECTION 23 OF THE ACT. THUS, WITH THESE DIRECTIONS, THIS ISSUE IS SE NT BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION. THESE GROUNDS MAY BE TRE ATED AS ALLOWED FOR STATISTICAL PURPOSES. 6. GROUND 3 : IN THIS GROUND, THE ASSESSEE IS AGGRIEVED WITH THE ACTION OF THE LOWER AUTHORITIES IN BRINGING TO TAX A SUM O F RS.5,67,237 BEING THE INTEREST INCOME BY APPLYING CLUBBING PROVISIONS CON TAINED IN SECTION 64(1)(IV) OF THE ACT ON THE GROUND THAT ASSESSEE HA D GIVEN INTEREST FREE LOAN TO HIS WIFE. 7. THE BRIEF BACKGROUND OF THIS ISSUE AS CULLED OUT FR OM THE ORDERS OF THE LOWER AUTHORITIES IS THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTED BY THE ASSESSING OFFICER THAT THE ASSE SSEE HAS EARNED SAVINGS BANK INTEREST OF RS.4,56.916/- WHICH WAS NO T OFFERED TO TAX IN THE RETURN. ACCORDINGLY, THE SAME WAS ADDED TO THE TOTAL INCOME RETURNED AFTER THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE ACCEPTED THE MISTAKE. THE ASSESSING OFFICER FURTHER NOTED THAT THE ASSESSEE'S WIFE IS A HOUSE WIFE AND DID NOT HAVE AN Y INDEPENDENT SOURCE OF INCOME. THE ASSESSEE TRANSFERRED FUNDS IN THE BA NK ACCOUNT OF THE ASSESSEE'S WIFE AT REGULAR INTERVALS AND WAS NOT CH ARGING ANY INTEREST THEREOF. THE TOTAL AMOUNT OUTSTANDING AS ON 31-03-2 011 WAS RS 6 I.T.A. NO.7717/MUM/2014 1,21,95,000/-. THE ASSESSEES SPOUSE HAD PURCHASED ONE HOUSE IN GLTANJALI SOCIETY ADJACENT TO THE FLAT PURCHASED BY THE ASSESSEE AND THE TWO FLATS WERE COMBINED TO FORM ONE SINGLE DWEL LING UNIT. IT WAS ALSO NOTED THAT THE ASSESSEES WIFE HAS EARNED INTE REST INCOME OF RS.5,67,237/- ON THE FUNDS TRANSFERRED BY THE ASSES SEE TO HER. ACCORDINGLY, THE AMOUNT OF RS.5,67,237/- WAS CLUBBE D IN THE HANDS OF THE ASSESSEE U/S.64(1)(IV) OF THE I.T. ACT. 8. DURING THE COURSE OF HEARING BEFORE LD. CIT(A), DET AILED SUBMISSIONS WERE MADE BUT THE LD.CIT(A) DID NOT AGREE WITH THE SUBMISSIONS OF THE ASSESSEE AND CONFIRMED THE ADDITION BY OBSERVING AS UNDER: IN RESPECT OF GROUNDS OF APPEAL NO.3 & 4 REGARDING CLUBBING OF INTEREST INCOME OF RS.5,67,237/- EARN B Y ASSESSEE'S WIFE, IN THE HANDS OF THE ASSESSEE, IT I S UNDISPUTED THAT A SUM OF RS.1,21,95,000/- HA BEEN TRANSFERRED BY THE ASSESSEE TO HIS WIFE. THE ASSESSEE'S WIFE IS A HOUS E WIFE AND DOES NOT HAVE ANY REGULAR SOURCES OF INCOME OF HER OWN. THE AUTHORISED REPRESENTATIVE FAIRLY AGREED THAT IT WIL L BE VERY DIFFICULT TO PROVE THAT THE INCOME OF RS.5,67,237/- HAS BEEN EARNED BY ASSESSEE'S WIFE .WAS OUT OF HER OWN FUNDS . THE CLAIM THAT THIS AMOUNT TRANSFERRED BY THE ASSESSEE WAS A INTEREST FREE LOAN, IS A SELF SERVING STATEMENT NOT SUPPORTED BY ANY EVIDENCES. THE PURPOSE OF LOAN IS NOT SPECIFIED AND THE REPAYING CAPACITY OF THE ASSESSEE'S WIFE IS LOW COMPARED TO THE AMOUNT OF ALLEGED LOAN. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, IT IS CLEAR THAT THE INTEREST EARNED BY THE ASSESSEE'S WI FE WAS OUT OF THE FUNDS TRANSFERRED BY THE ASSESSEE AND ACCORDING LY THE INTEREST INCOME OF RS.5,67,237/- CLUBBED BY THE ASS ESSING 7 I.T.A. NO.7717/MUM/2014 OFFICER IN THE HANDS OF THE ASSESSEE U/S 64(1)(IV) IS CORRECT AND IS HEREBY UPHELD. GROUND OF APPEAL NO.3 IS, THEREFO RE, DISMISSED. 9. DURING THE COURSE OF HEARING BEFORE US, THE LD. COU NSEL VEHEMENTLY ASSAILED THE ORDERS PASSED BY THE LOWER AUTHORITIES . IT WAS SUBMITTED THAT FACTS HAVE NOT BEEN PROPERLY UNDERSTOOD BY THE LOWE R AUTHORITIES. THE AMOUNT OF LOAN GIVEN BY THE ASSESSEE TO HIS WIFE WA S UTILIZED BY HER FOR ACQUIRING THE HOUSE PROPERTY ADJACENT TO THE HOUSE OF THE ASSESSEE AND THE SAME WAS NOT UTILISED FOR KEEPING DEPOSIT IN TH E BANK. THUS, SHE DID NOT EARN ANY INTEREST INCOME. IT WAS ALSO SUBMITTE D ON WITHOUT PREJUDICE BASIS THAT IN ANY CASE, NO ASSET WAS TRANSFERRED BY THE ASSESSEE TO HIS WIFE SINCE IT WAS A TRANSACTION OF GIVING OF LOAN WHICH IS NOT EQUIVALENT TO TRANSFER OF ASSET. THUS, CLUBBING PROVISIONS OF SE CTION 64(1)(IV) ARE NOT APPLICABLE. IN SUPPORT OF HIS ARGUMENT, HE PLACED RELIANCE UPON THE JUDGMENT OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF SHAH RUKH KHAN VS DCIT WTA NO.9/MUM/2013 DATED 10-12-2014 WHE REIN IT WAS HELD THAT GIVING OF INTEREST FREE REFUNDABLE LOAN TO WIF E IS NOT EQUIVALENT TO TRANSFERRING OF ASSET TO WIFE AND THUS, NO NOTIONAL INCOME COULD HAVE BEEN ADDED U/S 64(1)(IV). 10. PER CONTRA, THE LD. DR SUBMITTED THAT THE FACTS OF THIS CASE ARE NOT CLEAR AS THERE ARE CONTRADICTORY STATEMENTS AND FAI RLY SPEAKING, THERE ARE CONTRADICTORY FINDINGS IN THE ORDER PASSED BY THE A O. 11. WE HAVE GONE THROUGH THE ORDERS PASSED BY THE LOWER AUTHORITIES AS WELL AS SUBMISSIONS MADE BEFORE US. IT IS NOTED BY US THAT IN THE ASSESSMENT ORDER, THE AO HAS FIRSTLY WRITTEN THAT D URING THE ASSESSMENT PROCEEDINGS IT WAS FOUND BY THE AO THAT ASSESSEES SPOUSE HAD PURCHASED A HOUSE PROPERTY FOR WHICH FUNDS WERE TRANSFERRED B Y THE ASSESSEE. BUT IN SUBSEQUENT PARAGRAPHS OF THE ASSESSMENT ORDER, IT H AS BEEN MENTIONED 8 I.T.A. NO.7717/MUM/2014 BY THE AO THAT COPY OF RETURN OF WIFE SHOWS THAT AM OUNTS TRANSFERRED BY THE ASSESSEE TO HIS WIFE WERE INVESTED BY HER IN VA RIOUS BANK DEPOSITS. THUS, THERE IS A DIRECT CONTRADICTION IN THE FINDIN GS RECORDED BY THE AO. FURTHER, IT WAS STATED BEFORE US THAT THE SAID LOAN S WERE REFUNDED BY WIFE IN THE SUBSEQUENT YEARS. BUT, IN SUPPORT OF THIS A RGUMENT, NO FACTS / EVIDENCES ARE HELD ON RECORD. LD. DR WAS ALSO NOT ABLE TO THROW ANY LIGHT ON THE EXACT FACTS. THUS, WE FIND IT APPROPRIATE T O SEND THIS ISSUE BACK TO THE FILE OF THE AO, WHERE ASSESSEE SHALL BEING ON R ECORD COMPLETE FACTUAL DETAILS AND EVIDENCES, AS MAY BE REQUIRED BY THE AO FROM TIME TO TIME AS PER LAW. THE AO SHALL THEREAFTER DECIDE THIS ISSUE AFTER CONSIDERING THE ENTIRE MATERIAL AS MAY BE CONSIDERED BY THE ASSESSE E AFTER TAKING INTO ACCOUNT ALL THE JUDGMENTS RELIED UPON BY THE ASSESS EE BEFORE US AND THAT MAY BE RELIED UPON BEFORE HIM. THE AO, SHALL, DECI DE THE ISSUE AFRESH AFTER CONSIDERING THE ENTIRE MATERIAL THAT MAY BE B ROUGHT ON RECORD BY THE ASSESSEE. THIS GROUND MAY BE TREATED AS ALLOWED, F OR STATISTICAL PURPOSES. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATE D AS ALLOWED, FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN THE OPEN COURT AT CONCLUSIO N OF THE HEARING. SD/- SD/- (JOGINDER SINGH) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT: 13 TH JANUARY, 2017 PATEL/PS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 9 I.T.A. NO.7717/MUM/2014 4. THE CIT 5. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE , B-BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES